As filed with the Securities and Exchange Commission on March 2, 2009
- ------------------------------------------------------------------------------
==============================================================================
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 811-08043
-----------------------------------------------------------
THE BERKSHIRE FUNDS
(Exact name of registrant as specified in charter)
475 Milan Drive, Suite #103
San Jose, CA 95134-2453
(Address of principal executive offices)(Zip code)
-----------------------------------------------------------
MALCOLM R. FOBES III
The Berkshire Funds
475 Milan Drive, Suite #103
San Jose, CA 95134-2453
(Name and address of agent for service)
1-408-526-0707
Registrant's telephone number, including area code
-----------------------------------------------------------
Date of fiscal year end: December 31, 2008
Date of reporting period: December 31, 2008
[GRAPHIC OMITTED]
THE BERKSHIRE FUNDS
2008 Annual Report
This report is provided for the general information of the Berkshire Funds
shareholders. It is not authorized for distribution unless preceded or
accompanied by an effective Prospectus, which contains more complete
information about the Funds. Please read it carefully before you invest.
In recent years, returns have sustained significant gains and losses due to
market volatility in the technology sector. Due to market volatility, current
performance may be lower than the figures shown. Call 1-877-526-0707 or visit
berkshirefunds.com for more current performance information. Past performance
is no guarantee of future results and investment results and principal value
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. The returns shown do not reflect the deduction of taxes
that a shareholder would pay on Fund distributions or the redemption of Fund
shares. Total return includes reinvestment of dividends and capital gain
distributions.
The Dow Jones Industrial Average is a measurement of general market price
movement for 30 widely-held stocks primarily listed on the New York Stock
Exchange. The S&P 500(R) Index is a registered trademark of Standard & Poor's
Corporation and is a market-weighted index of common stock prices for 500
large U.S. companies. The Nasdaq Composite Index is a capitalization-weighted
index of over 5,000 common stocks listed on the Nasdaq Stock Market. Each
index represents an unmanaged, broad-based basket of stocks. These indices are
typically used as benchmarks for overall market performance.
Portfolio composition is subject to change at any time and references to
specific securities, industries and sectors are not recommendations to
purchase or sell any particular security.
*
-------------------------------
FUND OVERVIEW - BERKSHIRE FOCUS FUND
December 31, 2008
The Fund normally concentrates its investments in a core group of 20-30 common
stocks selected for their long-term growth potential.
PERFORMANCE COMPARISON (Average annual total returns as of 12/31/08)
- -------------------------------------------------------------------
1 Year 3 Year 5 Year 10 Year Since Inception(1)
BERKSHIRE FOCUS FUND -57.30% -14.78% -5.83% -11.73% -5.66%
- ---------------------------------------------------------------------------------------
Dow Jones Industrial Average -31.93% -4.08% -1.13% 1.67% 3.29%
S&P 500(R) Index -37.00% -8.35% -2.19% -1.38% 1.86%
Nasdaq Composite Index -39.98% -9.81% -3.95% -2.71% 1.31%
- ---------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------
12/31/08 $7.4 Million
NET ASSET VALUE
- ---------------------------------------
Net Asset Value Per Share $4.71
TOP TEN HOLDINGS(2)
- -------------------------------------------------
Apple, Inc. 10.49%
Google, Inc. (Class A) 8.81%
QUALCOMM, Inc. 7.86%
Research In Motion Ltd. 7.84%
Amazon.com, Inc. 7.37%
MasterCard, Inc. 5.90%
Hewlett-Packard Co. 4.99%
Broadcom Corp. (Class A) 4.93%
Oracle Corp. 4.84%
Marvell Technology Group Ltd. 4.78%
GROWTH OF $10,000(3)
- ---------------------------------------------
BERKSHIRE FOCUS FUND vs. THE S&P 500(R) INDEX
[GRAPHIC OMITTED]
S&P 500(R) BERKSHIRE FOCUS
INDEX FUND
MONTH $ AMOUNT $ AMOUNT
- ------ --------- -------------
JUN-97 $ 10,000 $ 10,000
JUL-97 10,796 10,000
AUG-97 10,191 9,950
SEP-97 10,749 10,050
OCT-97 10,390 9,500
NOV-97 10,871 9,510
DEC-97 11,058 8,738
JAN-98 11,180 9,699
FEB-98 11,986 10,174
MAR-98 12,600 10,174
APR-98 12,727 10,346
MAY-98 12,508 10,043
JUN-98 13,016 11,539
JUL-98 12,878 11,560
AUG-98 11,016 9,314
SEP-98 11,722 11,287
OCT-98 12,675 11,620
NOV-98 13,443 14,078
DEC-98 14,218 17,822
JAN-99 14,812 20,835
FEB-99 14,352 19,177
MAR-99 14,926 22,776
APR-99 15,504 23,741
MAY-99 15,138 20,976
JUN-99 15,978 23,036
JUL-99 15,480 21,735
AUG-99 15,403 24,001
SEP-99 14,981 24,749
OCT-99 15,929 26,884
NOV-99 16,253 31,405
DEC-99 17,210 43,289
JAN-00 16,346 44,376
FEB-00 16,036 62,228
MAR-00 17,605 60,273
APR-00 17,075 53,253
MAY-00 16,725 45,712
JUN-00 17,137 56,317
JUL-00 16,869 57,013
AUG-00 17,917 71,627
SEP-00 16,971 67,248
OCT-00 16,900 56,719
NOV-00 15,567 36,118
DEC-00 15,643 36,346
JAN-01 16,198 36,813
FEB-01 14,721 19,841
MAR-01 13,789 13,973
APR-01 14,860 19,624
MAY-01 14,960 17,418
JUN-01 14,596 16,440
JUL-01 14,452 13,398
AUG-01 13,547 10,257
SEP-01 12,453 6,498
OCT-01 12,691 8,845
NOV-01 13,664 10,518
DEC-01 13,784 10,116
JAN-02 13,583 10,464
FEB-02 13,321 8,171
MAR-02 13,822 9,649
APR-02 12,984 8,258
MAY-02 12,888 7,389
JUN-02 11,970 5,911
JUL-02 11,037 5,140
AUG-02 11,109 4,564
SEP-02 9,902 3,455
OCT-02 10,774 4,194
NOV-02 11,408 5,400
DEC-02 10,738 4,140
JAN-03 10,456 4,183
FEB-03 10,300 4,281
MAR-03 10,400 4,183
APR-03 11,256 4,857
MAY-03 11,849 5,791
JUN-03 12,000 5,552
JUL-03 12,212 5,672
AUG-03 12,450 6,509
SEP-03 12,318 5,878
OCT-03 13,015 6,943
NOV-03 13,129 7,280
DEC-03 13,818 6,911
JAN-04 14,071 7,552
FEB-04 14,267 7,291
MAR-04 14,052 6,791
APR-04 13,831 5,726
MAY-04 14,021 6,346
JUN-04 14,294 6,824
JUL-04 13,820 5,607
AUG-04 13,876 5,303
SEP-04 14,026 5,770
OCT-04 14,240 6,335
NOV-04 14,816 7,128
DEC-04 15,321 7,161
JAN-05 14,947 6,748
FEB-05 15,262 6,661
MAR-05 14,991 6,302
APR-05 14,707 5,987
MAY-05 15,175 6,911
JUN-05 15,197 6,509
JUL-05 15,762 6,878
AUG-05 15,618 6,900
SEP-05 15,744 7,215
OCT-05 15,482 7,660
NOV-05 16,067 8,236
DEC-05 16,073 8,269
JAN-06 16,498 8,943
FEB-06 16,543 8,573
MAR-06 16,749 8,877
APR-06 16,974 8,845
MAY-06 16,486 7,747
JUN-06 16,508 7,736
JUL-06 16,609 7,258
AUG-06 17,004 7,704
SEP-06 17,443 7,943
OCT-06 18,011 8,301
NOV-06 18,353 9,062
DEC-06 18,611 8,617
JAN-07 18,892 8,573
FEB-07 18,523 8,443
MAR-07 18,730 8,280
APR-07 19,560 8,258
MAY-07 20,242 8,780
JUN-07 19,906 9,149
JUL-07 19,289 9,497
AUG-07 19,578 9,736
SEP-07 20,310 10,735
OCT-07 20,633 12,528
NOV-07 19,770 11,942
DEC-07 19,633 11,985
JAN-08 18,456 8,943
FEB-08 17,856 8,443
MAR-08 17,779 8,584
APR-08 18,645 9,866
MAY-08 18,886 10,507
JUN-08 17,294 9,334
JUL-08 17,149 9,269
AUG-08 17,397 9,029
SEP-08 15,847 6,965
OCT-08 13,184 5,933
NOV-08 12,238 4,998
DEC-08 12,369 5,118
SECTOR ALLOCATION(4)
- ------------------------------------------
Internet Software & Services 22.42%
Semiconductors 17.32%
Computer Hardware 16.56%
Communications Equipment 15.70%
Exchange Traded Funds 12.84%
Financial Services 5.90%
Software 4.84%
Networking & Telecom Equipment 4.18%
Alternative Energy 0.01%
Medical Appliances & Equipment 0.01%
(1) The Fund's inception date was July 1, 1997.
(2) Stated as a percentage of total net assets as of 12/31/08. The holdings
information provided should not be construed as a recommendation to
purchase or sell a particular security and may not be representative of
the Fund's current or future investments.
(3) This chart assumes an initial investment of $10,000 made on July 1,
1997 (inception). 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 but do not reflect the impact of
taxes.
(4) Stated as a percentage of total net assets as of 12/31/08. The holdings
by sector are presented to illustrate examples of the sectors in which
the Fund has bought securities and may not be representative of the
Fund's current or future investments.
This Fund concentrates its investments in the technology industry.
As a result, the Fund is subject to greater risk than more diversified
funds because of its concentration of investments in fewer companies
and certain segments of a single industry.
1
*
- ------------------------------------------------------------------------------
BERKSHIRE FOCUS FUND
Performance and Portfolio Discussion
12/31/2008
- ------------------------------------------------------------------------------
*
2
*
-------------------------------
LETTER TO THE SHAREHOLDERS
[PHOTO]
Dear Fellow Shareholders,
For the twelve month period ended December 31, 2008, the Berkshire Focus Fund
posted a total return of -57.30%. For comparative purposes, the Dow Jones
Industrial Average fell by 31.93%, the S&P 500(R) Index lost 37.00% and the
Nasdaq Composite Index declined by 39.98% over the same period. Please see the
Fund Overview section and the accompanying financial statements for the Fund's
longer-term performance. All return data includes reinvested dividends but do
not reflect the impact of taxes.
The year 2008 will be remembered as a historic period for the U.S. financial
markets. The credit crisis that began to take shape in early 2007, escalated
dramatically during the third quarter. A weakening U.S. economy helped accel-
erate the number of delinquencies and foreclosures in the housing market,
which led to a series of massive write-downs by the financial institutions.
Eventually, the amalgam of declining asset values, diminishing market liquid-
ity and increased balance sheet strains coalesced into the collapse of several
major U.S. financial institutions and a wave of others that were consolidated.
In early September , the federal government announced the nation's two largest
mortgage finance companies, Fannie Mae and Freddie Mac, were placed into con-
servatorship. On September 15, Lehman Brothers filed for bankruptcy - repre-
senting the largest bankruptcy in U.S. history. On the same day, Merrill Lynch
announced plans to sell itself to Bank of America and the Federal Reserve
bailed out insurance giant American International Group (AIG) with an $85 bil-
lion infusion of capital. On September 25, the markets learned of the largest
bank failure in U.S. history - JP Morgan had bought the assets of Washington
Mutual after the bank collapsed and was taken over by the FDIC. Together these
extraordinary events contributed to the violent sell-off in stocks by period
end.
Not surprisingly, investor sentiment turned even more negative at the onset of
the fourth quarter. Fears of a dramatic slowdown in the economy coupled with
the systemic deleveraging of both financial institutions and hedge funds sent
the stock market averages into yet another tailspin. In an effort to help
forestall the adverse effects on the economy stemming from the growing credit
crisis, Fed policymakers embarked on a series of unprecedented moves. The
central bank slashed interest rates three additional times - taking interest
rates from 2.0% all the way down to zero. By the end of the period, the stock
market averages had declined dramatically for the year, representing the most
severe bear market since the Great Depression more than 70 years ago.
Against this harsh economic backdrop, our concentrated style of investing re-
sulted in the underperformance of our Fund relative to our equity market
benchmarks. While we recognize that our focus on technology stocks contributed
to our underperformance, we continue to believe that technology holds the
greatest long-term growth potential. Our near-term focus then, will be to take
advantage of the market's dislocations by adding to our positions at historic
discounts. We will also be looking to establish new positions in companies we
believe will rebound the strongest once the economy regains its footing. As a
result, you can expect us to remain committed to our aggressive, high-growth
style of investing just as we have in the past. We thank you for your loyalty
and continued confidence in our abilities during these difficult times.
/s/ Malcolm R. Fobes III
Malcolm R. Fobes III
Chairman & Chief Executive Officer
3
*
- ------------------------------------------------------------------------------
AUDITED FINANCIAL STATEMENTS
12/31/2008
- ------------------------------------------------------------------------------
*
4
*
-------------------------------
PORTFOLIO OF INVESTMENTS - BERKSHIRE FOCUS FUND
December 31, 2008
Shares Value
COMMON STOCKS - 86.94% $ 6,436,961
=========================================================
(Cost $9,958,347)
ALTERNATIVE ENERGY - 0.01% 875
---------------------------------------------------------
5 First Solar, Inc.* 690
5 SunPower Corp.* 185
COMMUNICATIONS EQUIPMENT - 15.70% 1,162,376
---------------------------------------------------------
16,240 QUALCOMM, Inc. 581,879
14,305 Research In Motion Ltd.* 580,497
COMPUTER HARDWARE - 16.56% 1,225,947
---------------------------------------------------------
9,100 Apple, Inc.* 776,685
7,590 EMC Corp.* 79,467
10,190 Hewlett-Packard Co. 369,795
FINANCIAL SERVICES - 5.90% 436,651
---------------------------------------------------------
3,055 MasterCard, Inc. 436,651
INTERNET SOFTWARE & SERVICES - 22.42% 1,660,397
---------------------------------------------------------
10,645 Amazon.com, Inc.* 545,876
2,275 Baidu.com, Inc. ADR* 297,047
2,120 Google, Inc. (Class A)* 652,218
1,075 Salesforce.com, Inc.* 34,411
10,725 Yahoo! Inc.* 130,845
MEDICAL APPLIANCES & EQUIPMENT - 0.01% 635
---------------------------------------------------------
5 Intuitive Surgical, Inc.* 635
NETWORKING & TELECOM EQUIPMENT - 4.18% 309,497
---------------------------------------------------------
9,255 Cisco Systems, Inc.* 150,856
9,060 Juniper Networks, Inc.* 158,641
SEMICONDUCTORS - 17.32% 1,282,437
---------------------------------------------------------
21,520 Broadcom Corp. (Class A)* 365,194
10 Cypress Semiconductor Corp.* 45
20,075 Intel Corp. 294,299
53,030 Marvell Technology Group Ltd.* 353,710
48,590 Skyworks Solutions, Inc.* 269,189
SOFTWARE - 4.84% 358,146
---------------------------------------------------------
20,200 Oracle Corp.* 358,146
EXCHANGE TRADED FUNDS - 12.84% 950,318
=========================================================
(Cost $1,260,681)
40 Internet HOLDRs Trust 1,277
10,020 PowerShares QQQ 297,995
11,965 ProShares Ultra QQQ 321,739
18,700 Semiconductor HOLDRs Trust 329,307
CASH EQUIVALENT - 0.46% 33,995
=========================================================
(Cost $33,995)
33,995 First American Treasury
Obligations Fund (1.97%)** 33,995
TOTAL INVESTMENT SECURITIES - 100.24% 7,421,274
=========================================================
(Cost $11,253,023)
LIABILITIES IN EXCESS OF OTHER ASSETS - 0.24% (17,466)
---------------------------------------------------------
NET ASSETS - 100.00% $ 7,403,808
=========================================================
Equivalent to $4.71 per share
*Non-income producing
**Variable Rate Security: The rate shown represents the rate as of 12/31/08
ADR - American Depositary Receipt
(See accompanying notes to financial statements)
5
*
-------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2008
BERKSHIRE
FOCUS FUND
ASSETS
- ---------------------------------------------------------------------
Investment securities:
At acquisition cost $ 11,253,023
=============
At market value $ 7,421,274
Receivable for capital shares sold 1,669
Interest receivable 3,739
-------------
TOTAL ASSETS 7,426,682
-------------
LIABILITIES
- ---------------------------------------------------------------------
Payable for capital shares redeemed 10,308
Payable to affiliate (Note 4) 12,553
Accrued expenses 13
-------------
TOTAL LIABILITIES 22,874
-------------
NET ASSETS $ 7,403,808
=====================================================================
Net assets consist of:
Paid-in-capital $ 377,899,584
Accumulated net realized losses
from security transactions (366,664,027)
Net unrealized depreciation on investments (3,831,749)
-------------
NET ASSETS $ 7,403,808
=============
Shares of beneficial interest issued and outstanding
(unlimited number of shares authorized, without
par value) 1,570,625
=============
Net asset value and offering price price per share $ 4.71
=============
Minimum redemption price per share* $ 4.62
=============
*The Fund will impose a 2.00% redemption fee on shares redeemed within
90 calendar days of purchase.
(see accompanying notes to financial statements)
6
*
-------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2008
BERKSHIRE
FOCUS FUND
INVESTMENT INCOME
- ---------------------------------------------------------------------
Interest $ 4,555
Dividends 44,115
-------------
TOTAL INVESTMENT INCOME 48,670
-------------
EXPENSES
- ---------------------------------------------------------------------
Investment advisory fees 216,387
Administrative fees 72,129
Interest expense 1,128
-------------
TOTAL EXPENSES 289,644
-------------
NET INVESTMENT LOSS (240,974)
- ---------------------------------------------------------------------
REALIZED AND UNREALIZED
LOSSES ON INVESTMENTS
- ---------------------------------------------------------------------
Net realized losses from security transactions (6,459,171)
Net change in unrealized depreciation on investments (5,248,758)
------------
NET REALIZED AND UNREALIZED
LOSSES ON INVESTMENTS (11,707,929)
------------
NET DECREASE IN NET ASSETS
FROM OPERATIONS $ (11,948,903)
=============
(see accompanying notes to financial statements)
7
*
-------------------------------
STATEMENTS OF CHANGES IN NET ASSETS - BERKSHIRE FOCUS FUND
For the Years Ended December 31, 2008 and December 31, 2007
Year Year
Ended Ended
12/31/08 12/31/07
FROM OPERATIONS:
- ----------------------------------------------------------------------------------------------
Net investment loss $ (240,974) $ (276,193)
Net realized gains (losses) from security transactions (6,459,171) 3,653,268
Net change in unrealized appreciation
(depreciation) on investments (5,248,758) 995,502
--------------------------------
Net increase (decrease) in net assets from operations (11,948,903) 4,372,577
--------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
- ----------------------------------------------------------------------------------------------
Proceeds from shares sold 6,922,408 12,910,487
Proceeds from redemption fees (Note 7) 26,136 0
Payments for shares redeemed (9,121,317) (10,188,706)
--------------------------------
Net increase (decrease) in net assets from
capital share transactions (2,172,773) 2,721,781
--------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (14,121,676) 7,094,358
- ----------------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------------
Beginning of period 21,525,484 14,431,126
--------------------------------
End of period $ 7,403,808 $ 21,525,484
================================
Including accumulated undistributed
net investment loss: $ 0 $ 0
================================
CAPITAL SHARE ACTIVITY:
- ----------------------------------------------------------------------------------------------
Shares sold 806,142 1,243,547
Shares redeemed (1,187,099) (1,111,556)
--------------------------------
Net increase (decrease) in shares outstanding (380,957) 131,991
Shares outstanding, beginning of period 1,951,582 1,819,591
--------------------------------
Shares outstanding, end of period 1,570,625 1,951,582
================================
(see accompanying notes to financial statements)
8
*
-------------------------------
FINANCIAL HIGHLIGHTS - BERKSHIRE FOCUS FUND
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Period
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/08 12/31/07 12/31/06 12/31/05 12/31/04
NET ASSET VALUE,
BEGINNING OF PERIOD $11.03 $ 7.93 $ 7.61 $ 6.59 $ 6.36
- -------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
- -------------------------------------------------------------------------------------------------------------
Net investment loss (0.16)(A) (0.15)(A) (0.02)(A) (0.14)(A) (0.13)(A)
Net realized and unrealized gains
(losses) on investments (6.17) 3.25 0.34 1.16 0.36
-----------------------------------------------------------------
Total from investment operations (6.33) 3.10 0.32 1.02 0.23
-----------------------------------------------------------------
Proceeds from redemption fees 0.01 - - - -
-----------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 4.71 $ 11.03 $ 7.93 $ 7.61 $ 6.59
=============================================================================================================
TOTAL RETURN(B) (57.30%) 39.09% 4.20% 15.48% 3.62%
=============================================================================================================
SUPPLEMENTAL DATA AND RATIOS:
- -------------------------------------------------------------------------------------------------------------
Net assets at end of period
(thousands) $ 7,404 $ 21,525 $ 14,431 $ 22,291 $ 29,542
Ratio of expenses to average
net assets 2.00%(G) 2.00%(F) 2.00%(E) 2.00%(D) 2.00%(C)
Ratio of net investment loss
to average net assets (1.68%) (1.94%) (0.21%) (1.99%) (1.98%)
Portfolio turnover rate(H) 539.9% 446.6% 386.2% 284.1% 316.5%
(A) Net investment loss per share is calculated using ending balances prior to
consideration or adjustment for permanent book and tax differences.
(B) Total return represents the rate that the investor would have earned or (lost) on an
investment in the Fund assuming reinvestment of dividends.
(C) For the year ended December 31, 2004 the ratio of expenses to average net assets excludes
interest expense. The ratio including interest expense would be 2.02%.
(D) For the year ended December 31, 2005 the ratio of expenses to average net assets excludes
interest expense. The ratio including interest expense would be 2.02%.
(E) For the year ended December 31, 2006 the ratio of expenses to average net assets excludes
interest expense. The ratio including interest expense would be 2.02%.
(F) For the year ended December 31, 2007 the ratio of expenses to average net assets excludes
interest expense. The ratio including interest expense would be 2.01%.
(G) For the year ended December 31, 2008 the ratio of expenses to average net assets excludes
interest expense. The ratio including interest expense would be 2.01%.
(H) Portfolio turnover is greater than most funds due to the investment style of the Fund.
(see accompanying notes to financial statements)
9
*
-------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
1. Organization
The Berkshire Focus Fund (the "Fund") is a non-diversified series of The
Berkshire Funds (the "Trust"), an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Trust was organized as a Delaware business trust on November 25,
1996. The Fund commenced operations on July 1, 1997. The Fund's investment
objective is to seek long-term capital appreciation through investments in
equity securities.
2. Significant Accounting Policies
The following is a summary of the Trust's significant accounting policies:
Securities valuation - The Fund's portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange (the
"NYSE"), normally 4:00 p.m., Eastern time. Securities which are traded on
stock exchanges or are quoted by Nasdaq are valued at the last reported sale
price as of the close of the regular session of trading on the NYSE, or, if
not traded, at the most recent bid price. Securities which are traded in the
over-the-counter market, and which are not quoted by Nasdaq, are valued at the
most recent bid price, as obtained from one or more of the major market makers
for such securities. Securities for which market quotations are not readily
available are valued at their fair value as determined in good faith in
accordance with consistently applied procedures established by and under the
general supervision of the Board of Trustees.
The Fund adopted Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), effective
January 1, 2008. In accordance with FAS 157, fair value is defined as the
price that the Fund would receive to sell an asset or pay to transfer a lia-
bility in an orderly transaction between market participants at the measure-
ment date. FAS 157 also establishes a framework for measuring fair value, and
a three-level hierarchy for fair value measurements based upon the transpar-
ency of inputs to the valuation of an asset or liability. Inputs may be
observable or unobservable and refer broadly to the assumptions that market
participants would use in pricing the asset or liability. Observable inputs
reflect the assumptions market participants would use in pricing the asset or
liability based on market data obtained from sources independent of the Fund.
Unobservable inputs reflect the Fund's own assumptions about the assumptions
that market participants would use in pricing the asset or liability developed
based on the best information available in the circumstances. Each investment
is assigned a level based upon the observability of the inputs which are
significant to the overall valuation. The three-tier hierarchy of inputs is
summarized below:
Level 1 - quoted prices in active markets for identical investments.
Level 2 - other significant observable inputs (including quoted prices for
similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3 - significant unobservable inputs (including the Fund's own assump-
tions in determining the fair value of investments).
10
*
-------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
The following table summarizes the valuation of the Fund's investments by the
above fair value hierarchy levels as of December 31, 2008:
OTHER
INVESTMENT IN FINANCIAL
DESCRIPTION SECURITIES INSTRUMENTS*
==============================================================================
Level 1 - Quoted prices $ 7,421,274 $ 0
Level 2 - Other significant observable inputs 0 0
Level 3 - Significant unobservable inputs 0 0
- --------------------------------------------- ----------- -----------
Total $ 7,421,274 $ 0
*Other financial instruments are derivative instruments not reflected in the
Portfolio of Investments, such as futures forwards and swap contracts, which
are valued at the unrealized appreciation/depreciation on the instrument.
In March 2008, the Financial Accounting Standards Board issued the Statement
of Financial Accounting Standards No.161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 is effective for
fiscal years and interim periods beginning after November 15, 2008. SFAS 161
requires enhanced disclosures about the Fund's derivative and hedging activi-
ties, including how such activities are accounted for and their effect on the
Fund's financial position, performance and cash flows. Management is currently
evaluating the impact the adoption of SFAS 161 will have on the Fund's finan-
cial statements and related disclosures.
Share valuation - The net asset value per share for the Fund is calculated
daily by dividing the total value of the Fund's assets, less liabilities, by
the number of shares outstanding, rounded to the nearest cent. The offering
and redemption price per share is equal to the net asset value per share.
Investment income - Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned.
Distributions to shareholders - Distributions to shareholders arising from net
investment income and net realized capital gains, if any, are distributed at
least once each year. Distributions to shareholders are recorded on the
ex-dividend date. Dividends from net investment income and capital gain
distributions are determined in accordance with income tax regulations, which
may differ from accounting principles generally accepted in the United States.
Security transactions - Security transactions are accounted for on the trade
date. Securities sold are determined on a specific identification basis.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and
11
*
-------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
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 income and expenses during the report-
ing period. Actual results could differ from those estimates.
Federal income tax - The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code (the "Code") necessary to qualify as
a regulated investment company. As provided therein, in any fiscal year in
which the Fund so qualifies and distributes at least 90% of its taxable net
income, the Fund (but not the shareholders) will be relieved of federal
income tax on the income distributed. Accordingly, no provision for income
taxes has been made.
As of and during the year ended December 31, 2008 the Fund did not have a
liability for any unrecognized tax benefits. The Fund recognizes interest and
penalties, if any, related to unrecognized tax benefits as income tax expense
on the statement of operations. During the period, the Fund did not incur any
interest or penalties. The Fund is not subject to examination by U.S. federal
tax authorities for tax years before 2005.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income and 98% of its
net realized capital gains plus undistributed amounts from prior years.
Other - The treatment for financial reporting purposes of distributions made
to shareholders during the year from net investment income or net realized
capital gains may differ from their ultimate treatment for federal income tax
purposes. These differences are caused primarily by differences in the timing
of the recognition of certain components of income, expense or realized
capital gain for federal income tax purposes. Where such differences are perm-
anent in nature, they are reclassified in the components of the net assets
based on their ultimate characterization for federal income tax purposes. Any
such reclassifications will have no effect on net assets, results of opera-
tions or net asset value per share of the Fund. For the fiscal year ended
December 31, 2008, net investment loss of $240,974 and accumulated net real-
ized loss for capital loss carryforwards expired in the current year of
$52,671,799 for the Fund were reclassified to paid-in-capital.
3. Investment Transactions
Purchases and sales of investment securities (excluding short-term instru-
ments) for the year ended December 31, 2008 were $78,056,807 and $79,512,121,
respectively. There were no purchases or sales of U.S. Government securities
for the Fund.
12
*
-------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
The following information is based upon the federal income tax cost of port-
folio investments as of December 31, 2008:
Gross unrealized appreciation $ 84,527
Gross unrealized depreciation (4,478,991)
--------------------------------------------------
Net unrealized depreciation $ (4,394,464)
==================================================
Federal income tax cost $ 11,815,738
The difference between the acquisition cost and the federal income tax cost
of portfolio investments is due to certain timing differences in the
recognition of capital losses under accounting principles generally accepted
in the United States and income tax regulations.
At December 31, 2008, the Fund had the following capital loss carryforwards
for tax purposes:
Capital Loss Carryforward Date of Expiration
----------------------------------------------------
$ 5,953,640 12/31/16
$ 542,380 12/31/12
$ 10,452,456 12/31/11
$ 56,400,653 12/31/10
$ 292,752,183 12/31/09
To the extent these loss carryforwards are used to offset future capital
gains, it is probable that the amount, which is offset, will not be distribut-
ed to shareholders.
4. Related Party Transactions, Investment Advisory and Administrative Fees
Certain Officers and Trustees of the Trust are also Officers and Directors of
Berkshire Capital Holdings, Inc. ("Berkshire Capital"). The non-interested
Trustees of the Fund were paid $1,216 in Trustee fees and expenses directly by
Berkshire Capital during the year ended December 31, 2008.
The Fund has an Investment Advisory Agreement (the "Advisory Agreement") and
a separate Administration Agreement with Berkshire Capital. Under the Advisory
Agreement, Berkshire Capital will determine what securities will be purchased,
retained or sold by the Fund on the basis of a continuous review of the port-
folio. For the services it provides under the Advisory Agreement, Berkshire
Capital receives a fee accrued each calendar day (including weekends and holi-
days) at a rate of 1.50% per annum of the daily net assets of the Fund. Under
the Administration Agreement, Berkshire Capital renders all administrative and
supervisory services of the Fund, as
13
*
-------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
well as facilities furnished and expenses assumed. For these services, Berk-
shire Capital receives a fee at the annual rate of 0.50% of the Fund's aver-
age daily net assets up to $50 million, 0.45% of average net assets from $50
million to $200 million, 0.40% of average net assets from $200 million to $500
million, 0.35% of average net assets from $500 million to $1 billion and 0.30%
of average net assets in excess of $1 billion. Such fee is computed as a per-
centage of the Fund's daily net assets and is accrued each calendar day (in-
cluding weekends and holidays). For the year ended December 31, 2008, Berk-
shire Capital was paid an investment advisory fee of $216,387 and an admin-
istration fee of $72,129 from the Fund. The amount due to Berkshire Capital
for these fees at December 31, 2008 totaled $12,553.
5. Distributions to Shareholders
There were no distributions paid during the year ended December 31, 2008 or
the year ended December 31, 2007. As of December 31, 2008, the components of
distributable earnings (accumulated losses) on a tax basis were as follows:
Undistributed ordinary income $ 0
Accumulated losses (366,101,312)
Unrealized depreciation (4,394,464)
---------------------------------------------------------
Total accumulated deficit $ (370,495,776)
=========================================================
The difference between the acquisition cost and the federal income tax cost
of unrealized appreciation is due to certain timing differences in the
recognition of capital losses under accounting principles generally accepted
in the United States and income tax regulations.
6. Redemption Fee
On October 12, 2006 the Board of Trustees unanimously approved a redemption
fee of 2.00% on shares held for 90 days or less, to become effective January
1, 2008, or thereafter as reasonably practical. For the year ended December
31, 2008 proceeds from redemption fees were $26,136.
14
*
-------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
The Berkshire Funds
San Jose, California
We have audited the accompanying statement of assets and liabilities, includ-
ing the portfolio of investments, of the Berkshire Focus Fund (the "Fund"), a
series of The Berkshire Funds, as of December 31, 2008, and the related state-
ment of operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These finan-
cial statements and financial highlights are the responsibility of Fund man-
agement. Our responsibility is to express an opinion on these financial state-
ments and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 misstate-
ment. 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 December 31, 2008 by correspondence
with the Fund's custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as eval-
uating the overall financial statement presentation. W e believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Berkshire Focus Fund as of December 31, 2008, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
Cohen Fund Audit Services, Ltd.
Westlake, Ohio
March 2, 2009
15
*
-------------------------------
ADDITIONAL INFORMATION
(unaudited)
EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory fees, administrative fees and
interest expense. This Example is intended to help you understand your ongoing
costs (in dollars) of investing in the Fund 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 in the Fund on July 1, 2008 and held through
December 31, 2008.
Actual Expenses
The first line of the table on the following page provides information about
actual account values and actual expenses. Although the Fund charges no sales
load or transaction fees, you will be assessed fees for outgoing wire trans-
fers, returned checks and stop payment orders at prevailing rates charged by
Mutual Shareholder Services, LLC, the Fund's transfer agent. If you request
that a redemption be made by wire transfer, currently a $20.00 fee is charged
by the Fund's transfer agent. IRA accounts will be charged an $8.00 annual
maintenance fee. To the extent the Fund invests in shares of other investment
companies as part of its investment strategy, you will indirectly bear your
proportionate share of any fees and expenses charged by the underlying funds
in which the Fund invests in addition to the expenses of the Fund. Actual
expenses of the underlying funds are expected to vary among the various
underlying funds. These expenses are not included in the example. The example
includes advisory fees, administrative fees and interest expense. However, the
example does not include portfolio trading commissions and related expenses
and other extraordinary expenses as determined under generally accepted
accounting principles. You may use the information in this line, together with
the amount you invested, to estimate the expenses that you paid over the per-
iod. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), 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 provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. 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 in-
vesting in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5%
16
*
-------------------------------
ADDITIONAL INFORMATION
(unaudited)
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 do not reflect any transactional costs. Therefore,
the second line of the table is useful in comparing ongoing costs only, and
will not help you determine the relative total costs of owning different
funds. In addition, if these transactional costs were included, your costs
would have been higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value July 1, 2008 to
July 1, 2008 December 31, 2008 December 31, 2008
------------ ----------------- -----------------
Actual $1,000.00 $548.30 $7.82
Hypothetical $1,000.00 $1,015.03 $10.18
(5% annual return
before expenses)
*Expenses are equal to the Fund's annualized expense ratio of 2.01%,
multiplied by the average account value over the period, multiplied by 184/366
to reflect the one-half year period.
OTHER INFORMATION
Proxy Voting Guidelines
Berkshire Capital Holdings, Inc., the Fund's Adviser, is responsible for exer-
cising the voting rights associated with the securities held by the Fund. A
description of the policies and procedures used by the Adviser in fulfilling
this responsibility and a record of the Fund's proxy votes for the twelve
months ended June 30, 2008 are available without charge, upon request, by
calling toll free 1-877-526-0707. They are also available on the Securities
and Exchange Commission's ("SEC") website at http://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 1-202-551-8090 (direct) or 1-800-SEC-0330 (general SEC
number).
17
*
-------------------------------
ADDITIONAL INFORMATION
(unaudited)
TRUSTEE AND OFFICER INFORMATION
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees. Information pertaining to the Trustees and Officers
of the Fund is set forth below. The SAI includes additional information about
the Fund's Trustees and Officers and is available without charge, upon
request, by calling toll-free 1-877-526-0707.
INTERESTED TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------------------------------------
Number of
portfolios
Term of in fund Other
office and Principal complex directorships
Position(s) held length of occupation during overseen held by trustee
Name, address and age with trust time served past five years by trustee and officer
===================== =============== =========== ==================== ========== ===============
Malcolm R. Fobes III* Trustee, Indefinite; Chairman and CEO; 1 Independent
475 Milan Drive President, Since 1996 Berkshire Capital Director;
Suite #103 Treasurer, Holdings, Inc. United States
San Jose, CA 95134 Chief Compliance (1993-present) Oil Fund,
Age: 44 Officer and United States
Chief Financial Natural Gas
Officer Fund, United
States 12 Month
Oil Fund, United
States Gasoline
Fund, United
States Heating
Oil Fund, United
States Short Oil
Fund
Ronald G. Seger, O.D.* Trustee and Indefinite; Optometrist; 1 None
475 Milan Drive Secretary Since 1996 Ronald G. Seger, O.D.
Suite #103 (1989-present)
San Jose, CA 95134
Age: 59
- --------------------------------------------------------------------------------------------------------------
*Trustees 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.
DISINTERESTED TRUSTEES
- --------------------------------------------------------------------------------------------------------------
Number of
portfolios
Term of in fund
office and Principal complex Other
Position held length of occupation during overseen directorships
Name, address and age with trust time served past five years by trustee held by trustee
===================== =============== =========== ==================== ========== ===============
Leland F. Smith Independent Indefinite; Chairman and CEO; 1 None
475 Milan Drive Trustee Since 1997 Elesco Ltd.*
Suite #103 (1989-present)
San Jose, CA 95134
Age: 70
Andrew W. Broer Independent Indefinite; Global Data Center 1 None
475 Milan Drive Trustee Since 1998 Manager;
Suite #103 Cisco Systems, Inc.
San Jose, CA 95134 (1996-present)
Age: 43
- --------------------------------------------------------------------------------------------------------------
*Elesco Ltd. provides consulting services for corporations and government agencies in the field of
land-use management.
18
*
-------------------------------
ADDITIONAL INFORMATION
(unaudited)
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
At an in-person meeting held on December 2, 2008, the Board of Trustees,
including a majority of Trustees that are not "interested" persons of the Fund
(as that term is defined in the 1940 Act), re-approved the Advisory Agreement
based upon its review of the qualitative and quantitative information provided
by the Investment Adviser. The Trustees, pursuant to the advice of counsel
regarding their fiduciary duties when re-approving the Advisory Agreement,
considered, among other things, the following information regarding the
Investment Adviser:
Nature, Extent and Quality of Services Provided by the Investment Adviser
The Trustees reviewed the nature, quality and scope of current and anticipated
services provided by the Investment Adviser under the Advisory Agreement. The
Trustees also analyzed the Investment Adviser's experience and the capabili-
ties of the Investment Adviser's portfolio manager. For example, the Trustees
reviewed and discussed the Investment Adviser's Form ADV and internal compli-
ance policies, as well as the experience of the Investment Adviser as invest-
ment adviser or sub-adviser to other investment companies. In addition to the
above considerations, the Trustees reviewed and considered a description of
the Investment Adviser's portfolio and brokerage transactions. Based on this
review, the Trustees concluded that the range and quality of services to be
provided by the Investment Adviser to the Fund were appropriate and continued
to support its original selection of the Investment Adviser.
Costs of Services to the Fund
The Trustees discussed at length the advisory fee of 1.50%, noting that it
fell within the 4th Quartile relative to similar funds within its benchmark
category and asset range, as provided by Lipper, Inc. The Trustees also con-
sidered the 0.50% administrative fee and concluded that it was more appropri-
ate to compare the Fund's total expense ratio to those of similar funds within
its benchmark category and asset range. The Trustees noted the Fund's total
expense ratio fell within the 3rd Quartile and near the industry average when
compared to its benchmark funds. The Trustees further noted that the Adviser
paid all of the Fund's expenses from the fees it received. The Trustees also
considered that managing a technology fund requires more intensive research
than the average mutual fund, which holds more securities and more stable
stocks across various sectors. Based on this review, the Trustees concluded
that the expense level of the Fund, as managed by the Investment Adviser, was
satisfactory.
19
*
-------------------------------
ADDITIONAL INFORMATION
(unaudited)
Investment Performance
The Trustees considered short-term and long-term investment performance for
the Fund over various periods of time as compared to both relevant equity in-
dices and the performance of the Fund's Lipper, Inc. peer group universe. The
Trustees noted in particular the investment outperformance delivered by the
Adviser to the Fund over the past 3-year and 5-year periods relative to its
Lipper, Inc. peer group universe. They also took into consideration that the
Fund tends to outperform its benchmarks in up markets and underperform in down
markets. Based on this review, the Trustees concluded that the current and
historical performance of the Fund, as managed by the Investment Adviser, was
satisfactory.
Profitability of the Adviser
The Trustees considered the level of profits that could be expected to accrue
to the Investment Adviser from the fee payable under the Advisory Agreement.
In addition, the Trustees reviewed the current financial condition of the
Investment Adviser and a summary of total expense ratios and management fees.
The Trustees also discussed the existence of other compensation arrangements
with the Investment Adviser. Based on this review, the Trustees concluded that
the Fund's advisory fee is competitive with those of comparable funds and that
the Investment Adviser's profit margin was reasonable.
Economies of Scale
The Trustees received and considered information regarding whether there have
been economies of scale with respect to the management of the Fund, whether
the Fund has appropriately benefited from any economies of scale, and whether
there is potential for realization of any further economies of scale. The
Trustees noted that the total operating expenses of the Fund contain break-
points and, accordingly, reflect the potential that economies of scale may be
realized as the Fund grows.
Conclusion
The Trustees who are non-interested persons met separately to further discuss
the performance of the Fund and the Adviser's compensation. On the basis of
its review and the foregoing information, the Board of Trustees determined
that the Advisory Agreement, including the advisory fee rates payable there-
under, continued to be fair and reasonable in light of all relevant circum-
stances and concluded that it is in the best interest of the Fund and its
shareholders to approve the Advisory Agreement.
20
THE BERKSHIRE FUNDS
475 Milan Drive
Suite #103
San Jose, CA 95134
(Toll-Free) 1-877-526-0707
BOARD OF TRUSTEES
Malcolm R. Fobes III, Chairman
Ronald G. Seger
Leland F. Smith
Andrew W. Broer
INVESTMENT ADVISER
Berkshire Capital Holdings, Inc.
475 Milan Drive
Suite #103
San Jose, CA 95134
COUNSEL
Thompson Hine LLP
312 Walnut Street
14th Floor
Cincinnati, OH 45202
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Cohen Fund Audit Services, Ltd.
800 Westpoint Parkway
Suite #1100
Westlake, OH 44145
TRANSFER AGENT
Mutual Shareholder Services, LLC
8000 Town Centre Drive
Suite #400
Broadview Heights, OH 44147
CUSTODIAN
U.S. Bank, N.A.
1555 North RiverCenter Drive
Suite #302
Milwaukee, WI 53212
WEBSITE
www.berkshirefunds.com
ITEM 2. CODE OF ETHICS
The Registrant has adopted a code of ethics that applies to the Reg-
istrant's principal executive officer and principal financial off-
icer. The Registrant has not made any amendments to its code of
ethics during the period covered by this report. The Registrant has
not granted any waivers from any provisions of the code of ethics
during the period covered by this report.
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 commit-
tee. At this time, the Registrant believes that the experience pro-
vided 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 and audit-related 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 statutory 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 performance of the audit. The following
table details the aggregate fees billed for each of the last two
fiscal years for audit fees and audit-related fees by the principal
accountant.
---------------------------------------------------------------------
FYE 12/31/2008 FYE 12/31/2007
---------------------------------------------------------------------
Audit Fees $10,500 $12,500
Audit-Related Fees $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 for the last two years. The audit commit-
tee 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 12/31/2008 FYE 12/31/2007
---------------------------------------------------------------------
Registrant $0 $0
Registrant's Investment Adviser $0 $0
---------------------------------------------------------------------
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable to registrants who are not listed issuers (as
defined in Rule 10A-3 under the Securities Exchange Act of 1934).
ITEM 6. SCHEDULE OF INVESTMENTS
Schedule of Investments is included as part of the report to share-
holders filed under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable to open-end investment companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable to open-end investment companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable to open-end investment companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES
(a) The Registrant's President, Treasurer and Chief Financial
Officer has reviewed the Registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment
Company Act of 1940 (the "Act")) as of a date within 90 days of
the filing of this report, as required by Rule 30a-3(b) under the
Act and Rules 13a-15(b) or 15d-15(b) under the Securities Ex-
change Act of 1934. Based on this review, such officer has con-
cluded that the disclosure controls and procedures are effective
in ensuring that information required to be disclosed in this re-
port is appropriately recorded, processed, summarized and report-
ed and made known to them by others within the Registrant and by
the Registrant's service provider.
(b) There were no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act)
that occurred during the second fiscal quarter of the period
covered by this report that have materially affected, or are rea-
sonably likely to materially affect, the Registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS
(a) (1) Any code of ethics or amendment thereto that is the subject
of the disclosure required by Item 2, to the extent that the
Registrant intends to satisfy Item 2 requirements through
filing an exhibit.
Incorporated by reference to the Registrant's Form N-CSR
filed February 25,2005.
(2) A separate certification for each principal executive and
principal financial officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Filed herewith.
(3) Any written solicitation to purchase securities under Rule
23c-1 under the Act sent or given during the period covered
by the report by or on behalf of the registrant to 10 or more
persons.
Not applicable to open-end investment companies.
(b) 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 author-
ized.
The Berkshire Funds
By: /s/ Malcolm R. Fobes III
--------------------
Malcolm R. Fobes III
President, Treasurer and Chief Financial Officer
Date: March 2, 2009
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 person on behalf of the Registrant and in the capacities and
on the date indicated.
The Berkshire Funds
By: /s/ Malcolm R. Fobes III
--------------------
Malcolm R. Fobes III
President, Treasurer and Chief Financial Officer
Date: March 2, 2009
THE BERKSHIRE FUNDS
EXHIBIT INDEX FOR FORM N-CSR
AS FILED ON MARCH 2, 2009
EXHIBIT INDEX
A. Certification pursuant to Section 302
of the Sarbanes-Oxley Act of 2002................................EX.99.CERT
B. Certification pursuant to Section 906
of the Sarbanes-Oxley Act of 2002............................EX.99.906.CERT