-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EQKfFP07XPpUQyToLmgw6c2H+4ZNENsCj3PMKNQk2aFUuc49u7McM4e20NQEr7z5 932b4gHC+Xdrb9rTxktr8g== 0000756976-98-000068.txt : 19981103 0000756976-98-000068.hdr.sgml : 19981103 ACCESSION NUMBER: 0000756976-98-000068 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19981102 EFFECTIVENESS DATE: 19981102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE CAPITAL INVESTMENT TRUST CENTRAL INDEX KEY: 0001030979 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 333-21089 FILM NUMBER: 98736019 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-08043 FILM NUMBER: 98736020 BUSINESS ADDRESS: STREET 1: C/O BERKSHIRE CAPITAL HOLDINGS INC STREET 2: 475 MILAN DR SUITE 103 CITY: SAN JOSE STATE: CA ZIP: 95134-2453 BUSINESS PHONE: 4085260707 MAIL ADDRESS: STREET 1: C/O BERKSHIRE CAPITAL HOLDINGS INC STREET 2: 475 MILAN DR SUITE 103 CITY: SAN JOSE STATE: CA ZIP: 95134 485BPOS 1 485BPOS FOR BERKSHIRE CAPITAL INVESTMENT TRUST As filed with the Securities and Exchange Commission on November 2, 1998 Securities Act Registration No. 333-21089 Investment Company Act Registration No. 811-08043 - ------------------------------------------------------------------------------ ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. __ Post-Effective Amendment No. 2 and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 3 (Check appropriate box or boxes) ----------------------------------------------------------- BERKSHIRE CAPITAL INVESTMENT TRUST (Exact Name of Registrant as Specified in Charter) 475 Milan Drive, Suite #103 San Jose, CA 95134-2453 (Address of Principal Executive Offices) (408) 526-0707 (Registrant's Telephone Number) MALCOLM R. FOBES III 475 Milan Drive, Suite #103 San Jose, CA 95134-2453 (Name and Address of Agent for Service) ----------------------------------------------------------- It is proposed that this filing will become effective (check appropriate box) [X] immediately upon filing pursuant to paragraph (b) of Rule 485. [ ] on (date) pursuant to paragraph (b) of Rule 485. [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485. [ ] on (date) pursuant to paragraph (a)(1) of Rule 485. [ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485. [ ] on (date) pursuant to paragraph (a)(2) of Rule 485. If appropriate, check the following box [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. ----------------------------------------------------------- Registrant registered an indefinite number of shares under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the fiscal year ended December 31, 1997 was filed with the Commission on February 20, 1998. BERKSHIRE CAPITAL INVESTMENT TRUST Cross Reference Sheet Pursuant to Rule 481(a) UNDER THE SECURITIES ACT OF 1933 INFORMATION REQUIRED CAPTIONS IN FILING - -------------------- ------------------ Part A: PROSPECTUS Item 1. Cover Page Cover Page Item 2. Synopsis Fund Expenses Item 3. Condensed Financial Information Financial Highlights Item 4. General Description of Registrant The Fund Item 5. Management of the Fund Management of the Fund; Investment Adviser; Advisory Fee; Fund Administration; Advisory and Administration Agreements Item 5A. Management's Discussion of Management Discussion Fund Performance and Analysis (Annual and Semi-Annual Report) Item 6. Capital Stock and Other Securities Organization and Capital Structure; Tax Status Item 7. Purchase of Securities Being Fund Share Purchase; Offered Purchase of Shares and Reinvestment; Pricing of Shares Item 8. Redemption or Repurchase Redemption of Shares Item 9. Pending Legal Proceedings Litigation Part B: STATEMENT OF ADDITIONAL INFORMATION Item 10. Cover Page Cover Page Item 11. Table of Contents Table of Contents Item 12. General Information and History The Fund Item 13. Investment Objectives and Policies Investment Objective; Risk Factors; Investment Restrictions; Portfolio Turnover Policy Item 14. Management of the Fund Management of the Fund; Remuneration of Officers and Trustees Item 15. Control Persons and Principal Principal Security Holders of Securities Holders; Organization and Capital Structure Item 16. Investment Advisory and Other Investment Adviser; Services Advisory Fee; Fund Administration; Advisory and Administration Agreements Item 17. Brokerage Allocation and Other Brokerage Practices Item 18. Capital Stock and Other Securities Organization and Capital Structure Item 19. Purchase, Redemption and Pricing of Purchase of Shares and Securities Being Offered Reinvestment; Retirement Plans; Pricing of Shares; Redemption of Shares; Item 20. Tax Status Tax Status Item 21. Underwriters Not Applicable Item 22. Calculation of Performance Data Performance Information Item 23. Financial Statements Financial Statements Part C: OTHER INFORMATION The information to be included in Part C is set forth under the appropriate Item, so numbered, in Part C to this Registration Statement. BERKSHIRE CAPITAL INVESTMENT TRUST BERKSHIRE CAPITAL GROWTH & VALUE FUND 475 Milan Drive, Suite #103 San Jose, California 95134-2453 (408) 526-0707 PROSPECTUS - NOVEMBER 2, 1998 THE FUND AND INVESTMENT OBJECTIVE Berkshire Capital Growth & Value Fund (the "Fund") is a non-diversified series of the Berkshire Capital Investment Trust (the "Trust"), an open-end management investment company. The Trust was organized in Delaware as a business trust and may offer shares of beneficial interest in a number of separate series, each series representing a distinct fund with its own investment objectives and policies. At present, there is only one series authorized by the Trust, which series has been designated as the Berkshire Capital Growth & Value Fund. The Fund's investment objective is to seek long-term capital appreciation through investments in equity securities. The Fund seeks to accomplish its objective by investing primarily in equities of growth companies in sectors offering the potential for above average returns and/or those companies which the Fund's adviser believes to be undervalued at their current market price, resulting in the potential for capital appreciation. Receipt of income is a secondary objective, as some investments may yield dividends, interest or other income. FUND SHARE PURCHASE Capital shares of the Fund may be purchased directly at net asset value as next determined after receipt of order. The Board of Trustees has established $5,000 as the minimum initial purchase unless investing through the vehicle of an Individual Retirement Account ("IRA"), in which case the minimum initial investment is $2,000. Subsequent investments in the Fund must be at least $500, or $200 for an IRA. Please see "Purchase of Shares and Reinvestment" in this Prospectus for more information. ADDITIONAL INFORMATION This Prospectus, which should be held for future reference, is designed to set forth concisely the information that you should know before you invest. A "Statement of Additional Information" containing more information about the Fund has been filed with the Securities and Exchange Commission. Such Statement is dated November 2, 1998 and has been incorporated by reference into the Prospectus. A copy of the Statement may be obtained without charge, by writing to the Fund or by calling the telephone number shown above. 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. Prospectus | 1 TABLE OF CONTENTS FUND EXPENSES ................................... 3 FINANCIAL HIGHLIGHTS ............................ 4 THE FUND ........................................ 5 INVESTMENT OBJECTIVE ............................ 5 RISK FACTORS .................................... 5 Generally ..................................... 5 Non-Diversification ........................... 5 Concentration ................................. 5 PORTFOLIO TURNOVER POLICY ....................... 5 CONCENTRATION AND NON-DIVERSIFICATION POLICY .... 6 Concentration ................................. 6 Non-Diversification ........................... 6 TAX STATUS ...................................... 6 INVESTMENT RESTRICTIONS ......................... 7 INVESTMENT ADVISER .............................. 8 ADVISORY FEE .................................... 8 FUND ADMINISTRATION ............................. 8 ADVISORY AND ADMINISTRATION AGREEMENTS .......... 9 MANAGEMENT OF THE FUND .......................... 10 REMUNERATION OF OFFICERS AND TRUSTEES ........... 10 ORGANIZATION AND CAPITAL STRUCTURE .............. 11 PURCHASE OF SHARES AND REINVESTMENT ............. 11 Initial Investments ........................... 11 Subsequent Purchases .......................... 12 Reinvestments ................................. 12 Fractional Shares ............................. 12 RETIREMENT PLANS ................................ 12 Generally ..................................... 12 Individual Retirement Accounts ................ 12 PRICING OF SHARES ............................... 13 REDEMPTION OF SHARES ............................ 13 If By Mail .................................... 13 If By Telephone ............................... 13 BROKERAGE ....................................... 14 SHAREHOLDERS MEETINGS ........................... 14 REPORTS TO SHAREHOLDERS ......................... 15 TRANSFER AGENT .................................. 15 CUSTODIAN ....................................... 15 AUDITORS ........................................ 15 LEGAL OPINION ................................... 15 LITIGATION ...................................... 15 ADDITIONAL INFORMATION .......................... 15 Prospectus | 2 FUND EXPENSES Set forth below is a table containing information regarding the annual expenses which may be incurred by the Fund. The purpose of this table is to assist an investor in understanding the various costs and expenses that a shareholder in the Fund will bear directly or indirectly. Shareholder Transaction Expenses: Sales Load Imposed on Purchases ............... None Sales Load Imposed on Reinvested Dividends .... None Redemption Fees ............................... $10 Exchange Fees ................................. None IRA Trustee Fees .............................. $20 Annualized Fund Operating Expenses: Management Fees ............................... 1.50% 12b-1 Fees .................................... None Other Expenses* ............................... 0.50% ----- Total Operating Expenses ...................... 2.00% ===== The Fund and the Investment Adviser may enter into arrangements with brokerage firms and financial institutions under which shares of the Fund may be purchased or sold. Investors may be charged a transaction fee if they effect transactions in Fund shares through a broker or agent. *Fees payable under the Administration Agreement between the Fund and the Investment Adviser are fixed at 0.50% of the Fund's average daily net assets up to $50 million, 0.45% of such assets from $50 million to $200 million, 0.40% of such assets from $200 million to $500 million, 0.35% of such assets from $500 million to $1 billion, and 0.30% of such assets in excess of $1 billion. ----------------------------------------------------------- The following is an example that illustrates the expenses paid on a $1,000 investment over various time periods assuming (a) 5% annual rate of return and (b) redemption at the end of each time period. This example should not be considered a representation of past or future expenses or performance. Actual expenses may be greater or less than those shown. 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- $30 $73 $118 $243 Prospectus | 3 FINANCIAL HIGHLIGHTS The following financial highlights table shows the results for a share outstanding of the Fund. You should read this information in conjunction with the financial statements included in the Fund's most recent Annual and Semi-Annual Reports. The Fund's December 31, 1997 financial statements were audited by Meredith, Cardozo, Lanz & Chiu LLP, Independent Certified Public Accountants. Their report on the financial statements and financial highlights is included in the Annual Report. The financial statements and financial highlights are incorporated by reference in the Fund's Statement of Additional Information. The financial data for the six-month period ended June 30, 1998 have not been audited.
BERKSHIRE CAPITAL GROWTH & VALUE FUND Six Months Period From(a) Ended 07/01/97 06/30/98 to (unaudited) 12/31/97 Per Share Data for a Share Outstanding Throughout Each Period ---------- -------- NET ASSET VALUE, BEGINNING OF PERIOD: $ 8.64 $ 10.00 ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income ......................................... .01 .10 Net realized and unrealized gains (losses) on investments ..... 2.76 (1.36) ------------ ------------ Total from investment operations ................................. 11.41 8.74 DISTRIBUTIONS: Dividends (from net investment income) ........................ 0 (.10) Distributions (from capital gains) ............................ 0 0 ------------ ------------ Total distributions .............................................. 0 (.10) ------------ ------------ NET ASSET VALUE, END OF PERIOD: $ 11.41 $ 8.64 ============ ============ TOTAL RETURN - Note (6) .......................................... 32.06%(b) (12.60%)(b) SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period ........................................ $ 156,782 $ 101,412 Ratio of expenses to average net assets(b)(c) ................. 0.95% 1.00% Ratio of expenses to average net assets(d) .................... 0% 0% Ratio of net investment income to average net assets (b)(c) ... (0.79%) 0.12% Ratio of net investment income to average net assets (d) ...... 0.16% 1.12% Portfolio turnover rate (b) ................................... 38% 13% (a) Date of effectiveness. (b) Not annualized for periods less than one full year. (c) Before fee waiver. (d) After fee waiver.
Prospectus | 4 THE FUND Berkshire Capital Growth & Value Fund is an open-end, non-diversified portfolio of the Berkshire Capital Investment Trust. The Trust was organized on November 25, 1996 as a Delaware business trust and is authorized to issue an indefinite number of shares of beneficial interest. The Trust's registered office is 1209 Orange Street, Wilmington, Delaware 19801. Mail may be addressed to Trust's principal executive office at 475 Milan Drive, #103, San Jose, California 95134-2453. INVESTMENT OBJECTIVE Berkshire Capital Growth & Value Fund has the primary objective of long-term capital appreciation through investments in equity securities. The Fund seeks to accomplish this objective by investing primarily in equities of growth companies in sectors offering the potential for above-average returns and/or those companies which the Fund's adviser believes to be undervalued at their current market price, resulting in the potential for capital appreciation. In selecting investments for the Fund, the adviser's primary emphasis is typically on evaluating a company's management, growth prospects, business operations, revenues, earnings, cash flows, and balance sheet in relationship to its share price. Fundamental analysis by use of dividend and cash flow discounting models are often employed to determine the intrinsic value of a company and then compared to the current share price. Receipt of income is a secondary objective, as some investments may yield dividends, interest or other income. RISK FACTORS Generally: Risks associated with the Fund's performance will be those due to broad market declines and business risks from difficulties which occur to particular companies while in the Fund's portfolio. It must be realized, as is true of almost all securities, there can be no assurance that the Fund will obtain its ongoing objective of capital appreciation. Non-Diversification: The Fund will be operated as a non-diversified investment company and as such, the Fund's shares may be more susceptible to adverse change in value than would be the shares of a diversified investment company. Concentration: The Fund has adopted the fundamental policy concentrating at least 25% of its assets in the equity securities of companies in the electronic technology industry. Because of such policy, the Fund may be subject to greater risk than that of a fund which is fully diversified among many market sectors. PORTFOLIO TURNOVER POLICY The Fund does not propose to purchase securities for short-term trading in the ordinary course of operations. Accordingly, it is expected that the annual turnover rate will not exceed 50%, wherein turnover is computed by dividing the lesser of the Fund's total purchases or sales of securities within the period by the average monthly portfolio value of the Fund during such period. There may be times when management deems it advisable to substantially alter the composition of the portfolio, in which event, the portfolio turnover rate might substantially exceed 50%; this would only result from special circumstances and not from the Fund's normal operations. Prospectus | 5 CONCENTRATION AND NON-DIVERSIFICATION POLICY Concentration: The Fund will concentrate its investments in the equity securities of companies in the electronic technology industry. Concentration requires the Fund to invest 25% or more of the value of its total assets in securities of issuers in a particular industry. Companies in the electronic technology industry shall include businesses which are principally engaged in the development, production, or distribution of products or services related to the following business segments: Computers, Computer Peripherals, Semiconductors, Software, Telecommunications and Mass Storage Devices. In some future period or periods, due to adverse economic conditions in the electronic technology industry, the Fund may temporarily have less than 25% of the value of its assets invested in that industry. At such times the adviser may adopt a temporary defensive posture and recommend the Fund invest in money market instruments or U.S. Government securities. As a result of such concentration in the electronic technology industry, the Fund's shares may fluctuate more widely than the value of shares of a portfolio which invests in a broader range of industries. Non-Diversification: The Fund is classified as being non-diversified which means that it may not invest more than 25% of its assets in the securities of any one issuer and, with respect to 50% of its total assets, the Fund may not invest more than 5% of its total assets in the securities of any one issuer. Thus, the Fund may invest up to 25% of its total assets in the securities of each of any two issuers. The Fund, therefore, may be more susceptible to risk of loss than a more widely diversified fund as a result of a single economic, political, or regulatory occurrence. The policy of the Fund, in the hope of achieving its objective as stated above, is therefore one of selective investments rather than broad diversification. The Fund seeks only enough diversification for adequate representation among what it considers to be the best performing securities and to maintain its federal non-taxable status under Sub-Chapter M of the Internal Revenue Code. TAX STATUS Under the provisions of Sub-Chapter M of the Internal Revenue Code of 1986 as amended, the Fund intends to pay out substantially all of its investment income and realized capital gains. As a result, the Fund intends to be relieved of federal income tax on the amounts distributed to shareholders. In order to qualify as a "regulated investment company" under Sub-Chapter M, at least 90% of the Fund's income must be derived from dividends, interest, and gains from securities transactions. No more than 30% of the Fund's profits may be derived from securities held less than three months and no more than 50% of the Fund assets may be held in security holdings that exceed 5% of the total assets of the Fund at time of purchase. Distribution of any net long-term capital gains realized by the Fund will be taxable to the shareholder as long-term capital gains regardless of the length of time Fund shares have been held by the investor. All income realized by the Fund, including short-term capital gains, will be taxable to the shareholder as ordinary income. Dividends from net income will be made annually or more frequently at the discretion of the Fund's Board of Trustees and will automatically be reinvested in additional Fund shares at net asset value, unless shareholder has elected to receive payment in the form of cash. Dividends received shortly after purchase of shares by an investor will have the effect of reducing the per share net asset value of the shares by the amount of such dividends or distributions and, although in effect a return of capital, are subject to federal income taxes. The Fund is required by federal law to withhold 31% of reportable payments (which may include dividends, capital gains, distributions and redemptions) paid to shareholders who have not complied with IRS regulations. In order to avoid this withholding requirement you must certify on the Shareholder Purchase Application supplied by the Fund, that your Social Security or Taxpayer Identification Number is correct and that you are not currently subject to back-up withholding or otherwise certify that you are exempt from back-up withholding. Prospectus | 6 INVESTMENT RESTRICTIONS The Fund has adopted the following fundamental investment restrictions. These restrictions cannot be changed without approval by the holders of a majority of the outstanding voting securities of the Fund. As defined in the Investment Company Act of 1940 (the "Act"), the "vote of a majority of the outstanding voting securities" means the lesser of the vote of (i) 67% of the shares of the Fund at a meeting where more than 50% of the outstanding shares are present in person or by proxy or (ii) more than 50% of the outstanding shares of the Fund. The Fund may not: (a) Act as underwriter for securities of other issuers except insofar as the Fund may be deemed an underwriter in selling its own portfolio securities. (b) Borrow money or purchase securities on margin except for temporary or emergency (not leveraging) purposes, including the meeting of redemption requests that might otherwise require the untimely disposition of securities, in an aggregate amount not exceeding 25% of the value of the Fund's total assets at the time any borrowing is made. While the Fund's borrowings are in excess of 5% of its total assets, the Fund will not purchase any additional portfolio securities. (c) Sell securities short. (d) Invest in securities of other investment companies except as part of a merger, consolidation, or purchase of assets approved by the Fund's shareholders or by purchases with no more than 10% of the Fund's assets in the open market involving only customary broker's commissions. (e) Make investments in commodities, commodity contracts or real estate although the Fund may purchase and sell securities of companies which deal in real estate or interests therein. (f) Make loans. The purchase of a portion of a readily marketable issue of publicly distributed bonds, debentures or other debt securities will not be considered the making of a loan. (g) Acquire more than 10% of the securities of any class of another issuer, treating all preferred securities of an issuer as a single class and all debt securities as a single class, or acquire more than 10% of the voting securities of another issuer. (h) Invest in companies for the purpose of acquiring control. (i) Purchase or retain securities of any issuer if those officers, directors or trustees of the Fund or its Investment Adviser individually owns more than 1/2 of 1% of any class of security or collectively own more than 5% of such class of securities of such issuer. (j) Pledge, mortgage or hypothecate any of its assets. (k) Invest in securities which may be subject to registration under the Securities Act of 1933 prior to sale to the public or which are not at the time of purchase readily saleable. (l) Invest more than 10% of the total Fund assets, taken at market value at the time of purchase, in securities of companies with less than three years' continuous operation, including the operations of any predecessor. (m) Issue senior securities. (n) Acquire any securities of companies within one industry if, as a result of such acquisition, more than 25% of the value of the Fund's total assets would be invested in securities of companies within such industry; provided, however, that there shall be no limitation on the purchase of securities of companies in the electronic technology industry. With respect to fundamental restriction (n) above, companies in the electronic technology industry shall be defined as businesses which are principally engaged in the development, production, or distribution of products or services related to the following business segments: Computers, Computer Peripherals, Semiconductors, Software, Telecommunications and Mass Storage Devices. Prospectus | 7 In connection with its investment objective and policies the Fund may, however, invest in the following types of securities which can involve certain risks: U.S. Government Securities: The Fund may purchase securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. Such securities will typically include, without limitation, U.S. Treasury securities such as Treasury Bills, Treasury Notes or Treasury Bonds that differ in their interest rates, maturities and times of issuance. Bank Obligations: The Fund may invest in bank obligations, including certificates of deposit, time deposits, banker's acceptances and other short-term obligations of banks, savings and loan associations and other banking institutions. Warrants: The Fund may purchase warrants, valued at the lower of cost or market, but only to the extent that such purchase does not exceed 5% of the Fund's net assets at the time of purchase. Included within that amount, but not to exceed 2% of the Fund's net assets, may be warrants which are not listed on the New York or American Stock Exchanges. INVESTMENT ADVISER The Fund retains Berkshire Capital Holdings, Inc., at 475 Milan Drive, #103, San Jose, California 95134-2453, as its Investment Adviser. Berkshire Capital Holdings, Inc. (the "Investment Adviser") is a California corporation founded in February 1993. The company is registered as an Investment Adviser with the Securities and Exchange Commission under the Investment Advisers Act of 1940. The corporation is controlled and wholly-owned by Malcolm R. Fobes III and Ronald G. Seger Malcolm R. Fobes III has the direct responsibility for the overall strategic management of the Fund's portfolio and its administration. Mr. Fobes founded Berkshire Capital Holdings, Inc. in 1993, has served as Chairman of the Board and Chief Executive Officer since the company's inception, and has been responsible for the direction of the company's investments in both private and publicly-held concerns. Mr. Fobes has a B.S. degree in Finance and a minor in Economics from San Jose State University in California. In addition to founding the company in 1993, Mr. Fobes was also simultaneously retained by Adobe Systems, Inc., a high-technology software development firm, as a technical support engineer from May 1991 to November 1994. Mr. Fobes has served exclusively in the capacity of Chairman and Chief Executive Officer of the Investment Adviser from November 1994 to present. Ronald G. Seger has served as Secretary and member of the Board of Directors of the Investment Adviser since September 1996. Both Mr. Fobes and Mr. Seger also serve as Trustees of the Fund. ADVISORY FEE The Fund will be managed by Berkshire Capital Holdings, Inc. The Investment Adviser will be paid a fee of 1.5% per year on the net assets of the Fund. All fees are computed on the average daily closing net asset value of the Fund and are payable monthly. Such fee is higher than the fee paid by most other funds. Notwithstanding, the Investment Adviser may at its discretion, forgo sufficient fees which would have the effect of lowering the Fund's expense ratio and increasing the yield to shareholders. FUND ADMINISTRATION In addition to its fee for serving as the Fund's Investment Adviser, Berkshire Capital Holdings, Inc. will receive a fee for serving as the Fund's administrator. The fee will be paid monthly at an annual rate of 0.50% of the Fund's average daily net assets up to $50 million, 0.45% of such assets from $50 million to $200 million, 0.40% of such assets from $200 million to $500 million, 0.35% of such assets from $500 million to $1 billion, and 0.30% of such assets in excess of $1 billion. For such fee, Berkshire Capital Holdings, Inc. is responsible for providing administrative and general supervisory services to the Fund and will provide virtually all customary services required for Fund operations. Prospectus | 8 ADVISORY AND ADMINISTRATION AGREEMENTS On October 26, 1997 the Board of Trustees unanimously approved an investment advisory contract (the "Advisory Agreement") and a separate administration contract (the "Administration Agreement") with Berkshire Capital Holdings, Inc. The Advisory Agreement and the Administration Agreement are effective through December 31, 1998. Thereafter, both agreements may be continued for successive periods not to exceed one year, provided that such continuance is specifically approved annually by (a) the Fund's Board of Trustees or (b) vote of the holders of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund. In either event, the continuance must be approved by a majority of the Board of Trustees who are not "interested persons" of the Trust (as defined in the 1940 Act) or the Investment Adviser, by vote cast in person at a meeting called for the purpose of voting on such approval. Under the Advisory Agreement, Berkshire Capital Holdings, Inc. will determine what securities will be purchased, retained or sold by the Fund on the basis of a continuous review of its portfolio. Mr. Fobes, will have the direct responsibility of managing the composition of the Fund's portfolio in accordance with the Fund's investment objective. Pursuant to its contract with the Fund, the Investment Adviser is (i) required to render research, statistical and advisory services to the Fund, (ii) make specific recommendations based on the Fund's investment requirements, and (iii) pay salaries of the Fund's employees who may be officers, directors or employees of the Investment Adviser. Excepting these items, the Fund pays all other fees and expenses incurred in conducting its business affairs. The Investment Adviser has paid the initial organizational costs of the Fund and will reimburse the Fund for any and all losses incurred because of purchase reneges. Under the Administration Agreement, the Investment Adviser will render all administrative and supervisory services to the Fund. The Adviser will oversee the maintenance of all books and records with respect to the Fund's securities transactions and the Fund's book of accounts in accordance with all applicable federal and state laws and regulations. The Adviser will also arrange for the preservation of journals, ledgers, corporate documents, brokerage account records and other records which are required pursuant to Rule 31a-1 promulgated under the 1940 Act. In accordance with the Administration Agreement, the Adviser is also responsible for the equipment, staff, office space and facilities necessary to perform its obligations. The Fund will assume all other expenses except to the extent of those paid by the Adviser. The Investment Adviser assumes and shall pay all ordinary expenses of the Fund. Examples of such expenses include: (a) organizational costs, (b) compensation of the Investment Adviser's personnel, (c) compensation of any of the Fund's trustees, officers or employees who are not interested persons of the Investment Adviser or its affiliates, (d) fees and expenses of registering the Fund's shares under the federal securities laws and of qualifying its shares under applicable state Blue Sky laws, including expenses attendant upon renewing such registrations and qualifications, (e) insurance premiums, (f) fidelity bonds, (g) accounting and bookkeeping costs and expenses necessary to maintain the Fund's books and records, (h) outside auditing and ordinary legal expenses, (i) all costs associated with shareholders meetings and the preparation and dissemination of proxy solicitation materials, (j) costs of printing and distribution of the Fund's Prospectus and other shareholder information to existing shareholders, (k) charges, if any, of custodian and dividend disbursing agent's fees, (l) industry association fees, and (m) costs of independent pricing services and calculation of daily net asset value. The Adviser may, at its discretion, assume any additional expenses ordinarily assumed by the Fund when it determines that such action is in the best interest of the shareholders. Any extraordinary and non-recurring expenses shall be paid by the Fund. Prospectus | 9 The Investment Adviser may act as an investment adviser and administrator to other persons, firms, or corporations (including investment companies), and may have numerous advisory clients besides the Fund. The Advisory Agreement and the Administration Agreement are terminable on 60 days' written notice, without penalty, by a vote of a majority of the Fund's outstanding shares or by vote of a majority of the Fund's entire Board of Trustees, or by the Investment Adviser on 60 days' written notice, and automatically terminates in the event of its assignment. MANAGEMENT OF THE FUND The business of the Fund is managed under the direction of its Board of Trustees in accordance with Section 3.2 of the Declaration of Trust of Berkshire Capital Investment Trust, which Declaration of Trust has been filed with the Securities and Exchange Commission and is available upon request. Pursuant to Section 2.6 of the Declaration of Trust, the trustees shall elect officers including a president, secretary and treasurer. The Board of Trustees retains the power to conduct, operate and carry on the business of the Fund and has the power to incur and pay any expenses which, in the opinion of the Board of Trustees, are necessary or incidental to carry out any of the Fund's purposes. The trustees, officers, employees and agents of the Fund, when acting in such capacities, shall not be subject to any personal liability except for his or her own bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties. The trustees and officers, together with their addresses, age, principal occupations during the past five years and ownership of the Fund are as follows:
Principal Occupation Fund Shares Percent Name and Address Past 5 Years Owned 11/2/98 of Class - ----------------------- ---------------------------------- ------------- -------- *Malcolm R. Fobes III BERKSHIRE CAPITAL INVESTMENT TRUST; 7,585 46.02% 475 Milan Drive, #103 Trustee/President San Jose, CA 95134 BERKSHIRE CAPITAL HOLDINGS, INC.; Age: 34 Chairman & CEO ADOBE SYSTEMS, INC.; Technical Support Engineer *Ronald G. Seger BERKSHIRE CAPITAL INVESTMENT TRUST; 5,362 32.53% 715 Glenborough Drive Trustee/Secretary Mountain View, CA 94041 RONALD G. SEGER, O.D.; Age: 48 Optometrist **Leland F. Smith BERKSHIRE CAPITAL INVESTMENT TRUST; 503 3.05% #7 Rocky Mountain Lane Trustee Sunriver, OR 97707 CORPORATE ASSET STRATEGIES, INC.; Age: 59 Chairman & CEO ELESCO, LTD.; Chairman & CEO Andrew W. Broer BERKSHIRE CAPITAL INVESTMENT TRUST; 839 5.09% 455 Navaro Way, #201 Trustee San Jose, CA 95134 CISCO SYSTEMS, INC.; Age: 32 Data Center Manager TALIGENT, INC.; Software Integration Engineer *Trustees of the Fund who are considered "interested persons" as defined in Section 2(a)(19) of the Investment Company Act of 1940 by virtue of their affiliation with the Investment Adviser. **Corporate Asset Strategies, Inc. provides consulting services in the field of corporate real estate management.
REMUNERATION OF OFFICERS AND TRUSTEES The Fund does not intend to pay fees to the trustees until such time as the Fund's assets exceed $2,500,000; although the Fund will reimburse trustees for their expenses. The Fund does not compensate trustees affiliated with the Investment Adviser except as they may benefit through payment of the Advisory and Administrative fees. Prospectus | 10 ORGANIZATION AND CAPITAL STRUCTURE The Trust was organized on November 25, 1996 as a Delaware business trust and is authorized to issue an unlimited number of shares of beneficial interest. At present there is only one series authorized by the Trust, which series has been designated as the Berkshire Capital Growth & Value Fund. The Board of Trustees may authorize the creation of an additional series without shareholder approval. All shares, when issued, will be fully paid and non-assessable and will be redeemable and freely transferable. All shares have equal voting rights and can be issued as full or fractional shares. A fractional share has pro rata the same kind of rights and privileges as a full share. The shares possess no preemptive or conversion rights. Each shareholder has one vote for each share held irrespective of the relative net asset value of the shares. Each share has equal dividend, distribution and liquidation rights. The voting rights of the shareholders are non-cumulative, so that holders of more than 50% of the shares can elect all trustees being elected. On some issues, such as election of trustees, all shares of the Fund vote together as one series. In the event that the Trust authorizes additional series of shares as separate funds, on issues affecting only a particular fund, the shares of the affected fund will vote as a separate series. An example of such an issue would be a fundamental investment restriction pertaining to only one fund. The Board of Trustees of the Trust is responsible for managing the business affairs of the Fund. The Board of Trustees consists of four members: Malcolm R. Fobes III, Ronald G. Seger, Leland F. Smith and Andrew W. Broer. As of November 2, 1998, the Board of Trustees owned of record or beneficially 86.69% of the Fund's outstanding shares. Malcolm R. Fobes III and Ronald G. Seger owned 46.02% and 32.53% of the Fund's outstanding shares respectively and are considered control persons as defined under Section 2(a)(9) of the 1940 Act by virtue of their ownership of more than 25% of the voting securities of the Fund. PURCHASE OF SHARES AND REINVESTMENT The offering price of the shares offered by the Fund is at the Net Asset Value ("NAV") per share next determined after receipt of the purchase order by the Fund and is computed in the manner described under the caption "Pricing of Shares" in this Prospectus. The Fund reserves the right to terminate the offering of the shares made by this Prospectus at any time and to refuse purchase applications when, in the judgement of management, such termination or refusal is in the best interests of the Fund. The Fund also reserves the right to waive initial and subsequent investment minimums and to modify investment minimums generally from time to time. The Fund does not intend to issue share certificates to its shareholders whereby shares of the Fund shall be considered "uncertificated securities" as defined under Rule 17f-1 of the Securities Exchange Act of 1934. The Fund and the Investment Adviser may enter into arrangements with brokerage firms and financial institutions under which shares of the Fund may be purchased or sold. Investors may be charged a transaction fee if they effect transactions in Fund shares through a broker or agent. Initial Investments: Initial purchase of shares of the Fund may be made by application submitted to the Fund. For the convenience of investors, a Share Purchase Application is provided with this Prospectus. The minimum initial purchase of shares is $5,000 unless investing through the vehicle of an Individual Retirement Account ("IRA"), in which case the minimum initial investment is $2,000. Such initial investment amount is due and payable three (3) business days after the purchase date. The Fund will be initially registered in California and therefore restricted to California residents at the time of purchase. There will be no solicitation out of the state of California of potential shareholders until registration under the Blue Sky laws of the state of residence have been met. Prospectus | 11 Subsequent Purchases: Subsequent purchases may be made by mail or by phone and are due and payable three (3) business days after the purchase date. The minimum is $500, or $200 for an IRA. Less may be accepted under special circumstances. Reinvestments: The Fund will automatically retain and reinvest dividends and capital gains distributions and use same for the purchase of additional shares for the shareholder at net asset value as of the close of business on the distribution date. A shareholder may at any time by letter or forms supplied by the Fund direct the Fund to pay dividends and/or capital gains distributions, if any, to such shareholder in cash. Fractional Shares: Full or fractional shares will be issued by the Fund. Fractional shares will be issued to three decimal places as purchased from the Fund. The Fund will maintain an account for each shareholder of shares for which no certificates have been issued. RETIREMENT PLANS Generally: Shares of the Fund may be purchased directly by existing retirement plans which allow for such investment. Self-employed individuals may purchase shares through properly drafted Keogh plans covering the self-employed individual or eligible employees. An investor should consult with a tax adviser concerning the eligibility or establishment of such plans before investing in shares of the Fund. Individual Retirement Accounts: Certain individuals may be eligible to establish an Individual Retirement Account (IRA) with the Fund if they meet the applicable requirements of the Internal Revenue Code. Persons who earn compensation and are not covered by a company retirement plan (and, if married, your spouse is not covered by a company retirement plan) may establish IRA accounts using Fund shares. Under such circumstances, annual contributions by individuals, limited to the lesser of $2,000 or 100% of compensation, are tax deductible from gross income. If you are married (filing jointly) and each spouse establishes an IRA, each spouse may contribute up to $2,000 to his or her IRA for a year as long as the combined compensation of both spouses for the year is at least $4,000. Contributions to each spousal account are fully deductible under the aforementioned guidelines. IRA contributions may also be tax deductible for individual taxpayers and married couples if covered by a company retirement plan as long as adjusted gross incomes are within certain specified limits. All individuals may make nondeductible IRA contributions to separate accounts. You may begin to make non-penalty IRA withdrawals as early as age 59 1/2 or as late as 70 1/2. Most withdrawals from an IRA account before age 59 1/2 are subject to a 10% penalty tax in addition to regular income taxes. In certain situations, withdrawals before age 59 1/2 are not subject to the 10% penalty. For example, in the event of death or disability early withdrawals may be made without penalty. Investors should consult their tax advisers to determine whether they are qualified to take advantage of an IRA and whether an investment in the Fund would be appropriate. The Board of Trustees has selected Delaware Charter Guarantee & Trust Co. as the Fund's trustee for qualified individuals who wish to establish an IRA account funded with shares of the Fund. Although the Fund does not charge IRA fees itself, there are fees charged by Delaware Charter Guarantee & Trust Co. to open and maintain an IRA account. To establish an IRA account, all prospective applicants are required to complete an IRA application for Delaware Charter Guarantee & Trust Co. A disclosure statement describing the general provisions of the IRA will be forwarded to all prospective applicants as required by U.S. Treasury regulations. All IRAs may be revoked within seven (7) days of their establishment with no penalty. For more information regarding the establishment of an IRA account, please direct all inquiries to the Fund at its principal office in San Jose, California. Prospectus | 12 PRICING OF SHARES The net asset value of the Fund's shares is determined as of the close of business of the New York Stock Exchange on each business day of which that Exchange is open (presently 4:00 p.m.); Monday through Friday exclusive of Washington's Birthday, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving, Christmas and New Year's Day. The price is determined by dividing the value of its securities, plus any cash and other assets less all liabilities, excluding capital surplus, by the number of shares outstanding. The market value of securities listed on a national exchange is determined to be the last recent sales price on such exchange. Listed securities that have not recently traded and over-the-counter securities are valued at the last bid price in such market. Short-term paper (debt obligations that mature in less than 60 days) are valued at amortized cost which approximates market value. Other assets are valued at fair market value as determined in good faith by the Board of Trustees. REDEMPTION OF SHARES The Fund will redeem all or any portion of a shareholder's shares of the Fund when requested in accordance with the procedures set forth below. Although the Fund does not charge a redemption fee, there is a fee equal to that charged to the Fund by the registered Transfer Agent for processing services, currently $10 regardless of the number of shares redeemed. All redemption requests should be made to the Fund at its principal office in San Jose, California. The redemption price shall be the net asset value per share next determined after notice is received by the Fund. If By Mail: Send a written request, signed by all registered owners in the exact names in which they appear on the account indicating the dollar amount or number of shares to be redeemed. Redemption requests by corporations, partnerships, trusts, estates, guardianships, custodial accounts and accounts under court jurisdiction shall be accompanied with all supporting legal documents if required by applicable law. To be in proper form, such redemption requests shall be signed by an authorized officer and must indicate the capacity in which the officer is acting. If by Telephone: Shareholders who complete the Share Purchase Application provided with this Prospectus may redeem shares of the Fund by telephone if they have elected on the application to do so. The Fund will employ reasonable procedures to confirm that all instructions given by telephone are genuine. Such procedures shall include requiring the caller to provide personal and/or account information for the purpose of establishing the caller's identification and sending a confirmation statement on redemptions to the address of record each time activity is initiated by telephone. As long as the Fund's registered transfer agent follows instructions communicated by telephone which were reasonably believed to be genuine at the time of receipt, neither the Fund nor the registered transfer agent shall be liable for any loss to the shareholder caused by an unauthorized transaction. In any instance where the Fund's registered transfer agent is not reasonably satisfied that instructions received by telephone are genuine, neither the Fund nor the transfer agent shall be liable for any losses which may occur because of delay in implementing a transaction. Unless the shareholder is known to management, all signatures must be guaranteed by an "eligible guarantor institution" as defined under Rule 17Ad-15 of the Securities Exchange Act of 1934. Generally, such institutions include national or state banks, savings and loan associations, credit unions, brokers and dealers which are members of a national securities exchange or a clearing agency and maintain a net capital of at least $100,000, national securities exchanges, registered securities associations, clearing agencies and institutions that participate in the Securities Transfer Agent Medallion Program ("STAMP") or other recognized signature guarantee medallion programs. Such guarantees must be signed by an authorized signatory thereof with "Signature Guaranteed" appearing along with the shareholder's signature. A notarized signature will not be sufficient for the request to be in proper form. Redemption requests by corporate and fiduciary shareholders must be accompanied by appropriate documentation establishing authority of the person seeking to act on behalf of the account. Prospectus | 13 The proceeds received by the shareholder may be more or less than his cost of such shares, depending upon the net asset value per share at the time of redemption. Any difference should be treated by the shareholder as a capital gain or loss for federal income tax purposes. Payment by the Fund will ordinarily be made within seven (7) business days provided the shareholder has complied with all the aforementioned requirements. However, if an investor has purchased Fund shares by check and subsequently submits a redemption request, the redemption proceeds will not be transmitted until the check used for investment has cleared, which may take up to fifteen (15) days. The Fund may suspend the right of redemption or postpone the date of payment if; the New York Stock Exchange is closed for other than customary weekend or holiday closings, or when trading on the New York Stock Exchange is restricted as determined by the Securities and Exchange Commission or when the Commission has determined that an emergency exists, thereby making disposal of fund securities or valuation of net assets not reasonably practicable, or for such other periods as the Commission may permit. The Fund intends to make payments in cash, however, if the Board of Trustees believes that economic conditions exist which would make such practice detrimental to the best interests of the Fund, redemption may be accomplished through distribution of portfolio securities of the Fund. The Fund and the Investment Adviser may enter into arrangements with brokerage firms and financial institutions under which shares of the Fund may be purchased or sold. Investors may be charged a transaction fee if they effect transactions in Fund shares through a broker or agent. BROKERAGE The Fund requires all brokers to effect transactions in portfolio securities in such a manner as to get prompt execution of the orders at the most favorable price. Under the terms of the Advisory Agreement, the Adviser is authorized to employ all brokers to execute orders for the purchase and sale of portfolio securities on behalf of the Fund. The Adviser will use its best judgement in determining which broker can provide the best net price and execution. The selected broker shall be required to provide prompt and reliable execution at a reasonably competitive price. The Adviser may select brokers who, in addition to meeting primary requirements of execution and price, may furnish statistical or other factual information and services, which, in the opinion of management, will produce a direct benefit to the Fund or assist the Adviser in carrying out its responsibilities to the Fund. Such information and services shall include economic studies, industry studies, statistical analysis, corporate reports and quotations necessary to determine the value of the Fund's net assets. No effort is made to determine the value of these services or the amount they might have reduced the expenses of the Adviser. Other than as set forth above, the Fund has no fixed policy, formula, method, or criteria which it uses in allocating brokerage business to firms furnishing these materials and services. The Board of Trustees will evaluate and review the reasonableness of brokerage commissions paid semiannually. SHAREHOLDERS MEETINGS Annual meetings of shareholders will not be held unless called by the shareholders pursuant to Delaware Business Trust Act or unless required by the 1940 Act and the rules and regulations promulgated thereunder. Special meetings of the shareholders may be held from time to time when called upon by (i) the Chairman of the Board of Trustees, if one exists, the President and two or more trustees, (ii) by one or more shareholders holding ten percent or more of the shares entitled to vote on matters presented to the meeting, or (iii) if the annual meeting is not held within any thirteen month period, upon application of any shareholder, a court of competent jurisdiction may summarily order that such meeting be held. In addition, the 1940 Act requires a shareholder vote on all investment advisory contracts and amendments thereto. Shareholder inquiries should be directed to the Fund's principal office at 475 Milan Drive, #103, San Jose, California 95134-2453. Prospectus | 14 REPORTS TO SHAREHOLDERS The Fund sends all shareholders annual reports containing audited financial statements and other periodic reports, at least semiannually, containing unaudited financial statements. TRANSFER AGENT The Investment Adviser has retained Mutual Shareholder Services (the "Transfer Agent") to provide shareholder servicing, dividend disbursing and transfer agent services. The Transfer Agent is an indirect wholly-owned subsidiary of Maxus Information Systems, Inc. The Investment Adviser (not the Fund) pays the Transfer Agent's fees for these services. CUSTODIAN Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263, has been retained to act as Custodian for the Fund's investments. Fifth Third Bank acts as the Fund's depository, safekeeps its portfolio securities, collects all income and other payments with respect thereto, disburses funds as instructed and maintains records in connection with its duties. AUDITORS The firm of McCurdy & Associates CPA's, Inc., 27955 Clemens Road, Westlake, Ohio 44145, has been selected as independent auditors for the Fund for the fiscal year ending December 31, 1998. McCurdy & Associates CPA's, Inc. will perform an annual audit of the Fund's financial statements and will advise the Fund as to certain accounting matters. LEGAL OPINION The legality of the shares offered hereby have been passed upon by Hall & Evans, L.L.C., 1200 Seventeenth Street, Suite 1700, Denver, Colorado 80202. LITIGATION As of the date of this prospectus, there was no pending or threatened litigation involving the Fund in any capacity whatsoever. ADDITIONAL INFORMATION This Prospectus omits certain information contained in the registration statement on file with the Securities & Exchange Commission. The registration statement may be inspected without charge at the principal office of the Commission in Washington, D.C. and copies of all or part thereof may be obtained upon payment of the fee prescribed by the Commission. Shareholders may also direct inquiries to the Fund by phone or at the address given on cover of this Prospectus. Prospectus | 15 BERKSHIRE CAPITAL INVESTMENT TRUST BERKSHIRE CAPITAL GROWTH & VALUE FUND - ------------------------------------ PROSPECTUS NOVEMBER 2, 1998 INVESTMENT ADVISER Berkshire Capital Holdings, Inc. 475 Milan Drive, Suite #103 San Jose, California 95134 INDEPENDENT AUDITORS McCurdy & Associates CPA's, Inc. 27955 Clemens Road Westlake, Ohio 44145 TRANSFER AGENT Mutual Shareholder Services 1301 East Ninth Street Suite 3600 Cleveland, Ohio 44114 CUSTODIAN Fifth Third Bank 38 Fountain Square Plaza Cincinnati, Ohio 45263 LEGAL COUNSEL Hall & Evans, LLC 1200 Seventeenth Street, Suite 1700, Denver, Colorado 80202 - --------------------------------- BERKSHIRE CAPITAL INVESTMENT TRUST 475 Milan Drive, Suite #103 San Jose, California 95134 (408) 526-0707 BERKSHIRE CAPITAL INVESTMENT TRUST BERKSHIRE CAPITAL GROWTH & VALUE FUND 475 Milan Drive, Suite #103 San Jose, California 95134-2453 (408) 526-0707 Part B STATEMENT OF ADDITIONAL INFORMATION NOVEMBER 2, 1998 This Statement of Additional Information is not a Prospectus, but is to be read in conjunction with the Prospectus for the Berkshire Capital Growth & Value Fund dated November 2, 1998 (the "Prospectus"). To obtain the Prospectus, please write or call the Fund at the address or phone number referenced above. TABLE OF CONTENTS THE FUND ........................................ 2 INVESTMENT OBJECTIVE ............................ 2 RISK FACTORS .................................... 2 Generally ..................................... 2 Non-Diversification ........................... 2 Concentration ................................. 2 PORTFOLIO TURNOVER POLICY ....................... 2 CONCENTRATION AND NON-DIVERSIFICATION POLICY .... 3 Concentration ................................. 3 Non-Diversification ........................... 3 TAX STATUS ...................................... 3 INVESTMENT RESTRICTIONS ......................... 4 INVESTMENT ADVISER .............................. 5 ADVISORY FEE .................................... 5 FUND ADMINISTRATION ............................. 5 ADVISORY AND ADMINISTRATION AGREEMENTS .......... 6 MANAGEMENT OF THE FUND .......................... 7 REMUNERATION OF OFFICERS AND TRUSTEES ........... 7 PRINCIPAL SECURITY HOLDERS ...................... 8 ORGANIZATION AND CAPITAL STRUCTURE .............. 8 PURCHASE OF SHARES AND REINVESTMENT ............. 9 Initial Investments ........................... 9 Subsequent Purchases .......................... 9 Reinvestments ................................. 9 Fractional Shares ............................. 9 RETIREMENT PLANS ................................ 10 Generally ..................................... 10 Individual Retirement Account ................. 10 PRICING OF SHARES ............................... 10 REDEMPTION OF SHARES ............................ 11 If By Mail .................................... 11 If By Telephone ............................... 11 PERFORMANCE INFORMATION ......................... 12 BROKERAGE ....................................... 13 FINANCIAL STATEMENTS ............................ 14 MISCELLANEOUS INFORMATION ....................... 14 Statement of Additional Information | 1 THE FUND Berkshire Capital Growth & Value Fund (the "Fund") is an open-end, non-diversified portfolio of the Berkshire Capital Investment Trust (the "Trust"). The Trust was organized on November 25, 1996 as a Delaware business trust and is authorized to issue an indefinite number of shares of beneficial interest. The Trust's registered office is 1209 Orange Street, Wilmington, Delaware 19801. Mail may be addressed to Trust's principal executive office at 475 Milan Drive, #103, San Jose, California 95134-2453. INVESTMENT OBJECTIVE Berkshire Capital Growth & Value Fund has the primary objective of long-term capital appreciation through investments in equity securities. The Fund seeks to accomplish this objective by investing primarily in equities of growth companies in sectors offering the potential for above-average returns and/or those companies which the Fund's adviser believes to be undervalued at their current market price, resulting in the potential for capital appreciation. In selecting investments for the Fund, the adviser's primary emphasis is typically on evaluating a company's management, growth prospects, business operations, revenues, earnings, cash flows, and balance sheet in relationship to its share price. Fundamental analysis by use of dividend and cash flow discounting models are often employed to determine the intrinsic value of a company and then compared to the current share price. Receipt of income is a secondary objective, as some investments may yield dividends, interest or other income. RISK FACTORS Generally: Risks associated with the Fund's performance will be those due to broad market declines and business risks from difficulties which occur to particular companies while in the Fund's portfolio. It must be realized, as is true of almost all securities, there can be no assurance that the Fund will obtain its ongoing objective of capital appreciation. Non-Diversification: The Fund will be operated as a non-diversified investment company and as such, the Fund's shares may be more susceptible to adverse change in value than would be the shares of a diversified investment company. Concentration: The Fund has adopted the fundamental policy of concentrating at least 25% of its assets in the equity securities of companies in the electronic technology industry. Because of such policy, the Fund may be subject to greater risk than that of a fund which is fully diversified among many market sectors. PORTFOLIO TURNOVER POLICY The Fund does not propose to purchase securities for short-term trading in the ordinary course of operations. Accordingly, it is expected that the annual turnover rate will not exceed 50%, wherein turnover is computed by dividing the lesser of the Fund's total purchases or sales of securities within the period by the average monthly portfolio value of the Fund during such period. There may be times when management deems it advisable to substantially alter the composition of the portfolio, in which event, the portfolio turnover rate might substantially exceed 50%; this would only result from special circumstances and not from the Fund's normal operations. Statement of Additional Information | 2 CONCENTRATION AND NON-DIVERSIFICATION POLICY Concentration: The Fund will concentrate its investments in the equity securities of companies in the electronic technology industry. Concentration requires the Fund to invest 25% or more of the value of its total assets in securities of issuers in a particular industry. Companies in the electronic technology industry shall include businesses which are principally engaged in the development, production, or distribution of products or services related to the following business segments: Computers, Computer Peripherals, Semiconductors, Software, Telecommunications and Mass Storage Devices. In some future period or periods, due to adverse economic conditions in the electronic technology industry, the Fund may temporarily have less than 25% of the value of its assets invested in that industry. At such times the adviser may adopt a temporary defensive posture and recommend the Fund invest in money market instruments or U.S. Government securities. As a result of such concentration in the electronic technology industry, the Fund's shares may fluctuate more widely than the value of shares of a portfolio which invests in a broader range of industries. Non-Diversification: The Fund is classified as being non-diversified which means that it may not invest more than 25% of its assets in the securities of any one issuer and, with respect to 50% of its total assets, the Fund may not invest more than 5% of its total assets in the securities of any one issuer. Thus, the Fund may invest up to 25% of its total assets in the securities of each of any two issuers. The Fund, therefore, may be more susceptible to risk of loss than a more widely diversified fund as a result of a single economic, political, or regulatory occurrence. The policy of the Fund, in the hope of achieving its objective as stated above, is therefore one of selective investments rather than broad diversification. The Fund seeks only enough diversification for adequate representation among what it considers to be the best performing securities and to maintain its federal non-taxable status under Sub-Chapter M of the Internal Revenue Code. TAX STATUS Under the provisions of Sub-Chapter M of the Internal Revenue Code of 1986 as amended, the Fund intends to pay out substantially all of its investment income and realized capital gains. As a result, the Fund intends to be relieved of federal income tax on the amounts distributed to shareholders. In order to qualify as a "regulated investment company" under Sub-Chapter M, at least 90% of the Fund's income must be derived from dividends, interest, and gains from securities transactions. No more than 30% of the Fund's profits may be derived from securities held less than three months and no more than 50% of the Fund assets may be held in security holdings that exceed 5% of the total assets of the Fund at time of purchase. Distribution of any net long-term capital gains realized by the Fund will be taxable to the shareholder as long-term capital gains regardless of the length of time Fund shares have been held by the investor. All income realized by the Fund, including short-term capital gains, will be taxable to the shareholder as ordinary income. Dividends from net income will be made annually or more frequently at the discretion of the Fund's Board of Trustees and will automatically be reinvested in additional Fund shares at net asset value, unless shareholder has elected to receive payment in the form of cash. Dividends received shortly after purchase of shares by an investor will have the effect of reducing the per share net asset value of the shares by the amount of such dividends or distributions and, although in effect a return of capital, are subject to federal income taxes. The Fund is required by federal law to withhold 31% of reportable payments (which may include dividends, capital gains, distributions and redemptions) paid to shareholders who have not complied with IRS regulations. In order to avoid this withholding requirement you must certify on the Shareholder Purchase Application supplied by the Fund, that your Social Security or Taxpayer Identification Number is correct and that you are not currently subject to back-up withholding or otherwise certify that you are exempt from back-up withholding. Statement of Additional Information | 3 INVESTMENT RESTRICTIONS The Fund has adopted the following fundamental investment restrictions. These restrictions cannot be changed without approval by the holders of a majority of the outstanding voting securities of the Fund. As defined in the Investment Company Act of 1940 (the "Act"), the "vote of a majority of the outstanding voting securities" means the lesser of the vote of (i) 67% of the shares of the Fund at a meeting where more than 50% of the outstanding shares are present in person or by proxy or (ii) more than 50% of the outstanding shares of the Fund. The Fund may not: (a) Act as underwriter for securities of other issuers except insofar as the Fund may be deemed an underwriter in selling its own portfolio securities. (b) Borrow money or purchase securities on margin except for temporary or emergency (not leveraging) purposes, including the meeting of redemption requests that might otherwise require the untimely disposition of securities, in an aggregate amount not exceeding 25% of the value of the Fund's total assets at the time any borrowing is made. While the Fund's borrowings are in excess of 5% of its total assets, the Fund will not purchase any additional portfolio securities. (c) Sell securities short. (d) Invest in securities of other investment companies except as part of a merger, consolidation, or purchase of assets approved by the Fund's shareholders or by purchases with no more than 10% of the Fund's assets in the open market involving only customary broker's commissions. (e) Make investments in commodities, commodity contracts or real estate although the Fund may purchase and sell securities of companies which deal in real estate or interests therein. (f) Make loans. The purchase of a portion of a readily marketable issue of publicly distributed bonds, debentures or other debt securities will not be considered the making of a loan. (g) Acquire more than 10% of the securities of any class of another issuer, treating all preferred securities of an issuer as a single class and all debt securities as a single class, or acquire more than 10% of the voting securities of another issuer. (h) Invest in companies for the purpose of acquiring control. (i) Purchase or retain securities of any issuer if those officers, directors or trustees of the Fund or its Investment Adviser individually owns more than 1/2 of 1% of any class of security or collectively own more than 5% of such class of securities of such issuer. (j) Pledge, mortgage or hypothecate any of its assets. (k) Invest in securities which may be subject to registration under the Securities Act of 1933 prior to sale to the public or which are not at the time of purchase readily saleable. (l) Invest more than 10% of the total Fund assets, taken at market value at the time of purchase, in securities of companies with less than three years' continuous operation, including the operations of any predecessor. (m) Issue senior securities. (n) Acquire any securities of companies within one industry if, as a result of such acquisition, more than 25% of the value of the Fund's total assets would be invested in securities of companies within such industry; provided, however, that there shall be no limitation on the purchase of securities of companies in the electronic technology industry. With respect to fundamental restriction (n) above, companies in the electronic technology industry shall be defined as businesses which are principally engaged in the development, production, or distribution of products or services related to the following business segments: Computers, Computer Peripherals, Semiconductors, Software, Telecommunications and Mass Storage Devices. Statement of Additional Information | 4 In connection with its investment objective and policies the Fund may, however, invest in the following types of securities which can involve certain risks: U.S. Government Securities: The Fund may purchase securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. Such securities will typically include, without limitation, U.S. Treasury securities such as Treasury Bills, Treasury Notes or Treasury Bonds that differ in their interest rates, maturities and times of issuance. Bank Obligations: The Fund may invest in bank obligations, including certificates of deposit, time deposits, banker's acceptances and other short-term obligations of banks, savings and loan associations and other banking institutions. Warrants: The Fund may purchase warrants, valued at the lower of cost or market, but only to the extent that such purchase does not exceed 5% of the Fund's net assets at the time of purchase. Included within that amount, but not to exceed 2% of the Fund's net assets, may be warrants which are not listed on the New York or American Stock Exchanges. INVESTMENT ADVISER The Fund retains Berkshire Capital Holdings, Inc., at 475 Milan Drive, #103, San Jose, California 95134-2453, as its Investment Adviser. Berkshire Capital Holdings, Inc. (the "Investment Adviser") is a California corporation founded in February 1993. The company is registered as an Investment Adviser with the Securities and Exchange Commission under the Investment Advisers Act of 1940. The corporation is controlled and wholly-owned by Malcolm R. Fobes III and Ronald G. Seger Malcolm R. Fobes III has the direct responsibility for the overall strategic management of the Fund's portfolio and its administration. Mr. Fobes founded Berkshire Capital Holdings, Inc. in 1993, has served as Chairman of the Board and Chief Executive Officer since the company's inception, and has been responsible for the direction of the company's investments in both private and publicly-held concerns. Mr. Fobes has a B.S. degree in Finance and a minor in Economics from San Jose State University in California. In addition to founding the company in 1993, Mr. Fobes was also simultaneously retained by Adobe Systems, Inc., a high-technology software development firm, as a technical support engineer from May 1991 to November 1994. Mr. Fobes has served exclusively in the capacity of Chairman and Chief Executive Officer of the Investment Adviser from November 1994 to present. Ronald G. Seger has served as Secretary and member of the Board of Directors of the Investment Adviser since September 1996. Both Mr. Fobes and Mr. Seger also serve as Trustees of the Fund. ADVISORY FEE The Fund will be managed by Berkshire Capital Holdings, Inc. The Investment Adviser will be paid a fee of 1.5% per year on the net assets of the Fund. All fees are computed on the average daily closing net asset value of the Fund and are payable monthly. Such fee is higher than the fee paid by most other funds. Notwithstanding, the Investment Adviser may at its discretion, forgo sufficient fees which would have the effect of lowering the Fund's expense ratio and increasing the yield to shareholders. FUND ADMINISTRATION In addition to its fee for serving as the Fund's Investment Adviser, Berkshire Capital Holdings, Inc. will receive a fee for serving as the Fund's administrator. The fee will be paid monthly at an annual rate of 0.50% of the Fund's average daily net assets up to $50 million, 0.45% of such assets from $50 million to $200 million, 0.40% of such assets from $200 million to $500 million, 0.35% of such assets from $500 million to $1 billion, and 0.30% of such assets in excess of $1 billion. For such fee, Berkshire Capital Holdings, Inc. is responsible for providing administrative and general supervisory services to the Fund and will provide virtually all customary services required for Fund operations. Statement of Additional Information | 5 ADVISORY AND ADMINISTRATION AGREEMENTS On October 26, 1997 the Board of Trustees unanimously approved an investment advisory contract (the "Advisory Agreement") and a separate administration contract (the "Administration Agreement") with Berkshire Capital Holdings, Inc. The Advisory Agreement and the Administration Agreement are effective through December 31, 1998. Thereafter, both agreements may be continued for successive periods not to exceed one year, provided that such continuance is specifically approved annually by (a) the Fund's Board of Trustees or (b) vote of the holders of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund. In either event, the continuance must be approved by a majority of the Board of Trustees who are not "interested persons" of the Trust (as defined in the 1940 Act) or the Investment Adviser, by vote cast in person at a meeting called for the purpose of voting on such approval. Under the Advisory Agreement, Berkshire Capital Holdings, Inc. will determine what securities will be purchased, retained or sold by the Fund on the basis of a continuous review of its portfolio. Mr. Fobes, will have the direct responsibility of managing the composition of the Fund's portfolio in accordance with the Fund's investment objective. Pursuant to its contract with the Fund, the Investment Adviser is (i) required to render research, statistical and advisory services to the Fund, (ii) make specific recommendations based on the Fund's investment requirements, and (iii) pay salaries of the Fund's employees who may be officers, directors or employees of the Investment Adviser. Excepting these items, the Fund pays all other fees and expenses incurred in conducting its business affairs. The Investment Adviser has paid the initial organizational costs of the Fund and will reimburse the Fund for any and all losses incurred because of purchase reneges. Under the Administration Agreement, the Investment Adviser will render all administrative and supervisory services to the Fund. The Adviser will oversee the maintenance of all books and records with respect to the Fund's securities transactions and the Fund's book of accounts in accordance with all applicable federal and state laws and regulations. The Adviser will also arrange for the preservation of journals, ledgers, corporate documents, brokerage account records and other records which are required pursuant to Rule 31a-1 promulgated under the 1940 Act. In accordance with the Administration Agreement, the Adviser is also responsible for the equipment, staff, office space and facilities necessary to perform its obligations. The Fund will assume all other expenses except to the extent of those paid by the Adviser. The Investment Adviser assumes and shall pay all ordinary expenses of the Fund. Examples of such expenses include: (a) organizational costs, (b) compensation of the Investment Adviser's personnel, (c) compensation of any of the Fund's trustees, officers or employees who are not interested persons of the Investment Adviser or its affiliates, (d) fees and expenses of registering the Fund's shares under the federal securities laws and of qualifying its shares under applicable state Blue Sky laws, including expenses attendant upon renewing such registrations and qualifications, (e) insurance premiums, (f) fidelity bonds, (g) accounting and bookkeeping costs and expenses necessary to maintain the Fund's books and records, (h) outside auditing and ordinary legal expenses, (i) all costs associated with shareholders meetings and the preparation and dissemination of proxy solicitation materials, (j) costs of printing and distribution of the Fund's Prospectus and other shareholder information to existing shareholders, (k) charges, if any, of custodian and dividend disbursing agent's fees, (l) industry association fees, and (m) costs of independent pricing services and calculation of daily net asset value. The Adviser may, at its discretion, assume any additional expenses ordinarily assumed by the Fund when it determines that such action is in the best interest of the shareholders. Any extraordinary and non-recurring expenses shall be paid by the Fund. Statement of Additional Information | 6 The Investment Adviser may act as an investment adviser and administrator to other persons, firms, or corporations (including investment companies), and may have numerous advisory clients besides the Fund. The Advisory Contract and the Administration Agreement are terminable on 60 days' written notice, without penalty, by a vote of a majority of the Fund's outstanding shares or by vote of a majority of the Fund's entire Board of Trustees, or by the Investment Adviser on 60 days' written notice, and automatically terminates in the event of its assignment. MANAGEMENT OF THE FUND The business of the Fund is managed under the direction of its Board of Trustees in accordance with Section 3.2 of the Declaration of Trust of Berkshire Capital Investment Trust, which Declaration of Trust has been filed with the Securities and Exchange Commission and is available upon request. Pursuant to Section 2.6 of the Declaration of Trust, the trustees shall elect officers including a president, secretary and treasurer. The Board of Trustees retains the power to conduct, operate and carry on the business of the Fund and has the power to incur and pay any expenses which, in the opinion of the Board of Trustees, are necessary or incidental to carry out any of the Fund's purposes. The trustees, officers, employees and agents of the Fund, when acting in such capacities, shall not be subject to any personal liability except for his or her own bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties. The trustees and officers, together with their addresses, age, principal occupations during the past five years and ownership of the Fund are as follows:
Principal Occupation Fund Shares Percent Name and Address Past 5 Years Owned 11/2/98 of Class - ----------------------- ---------------------------------- ------------- -------- *Malcolm R. Fobes III BERKSHIRE CAPITAL INVESTMENT TRUST; 7,585 46.02% 475 Milan Drive, #103 Trustee/President San Jose, CA 95134 BERKSHIRE CAPITAL HOLDINGS, INC.; Age: 34 Chairman & CEO ADOBE SYSTEMS, INC.; Technical Support Engineer *Ronald G. Seger BERKSHIRE CAPITAL INVESTMENT TRUST; 5,362 32.53% 715 Glenborough Drive Trustee/Secretary Mountain View, CA 94041 RONALD G. SEGER, O.D.; Age: 48 Optometrist **Leland F. Smith BERKSHIRE CAPITAL INVESTMENT TRUST; 503 3.05% #7 Rocky Mountain Lane Trustee Sunriver, OR 97707 CORPORATE ASSET STRATEGIES, INC.; Age: 59 Chairman & CEO ELESCO, LTD.; Chairman & CEO Andrew W. Broer BERKSHIRE CAPITAL INVESTMENT TRUST; 839 5.09% 455 Navaro Way, #201 Trustee San Jose, CA 95134 CISCO SYSTEMS, INC.; Age: 32 Data Center Manager TALIGENT, INC.; Software Integration Engineer *Trustees of the Fund who are considered "interested persons" as defined in Section 2(a)(19) of the Investment Company Act of 1940 by virtue of their affiliation with the Investment Adviser. **Corporate Asset Strategies, Inc. provides consulting services in the field of corporate real estate management.
REMUNERATION OF OFFICERS AND TRUSTEES The Fund does not intend to pay fees to the trustees until such time as the Fund's assets exceed $2,500,000; although the Fund will reimburse trustees for their expenses. The Fund does not compensate trustees affiliated with the Investment Adviser except as they may benefit through payment of the Advisory and Administrative fees. Statement of Additional Information | 7 PRINCIPAL SECURITY HOLDERS As of November 2, 1998, the following persons owned of record 5% or more of the shares of the Fund: NAME: SHARES % OWNERSHIP - -------------------- ------ ----------- Malcolm R. Fobes III 7,585 46.02% 475 Milan Drive, #103 San Jose, California 95134 Ronald G. Seger 5,362 32.53% 715 Glenborough Drive Mountain View, California 94041 Andrew W. Broer 839 5.09% 455 Navaro Way, #201 San Jose, California 95134 As of November 2, 1998, the Trustees and officers of the Trust owned of record or beneficially 86.69% of the Fund's outstanding shares. ORGANIZATION AND CAPITAL STRUCTURE The Trust was organized on November 25, 1996 as a Delaware business trust and is authorized to issue an unlimited number of shares of beneficial interest. At present there is only one series authorized by the Trust, which series has been designated as the Berkshire Capital Growth & Value Fund. The Board of Trustees may authorize the creation of an additional series without shareholder approval. All shares, when issued, will be fully paid and non-assessable and will be redeemable and freely transferable. All shares have equal voting rights and can be issued as full or fractional shares. A fractional share has pro rata the same kind of rights and privileges as a full share. The shares possess no preemptive or conversion rights. Each shareholder has one vote for each share held irrespective of the relative net asset value of the shares. Each share has equal dividend, distribution and liquidation rights. The voting rights of the shareholders are non-cumulative, so that holders of more than 50% of the shares can elect all trustees being elected. On some issues, such as election of trustees, all shares of the Fund vote together as one series. In the event that the Trust authorizes additional series of shares as separate funds, on issues affecting only a particular fund, the shares of the affected fund will vote as a separate series. An example of such an issue would be a fundamental investment restriction pertaining to only one fund. The Board of Trustees of the Trust is responsible for managing the business affairs of the Fund. The Board of Trustees consists of four members: Malcolm R. Fobes III, Ronald G. Seger, Leland F. Smith and Andrew W. Broer. As of November 2, 1998, the Board of Trustees owned of record or beneficially 86.69% of the Fund's outstanding shares. Malcolm R. Fobes III and Ronald G. Seger owned 46.02% and 32.53% of the Fund's outstanding shares respectively and are considered control persons as defined under Section 2(a)(9) of the 1940 Act by virtue of their ownership of more than 25% of the voting securities of the Fund. Statement of Additional Information | 8 PURCHASE OF SHARES AND REINVESTMENT The offering price of the shares offered by the Fund is at the Net Asset Value ("NAV") per share next determined after receipt of the purchase order by the Fund and is computed in the manner described under the caption "Pricing of Shares" in this Prospectus. The Fund reserves the right to terminate the offering of the shares made by this Prospectus at any time and to refuse purchase applications when, in the judgement of management, such termination or refusal is in the best interests of the Fund. The Fund also reserves the right to waive initial and subsequent investment minimums and to modify investment minimums generally from time to time. The Fund does not intend to issue share certificates to its shareholders whereby shares of the Fund shall be considered "uncertificated securities" as defined under Rule 17f-1 of the Securities Exchange Act of 1934. The Fund and the Investment Adviser may enter into arrangements with brokerage firms and financial institutions under which shares of the Fund may be purchased or sold. Investors may be charged a transaction fee if they effect transactions in Fund shares through a broker or agent. Initial Investments: Initial purchase of shares of the Fund may be made by application submitted to the Fund. For the convenience of investors, a Share Purchase Application is provided with the Prospectus. The minimum initial purchase of shares is $5,000 unless investing through the vehicle of an Individual Retirement Account ("IRA"), in which case the minimum initial investment is $2,000. Such initial investment amount is due and payable three (3) business days after the purchase date. The Fund will be initially registered in California and therefore restricted to California residents at the time of purchase. There will be no solicitation out of the state of California of potential shareholders until registration under the Blue Sky laws of the state of residence have been met. Subsequent Purchases: Subsequent purchases may be made by mail or by phone and are due and payable three (3) business days after the purchase date. The minimum is $500, or $200 for an IRA. Less may be accepted under special circumstances. Reinvestments: The Fund will automatically retain and reinvest dividends and capital gains distributions and use same for the purchase of additional shares for the shareholder at net asset value as of the close of business on the distribution date. A shareholder may at any time by letter or forms supplied by the Fund direct the Fund to pay dividends and/or capital gains distributions, if any, to such shareholder in cash. Fractional Shares: Full or fractional shares will be issued by the Fund. Fractional shares will be issued to three decimal places as purchased from the Fund. The Fund will maintain an account for each shareholder of shares for which no certificates have been issued. Statement of Additional Information | 9 RETIREMENT PLANS Generally: Shares of the Fund may be purchased directly by existing retirement plans which allow for such investment. Self-employed individuals may purchase shares through properly drafted Keogh plans covering the self-employed individual or eligible employees. An investor should consult with a tax adviser concerning the eligibility or establishment of such plans before investing in shares of the Fund. Individual Retirement Accounts: Certain individuals may be eligible to establish an Individual Retirement Account (IRA) with the Fund if they meet the applicable requirements of the Internal Revenue Code. Persons who earn compensation and are not covered by a company retirement plan (and, if married, your spouse is not covered by a company retirement plan) may establish IRA accounts using Fund shares. Under such circumstances, annual contributions by individuals, limited to the lesser of $2,000 or 100% of compensation, are tax deductible from gross income. If you are married (filing jointly) and each spouse establishes an IRA, each spouse may contribute up to $2,000 to his or her IRA for a year as long as the combined compensation of both spouses for the year is at least $4,000. Contributions to each spousal account are fully deductible under the aforementioned guidelines. IRA contributions may also be tax deductible for individual taxpayers and married couples if covered by a company retirement plan as long as adjusted gross incomes are within certain specified limits. All individuals may make nondeductible IRA contributions to separate accounts. You may begin to make non-penalty IRA withdrawals as early as age 59 1/2 or as late as 70 1/2. Most withdrawals from an IRA account before age 59 1/2 are subject to a 10% penalty tax in addition to regular income taxes. In certain situations, withdrawals before age 59 1/2 are not subject to the 10% penalty. For example, in the event of death or disability early withdrawals may be made without penalty. Investors should consult their tax advisers to determine whether they are qualified to take advantage of an IRA and whether an investment in the Fund would be appropriate. The Board of Trustees has selected Delaware Charter Guarantee & Trust Co. as the Fund's trustee for qualified individuals who wish to establish an IRA account funded with shares of the Fund. Although the Fund does not charge IRA fees itself, there are fees charged by Delaware Charter Guarantee & Trust Co. to open and maintain an IRA account. To establish an IRA account, all prospective applicants are required to complete an IRA application for Delaware Charter Guarantee & Trust Co. A disclosure statement describing the general provisions of the IRA will be forwarded to all prospective applicants as required by U.S. Treasury regulations. All IRAs may be revoked within seven (7) days of their establishment with no penalty. For more information regarding the establishment of an IRA account, please direct all inquiries to the Fund at its principal office in San Jose, California. PRICING OF SHARES The net asset value of the Fund's shares is determined as of the close of business of the New York Stock Exchange on each business day of which that Exchange is open (presently 4:00 p.m.); Monday through Friday exclusive of Washington's Birthday, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving, Christmas and New Year's Day. The price is determined by dividing the value of its securities, plus any cash and other assets less all liabilities, excluding capital surplus, by the number of shares outstanding. The market value of securities listed on a national exchange is determined to be the last recent sales price on such exchange. Listed securities that have not recently traded and over-the-counter securities are valued at the last bid price in such market. Short-term paper (debt obligations that mature in less than 60 days) are valued at amortized cost which approximates market value. Other assets are valued at fair market value as determined in good faith by the Board of Trustees. Statement of Additional Information | 10 REDEMPTION OF SHARES The Fund will redeem all or any portion of a shareholder's shares of the Fund when requested in accordance with the procedures set forth below. Although the Fund does not charge a redemption fee, there is a fee equal to that charged to the Fund by the registered Transfer Agent for processing services, currently $10 regardless of the number of shares redeemed. All redemption requests should be made to the Fund at its principal office in San Jose, California. The redemption price shall be the net asset value per share next determined after notice is received by the Fund. If By Mail: Send a written request, signed by all registered owners in the exact names in which they appear on the account indicating the dollar amount or number of shares to be redeemed. Redemption requests by corporations, partnerships, trusts, estates, guardianships, custodial accounts and accounts under court jurisdiction shall be accompanied with all supporting legal documents if required by applicable law. To be in proper form, such redemption requests shall be signed by an authorized officer and must indicate the capacity in which the officer is acting. If by Telephone: Shareholders who complete the Share Purchase Application provided with this Prospectus may redeem shares of the Fund by telephone if they have elected on the application to do so. The Fund will employ reasonable procedures to confirm that all instructions given by telephone are genuine. Such procedures shall include requiring the caller to provide personal and/or account information for the purpose of establishing the caller's identification and sending a confirmation statement on redemptions to the address of record each time activity is initiated by telephone. As long as the Fund's registered transfer agent follows instructions communicated by telephone which were reasonably believed to be genuine at the time of receipt, neither the Fund nor the registered transfer agent shall be liable for any loss to the shareholder caused by an unauthorized transaction. In any instance where the Fund's registered transfer agent is not reasonably satisfied that instructions received by telephone are genuine, neither the Fund nor the transfer agent shall be liable for any losses which may occur because of delay in implementing a transaction. Unless the shareholder is known to management, all signatures must be guaranteed by an "eligible guarantor institution" as defined under Rule 17Ad-15 of the Securities Exchange Act of 1934. Generally, such institutions include national or state banks, savings and loan associations, credit unions, brokers and dealers which are members of a national securities exchange or a clearing agency and maintain a net capital of at least $100,000, national securities exchanges, registered securities associations, clearing agencies and institutions that participate in the Securities Transfer Agent Medallion Program ("STAMP") or other recognized signature guarantee medallion programs. Such guarantees must be signed by an authorized signatory thereof with "Signature Guaranteed" appearing along with the shareholder's signature. A notarized signature will not be sufficient for the request to be in proper form. Redemption requests by corporate and fiduciary shareholders must be accompanied by appropriate documentation establishing authority of the person seeking to act on behalf of the account. The proceeds received by the shareholder may be more or less than his cost of such shares, depending upon the net asset value per share at the time of redemption. Any difference should be treated by the shareholder as a capital gain or loss for federal income tax purposes. Payment by the Fund will ordinarily be made within seven (7) business days provided the shareholder has complied with all the aforementioned requirements. However, if an investor has purchased Fund shares by check and subsequently submits a redemption request, the redemption proceeds will not be transmitted until the check used for investment has cleared, which may take up to fifteen (15) days. The Fund may suspend the right of redemption or postpone the date of payment if; the New York Stock Exchange is closed for other than customary weekend or holiday closings, or when trading on the New York Stock Exchange is restricted as determined by the Securities and Exchange Commission or when the Commission has determined that an emergency exists, thereby making disposal of fund securities or valuation of net assets not reasonably practicable, or for such other periods as the Commission may permit. The Fund intends to make payments in cash, however, if the Board of Trustees believes that economic conditions exist which would make such practice detrimental to the best interests of the Fund, redemption may be accomplished through distribution of portfolio securities of the Fund. The Fund and the Investment Adviser may enter into arrangements with brokerage firms and financial institutions under which shares of the Fund may be purchased or sold. Investors may be charged a transaction fee if they effect transactions in Fund shares through a broker or agent. Statement of Additional Information | 11 PERFORMANCE INFORMATION The Fund's total returns are based on the overall dollar or percentage change in value of a hypothetical investment in the Fund, assuming all dividends and distributions are reinvested. Average annual total return reflects the hypothetical annually compounded return that would have produced the same cumulative total return if the Fund's performance had been constant over the entire period presented. Because average annual total returns tend to smooth out variations in the Fund's returns, investors should recognize that they are not the same as actual year-by-year returns. It should be noted that average annual return is based on historical earnings and is not intended to indicate future performance. For the purposes of quoting and comparing the performance of the Fund to that of other mutual funds and to other relevant market indices in advertisements, performance will be stated in terms of average annual total return. Under regulations adopted by the Securities and Exchange Commission, funds that intend to advertise performance must include average annual total return quotations calculated according to the following formula: n P(1+T) = ERV Where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years (1, 5, or 10) ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10- year period, at the end of such period (or fractional portion thereof). Under the foregoing formula, the time periods used in advertising will be based on rolling calendar quarters, updated to the last day of the most recent quarter prior to submission of the advertising for publication, and will cover 1, 5, and 10 year periods of the Fund's existence or shorter periods dating from the commencement of Fund registration. In calculating the ending redeemable value, all dividends and distributions by the Fund are assumed to have been reinvested at net asset value as described in the Prospectus on the reinvestment dates during the period. Additionally, redemption of shares is assumed to occur at the end of each applicable time period. The foregoing information should be considered in light of the Fund's investment objectives and policies, as well as the risks incurred in the Fund's investment practices. Future results will be affected by the future composition of the Fund's portfolio, as well as by changes in the general level of interest rates, and general economic and other market conditions. The average annual total return of the Fund for the period ended June 30, 1998 was 15.14%. The inception date of the Fund was July 1, 1997. The Fund may also advertise total return which is calculated differently from average annual total return. Total return performance for a specific period is calculated by taking the initial investment in the Fund's shares on the first day of the period and the redeemable value of that investment at the end of the period. The total return percentage is then determined by subtracting the initial investment from the redeemable value and dividing the remainder by the initial investment and expressing the result as a percentage. The calculation assumes that all income and capital gains dividends by the Fund have been reinvested at net asset value on the reinvestment dates during the period. Total return may also be shown as the increased dollar value of the hypothetical investment over the period. A quotation of the Fund's total return will always be accompanied by the Fund's average annual total return. The total returns for the Fund's two most recent fiscal periods are as follows: PERIOD ENDED December 31, 1997* (12.60%) June 30, 1998** 32.06% * From July 1, 1997 to December 31, 1997. ** From December 31, 1997 to June 30, 1998. Statement of Additional Information | 12 Performance information for the Fund may be compared, in reports and promotional literature, to the performance of unmanaged indices which may assume reinvestment of dividends or interest but generally do not reflect deductions for administrative and management costs. Examples include, but are not limited to the Dow Jones Industrial Average (DJIA), Standard & Poor's 500 Composite Stock Price Index (S&P 500), the NASDAQ Composite Index (NASDAQ Composite) and the Russell 2000 Index. The Dow Jones Industrial Average is a measurement of general market price movement for 30 widely held stocks listed on the New York Stock Exchange. The S&P 500 Index is an unmanaged index of 500 stocks, the purpose of which is to portray the pattern of common stock price movement. The NASDAQ Composite Index is an unmanaged index which averages the trading prices of more than 3,000 domestic over-the-counter companies. The Russell 2000 Index, representing approximately 11% of the U.S. equity market, is an unmanaged index comprised of the 2,000 smallest U.S. domiciled publicly-traded common stocks in the Russell 3000 Index (an unmanaged index of the 3,000 largest U.S. domiciled publicly-traded common stocks by market capitalization representing approximately 98% of the U.S. publicly-traded equity market). In assessing such comparisons of performance an investor should keep in mind that the composition of the investments in the reported indices and averages is not identical to the Fund's portfolio, that the averages are generally unmanaged and that the items included in the calculations of such averages may not be identical to the formula used by the Fund to calculate its performance. In addition, there can be no assurance that the Fund will continue this performance as compared to such other averages. From time to time, in marketing and other fund literature, the Fund's performance may be compared to the performance of other mutual funds in general or to the performance of particular types of mutual funds with similar investment goals, as tracked by independent organizations. Among these organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used independent research firm which ranks mutual funds by overall performance, investment objectives, and assets, may be cited. Lipper performance figures are based on changes in net asset value, with all income and capital gain dividends reinvested. Such calculations do not include the effect of any sales charges imposed by other funds. The Fund will be compared to Lipper's appropriate fund category, that is, by fund objective and portfolio holdings. The Fund's performance may also be compared to the average performance of its Lipper category. The Fund's performance may also be compared to the performance of other mutual funds by Morningstar, Inc. which ranks funds on the basis of historical risk and total return. Morningstar's rankings range from five stars (highest) to one star (lowest) and represent Morningstar's assessment of the historical risk level and total return of a fund as a weighted average for three, five and ten year periods. Ranks are not absolute or necessarily predictive of future performance. BROKERAGE The Fund requires all brokers to effect transactions in portfolio securities in such a manner as to get prompt execution of the orders at the most favorable price. Under the terms of the Advisory Agreement, the Adviser is authorized to employ all brokers to execute orders for the purchase and sale of portfolio securities on behalf of the Fund. The Adviser will use its best judgement in determining which broker can provide the best net price and execution. The selected broker shall be required to provide prompt and reliable execution at a reasonably competitive price. The Adviser may select brokers who, in addition to meeting primary requirements of execution and price, may furnish statistical or other factual information and services, which, in the opinion of management, will produce a direct benefit to the Fund or assist the Adviser in carrying out its responsibilities to the Fund. Such information and services shall include economic studies, industry studies, statistical analysis, corporate reports and quotations necessary to determine the value of the Fund's net assets. No effort is made to determine the value of these services or the amount they might have reduced the expenses of the Adviser. Other than as set forth above, the Fund has no fixed policy, formula, method, or criteria which it uses in allocating brokerage business to firms furnishing these materials and services. The Board of Trustees will evaluate and review the reasonableness of brokerage commissions paid semiannually. Statement of Additional Information | 13 FINANCIAL STATEMENTS The Berkshire Capital Growth & Value Fund's audited financial statements as of December 31, 1997 and its unaudited financial statements as of June 30, 1998 appear in the reports which are attached to this Statement of Additional Information. MISCELLANEOUS INFORMATION This Statement of Additional Information and the Prospectus do not contain all the information included in the Trust's registration statement filed with the Securities and Exchange Commission under the Securities Act with respect to the securities offered hereby, certain portions of which have been omitted pursuant to the rules and regulations of the Commission. The registration statement, including exhibits filed therewith, may be examined at the offices of the Commission in Washington D.C. Statements contained herein and in the Prospectus as to the contents of any contract or other documents referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other documents filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. Statement of Additional Information | 14 BERKSHIRE CAPITAL INVESTMENT TRUST BERKSHIRE CAPITAL GROWTH & VALUE FUND 1997 Annual Report TABLE OF CONTENTS Page ---- Letter to Shareholders ........................................ 1 Portfolio Snapshot ............................................ 4 Independent Auditors' Report .................................. 5 Statement of Assets & Liabilities ............................. 6 Statement of Operations ....................................... 7 Statement of Changes in Net Assets ............................ 8 Notes to Financial Statements ................................. 9 Financial Highlights, Related Ratios and Supplemental Data .... 12 Schedule of Portfolio of Investments .......................... 13 BERKSHIRE CAPITAL GROWTH & VALUE FUND Net Asset Value High, Low & Close For Six Months Ended December 31, 1997 3rd 4th Quarter Quarter ============================= High $ 10.05 $ 10.10 Low 9.95 8.29 Close 10.05 *8.64 ============================= *Dividend distribution of $.10 per share paid on 12/30/97 February 27, 1998 Dear Shareholder: On July 1, 1997 the Securities and Exchange Commission granted the effectiveness of your fund. I highlight this significant event in order to illustrate that success, more often than not, is the direct result of good preparation and the ability to persevere. Such qualities are the exact ingredients required when making profitable long-term investments. We intend to adhere to these qualities as we build a tradition of success that will carry us forward for many years to come. The launching of our fund has proven that in order to be successful, one does not have to be a sizable financial institution backed by a multitude of attorneys and an abundance of capital. In fact, our small fund was created on little more than a simple idea which was boot-strapped by a meager budget. With that, we would like to take this opportunity to salute all of those individuals who had the courage to stand firm in the face of adversity and by doing so, realized their dreams. OUR MISSION At the Berkshire Capital Growth & Value Fund our single goal is to increase share-owner value. Because each of our shareholders has entrusted us with their assets, it is our responsibility to deliver superior performance over the long-term. We like to place a great deal of emphasis on "long-term." Furthermore, we recognize that if we do our job properly, our investment decisions will have a positive impact on the lives of others. For example, increasing share-owner value can help to provide for someone's college education, a new home, or even retirement. We also realize that it is important to treat our shareholders as investment-partners which is why we have invested a significant amount of our own net-worth into the fund. We encourage such investment because as a share-owner you can be confident that our economic interests will always be aligned exactly with yours. Lastly, we will never forget that we were put into business to work for our shareholders. Our ultimate goal will always be to serve your interests as we endeavor to increase share-owner value. -1- OUR INVESTMENT PHILOSOPHY As you read through our annual report you will find that we maintain a portfolio with a limited number of securities. You will also notice that a large percentage of our portfolio is dedicated to a select few of some of the world's most successful companies. We are not afraid to allocate a large portion of our portfolio to these companies because we invest only in those businesses in which we have a high degree of knowledge and understanding. Such knowledge and understanding gives us the confidence to concentrate our investments which increases our chances of achieving superior returns to our shareholders over the long-term. We feel there is a great disadvantage to owning a portfolio with a large number of securities. This is because owning such a portfolio makes it increasingly difficult to maintain what we consider to be an adequate amount of knowledge about each security. We feel that investing with an limited amount of knowledge and understanding is inherently more risky than owning a portfolio with limited diversification. As a result, our goal will always be to focus our investments into a limited number of only the best companies, all of which we know very well. OUR 1997 RESULTS Your fund demonstrated an increase of 0.5% for the third quarter and a decrease of 13% for the fourth quarter, resulting in an overall net decrease of 12.6% for the first six months of operation. On December 30, 1997 the Board of Trustees authorized the payment of a dividend in the amount of $.10 per share for the distribution of the fund's investment income. The table below shows a comparison of your fund's returns versus three major market indices - the Dow Jones Industrial Average (DJIA), Standard & Poor's 500 (S&P 500) and the NASDAQ Composite Index (NASDAQ): 3rd 4th Since Quarter Quarter Inception =========================================== BCGVF 0.5% -13.0% -12.6% DJIA* 4.0% 0.0% 4.0% S&P 500* 7.5% 2.9% 10.6% NASDAQ* 17.0% -6.7% 9.1% =========================================== *Includes reinvestment of dividends. Assumes investments are made on the day prior to the first day of each period. Past performance is not a guarantee of future results. As you can see, the fund's returns remained relatively unchanged during the third quarter lagging behind the DJIA, S&P 500 and the NASDAQ indices. This was due in large part to your portfolio manager's inability to find anything of value during this time period. As a result, the fund maintained a cash position of nearly 90% for most of the quarter. The fund did however, record its first investments during the period with purchases of shares in both the Coca-Cola and Gillette companies. The purchases were made after the share prices of both had declined by nearly 25%. The declines were due to concerns over the future profitability of these companies because of the strength of the U.S. dollar. We felt that these concerns were exaggerated and are very pleased to have purchased such quality companies at bargain prices. -2- The fourth quarter was dominated by news of the financial crisis in the Asian-Pacific markets. On October 27, 1997 concerns over this region's currency devaluations and large percentage stock market declines finally spilled over to the U.S. markets causing the DJIA to fall a breathtaking 554.12 points. The DJIA had recorded a single-day loss of 7.18%. This was a significant event for the fund because it was on this day that your portfolio manager stepped in and purchased some of the fund's largest investments. Specifically, we established large positions in Cisco Systems, Intel and PeopleSoft. These three companies alone comprised over 45% of the fund's holdings at year-end. The tables below show the fund's three largest and smallest investments for 1997. THREE LARGEST INVESTMENTS ==================================== Cisco Systems 24.3% $ 24,642 Intel 17.3% 17,563 Coca-Cola 5.3% 5,335 ------------------------------------ Total 46.9% $ 47,540 ==================================== THREE SMALLEST INVESTMENTS ==================================== Ascend 1.3% $ 1,347 Texas Instruments 1.8% 1,800 Adaptec 2.2% 2,227 ------------------------------------ Total 5.3% $ 5,374 ==================================== The fund's decline in value during the fourth quarter was due in large part to continued market volatility amid concerns over the impact of the Asian-Pacific crisis on the U.S. economy. The technology sector experienced the largest decline as evidenced by the 6.7% decrease in the technology-laden NASDAQ index. The fund outpaced the retreat of this index because a significant amount of the fund's investments were concentrated in the technology sector. We remain quite confident in the future growth of this sector however, and will continue to concentrate our holdings there despite the market's temporary reversal. As we move forward into 1998 it is important to remind our shareholders that the goal of our fund is to increase share-owner value over the long-term. A six-month period is much too short of a time frame in which to gauge a proper performance comparison. In fact, as of this writing your fund has already increased in value by over 16% since year-end. We recognize that stock market corrections like the one we experienced during the fourth quarter are usually temporary. This is especially true when the underlying fundamentals of our economy remain strong as they are now. We will always welcome such corrections because they present us with opportunities to purchase terrific companies at bargain prices. Sincerely, /S/ MALCOLM R. FOBES III ------------------------ Malcolm R. Fobes III Chairman -3- Portfolio Snapshot December 31, 1997 =========================================================================== Security Percent Shares Price Market Value --------------------------------------------------------------------------- 3Com 4.1% 120 34 15/16 $ 4,192 Adaptec 2.2% 60 37 1/8 2,227 Ascend 1.3% 55 24 1/2 1,347 Berkshire Hathaway 4.6% 3 1539 4,617 Cisco Systems 24.3% 442 55 3/4 24,642 Coca-Cola 5.3% 80 66 11/16 5,335 Dell Computer 4.1% 50 84 4,200 E*Trade 5.2% 230 23 5,290 Gillette 5.0% 50 100 7/16 5,022 IBM 5.2% 50 104 5/8 5,231 Innovex 3.4% 150 22 15/16 3,441 Intel 17.3% 250 70 1/4 17,563 Microsoft 4.5% 35 129 1/4 4,524 PeopleSoft 3.8% 100 39 3,900 Sun Microsystems 3.1% 80 39 7/8 3,190 Texas Instruments 1.8% 40 45 1,800 Vivus 4.5% 430 10 5/8 4,569 Cash .3% 322 --------------------------------------------------------------------------- Total Investments 100.0% 2,225 $ 101,412 =========================================================================== IMPORTANT LEGAL DISCLOSURES This report is submitted for the general information of the shareholders of the Berkshire Capital Growth & Value Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus which includes details regarding the Fund's objectives, policies, expenses and other information. Past performance is not a guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Dow Jones Industrial Average, the Standard & Poor's 500 index and the NASDAQ Composite index all represent an unmanaged, broad-basket of stocks. They are typically used as a proxy for overall market performance. Investing in technology stocks entails certain risks, including increased volatility of share value. Investors are encouraged to read the Fund's Prospectus carefully. Copies of the most recent Prospectus may be obtained by calling the Fund directly at (408) 526-0707. -4- MEREDITH, CARDOZO, LANZ & CHIU LLP Certified Public Accountants 97 South Second Street, Suite 100 San Jose, California 95113 (408) 278-0220 INDEPENDENT AUDITORS' REPORT To the Board of Trustees and Shareholders Berkshire Capital Investment Trust We have audited the accompanying statement of assets and liabilities of Berkshire Capital Investment Trust (comprising the Berkshire Capital Growth & Value Fund), including the schedule of portfolio investments, as of December 31, 1997 and the related statements of operations and changes in net assets for the period from July 1, 1997 (date of inception) to December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Berkshire Capital Investment Trust, as of December 31, 1997, and the results of its operations and the changes in its net assets for the period from July 1, 1997 (date of inception) to December 31, 1997, in conformity with generally accepted accounting principles. /s/ MEREDITH, CARDOZO, LANZ & CHIU LLP - -------------------------------------- Meredith, Cardozo, Lanz & Chiu LLP San Jose, California January 21, 1998 -5- Berkshire Capital Investment Trust Statement of Assets & Liabilities December 31, 1997 ASSETS - Note (1) Investment in securities, at value (identified cost - $113,703) ........................... $ 101,090 Cash in bank ........................................... 319 Dividend receivable .................................... 3 ------- Total assets ........................................... 101,412 LIABILITIES Total liabilities ...................................... 0 ------- Net assets - at value .................................. $ 101,412 ======= NET ASSETS COMPRISED OF: Common Stock (par value $1.00) ......................... $ 11,738 Paid-in capital ........................................ 104,900 Net realized gain (loss) from investments .............. (2,613) Net unrealized gain (loss) on investments .............. (12,613) -------- Total net assets ....................................... $ 101,412 ======== Net asset value per share based on 11,738.358 shares outstanding .......................... $ 8.64 ======== See Accompanying Notes to Financial Statements -6- Berkshire Capital Investment Trust Statement of Operations For the Period from July 1, 1997 (date of inception) to December 31, 1997 INVESTMENT INCOME: Income: Dividends .............................................. $ 87 Interest ............................................... 1,051 ----- Total income ........................................... 1,138 ----- Expenses: Investment advisory fees ............................... 764 Administration fees .................................... 255 Investment advisory and administration fees waived - Note (7) ............................................... (1019) ----- Total expenses ......................................... 0 ----- Total investment income ................................ 1,138 ----- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments ................ (2,613) Net change in unrealized gain (loss) on investments for 1997 ................................ (12,613) -------- Net gain (loss) on investments for 1997 ................ (15,226) -------- Net increase (decrease) in net assets resulting from operations .............................. $ (14,088) ======== See Accompanying Notes to Financial Statements -7- Berkshire Capital Investment Trust Statement of Changes in Net Assets For the Period from July 1, 1997 (date of inception) to December 31, 1997 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income .................................. $ 1,138 Net realized gain (loss) on investments ................ (2,613) Net change in unrealized gain (loss) on investments .... (12,613) -------- Net increase (decrease) in net assets resulting from operations .............................. (14,088) -------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income .................................. $ (1,138) Net realized gain on investments ....................... 0 ------- Reinvestment of dividends by shareholders .............. 1,138 CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares - net of redemption, if any .............................. 115,500 ------- Total increase in net assets ........................... 101,412 NET ASSETS: Beginning of year ...................................... 0 -------- End of year ............................................ $ 101,412 ======== See Accompanying Notes to Financial Statements -8- Berkshire Capital Investment Trust Notes to Financial Statements December 31, 1997 (1) SIGNIFICANT ACCOUNTING POLICIES: The Berkshire Capital Investment Trust (the "Trust") was organized as a business trust under the state of Delaware on November 25, 1996. The Trust is authorized to issue an indefinite number of shares of beneficial interest, par value $1.00 per share. Shares have non-cumulative voting rights, do not have preemptive subscription rights and are freely transferable. The Berkshire Capital Growth & Value Fund is an open-end non-diversified portfolio of the Trust. (a) Security Valuation Investments in securities traded on a national security exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation; other securities traded on the over-the-counter market and listed securities for which no sale was reported on that date are stated at the last quoted bid price. (b) Federal Income Taxes The Trust's policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all its taxable income to its shareholders. Therefore, no federal income tax provision is required. (c) Equalization The Trust uses the accounting practice of equalization, by which a portion of the proceeds from the sale and cost of redemption of capital shares, equivalent on a per share basis to the amount of undistributed net investment income on the date of the transaction, is credited or charged to undistributed income. As a result, undistributed net investment income per share is unaffected by sales or redemption of capital shares. (d) Use Of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (continued) -9- Berkshire Capital Investment Trust Notes to Financial Statements (1) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) Distributions To Shareholders Dividends to shareholders are recorded on the ex-dividend date. (f) Accounting Practices The Trust follows the industry practice and records security transactions on the trade date. The specific identification method is used for determining gains and losses for financial statement and income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. (2) CURRENT YEAR DISTRIBUTIONS TO SHAREHOLDERS: On December 31, 1997, the Board of Trustees approved the distribution of $.0979 per share aggregating $1,138 declared from net investment income during 1997. The dividend was paid on December 30, 1997 to shareholders of record on December 29, 1997. All shareholders have elected to have all dividends reinvested into additional shares of the Trust's stock. This resulted in the issuance of 131.698 additional shares of common stock. As of December 31, 1997, the Trust had available for federal income tax purposes an unused capital loss carryover of $2,613 which will expire in 2002. (3) CAPITAL SHARE TRANSACTIONS: The Trust is authorized to issue an unlimited number of shares of $1.00 par capital stock. As of December 31, 1997 there was $116,638 of total paid-in capital. Shares sold ................. 11,606.660 $ 115,500 Shares issued on reinvestment of dividends ... 131.698 1,138 Net increase ................ 11,738.358 $ 116,638 ========== ========= (4) ORGANIZATIONAL COSTS: All organizational costs were borne by the Fund's Investment Advisor. (5) REGISTRATION FEES: All registration fees were borne by the Fund's Investment Advisor. (continued) -10- Berkshire Capital Investment Trust Notes to Financial Statements (6) INVESTMENT TRANSACTIONS: Purchases and sales of investment securities were $122,139 and $5,822 respectively for common stocks. Net loss on investments for the year ended December 31, 1997 were $15,226. That amount represents the net decrease in value of investments held during the year. The components are as follows: Realized loss on securities ........... $ 2,613 Net unrealized loss on securities ..... 12,613 ------ Net decrease .......................... $ 15,226 ====== (7) INVESTMENT ADVISORY FEES: The Trust has an Investment Advisory Agreement and a separate Administration Agreement with Berkshire Capital Holdings, Inc. Under the terms of the Investment Advisory Agreement, Berkshire Capital Holdings, Inc. will receive a fee accrued each calendar day (including weekends and holidays) at a rate of 1.5% per annum of the daily net assets of the Fund. Under the Administration Agreement, Berkshire Capital Holdings, Inc. receives a fee as compensation for services rendered, facilities furnished and expenses assumed. Such fee is computed as a percentage of the Fund's daily net assets and are accrued each calendar day (including weekends and holidays). The administration fee is based on the following schedule: Percentage Daily Net Asset Range ---------- ---------------------- .50% $0 to $50 million .45% $50 to $200 million .40% $200 to $500 million .35% $500 to $1 billion .30% excess of $1 billion Berkshire Capital Holdings, Inc. may at its discretion, forego fees normally paid to it by the Trust for services rendered. For the fiscal year ending December 31, 1997, Berkshire Capital Holdings, Inc. has agreed to irrevocably waive any and all rights to its investment advisory and administration fees. The foregoing of such fees for 1997 had a material effect on the Fund's expense ratio and yield to the shareholders. Such material effect was the subsequent lowering of the Fund's expense ratio resulting in the increase of the yield to the shareholders. (continued) -11- Berkshire Capital Investment Trust Notes to Financial Statements (8) FINANCIAL HIGHLIGHTS: Selected data for a share outstanding throughout each period: Financial Highlights, Related Ratios and Supplemental Data December 31, 1997 NET ASSET VALUE, BEGINNING OF PERIOD: ..................... $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income ..................................... .10 Net gains or losses on securities (both realized and unrealized) (1.36) ------ Total from investment operations .......................... 8.74 LESS DISTRIBUTIONS: Dividends (from net investment income) .................... (.10) Distributions (from capital gains) ........................ 0 ----- Total distributions ....................................... (.10) ----- NET ASSET VALUE, END OF PERIOD ............................ $ 8.64 ===== Total return - Note (7) ................................... (12.6%)* RATIO/SUPPLEMENTAL DATA: Net assets, end of period ................................. $ 101,412 Ratio of expenses to average net assets - Note (7) ........ 0% Ratio of net investment income to average net assets ...... 1% Portfolio turnover rate ................................... 13% Average commission rate paid for securities transactions (cost per share) .......................................... $ .7897 *Not annualized. -12- Berkshire Capital Investment Trust Schedule of Portfolio of Investments December 31, 1997 Shares Percent Unrealized or of Historical Market Gain Common Stocks (99.7%) Face Amount Total Cost Value (Loss) ----------- ----- -------- ------- ------- BEVERAGES: The Coca-Cola Company* 80 5.3% $ 4,819 $ 5,335 $ 516 ---- ------ ----- ---- Total Beverages 5.3% 4,819 5,335 516 PERSONAL CARE: Gillette Company* 50 5.0% 4,368 5,022 654 ---- ------ ----- ---- Total Personal Care 5.0% 4,368 5,022 654 COMPUTER: Dell Computer Corporation 50 4.1% 4,087 4,200 113 IBM Corporation* 50 5.2% 5,138 5,231 93 Sun Microsystems, Inc. 80 3.1% 3,747 3,190 (557) ----- ------ ------ ----- Total Computer 12.4% 12,972 12,621 (351) COMPUTER COMPONENTS: Adaptec, Inc. 60 2.2% 3,016 2,227 (789) Innovex, Inc.* 150 3.4% 4,469 3,441 (1,028) ---- ----- ----- ------ Total Computer Components 5.6% 7,485 5,668 (1,817) CONGLOMERATE: Berkshire Hathaway (Class B) 3 4.6% 4,474 4,617 143 ---- ----- ----- --- Total Conglomerate 4.6% 4,474 4,617 143 FINANCIAL SERVICES: E*Trade Group, Inc. 230 5.2% 5,632 5,290 (342) ---- ----- ----- ----- Total Financial Services 5.2% 5,632 5,290 (342) MEDICAL PRODUCTS: Vivus, Inc. 430 4.5% 12,141 4,569 (7,572) ---- ------ ----- ------ Total Medical Products 4.5% 12,141 4,569 (7,572) NETWORKING: Ascend Communications 55 1.3% 2,043 1,347 (696) 3Com Corporation 120 4.1% 5,663 4,192 (1,471) Cisco Systems, Inc. 442 24.3% 23,361 24,642 1,281 ----- ------ ------ ----- Total Networking 29.7% 31,067 30,181 (886) (continued on next page) -13- SEMICONDUCTOR: Intel Corporation* 250 17.3% 20,524 17,563 (2,961) Texas Instruments* 40 1.8% 2,600 1,800 (800) ---- ----- ----- ----- Total Semiconductor 19.1% 23,124 19,363 (3,761) SOFTWARE: Microsoft Corporation 35 4.5% 4,636 4,524 (112) PeopleSoft, Inc. 100 3.8% 2,985 3,900 915 ---- ----- ----- ----- Total Software 8.3% 7,621 8,424 803 Total Common Stocks 113,703 101,090 (12,613) ------- ------- -------- Cash: .3% 322 322 --- --- --- Total Cash .3% 322 322 Total Investments 100% $ 114,025 $ 101,412 $ (12,613) ==== ======= ======= ======== *Income Producing -14- BERKSHIRE CAPITAL INVESTMENT TRUST BERKSHIRE CAPITAL GROWTH & VALUE FUND ------------------------------------- 475 Milan Drive, #103 San Jose, CA 95134 (408) 526-0707 BOARD OF TRUSTEES ----------------- Malcolm R. Fobes III Ronald G. Seger Leland F. Smith Arthur J. Hopper INVESTMENT ADVISER/TRANSFER AGENT/FUND ACCOUNTANT ------------------------------------------------- Berkshire Capital Holdings, Inc. 475 Milan Drive, #103 San Jose, CA 95134 CUSTODIAN --------- Berkshire Capital Investment Trust 475 Milan Drive, #103 San Jose, CA 95134 LEGAL COUNSEL ------------- Hall & Evans, L.L.C. 1200 Seventeenth Street Suite 1700 Denver, CO 80202 INDEPENDENT AUDITOR ------------------- Meredith, Cardozo Lanz & Chiu LLP 97 South Second Street Suite 100 San Jose, CA 95113 -15- BERKSHIRE CAPITAL INVESTMENT TRUST BERKSHIRE CAPITAL GROWTH & VALUE FUND 1998 Semi-Annual Report TABLE OF CONTENTS Page ---- Letter to Shareholders ........................................ 1 Performance Graph ............................................. 4 Portfolio Snapshot ............................................ 4 Schedule of Investments ....................................... 5 Statement of Assets & Liabilities ............................. 6 Statement of Operations ....................................... 7 Statement of Changes in Net Assets ............................ 8 Financial Highlights, Related Ratios and Supplemental Data .... 9 Notes to Financial Statements ................................. 10 PERFORMANCE SUMMARY (returns as of 6/30/98) ================================================== Q1 Q2 YTD 1-YEAR ================================================== BCGVF 16.44% 13.42% 32.06% 15.10% DJIA 11.75% 2.15% 14.14% 18.71% S&P 500 13.95% 3.30% 17.71% 30.15% NASDAQ 17.02% 3.32% 20.91% 31.94% ================================================== Past performance does not guarantee future results. All returns reflect reinvested dividends. August 27, 1998 Dear Shareholder: We are pleased to report that 1998 has been an exceptional year for your Fund. We met our goal of delivering superior returns to our shareholders by significantly outperforming all of our benchmarks. The performance of your Fund did not go unrecognized as the Associated Press and Lipper Analytical Services ranked your Fund as the #1 performing Growth & Income fund for the first-half of 1998 with a return of 32.06%. Your Fund was also ranked #1 in its category for its performance in the second quarter with a return of 13.42%. Overall, your Fund was ranked 16th out of all U.S. equity funds for 1998. As we move forward into the second-half of the year our goal will be to work even harder to find investments that will further increase your share-owner value. 1998 Q1 As you can see in the Performance Summary Chart at the top of the page, we outperformed both the Dow Jones Industrial Average (DJIA) and the S&P 500 Index (S&P 500) in the first quarter. The noted exception was our near-par return when compared to the NASDAQ Composite Index (NASDAQ). We also outperformed the average total return of 11.91% for all U.S. equity funds during the period according to data from Lipper Analytical Services. Further confirming our relative outperformance for the period was the Wall Street Journal's report that 78.5% of all U.S. equity funds failed to even match the returns of the S&P 500 for the first quarter. The Fund's heavy weighting in technology stocks contributed substantially to its performance during the period. We have always maintained a bias towards investing in the technology sector because we believe that technology is now the key driver of the U.S. economy. Moreover, your Fund's principal office is located in the heart of Silicon Valley, giving us a tremendous advantage in utilizing our connections within the industry. From our Silicon Valley location we can also witness the direction of technology firsthand, allowing us to make informed investment decisions on behalf of the Fund. It is no coincidence then, that the Fund's largest investment is in Cisco Systems whose corporate campus is located within walking distance from our office. Semi-Annual Report to Shareholders | 1 Among the Fund's best performing investments for the first quarter were Dell Computer Corp. and Berkshire Hathaway which gained 61% and 46% respectively. We believe that Dell is one of the best managed companies in the world. Dell employs an intensely focused business model based on the direct delivery of high-end PCs to its customers. The company will build a computer only after it has been ordered eliminating the need to maintain inventories. Additionally, Dell is actually one of the few companies in the world positioned to benefit from the recent Asian-Pacific crisis. This is because most of the company's computer components originate from that region. As the region weakens, component prices become cheaper. This allows Dell to pass on lower prices to its customers while at the same time further expanding profit margins. We expect Dell to remain a core holding of our Fund for quite some time. Another core holding of the Fund which performed exceptionally well was our investment in Berkshire Hathaway. At the helm of this company is legendary investor Warren Buffett. Mr. Buffett is largely known for his outstanding ability to manage Berkshire Hathaway's investment portfolios. As of late the company's diverse operating businesses, rather than its investment portfolios, have contributed most to increases in shareholder value. Continued strong growth in Berkshire Hathaway's GEICO auto insurance unit best represents the positive contributions made to shareholder value from the operating businesses. GEICO's success is the result of the employment of the same direct-to-the-customer business model as Dell, thereby making it the lowest cost auto insurer in the business. Mr. Buffett's investment decisions also had a hand in contributing to shareholder value. The most notable was his timely decision to purchase $4.6 billion in long-term zero-coupon U.S. Treasury bonds and 112.2 million ounces of the world's supply of silver. Looking ahead, we see the recent $22 billion acquisition of General Re Corporation as positioning the company to enjoy solid growth for quite some time. [GRAPHIC OMITTED] Q1 Best Performing Investments (returns thru 3/31/98) DELL 61.31% BRK/B 45.87% MSFT 38.49% PSFT 35.10% CSCO 22.65% Rounding out the Fund's best performing investments for the quarter were our holdings in Microsoft, PeopleSoft, and Cisco Systems each appreciating 38%, 35%, and 23% respectively. The graph to the right shows the relative performance of each of these investments during the period. At the end of the quarter, the best performing stocks shown in the graph represented a total of 42% of the Fund's assets. 1998 Q2 Our performance for the second quarter of 1998 was extraordinary. The Fund posted a return of 13.42% for the period while the average U.S. equity fund lost 0.29% according to data from Lipper Analytical Services. As you can see from the Performance Summary Chart on the previous page, our returns were more than four times those of the DJIA, S&P 500 and the NASDAQ. Moreover, the returns of your Fund for the period were greater than the total combined returns of these indices added together. While we are enthusiastic about outperforming all of our benchmarks by such a wide margin, it is important to remind our shareholders that we are certain such remarkable returns are unsustainable over the long-term. Semi-Annual Report to Shareholders | 2 In the second quarter, the Fund's heavy weighting in technology stocks again contributed substantially to its performance. During the period we established new positions in the Internet sector with purchases of shares of America Online and Yahoo!. America Online's 13 million subscribers makes the company the world's leading provider of Internet access and content. The company has successfully leveraged its brand name into multiple sources of revenue streams including membership fees, advertising and electronic commerce. Going forward, we expect subscriber growth to remain strong allowing America Online to further build on its dominant franchise. We feel very comfortable dedicating a significant portion of our Fund to the leader of one of the fastest growing sectors of our economy. At the end of the quarter America Online grew to our second largest investment behind Cisco Systems, representing 11% of the Fund's total assets. Our investment in Yahoo! has also proven to be very profitable for the Fund. The company's shares have appreciated over 45% since our initial purchase quickly making it one of the best performing stocks in our portfolio. Yahoo! is an Internet media company widely known for its popular search engine used to navigate the Web. The company has the most heavily trafficked web-site on the Internet and derives the majority of its revenues from advertisements on its web pages. The company has built a strong brand-name and is one of the few businesses in the sector to have ever made a profit. We continue to be impressed by Yahoo!'s quality management team and the company's ability to consistently beat revenues and earnings projections. At the end of the quarter our Yahoo! investment had appreciated to 6% of the Fund's total assets. [GRAPHIC OMITTED] Q2 Best Performing Stocks (returns from 12/31/97 to 6/30/98*) DELL 120.98% BRK/B 69.79% MSFT 67.70% CSCO 65.13% YHOO 45.50% * Yahoo! returns from date of purchase in second quarter. To the right is a graph showing the year-to-date returns of the Fund's best performing investments. As you can see, Dell clearly outpaced all other investments by appreciating a remarkable 121%. Meanwhile, Berkshire Hathaway, Microsoft and Cisco Systems all performed exceptionally well with gains in excess of 65%. Yahoo! shares also fared well by gaining over 45%. The stocks in the graph represented 53% of the Fund's total assets at the end of the second quarter. Looking ahead, we are very enthusiastic about the potential of our Fund's current holdings. We will continue to focus our investments in only those companies which have dominant franchises and strong growth prospects. You can be assured that we will be working hard to continue the trend that we began in the first half of 1998. Thank you for your confidence in our abilities and for your investment in the Berkshire Capital Growth & Value Fund. Sincerely, /s/ Malcolm R. Fobes III Chairman Semi-Annual Report to Shareholders | 3 PERFORMANCE OVERVIEW Hypothetical $10,000 Investment At Inception* [GRAPH DEPICTED HERE] S&P 500 BERKSHIRE CAPITAL INDEX GROWTH & VALUE FUND MONTH $ AMOUNT $ AMOUNT ------ --------- ------------- JUL-97 $10,000 $ 10,000 AUG-97 10,795 10,000 SEP-97 10,191 9,950 OCT-97 10,749 10,050 NOV-97 10,390 9,500 DEC-97 10,871 9,510 JAN-98 11,057 8,740 FEB-98 11,180 9,701 MAR-98 11,986 10,176 APR-98 12,599 10,176 MAY-98 12,725 10,348 JUN-98 12,507 10,045 JUL-98 13,015 11,542 * The inception date of the Fund was July 1, 1997. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. All returns reflect reinvested dividends. The Standard & Poor's 500 Index (the "Index") represents an unmanaged, broad-basket of stocks. The Index is typically used as a proxy for overall market performance. The Fund's portfolio may differ significantly from the securities in the Index. The Index does not reflect the cost of portfolio management or trading. Berkshire Capital Growth & Value Fund Portfolio as of June 30, 1998 ============================================================================ Security Percent Shares Price Market Value ============================================================================ 3Com 2.35% 120 30 11/16 $ 3,682 3Dfx Interactive 2.08% 190 17 1/8 3,254 Ascend Communications 1.74% 55 49 9/16 2,726 America Online 11.06% 165 105 1/8 17,346 Berkshire Hathaway 5.00% 3 2,613 7,839 Cisco Systems 25.95% 442 92 1/16 40,692 Coca-Cola 4.36% 80 85 1/2 6,840 Dell Computer 4.74% 80 92 13/16 7,425 E*Trade 1.90% 130 22 15/16 2,982 Gillette 3.63% 100 56 7/8 5,688 i2 Technologies 1.79% 80 35 1/8 2,810 Innovex 1.25% 150 13 1/16 1,959 Intel 4.73% 100 74 1/8 7,412 Microsoft 4.84% 70 108 3/8 7,586 PeopleSoft 9.29% 310 47 14,570 Texas Instruments 1.49% 40 58 5/16 2,333 Yahoo! 6.03% 60 157 1/2 9,450 --------------------------------------------------------------------------- Cash/Equivalents 7.77% 12,188 --------------------------------------------------------------------------- Total 100.00% $ 156,782 =========================================================================== Semi-Annual Report to Shareholders | 4 Berkshire Capital Investment Trust Schedule of Investments June 30, 1998 (unaudited) Number of Shares Value ------ ----- COMMON STOCKS - 92.23% Beverages - 4.36% 80 (The) Coca-Cola Company $ 6,840 Computer - 4.74% 80 Dell Computer Corporation* 7,425 Computer Components - 1.25% 150 Innovex, Inc. 1,959 Conglomerate - 5.00% 3 Berkshire Hathaway (Class B)* 7,839 Financial Services - 1.90% 130 E*Trade Group, Inc.* 2,982 Internet - 17.09% 165 America Online, Inc.* 17,346 60 Yahoo!, Inc.* 9,450 Networking - 30.04% 55 Ascend Communications, Inc.* 2,726 120 3Com Corporation* 3,682 442 Cisco Systems, Inc.* 40,692 Personal Care - 3.63% 100 (The) Gillette Company 5,688 Semiconductor - 8.30% 190 3Dfx Interactive, Inc.* 3,254 100 Intel Corporation 7,412 40 Texas Instruments 2,333 Software - 15.92% 80 i2 Technologies, Inc.* 2,810 70 Microsoft Corporation* 7,586 310 PeopleSoft, Inc.* 14,570 TOTAL COMMON STOCKS (cost - $113,863) 144,594 ------- OTHER ASSETS LESS LIABILITIES - 7.77% 12,188 ------ NET ASSETS - 100% Equivalent to $11.41 per share $ 156,782 ======= *Non-income producing (See Accompanying Notes to Financial Statements) Semi-Annual Report to Shareholders | 5 Berkshire Capital Investment Trust Statement of Assets and Liabilities June 30, 1998 (unaudited) ASSETS - Note(1): Investment in securities, at value (identified cost - $113,863) ........................... $ 144,594 Cash in bank ........................................... 683 Security sales receivable .............................. 11,493 Dividends receivable ................................... 12 ------- Total Assets ........................................... 156,782 ------- LIABILITIES: Total Liabilities ...................................... 0 ------- NET ASSETS ................................................ $ 156,782 ======= NET ASSETS COMPRISED OF: Capital paid-in on shares of beneficial interest ...... $ 134,638 Undistributed net investment income ................... 224 Accumulated net realized losses on investments ........ (8,811) Net unrealized appreciation on investments ............ 30,731 ------ NET ASSETS ................................................ $ 156,782 ======= Net asset value per share based on 13,746.607 shares outstanding ............................. $ 11.41 ===== (See Accompanying Notes to Financial Statements) Semi-Annual Report to Shareholders | 6 Berkshire Capital Investment Trust Statement of Operations For the Six Month Period Ended June 30, 1998 (unaudited) INVESTMENT INCOME: Dividends ............................................. $ 83 Interest .............................................. 141 --- Total Investment Income ................................... 224 --- EXPENSES: Investment advisory fees .............................. 970 Administration fees ................................... 323 --- Total expenses before fee waiver .......................... 1,293 Investment advisory and administration fees waived - Note (6) .............................. (1,293) ------ Total Expenses ............................................ 0 ------ NET INVESTMENT INCOME ..................................... 224 --- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on investments ............... (6,198) Net change in unrealized appreciation on investments .. 43,344 ------ Net Gain on Investments ................................... 37,146 ------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................. $ 37,370 ====== (See Accompanying Notes to Financial Statements) Semi-Annual Report to Shareholders | 7 Berkshire Capital Investment Trust Statement of Changes in Net Assets Six Months Period From(a) Ended 07/01/97 06/30/98 to (unaudited) 12/31/97 ----------- -------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income ....................... $ 224 $ 1,138 Net realized gain (loss) on investments ..... (6,198) (2,613) Net change in unrealized appreciation on investments ............................ 43,344 (12,613) ------ -------- Net increase (decrease) in net assets from operations ............................... 37,370 (14,088) ------ -------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ....................... 0 (1,138) Net realized gain on investments ............ 0 0 ------ ------- Total distributions to shareholders ............. 0 (1,138) CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold (2,008 and 11,607 shares, respectively) ... 18,000 115,500 Increase from shares issued in reinvested distributions .................. 0 1,138 Shares redeemed ............................. 0 0 ------ ------- Net increase in net assets from capital share transactions ...................... 18,000 116,638 TOTAL INCREASE IN NET ASSETS .................... 55,370 101,412 NET ASSETS: Beginning of period (including undistributed net investment income of $0) .............................. 101,412 0 ------- ------- End of period (including undistributed net investment income of $224 and $0 respectively) ........ $ 156,782 101,412 ======= ======= (a) Date of effectiveness. (See Accompanying Notes to Financial Statements) Semi-Annual Report to Shareholders | 8 Berkshire Capital Investment Trust Financial Highlights Six Months Period From(a) Ended 07/01/97 06/30/98 to (unaudited) 12/31/97 ----------- -------- Per Share Data for a Share Outstanding Throughout Each Period NET ASSET VALUE, BEGINNING OF PERIOD: $ 8.64 $ 10.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income .................... .01 .10 Net realized and unrealized gains (losses) on investments .......... 2.76 (1.36) ---- ----- Total from investment operations ............. 11.41 8.74 DISTRIBUTIONS: Dividends (from net investment income) ... 0 (.10) Distributions (from capital gains) ....... 0 0 ----- ----- Total distributions .......................... 0 (.10) ----- ----- NET ASSET VALUE, END OF PERIOD: $ 11.41 $ 8.64 ===== ==== TOTAL RETURN - Note (6) ...................... 32.06%(b) (12.60%)(b) SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period .................... $ 156,782 $ 101,412 Ratio of expenses to average net assets(b)(c) ............... 0.95% 1.00% Ratio of expenses to average net assets(d) .................. 0% 0% Ratio of net investment income to average net assets(b)(c) ............... (0.79%) 0.12% Ratio of net investment income to average net assets(d) .................. 0.16% 1.12% Portfolio turnover rate(b) ............... 38% 13% (a) Date of effectiveness. (b) Not annualized for periods less than one full year. (c) Before fee waiver. (d) After fee waiver. (See Accompanying Notes to Financial Statements) Semi-Annual Report to Shareholders | 9 Berkshire Capital Investment Trust Notes to Financial Statements June 30, 1998 (unaudited) (1) SIGNIFICANT ACCOUNTING POLICIES: The Berkshire Capital Investment Trust (the "Trust") was organized as a business trust under the state of Delaware on November 25, 1996. The Trust is authorized to issue an indefinite number of shares of beneficial interest, par value $1.00 per share. Shares have non-cumulative voting rights, do not have preemptive subscription rights and are freely transferable. The Berkshire Capital Growth & Value Fund (the "Fund") is an open-end non-diversified portfolio of the Trust. The Fund's investment objective is to seek long-term capital appreciation through investments in equity securities. (a) Security Valuation ------------------ The market value of securities listed on a national exchange is determined to be the last recent sales price on such exchange. Listed securities that have not recently traded and over-the-counter securities are valued at the last bid price in such market. Other assets are valued at fair market value as determined in good faith by the Board of Trustees. (b) Federal Income Taxes -------------------- The Trust's policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all its taxable income to its shareholders. Therefore, no federal income tax provision is required. (c) Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (d) Distributions to Shareholders ----------------------------- Dividends to shareholders are recorded on the ex-dividend date. (e) Security Transactions and Related Income --------------------------------------- The Trust follows the industry practice and records security transactions on the trade date. The specific identification method is used for determining gains and losses for financial statement and income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Semi-Annual Report to Shareholders | 10 Berkshire Capital Investment Trust Notes to Financial Statements June 30, 1998 (unaudited) (2) CAPITAL SHARE TRANSACTIONS: The Trust is authorized to issue an unlimited number of shares of $1.00 par capital stock. As of June 30, 1998 there was $134,638 of total paid-in capital. Shares Amount ------ ------ December 31, 1997 ....... 11,738 $ 116,638 Subscriptions sold ....... 2,008 18,000 ----- ------ June 30, 1998 ............ 13,746 $ 134,638 ====== ======= (3) ORGANIZATIONAL COSTS: All organizational costs were borne by the Fund's Investment Advisor. (4) REGISTRATION FEES: All registration fees were borne by the Fund's Investment Advisor. (5) INVESTMENT TRANSACTIONS: Purchases and sales of investment securities, other than U.S. Government obligations and short-term investments, were $52,967 and $46,609 respectively for common stocks. Net gain on investments for the period ended June 30, 1998 were $37,146. That amount represents the net increase in value of investments held during the period. For federal income tax purposes, the cost of investments owned at June 30, 1998 was the same as identified cost. At June 30, 1998 the composition of unrealized appreciation (the excess of value over tax cost) and depreciation (the excess of tax cost over value) was as follows: Appreciation ........ $ 38,768 Depreciation ........ (8,037) ------- Net appreciation..... $ 30,731 ====== As of December 31, 1997, the Trust had available for federal income tax purposes an unused capital loss carryover of $2,613 which will expire in 2005. Semi-Annual Report to Shareholders | 11 Berkshire Capital Investment Trust Notes to Financial Statements June 30, 1998 (unaudited) (6) RELATED PARTY TRANSACTIONS/ INVESTMENT ADVISORY AND ADMINISTRATION FEES: Certain officers and directors of the Trust are also officers and directors of Berkshire Capital Holdings, Inc. The Trust has an Investment Advisory Agreement and a separate Administration Agreement with Berkshire Capital Holdings, Inc. Under the terms of the Investment Advisory Agreement, Berkshire Capital Holdings, Inc. will receive a fee accrued each calendar day (including weekends and holidays) at a rate of 1.5% per annum of the daily net assets of the Fund. Under the Administration Agreement, Berkshire Capital Holdings, Inc. receives a fee as compensation for services rendered, facilities furnished and expenses assumed. Such fee is computed as a percentage of the Fund's daily net assets and are accrued each calendar day (including weekends and holidays). The administration fee is based on the following schedule: Percentage Daily Net Asset Range ---------- --------------------- .50% $0 to $50 million .45% 50 to $200 million .40% $200 to $500 million .35% $500 to $1 billion .30% excess of $1 billion Berkshire Capital Holdings, Inc. may at its discretion, forego fees normally paid to it by the Trust for services rendered. For the period ending June 30, 1998 Berkshire Capital Holdings, Inc. reserves the right to irrevocably waive any and all investment advisory and administration fees. The foregoing of such fees for 1998 had a material effect on the Fund's expense ratio and yield to the shareholders. Such material effect was the subsequent lowering of the Fund's expense ratio resulting in the increase of the yield to the shareholders. Semi-Annual Report to Shareholders | 12 Important Legal Disclosures This report is submitted for the general information of the shareholders of the Berkshire Capital Growth & Value Fund. It is not authorized for distribution to prospective investors in the Fund unless accompanied or preceded by an effective Prospectus which includes details regarding the Fund's objectives, policies, expenses and other information. Please read the prospectus carefully. Past performance is not a guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Dow Jones Industrial Average, the Standard & Poor's 500 index and the NASDAQ Composite index all represent an unmanaged, broad-basket of stocks. They are typically used as a proxy for overall market performance. Investing in technology stocks entails certain risks, including increased volatility of share value. Investors are encouraged to read the Fund's Prospectus carefully. Copies of the most recent Prospectus may be obtained by calling the Fund directly at (408) 526-0707. Semi-Annual Report to Shareholders | 13 Berkshire Capital Investment Trust Berkshire Capital Growth & Value Fund ------------------------------------- 475 Milan Drive Suite #103 San Jose, CA 95134 (408) 526-0707 Board of Trustees ----------------- Malcolm R. Fobes III Ronald G. Seger Leland F. Smith Andrew W. Broer Investment Adviser/Administrator -------------------------------- Berkshire Capital Holdings, Inc. 475 Milan Drive Suite #103 San Jose, CA 95134 Independent Auditor ------------------- McCurdy & Associates CPA's, Inc. 27955 Clemens Road Westlake, OH 44145 Transfer Agent -------------- Mutual Shareholder Services 1301 East Ninth Street Suite #3600 Cleveland, OH 44114 Custodian --------- Fifth Third Bank 38 Fountain Square Plaza Cincinnati, OH 45263 Legal Counsel ------------- Hall & Evans, L.L.C. 1200 Seventeenth Street Suite 1700 Denver, CO 80202 Semi-Annual Report to Shareholders | 14 BERKSHIRE CAPITAL INVESTMENT TRUST PART C. OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) (i) Financial Statements included in Part A; Financial Highlights Berkshire Capital Growth & Value Fund (ii) Financial Statements included in Part B; Independent Auditor's Report Statement of Assets & Liabilities Berkshire Capital Investment Trust, December 31, 1997 Statement of Operations Berkshire Capital Investment Trust, For the Period from July 1, 1997 to December 31, 1997 Statement of Changes in Net Assets Berkshire Capital Investment Trust, For the Period from July 1, 1997 to December 31, 1997 Notes to Financial Statements Berkshire Capital Investment Trust, December 31, 1997 Financial Highlights Berkshire Capital Investment Trust, December 31, 1997 Schedule of Portfolio of Investments Berkshire Capital Investment Trust, December 31, 1997 Schedule of Investments Berkshire Capital Investment Trust, June 30, 1998 Statement of Assets & Liabilities Berkshire Capital Investment Trust, June 30, 1998 Statement of Operations Berkshire Capital Investment Trust, For the Six Month Period Ended June 30, 1998 Statement of Changes in Net Assets Berkshire Capital Investment Trust, For the Periods Ended June 30, 1998 and December 31, 1997 Financial Highlights Berkshire Capital Investment Trust For the Periods Ended June 30, 1998 and December 31, 1997 Notes to Financial Statements Berkshire Capital Investment Trust, June 30, 1998 (b) Exhibits Exhibit No. Description - ----------- ----------- 99.1 (1) Certificate of Trust - Berkshire Capital Investment Trust 99.2 (1) Certificate of Amendment of Certificate of Trust Berkshire Capital Investment Trust 99.2.1 Certificate of Amendment of Certificate of Trust Berkshire Capital Investment Trust 99.3 (1) Declaration of Trust - Berkshire Capital Investment Trust 99.4 (1) Certificate of Consent of the Trustees of the Berkshire Capital Investment Trust 99.5 (1) Investment Advisory Agreement 99.6 (1) Administration Agreement 99.7 (1) Transfer Agent Agreement 99.8 (1) Subscription Agreements 99.9 (1) Reimbursement Agreement 99.10 Consent of Independent Auditors 99.11 Inapplicable 99.12 Addendum to Declaration of Trust Berkshire Capital Investment Trust 99.13 Custody Agreement with Fifth Third Bank 99.14 Administration Agreement with Mutual Shareholder Services 99.15.1 Financial Data Schedule December 31, 1997 99.15.2 Financial Data Schedule June 30, 1998 (1) Previously filed on June 30, 1997, with Pre-Effective Amendment No. 1 to the Registrant's Registration Statement on Form N-1A and incorporated herein by reference. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Registration Statement to be signed below on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose and State of California, on the 2nd day of November, 1998. BERKSHIRE CAPITAL INVESTMENT TRUST By: /s/ MALCOLM R. FOBES III ------------------------ Malcolm R. Fobes III President Pursuant to the requirements of the Securities Act of 1933, this registration Statement has been signed below by the following persons in the capacities and on the dates(s) indicated. SIGNATURE TITLE DATE /s/ MALCOLM R. FOBES III - ------------------------ Malcolm R. Fobes III Trustee; President 11/2/98 /s/ RONALD G. SEGER - ------------------- Ronald G. Seger Trustee; Secretary 11/2/98 /s/ LELAND F. SMITH - ------------------- Leland F. Smith Trustee 11/2/98 /s/ ANDREW W. BROER - -------------------- Andrew W. Broer Trustee 11/2/98 Malcolm R. Fobes III, by signing his name below, signs this Post-Effective Amendment No. 2 on behalf of the above-named Trustees pursuant to Powers of Attorney contained in the Post-Effective Amendment No. 1 and Post-Effective Amendment No. 2 filed herewith with the Securities and Exchange Commission. Dated: November 2, 1998 /s/ MALCOLM R. FOBES III ------------------------ Malcolm R. Fobes III Attorney-in-Fact POWER OF ATTORNEY The undersigned Trustee of Berkshire Capital Investment Trust, a Delaware business trust, which anticipates filing with the Securities and Exchange Commission, Washington, DC, under the provisions of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, a Post-Effective Amendment No. 2 of the Registration Statement on Form N-1A, hereby constitutes and appoints Malcolm R. Fobes III with full power of substitution and resubstitution, as attorney to sign for the undersigned and in my name, place and stead, as Trustee of said Trust, said registration statement and any and all amendments and exhibits thereto, and any and all applications and documents to be filed with the Securities and Exchange Commission pertaining to such registration statement, with full power and authority to do and perform any and all acts and things whatsoever requisite, necessary or advisable to be done in the premises, as fully and for all intents and purposes as the undersigned could do if personally present, hereby approving the acts of said attorney, and any such substitute. IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of November, 1998. /s/ ANDREW W. BROER ------------------- Andrew W. Broer EX-99 2 EXHIBIT INDEX INDEX TO EXHIBITS Exhibit No. Description - ----------- ----------- 99.1 (1) Certificate of Trust - Berkshire Capital Investment Trust 99.2 (1) Certificate of Amendment of Certificate of Trust Berkshire Capital Investment Trust 99.2.1 Certificate of Amendment of Certificate of Trust Berkshire Capital Investment Trust 99.3 (1) Declaration of Trust - Berkshire Capital Investment Trust 99.4 (1) Certificate of Consent of the Trustees of the Berkshire Capital Investment Trust 99.5 (1) Investment Advisory Agreement 99.6 (1) Administration Agreement 99.7 (1) Transfer Agent Agreement 99.8 (1) Subscription Agreements 99.9 (1) Reimbursement Agreement 99.10 Consent of Independent Auditors 99.11 Inapplicable 99.12 Addendum to Declaration of Trust Berkshire Capital Investment Trust 99.13 Custody Agreement with Fifth Third Bank 99.14 Administration Agreement with Mutual Shareholder Services 99.15.1 Financial Data Schedule December 31, 1997 99.15.2 Financial Data Schedule June 30, 1998 (1) Previously filed on June 30, 1997, with Pre-Effective Amendment No. 1 to the Registrant's Registration Statement on Form N-1A and incorporated herein by reference. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. No person is directly or indirectly controlled by or under common control with the Registrant. ITEM 26. NUMBER OF HOLDERS OF SECURITIES. As of November 2, 1998, there were 12 holders of the shares of beneficial interest of the Berkshire Capital Growth & Value Fund series of Registrant. ITEM 27. INDEMNIFICATION. Under section 3817(a) of the Delaware Business Trust Act, a Delaware business trust has the power to indemnify and hold harmless any trustee, beneficial owner or other person from and against any and all claims and demands whatsoever. Reference is made to sections 5.1 and 5.2 of the Declaration of Trust of Berkshire Capital Investment Trust (the "Trust") (Exhibit 99.3) pursuant to which no trustee, officer, employee or agent of the Trust shall be subject to any personal liability, when acting in his or her individual capacity, except for his own bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties. The Trust shall indemnify each of its trustees, officers, employees and agents against all liabilities and expenses reasonably incurred by him or her in connection with the defense or disposition of any actions, suits or other proceedings by reason of his or her being or having been a trustee, officer, employee or agent, except with respect to any matter as to which he or she shall have been adjudicated to have acted in or with bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties. The Trust will comply with Section 17(h) of the Investment Company Act of 1940, as amended (the "1940 Act") and 1940 Act Releases number 7221 (June 9, 1972) and number 11330 (September 2, 1980). Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Trust pursuant to the foregoing, the Trust has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy and therefore may be unenforceable. In the event that a claim for indemnification (except insofar as it provides for the payment by the Trust of expenses incurred or paid by a trustee, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted against the Trust by such trustee, officer or controlling person and the Securities and Exchange Commission is still in the same opinion, the Trust will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. Indemnification provisions exist in the Investment Advisory and Administration Agreement under the headings "Limitation of Liability" which are identical to those in the Declaration of Trust noted above. ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER. (a) Inapplicable (b) Inapplicable ITEM 29. PRINCIPAL UNDERWRITER. (a) Inapplicable (b) Inapplicable (c) Inapplicable 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 will be maintained by the Registrant at its offices located at 475 Milan Drive, Suite #103, San Jose, California 95134 or at the offices of the Registrant's transfer agent located at 1301 East Ninth Street, Suite 3600, Cleveland, Ohio 44114. ITEM 31. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A AND B. Inapplicable ITEM 32. UNDERTAKINGS. (a) Inapplicable (b) Inapplicable (c) The Registrant undertakes that, if so requested, it will furnish each person to whom a prospectus is delivered with a copy of Registrant's latest annual report to shareholders without charge. EX-99.2.1 3 CERTIFICATE OF AMENDMENT CERTIFICATE OF AMENDMENT OF CERTIFICATE OF TRUST OF BERKSHIRE CAPITAL INVESTMENT TRUST This Certificate of Amendment is filed in accordance with the provisions of the Delaware Business Trust Act (12 Del. C. Section 3801 et. seq.) and sets forth the following: 1. The name of the business trust is BERKSHIRE CAPITAL INVESTMENT TRUST. 2. The Certificate of Trust filed on November 25, 1996 is to be amended, as the following persons shall hereinafter serve as all of the trustees of the BERKSHIRE CAPITAL INVESTMENT TRUST: Malcolm R. Fobes III Ronald G. Seger Leland F. Smith Andrew W. Broer 3. This Certificate of Amendment is to be effective upon this filing. The undersigned, in order to amend the Certificate of Trust of BERKSHIRE CAPITAL INVESTMENT TRUST under the laws of the State of Delaware, hereby make and file this Certificate of Amendment this 8th day of August, 1998. /s/ Malcolm R. Fobes III ------------------------- Malcolm R. Fobes III, Trustee /s/ Ronald G. Seger ------------------- Ronald G. Seger, Trustee /s/ Leland F. Smith ------------------------- Leland F. Smith, Trustee /s/ Andrew W. Broer ------------------- Andrew W. Broer, Trustee EX-99.10 4 CONSENT OF INDEPENDENT AUDITORS MEREDITH, CARDOZO, LANZ & CHIU LLP Certified Public Accountants 97 South Second Street, Suite 100 San Jose, California 95113 (408) 278-0220 CONSENT OF INDEPENDENT AUDITORS We consent to the references to our firm in Post-Effective Amendment No. 2 to the Registration Statement on Form N-1A of Berkshire Capital Investment Trust comprising the Berkshire Capital Growth & Value Fund and to the use of our report dated January 21, 1998 on the financial statements and financial highlights. Such financial statements and financial highlights are incorporated by reference in the Statement of Additional Information, which is a part of such Registration Statement. /s/ Meredith, Cardozo, Lanz & Chiu LLP - --------------------------------------- MEREDITH, CARDOZO, LANZ & CHIU LLP San Jose, California November 2, 1998 EX-99.12 5 ADDENDUM TO DECLARATION OF TRUST ADDENDUM TO DECLARATION OF TRUST OF BERKSHIRE CAPITAL INVESTMENT TRUST ADDENDUM TO DECLARATION OF TRUST OF BERKSHIRE CAPITAL INVESTMENT TRUST, executed this 8th day of August, 1998, by and among Malcolm R. Fobes III, Ronald G. Seger and Leland F. Smith (collectively the "Trustees"). WHEREAS, on November 25, 1996 Trustees entered into Declaration of Trust (the "Declaration"); and WHEREAS, on August 8, 1998, the Trustees desired to appoint one (1) additional Trustee of the Berkshire Capital Investment Trust (the "Trust") and in connection therewith, to execute an addendum to the Declaration which binds the new Trustee to the terms and conditions of the Declaration; NOW, THEREFORE, in consideration of the mutual promises contained herein, it is agreed that the undersigned Trustee understand the terms and conditions of the Declaration, agree to be bound by the terms and conditions of the Declaration and consent and agree to perform the duties and obligations of Trustees under the Declaration. IN WITNESS WHEREOF, the parties have caused the Addendum to be executed as of the date first written above. /s/ Andrew W. Broer -------------------- Andrew W. Broer Trustee EX-99.13 6 CUSTODY AGREEMENT CUSTODY AGREEMENT THIS AGREEMENT, is made as of May 16, 1998, by and between BERKSHIRE CAPITAL INVESTMENT TRUST, a business trust organized under the laws of the State of Delaware (the "Trust"), and THE FIFTH THIRD BANK, a banking company organized under the laws of the State of Ohio (the "Custodian"). WITNESSETH: WHEREAS, the Trust desires that the Securities and cash of each of the investment portfolios identified in Exhibit A hereto (such investment portfolios and individually referred to herein as a "Fund" and collectively as the "Funds"), be held and administered by the Custodian pursuant to this Agreement; and WHEREAS, the Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Custodian represents that it is a bank having the qualifications prescribed in Section 26(a)(i) of the 1940 Act; NOW, THEREFORE, in consideration of the mutual agreements herein made, the Trust and the Custodian hereby agree as follows: ARTICLE I DEFINITIONS Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: 1.1 "AUTHORIZED PERSON" means any Officer or other person duly authorized by resolution of the Board of Trustees to give Oral Instructions and Written Instructions on behalf of the Trust and named in Exhibit B hereto or in such resolutions of the Board of Trustees, certified by an Officer, as may be received by the Custodian from time to time. 1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time serving under the Trust's Agreement and Declaration of Trust, dated November 25, 1996, as from time to time amended. 1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR Part 350, or in such book-entry regulations of federal agencies as are substantially in the form of such Subpart O. 1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day by The New York Stock Exchange, Inc. and any other day for which the Fund computes the net asset value of the Fund. 1.5 "NASD" shall mean The National Association of Securities Dealers, Inc. 1.6 "OFFICER" shall mean the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Trust. 1.7 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to and accepted by the Custodian because such instructions are: (i) reasonably believed by the Custodian to have been given by an Authorized Person, (ii) recorded and kept among the records of the Custodian made in the ordinary course of business and (iii) orally confirmed by the Custodian. The Trust shall cause all Oral Instructions to be confirmed by Written Instructions. If such Written Instructions confirming Oral Instructions are not received by the Custodian prior to a transaction, it shall in no way affect the validity of the transaction or the authorization thereof by the Trust. If Oral Instructions vary from the Written Instructions which purport to confirm them, the Custodian shall notify the Trust of such variance but such Oral Instructions will govern unless the Custodian has not yet acted. 1.8 "CUSTODY ACCOUNT" shall mean any account in the name of the Trust, which is provided for in Section 3.2 below. 1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written Instructions. Proper Instructions may be continuing Written Instructions when deemed appropriate by both parties. 1.10 "SECURITIES DEPOSITORY" shall mean The Participants Trust Company or The Depository Trust Company and (provided that Custodian shall have received a copy of a resolution of the Board of Trustees, certified by an Officer, specifically approving the use of such clearing agency as a depository for the Trust) any other clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities and Exchange Act of 1934 (the "1934 Act"), which acts as a system for the central handling of Securities where all Securities of any particular class or series of an issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of the Securities. 1.11 "SECURITIES" shall include, without limitation, common and preferred stocks, bonds, call options, put options, debentures, notes, bank certificates of deposit, bankers' acceptances, mortgage-backed securities, other money market instruments or other obligations, and any certificates, receipts, warrants or other instruments or documents representing rights to receive, purchase or subscribe for the same, or evidencing or representing any other rights or interests therein, or any similar property or assets that the Custodian has the facilities to clear and to service. 1.12 "SHARES" shall mean the units of beneficial interest issued by the Trust. 1.13 "WRITTEN INSTRUCTIONS" shall mean (i) written communications actually received by the Custodian and signed by one or more persons as the Board of Trustees shall have from time to time authorized, or (ii) communications by telex or any other such system from a person or persons reasonably believed by the Custodian to be Authorized, or (iii) communications transmitted electronically through the Institutional Delivery System (IDS), or any other similar electronic instruction system acceptable to Custodian and approved by resolutions of the Board of Trustees, a copy of which, certified by an Officer, shall have been delivered to the Custodian. ARTICLE II APPOINTMENT OF CUSTODIAN 2.1 APPOINTMENT. The Trust hereby constitutes and appoints the Custodian as custodian of all Securities and cash owned by or in the possession of the Trust at any time during the period of this Agreement, provided that such Securities or cash at all times shall be and remain the property of the Trust. 2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such custodian and agrees to perform the duties thereof as hereinafter set forth and in accordance with the 1940 Act as amended. Except as specifically set forth herein, the Custodian shall have no liability and assumes no responsibly for any non-compliance by the Trust or a Fund of any laws, rules or regulations. ARTICLE III CUSTODY OF CASH AND SECURITIES 3.1 SEGREGATION. All Securities and non-cash property held by the Custodian for the account of the Fund, except Securities maintained in a Securities Depository or Book-Entry System, shall be physically segregated from other Securities and non-cash property in the possession of the Custodian and shall be identified as subject to this Agreement. 3.2 CUSTODY ACCOUNT. The Custodian shall open and maintain in its trust department a custody account in the name of each Fund, subject only to draft or order of the Custodian, in which the Custodian shall enter and carry all Securities, cash and other assets of the Fund which are delivered to it. 3.3 APPOINTMENT OF AGENTS. In its discretion, the Custodian may appoint, and at any time remove, any domestic bank or trust company, which has been approved by the Board of Trustees and is qualified to act as a custodian under the 1940 Act, as sub-custodian to hold Securities and cash of the Funds and to carry out such other provisions of this Agreement as it may determine, and may also open and maintain one or more banking accounts with such a bank or trust company (any such accounts to be in the name of the Custodian and subject only to its draft or order), provided, however, that the appointment of any such agent shall not relieve the Custodian of any of its obligations or liabilities under this Agreement. 3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Fund shall deliver, or cause to be delivered, to the Custodian all of the Fund's Securities, cash and other assets, including (a) all payments of income, payments of principal and capital distributions received by the Fund with respect to such Securities, cash or other assets owned by the Fund at any time during the period of this Agreement, and (b) all cash received by the Fund for the issuance, at any time during such period, of Shares. The Custodian shall not be responsible for such Securities, cash or other assets until actually received by it. 3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may deposit and/or maintain Securities of the Funds in a Securities Depository or in a Book-Entry System, subject to the following provisions: -2- (a) Prior to a deposit of Securities of the Funds in any Securities Depository or Book-Entry System, the Fund shall deliver to the Custodian a resolution of the Board of Trustees, certified by an Officer, authorizing and instructing the Custodian on an on-going basis to deposit in such Securities Depository or Book-Entry System all Securities eligible for deposit therein and to make use of such Securities Depository or Book-Entry System to the extent possible and practical in connection with its performance hereunder, including, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities, and deliveries and returns of collateral consisting of Securities. So long as such Securities Depository or Book-Entry System shall continue to be employed for the deposit of Securities of the Funds, the Trust shall annually re-adopt such resolution and deliver a copy thereof, certified by an Officer, to the Custodian. (b) Securities of the Fund kept in a Book-Entry System or Securities Depository shall be kept in an account ("Depository Account") of the Custodian in such Book-Entry System or Securities Depository which includes only assets held by the Custodian as a fiduciary, custodian or otherwise for customers. (c) The records of the Custodian and the Custodian's account on the books of the Book-Entry System and Securities Depository as the case may be, with respect to Securities of a Fund maintained in a Book-Entry System or Securities Depository shall, by book-entry, or otherwise identify such Securities as belonging to the Fund. (d) If Securities purchases by the Fund are to be held in a Book-Entry System or Securities Depository, the Custodian shall pay for such Securities upon (i) receipt of advice from the Book-Entry System or Securities Depository that such Securities have been transferred to the Depository Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. If Securities sold by the Fund are held in a Book-Entry System or Securities Depository, the Custodian shall transfer such Securities upon (i) receipt of advice from the Book-Entry System or Securities depository that payment for such Securities has been transferred to the Depository Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund. (e) Upon request, the Custodian shall provide the Fund with copies of any report (obtained by the Custodian from a Book-Entry System or Securities Depository in which Securities of the Fund is kept) on the internal accounting controls and procedures for safeguarding Securities deposited in such Book-Entry System or Securities Depository. (f) Anything to the contrary in this Agreement notwithstanding, the Custodian shall be liable to the Trust for any loss or damage to the Trust resulting (i) from the use of a Book-Entry System or Securities Depository by reason of any negligence or willful misconduct on the part of Custodian or any sub-custodian appointed pursuant to Section 3.3 above or any of its or their employees, or (ii) from failure of Custodian or any such sub-custodian to enforce effectively such rights as it may have against a Book-Entry System or Securities Depository. At its election, the Trust shall be subrogated to the rights of the Custodian with respect to any claim against a Book-Entry System or Securities Depository or any other person for any loss or damage to the Funds arising from the use of such Book-Entry System or Securities Depository, if and to the extent that the Trust has been made whole for any such loss or damage. 3.6 DISBURSEMENT OF MONEYS FROM CUSTODY ACCOUNTS. Upon receipt of Proper Instructions, the Custodian shall disburse moneys from a Fund Custody Account but only in the following cases: (a) For the purchase of Securities for the Fund but only upon compliance with Section 4.1 of this Agreement and only (i) in the case of Securities (other than options on Securities, futures contracts and options on futures contracts), against the delivery to the Custodian (or any sub-custodian appointed pursuant to Section 3.3 above) of such Securities registered as provided in Section 3.9 below in proper form for transfer, or if the purchase of such Securities is effected through a Book-Entry System or Securities Depository, in accordance with the conditions set forth in Section 3.5 above; (ii) in the case of options on Securities, against delivery to the Custodian (or such sub-custodian) of such receipts as are required by the customs prevailing among dealers in such options; (iii) in the case of futures contracts and options on futures contracts, against delivery to the Custodian (or such sub-custodian) of evidence of title thereto in favor of the Trust or any nominee referred to in Section 3.9 below; and (iv) in the case of repurchase or reverse repurchase agreements entered into between the Trust and a bank which is a member of the Federal Reserve System or between the Trust and a primary dealer in U.S. Government securities, against delivery of the purchased Securities either in certificate form or through an entry crediting the Custodian's account at a Book-Entry System or Securities Depository for the account of the Fund with such Securities; (b) In connection with the conversion, exchange or surrender, as set forth in Section 3.7(f) below, of Securities owned by the Fund; -3- (c) For the payment of any dividends or capital gain distributions declared by the Fund; (d) In payment of the redemption price of Shares as provided in Section 5.1 below; (e) For the payment of any expense or liability incurred by the Trust, including but not limited to the following payments for the account of a Fund: interest; taxes; administration, investment management, investment advisory, accounting, auditing, transfer agent, custodian, trustee and legal fees; and other operating expenses of a Fund; in all cases, whether or not such expenses are to be in whole or in part capitalized or treated as deferred expenses; (f) For transfer in accordance with the provisions of any agreement among the Trust, the Custodian and a broker-dealer registered under the 1934 Act and a member of the NASD, relating to compliance with rules of The Options Clearing Corporation and of any registered national securities exchange (or of any similar organization or organizations) regarding escrow or other arrangements in connection with transactions by the Trust; (g) For transfer in accordance with the provisions of any agreement among the Trust, the Custodian, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any contract market (or any similar organization or organizations) regarding account deposits in connection with transactions by the Trust; (h) For the funding of any uncertificated time deposit or other interest-bearing account with any banking institution (including the Custodian), which deposit or account has a term of one year or less; and (i) For any other proper purposes, but only upon receipt, in addition to Proper Instructions, of a copy of a resolution of the Board of Trustees, certified by an Officer, specifying the amount and purpose of such payment, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom such payment is to be made. 3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNTS. Upon receipt of Proper Instructions, the Custodian shall release and deliver Securities from a Custody Account but only in the following cases: (a) Upon the sale of Securities for the account of a Fund but only against receipt of payment therefor in cash, by certified or cashiers check or bank credit; (b) In the case of a sale effected through a Book-Entry System or Securities Depository, in accordance with the provisions of Section 3.5 above; (c) To an Offeror's depository agent in connection with tender or other similar offers for Securities of a Fund; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; (d) To the issuer thereof or its agent (i) for transfer into the name of the Trust, the Custodian or any sub-custodian appointed pursuant to Section 3.3 above, or of any nominee or nominees of any of the foregoing, or (ii) for exchange for a different number of 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 the Custodian; (e) To the broker selling Securities, for examination in accordance with the "street delivery" custom; (f) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the issuer of such Securities, or pursuant to provisions for conversion contained in such Securities, or pursuant to any deposit agreement, including surrender or receipt of underlying Securities in connection with the issuance or cancellation of depository receipts; provided that, in any such case, the new Securities and cash, if any, are to be delivered to the Custodian; (g) Upon receipt of payment therefor pursuant to any repurchase or reverse repurchase agreement entered into by a Fund; (h) In the case of warrants, rights or similar Securities, upon the exercise thereof, provided that, in any such case, the new Securities and cash, if any, are to be delivered to the Custodian; (i) For delivery in connection with any loans of Securities of a Fund, but only against receipt of such collateral as the Trust shall have specified to the Custodian in Proper Instructions; -4- (j) For delivery as security in connection with any borrowings by the Trust on behalf of a Fund requiring a pledge of assets by such Fund, but only against receipt by the Custodian of the amounts borrowed; (k) Pursuant to any authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Trust or a Fund; (l) For delivery in accordance with the provisions of any agreement among the Trust, the Custodian and a broker-dealer registered under the 1934 Act and a member of the NASD, relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or of any similar organization or organizations) regarding escrow or other arrangements in connection with transactions by the Trust on behalf of a Fund; (m) For delivery in accordance with the provisions of any agreement among the Trust on behalf of a Fund, the Custodian, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any contract market (or any similar organization or organizations) regarding account deposits in connection with transactions by the Trust on behalf of a Fund; or (n) For any other proper corporate purposes, but only upon receipt, in addition to Proper Instructions, of a copy of a resolution of the Board of Trustees, certified by an Officer, specifying the Securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such Securities shall be made. 3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise instructed by the Trust, the Custodian shall with respect to all Securities held for a Fund; (a) Subject to Section 7.4 below, collect on a timely basis all income and other payments to which the Trust is entitled either by law or pursuant to custom in the securities business; (b) Present for payment and, subject to Section 7.4 below, collect on a timely basis the amount payable upon all Securities which may mature or be called, redeemed, or retired, or otherwise become payable; (c) Endorse for collection, in the name of the Trust, checks, drafts and other negotiable instruments; (d) Surrender interim receipts or Securities in temporary form for Securities in definitive form; (e) Execute, as custodian, any necessary declarations or certificates of ownership under the federal income tax laws or the laws or regulations of any other taxing authority now or hereafter in effect, and prepare and submit reports to the Internal Revenue Service ("IRS") and to the Trust at such time, in such manner and containing such information as is prescribed by the IRS; (f) Hold for a Fund, either directly or, with respect to Securities held therein, through a Book-Entry System or Securities Depository, all rights and similar securities issued with respect to Securities of the Fund; and (g) In general, and except as otherwise directed in Proper Instructions, attend to all non-discretionary details in connection with sale, exchange, substitution, purchase, transfer and other dealings with Securities and assets of the Fund. 3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for a Fund that are issued or issuable only in bearer form shall be held by the Custodian in that form, provided that any such Securities shall be held in a Book-Entry System for the account of the Trust on behalf of a Fund, if eligible therefor. All other Securities held for a Fund may be registered in the name of the Trust on behalf of such Fund, the Custodian, or any sub-custodian appointed pursuant to Section 3.3 above, or in the name of any nominee of any of them, or in the name of a Book-Entry System, Securities Depository or any nominee of either thereof; provided, however, that such Securities are held specifically for the account of the Trust on behalf of a Fund. The Trust shall furnish to the Custodian appropriate instruments to enable the Custodian to hold or deliver in proper form for transfer, or to register in the name of any of the nominees hereinabove referred to or in the name of a Book-Entry System or Securities Depository, any Securities registered in the name of a Fund. -5- 3.10 RECORDS. (a) The Custodian shall maintain, by Fund, complete and accurate records with respect to Securities, cash or other property held for the Trust, including (i) journals or other records of original entry containing an itemized daily record in detail of all receipts and deliveries of Securities and all receipts and disbursements of cash; (ii) ledgers (or other records) reflecting (A) Securities in transfer, (B) Securities in physical possession, (C) monies and Securities borrowed and monies and Securities loaned (together with a record of the collateral therefor and substitutions of such collateral), (D) dividends and interest received, and (E) dividends receivable and interest accrued; and (iii) canceled checks and bank records related thereto. The Custodian shall keep such other books and records of the Trust as the Trust shall reasonably request, or as may be required by the 1940 Act, including, but not limited to Section 3.1 and Rule 31a-1 and Rule 31a-2 promulgated thereunder. (b) All such books and records maintained by the Custodian shall (i) be maintained in a form acceptable to the Trust and in compliance with rules and regulations of the Securities and Exchange Commission, (ii) be the property of the Trust and at all times during the regular business hours of the Custodian be made available upon request for inspection by duly authorized officers, employees or agents of the Trust and employees or agents of the Securities and Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the 1940 Act. 3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust with a daily activity statement by Fund and a summary of all transfers to or from the Custody Account on the day following such transfers. At least monthly and from time to time, the Custodian shall furnish the Trust with a detailed statement, by Fund, of the Securities and moneys held for the Trust under this Agreement. 3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust with such reports, as the Trust may reasonably request from time to time, on the internal accounting controls and procedures for safeguarding Securities, which are employed by the Custodian or any sub-custodian appointed pursuant to Section 3.3 above. 3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies if any, relating to Securities which are not registered in the name of a Fund, to be promptly executed by the registered holder of such Securities, without indication of the manner in which such proxies are to be voted, and shall include all other proxy materials, if any, promptly deliver to the Trust such proxies, all proxy soliciting materials, which should include all other proxy materials, if any, and all notices to such Securities. 3.14 INFORMATION ON CORPORATE ACTIONS. Custodian will promptly notify the Trust of corporate actions, limited to those Securities registered in nominee name and to those Securities held at a Depository or sub-Custodian acting as agent for Custodian. Custodian will be responsible only if the notice of such corporate actions is published by the Financial Daily Card Service, J.J. Kenny Called Bond Service, DTC, or received by first class mail from the agent. For market announcements not yet received and distributed by Custodian's services, Trust will inform its custody representative with appropriate instructions. Custodian will, upon receipt of Trust's response within the required deadline, affect such action for receipt or payment for the Trust. For those responses received after the deadline, Custodian will affect such action for receipt or payment, subject to the limitations of the agent(s) affecting such actions. Custodian will promptly notify Trust for put options only if the notice is received by first class mail from the agent. The Trust will provide or cause to be provided to Custodian with all relevant information contained in the prospectus for any security which has unique put/option provisions and provide Custodian with specific tender instructions at least ten business days prior to the beginning date of the tender period. ARTICLE IV PURCHASE AND SALE OF INVESTMENTS OF THE FUND 4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for the Trust, Written Instructions shall be delivered to the Custodian, specifying (a) the name of the issuer or writer of such Securities, and the title or other description thereof, (b) the number of shares, principal amount (and accrued interest, if any) or other units purchased, (c) the date of purchase and settlement, (d) the purchase price per unit, (e) the total amount payable upon such purchase, and (f) the name of the person to whom such amount is payable. The Custodian shall upon receipt of such Securities purchased by a Fund pay out of the moneys held for the account of such Fund the total amount specified in such Written Instructions to the person named therein. The Custodian shall not be under any obligation to pay out moneys to cover the cost of a purchase of Securities for a Fund, if in the relevant Custody Account there is insufficient cash available to the Fund for which such purchase was made. 4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In any and every case where payment for the purchase of Securities for a Fund is made by the Custodian in advance of receipt for the account of the Fund of the Securities purchased but in the absence of specific Written or Oral Instructions to so pay in advance, the Custodian shall be liable to the Fund for such Securities to the same extent as if the Securities had been received by the Custodian. -6- 4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by a Fund, Written Instructions shall be delivered to the Custodian, specifying (a) the name of the issuer or writer of such Securities, and the title or other description thereof, (b) the number of shares, principal amount (and accrued interest, if any), or other units sold, (c) the date of sale and settlement (d) the sale price per unit, (e) the total amount payable upon such sale, and (f) the person to whom such Securities are to be delivered. Upon receipt of the total amount payable to the Trust as specified in such Written Instructions, the Custodian shall deliver such Securities to the person specified in such Written Instructions. Subject to the foregoing, the Custodian may accept payment in such form as shall be satisfactory to it, and may deliver Securities and arrange for payment in accordance with the customs prevailing among dealers in Securities. 4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or any other provision of this Agreement, the Custodian, when instructed to deliver Securities against payment, shall be entitled, if in accordance with generally accepted market practice, to deliver such Securities prior to actual receipt of final payment therefor. In any such case, the Trust shall bear the risk that final payment for such Securities may not be made or that such Securities may be returned or otherwise held or disposed of by or through the person to whom they were delivered, and the Custodian shall have no liability for any of the foregoing. 4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from time to time, the Custodian may credit the relevant Custody Account, prior to actual receipt of final payment thereof, with (i) proceeds from the sale of Securities which it has been instructed to deliver against payment, (ii) proceeds from the redemption of Securities or other assets of the Trust, and (iii) income from cash, Securities or other assets of the Trust. Any such credit shall be conditional upon actual receipt by Custodian of final payment and may be reversed if final payment is not actually received in full. The Custodian may, in its sole discretion and from time to time, permit the Trust to use funds so credited to its Custody Account in anticipation of actual receipt of final payment. Any such funds shall be repayable immediately upon demand made by the Custodian at any time prior to the actual receipt of all final payments in anticipation of which funds were credited to the Custody Account. 4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its sole discretion and from time to time, advance funds to the Trust to facilitate the settlement of a Trust transactions on behalf of a Fund in its Custody Account. Any such advance shall be repayable immediately upon demand made by Custodian. ARTICLE V REDEMPTION OF TRUST SHARES TRANSFER OF FUNDS. From such funds as may be available for the purpose in the relevant Custody Account, and upon receipt of Proper Instructions specifying that the funds are required to redeem Shares of a Fund, the Custodian shall wire each amount specified in such Proper Instructions to or through such bank as the Trust may designate with respect to such amount in such Proper Instructions. Upon effecting payment or distribution in accordance with proper Instruction, the Custodian shall not be under any obligation or have any responsibility thereafter with respect to any such paying bank. ARTICLE VI SEGREGATED ACCOUNTS Upon receipt of Proper Instructions, the Custodian shall establish and maintain a segregated account or accounts for and on behalf of each Fund, into which account or accounts may be transferred cash and/or Securities, including Securities maintained in a Depository Account, (a) in accordance with the provisions of any agreement among the Trust, the Custodian and a broker-dealer registered under the 1934 Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Trust, (b) for purposes of segregating cash or Securities in connection with securities options purchased or written by a Fund or in connection with financial futures contracts (or options thereon) purchased or sold by a Fund, (c) which constitute collateral for loans of Securities made by a Fund, (d) for purposes of compliance by the Trust with requirements under the 1940 Act for the maintenance of segregated accounts by registered investment companies in connection with reverse repurchase agreements and when-issued, delayed delivery and firm commitment transactions, and -7- (e) for other proper corporate purposes, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Trustees, certified by an Officer, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes. ARTICLE VII CONCERNING THE CUSTODIAN 7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of reasonable care in carrying out its obligations under this Agreement, and shall be without liability to the Trust for any loss, damage, cost, expense (including attorneys' fees and disbursements), liability or claim unless such loss, damages, cost, expense, liability or claim arises from negligence, bad faith or willful misconduct on its part or on the part of any sub-custodian appointed pursuant to Section 3.3 above. The Custodian's cumulative liability within a calendar year shall be limited with respect to the Trust or any party claiming by, through or on behalf of the Trust for the initial and all subsequent renewal terms of this Agreement, to the lessor amount of (a) the actual damages sustained by the Trust, (actual damages for uninvested funds shall be the overnight Feds fund rate), or (b) to an amount not to exceed one-half of the net fees paid to the Custodian within the prior three calendar months. The Custodian shall be entitled to rely on and may act upon advice of counsel on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall promptly notify the Trust of any action taken or omitted by the Custodian pursuant to advice of counsel. The Custodian shall not be under any obligation at any time to ascertain whether the Trust is in compliance with the 1940 Act, the regulations thereunder, the provisions of the Trust's charter documents or by-laws, or its investment objectives and policies as then in effect. 7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for, or considered to be the custodian of, any cash belonging to the Trust or any money represented by a check, draft or other instrument for the payment of money, until the Custodian or its agents actually receive such cash or collect on such instrument. 7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received or delivered by it pursuant to this Agreement. 7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to enforce collection, by legal means or otherwise, of any money or property due and payable with respect to Securities held for the Trust if such Securities are in default or payment is not made after due demand or presentation. 7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be entitled to rely upon any certificate, notice or other instrument in writing received by it and reasonably believed by it to be genuine. The Custodian shall be entitled to rely upon any Oral Instructions and/or any Written Instructions actually received by it pursuant to this Agreement. 7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or obligations whatsoever except such duties and obligations as are specifically set forth in this Agreement, and no covenant or obligation shall be implied in this Agreement against the Custodian. 7.7 COOPERATION. The Custodian shall cooperate with and supply necessary information, by the Trust, to the entity or entities appointed by the Trust to keep the books of account of the Trust and/or compute the value of the assets of the Trust. The Custodian shall take all such reasonable actions as the Trust may from time to time request to enable the Trust to obtain, from year to year, favorable opinions from the Trust's independent accountants with respect to the Custodian's activities hereunder in connection with (a) the preparation of the Trust's report on Form N-1A and Form N-SAR and any other reports required by the Securities and Exchange Commission, and (b) the fulfillment by the Trust of any other requirements of the Securities and Exchange Commission. ARTICLE VIII INDEMNIFICATION 8.1 INDEMNIFICATION. The Trust shall indemnify and hold harmless the Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any nominee of the Custodian or of such sub-custodian from and against any loss, damage, cost, expense (including attorneys' fees and disbursements), liability (including, without limitation, liability arising under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or banking laws) or claim arising directly or indirectly (a) from the fact that Securities are registered in the name of any such nominee, or (b) from any action or inaction by the Custodian or such sub-custodian (i) at the request or direction of or in reliance on the advice of the Trust, or (ii) upon Proper Instructions, or (c) generally, from the performance of its obligations under this Agreement or any sub-custody agreement with a sub-custodian appointed pursuant to Section 3.3 above or, in the case of any -8- such sub-custodian, from the performance of its obligations under such custody agreement, provided that neither the Custodian nor any such sub-custodian shall be indemnified and held harmless from and against any such loss, damage, cost, expense, liability or claim arising from the Custodian's or such sub-custodian's negligence, bad faith or willful misconduct. 8.2 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to take any action with respect to Securities, which may, in the opinion of the custodian, result in the Custodian or its nominee becoming liable for the payment of money or incurring liability of some other form, the Custodian shall not be required to take such action until the Trust shall have provided indemnity therefor to the Custodian in an amount and form satisfactory to the Custodian. ARTICLE IX FORCE MAJEURE Neither the Custodian nor the Trust shall be liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances; sabotage; strikes; epidemics; riots; power failures; computer failure and any such circumstances beyond its reasonable control as may cause interruption, loss or malfunction of utility, transportation, computer (hardware or software) or telephone communication service; accidents; labor disputes, acts of civil or military authority; governmental actions; or inability to obtain labor, material, equipment or transportation; provided, however, that the Custodian in the event of a failure or delay shall use its best efforts to ameliorate the effects of any such failure or delay. Notwithstanding the foregoing, the Custodian shall maintain sufficient disaster recovery procedures to minimize interruptions. ARTICLE X EFFECTIVE PERIOD; TERMINATION 10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of the date first set forth above and shall continue in full force and effect until terminated as hereinafter provided. 10.2 TERMINATION. Either party hereto may terminate this Agreement by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than ninety (90) days after the date of the giving of such notice. If a successor custodian shall have been appointed by the Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance by the successor custodian, on such specified date of termination (a) deliver directly to the successor custodian all Securities (other than Securities held in a Book-Entry System or Securities Depository) and cash then owned by the Trust and held by the Custodian as custodian, and (b) transfer any Securities held in a Book-Entry System or Securities Depository to an account of or for the benefit of the Trust at the successor custodian, provided that the Trust shall have paid to the Custodian all fees, expenses and other amounts to the payment or reimbursement of which it shall then be entitled. Upon such delivery and transfer, the Custodian shall be relieved of all obligations under this Agreement. The Trust may at any time immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Custodian by regulatory authorities in the State of Ohio or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. 10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian is not designated by the Trust on or before the date of termination specified pursuant to Section 10.1 above, then the Custodian shall have the right to deliver to a bank or trust company of its own selection, which is (a) a "Bank" as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided profits as shown on its then most recent published report of not less than $25 million, and (c) is doing business in New York, New York, all Securities, cash and other property held by Custodian under this Agreement and to transfer to an account of or for the Trust at such bank or trust company all Securities of the Trust held in a Book-Entry System or Securities Depository. Upon such delivery and transfer, such bank or trust company shall be the successor custodian under this Agreement and the Custodian shall be relieved of all obligations under this Agreement. If, after reasonable inquiry, Custodian cannot find a successor custodian as contemplated in this Section 10.3, then Custodian shall have the right to deliver to the Trust all Securities and cash then owned by the Trust and to transfer any Securities held in a Book-Entry System or Securities Depository to an account of or for the Trust. Thereafter, the Trust shall be deemed to be its own custodian with respect to the Trust and the Custodian shall be relieved of all obligations under this Agreement. ARTICLE XI COMPENSATION OF CUSTODIAN The Custodian shall be entitled to compensation as agreed upon from time to time by the Trust and the Custodian. The fees and other charges in effect on the date hereof and applicable to the Funds are set forth in Exhibit B attached hereto. -9- ARTICLE XII LIMITATION OF LIABILITY The Trust is a business trust organized under the laws of the State of Delaware and under a Declaration of Trust, to which reference is hereby made a copy of which is on file at the office of the Secretary of State of Delaware as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of the Trust entered into in the name of the Trust or on behalf thereof by any of the Trustees, officers, employees or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, officers, employees, agents or shareholders of the Trust or the Funds personally, but bind only the assets of the Trust, and all persons dealing with any of the Funds of the Trust must look solely to the assets of the Trust belonging to such Fund for the enforcement of any claims against the Trust. ARTICLE XIII NOTICES Unless otherwise specified herein, all demands, notices, instructions, and other communications to be given hereunder shall be in writing and shall be sent or delivered to The receipt at the address set forth after its name herein below: TO THE TRUST OR TO THE ADVISER: Berkshire Capital Holdings, Inc. 475 Milan Drive, Suite #103 San Jose, California 95134 Attn: Malcolm R. Fobes III Telephone: (408) 526-0707 Facsimile: (408) 562-6501 TO THE CUSTODIAN: The Fifth Third Bank 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Area Manager - Trust Operations Telephone: (513) 579-5300 Facsimile: (513) 579-4312 or at such other address as either party shall have provided to the other by notice given in accordance with this Article XIII. Writing shall include transmission by or through teletype, facsimile, central processing unit connection, on-line terminal and magnetic tape. ARTICLE XIV MISCELLANEOUS 14.1 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio. 14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed matter which contains any reference to Custodian without the prior written approval of Custodian, excepting printed matter contained in the prospectus or statement of additional information or its registration statement for the Trust and such other printed matter as merely identifies Custodian as custodian for the Trust. The Trust shall submit printed matter requiring approval to Custodian in draft form, allowing sufficient time for review by Custodian and its counsel prior to any deadline for printing. 14.3 NO WAIVER. No failure by either party hereto to exercise and no delay by such party in exercising, any right hereunder shall operate as a waiver thereof. The exercise by either party hereto of any right hereunder shall not preclude the exercise of any other right, and the remedies provided herein are cumulative and not exclusive of any remedies provided at law or in equity. 14.4 AMENDMENTS. This Agreement cannot be changed orally and no amendment to this Agreement shall be effective unless evidenced by an instrument in writing executed by the parties hereto. 14.5 COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the parties hereto on separate counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same instrument. -10- 14.6 SEVERABILITY. If any provision of this Agreement shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired thereby. 14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by either party hereto without the written consent of the other party hereto. 14.8 HEADINGS. The headings of sections in this Agreement are for convenience of reference only and shall not affect the meaning or construction of any provision of this Agreement. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and delivered in its name and on its behalf by its representatives thereunto duly authorized, all as of the day and year first above written. ATTEST: BERKSHIRE CAPITAL INVESTMENT TRUST /s/ Ronald G. Seger By: Malcolm R. Fobes III - ------------------- ------------------------ Its: President ATTEST: THE FIFTH THIRD BANK /s/ Christine Ok By: /s/ Elizabeth Goldthwait - ----------------- ---------------------------- Its: Officer -11- Dated: May 16, 1998 EXHIBIT A TO THE CUSTODY AGREEMENT BETWEEN BERKSHIRE CAPITAL INVESTMENT TRUST AND THE FIFTH THIRD BANK May 16, 1998 Name of Fund Date ------------- ----- BERKSHIRE CAPITAL GROWTH & VALUE FUND May 16, 1998 BERKSHIRE CAPITAL INVESTMENT TRUST By: /s/ Malcolm R. Fobes III ----------------------------- Its: President THE FIFTH THIRD BANK By: /s/ Elizabeth Goldthwait ----------------------------- Its: Officer -12- Dated: May 16, 1998 EXHIBIT B TO THE CUSTODY AGREEMENT BETWEEN BERKSHIRE CAPITAL INVESTMENT TRUST AND THE FIFTH THIRD BANK May 16, 1998 AUTHORIZED PERSONS Set forth below are the names and specimen signatures of the persons authorized by the Trust to Administer each Custody Account. NAME SIGNATURE - --------------------- ------------------------ MALCOLM R. FOBES III /s/ Malcolm R. Fobes III ------------------------ LELAND F. SMITH /s/ Leland F. Smith ------------------------ RONALD G. SEGER /s/ Ronald G. Seger ------------------------ -13- SIGNATURE RESOLUTION RESOLVED, That all of the following officers of BERKSHIRE CAPITAL INVESTMENT TRUST and any of them, namely the Chairman, President, Vice President, Secretary and Treasurer, are hereby authorized as signers for the conduct of business for an on behalf of the Funds with THE FIFTH THIRD BANK: CHAIRMAN - ---------------------- ------------------------ MALCOLM R. FOBES III PRESIDENT /s/ Malcolm R. Fobes III - ---------------------- ------------------------ LELAND F. SMITH VICE PRESIDENT /s/ Leland F. Smith - ---------------------- ------------------------ VICE PRESIDENT - ---------------------- ------------------------ VICE PRESIDENT - ---------------------- ------------------------ VICE PRESIDENT - ---------------------- ------------------------ TREASURER - ---------------------- ------------------------ RONALD G. SEGER SECRETARY /s/ Ronald G. Seger - ---------------------- ------------------------ In addition, the following Assistant Treasurer is authorized to sign on behalf of the Trust for the purpose of effecting securities transactions: ASSISTANT TREASURER - ------------------------ ------------------------------- The undersigned officers of BERKSHIRE CAPITAL INVESTMENT TRUST hereby certify that the foregoing is within the parameters of a Resolution adopted by Trustees of the Trust in a meeting held May 16, 1998, directing and authorizing preparation of documents and to do everything necessary to effect the Custody Agreement between BERKSHIRE CAPITAL INVESTMENT TRUST and THE FIFTH THIRD BANK. By: /s/ Malcolm R. Fobes III ---------------------------- Its: President -14- EXHIBIT C TO THE CUSTODY AGREEMENT BETWEEN BERKSHIRE CAPITAL INVESTMENT TRUST AND THE FIFTH THIRD BANK May 16, 1998 MUTUAL FUND CUSTODY FEE SCHEDULE PER UNIT FEE I Basic Per Account Fee Annual Asset Based Fees Under $25 Million 1 bp $25 - $100 Million .75 bp $100 - $200 Million .5 bp Over $200 Million .25 bp Minimum $2,400.00 II Security Transaction Fees DTC/Fed Eligible $ 9.00 Physical 25.00 Amortized Securities 25.00 Options 25.00 Mutual Funds 15.00 Foreign - Euroclear & Cedel 50.00 Foreign - Other TBD III Systems Automated Securities Workstation $ 150.00 $200.00 Initial Setup Mainframe-To-Mainframe 150.00 $200.00 Initial Setup ACCESS Single Account 50.00 Multiple Accounts 100.00 IV. Miscellaneous Fees P & I Collection (on amortized securities) $ 5.00 Per additional issue for repo 5.00 collateral Voluntary Corporate Actions 25.00 Wire Transfers (In/Out) 7.00 Check Requests 6.00 Automated Asset Reconciliation 25.00 *FIFTH THIRD BANK IS WILLING TO REDUCE THE TOTAL ACCOUNT FEES 50% FOR THE FIRST SIX MONTHS AND 25% FOR THE SECOND SIX MONTHS ONCE CONVERTED TO FIFTH THIRD **Minimum Account Fee $2,400 -15- EX-99.14 7 ADMIN AGREEMENT ADMINISTRATION AGREEMENT THIS AGREEMENT is made and entered into this 27th day of October, 1998, by and between BERKSHIRE CAPITAL INVESTMENT TRUST a registered management investment company (the "Fund"), and Maxus Information Systems, Inc. DBA Mutual Shareholder Services, an Ohio corporation ("MSS"). RECITALS: A. The Fund is a non-diversified, open-end management investment company registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"); and B. The Fund desires to appoint MSS as its transfer agent and dividend disbursing and redemption agent, and MSS desires to accept such appointment. AGREEMENTS: NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereby agree as follows: 1. DUTIES OF MSS. 1.01 Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints MSS to act, and MSS agrees to act, as transfer agent for the Fund's authorized and issued shares of beneficial interest of each class of each portfolio of the Fund (the "Shares"), and as dividend disbursing and redemption agent for the Fund. 1.02 MSS agrees that it will perform the following services: (a) In accordance with procedures established from time to time by agreement between the Fund and MSS, MSS shall: (i) Receive for acceptance, orders for the purchase of Shares, and promptly deliver payment and appropriate documentation therefore to the Custodian of the Fund authorized by the Board of Directors of the Fund (the "Custodian"); (ii) Pursuant to purchase orders, issue the appropriate number of Shares and hold such Shares in the appropriate Shareholder account; (iii) Receive for acceptance redemption requests and redemption directions and deliver the appropriate documentation therefore to the Custodian; -1- (iv) At the appropriate time as and when it receives monies paid to it by the Custodian with respect to any redemption, pay over or cause to be paid over in the appropriate manner such monies as instructed by the redeeming Shareholders; (v) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions; (vi) Prepare and transmit payments for dividends and distributions declared by the Fund; (vii) Maintain records of account for and advise the Fund and its Shareholders as to the foregoing; and (viii) Record the issuance of shares of the Fund and maintain pursuant to SEC Rule 17Ad-10(e) a record of the total number of shares of the Fund which are authorized, based upon data provided to it by the Fund, and issued and outstanding. MSS shall also provide the Fund on a regular basis with the total number of shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of shares, to monitor the issuance of such shares or to take cognizance of any laws relating to the issue or sale of such shares, which functions shall be the sole responsibility of the Fund. (b) In addition, MSS shall perform all of the customary services of a transfer agent, dividend disbursing and redemption agent, including but not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, receiving and tabulating proxies, mailing Shareholder reports and prospectuses to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all Shareholders, preparing and mailing confirmation forms and statements of account to Shareholders for all purchases and redemptions of Shares and other confirmable transactions in Shareholder accounts, preparing and mailing activity statements for Shareholders, and providing Shareholder account information and provide a system and reports which will enable the Fund to monitor the total number of Shares sold in each State. Procedures applicable to certain of these services may be established from time to time by agreement between the Fund and MSS. 2. FEES AND EXPENSES 2.01 In consideration of the services to be performed by MSS pursuant to this Agreement, the Fund agrees to pay MSS the fees set forth in the fee schedule attached hereto as Exhibit "A". -2- 2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees to reimburse MSS for out-of-pocket expenses or advances incurred by MSS in connection with the performance of its obligations under this Agreement. In addition, any other expenses incurred by MSS at the request or with the consent of the Fund will be reimbursed by the Fund. 2.03 The Fund agrees to pay all fees and reimbursable expenses within five days following the receipt of the respective billing notice. Postage for mailing of dividends, proxies, Fund reports and other mailings to all shareholder accounts shall be advanced to MSS by the Fund at least seven days prior to the mailing date of such materials. 3. REPRESENTATIONS AND WARRANTIES OF MSS MSS represents and warrants to the Fund that: 3.01 It is a corporation duly organized and existing and in good standing under the laws of the State Ohio. 3.02 It is duly qualified to carry on its business in the State of Ohio. 3.03 It is empowered under applicable laws and by its charter and by-laws to enter into and perform this Agreement. 3.04 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement. 3.05 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. 3.06 MSS is duly registered as a transfer agent under the Securities Act of 1934 and shall continue to be registered throughout the remainder of this Agreement. 4. REPRESENTATIONS AND WARRANTIES OF THE FUND The Fund represents and warrants to MSS that: 4.01 It is a Corporation duly organized and existing and in good standing under the laws of Delaware. 4.02 It is empowered under applicable laws and by its charter and By-Laws to enter into and perform this Agreement. 4.03 All corporate proceedings required by said charter and By-Laws have been taken to authorize it to enter into and perform this Agreement. -3- 4.04 It is an open-end and diversified management investment company registered under the 1940 Act. 4.05 A registration statement under the Securities Act of 1933 is currently or will become effective and will remain effective, and appropriate state securities law filings as required, have been or will be made and will continue to be made, with respect to all Shares of the Fund being offered for sale. 5. INDEMNIFICATION 5.01 MSS shall not be responsible for, and the Fund shall indemnify and hold MSS harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to: (a) All actions of MSS or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without gross negligence or willful misconduct. (b) The Fund's refusal or failure to comply with the terms of this Agreement, or which arise out of the Fund's lack good faith, gross negligence or willful misconduct or which arise out of the breach of any representation or warranty of the Fund hereunder. (c) The reliance on or use by MSS or its agents or subcontractors of information, records and documents which (i) are received by MSS or its agents or subcontractors and furnished to it by or on behalf of the Fund, and (ii) have been prepared and/or maintained by the Fund or any other person or firm on behalf of the Fund. (d) The reliance on, or the carrying out by MSS or its agents or subcontractors of, any instructions or requests of the Fund. (e) The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state. 5.02 MSS shall indemnify and hold the Fund harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to any action or failure or omission to act by MSS as a result of MSS's lack of good faith, gross or ordinary negligence or willful misconduct. -4- 5.03 At any time MSS may apply to any officer of the Fund for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by MSS under this Agreement, and MSS and its agents or subcontractors shall not be liable and shall be indemnified by the Fund for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. MSS, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided MSS or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund. MSS, its agents and subcontractors shall also be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of the officers of the Fund, and the proper countersignature of any former transfer agent or registrar, or of a co-transfer agent or co-registrar. 5.04 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes. 5.05 Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any act or failure to act hereunder. 5.06 Upon the assertion of a claim for which either party may be required to indemnify the other, the party of seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification the defense of such claim. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent. 6. COVENANTS OF THE FUND AND MSS 6.01 The Fund shall promptly furnish to MSS a certified copy of the resolution of the Board of Directors of the Fund authorizing the appointment of MSS and the execution and delivery of this Agreement. 6.02 MSS hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices. -5- 6.03 MSS shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the 1940 Act, as amended, and the Rules thereunder, MSS agrees that all such records prepared or maintained by MSS relating to the services to be performed by MSS hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request. 6.04 MSS and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law. 6.05 In case of any requests or demands for the inspection of the Shareholder records of the Fund, MSS will endeavor to notify the Fund and to secure instructions from an authorized officer of the Fund as to such inspection. MSS reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person, and shall promptly notify the Fund of any unusual request to inspect or copy the shareholder records of the Fund or the receipt of any other unusual request to inspect, copy or produce the records of the Fund. 7. TERM OF AGREEMENT 7.01 This Agreement shall become effective as of the date hereof and shall remain in force for a period of three years; provided, however, that each party to this Agreement have the option to terminate the Agreement without penalty, upon 90 days prior written notice. 7.02 Should the Fund exercise its right to terminate, all out-of-pocket expenses associated with the movement of records and material will be borne by the Fund. Additionally, MSS reserves the right to charge for any other reasonable expenses associated with such termination. 8. MISCELLANEOUS 8.01 Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party. This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. 8.02 This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Directors of the Fund. 8.03 The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Ohio as at the time in effect and the applicable provisions of the 1940 Act. To the extent that the applicable law of the State of Ohio, or any of the provisions here in, conflict with the applicable provisions of the 1940 Act, the latter shall control. -6- 8.04 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written. 8.05 All notices and other communications hereunder shall be in writing, shall be deemed to have been given when received or when sent by telex or facsimile, and shall be given to the following addresses (or such other addresses as to which notice is given): To the Fund: To MSS: Berkshire Capital Investment Trust Maxus Information Systems, Inc. 475 Milan Drive, Suite #103 DBA Mutual Shareholder Services San Jose, CA 95134 1301 East Ninth Street, 36th Floor Cleveland, OH 44114 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Fund: BERKSHIRE CAPITAL INVESTMENT TRUST MAXUS INFORMATION SYSTEMS, INC. (Name of Fund) By: /s/ Malcolm R. Fobes III By: /s/ Gregory B. Getts - ---------------------------- ------------------------- Its: President Its: President -7- EXHIBIT A MSS FEE SCHEDULE BERKSHIRE CAPITAL INVESTMENT TRUST ACCOUNTING FEES: If the average value fund is between the following: Yearly Fee Monthly Fee - ----------------------------- ---------- ------------ - 25,000,000 $ 21,000 $ 1,750 25,000,000 50,000,000 30,500 2,542 50,000,000 75,000,000 36,250 3,021 75,000,000 100,000,000 42,000 3,500 100,000,000 125,000,000 47,750 3,979 125,000,000 150,000,000 53,500 4,458 150,000,000 - 59,250 4,938 SHAREHOLDER SERVICING FEES: $9.25 annual fee per shareholder with a minimum of $775.00 charge per month* BLUE SKY SERVICING FEES: $12.00 per state per month *Discount calculated as follows: Discount Net Assets of Fund - -------- ------------------------ 85% - 200,000 80% 200,000 250,000 70% 250,000 500,000 60% 500,000 1,000,000 50% 1,000,000 2,000,000 45% 2,000,000 3,000,000 40% 3,000,000 4,000,000 35% 4,000,000 5,000,000 30% 5,000,000 6,000,000 25% 6,000,000 7,000,000 20% 7,000,000 8,000,000 15% 8,000,000 9,000,000 10% 9,000,000 10,000,000 5% 10,000,000 11,000,000 0% 11,000,000 - EX-99.15.1 8 FINANCIAL DATA SCHEDULE PERIOD TYPE: 12-MOS FISCAL YEAR END: DEC-31-1997 PERIOD END: DEC-31-1997 INVESTMENTS AT COST: 113,703 INVESTMENTS AT VALUE: 101,090 RECEIVABLES: 3 ASSETS OTHER: 319 OTHER ITEMS ASSETS: 0 TOTAL ASSETS: 101,412 PAYABLE FOR SECURITIES: 0 SENIOR LONG TERM DEBT: 0 OTHER ITEMS LIABILITIES: 0 TOTAL LIABILITIES: 0 SENIOR EQUITY: 0 PAID IN CAPITAL COMMON: 104,900 SHARES COMMON STOCK: 11,738 SHARES COMMON PRIOR: 0 ACCUMULATED NII CURRENT: 0 OVERDISTRIBUTION NII: 0 ACCUMULATED NET GAINS: 0 OVERDISTRIBUTION GAINS: 0 ACCUM APPREC OR DEPREC: (12,613) NET ASSETS: 101,412 DIVIDEND INCOME: 87 INTEREST INCOME: 1,051 OTHER INCOME: 0 EXPENSES NET: 0 NET INVESTMENT INCOME: 1,138 REALIZED GAINS CURRENT: (2,613) APPREC INCREASE CURRENT: (12,613) NET CHANGE FROM OPS: (14,088) EQUALIZATION: 0 DISTRIBUTIONS OF INCOME: 1,138 DISTRIBUTIONS OF GAINS: 0 DISTRIBUTIONS OTHER: 0 NUMBER OF SHARES SOLD: 11,606 NUMBER OF SHARES REDEEMED: 0 SHARES REINVESTED: 132 NET CHANGE IN ASSETS: 11,738 ACCUMULATED NII PRIOR: 0 ACCUMULATED GAINS PRIOR: 0 OVERDISTRIB NII PRIOR: 0 OVERDIST NET GAINS PRIOR: 0 GROSS ADVISORY-FEES: 0 INTEREST EXPENSE: 0 GROSS EXPENSE: 0 AVERAGE NET ASSETS: 101,284 PER SHARE NAV BEGIN: 10.00 PER SHARE NII: .10 PER SHARE GAIN APPREC: (1.36) PER SHARE DIVIDEND: (.10) PER SHARE DISTRIBUTIONS: 0 RETURNS OF CAPITAL: 0 PER SHARE NAV END: 8.64 EXPENSE RATIO: 0 AVG DEBT OUTSTANDING: 0 AVG DEBT PER SHARE: 0 EX-99.15.2 9 FINANCIAL DATA SCHEDULE PERIOD TYPE: 6-MOS FISCAL YEAR END: DEC-31-1998 PERIOD END: JUN-30-1998 INVESTMENTS AT COST: 113,863 INVESTMENTS AT VALUE: 144,594 RECEIVABLES: 11,505 ASSETS OTHER: 683 OTHER ITEMS ASSETS: 0 TOTAL ASSETS: 156,782 PAYABLE FOR SECURITIES: 0 SENIOR LONG TERM DEBT: 0 OTHER ITEMS LIABILITIES: 0 TOTAL LIABILITIES: 0 SENIOR EQUITY: 0 PAID IN CAPITAL COMMON: 134,638 SHARES COMMON STOCK: 13,746 SHARES COMMON PRIOR: 11,738 ACCUMULATED NII CURRENT: 0 OVERDISTRIBUTION NII: 224 ACCUMULATED NET GAINS: (8,811) OVERDISTRIBUTION GAINS: 0 ACCUM APPREC OR DEPREC: 30,731 NET ASSETS: 156,782 DIVIDEND INCOME: 83 INTEREST INCOME: 141 OTHER INCOME: 0 EXPENSES NET: 0 NET INVESTMENT INCOME: 224 REALIZED GAINS CURRENT: (6,198) APPREC INCREASE CURRENT: 43,344 NET CHANGE FROM OPS: 37,370 EQUALIZATION: 0 DISTRIBUTIONS OF INCOME: 0 DISTRIBUTIONS OF GAINS: 0 DISTRIBUTIONS OTHER: 0 NUMBER OF SHARES SOLD: 2,008 NUMBER OF SHARES REDEEMED: 0 SHARES REINVESTED: 0 NET CHANGE IN ASSETS: 55,370 ACCUMULATED NII PRIOR: 0 ACCUMULATED GAINS PRIOR: (2,613) OVERDISTRIB NII PRIOR: 0 OVERDIST NET GAINS PRIOR: 0 GROSS ADVISORY FEES: 970 INTEREST EXPENSE: 0 GROSS EXPENSE: 1,293 AVERAGE NET ASSETS: 135,926 PER SHARE NAV BEGIN: 8.64 PER SHARE NII: .01 PER SHARE GAIN APPREC: 2.76 PER SHARE DIVIDEND: 0 PER SHARE DISTRIBUTIONS: 0 RETURNS OF CAPITAL: 0 PER SHARE NAV END: 11.41 EXPENSE RATIO: 0.95 AVG DEBT OUTSTANDING: 0 AVG DEBT PER SHARE: 0 -----END PRIVACY-ENHANCED MESSAGE-----