As filed with the Securities and Exchange Commission on August 30, 2010
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==============================================================================
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
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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)
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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
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Date of fiscal year end: December 31, 2010
Date of reporting period: June 30, 2010
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 stock-
holders 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
[GRAPHIC OMITTED]
THE BERKSHIRE FUNDS
2010 Semi-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 infor-
mation about the Berkshire 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.
*
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FUND OVERVIEW - BERKSHIRE FOCUS FUND
June 30, 2010 (unaudited)
PERFORMANCE COMPARISON (Average annual total returns as of 6/30/10)
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YTD(1) 1 Year 3 Year 5 Year 10 Year Since Inception(2)
BERKSHIRE FOCUS FUND 2.08% 31.55% 1.64% 8.09% -16.21% -0.31%
- -----------------------------------------------------------------------------------------
Dow Jones Industrial Average -5.00% 18.93% -7.36% 1.66% 1.69% 4.13%
S&P 500(R) Index -6.65% 14.43% -9.79% -0.79% -1.59% 2.95%
Nasdaq Composite Index -6.62% 16.04% -5.88% 1.39% -5.50% 3.57%
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NET ASSETS
- ---------------------------------------
6/30/10 $15.76 Million
NET ASSET VALUE
- ---------------------------------------
Net Asset Value Per Share $8.84
TOP TEN HOLDINGS(3)
- -------------------------------------------------
Apple, Inc. 22.48%
Chipotle Mexican Grill, Inc. (Class A) 8.00%
Salesforce.com, Inc. 7.04%
Baidu, Inc. - ADR 5.94%
NetApp, Inc. 5.00%
F5 Networks, Inc. 4.96%
Netflix, Inc. 4.90%
Akamai Technologies, Inc. 4.86%
Skyworks Solutions, Inc. 4.83%
SanDisk Corp. 4.80%
GROWTH OF $10,000(4)
- ---------------------------------------------
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
JAN-09 11,326 5,205
FEB-09 10,120 5,096
MAR-09 11,007 5,781
APR-09 12,060 6,889
MAY-09 12,735 7,247
JUN-09 12,760 7,302
JUL-09 13,725 8,019
AUG-09 14,221 8,106
SEP-09 14,751 8,627
OCT-09 14,477 8,247
NOV-09 15,346 8,910
DEC-09 15,642 9,410
JAN-10 15,079 8,399
FEB-10 15,546 8,986
MAR-10 16,485 9,747
APR-10 16,745 10,290
MAY-10 15,408 10,138
JUN-10 14,601 9,605
SECTOR ALLOCATION(5)
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Internet Software & Services 25.98%
Computer Hardware 22.48%
Semiconductors 19.00%
Restaurants 8.00%
Software 7.29%
Storage Devices 5.00%
Investment Banking 4.75%
Networking & Telecom Equipment 4.22%
Diversified Banks 3.30%
Exchange Traded Funds 0.01%
(1) Not annualized for periods of less than one full year.
(2) The Fund's inception date was July 1, 1997.
(3) Stated as a percentage of total net assets as of 6/30/10. 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.
(4) 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.
(5) Stated as a percentage of total net assets as of 6/30/10. 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
*
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BERKSHIRE FOCUS FUND
Performance and Portfolio Discussion
6/30/2010
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*
2
*
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LETTER TO THE SHAREHOLDERS
[PHOTO]
Dear Fellow Shareholders,
For the six month period ended June 30, 2010, the Berkshire Focus Fund outper-
formed its primary benchmark index. The Berkshire Focus Fund generated a total
return of +2.08% while the S&P 500(R) Index - which we consider to be the
Fund's primary benchmark index - had a total return of -6.65% over the same
period. For comparative purposes, the Dow Jones Industrial Average posted a
return of -5.00% and the Nasdaq Composite Index generated a return of -6.62%
for the period ended June 30, 2010. Please see the Fund Overview section and
the accompanying financial statements for more detailed information about the
Fund's longer-term performance. All return data includes reinvested dividends
but do not reflect the impact of taxes.
Stock markets stumbled out of the gate in early 2010 as investors who were
unable to shake-off persistent worries about the sustainability of U.S. eco-
nomic growth, decided to lock in their strong gains from the previous year.
Labor markets were anemic and the U.S. unemployment rate remained stubbornly
weak at 9.7% through the end of March. The housing market continued to sput-
ter, despite government incentives for homebuyers, and the fading effects of
government stimulus coupled with large U.S. fiscal deficits - all remained key
concerns for investors. However, despite investor angst, the broad-market
equity indices staged a strong rally that lasted into the end of the quarter.
The rally was buoyed in large part by better-than-expected corporate earnings
reports which showed a tremendous recovery in earnings; a direct result of
U.S. corporations focus on tight cost controls instead of increased spending
and hiring. Also fueling the stock market's advance was an expansion of U.S.
gross domestic product, the value of all goods and services produced, which
grew at an annualized rate of 3.7% from January to March.
Early in the second quarter, equity markets resumed their upward trajectory
driven by robust corporate earnings reports and investors increased appetite
for risk. The end of April however, marked the cyclical peak of the markets as
economic growth expectations were downgraded and worries about a "double-dip"
recession were re-kindled. Negative investor sentiment was further aggravated
by a maelstrom of other developments - including a "flash crash" in the U.S.
equity markets, a major oil spill in the Gulf of Mexico, reduced stimulus and
monetary tightening in China, regulatory reform of the financial services
industry, reduced sovereign creditworthiness in Europe, Goldman Sachs coming
under fire from the SEC, the specter of higher taxes as the Bush tax cuts
expire - all proved too much for the stock markets to overcome. Not surpris-
ingly, investors faced with a seemingly endless stream of negative events,
finally succumbed to a crisis of confidence igniting several broad market
sell-offs that would last until the end of the quarter.
The Fund advanced against this backdrop led by strong gains in some of our
largest investments - Apple (AAPL), Salesforce.com (CRM), Baidu (BIDU) and
Netflix ( NFLX). Other contributors to the Fund's outperformance during the
period were Chipotle Mexican Grill (CMG), F5 Networks (FFIV) and VMware (VMW).
Meanwhile, our investments in Priceline.com (PCLN), Google (GOOG) and Goldman
Sachs (GS) temporarily worked against us. Some new additions to the portfolio
during the second half of the year included Acme Packet (APKT), Akamai Tech-
nologies (AKAM), Cirrus Logic (CRUS) and Citigroup (C).
As always, we thank you for your confidence and continued investment in the
Berkshire Funds.
/s/ Malcolm R. Fobes III
Malcolm R. Fobes III
Chairman and Chief Investment Officer
3
*
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FINANCIAL STATEMENTS
(unaudited)
6/30/2010
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*
4
*
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PORTFOLIO OF INVESTMENTS - BERKSHIRE FOCUS FUND
June 30, 2010 (unaudited)
Shares Value
COMMON STOCKS - 100.02% $ 15,760,719
=========================================================
(Cost $16,478,790)
COMPUTER HARDWARE - 22.48% 3,542,800
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14,085 Apple, Inc.* 3,542,800
DIVERSIFIED BANKS - 3.30% 520,113
---------------------------------------------------------
3,104 Bank of America Corp. 44,605
126,465 Citigroup, Inc.* 475,508
INTERNET SOFTWARE & SERVICES - 25.98% 4,093,831
---------------------------------------------------------
18,860 Akamai Technologies, Inc.* 765,150
10 Amazon.com, Inc.* 1,093
13,750 Baidu, Inc. - ADR* 936,100
1,565 Ctrip.com International Ltd. - ADR* 58,781
10 Google, Inc. (Class A)* 4,450
7,105 Netflix, Inc.* 771,958
2,530 Priceline.com, Inc.* 446,646
12,930 Salesforce.com, Inc.* 1,109,653
INVESTMENT BANKING - 4.75% 748,239
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5,700 The Goldman Sachs Group, Inc. 748,239
NETWORKING & TELECOM EQUIPMENT - 4.22% 665,587
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24,745 Acme Packet, Inc.* 665,146
10 Cisco Systems, Inc.* 213
10 Juniper Networks, Inc.* 228
RESTAURANTS - 8.00% 1,260,020
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9,210 Chipotle Mexican Grill, Inc. (Class A)* 1,260,020
SEMICONDUCTORS - 19.00% 2,992,923
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10 Broadcom Corp. (Class A)* 330
47,000 Cirrus Logic, Inc.* 743,070
55 Intel Corp. 1,070
15 Marvell Technology Group Ltd.* 236
34,105 OmniVision Technologies, Inc.* 731,211
17,980 SanDisk Corp.* 756,419
45,300 Skyworks Solutions, Inc.* 760,587
SOFTWARE - 7.29% 1,149,219
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11,395 F5 Networks, Inc.* 781,355
10 Microsoft Corp. 230
15,300 SuccessFactors, Inc.* 319,127
775 VMware, Inc.* 48,507
STORAGE DEVICES - 5.00% 787,987
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21,120 NetApp, Inc.* 787,987
EXCHANGE TRADED FUNDS - 0.01% 1,459
=========================================================
(Cost $1,544)
10 PowerShares QQQ 427
10 SPDR S&P 500 ETF Trust 1,032
CASH EQUIVALENT - 0.17% 26,452
=========================================================
(Cost $26,452)
26,452 Fidelity Money Market Portfolio
Select Class (0.20%)** 26,452
TOTAL INVESTMENT SECURITIES - 100.20% 15,788,630
=========================================================
(Cost $16,506,786)
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.20%) (31,651)
---------------------------------------------------------
NET ASSETS - 100.00% $ 15,756,979
=========================================================
Equivalent to $8.84 per share
*Non-income producing
**Variable Rate Security: The rate shown represents the 7-day yield
as of 6/30/10
ADR - American Depositary Receipt
(See accompanying notes to financial statements)
5
*
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STATEMENT OF ASSETS AND LIABILITIES
June 30, 2010 (unaudited)
BERKSHIRE
FOCUS FUND
ASSETS
- ---------------------------------------------------------------------
Investment securities:
At cost $ 16,506,786
=============
At value $ 15,788,630
Receivable for securities sold 3,754,824
Dividends and interest receivable 12
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TOTAL ASSETS 19,543,466
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LIABILITIES
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Payable for securities purchased 3,756,611
Payable for capital shares redeemed 1,976
Payable to affiliate (Note 5) 27,853
Accrued expenses 47
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TOTAL LIABILITIES 3,786,487
-------------
NET ASSETS $ 15,756,979
=====================================================================
Net assets consist of:
Paid in capital $ 87,937,065
Accumulated net realized losses
from security transactions (71,461,930)
Net unrealized depreciation on investments (718,156)
-------------
NET ASSETS $ 15,756,979
=============
Shares of beneficial interest issued and outstanding
(unlimited number of shares authorized, without
par value) 1,782,603
=============
Net asset value and offering price per share $ 8.84
=============
Minimum redemption price per share* $ 8.66
=============
*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
*
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STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2010 (unaudited)
BERKSHIRE
FOCUS FUND
INVESTMENT INCOME
- ---------------------------------------------------------------------
Interest $ 41
Dividends 19,330
-------------
TOTAL INVESTMENT INCOME 19,371
-------------
EXPENSES
- ---------------------------------------------------------------------
Investment advisory fees (Note 5) 127,858
Administrative fees (Note 5) 42,605
Interest expense 474
-------------
TOTAL EXPENSES 170,937
-------------
NET INVESTMENT LOSS (151,566)
- ---------------------------------------------------------------------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS
- ---------------------------------------------------------------------
Net realized gains from security transactions 1,900,624
Net change in unrealized appreciation
(depreciation) on investments (1,467,246)
------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 433,378
------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 281,812
=============
(see accompanying notes to financial statements)
7
*
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STATEMENTS OF CHANGES IN NET ASSETS - BERKSHIRE FOCUS FUND
For the Periods Ended June 30, 2010 (unaudited) and December 31, 2009
Six Months Year
Ended Ended
6/30/10 12/31/09
FROM OPERATIONS:
- ----------------------------------------------------------------------------------------------
Net investment loss $ (151,566) $ (203,486)
Net realized gains from security transactions 1,900,624 3,060,256
Net change in unrealized appreciation
(depreciation) on investments (1,467,246) 4,580,839
--------------------------------
Net increase in net assets from operations 281,812 7,437,609
--------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
- ----------------------------------------------------------------------------------------------
Proceeds from shares sold 1,253,033 9,129,841
Proceeds from redemption fees (Note 6) 6,719 23,714
Payments for shares redeemed (4,603,770) (5,175,787)
--------------------------------
Net increase (decrease) in net assets from
capital share transactions (3,344,018) 3,977,768
--------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (3,062,206) 11,415,377
- ----------------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------------
Beginning of period 18,819,185 7,403,808
--------------------------------
End of period $ 15,756,979 $ 18,819,185
================================
CAPITAL SHARE ACTIVITY:
- ----------------------------------------------------------------------------------------------
Shares sold 139,755 1,348,042
Shares redeemed (529,629) (746,190)
--------------------------------
Net increase (decrease) in shares outstanding (389,874) 601,852
Shares outstanding, beginning of period 2,172,477 1,570,625
--------------------------------
Shares outstanding, end of period 1,782,603 2,172,477
================================
(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
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
6/30/10 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05
(unaudited)
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.66 $ 4.71 $ 11.03 $ 7.93 $ 7.61 $ 6.59
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment loss(A) (0.08) (0.09) (0.16) (0.15) (0.02) (0.14)
Net realized and unrealized gains
(losses) on investments 0.26 4.03 (6.17) 3.25 0.34 1.16
-------------------------------------------------------------------------------------
Total from investment operations 0.18 3.94 (6.33) 3.10 0.32 1.02
-------------------------------------------------------------------------------------
Proceeds from redemption fees 0.00(B) 0.01 0.01 - - -
-------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 8.84 $ 8.66 $ 4.71 $ 11.03 $ 7.93 $ 7.61
=================================================================================================================================
TOTAL RETURN(C) 2.08%(Z) 83.86% (57.30%) 39.09% 4.20% 15.48%
=================================================================================================================================
SUPPLEMENTAL DATA AND RATIOS:
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (thousands) $ 15,757 $ 18,819 $ 7,404 $ 21,525 $ 14,431 $ 22,291
Ratio of expenses to average net assets 2.00%(I)(Y) 2.00%(H) 2.00%(G) 2.00%(F) 2.00%(E) 2.00%(D)
Ratio of net investment loss to
average net assets (1.78%)(Y) (1.50%) (1.68%) (1.94%) (0.21%) (1.99%)
Portfolio turnover rate(X) 429.3%(Z) 833.0% 539.9% 446.6% 386.2% 284.1%
(A) Net investment loss per share is calculated using ending balances prior to
consideration or adjustment for permanent book and tax differences.
(B) Amount is less than $0.01 per share.
(C) Total return represents the rate that the investor would have earned or (lost) on an
investment in the Fund assuming reinvestment of dividends.
(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) For the year ended December 31, 2009 the ratio of expenses to average net assets excludes
interest expense. The ratio including interest expense would be 2.00%.
(I) For the six months ended June 30, 2010 the ratio of expenses to average net assets excludes
interest expense. The ratio including interest expense would be 2.01%.
(X) Portfolio turnover is greater than most funds due to the investment style of the Fund.
(Y) Annualized for periods of less than one full year.
(Z) Not annualized for periods of less than one full year.
(see accompanying notes to financial statements)
9
*
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NOTES TO FINANCIAL STATEMENTS
June 30, 2010 (unaudited)
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 t he 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.
In accordance with U.S. generally accepted accounting principles ("GAAP"),
fair value is defined as the price that the Fund would receive to sell an
investment or pay to transfer a liability in an orderly transaction with an
independent buyer in the principal market, or in the absence of a principal
market the most advantageous market for the investment or liability. GAAP
establishes a three-tier hierarchy to distinguish between (1) inputs that
reflect the assumptions market participants would use in pricing an asset or
liability developed based on market data obtained from sources independent of
the reporting entity (observable inputs) and (2) inputs that reflect the
reporting entity's own assumptions about the assumptions market participants
would use in pricing an asset or liability developed based on the best
information available in the circumstances (unobservable inputs) and to estab-
lish classification of fair value measurements for disclosure purposes.
Various inputs are used in determining the value of the Fund's investments.
The inputs are summarized in the three broad levels listed 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).
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
10
*
-------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 2010 (unaudited)
The following table summarizes the valuation of the Fund's investments by the
above fair value hierarchy levels as of June 30, 2010:
Level 1 Level 2 Level 3 Total
- ------------------------------------------------------------------------------
Common Stocks
Internet Software & Services $ 4,093,831 - - $ 4,093,831
Computer Hardware 3,542,800 - - 3,542,800
Semiconductors 2,992,923 - - 2,992,923
Restaurants 1,260,020 - - 1,260,020
Software 1,149,219 - - 1,149,219
Storage Devices 787,987 - - 787,987
Investment Banking 748,239 - - 748,239
Networking & Telecom Equipment 665,587 - - 665,587
Diversified Banks 520,113 - - 520,113
------------------------------------------
Total Common Stocks 15,760,719 - - 15,760,719
Exchange Traded Funds 1,459 - - 1,459
Cash Equivalent 26,452 - - 26,452
------------------------------------------
Total Investments $ 15,788,630 - - $ 15,788,630
- ------------------------------------------------------------------------------
In January 2010, FASB issued Accounting Standards Update No. 2010-06, Improv-
ing Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06
requires new disclosures regarding transfers in and out of Levels 1 and 2
(effective for interim and annual periods beginning after December 15, 2009),
as well as additional details regarding Level 3 transaction activity (effect-
ive for interim and annual periods beginning after December 15, 2010). There
were no significant transfers into or out of Level 1 and Level 2 fair value
measurements during the reporting period, as compared to their classification
from the most recent annual report.
Subsequent events evaluation - In preparing these financial statements, the
Fund has evaluated events and transactions for potential recognition or dis-
closure through the date the financial statements were issued and noted no
items requiring adjustments of the financial statements or additional disclos-
ures.
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 GAAP.
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
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual results
could differ from those estimates.
11
*
-------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 2010 (unaudited)
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, 2009 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 year, 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 2006.
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
permanent 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.
3. Investment Transactions
Purchases and sales of investment securities (excluding short-term instru-
ments) for the six months ended June 30, 2010 were $72,799,961 and
$76,210,806, respectively. There were no purchases or sales of U.S. Government
securities for the Fund.
4. Tax Information
As of December 31, 2009, the components of accumulated earnings (deficit) on a
tax basis were as follows:
Federal income tax cost $ 18,118,261
==================================================
Gross unrealized appreciation $ 915,384
Gross unrealized depreciation (179,719)
--------------------------------------------------
Net unrealized appreciation 735,665
--------------------------------------------------
Undistributed ordinary income 0
--------------------------------------------------
Accumulated losses (73,349,129)
--------------------------------------------------
Total accumulated losses $ (72,613,464)
==================================================
The cost basis of investments for tax and financial reporting purposes differs
primarily due to the deferral of capital losses from wash sales.
12
*
-------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 2010 (unaudited)
There were no distributions paid during the six months ended June 30, 2010 or
the year ended December 31, 2009.
At December 31, 2009, 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
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.
5. 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 not paid any Trustee fees and expenses directly by
Berkshire Capital during the six months ended June 30, 2010.
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 well as facilities furnished and
expenses assumed. For these services, Berkshire Capital receives a fee at the
annual rate of 0.50% of the Fund's average 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 percentage of the Fund's daily net
assets and is accrued each calendar day (including weekends and holidays).
For the six months ended June 30, 2010, Berkshire Capital was paid an
investment advisory fee of $127,858 and an administration fee of $42,605 from
the Fund. The amount due to Berkshire Capital for these fees at June 30, 2010
totaled $27,853.
13
*
-------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 2010 (unaudited)
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 six months ended June
30, 2010 proceeds from redemption fees were $6,719.
7. Beneficial Ownership
The beneficial ownership, either directly or indirectly, of more than 25% of
the voting securities of a fund creates a presumption of control of the fund,
under Section 2(a)(9) of the Investment Company Act of 1940. At June 30, 2010
Charles Schwab & Co. owned 30.67% of the Fund.
14
*
-------------------------------
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 January 1, 2010 and held
through June 30, 2010.
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%
15
*
-------------------------------
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 January 1, 2010 to
January 1, 2010 June 30, 2010 June 30, 2010
--------------- ------------- ------------------
Actual $1,000.00 $1,020.80 $10.07
Hypothetical $1,000.00 $1,014.83 $10.04
(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 181/365
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 most recent
twelve month period ended June 30, 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).
16
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
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
Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable for semi-annual reports.
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.
Not applicable.
(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: August 30, 2010
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: August 30, 2010
THE BERKSHIRE FUNDS
EXHIBIT INDEX FOR FORM N-CSR
AS FILED ON AUGUST 30, 2010
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