<PAGE>
STONEBRIDGE GROWTH FUND, INC.
OFFICERS AND DIRECTORS
Richard C. Barrett, CHAIRMAN, BOARD OF DIRECTORS
AND VICE PRESIDENT
Debra L. Newman, PRESIDENT AND TREASURER
Craig B. Burger, VICE PRESIDENT
Chad S. Christensen, VICE PRESIDENT STONEBRIDGE
James V. Hyatt, SECRETARY GROWTH FUND, INC.
Selvyn B. Bleifer, DIRECTOR
Marvin Freedman, DIRECTOR
Charles F. Haas, DIRECTOR
William H. Taylor, DIRECTOR
INVESTMENT ADVISER
STONEBRIDGE CAPITAL MANAGEMENT,
INCORPORATED
1801 Century Park East, Suite 1800
Los Angeles, California 90067
ADMINISTRATOR AND DISTRIBUTOR
ALPS MUTUAL FUNDS SERVICES, INC.
370 Seventeenth Street, Suite 3100
Denver, Colorado 80202
TRANSFER AGENT
NATIONAL FINANCIAL DATA SERVICES
330 W. 9th Street, 4th Floor,
Kansas City, Missouri 64105
CUSTODIAN
FIFTH THIRD BANK
Fifth Third Center,
Cincinnati, Ohio 45263
LEGAL COUNSEL
PAUL, HASTINGS, JANOFSKY & WALKER
555 S. Flower Street, 23rd Floor
Los Angeles, California 90071
INDEPENDENT AUDITORS
HEIN + ASSOCIATES LLP ANNUAL REPORT
717 Seventeenth Street, Suite 1600 FOR THE YEAR ENDED
Denver, Colorado 80202 OCTOBER 31, 1998
This report and its financial statements are submitted for the general
information of the shareholders of the Fund. The report is not authorized for
distribution to prospective investors in the Fund unless preceded or accompanied
by a prospectus.
<PAGE>
LETTER TO SHAREHOLDERS
I REORGANIZATION
Thanks to the support of our shareholders, we were able to accomplish a major
reorganization of the corporate form for each of the two Stonebridge Funds in
1998. Since inception, each fund has operated as a separate corporation. At
the 1998 annual meeting, shareholders voted to combine both funds into two
separate series of a single Trust effective November 1, 1998. The Stonebridge
Funds Trust includes the Stonebridge Aggressive Growth Fund and the Stonebridge
Growth Fund. The efficiencies and reduced costs of the Trust structure should
serve shareholders both currently and well into the future. The information in
this report corresponds to the period up to the Fund's reorganization.
II THE YEAR IN REVIEW
1998 began with a continuation of the upward trend in the U.S. stock market.
However, global turmoil in Asia, Russia, and Brazil, together with a slowing in
U.S. corporate earnings and fears about hedge fund leverage, were sufficient to
trigger a major decline in equity prices over the summer. Investors have taken
recent interest rate cuts by the Federal Reserve and many other central banks as
a signal that economic and financial risks have diminished dramatically and the
U.S. equity markets have recovered to prior highs.
In an environment where there have been wide swings in investor sentiment, once
again the large capitalization stocks have been viewed as "safe havens" and have
significantly outperformed the broader market. Small and mid capitalization
stocks under performed again this year, so far. Given the continuing
uncertainties in the global economy, this trend could persist for several more
quarters.
The domestic economy continues to benefit from low interest rates, nominal
inflation, low unemployment and improved productivity in the corporate sector.
However, extended equity valuations, slowing corporate earnings growth and
political uncertainty weigh as potential negative influences for the coming
year.
III STONEBRIDGE GROWTH FUND
1998 proved to be a volatile and difficult year for the Stonebridge Growth Fund.
For the calendar year as of October 31, 1998, the Growth Fund posted a return of
- -4.47%. This compared to a return of +14.63% for the S&P 500 and +6.29% for the
New York Stock Exchange Composite Index (NYSE). This broad range of returns was
fairly typical of the year.
1
<PAGE>
CHANGE IN VALUE OF A $10,000 INVESTMENT IN STONEBRIDGE GROWTH FUND, INC.
VS. S&P 500 WITH INCOME AND THE NYSE COMPOSITE INDEX
FROM NOVEMBER 1, 1988 TO OCTOBER 31, 1998
[GRAPH]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Average Annual Total Return
Periods Ended October 31, 1998
- --------------------------------------------------------------------------------
<C> <C> <C>
1 Year 5 Year 10 Year
- --------------------------------------------------------------------------------
(2.04)% 11.96% 11.19%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Average Annual Total Return
Periods Ended September 30, 1998
- --------------------------------------------------------------------------------
<C> <C> <C>
1 Year 5 Year 10 Year
- --------------------------------------------------------------------------------
(8.41)% 11.71% 11.13%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Final Portfolio Values
Period Ended October 31, 1998
- --------------------------------------------------------------------------------
<S> <C>
Stonebridge Growth Fund $28,891
- --------------------------------------------------------------------------------
S&P 500 $51,785
- --------------------------------------------------------------------------------
NYSE Composite $34,622
- --------------------------------------------------------------------------------
</TABLE>
DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NOT INDICATIVE OF FUTURE RESULTS.
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE AND AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. DUE TO THE REORGANIZATION OF THE FUND, THE FISCAL
YEAR END IS NOW OCTOBER 31ST.
The uncertain environment for corporate earnings coupled with a slowdown in
Asian economies impacted the consumer cyclical and capital goods stocks most
strongly in the Fund. Many of these companies, such as Boeing Co., Deere &
Co., and Vicor Corporation, affected performance negatively in 1998. We have
acted to shift assets out of these sectors and expanded our exposure in areas
such as technology, healthcare and finance.
2
<PAGE>
GROWTH FUND SECTOR ALLOCATION
as of October 31, 1998
[CHART]
<TABLE>
<CAPTION>
<S> <C>
Basic Materials 4.5%
Capital Goods 10.4%
Communication Services 1.8%
Consumer Cyclicals 4.6%
Consumer Staples 6.6%
Energy 4.0%
Financial 13.3%
Foreign 10.3%
Healthcare 8.6%
Technology 14.1%
U.S. Government Agency Obligations 18.1%
Mutual Funds 3.7%
</TABLE>
We established new positions in such companies as IBM Corp. (TECHNOLOGY), SBC
Communications (COMMUNICATION SERVICES), and Merck & Co. (HEALTHCARE). We also
added to existing positions such as Chase Manhattan (FINANCE), and Du Pont E I
De Nemours (BASIC MATERIALS). While we expect the U.S. equity markets to remain
volatile going forward, we are cautiously optimistic about the prospects for
stocks, given the relatively favorable economic environment that currently
exists.
Thank you for your investment in the Stonebridge Growth Fund. Should you have
questions or concerns, please call a Shareholder Services Representative at
1-800-639-3935.
Sincerely,
/s/ Richard C. Barrett
Richard C. Barrett
President
Stonebridge Capital Management, Inc.
3
<PAGE>
DEFINITION OF INDICES
The STANDARD & POOR'S 500 INDEX (S&P 500) is an unmanaged index containing
common stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the U.S. stock market. The
index return reflects the reinvestment of income dividends and capital gain
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing.
The NEW YORK STOCK EXCHANGE COMPOSITE INDEX (NYSE) is an unmanaged market
weighted index comprising all equity issues listed in the New York Stock
Exchange. This is a total return index which reflects the reinvestment of
income dividends and capital gain distributions, if any, but does not reflect
fees, brokerage commissions, or other expenses of investing.
HISTORICAL RECORD
<TABLE>
<CAPTION>
PER SHARE
-----------------------------------------
DIVIDENDS DISTRIBUTIONS
NET FROM NET FROM
ASSET INVESTMENT CAPITAL
YEAR ENDED NOVEMBER 30, VALUE INCOME GAINS
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1989 . . . . . . . . . . . . . . . . . . $ 14.18 $ .13 $ .50
1990 . . . . . . . . . . . . . . . . . . $ 12.55 $ .21 $ 1.48
1991 . . . . . . . . . . . . . . . . . . $ 14.85 $ .22 $ .33
1992 . . . . . . . . . . . . . . . . . . $ 14.78 $ .21 $ 1.10
1993 . . . . . . . . . . . . . . . . . . $ 12.62 $ .15 $ 1.88
1994 . . . . . . . . . . . . . . . . . . $ 12.61 $ .07 $ .30
1995 . . . . . . . . . . . . . . . . . . $ 14.36 $ .07 $ .69
1996 . . . . . . . . . . . . . . . . . . $ 16.56 $ .17 $ .56
1997 . . . . . . . . . . . . . . . . . . $ 17.69 $ .28 $ 1.51
1998*. . . . . . . . . . . . . . . . . . $ 14.32 $ .02 $ 3.28
</TABLE>
*FOR THE ELEVEN MONTHS ENDED OCTOBER 31, 1998 DUE TO THE REORGANIZATION OF THE
FUND.
4
<PAGE>
INDEPENDENT AUDITOR'S REPORT
BOARD OF DIRECTORS AND SHAREHOLDERS
STONEBRIDGE GROWTH FUND, INC.
LOS ANGELES, CALIFORNIA
We have audited the accompanying statement of assets and liabilities of
Stonebridge Growth Fund, Inc., (the "Fund") including the statement of
investments, as of October 31, 1998, the related statement of operations for the
eleven months then ended, the statements of changes in net assets for the eleven
months ended October 31, 1998 and the year ended November 30, 1997, and the
selected per share data and ratios set forth under the caption "Financial
Highlights" for each of the five periods in the period ended October 31, 1998.
These financial statements and per share data and ratios are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and per share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and
ratios referred to in the first sentence above present fairly, in all material
respects, the financial position of Stonebridge Growth Fund, Inc. at October 31,
1998, the results of its operations for the eleven months then ended, the
changes in its net assets for the eleven months ended October 31, 1998 and the
year ended November 30, 1997, and the selected per share data and ratios for
each of the five periods in the periods then ended, in conformity with generally
accepted accounting principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
December 14, 1998
5
<PAGE>
STONEBRIDGE GROWTH FUND, INC
STATEMENT OF INVESTMENTS
OCTOBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (79.9%)
BASIC MATERIALS (4.6%)
CHEMICALS (2.2%)
Du Pont E I De Nemours Co . . . . . . . . . . . 15,000 $ 862,500
----------
CHEMICALS - SPECIALTY (2.4%)
Sigma Aldrich Corp. . . . . . . . . . . . . . . 30,000 927,188
----------
TOTAL BASIC MATERIALS . . . . . . . . . . . . . 1,789,688
----------
----------
CAPITAL GOODS (10.6%)
AEROSPACE & DEFENSE (1.2%)
Boeing Co . . . . . . . . . . . . . . . . . . . 12,000 450,000
----------
ELECTRICAL EQUIPMENT (3.7%)
Emerson Electric Co . . . . . . . . . . . . . . 20,000 1,320,000
Vicor Corp**. . . . . . . . . . . . . . . . . . 13,000 121,875
----------
1,441,875
----------
MACHINERY (2.4%)
Dover Corp. . . . . . . . . . . . . . . . . . . 30,000 952,500
----------
MANUFACTURING (3.3%)
Illinois Tool Works Inc . . . . . . . . . . . . 20,000 1,282,500
----------
TOTAL CAPITAL GOODS . . . . . . . . . . . . . . 4,126,875
----------
COMMUNICATION SERVICES (1.8%)
TELEPHONE (1.8%)
SBC Communications Inc. . . . . . . . . . . . . 15,000 694,688
----------
TOTAL COMMUNICATION SERVICES. . . . . . . . . . 694,688
----------
CONSUMER CYCLICALS (4.7%)
BUILDING MATERIALS & HOME BUILDERS (2.8%)
Clayton Homes . . . . . . . . . . . . . . . . . 16,200 250,088
Valspar Corp. . . . . . . . . . . . . . . . . . 30,000 841,875
----------
1,091,963
----------
LEISURE & ENTERTAINMENT (1.9%)
Mattel Inc. . . . . . . . . . . . . . . . . . . 20,000 717,500
----------
TOTAL CONSUMER CYCLICALS. . . . . . . . . . . . 1,809,463
----------
CONSUMER STAPLES (6.8%)
BEVERAGES (2.2%)
Pepsico Inc . . . . . . . . . . . . . . . . . . 25,000 843,750
----------
BROADCAST MEDIA & ENTERTAINMENT (2.9%)
Time Warner Inc . . . . . . . . . . . . . . . . 12,000 1,113,750
----------
</TABLE>
6
<PAGE>
STONEBRIDGE GROWTH FUND, INC
STATEMENT OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (CONTINUED)
CONSUMER STAPLES (CONTINUED)
PERSONAL CARE (1.7%)
Gillette Co . . . . . . . . . . . . . . . . . . 15,000 $ 674,062
----------
TOTAL CONSUMER STAPLES. . . . . . . . . . . . . 2,631,562
----------
ENERGY (4.1%)
OIL - INTERNATIONAL (4.1%)
Chevron Corp. . . . . . . . . . . . . . . . . . 10,000 815,000
Mobil Corp. . . . . . . . . . . . . . . . . . . 10,000 756,875
----------
TOTAL ENERGY. . . . . . . . . . . . . . . . . . 1,571,875
----------
FINANCIAL (13.6%)
BANKS - MAJOR REGIONAL (2.9%)
Chase Manhattan Corp. . . . . . . . . . . . . . 20,000 1,136,250
----------
BROKERAGE & DIVERSE FINANCIAL SERVICES (5.9%)
American Express Co . . . . . . . . . . . . . . 10,000 883,750
Fannie Mae. . . . . . . . . . . . . . . . . . . 20,000 1,416,250
----------
2,300,000
----------
INSURANCE - MULTILINE & BROKERAGE (2.5%)
American International Group. . . . . . . . . . 11,250 959,063
----------
INSURANCE PROPERTY (2.3%)
General RE Corp . . . . . . . . . . . . . . . . 4,000 878,750
----------
TOTAL FINANCIAL . . . . . . . . . . . . . . . . 5,274,063
----------
FOREIGN STOCKS (10.5%)
ABB AG ADR. . . . . . . . . . . . . . . . . . . 7,000 838,495
Nestle S A Sponsored ADR. . . . . . . . . . . . 12,000 1,276,130
Roche Holdings Ltd Sponsored ADR. . . . . . . . 10,000 1,166,833
Royal Dutch Petroleum . . . . . . . . . . . . . 16,000 788,000
----------
TOTAL FOREIGN STOCKS. . . . . . . . . . . . . . 4,069,458
----------
HEALTHCARE (8.8%)
HEALTHCARE - DIVERSE (7.1%)
Abbott Labs . . . . . . . . . . . . . . . . . . 35,000 1,642,812
Bristol Myers Squibb Co . . . . . . . . . . . . 10,000 1,105,625
----------
2,748,437
----------
MAJOR DRUGS (1.7%)
Merck & Co Inc. . . . . . . . . . . . . . . . . 5,000 676,250
----------
TOTAL HEALTHCARE. . . . . . . . . . . . . . . . 3,424,687
----------
TECHNOLOGY (14.4%)
COMMUNICATION EQUIPMENT (1.2%)
Motorola Inc. . . . . . . . . . . . . . . . . . 9,000 468,000
----------
</TABLE>
7
<PAGE>
STONEBRIDGE GROWTH FUND, INC
STATEMENT OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (CONTINUED)
TECHNOLOGY (CONTINUED)
COMPUTER HARDWARE & PERIPHERAL (3.6%)
Lexmark International Group Class A** . . . . . . . . . . . . . 20,000 $ 1,398,750
-----------
COMPUTER SOFTWARE & SERVICES (4.4%)
Computer Associates International Inc . . . . . . . . . . . . . 25,000 984,375
International Business Machines Corp. . . . . . . . . . . . . . 5,000 742,187
-----------
1,726,562
-----------
ELECTRONICS - INSTRUMENTS & DISTRIBUTION (2.9%)
W.W. Grainger Inc . . . . . . . . . . . . . . . . . . . . . . . 24,000 1,105,500
-----------
SEMICONDUCTORS (2.3%)
Intel Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 891,875
-----------
TOTAL TECHNOLOGY. . . . . . . . . . . . . . . . . . . . . . . . 5,590,687
-----------
TOTAL COMMON STOCKS(79.9%)
(Cost $18,753,399). . . . . . . . . . . . . . . . . . . . . . . 30,983,046
-----------
WARRANTS (0.0%)
Coram Healthcare Corp . . . . . . . . . . . . . . . . . . . . . 495 0
(Cost $0) -----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (18.5%)
Federal Home Loan Bank Discount Note 4.29%, 11/06/98. . . . . . 1,000,000 999,285
Federal Home Loan Bank Discount Note 4.59%, 12/16/98. . . . . . 1,000,000 994,163
Federal Home Loan Bank Discount Note 4.51%, 12/23/98. . . . . . 1,000,000 993,402
Federal Home Loan Bank Discount Note 4.54%, 01/20/99. . . . . . 800,000 792,114
Federal Mortgage Corporation Discount Note 4.91%, 11/02/98. . . 800,000 799,782
Federal Mortgage Corporation Discount Note 4.97%, 11/19/98. . . 1,000,000 997,386
Federal Mortgage Corporation Discount Note 4.53%, 11/30/98. . . 1,000,000 996,242
Federal National Mortgage Association 4.55%, 12/09/98 . . . . . 600,000 597,060
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS. . . . . . . . . . . . 7,169,434
(Cost $7,169,434) -----------
MUTUAL FUND (MONEY MARKET INVESTMENTS) (3.8%)
Fountain Square Money Market. . . . . . . . . . . . . . . . . . 1,461,613
(Cost $1,461,613) -----------
TOTAL INVESTMENTS (102.2%)
(Cost $27,384,446). . . . . . . . . . . . . . . . . . . . . . . $39,614,093
OTHER LIABILITIES IN EXCESS OF ASSETS (-2.2%). . . . . . . . . . . . . (840,393)
-----------
NET ASSETS (100%). . . . . . . . . . . . . . . . . . . . . . . . . . . $38,773,700
-----------
-----------
</TABLE>
**Securities on which no cash dividends were paid during the preceding eleven
(11) months.
The accompanying notes to financial statements are an integral part of the
financial statements.
8
<PAGE>
STONEBRIDGE GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost - see below) . . . . . . . . . $ 39,614,093
Dividends and interest receivable. . . . . . . . . . . . . 26,378
Receivable for Capital Stock sold. . . . . . . . . . . . . 700
Deferred Expense Subsidy** (Note 3). . . . . . . . . . . . 4,729
Prepaid Bond Expenses. . . . . . . . . . . . . . . . . . . 36,724
Other Assets . . . . . . . . . . . . . . . . . . . . . . . 13,092
-------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $ 39,695,716
-------------
LIABILITIES:
Payable for investments purchased. . . . . . . . . . . . . $ 792,114
Dividends Payable. . . . . . . . . . . . . . . . . . . . . 341
Capital Gains Payable. . . . . . . . . . . . . . . . . . . 36,333
Shares of beneficial interest redeemed . . . . . . . . . . 16,142
Administration Fee** . . . . . . . . . . . . . . . . . . . 6,636
Transfer Agent Fee . . . . . . . . . . . . . . . . . . . . 22,881
Custody Fee. . . . . . . . . . . . . . . . . . . . . . . . 998
Fund Accounting Fee. . . . . . . . . . . . . . . . . . . . 7,774
Legal Fee. . . . . . . . . . . . . . . . . . . . . . . . . 3,810
Audit Fee. . . . . . . . . . . . . . . . . . . . . . . . . 9,026
Printing Fee . . . . . . . . . . . . . . . . . . . . . . . 21,754
Other payables . . . . . . . . . . . . . . . . . . . . . . 4,207
-------------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . $ 922,016
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $ 38,773,700
-------------
-------------
COMPOSITION OF NET ASSETS:
Capital Stock ($1.00 par value). . . . . . . . . . . . . . $ 2,708,457
Paid in capital. . . . . . . . . . . . . . . . . . . . . . 23,835,596
Net unrealized appreciation in value of investments. . . . 12,229,647
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $ 38,773,700
-------------
-------------
NET ASSET VALUE PER SHARE:
Net assets . . . . . . . . . . . . . . . . . . . . . . . . $ 38,773,700
Shares outstanding . . . . . . . . . . . . . . . . . . . . 2,708,457
Net asset value and redemption price per share . . . . . . $14.32
COST OF INVESTMENTS. . . . . . . . . . . . . . . . . . . . . $ 27,384,446
-------------
-------------
</TABLE>
**Related Party
The accompanying notes to financial statements are an integral part of the
financial statements.
9
<PAGE>
STONEBRIDGE GROWTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED OCTOBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . $ 371,467
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 220,876
-------------
TOTAL INCOME . . . . . . . . . . . . . . . . . . . . . $ 592,343
-------------
EXPENSES:
Management Fee . . . . . . . . . . . . . . . . . . . . . . $ 288,991
Administrative Fee . . . . . . . . . . . . . . . . . . . . 63,097
Transfer Agency Fee. . . . . . . . . . . . . . . . . . . . 139,058
Fund Accounting Fee. . . . . . . . . . . . . . . . . . . . 31,684
Legal Fee. . . . . . . . . . . . . . . . . . . . . . . . . 43,735
Printing Fee . . . . . . . . . . . . . . . . . . . . . . . 56,582
Registration Fee . . . . . . . . . . . . . . . . . . . . . 5,486
Audit Fee. . . . . . . . . . . . . . . . . . . . . . . . . 13,528
Custodian Fee. . . . . . . . . . . . . . . . . . . . . . . 2,490
Trustee Fee. . . . . . . . . . . . . . . . . . . . . . . . 19,896
Other Fees . . . . . . . . . . . . . . . . . . . . . . . . 25,903
Expense Subsidy (Note 3) . . . . . . . . . . . . . . . . . (107,500)
-------------
TOTAL EXPENSES . . . . . . . . . . . . . . . . . . . . $ 582,950
-------------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . $ 9,393
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net Realized Gain on Investments . . . . . . . . . . . . . $ 1,003,163
Unrealized Appreciation
Beginning of Period. . . . . . . . . . . . . . . . . . . 13,295,084
End of Period. . . . . . . . . . . . . . . . . . . . . . 12,229,647
-------------
Change in net unrealized appreciation/depreciation . . . . (1,065,437)
-------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS. . . . . . (62,274)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . $ (52,881)
-------------
-------------
</TABLE>
The accompanying notes to financial statements are an integral part of the
financial statements.
10
<PAGE>
STONEBRIDGE GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
OCTOBER 31, NOVEMBER 30,
1998 1997
---------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net Investment Income. . . . . . . . . . . . . . . . . . . $ 9,393 $ 45,114
Net Realized Gain On Investments . . . . . . . . . . . . . 1,003,163 6,904,912
Net Change In Unrealized Appreciation/Depreciation . . . . (1,065,437) 722,858
---------------------------
INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS. . . . . . . . . . . . . . . . . . . . . . (52,881) 7,672,884
---------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from Net Investment Income . . . . . . . . . . . (54,630) (242,665)
Distributions from Net Realized Gain on Investments. . . . (7,908,061) (4,030,449)
---------------------------
DECREASE IN NET ASSETS RESULTING FROM
DISTRIBUTIONS TO SHAREHOLDERS. . . . . . . . . . . . . . . (7,962,691) (4,273,114)
CHANGE IN NET ASSETS DERIVED FROM INVESTMENT ACTIVITIES. . (8,015,572) 3,399,770
---------------------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net Increase (Decrease) in Net Assets Derived From
Capital Stock Transactions - Note 4 . . . . . . . . . . 4,409,424 (621,631)
---------------------------
NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . (3,606,148) 2,778,139
---------------------------
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . . . . . . . 42,379,848 39,601,709
---------------------------
End of period (including overdistributed net investment
Income of $0 and ($392,570), respectively). . . . . . . $ 38,773,700 $ 42,379,848
---------------------------
---------------------------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THE
FINANCIAL STATEMENTS.
11
<PAGE>
STONEBRIDGE GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
PERIOD ENDED YEARS ENDED
OCTOBER 31, NOVEMBER 30,
1998 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value, Beginning of Period . . . . $17.69 $16.56 $14.36 $12.61 $12.62
--------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income. . . . . . . . . . . 0.00 0.02 0.10 0.17 0.07
Net Realized and Unrealized Gain (Loss)
on Investments. . . . . . . . . . . . . (0.07) 2.90 2.83 2.34 0.29
--------------------------------------------------------------------
Total Income from Investment Operations. . (0.07) 2.92 2.93 2.51 0.36
--------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
STOCKHOLDERS:
Distributions from Net Investment
Income. . . . . . . . . . . . . . . . . (0.02) (0.10) (0.17) (0.07) (0.07)
Distributions from Net Realized Gain
on Investments. . . . . . . . . . . . . (3.28) (1.69) (0.56) (0.69) (0.30)
--------------------------------------------------------------------
Total Distributions to shareholders. . . . (3.30) (1.79) (0.73) (0.76) (0.37)
--------------------------------------------------------------------
Net Asset Value, End of Period . . . . . . . $14.32 $17.69 $16.56 $14.36 $12.61
--------------------------------------------------------------------
--------------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . (0.44)% 19.79% 21.46% 23.50% 2.81%
--------------------------------------------------------------------
--------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in 000s). . . . $38,774 $42,380 $39,602 $34,775 $30,775
--------------------------------------------------------------------
--------------------------------------------------------------------
Ratio of Operating Expenses to
Average Net Assets . . . . . . . . . . . 1.50% 1.50% 1.47% 1.49% 1.64%
--------------------------------------------------------------------
--------------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . 0.02% 0.11% 0.67% 1.27% 0.53%
--------------------------------------------------------------------
--------------------------------------------------------------------
Portfolio Turnover Rate* . . . . . . . . . 41% 41% 45% 38% 36%
--------------------------------------------------------------------
--------------------------------------------------------------------
Average Commission Rate**. . . . . . . . . $.1004 $.1221 $.1351 - -
--------------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
*A portfolio turnover rate is the percentage computed by taking the lesser of
purchases or sales of portfolio securities (excluding securities with a maturity
date of one year or less at the time of acquisition) for a period and dividing
it by the monthly average of the market value of such securities during the
period.
**For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on which
commissions are charged.
The accompanying notes to financial statements are an integral part of the
financial statements.
12
<PAGE>
STONEBRIDGE GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND NATURE OF OPERATIONS -- Stonebridge Growth Fund, Inc. (the
Fund) is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company.
SECURITY VALUATION -- Investment securities listed or traded on a
registered securities exchange or quoted on NASDAQ are valued at the last
sales price on the date of valuation. Securities traded on the
over-the-counter market for which no sales are reported are valued at the
mean between the bid and asked price. Short-term debt securities having a
remaining maturity of 60 days or less consist exclusively of U.S. Treasury
and Agency Obligations and are stated at amortized cost which is
approximately equivalent to value.
FEDERAL INCOME TAXES -- No provision for Federal income taxes is necessary
since the Fund is qualified as a "regulated investment company" under the
Internal Revenue Code and intends to maintain this qualification and
distribute substantially all of its net investment income and realized
gains from investment transactions to its stockholders each year.
DISTRIBUTIONS - Distributions of net investment income, if any, are
distributed annually. Distributions of net realized gains, if any, are
declared at least once each year. Distributions to stockholders are
recorded on the ex-dividend date.
OTHER -- Securities transactions are accounted for on the date the
securities are purchased or sold (trade date). Dividend income is recorded
on the ex-dividend date. Interest income, which includes amortization of
premiums and accretion of discounts, is accrued and recorded daily.
Realized gains and losses from investment transactions and unrealized
appreciation and depreciation of investments are reported on an identified
cost basis, which is the same basis the Fund uses for Federal income tax
purposes.
USE OF ESTIMATES -- The preparation of the Fund's financial statements in
conformity with generally accepted accounting principles requires the
Fund's management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
RECLASSIFICATION -- Certain reclassifications have been made to conform
fiscal 1997 financial statements to the presentation in fiscal 1998. The
reclassifications had no effect on the net decrease in net assets.
2. INVESTMENT TRANSACTIONS:
Purchases and sales of investment securities (excluding short-term
securities), for the period ended October 31, 1998 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------- -----
<S> <C> <C>
Common Stocks $15,124,063 $20,601,876
</TABLE>
13
<PAGE>
STONEBRIDGE GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT TRANSACTIONS (CONTINUED):
<TABLE>
<CAPTION>
As of October 31, 1998
<S> <C>
Gross appreciation (excess of value over cost) $12,263,953
Gross depreciation (excess of cost over value) (34,306)
-----------
Net unrealized appreciation $12,229,647
-----------
-----------
</TABLE>
This amount represents the net increase in the value of investments (all of
which are represented by long transactions) held at October 31, 1998.
3. TRANSACTIONS WITH AFFILIATES:
The Fund has entered into an investment advisory agreement with Stonebridge
Capital Management, Inc. (the Adviser). The advisory agreement has been
approved by the Fund's Board of Directors and stockholders. Under the
agreement, the Adviser is entitled to a fee, computed daily and paid
monthly (in arrears), at the annual rate of 0.75% of the average daily net
assets of the Fund. For the period ended October 31, 1998 Advisory fees
paid to the Adviser totaled approximately $214,284.
The Adviser has agreed that it will limit the overall annual expenses of
the Fund to 1.50% of average annual net assets, by either reducing its fees
or reimbursing the Fund for operating expenses in excess of this
limitation. The Fund will remain liable to the Adviser for all such
expenses subsidized in any fiscal year, for a period of up to three years
from the date the expenses were incurred, so long as reimbursement will not
cause the annual expense ratio to exceed the expense limit in effect for
that year. The amount of the deferred expense subsidy, as defined in the
statement of assets and liabilities, represents the difference between
total expenses subsidized and management fees waived by the Adviser (less
payments received from the Adviser) totaling $107,500 at October 31, 1998
and the accrued management fee due the Adviser at October 31, 1998 of
$102,771; this amount will be recognized as expense previously deferred in
the statement of operations in future periods, if limits permit in those
periods. As of October 31, 1998, the Fund had a cumulative carryover of
$107,500 in waived expenses.
On July 23, 1997, the Fund entered into an administration agreement with
ALPS Mutual Funds Services ("ALPS"). The administrative agreement provides
that ALPS will receive a monthly management fee equal to the annual rate of
.10% of the average daily net assets in the Fund up to $250,000,000 and
.075% of the average daily net assets of the Fund in excess of
$250,000,000. At all times ALPS' fee will be no less than $5,000 per
month in the first year and $6,250 per month in years two and three. For
the period ended October 31, 1998, ALPS received $56,461 for administration
services.
Certain officers and directors of the Fund are also officers and/or
directors of the Adviser and/or ALPS.
14
<PAGE>
STONEBRIDGE GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL STOCK:
At October 31, 1998, there were indefinite shares of $1.00 par value
capital stock authorized shares. Transactions in shares of capital stock
for the period ended October 31, 1998 and the year ended November 30, 1997,
were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED FOR THE YEAR ENDED
OCTOBER 31, 1998 NOVEMBER 30, 1997
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares Sold 86,431 $1,380,501 26,597 $ 401,883
Shares Issued to Stockholders
in Reinvestment of Dividends 532,749 7,837,364 288,177 4,233,322
---------------------------------------------
Total 619,180 9,217,865 314,774 4,635,205
Less Shares Redeemed (306,521) (4,808,441) (310,844) (5,256,836)
---------------------------------------------
Net Increase (Decrease) 312,659 $4,409,424 3,930 $(621,631)
---------------------------------------------
---------------------------------------------
</TABLE>
5. STONEBRIDGE REORGANIZATION:
On August 25, 1998, shareholders of the former Stonebridge Growth Fund,
Inc. voted to approve its reorganization into the Growth Fund Portfolio of
the Stonebridge Funds Trust, a newly created Delaware business trust,
effective November 1, 1998.
6. DISTRIBUTION TO STOCKHOLDERS:
On December 10, 1997, a dividend of $0.02 per share, aggregating $45,114
was declared from net investment income. Additionally, a dividend of $2.90
per share, aggregating $6,904,913 was declared from net realized gains from
investment transactions (including $0.21 applicable to short-term capital
gains that are taxable to shareholders as ordinary income dividends.)
These dividends were paid on December 31, 1997 to shareholders of record
December 29, 1997.
On October 29, 1998, a dividend of $.004 per share, aggregating $9,516 was
declared from net investment income. Additionally, a dividend of $.38 per
share, aggregating $1,003,163 was declared from net realized gains from
investment transactions. These dividends were paid on October 31, 1998 to
shareholders of record October 28, 1998.
15
