United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of Registered Management investment companies
Investment Company Act file number 811-6680
BHIRUD FUNDS INC.
(Exact Name of Registrant as Specified in Charter)
c/o Bhirud Associates, Inc.
3 Thorndal Circle, Darien, Connecticut 06820
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number, including Area Code: (203) 662-6659
SURESH BHIRUD
Bhirud Associates, Inc.
3 Thorndal Circle, Darien, Connecticut 06820
(Name and Address of Agent for Service)
Registrant's telephone number, including area code: (203) 662-6659
Date of fiscal year end: July 31
Date of reporting period: July 31, 2005
Form N-CSR is to be used by management investment companies
to file reports with the Commission not later than 10 days
after the transmission to stockholders of any report that is
required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-
CSR in its regulatory, disclosure review, inspection and
policymaking roles.
A registrant is required to disclose the information
specified by Form N-CSR, and the Commission will make this
information public. A registrant is not required to respond
to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of
Management and Budget ("OMB") control number. Please direct
comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing
the burden to Secretary, Securities and Exchange Commission,
450 Fifth Street, NW, Washington, DC 20549-0609. The OMB
has reviewed this collection of information under the
clearance requirements of 44 U.S.C. 3507.
Item 1. Reports to Stockholders.
The Apex Mid Cap Growth Fund
C/o Bhirud Funds Inc.
3 Thorndal Circle, Darien, Connecticut 06820
Telephone (877) 593-8637, www.apexfund.net
ANNUAL REPORT dated July 31st , 2005
September 24, 2005
Dear Shareholder,
Following is the annual report for Apex Mid Cap Growth Fund for the period
ending July 31, 2005. It includes a discussion of portfolio performance and the
stock market outlook for the near future from the fund manager.
We have been extremely disappointed with the performance of Apex in calendar
years 2004 and 2005, especially since Lipper Inc. named Apex the number one
performing mutual fund in calendar year 2003. While Apex was up 165% in 2003,
the year 2004 brought a very different scenario. The fund declined -6.3% during
2004, compared to a 10.88% total return for the S&P 500 index. During 2004, the
Russell mid cap index and Nasdaq composite were up 18.37% and 8.59%
respectively. For the seven month period ending July 31,2005, Apex declined by
23.46% compared to a 8.53% price appreciation for the Russell mid cap index.
There is no single explanation or factor that has led to the underperformance of
Apex since the end of 2003. The most important contributing factor has been the
change in leadership of the stock market since 2003. To a large degree, housing
related stocks, energy, basic cyclicals and industrials have demonstrated the
best market performance. Traditionally, however, these sectors have not been
considered long-term growth industries. The second outstanding factor
contributing to the underperformance of Apex is redemptions by shareholders,
which has caused undue volatility in our holdings. Our performance also suffered
as some of our large holdings were topped out and we were forced to take
profits.
Recently we are beginning to see a recovery in some of our depressed holdings
and as we go forward we see Apex beginning to return to a more stable level. We
are hopeful that our performance will improve, as some of our key stocks start
moving in a positive direction.
Broadly speaking, the primary sectors in which we are currently invested are
various internet driven stocks, entertainment related names, telecom equipment,
telecom services, computer software, advertising, internet service and
information portal industries. It is important to note, however, that we do not
invest on the basis of sectors. Rather, we use a highly focused company
specific approach with diversification across a spectrum of growth industries
that we believe best contributes to long-term performance. Our concern is to
identify companies with revenues, earnings, and market share growing at above
normal rates due to the superiority of their respective business models. Our
holdings continue to be distributed over a variety of industries, which protects
shareholders against stock-specific risk. As of July 31, 2005, we are invested
in fifty-eight listings.
Some of our notables holding at the end of the fiscal year are, Netflix (NFLX),
Cmgi Inc. (CMGI), Tivo (TIVO), Palm Inc. (PALM), Millennium Pharmaceutical
(MLNM) and Linktone Ltd. (LTON).
As we have stated in several of our previous reports, we believe that the
current stock market rally is likely to continue for a much longer period than
prevailing popular media sentiment suggests. Indeed, since the 1940's a bull
market in stocks has averaged three to four years in duration. More often than
not this three to four year cycle for stocks has coincided with a presidential
term. Generally speaking, the fundamental factors that have driven a stock
market rally are expectations of sustained economic growth, moderate inflation
and corporate earnings. Within this context, it is the degree of interest rate
increases, financial debt crisis, or currency crisis that has affected the
length of the stock market cycle, as well as the short-term volatility.
Since early 2003 there has been strength and resiliency in the growth of the US
economy. We note that real GDP has grown at an annual rate of 4% for the last
two years. Consumer spending has remained resilient, even in the face of rising
energy prices and health care costs. Even though the Greenspan FRB has been
pushing up short-term interest rates, the long end of the yield curve has
remained stable. At present the YTM for 10-year treasuries is hovering around
4.20%. This persistence of historically low interest rates and mortgage rates
has led to a boom in the housing cycle. Employment gains have also been
accelerating since early 2004, which has greatly contributed to the strength of
consumer spending.
By all measures core inflation remains tame, up only 3.1% yr./yr. as of July
2005. It has remained under control in spite of fluctuations in the value of the
dollar, as well as steep increases in the price of energy. In our view,
globally competitive forces and implementation of new technology are keeping
consumer product prices under control.
There is always a risk, however, that further increases in industrial raw
material prices and energy products could start an inflationary cycle. There is
also a significant and unanticipated risk of a currency crisis within any of the
emerging countries that are adversely affected by rising energy costs, higher
raw material costs, or political upheaval. This risk of earnings disappointments
for the equity market also increases during the late stage of an economic cycle.
Finally, the ultimate risk to the equity market is always from a material
increase in long-term interest rates.
Taking all factors into consideration, our view is that the current bull market
will continue for at least one to two years. We also believe that Apex will
benefit in the late stage of the bull market due to our emphasis on growth
companies that are not affected by rising interest rates or labor costs.
We are hoping to recreate the stellar performance of Apex over the next twelve
months, assuming the stock market co-operates.
Sincerely,
Suresh L. Bhirud, CFA
Chairman
SUMMARY OF FUNDS' EXPENSES - (UNAUDITED)
As a shareholder of the Funds, you incur ongoing costs, including
management fees, distribution and/or service (12b-1) fees; and other
Fund expenses. This Example is intended to help you understand your
ongoing costs (in dollars) of
investing in the Funds and to compare these costs with the ongoing
costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period (August 1,
2004 through July 31, 2005).
Actual Expenses
The first line of the table below provides information about actual
account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.60), then multiply the result by the number in the first
line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about
hypothetical account values and hypothetical expenses based on the
Funds' actual expense ratios and an assumed rate of return of 5% per
year before expenses, which are not the Funds' actual returns. The
hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to
highlight your ongoing costs only and will not help you determine the
relative total costs of owning different funds.
Fund Beginning Ending Expenses Paid
Account Value Account During Period (*)
Value
August 1, 2004 July 31, August 1, 2004 -
2005 July 31, 2005
Actual (-9.27% $ 1,000 $907.28 $44.63
return**)
Hypothetical*** $ 1,000 $1,003.20 $46.87
* Expenses are equal to the Funds' annualized expense ratios,
multiplied by the average account value over the period.
The annualized expense ratios for the Fund were 4.68%.
** Returns are with expenses and not annualized.
*** Assumes a 5% annual return before expenses.
CAPITAL GOODS 2.05
CONSUMER DURABLES 2.60
FINANCIAL 4.50
MISC. 2.64
NONDURABLES 3.94
SERVICES 61.29
TECHNOLOGY 27.27
This above table gives a visual breakdown of the Fund by the Industry
Sectors the underlying securities represent as a percentage of the
portfolio of investments.
The Apex Mid Cap Growth Fund
Schedule of Investments report Date July 31st , 2005
CO. NAME Shares % MV Market
Value
ABLEAUCTIONS.COM INC * 20000 9,000
TOTAL ACTIONEERS 1.98 9,000
LOOKSMART LTD * 5000 2,950
TOTAL ADVERTISING - PROMOTIONAL 0.65 2,950
TIVO * 5000 31,250
TOTAL BROADCASTING 6.86 31,250
PALMSOURCE INC * 61 476
SILICON STORAGE TECH * 1000 4,720
TOTAL COMPUTER & PERIP. 1.14 5,196
CHINA.COM CORP CLASS A * 5050 15,302
CITYVIEW CORP * 10000 260
FVC . COM * 3000 48
I2 TECHNOLOGIES INC. * 40 857
PALMONE INC * 1000 28,540
REALLNET WORKS * 1000 4,970
VA LINUX SYSTEMS * 5000 8,600
TOTAL COMPUTER SOFTW & SVC 12.86 58,577
EDULINK INC * 40000 40
TOTAL DIVERSIFIED CO 0.01 40
MILLENNIUM PHARMACEUTICAL * 1500 15,495
VIVUS INC * 8 28
TOTAL DRUG INDUSTRY 3.41 15,523
AROTECH CORP * 5000 5,500
SUPERCONDUCTOR TECHNOLOGIES * 4000 3,840
TOTAL ELECTRICAL EQUIPT. 2.05 9,340
ADAPTIVE BROADBAND * 1300 26
PARADYNE NETWORKS * 1000 3,190
STOCKERYALE INC COM. * 3000 2,850
VPGI CORP * 8500 1,020
TOTAL ELECTRONICS 1.56 7,086
DIAMOND HITTS PRODUCTION IN * 9000 1
LINKTONE * 3000 24,570
NETFLIX INC. * 1600 29,696
TOTAL ENTERTAINMENT 11.92 54,267
TALKPOINT LIQUIDATION * 200 1
TOTAL ENVIRONMENTAL 0.00 1
TYSON FOODS A * 1100 20,504
TOTAL FOOD PROCESSING 4.50 20,504
NETEASE COM INC. * 400 23,532
SHANDA INTERACTIVE ENTERTAI * 500 16,355
TOTAL HEALTHCARE INFO SYS 8.76 39,887
ACCLAIM ENTERTAINMENT INC. * 1000 20
TOTAL HOTEL / GAMING 0.00 20
IDENTIX INC. * 3343 18,019
VISAGE TECHNOLOGY * 4000 21,640
TOTAL INDUSTRIAL SERVICES 8.71 39,659
IVILLAGE * 1000 5,500
TOTAL INFORMATION PORTALS 1.21 5,500
DSL.NET INC * 20000 1,600
PACIFIC INTERNET * 3500 21,525
SATYAM INFOWAY LIMITED * 4000 18,280
TOTAL INTERNET SERVICE PROVIDER 9.09 41,405
CMG INFORMATION SERVICES * 21000 39,900
TOTAL INVESTMENT CO. (DOM) COMP. 8.76 39,900
APRIA HEALTHCARE GROUP * 600 20,238
TOTAL MEDICAL SERVICES 4.44 20,238
CARDIAC SCIENCE INC. * 6000 7,080
TRIMEDYNE INC * 20000 12,600
TOTAL MEDICAL SUPPLIES 4.32 19,680
FUTUREMEDIA PLC ADR * 20000 12,000
JPC CAP PARTNERS INC * 116 2
TOTAL MISCELLANEOUS 2.64 12,002
SINA CORPORATION * 1000 27,810
TOTAL ONLINE MEDIA 6.11 27,810
HOMESTORE.COM * 3000 7,800
TOTAL REAL ESTATE INVESTME 1.71 7,800
EGGHEAD.COM * 4260 85
GSV INC * 200 28
LOUDEYE CORP * 10000 8,000
TOTAL RETAIL SPECIALTY 1.78 8,113
LEXAR MEDIA INC. * 1000 4,930
TRANSMETA CORPORATION * 4000 3,400
TOTAL SEMICONDUCTOR 1.83 8,330
FOCUS ENHANCEMENTS * 5000 3,650
TOTAL SEMICONDUCTOR CAP EQ 0.80 3,650
TOM ONLINE INC. * 1000 13,480
TOTAL TELECOM MESSAGING 2.96 13,480
ADC TELECOMMUNICATIONS INC. * 0.3 7
AIRNET COMMUNICATIONS * 500 770
CIENA CORP * 4000 8,960
OCCAM NETWORKS * 2000 682
TOTAL TELECOM. EQUIPMENT 2.29 10,419
HIGH SPEED ACCESS * 1000 20
INTERNAP CORP. * 20000 9,800
KOREA THRUNET CO LTD. * 25 1
USURF AMERICA INC * 50000 2,850
TOTAL TELECOM. SERVICES 2.78 12,671
TOTAL COMMON STOCKS 115.13 524,297
TOTAL INVESTMENTS 115.13 524,297
OTHER ASSETS (LESS LIABILITIES) -15.13 (68,907)
NET ASSETS 100.00 455,390
NET ASSETS VALUE PER SHARE 1.37
OFFERING PRICE PER SHARE 1.37
* Non - income producing securities
See accompanying Notes to Financial Statements
THE APEX MID CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES For the year ended July 31st , 2005
(Audited)
ASSETS
Investment Securities at Value $ 524,297
(Identified cost - $1,422,390) (Note 1)
Securities Sold 19,819
Prepaid Insurance 585
Total Assets $544,701
LIABILITIES
Cash - Overdraft (46,979)
Securities Purchased (20,548)
Accrued expenses (21,784)
Total Liabilities ($ 89,311)
NET ASSETS (Equivalent to $1.37 per share $ 455,390
based on 332,384 shares outstanding)
COMPOSITION OF NET ASSETS:
Paid in Capital $3,425,960
Distribution in excess of accumulated Net (2,072,477)
Realized gain (loss)
Accumulated Net Investment Income --
Net Unrealized Appreciation (Depreciation) (898,093)
of Investments
Total Net Assets $ 455,390
STATEMENT OF OPERATIONS (AUDITED) FOR THE YEAR ENDED JULY 31st , 2005
INVESTMENT INCOME
Interest $ 91
Dividends 777
EXPENSES
Audit $ 4,000
Fund Accounting 9,522
Transfer Agent 4,207
Shareholder Report 731
Director 6,000
Registration 2,187
Insurance 606
Fund Administration (Note 4) 1,528
Custodian 6,665
Investment Advisor (Note 4) 7,644
12b-1 Fees (Note 6) 1,911
Total Expenses (45,001)
Expense Reimbursement/ waived by Advisor 9,172
(Note 4)
Expense net of Reimbursement/ waiver (35,829)
NET INVESTMENT GAIN (LOSS) (34,961)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on Investments (668,374)
Change in Unrealized Appreciation 653,468
(Depreciation) of Investments
NET REALIZED/UNREALIZED GAIN (LOSS) ON ( 14,906)
INVESTMENTS
NET INCREASE (DECREASE) IN NET ASSETS ( 49,867)
RESULTING FROM OPERATION
See accompanying Notes to Financial Statements
THE APEX MID CAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS FOR EACH PERIOD (AUDITED)
For the Year For the Year
Ended Ended
July 31, 2005 July 31, 2004
INCREASE (DECREASE) IN NET ASSETS
Net Investment Income/ (loss) $ (34,961) $ (37,950)
Net Realized Gain / (loss) on (668,374) (239,888)
investment Securities Sold
Net unrealized 653,468 54,765
appreciation/(depreciation) of
Investments
Net Increase (Decrease) in Net $ (49,867) $ (223,073)
Assets Resulting from Operations
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Dividend distributions paid 0 0
Capital Gains 0 0
Total Distributions 0 0
CAPITAL SHARE TRANSACTIONS
Shares Sold 4,250 1,022,803
Shares issued in lieu of Cash 0 0
Distributions
Cost of shares Redeemed (535,288) (580,930)
Increase (Decrease) in Net Assets (531,038) 441,873
Due to Capital Share Transactions
TOTAL INCREASE (DECREASE) IN NET (580,905) 218,800
ASSETS
NET ASSETS BEGINNING OF PERIOD 1,036,295 817,495
NET ASSETS END OF PERIOD $ 455,390 $1,036,295
FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD (AUDITED)
For the For the For the For the For the
Year Year Year Year Year
Ended Ended Ended Ended Ended
July July July July July
31, 31, 31, 31, 31,
2005 2004 2003 2002 2001
NET ASSET VALUE, BEGINNING OF $1.51 $1.65 $0.79 $1.31 $4.45
PERIOD
Income/(Loss) from Investment
Operations:
Net Investment (0.10) (0.02) (0.09) (0.15) (0.15)
Income/(Loss)
Net Gain/(Loss) on (0.04) (0.12) 0.95 (0.37) (2.48)
Securities (Both Realized and
Unrealized)
Total from Investment (0.14) (0.14) 0.86 (0.52) (2.63)
Operations
Distributions:
Dividend Distributions Paid 0.00 0.00 0.00 0.00 (0.51)
Distributions from Capital 0.00 0.00 0.00 0.00 0.00
Gains
Total Distributions 0.00 0.00 0.00 0.00 (0.51)
NET ASSET VALUE, END OF $ 1.37 $ 1.51 $ 1.65 $ 0.79 $ 1.31
PERIOD
Total Return (9.27)% (8.48)% 108.86% (39.69)% (62.36)%
Ratios/Supplemental Data:
Net Assets, End of Period $ 455 $ 1,036 $ 817 $ 230 $ 417
(in thousands)
Ratios to Average Net
Assets:
Expenses 4.68% 3.35% 9.19% 12.42% 7.04%
Net Investment (4.56)% (3.24)% (8.67)% (12.31)% (6.72)%
Income/(Loss)
Effect of
Reimbursements/Waivers on 1.20% 1.20% 1.20% 1.20% 1.20%
Above - Ratios
Portfolio Turnover Rate 161.01% 189.97% 128.42% 117.18% 158.17%
See accompanying Notes to Financial Statements
THE APEX MID CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JULY 31, 2005 (Audited)
1 SIGNIFICANT ACCOUNTING POLICIES
Bhirud Funds Inc. (the "Fund") is a diversified open-end management
investment company currently consisting of The Apex Mid Cap Growth Fund
portfolio (the "Portfolio"). The Fund was incorporated in Maryland on May
27, 1992. Prior to November 4, 1992 (commencement of operations), the Fund
had no operations other than the sale of 10,000 shares of stock on August
4, 1992 at a cost of $100,000 to Thomas James MidCap Partners representing
the initial capital. The following is a summary of significant accounting
policies followed by the Fund:
SECURITY VALUATION
Readily marketable portfolio securities listed on the New York Stock
Exchange are valued at the last sale price reflected at the close of the
regular trading session of the New York Stock Exchange on the business day
as of which such value is being determined. If there has been no sale on
such day, the securities are valued at the mean of the closing bid and
asked prices on such day. If no bid or asked prices are quoted on such day,
then the security is valued by such method as the Board of Directors shall
determine in good faith to reflect its fair value. Readily marketable
securities not listed on the New York Stock Exchange but listed on other
national securities exchanges or admitted to trading on the National
Association of Securities Dealers Automated Quotations, Inc. ("NASDAQ")
National List are valued in like manner. Portfolio securities traded on
more than one national securities exchange are valued at the last price on
the business day as of which such value is being determined as reflected on
the tape at the close of the exchange representing the principal market for
such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the Advisor
to be over-the-counter but excluding securities admitted to trading on the
NASDAQ National List, are valued at the mean of the current bid and asked
prices as reported by NASDAQ or, in the case of securities not quoted by
NASDAQ, the National Quotation Bureau or such other comparable sources as
the Board of Directors deem appropriate to reflect their fair value.
United States Government obligations and other debt instruments having
sixty days or less remaining until maturity are stated at amortized cost.
Debt instruments having a greater remaining maturity will be valued at the
highest bid price obtained from a dealer maintaining an active market in
that security or on the basis of prices obtained from a pricing service
approved as reliable by the Board of Directors.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on the dates the securities are
purchased or sold (the trade dates), with realized gain and loss on
investments determined by using specific identification as the cost method.
Interest income (including amortization of premium and discount, when
appropriate) is recorded as earned. Dividend income and dividends and
capital gain distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL INCOME TAXES
The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code and distribute all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
CAPITAL LOSS CARRY FORWARDS
The Fund intends to utilize provisions of the federal income tax laws which
allows it to carry a realized capital loss for eight years following the
year of loss and offset such losses against any future realized capital
gains. At July 31, 2005, the Fund had capital loss carry forward for tax
purposes of $ 1,667,143, of which $442,745 expires in 2009, $204,042
expires in 2010, $112,094 expires in 2011, $239,888 expires in 2012, and
$668,374 expires in 2013.
2. CAPITAL STOCK TRANSACTIONS
The Articles of Incorporation, dated May 27, 1992, permit the Fund to issue
twenty billion shares (par value $0.001). Transactions in shares of common
stock for the year ended July 31st , 2005 were as follows:
For the Year Ended For the Year Ended
July 31,2005 July 31, 2004
Shares Amount Shares Amount
Beginning Balance 688,228 $ 4,029,909 494,749 $ 3,612,533
Shares Sold 3,120 4,250 528,246 1,022,803
Shares Issued in 0 0 0 0
Reinvestment of Dividends
Shares Redeemed (358,964) (535,288) (334,767) (580,930)
Reclassification of 0 (37,950) 0 (24,497)
Capital Account
Net Increase (Decrease) (355,844) (568,988) 193,479 417,376
Ending Balance 332,384 $3,460,921 688,228 $4,029,909
THE APEX MID CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JULY 31, 2005 (Audited)
3. INVESTMENTS
Purchases and sales of securities for the year ended July 31st , 2005 other
than short-term securities, aggregated $1,227,127 and $1,701,752,
respectively. The cost of securities is substantially the same for Federal
income tax purposes. For Federal income tax purposes:
Aggregate Cost is $1,422,390
Gross Unrealized Gross Unrealized Net Unrealized
Appreciation Depreciation Depreciation
$23,895 $(921,988) $(898,093)
4. INVESTMENT ADVISORY CONTRACT
The Fund employs Bhirud Associates, Incorporated (the "Advisor") to provide
a continuous investment program for the Fund's portfolio, provide all
facilities and personnel, including Officers required for its
administrative management, and to pay the compensation of all Officers and
Directors of the Fund who are affiliated with the Advisor. As compensation
for the services rendered and related expenses borne by the Advisor, the
Fund pays the Advisor a fee, computed and accrued daily and payable
monthly, equal to 1.00% of the first $250 million of the average net assets
of the Portfolio; 0.75% of the average net assets of the Portfolio between
$250 and $500 million; and 0.65% of the average net assets of the Portfolio
over $500 million. The Advisor has voluntarily agreed to reimburse the Fund
in the event the Fund's expenses exceed certain prescribed limits. During
the year ended July 31st , 2005 the Advisor elected to defer the payment of
Advisory fees payable in the amount of $ 7,644. The Advisor has voluntarily
agreed to waive these fees, considering the small assets of the Fund. The
Advisory and Administrative Services Contracts provide that if, in any
fiscal year, the aggregate expenses of a Fund, excluding interest, taxes,
brokerage and extraordinary expenses, but including the Advisory and
Administrative Services fees, exceed the expense limitation of any state in
which the Corporation is registered for sale, the Funds may deduct from
fees paid to the Advisor and Administrator their proportionate share of
such excess expenses to the extent of the fees payable. As a result of the
passage of the National Securities Markets Improvement Act of 1996, all
state expenses limitations have been eliminated at this time.
The Fund retained Bhirud Associates, Inc. ("BAI") to act as Administrator
for the Fund from November 1, 1994. BAI provided administrative services
for the Fund. During the year ended July 31st , 2005 the Administrator
elected to defer the payment of Administrative service fees payable in the
amount of $1,528.
From December 1, 1996, the U.S. Bank has been providing custodian services
and from February 1st, 1998, fund accounting and transfer agency functions
are provided by Mutual Shareholders Services LLC.
5. ORGANIZATION EXPENSES
The organizational expense was amortized over the first five years of the
Fund's operations and is now zero going forward.
6. DISTRIBUTION PLAN
The Fund's Board of Directors has adopted a distribution plan (the "Plan")
under Section 12(b) of the Investment Company Act of 1940 and Rule 12b-1
thereunder. The Plan provides that the Portfolio may bear certain expenses
and costs which in the aggregate are subject to a maximum of 0.25% per
annum of the Portfolio's average daily net assets. For the year ended July
31st , 2005, the Fund has incurred distribution costs of $1,695 payable to
Bhirud Associates, Inc.
7. TRANSACTIONS WITH AFFILIATES
During the year ended July 31st , 2005 the Fund paid $11,060, brokerage
commissions to Bhirud Associates, Inc.
8. RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with generally accepted accounting principals, the Fund
recorded reclassifications in the capital accounts. The Fund recorded a
permanent book/tax difference of $(34,961) as of July 31, 2005, from
undistributed net investment income to paid in capital. These
reclassifications have no impact on net asset value of the Fund and are
designed generally to present undistributed income and realized gains on a
tax basis which is considered to be more informative to the shareholder.
VB&T Certified Public Accounts, PLLC
183 Madison Avenue, Suite 204, New York, NY 10016
Report of Independent Certified Public Accountants'
Shareholders and Board of Directors
Bhirud Funds Inc.
We have audited the accompanying statements of assets and liabilities of
the Apex Mid Cap Growth Fund (a portfolio of Bhirud Funds Inc.), including the
portfolio of investments, as of July 31, 2005, and the related statement of
operations, the statement of changes in net assets, and financial highlights for
the year then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
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 and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 2004 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly in all material respects, the financial position of the
Apex Mid Cap Growth Fund at July 31, 2005, the results of its operations and
changes in net assets and financial highlights for the year then ended in
conformity with U.S. generally accepted accounting principles.
September 22, 2005
New York, New York
The Apex Mid Cap Growth Fund
The line graph below shows how a $10,000 investment in the Fund made on December
23,1992 (the date the fund began to invest in assets other than cash or cash
equivalents in accordance with its investment objectives) would have become
$2,905 (as of July 31,2005). The line graph shows how this compares to the
broad- based Standard & Poor's 500 Index and the Fund's bench mark, the
Standard & Poor's MidCap 400 Index, over the same period.
[GRAPH]
All Fund performance numbers represent past performance numbers, and are no
guarantee of future results.
THE APEX MID CAP GROWTH FUND
C/o Bhirud Funds Inc.
3 Thorndal Circle
Darien, CT 06820
(877) 593-8637
Trustees Information
The Fund's Board of Trustees has responsibility for the overall management
and operations of the Portfolios. Each Trustee oversees Fund and serves until he
or she resigns, retires or his or her successor is elected and qualified. Each
officer serves until his or her successor is elected and qualified. The
following table provides information regarding each Trustee, including those who
are not an 'interested person' of the Fund, as defined in the Investment Company
Act of 1940.
Name, Address and Age Position(s), Length Principal Occupations
of Time Served During Past 5 Years,
Directorship Held
Officers and Interested Directors
Suresh L. Bhirud, 57 Chairman of the Board Chairman of the Board
27 Winding Ln. and Treasurer since and Treasures;
Darien, CT 06820 August 6,1992 President of Bhirud
President since July Associates, Inc.
23, 2002
Harish L. Bhirud, 52 Director since April Director and Vice-
71 Strawberry Hill 7, 1997 President of Bhirud
Ave., #607 Vice President since Funds Inc.
Stamford, CT 06902 January 24, 1995 Vice-President-Bhirud
Chief Compliance Associates, Inc.
Officer since
September 22, 2004
Disinterested Directors
Timothy M. Fenton, Director since August Licensed Realtor with
62 6, 1992 William Raveis, Since
6 Jackson Dr. August 2002.
Norwalk, CT 06851 Chairman of Fenton &
Zalenetz Inc., a
direct marketing
consulting firm.
M. John Sterba, Jr., Director since August Chairman of
62 6,1992 Investment Management
Investment Mgmt Advisors, Inc.
Advisors Inc.
156 Fifth Ave.
New York, NY 10010
Alexander Norman Director since August Independent
Crowder, III, 70 6,1992 Management
159 E Ave., Old Forge Consultant, Since
Green 1991 and part time
New Canaan, CT 06840 Chairman of EFI
Actuaries, Inc.
Investment Advisor & Distributor Bhirud Associates, Inc.
Administrator Bhirud Associates, Inc.
Custodian US Bank, N.A.
Legal Counsel Sherman & Sterling
Independent Auditors VB&T CPA, PLLC
OTHER ITEMS - PROXY VOTING
A description of the Company's proxy voting policies and procedures relating to
the holdings of the Fund is available, without charge and upon request, by
calling 1-877-593 8637, on the Mutual Shareholder Services, LLC website at
www.mutualss.com and on the SEC's website at www.sec.gov.
Quarterly Filing of Portfolio Holdings
The Fund files its complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the SEC's Website at http://www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the SEC's Public Reference
Room in Washington, DC. Information on the operation of the Public Reference
Room may be obtained by calling 1-800-SEC-0330.
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
In approving the most recent annual continuance of the Advisory Agreement, the
Trustees considered all information they deemed reasonably necessary to evaluate
the terms of the Advisory Agreement. The principal areas of the review by the
Trustees were the nature and quality of the services provided by the Adviser,
the reasonableness of the fees charged for those services, the investment
performance of Bhirud Associates, Inc. (BAI), the costs of services and profits
realized by BAI and potential economies of scale, specifically reduced operating
expense ratios, to be realized by the Fund through its relationship with BAI or
some alternative investment advisor.
The Board considered the nature, extent and quality of the services to be
provided by the Adviser of the Fund pursuant to the Advisory Agreement,
including the Adviser's competence and integrity; research capabilities,
implementation and enforcement of compliance procedures and financial reporting
controls, and adherence to the Fund's investment objectives, policies and
restrictions. The Board concluded that the adviser fulfilled all of the
foregoing factors and responsibilities in accordance with its obligations under
the Advisory Agreement.
The Board also evaluated the investment performance of the Fund relative to the
S&P Mid Cap Index over the last three years. The Board noted that the Fund was
ranked number one in performance by Lipper Inc. in 2003 among all funds tracked
by Lipper, and out performed the S&P Mid Cap Index by a very wide margin. The
board also noted that since 2004, and to date, the fund has under performed S&P
Mid Cap Index.
The Board considered the fact that the Adviser voluntarily waived receipt of all
of its Advisory fee as well as Administrative fee.
Based on its evaluation of all material aspects of the Advisory Agreement,
including the foregoing factors, and such other information believed to be
reasonably necessary to evaluate the terms of the Agreement, the Board,
including all of the non-interested Trustees, concluded that the continuation of
that Advisory Agreement would be in the best interest of the Fund's
shareholders, and determined that the compensation to the Adviser provided for
in the Agreement is fair and reasonable.
Investment Advisor:
Suresh L. Bhirud (President)
Bhirud Associates, Inc.
3 Thorndal Circle
Darien, CT 06820
This report and the financial statements contained herein are submitted for the
general information of shareholders and are not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
Nothing herein contained is to be considered an offer of sale or solicitation of
an offer to buy shares of Bhirud Funds Inc. Such offering is made only by
prospectus, which includes details as to offering price and other material
information.
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the regis-
trant's principal executive officer and principal financial officer.
The registrant has not made any amendments to its code of ethics
during the covered period. The registrant has not granted any waivers
from any provisions of the code of ethics during the covered period.
A copy of the registrant's Code of Ethics is filed herewith.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The registrant's Board of Trustees has determined that it does not
have an audit committee financial expert serving on its audit comm-
ittee. At this time, the registrant believes that the experience
provided by each member of the audit committee together offers the
registrant adequate oversight for the registrant's level of financial
complexity.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The registrant has engaged its principal accountant to perform audit
services, audit-related services, tax services and other services
during the past two fiscal years. "Audit services" refer to performing
an audit of the registrant's annual financial statements or services
that are normally provided by the accountant in connection with stat-
utory and regulatory filings or engagements for those fiscal years.
"Audit-related services" refer to the assurance and related services
by the principal accountant that are reasonably related to the perfor-
mance of the audit. "Tax services" refer to professional services ren-
dered by the principal accountant for tax compliance, tax advice, and
tax planning. The following table details the aggregate fees billed
for each of the last two fiscal years for audit fees, audit-related
fees, tax fees and other fees by the principal accountant.
----------------------------------------------------------------------
FYE 7/31/2004 FYE 7/31/2005 # of Hours spent
in FYE 2005
----------------------------------------------------------------------
Audit Fees $ 4,000 $ 4,000 40
Audit-Related Fees $ 0 $ 0 0
Tax Fees $ 0 $ 0 0
All Other Fees $ 0 $ 0 0
----------------------------------------------------------------------
The audit committee has adopted pre-approval policies and procedures
that require the audit committee to pre-approve all audit and non-
audit services of the registrant, including services provided to any
entity affiliated with the registrant. All of the principal account-
ant's hours spent on auditing the registrant's financial statements
were attributed to work performed by full-time permanent employees of
the principal accountant.
The following table indicates the non-audit fees billed by the regis-
trant's accountant for services to the registrant and to the regis-
trant's investment adviser (and any other controlling entity, etc.
-not sub-adviser) for the last two years. The Audit Committee of the
Board of Trustees has considered whether the provision of non-audit
services that were rendered to the registrant's investment adviser is
compatible with maintaining the principal accountant's independence
and has concluded that the provision of such non-audit services by the
accountant has not compromised the accountant's independence.
----------------------------------------------------------------------
Non-Audit Related Fees FYE 7/31/2004 FYE 7/31/2005
----------------------------------------------------------------------
Registrant $0 $ 0
Registrant's Investment Adviser $0 $ 0
----------------------------------------------------------------------
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable to open-end investment companies.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable to open-end investment companies.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASES
Not applicable to open-end investment companies.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable to open-end investment companies.
ITEM 10.CONTROLS AND PROCEDURES
(a) The Registrant's President and Treasurer has concluded that the Regis-
trant's disclosure controls and procedures (as defined in Rule 30a-3
(c) under the Investment Company Act of 1940 (the "Act")) are eff-
ective as of a date within 90 days of the filing date of the report
that includes the disclosure required by this paragraph, based on the
evaluation of these controls and procedures required by Rule 30a-3(b)
under the Act.
(b) There were no changes in the Registrant's internal control over fin-
ancial reporting (as defined in Rule 30a-3(d) under the Act) that occ-
urred during the Registrant's last fiscal year that has material-
ly affected, or is reasonably likely to materially affect, the regis-
trant's internal control over financial reporting.
ITEM 11.EXHIBITS
(a) ANY CODE OF ETHICS OR AMENDMENT THERETO.
Filed herewith.
(b) CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002.
Filed herewith.
(c) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002.
Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Bhirud Funds Inc.
By: /s/ Suresh L. Bhirud
--------------------
Suresh L. Bhirud
President and Treasurer
Date: September 28, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Bhirud Funds Inc.
By: /s/ Suresh L. Bhirud
--------------------
Suresh L. Bhirud
President and Treasurer
Date: September 28, 2005
Bhirud Funds Inc.
EXHIBIT INDEX FOR FORM N-CSR
AS FILED ON September 28, 2005
EXHIBIT INDEX
A. Code of Ethics for Principal Executive & Senior Financial
Officers.....................................................EX.99.CODE ETH
B. Certification....................................................EX.99.CERT
C. Certification pursuant to Section 906
of the Sarbanes-Oxley Act....................................EX.99.906.CERT