U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 7
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and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
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Amendment No. 7
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(Check appropriate box or boxes)
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
312 Walnut Street, 21st Floor
Cincinnati, OH 45202
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (513) 629-2000
Malcolm D. Clarke, Jr.
Brundage, Story and Rose LLC
One Broadway
New York, New York 10004
(Name and Address of Agent for Service)
Copies to:
John A. Dudley, Esq.
Sullivan & Worcester
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective (check
appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite number of shares of
beneficial interest of its Brundage, Story and Rose Equity Fund
and its Brundage, Story and Rose Short/Intermediate Term Fixed-
Income Fund under the Securities Act of 1933 pursuant to Rule
24f-2 under the Investment Company Act of 1940. Registrant's
Rule 24f-2 Notice for the fiscal year ended November 30, 1995 was
filed with the Commission on January 16, 1996.
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
--------------------------------
PART A
ITEM NO. REGISTRATION STATEMENT CAPTION CAPTION IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Information Financial Highlights;
Performance Information
4. General Description of Registrant Operation of the Funds;
Investment Objectives,
Investment Policies and
Risk Considerations
5. Management of the Fund Operation of the Funds;
Financial Highlights
6. Capital Stock and Other Securities Cover Page; Operation of
the Funds; Dividends and
Distributions; Taxes
7. Purchase of Securities Being Offered How to Purchase Shares;
Shareholder Services;
Calculation of Share
Price; Exchange
Privilege; Operation of
the Funds; Distribution
Plan; Application
8. Redemption or Repurchase How to Redeem Shares;
Shareholder Services
9. Pending Legal Proceedings Inapplicable
PART B
Caption in Statement
of Additional
ITEM NO. REGISTRATION STATEMENT CAPTION INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
(i)
<PAGE>
12. General Information and History The Trust
13. Investment Objectives and Policies Definitions, Policies and
Risk Considerations;
Quality Ratings of
Corporate Bonds and
Preferred Stocks;
Investment Limitations;
Portfolio Turnover
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders Principal Security
of Security Holders
16. Investment Advisory and Other Services The Investment Adviser;
Distribution Plan;
Custodian; Auditors;
MGF Service Corp.
17. Brokerage Allocation and Other Securities Transactions
Practices
18. Capital Stock and Other Securities The Trust
19. Purchase, Redemption and Pricing of Calculation of Share
Securities Being Offered Price; Redemption in Kind
20. Tax Status Taxes
21. Underwriters The Underwriter
22. Calculation of Performance Data Historical Performance
Information
23. Financial Statements Annual Report
PART C
The information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C to this Registration Statement.
PROSPECTUS
April 1, 1996
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
==============================================================================
Brundage, Story and Rose Investment Trust currently offers two separate series
of shares to investors, the Brundage, Story and Rose Equity Fund and the
Brundage, Story and Rose Short/Intermediate Term Fixed-Income Fund
(individually a "Fund" and collectively the "Funds").
The BRUNDAGE, STORY AND ROSE EQUITY FUND seeks to provide protection and
enhancement of capital, current income and growth of income. The Fund invests
primarily in common stocks and securities convertible into common stock.
The BRUNDAGE, STORY AND ROSE SHORT/INTERMEDIATE TERM FIXED-INCOME FUND seeks
to provide a higher and more stable level of income than a money market fund
with more principal stability than a mutual fund investing in intermediate and
long-term fixed-income securities. The Fund may provide higher income, but
with less principal stability and greater credit risks than a money market
fund. Because the Fund may provide a more stable level of income than a money
market fund (i.e., the Fund's yield will not change as rapidly during periods
of fluctuating interest rates), the Fund's yield may not rise as rapidly as
that of a money market fund during periods of rising interest rates. Although
the Fund may provide more principal stability than a mutual fund investing in
intermediate and long-term fixed-income securities, it may provide a lower
yield. The Fund invests primarily in short and intermediate-term fixed-income
securities.
Brundage, Story and Rose LLC (the "Adviser"), One Broadway, New York, New
York, manages the Funds' investments. Brundage, Story and Rose LLC is an
independent investment counsel firm that has advised individual and
institutional clients since 1932.
This Prospectus sets forth concisely the information about the Funds that you
should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated April 1, 1996 has been
filed with the Securities and Exchange Commission and is hereby incorporated
by reference in its entirety. A copy of the Statement of Additional
Information can be obtained at no charge by calling one of the numbers listed
below.
- ------------------------------------------------------------------------------
FOR INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
Nationwide (Toll-Free)............................................800-320-2212
Cincinnati........................................................513-629-2070
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
EXPENSE INFORMATION
================================================================================================================
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Sales Load Imposed on Purchases.............................................. None
Sales Load Imposed on Reinvested Dividends................................... None
Exchange Fee................................................................. None
Check Redemption Fee (per check)............................................. $0.50
Other Redemption Fees........................................................ None*
<FN>
*A wire transfer fee is charged by the Fund's Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently
$8. See "How to Redeem Shares."
</FN>
</TABLE>
<TABLE>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<CAPTION>
Short/Inter.
Equity Term Fixed-
Fund Income Fund
------- -----------
<S> <C> <C>
Management Fees................................................................. .65% .06%(A)
12b-1 Fees(B)................................................................... .01% .01%
Other Expenses.................................................................. .79% .58%
------- -------
Total Fund Operating Expenses................................................... 1.45% .65%(C)
======= =======
<FN>
(A) Absent waivers of management fees, such fees would have been .50% for the
fiscal year ended November 30, 1995.
(B) Each Fund may incur 12b-1 fees in an amount up to .25% of its average
net assets. Long-term shareholders may pay more than the economic equivalent
of the maximum front-end sales loads permitted by the National Association
of Securities Dealers.
(C) Absent waivers of management fees, total Fund operating expenses
would have been 1.09% for the fiscal year ended November 30, 1995.
</FN>
</TABLE>
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The percentages expressing annual fund operating expenses are
based on amounts incurred during the most recent fiscal year, except that
annual fund operating expenses of the Short/Intermediate Term Fixed-Income
Fund have been restated to reflect an increase in the amount of expenses
currently being charged to the Fund. THE EXAMPLE BELOW SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Equity Short/Intermediate
Fund Term Fixed-Income Fund
<S> <C> <C> <C>
1 Year $ 15 $ 7
3 Years 46 21
5 Years 79 36
10 Years 174 81
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
==============================================================================
The following information, which has been audited by Arthur Andersen LLP, is
an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of
November 30, 1995 and related auditors' report appear in the Statement of
Additional Information of the Funds, which can be obtained by shareholders at
no charge by calling MGF Service Corp. (Nationwide call toll-free
800-320-2212; in Cincinnati call 629-2070) or by writing to the Trust at the
address on the front of this Prospectus.
<TABLE>
EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FROM DATE OF
PUBLIC OFFERING
YEAR YEAR YEAR YEAR (JAN. 2, 1991)
ENDED ENDED ENDED ENDED THROUGH
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period...... $ 12.43 $ 12.70 $ 12.26 $ 10.85 $ 10.00
----------- ----------- ---------- ----------- -----------
Income from investment operations:
Net investment income.................... 0.07 0.06 0.09 0.12 0.15
Net realized and unrealized gains on
investments............................ 3.02 0.11 0.76 1.40 0.92
----------- ----------- ---------- ----------- -----------
Total from investment operations............ 3.09 0.17 0.85 1.52 1.07
----------- ----------- ---------- ----------- -----------
Less distributions:
Dividends from net investment income..... ( 0.06 ) ( 0.06 ) ( 0.10) ( 0.11 ) ( 0.15 )
Distributions from net realized gains.... ( 0.55 ) ( 0.38 ) ( 0.31) -- ( 0.07 )
----------- ----------- ---------- ----------- -----------
Total distributions......................... ( 0.61 ) ( 0.44 ) ( 0.41) ( 0.11 ) ( 0.22 )
----------- ----------- ---------- ----------- -----------
Net asset value at end of period............ $ 14.91 $ 12.43 $ 12.70 $ 12.26 $ 10.85
=========== =========== ========== =========== ===========
Total return................................ 26.08% 1.35% 6.83% 14.39% 11.64% (B)
=========== =========== ========== =========== ===========
Net assets at end of period (000's)......... $ 24,191 $ 18,821 $ 19,150 $ 15,081 $ 9,103
=========== =========== ========== =========== ===========
Ratio of expenses to average net assets(A) . 1.45% 1.50% 1.50% 1.50% 1.48% (B)
Ratio of net investment income to average
net assets............................... 0.52% 0.51% 0.74% 1.05% 1.51% (B)
Portfolio turnover rate..................... 42% 44% 45% 44% 37% (B)
<FN>
(A) Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 1.58%, 1.78% and 2.35%(B) for the periods ended
November 30, 1993, 1992 and 1991, respectively.
(B) Annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FROM DATE OF
PUBLIC OFFERING
YEAR YEAR YEAR YEAR (JAN. 2, 1991)
ENDED ENDED ENDED ENDED THROUGH
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period...... $ 9.94 $ 10.77 $ 10.49 $ 10.43 $ 10.00
----------- ----------- ---------- ----------- -----------
Income from investment operations:
Net investment income.................... 0.64 0.59 0.64 0.69 0.62
Net realized and unrealized
gains (losses) on investments.......... 0.79 ( 0.79 ) 0.28 0.06 0.43
----------- ----------- ---------- ----------- -----------
Total from investment operations............ 1.43 ( 0.20 ) 0.92 0.75 1.05
----------- ----------- ---------- ----------- -----------
Less distributions: ........................
Dividends from net investment income..... ( 0.64 ) ( 0.59 ) ( 0.64) ( 0.69 ) ( 0.62 )
Distributions from net realized gains.... -- ( 0.04 ) -- -- --
----------- ----------- ---------- ----------- -----------
Total distributions......................... ( 0.64 ) ( 0.63 ) ( 0.64) ( 0.69 ) ( 0.62 )
----------- ----------- ---------- ----------- -----------
Net asset value at end of period............ $ 10.73 $ 9.94 $ 10.77 $ 10.49 $ 10.43
=========== =========== ========== =========== ===========
Total return................................ 14.84% ( 1.98% ) 9.00% 7.38% 11.87% (B)
=========== =========== ========== =========== ===========
Net assets at end of period (000's)......... $ 35,272 $ 35,390 $ 43,272 $ 32,025 $ 12,871
=========== =========== ========== =========== ===========
Ratio of expenses to average net assets(A) . 0.60% 0.50% 0.50% 0.50% 0.50% (B)
Ratio of net investment income to average
net assets............................... 6.21% 5.67% 5.95% 6.50% 7.05%(B)
Portfolio turnover rate..................... 39% 57% 29% 24% 12% (B)
<FN>
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the
ratios of expenses to average net assets would have been 1.09%, 1.06%,
1.11%, 1.30% and 2.54%(B) for the periods ended November 30, 1995, 1994,
1993, 1992 and 1991, respectively.
(B) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES, INVESTMENT POLICIES AND RISK CONSIDERATIONS
===============================================================================
Brundage, Story and Rose Investment Trust (the "Trust") is comprised of two
Funds, each with its own portfolio and investment objective. Neither Fund is
intended to be a complete investment program, and there is no assurance that
the investment objective of either Fund can be achieved. Each Fund's
investment objective may be changed by the Board of Trustees without
shareholder approval, but only after notification has been given to
shareholders and after this Prospectus has been revised accordingly. If there
is a change in a Fund's investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. Unless otherwise indicated, all
investment practices and limitations of the Funds are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
BRUNDAGE, STORY AND ROSE EQUITY FUND
The Equity Fund seeks to provide protection and enhancement of capital,
current income and growth of income. The Fund will invest primarily in a
diversified portfolio of common stocks and securities convertible into common
stock.
Investments in equity securities are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions and other factors
beyond the control of the Adviser. As a result, the return and net asset value
of the Fund will fluctuate. In selecting securities for the Fund, the Adviser
first attempts to identify economic trends. On the basis of this analysis,
industries with the best prospects for providing protection and enhancement of
capital, current income and growth of income are determined and reviewed.
Then, from within those industries, the Adviser selects as candidates those
companies that have experienced, capable managements, sound financial policies
and strong competitive positions in their markets. The final step in specific
stock selection is the Adviser's determination whether the current market
valuation of a company is reasonable in relation to its earnings, dividends,
assets and long-term opportunities. Once approved as appropriate for
investment, companies remain under continuous review by the Adviser.
The Fund expects to invest primarily in securities currently paying dividends
although it may buy securities that are not paying dividends but offer
prospects for growth of capital or future income. Although the Fund invests
primarily in common stocks and securities convertible into common stock (such
as convertible bonds, convertible preferred stocks and warrants), the Fund may
also invest in non-convertible preferred stocks and bonds. The Fund may invest
in preferred stocks and bonds which are rated at the time of purchase in the
four highest grades assigned by Moody's Investors Service, Inc. (Aaa, Aa, A or
Baa) or Standard & Poor's Ratings Group (AAA, AA, A or BBB) or unrated
securities determined by the Adviser to be of comparable quality. Preferred
stocks and bonds rated Baa or BBB have speculative characteristics and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to pay principal and interest or to pay the preferred stock
obligations than is the case with higher grade securities. Subsequent to its
purchase by the Fund, a security's rating may be reduced below Baa or BBB and
the Adviser will sell such security, subject to market conditions and the
Adviser's assessment of the most opportune time for sale.
<PAGE>
The Fund may invest in securities of foreign issuers. When selecting foreign
investments, the Adviser will seek to invest in securities that have
investment characteristics and qualities comparable to the kinds of domestic
securities in which the Fund invests. The Fund may invest in securities of
foreign issuers directly or in the form of sponsored American Depository
Receipts. American Depository Receipts are receipts typically issued by an
American bank or trust company that evidence ownership of underlying
securities issued by a foreign corporation. Where investments in foreign
securities are made in currencies of foreign countries, the value of the
Fund's assets as measured in U.S. dollars may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations.
Foreign investments may be subject to special risks, including future
political and economic developments and the possibility of seizure or
nationalization of companies, imposition of withholding taxes on income,
establishment of exchange controls or adoption of other restrictions, that
might affect an investment adversely. The Fund will not invest in securities
of foreign issuers which are not listed on a recognized domestic or foreign
exchange.
When the Adviser believes substantial price risks exist for common stocks and
securities convertible into common stocks because of uncertainties in the
investment outlook or when in the judgment of the Adviser it is otherwise
warranted in selling to manage the Fund's portfolio, the Fund may temporarily
hold all or a portion of its assets in short-term obligations such as bank
debt instruments (certificates of deposit, bankers' acceptances and time
deposits), commercial paper, U.S. Government obligations having a maturity of
less than one year or repurchase agreements.
BRUNDAGE, STORY AND ROSE SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
The Short/Intermediate Term Fixed-Income Fund seeks to provide a higher and
more stable level of income than a money market fund with more principal
stability than a mutual fund investing in intermediate and long-term
fixed-income securities. The Fund will invest in a diversified portfolio of
short and intermediate-term fixed-income securities. Under normal market
conditions, at least 90% of the Fund's total assets will be invested in
fixed-income securities with remaining maturities or, in the case of
mortgage-backed and asset-backed securities, remaining average lives of
between one and ten years, and at no time will the Fund be less than 65%
invested in such securities. For defensive or liquidity purposes, the Fund may
temporarily hold up to 35% of its total assets in securities having a maturity
of less than one year, including bank debt instruments, commercial paper, U.S.
Government obligations or repurchase agreements. Under normal market
conditions, the Fund will maintain a dollar-weighted average maturity of
between two and five years. In calculating the Fund's dollar-weighted average
maturity, the Adviser will use average life as the remaining maturity of
mortgage-backed and asset-backed securities (see below).
The Fund invests in securities having longer maturities and lower ratings than
securities in which a money market fund may invest. The Fund may therefore
provide higher income, but with less principal stability and greater credit
risks than a money market fund. In addition, because the Fund invests in
securities having longer maturities, the Fund may provide a more stable level
of income than a money market fund, i.e., the Fund's yield will not change as
rapidly as a money market fund during periods of fluctuating interest rates.
During periods of rising interest rates, the Fund's yield may not rise as
quickly as the yield of a money market fund because a money market fund will
generally be able to reinvest the proceeds of maturing securities sooner than
the Fund.
The Fund pursues its objective by investing primarily in U.S. Government
obligations, corporate fixed-income securities, bank debt instruments,
mortgage-backed and asset-backed securities, U.S. dollar-denominated
fixed-income securities issued by foreign issuers, foreign branches of U.S.
banks and U.S. branches of foreign banks, and money market instruments. In
addition, the Fund may purchase securities on a when-issued basis and may
invest in interest rate futures contracts and options on fixed-income
securities or market indices.
<PAGE>
The Fund may invest in securities which are rated at the time of purchase
within the four highest grades assigned by Moody's Investors Service, Inc.
(Aaa, Aa, A or Baa) or Standard & Poor's Ratings Group (AAA, AA, A or BBB), or
unrated securities determined by the Adviser to be of comparable quality.
While securities in these categories are generally accepted as being of
investment grade, securities rated Baa or BBB have speculative characteristics
and changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to pay principal and interest than is the case
with higher grade securities. The Fund will not invest more than 10% of its
net assets in securities rated Baa or BBB. Subsequent to its purchase by the
Fund, a security's rating may be reduced below Baa or BBB and the Adviser will
sell such security, subject to market conditions and the Adviser's assessment
of the most opportune time for sale. At least 65% of the Fund's assets will be
invested in a combination of U.S. Government obligations (described below) and
securities rated at the time of purchase in one of the two highest categories
of Moody's Investors Service, Inc. (Aaa or Aa) or Standard & Poor's Ratings
Group (AAA or AA), or unrated securities determined by the Adviser to be of
comparable quality.
Investments in debt securities are subject to inherent market risks and
fluctuations in value due to changes in earnings, economic conditions, quality
ratings and other factors beyond the control of the Adviser. Debt securities
are subject to price fluctuations based upon changes in the level of interest
rates, which will generally result in all those securities changing in price
in the same way, i.e., all those securities experiencing appreciation when
interest rates decline and depreciation when interest rates rise. As a result,
the return and net asset value of the Fund will fluctuate but these
fluctuations should be less than a mutual fund investing in longer term
securities.
<PAGE>
U.S. GOVERNMENT OBLIGATIONS. Under normal market conditions, at least 35% of
the Fund's assets will be invested in U.S. Government obligations. "U.S.
Government obligations" include securities which are issued or guaranteed by
the United States Treasury, by various agencies of the United States
Government, and by various instrumentalities which have been established or
sponsored by the United States Government. U.S. Treasury obligations are
backed by the "full faith and credit" of the United States Government. U.S.
Treasury obligations include Treasury bills, Treasury notes and Treasury
bonds. Agencies and instrumentalities established by the United States
Government include the Federal Home Loan Banks, the Federal Land Bank, the
Government National Mortgage Association, the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, the Student Loan
Marketing Association, the Small Business Administration, the Bank for
Cooperatives, the Federal Intermediate Credit Bank, the Federal Financing
Bank, the Federal Farm Credit Banks, the Federal Agricultural Mortgage
Corporation, the Resolution Funding Corporation, the Financing Corporation of
America and the Tennessee Valley Authority. Some of these securities are
supported by the full faith and credit of the United States Government while
others are supported only by the credit of the agency or instrumentality,
which may include the right of the issuer to borrow from the United States
Treasury.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Fund may invest in
mortgage-backed securities, which are mortgage loans made by banks, savings
and loan institutions, and other lenders which are assembled into pools. Often
these securities are issued and guaranteed by an agency or instrumentality of
the United States Government, though not necessarily backed by the full faith
and credit of the United States Government, or are collateralized by U.S.
Government obligations. The Fund invests in mortgage-backed securities
representing undivided ownership interests in pools of mortgage loans,
including Government National Mortgage Association (GNMA), Federal National
Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC)
Certificates and so-called "CMOs" -- i.e., collateralized mortgage obligations
which are issued by non-governmental entities.
The rate of return on mortgage-backed securities such as GNMA, FNMA and FHLMC
Certificates and CMOs may be affected by early prepayment of principal on the
underlying loans. Prepayment rates vary widely and may be affected by changes
in market interest rates. It is not possible to accurately predict the average
life of a particular pool. Reinvestment of principal may occur at higher or
lower rates than the original yield. Therefore, the actual maturity and
realized yield on mortgage-backed securities will vary based upon the
prepayment experience of the underlying pool of mortgages. Mortgage-backed
securities purchased by the Fund will be either (i) issued by United States
Government sponsored corporations or (ii) rated at least Aa by Moody's
Investors Service, Inc. or AA by Standard & Poor's Ratings Group or, if not
rated, are of comparable quality as determined by the Adviser.
<PAGE>
The Fund may also invest in stripped mortgage-backed securities, which are
derivative multiclass mortgage securities issued by agencies or
instrumentalities of the United States Government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose
subsidiaries of the foregoing. Stripped mortgage-backed securities are usually
structured with two classes that receive different proportions of the interest
and principal distributions on a pool of mortgage assets. A common type of
stripped mortgage-backed security will have one class receiving all of the
interest from the mortgage assets (the interest-only or "IO" class), while the
other class will receive all of the principal (the principal-only or "PO"
class). The yield to maturity on an IO class is extremely sensitive to the
rate of principal payments (including prepayments) on the related underlying
mortgage assets, and a rapid rate of principal payments may have a material
adverse effect on the securities' yield to maturity. If the underlying
mortgage assets experience greater than anticipated prepayments of principal,
the Fund may fail to fully recoup its initial investment in these securities
even if the security is rated AAA or Aaa, and could even lose its entire
investment. Although stripped mortgage-backed securities are purchased and
sold by institutional investors through several investment banking firms
acting as brokers or dealers, these securities were only recently developed.
As a result, established trading markets have not developed for certain
stripped mortgage-backed securities. The Fund will not invest more than 10% of
its net assets in stripped mortgage-backed securities and CMOs for which there
is no established market and other illiquid securities. The Fund may invest
more than 10% of its net assets in stripped mortgage-backed securities and
CMOs deemed to be liquid if the Adviser determines, under the direction of the
Board of Trustees, that the security can be disposed of promptly in the
ordinary course of business at a value reasonably close to that used in the
calculation of the Fund's net asset value per share. In addition, pursuant to
the position of the staff of the Securities and Exchange Commission, the Fund
will not invest more than 5% of its total assets in any CMO which is an
investment company under the Investment Company Act of 1940 and will not
invest more than 10% of its total assets in all such CMO's and securities of
other investment companies.
<PAGE>
Asset-backed securities may include such securities as Certificates for
Automobile Receivables and Credit Card Receivable Securities. Certificates for
Automobile Receivables represent undivided fractional interests in a pool of
motor vehicle retail installment sales contracts. Underlying sales contracts
are subject to prepayment, which may reduce the overall return to certificate
holders. Certificate holders may also experience delays in payment or losses
if the full amounts due on underlying sales contracts are not realized because
of unanticipated costs of enforcing the contracts or because of depreciation,
damage or loss of the vehicles securing the contracts, or other factors.
Credit Card Receivable Securities are backed by receivables from revolving
credit card agreements. An acceleration in cardholders' payment rates may
adversely affect the overall return to holders of such certificates. Unlike
most other asset-backed securities, Credit Card Receivable Securities are
unsecured obligations of the credit cardholders. The Fund may also invest in
other asset-backed securities that may be developed in the future, provided
that this Prospectus is revised before the Fund does so. The Fund will not
invest more than 10% of its net assets in asset-backed securities for which
there is no established market and other illiquid securities.
Mortgage-backed securities, when they are issued, have stated maturities of up
to forty years, depending on the length of the mortgages underlying the
securities. In practice, unscheduled or early payments of principal on the
underlying mortgages may make the securities' effective maturity shorter than
this. A security based on a pool of forty-year mortgages may have an average
life of as short as two years. The average life of asset-backed securities may
also be substantially less than the stated maturity of the contracts or
receivables underlying such securities. It is common industry practice to
estimate the average life of mortgage-backed and asset-backed securities based
on assumptions regarding prepayments. The Fund will assume an average life
based on the prepayment characteristics of the underlying mortgages or other
assets.
BANK DEBT INSTRUMENTS. The Fund may invest in certificates of deposit, time
deposits and bankers' acceptances issued by commercial banks. Certificates of
deposit are receipts from a bank for funds deposited for a specified period of
time at a specified rate of return. Bankers' acceptances are time drafts drawn
on commercial banks by borrowers, usually in connection with international
commercial transactions. Time deposits are generally similar to certificates
of deposit, but are uncertificated. The Fund will not invest more than 10% of
its net assets in time deposits maturing in greater than seven days and other
illiquid securities.
<PAGE>
The Fund will not invest in any security issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in
other currencies, or, in the case of domestic banks which do not have total
assets of at least $1 billion, the aggregate investment made in any one such
bank is limited to $100,000 and the principal amount of such investment is
insured in full by the Federal Deposit Insurance Corporation, (ii) in the case
of U.S. banks, it is a member of the Federal Deposit Insurance Corporation,
and (iii) in the case of foreign banks, the security is, in the opinion of the
Adviser, of an investment quality comparable with other debt securities which
may be purchased by the Fund. These limitations do not prohibit investments in
securities issued by foreign branches of U.S. banks, provided such U.S. banks
meet the foregoing requirements.
FOREIGN SECURITIES. The Fund may invest in U.S. dollar-denominated
fixed-income securities issued by foreign issuers, foreign branches of U.S.
banks and U.S. branches of foreign banks. Investment in securities of foreign
issuers and in foreign branches of domestic banks involves somewhat different
investment risks from those affecting securities of domestic issuers. In
addition to credit and market risks, investments in foreign securities involve
sovereign risk, which includes local political and economic developments,
potential nationalization, withholding taxes on dividend or interest payments
and currency blockage. Foreign companies may have less public or less reliable
information available about them and may be subject to less governmental
regulation than U.S. companies. Securities of foreign companies may be less
liquid or more volatile than securities of U.S. companies. The Fund will not
invest more than 10% of its net assets in foreign securities which, in the
opinion of the Adviser, are not readily marketable and other illiquid
securities.
The Fund may invest in corporate fixed-income securities in the Eurodollar
market. Eurodollar notes and bonds are U.S. dollar-denominated securities for
which the primary trading market is outside the United States. Many U.S.
corporations sell Eurodollar notes and bonds through a foreign subsidiary and
then guarantee payment of principal and interest. Since offerings of
Eurodollar securities are not registered with the Securities and Exchange
Commission, these securities must be sold at issue to non-U.S. investors.
Underwriters are legally prohibited from selling new issues to the U.S. public
until the issue has come to rest and a seasoning period has expired. Although
U.S.-based investors, including the Fund, may buy Eurodollar bonds after the
seasoning period, the market remains dominated by foreign-based investors.
WHEN-ISSUED SECURITIES. The Fund may purchase securities on a when-issued
basis. Delivery of and payment for these securities may occur a month or more
after the date of the purchase commitment. The securities are subject to
market fluctuations during this period and no interest accrues to the Fund
until settlement. The Fund maintains with the Custodian a segregated account
of cash, U.S. Government obligations or other liquid high-grade debt
obligations in an amount at least equal to these commitments.
<PAGE>
INTEREST RATE FUTURES CONTRACTS. The Fund may enter into futures contracts as
a hedge against or to minimize adverse principal fluctuations, or as an
efficient means of adjusting its exposure to the market, but not for
speculation. An interest rate futures contract between two parties locks in
the price of a specified package of securities (primarily U.S. Treasury Bills,
U.S. Treasury Notes or U.S. Treasury Bonds) to be delivered at a future date.
Selling an interest rate futures contract has a similar effect to selling a
portion of the Fund's securities. While the value of the Fund's securities
would decline if interest rates were to rise, the value of the futures
contract would increase, offsetting the decline in the Fund's net asset value
to that extent. Conversely, an increase in the value of the Fund's securities
resulting from a decline in interest rates would be offset by a decline in
value of the futures contract. The Fund will limit its use of futures
contracts so that (1) no more than 5% of the Fund's total assets will be
committed to initial margin deposits and (2) immediately after entering into
such contracts, no more than 30% of the Fund's total assets would be
represented by such contracts. These contracts entail certain risks, including
possible reduction of the Fund's total return and yield due to the use of
hedging, no assurance that futures contracts transactions can be offset at
favorable prices, possible reduction in value of both the securities hedged
and the hedging instrument, possible lack of liquidity due to daily limits on
price fluctuation, imperfect correlation between the contract and the
securities being hedged, and potential losses in excess of the amount invested
in the futures contracts themselves. In instances involving the purchase of
futures contracts by the Fund, an amount of cash, U.S. Government obligations
or other liquid high-grade debt obligations, equal to the market value of the
futures contracts (less any related margin deposits), will be deposited in a
segregated account with the Custodian to cover the position, or alternative
cover will be employed thereby insuring that the use of such futures contracts
is unleveraged. Futures transactions will only be used for bona fide hedging
purposes.
<PAGE>
OPTIONS. The Fund may write covered call options and purchase covered put
options on its portfolio securities or on bond market indices. The aggregate
market value of the Fund's portfolio securities covering call options or
subject to put options will not exceed 25% of the Fund's net assets. Such
options may be exchange-traded or traded over-the-counter. Over-the-counter
options and the assets used to secure the options are considered illiquid. An
option gives the owner the right to buy or sell securities at a predetermined
exercise price for a given period of time. Although options will primarily be
used to minimize principal fluctuations or to generate additional income, they
do involve certain risks. Writing covered call options involves the risk of
not being able to effect closing transactions at a favorable price or
participate in the appreciation of the underlying securities above the
exercise price. Purchasing put options involves the risk of losing the entire
purchase price of the option. The Fund will only write a call option or
purchase a put option on a security which the Fund already owns.
INVESTMENT TECHNIQUES AND RISK CONSIDERATIONS APPLICABLE TO BOTH FUNDS
The Funds may also engage in the following investment techniques, each of
which may involve certain risks:
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which a Fund
purchases a security and simultaneously commits to resell that security to the
seller at an agreed upon time and price, thereby determining the yield during
the term of the agreement. In the event of a bankruptcy or other default of
the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these
possibilities, each Fund intends to enter into repurchase agreements only with
its Custodian, banks having assets in excess of $10 billion and the largest
and, in the Adviser's judgment, most creditworthy primary U.S. Government
securities dealers. The Funds will enter into repurchase agreements which are
collateralized by U.S. Government obligations or other liquid high-grade debt
obligations. Collateral for repurchase agreements is held in safekeeping in
the customer-only account of the Funds' Custodian at the Federal Reserve Bank.
At the time a Fund enters into a repurchase agreement, the value of the
collateral, including accrued interest, will equal or exceed the value of the
repurchase agreement and, in the case of a repurchase agreement exceeding one
day, the seller agrees to maintain sufficient collateral so that the value of
the underlying collateral, including accrued interest, will at all times equal
or exceed the value of the repurchase agreement. A Fund will not enter into a
repurchase agreement not terminable within seven days if, as a result thereof,
more than 10% of the value of the net assets of the Fund would be invested in
such securities and other illiquid securities.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from one to
two hundred seventy days) unsecured promissory notes issued by corporations in
order to finance their current operations. The Funds will only invest in
commercial paper within the top three ratings of either Moody's Investors
Service, Inc. (Prime-1, Prime-2 or Prime-3) or Standard & Poor's Ratings Group
(A-1, A-2 or A-3), or which, in the opinion of the Adviser, is of equivalent
investment quality. Certain notes may have floating or variable rates.
Variable and floating rate notes with a demand notice period exceeding seven
days will be subject to each Fund's restriction on illiquid investments
unless, in the judgment of the Adviser, such note is liquid.
<PAGE>
LENDING PORTFOLIO SECURITIES. Each Fund may, from time to time, lend
securities on a short-term basis (i.e., for up to seven days) to banks,
brokers and dealers and receive as collateral cash, U.S. Government
obligations or irrevocable bank letters of credit (or any combination
thereof), which collateral will be required to be maintained at all times in
an amount equal to at least 100% of the current value of the loaned securities
plus accrued interest. Although each Fund does have the ability to make loans
of all of its portfolio securities, it is the present intention of the Trust,
which may be changed without shareholder approval, that such loans will not be
made with respect to a Fund if as a result the aggregate of all outstanding
loans exceeds one-third of the value of the Fund's total assets. Securities
lending will afford a Fund the opportunity to earn additional income because
the Fund will continue to be entitled to the interest payable on the loaned
securities and also will either receive as income all or a portion of the
interest on the investment of any cash loan collateral or, in the case of
collateral other than cash, a fee negotiated with the borrower. Such loans
will be terminable at any time. Loans of securities involve risks of delay in
receiving additional collateral or in recovering the securities lent or even
loss of rights in the collateral in the event of the insolvency of the
borrower of the securities. A Fund will have the right to regain record
ownership of loaned securities in order to exercise beneficial rights. A Fund
may pay reasonable fees in connection with arranging such loans.
BORROWING AND PLEDGING. Each Fund may borrow money from banks (provided there
is 300% asset coverage) or from banks or other persons for temporary purposes
(in an amount not exceeding 5% of a Fund's total assets). Each Fund will not
make any borrowing which would cause its outstanding borrowings to exceed
one-third of its total assets. Each Fund may pledge assets in connection with
borrowings but will not pledge more than one-third of its total assets.
Borrowing magnifies the potential for gain or loss on the portfolio securities
of the Funds and, therefore, if employed, increases the possibility of
fluctuation in a Fund's net asset value. This is the speculative factor known
as leverage. A Fund's policies on borrowing and pledging are fundamental
policies which may not be changed without the affirmative vote of a majority
of its outstanding shares. It is each Fund's present intention, which may be
changed by the Board of Trustees without shareholder approval, to borrow only
for emergency or extraordinary purposes and not for leverage.
<PAGE>
PORTFOLIO TURNOVER. The Funds do not intend to use short-term trading as a
primary means of achieving their investment objectives. However, each Fund's
rate of portfolio turnover will depend upon market and other conditions, and
it will not be a limiting factor when portfolio changes are deemed necessary
or appropriate by the Adviser. Although the annual portfolio turnover rate of
each Fund cannot be accurately predicted, it is not expected to exceed 100%,
but may be either higher or lower. A 100% turnover rate would occur, for
example, if all the securities of a Fund were replaced once in a one-year
period. High turnover involves correspondingly greater commission expenses and
transaction costs and increases the possibility that the Funds would not
qualify as regulated investment companies under Subchapter M of the Internal
Revenue Code. A Fund will not qualify as a regulated investment company if it
derives 30% or more of its gross income from gains (without offset for losses)
from the sale or other disposition of securities held for less than three
months. High turnover may result in a Fund recognizing greater amounts of
income and capital gains, which would increase the amount of income and
capital gains which the Fund must distribute to shareholders in order to
maintain its status as a regulated investment company and to avoid the
imposition of federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
===============================================================================
Your initial investment in either Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). Shares of each Fund are sold on a
continuous basis at the net asset value next determined after receipt of a
purchase order by the Trust. Purchase orders received by dealers prior to 4:00
p.m., Eastern time, on any business day and transmitted to the Trust's
transfer agent, MGF Service Corp., by 5:00 p.m., Eastern time, that day are
confirmed at the net asset value determined as of the close of the regular
session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by MGF Service Corp. by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
MGF Service Corp. by 4:00 p.m., Eastern time, are confirmed at that day's net
asset value. Direct investments received by MGF Service Corp. after 4:00 p.m.,
Eastern time, and orders received from dealers after 5:00 p.m., Eastern time,
are confirmed at the net asset value next determined on the following business
day.
<PAGE>
You may open an account and make an initial investment in either Fund by
sending a check and a completed account application form to MGF Service Corp.,
P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to
the "Equity Fund" or the "Short/Intermediate Term Fixed-Income Fund,"
whichever is applicable. An account application is included in this
Prospectus.
The Trust mails you confirmations of all purchases or redemptions of Fund
shares. Certificates representing shares are not ordinarily issued, but you
may receive a certificate without charge by sending a written request to MGF
Service Corp. Certificates for fractional shares will not be issued. If a
certificate has been issued to you, you will not be permitted to redeem shares
by check or to redeem or exchange shares by telephone, or to use the automatic
withdrawal plan as to those shares. The Trust and the Underwriter reserve the
rights to limit the amount of investments and to refuse to sell to any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, MGF Service Corp. and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating
to the various services (for example, telephone redemptions and exchanges and
check redemptions) made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by
the Trust or MGF Service Corp. in the transaction.
You may also purchase shares of the Funds by wire. Please telephone MGF
Service Corp. (Nationwide call toll-free 800-320-2212; in Cincinnati call
629-2070) for instructions. You should be prepared to give the name in which
the account is to be established, the address, telephone number and taxpayer
identification number for the account, and the name of the bank which will
wire the money.
Your investment will be made at the net asset value next determined after your
wire is received together with the account information indicated above. If the
Trust does not receive timely and complete account information, there may be a
delay in the investment of your money and any accrual of dividends. To make
your initial wire purchase, you are required to mail a completed account
application to MGF Service Corp. Your bank may impose a charge for sending
your wire. There is presently no fee for receipt of wired funds, but MGF
Service Corp. reserves the right to charge shareholders for this service upon
thirty days' prior notice to shareholders.
<PAGE>
You may purchase and add shares to your account by mail or by bank wire.
Checks should be sent to MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio
45201-5354. Checks should be made payable or endorsed to the applicable Fund.
Bank wires should be sent as outlined above. You may also make additional
investments at the Trust's offices at 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202. Each additional purchase request must contain the name
of your account and your account number to permit proper crediting to your
account. While there is no minimum amount required for subsequent investments,
the Trust reserves the right to impose such requirement.
SHAREHOLDER SERVICES
===============================================================================
Contact MGF Service Corp. (Nationwide call toll-free 800-320-2212; in
Cincinnati call 629-2070) for additional information about the shareholder
services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may elect
to receive, or may designate another person to receive, monthly or quarterly
payments in a specified amount of not less than $50 each. There is no charge
for this service.
TAX-DEFERRED RETIREMENT PLANS
Shares of the Funds are available for purchase in connection with the
following tax-deferred retirement plans:
- -- Keogh Plans for self-employed individuals
- -- Individual retirement account (IRA) plans for individuals and their
non-employed spouses
- -- Qualified pension and profit-sharing plans for employees, including those
profit-sharing plans with a 401(k) provision
- -- 403(b)(7) custodial accounts for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code
DIRECT DEPOSIT PLANS
Shares of either Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable a shareholder to
have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Funds.
<PAGE>
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in either Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. MGF Service Corp. pays
the costs associated with these transfers, but reserves the right, upon thirty
days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account
which would reduce your return from an investment in the Funds.
HOW TO REDEEM SHARES
===============================================================================
You may redeem shares of either Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by MGF Service Corp. of your redemption request in the form described
below. Payment is normally made within three business days after tender in
such form, provided that payment in redemption of shares purchased by check
will be effected only after the check has been collected, which may take up to
fifteen days from the purchase date. To eliminate this delay, you may purchase
shares of the Funds by certified check or wire.
BY TELEPHONE. You may redeem shares by telephone. The proceeds will be sent by
mail to the address designated on your account or wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. To redeem by telephone, call MGF Service
Corp. (Nationwide call toll-free 800-320-2212; in Cincinnati call 629-2070).
The redemption proceeds will normally be sent by mail or by wire within three
business days after receipt of your telephone instructions. IRA accounts are
not redeemable by telephone.
The telephone redemption privilege is automatically available to all
shareholders. You may change the bank or brokerage account which you have
designated under this procedure at any time by writing to MGF Service Corp.
with your signature guaranteed by any eligible guarantor institution
(including banks, brokers and dealers, municipal securities brokers and
dealers, government securities brokers and dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations) or by completing a supplemental telephone redemption
authorization form. Contact MGF Service Corp. to obtain this form. Further
documentation will be required to change the designated account if shares are
held by a corporation, fiduciary or other organization.
<PAGE>
Neither the Trust, MGF Service Corp., nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expenses in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss.
The Trust or MGF Service Corp., or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or MGF
Service Corp. do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include,
among others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
BY MAIL. You may redeem any number of shares from your account by sending a
written request to MGF Service Corp. The request must state the number of
shares or the dollar amount to be redeemed and your account number. The
request must be signed exactly as your name appears on the Trust's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any of the eligible guarantor institutions
outlined above.
Written redemption requests may also direct that the proceeds be deposited
directly in the bank account or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by
mail are normally mailed within three business days following receipt of
instructions in proper form.
BY CHECK (SHORT/INTERMEDIATE TERM FIXED-INCOME FUND ONLY). You may establish a
special checking account with the Short/Intermediate Term Fixed-Income Fund
for the purpose of redeeming shares by check. Checks may be made payable to
anyone for any amount, but checks may not be certified.
When a check is presented to the Custodian for payment, MGF Service Corp., as
your agent, will cause the Fund to redeem a sufficient number of full and
fractional shares in your account to cover the amount of the check. Checks
will be processed at the net asset value on the day the check is presented to
the Custodian for payment.
If the amount of a check is greater than the value of the shares held in your
account, the check will be returned. Shareholders of the Short/Intermediate
Term Fixed-Income Fund should consider potential fluctuations in the net asset
value of the Fund's shares when writing checks. A check representing a
redemption request will take precedence over any other redemption instructions
issued by a shareholder.
<PAGE>
MGF Service Corp. will charge you $.50 per check. This charge is imposed at
the time you order checks; there is no additional charge at the time a
redemption check is processed. MGF Service Corp. charges shareholders its
costs for each stop payment and each check returned for insufficient funds. In
addition, MGF Service Corp. reserves the right to make additional charges to
recover the costs of providing the check redemption service. All charges will
be deducted from your account by redemption of shares in your account. The
check redemption procedure may be suspended or terminated at any time upon
written notice by the Trust or MGF Service Corp.
Shareholders should be aware that writing a check (a redemption of shares) is
a taxable event. Shares for which certificates have been issued may not be
redeemed by check.
THROUGH BROKER-DEALERS. You may also redeem shares by placing a wire
redemption request through a securities broker or dealer. Unaffiliated
broker-dealers may impose a fee on the shareholder for this service. You will
receive the net asset value per share next determined after receipt by the
Trust or its agent of your wire redemption request. It is the responsibility
of broker-dealers to promptly transmit wire redemption orders.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a redemption
by wire, you will be charged an $8 processing fee by the Funds' Custodian. The
Trust reserves the right, upon thirty days' written notice, to change the
processing fee. All charges will be deducted from your account by redemption
of shares in your account. Your bank or brokerage firm may also impose a
charge for processing the wire. In the event that wire transfer of funds is
impossible or impractical, the redemption proceeds will be sent by mail to the
designated account.
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for
ACH transactions. Contact MGF Service Corp. for more information about ACH
transactions.
If a certificate for the shares was issued, it must be delivered to MGF
Service Corp., or the dealer in the case of a wire redemption, duly endorsed
or accompanied by a duly endorsed stock power, with the signature guaranteed
by any of the eligible guarantor institutions outlined above.
<PAGE>
At the discretion of the Trust or MGF Service Corp., corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $1,000 (based on actual amounts invested, unaffected by
market fluctuations), or $250 in the case of tax-deferred retirement plans, or
such other minimum amount as the Trust may determine from time to time. After
notification to you of the Trust's intention to close your account, you will
be given sixty days to increase the value of your account to the minimum
amount. The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
EXCHANGE PRIVILEGE
===============================================================================
Shares of the Funds may be exchanged for each other at net asset value. Shares
of either Fund may also be exchanged for the following money market funds:
Short Term Government Income Fund (a series of Midwest Trust) --
invests in short-term U.S. Government obligations backed by the "full
faith and credit" of the United States and seeks high current income
consistent with protection of capital.
Tax-Free Money Fund (a series of Midwest Group Tax Free Trust) --
invests in high quality, short-term municipal obligations and seeks
the highest level of interest income that is exempt from federal
income tax, consistent with protection of capital.
Shares of the Short Term Government Income Fund and the Tax-Free Money Fund
acquired via exchange may be reexchanged for shares of either Fund at net
asset value.
You may request an exchange by sending a written request to MGF Service Corp.
The request must be signed exactly as your name appears on the Trust's account
records. Exchanges may also be requested by telephone. If you are unable to
execute your transaction by telephone (for example during times of unusual
market activity) consider requesting your exchange by mail or by visiting the
Trust's offices at 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202. An
exchange will be effected at the next determined net asset value after receipt
of a request by MGF Service Corp.
<PAGE>
Exchanges may only be made for shares of funds then offered for sale in your
state of residence and are subject to the applicable minimum initial
investment requirements. The exchange privilege may be modified or terminated
by the Board of Trustees upon 60 days' prior notice to shareholders. An
exchange results in a sale of fund shares, which may cause you to recognize a
capital gain or loss. Before making an exchange for shares of the Short Term
Government Income Fund or the Tax-Free Money Fund, contact MGF Service Corp.
to obtain a current prospectus and more information about exchanges among the
funds.
DIVIDENDS AND DISTRIBUTIONS
===============================================================================
The Equity Fund expects to distribute substantially all of its net investment
income, if any, on a quarterly basis. All of the net investment income of the
Short/Intermediate Term Fixed-Income Fund is declared as a dividend to
shareholders of record on each business day of the Trust and paid monthly.
Each Fund expects to distribute any net realized long-term capital gains at
least once each year. Management will determine the timing and frequency of
the distributions of any net realized short-term capital gains.
Distributions are paid according to one of the following options:
Share Option -- income distributions and capital gains
distributions reinvested in additional shares.
Income Option -- income distributions and
short-term capital gains distributions
paid in cash; long-term capital gains
distributions reinvested in additional
shares.
Cash Option -- income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested
in additional shares. All distributions will be based on the net asset value
in effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six months,
your dividends may be reinvested in your account at the then-current net asset
value and your account will be converted to the Share Option.
<PAGE>
TAXES
===============================================================================
Each Fund has qualified in all prior years and intends to continue to qualify
for the special tax treatment afforded a "regulated investment company" under
Subchapter M of the Internal Revenue Code so that it does not pay federal
taxes on income and capital gains distributed to shareholders. Each Fund
intends to distribute substantially all of its net investment income and any
realized capital gains to its shareholders. Distributions of net investment
income as well as from net realized short-term capital gains, if any, are
taxable to investors as ordinary income. Dividends distributed by the Equity
Fund from net investment income may be eligible, in whole or in part, for the
dividends received deduction available to corporations. Since the investment
income of the Short/Intermediate Term Fixed-Income Fund is derived from
interest rather than dividends, no portion of such distributions is eligible
for the dividends received deduction available to corporations. Distributions
of net realized long-term capital gains are taxable as long-term capital gains
regardless of how long you have held your Fund shares. Redemptions of shares
of the Funds are taxable events on which a shareholder may realize a gain or
loss.
The Funds will mail to each of their shareholders a statement indicating the
amount and federal income tax status of all distributions made during the
year. In addition to federal taxes, shareholders of the Funds may be subject
to state and local taxes on distributions. Shareholders should consult their
tax advisors about the tax effect of distributions and withdrawals from the
Funds and the use of the Automatic Withdrawal Plan and the Exchange Privilege.
The tax consequences described in this section apply whether distributions are
taken in cash or reinvested in additional shares.
OPERATION OF THE FUNDS
===============================================================================
The Funds are diversified series of Brundage, Story and Rose Investment Trust,
an open-end management investment company organized as an Ohio business trust
on October 3, 1990. The Board of Trustees supervises the business activities
of the Trust. Like other mutual funds, the Trust retains various organizations
to perform specialized services for the Funds.
<PAGE>
The Trust retains Brundage, Story and Rose LLC, One Broadway, New York, New
York (the "Adviser"), to manage the Funds' investments. The Adviser is an
independent investment counsel firm that has advised individual and
institutional clients since 1932. The Equity Fund and the Short/Intermediate
Term Fixed-Income Fund pay the Adviser a fee at the annual rate of .65% and
.50%, respectively, of the average value of their daily net assets. The
Adviser may be deemed to control the Equity Fund by virtue of the fact that
the Adviser, principals of the Adviser and employee benefit plans sponsored by
the Adviser own of record more than 25% of the Fund's shares as of the date of
this Prospectus.
Gregory E. Ratte, a principal of the Adviser, is primarily responsible
for managing the portfolio of the Equity Fund. Mr. Ratte has been employed
by the Adviser since 1989 and has been managing the Equity Fund's portfolio
since November 1994. H. Dean Benner, a principal of the Adviser, is
primarily responsible for managing the portfolio of the Short/Intermediate
Term Fixed-Income Fund. Mr. Benner has been employed by the Adviser since
1990 and has been managing the Short/Intermediate Term Fixed-Income Fund's
portfolio since January 1991.
The Funds are responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Funds' shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Funds, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders,
expenses of shareholders' meetings and proxy solicitations, and such
extraordinary or non-recurring expenses as may arise, including litigation to
which the Funds may be a party and indemnification of the Trust's officers and
Trustees with respect thereto.
<PAGE>
The Trust has retained MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio, to
serve as the Funds' transfer agent, dividend paying agent and shareholder
service agent. MGF Service Corp. is a subsidiary of Leshner Financial, Inc.,
of which Robert H. Leshner is the controlling shareholder.
MGF Service Corp. also provides accounting and pricing services to the Funds.
MGF Service Corp. receives a monthly fee from each Fund for calculating
daily net asset value per share and maintaining such books and records
as are necessary to enable it to perform its duties.
In addition, MGF Service Corp. has been retained to provide administrative
services to the Funds. In this capacity, MGF Service Corp. supplies executive,
administrative and regulatory services, supervises the preparation of tax
returns, and coordinates the preparation of reports to shareholders and
reports to and filings with the Securities and Exchange Commission and state
securities authorities. Each Fund pays MGF Service Corp. a fee for these
administrative services at the annual rate of .2% of the average value of its
daily net assets up to $50,000,000, .175% of such assets from $50,000,000 to
$100,000,000 and .15% of such assets in excess of $100,000,000; provided,
however, that the minimum fee is $1,000 per month with respect to each Fund.
Midwest Group Financial Services, Inc., 312 Walnut Street, Cincinnati, Ohio
(the "Underwriter"), serves as principal underwriter for the Funds and, as
such, is the exclusive agent for the distribution of shares of the Funds. The
Underwriter is a subsidiary of Leshner Financial, Inc. Robert G. Dorsey,
Treasurer of the Underwriter, is Vice President of the Trust. John F. Splain,
Secretary and General Counsel of the Underwriter, is Secretary of the Trust.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Adviser may give consideration to
sales of shares of the Funds as a factor in the selection of brokers and
dealers to execute portfolio transactions of the Funds.
<PAGE>
Shares of each Fund have equal voting rights and liquidation rights, and are
voted in the aggregate and not by Fund except in matters where a separate vote
is required by the Investment Company Act of 1940 or when the matter affects
only the interest of a particular Fund. When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each
full share owned and fractional votes for fractional shares owned. The Trust
does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the Investment Company Act
of 1940 in order to facilitate communications among shareholders.
DISTRIBUTION PLAN
===============================================================================
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Funds
have adopted a plan of distribution (the "Plan") under which the Funds may
directly incur or reimburse the Adviser for certain distribution-related
expenses, including payments to securities dealers and others who are engaged
in the sale of shares of the Funds and who may be advising investors regarding
the purchase, sale or retention of Fund shares; expenses of maintaining
personnel who engage in or support distribution of shares or who render
shareholder support services not otherwise provided by MGF Service Corp.;
expenses of formulating and implementing marketing and promotional activities,
including direct mail promotions and mass media advertising; expenses of
preparing, printing and distributing sales literature and prospectuses and
statements of additional information and reports for recipients other than
existing shareholders of the Funds; expenses of obtaining such information,
analyses and reports with respect to marketing and promotional activities as
the Trust may, from time to time, deem advisable; and any other expenses
related to the distribution of the Funds' shares.
The annual limitation for payment of expenses pursuant to the Plan is .25% of
each Fund's average daily net assets. Unreimbursed expenditures will not be
carried over from year to year. In the event the Plan is terminated by a Fund
in accordance with its terms, the Fund will not be required to make any
payments for expenses incurred by the Adviser after the date the Plan
terminates.
<PAGE>
Pursuant to the Plan, the Funds may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to
state law. If a bank were prohibited from continuing to perform all or a part
of such services, management of the Trust believes that there would be no
material impact on the Funds or their shareholders. Banks may charge their
customers fees for offering these services to the extent permitted by
regulatory authorities, and the overall return to those shareholders availing
themselves of the bank services will be lower than to those shareholders who
do not. The Funds may from time to time purchase securities issued by banks
which provide such services; however, in selecting investments for the Funds,
no preference will be shown for such securities.
CALCULATION OF SHARE PRICE
===============================================================================
On each day that the Trust is open for business, the share price (net asset
value) of the shares of each Fund is determined as of the close of the regular
session of trading on the New York Stock Exchange, currently 4:00 p.m.,
Eastern time. The Trust is open for business on each day the New York Stock
Exchange is open for business and on any other day when there is sufficient
trading in a Fund's investments that its net asset value might be materially
affected. The net asset value per share of each Fund is calculated by dividing
the sum of the value of the securities held by the Fund plus cash or other
assets minus all liabilities (including estimated accrued expenses) by the
total number of shares outstanding of the Fund, rounded to the nearest cent.
U.S. Government obligations are valued at their most recent bid prices as
obtained from one or more of the major market makers for such securities.
Other portfolio securities are valued as follows: (i) 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
New York Stock Exchange on the day the securities are being valued, or, if not
traded on a particular day, at the closing bid price, (ii) securities traded
in the over-the-counter market, and which are not quoted by NASDAQ, are valued
at the last sale price (or, if the last sale price is not readily available,
at the last bid price as quoted by brokers that make markets in the
securities) as of the close of the regular session of trading on the New York
Stock Exchange on the day the securities are being valued, (iii) securities
which are traded both in the over-the-counter market and on a stock exchange
are valued according to the broadest and most representative market, and (iv)
securities (and other assets) 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 net asset value per share of
each Fund will fluctuate with the value of the securities it holds.
<PAGE>
PERFORMANCE INFORMATION
===============================================================================
From time to time, each Fund may advertise its "average annual total return."
Each Fund may also advertise "yield." Both yield and average annual total
return figures are based on historical earnings and are not intended to
indicate future performance.
The "average annual total return" of a Fund refers to the average annual
compounded rates of return over the most recent 1, 5 and 10 year periods or,
where the Fund has not been in operation for such period, over the life of the
Fund (which periods will be stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions. A Fund
may also advertise total return (a "nonstandardized quotation") which is
calculated differently from "average annual total return." A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of
a period, assuming no activity in the account other than reinvestment of
dividends and capital gains distributions. A nonstandardized quotation of
total return may also indicate average annual compounded rates of return over
periods other than those specified for "average annual total return." A
nonstandardized quotation of total return will always be accompanied by a
Fund's "average annual total return" as described above.
The "yield" of a Fund is computed by dividing the net investment income per
share earned during a thirty-day (or one month) period stated in the
advertisement by the net asset value per share on the last day of the period
(using the average number of shares entitled to receive dividends). The yield
formula assumes that net investment income is earned and reinvested at a
constant rate and annualized at the end of a six-month period.
From time to time the Funds may advertise their performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc.("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week,
Barron's, Fortune or Morningstar Mutual Fund Values. The Funds may also
compare their performance to that of other selected mutual funds, averages of
the other mutual funds within their categories as determined by Lipper, or
recognized indicators such as the Dow Jones Industrial Average and the
Standard & Poor's 500 Stock Index. In connection with a ranking, the Funds may
provide additional information, such as the particular category of funds to
which the ranking relates, the number of funds in the category, the criteria
upon which the ranking is based, and the effect of fee waivers and/or expense
reimbursements, if any. The Funds may also present their performance and other
investment characteristics, such as volatility or a temporary defensive
posture, in light of the Adviser's view of current or past market conditions
or historical trends.
<PAGE>
Further information about the Funds' performance is contained in the Trust's
annual report which can be obtained by shareholders at no charge by calling
MGF Service Corp. (Nationwide call toll-free 800-320-2212; in Cincinnati call
629-2070) or by writing to the Trust at the address on the front of this
Prospectus.
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
===============================================================================
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
===============================================================================
Malcolm D. Clarke, Jr.
Francis S. Branin, Jr.
Cheryl L. Grandfield
Antoinette Geyelin Hoar
Jerome B. Lieber
William M.R. Mapel
James G. Pepper
Crosby R. Smith
Charles G. Watson
INVESTMENT ADVISER
===============================================================================
BRUNDAGE, STORY AND ROSE
One Broadway
New York, New York 10004
UNDERWRITER
===============================================================================
MIDWEST GROUP FINANCIAL SERVICES, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
===============================================================================
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICE
Nationwide: (Toll-Free) 800-320-2212
Cincinnati: 513-629-2070
RATE LINE
Nationwide: (Toll-Free) 800-852-4052
TABLE OF CONTENTS
===============================================================================
Expense Information................................ 2
Financial Highlights............................... 3
Investment Objectives, Investment Policies and
Risk Considerations.............................. 5
How to Purchase Shares............................. 11
Shareholder Services............................... 12
How to Redeem Shares............................... 13
Exchange Privilege................................. 15
Dividends and Distributions........................ 15
Taxes.............................................. 16
Operation of the Funds............................. 16
Distribution Plan.................................. 17
Calculation of Share Price......................... 18
Performance Information............................ 19
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Trust. This Prospectus does not constitute an offer by the Trust to sell
shares in any State to any person to whom it is unlawful for the Trust to make
such offer in such State.
BRUNDAGE,
STORY AND ROSE
INVESTMENT TRUST
===============================================================================
Prospectus
April 1, 1996
Equity Fund
Short/Intermediate Term
Fixed-Income Fund
<PAGE>
ACCOUNT APPLICATION (check appropriate Fund) Please mail account application
to:
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
o EQUITY FUND $_____________________
o SHORT/INTEMEDIATE TERM FIXED-INCOME FUND $
TOTAL $_____________________
ACCOUNT NO.__________________
(For Fund Use Only)
FOR BROKER/DEALER USE ONLY
Firm Name:____________________________
Home Office Address:______________________________________
Branch Address:___________________________________________
Rep Name & No.:___________________________________________
Rep Signature:____________________________________________
o Check or draft enclosed payable to the Fund(s) designated above.
o Bank Wire From: ___________________________________________________________
o Exchange From: ___________________________________________________________
(Fund Name) (Fund Account Number)
ACCOUNT NAME S.S. #/TAX L.D.#
_________________________________________________ _____________________________
Name of Individual, Corporation, Organization, (In case of custodial account
or Minor, etc please list minor's S.S.#)
________________________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian
o Other ___________________________
ADDRESS PHONE
_________________________________________________ ( )____________________
Street or P.O. Box Business Phone
_________________________________________________ ( )____________________
City State Zip Home Phone
Check Appropriate Box: o Individual
o Joint Tenant (Right of survivorship presumed) o Partnership o Corporation
o Trust o Custodial o Non-Profit o Other
Occupation and Employer Name/Address___________________________________________
Are you an associated person of an NASD member? o Yes o No
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that
the Taxpayer Identification Number listed above is my correct number. Check
box if appropriate: o I am exempt from backup withholding under the provisions
of section 3406(a)(1)(c) of the Internal Revenue Code; or I am not subject
to backup withholding because I have not been notified that I am subject to
backup withholding as a result of a failure to report all interest or
dividends; or the Internal Revenue Service has notified me that I am no
longer subject to backup withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do
not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital gains
distributions paid in cash, long term capital gains distributions reinvested
in additional shares.
o Cash Option -- Income distributions and capital gains distributions paid
in cash.
REDEMPTION OPTIONS
I (we) authorize the Trust or MGF Service Corp. to act upon instructions
received by telephone, or upon receipt of and in the amounts of checks as
described below (if checkwriting is selected), to have amounts withdrawn from
my (our) account in any fund of the Trust (see prospectus for limitations on
this option) and:
o WIRED ($1,000 minimum OR MAILED to my (our) bank account designated below. I
(we) further authorize the use of automated cash transfers to and from the
account designated below.
NOTE: For wire redemptions, the indicated bank should be a commercial bank.
PLEASE ATTACH A VOIDED CHECK FOR THE ACCOUNT.
Bank Account Number____________________________________________
Bank Routing Transit Number____________________________________
Name of Account Holder_________________________________________________________
Bank Name______________________________________________________________________
Bank Address___________________________________________________________________
City State
o CHECKWRITING (A signature card must be completed) -- Short/Intermediate Term
Fixed-Income Fund only ...to deposit the proceeds of such redemptions in the
Brundage, Story & Rose Investment Trust Pay Through Draft Account (PTDA)
or otherwise arrange for application of such proceeds to payment of said
checks. I (we) authorize the persons whose signatures appear on the PTDA
signature card to draw checks on the PTDA and to cause the redemption of
my (our) shares of the Trust. I (we) agree to be bound by the Rules and
Regulations for the PTDA as such Rules and Regulations may be amended from
time to time
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Trust's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints MGF Service Corp. as his agent to enter orders for shares whether by
direct purchase or exchange, to receive dividends and distributions for
automatic reinvestment in additional shares of the Trust for credit to the
investor's account and to surrender for redemption shares held in the
investor's account in accordance with any of the procedures elected above or
for payment of service charges incurred by the investor. The investor further
agrees that MGF Service Corp. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this
Application. The investor hereby ratifies any instructions given pursuant to
this Application and for himself and his successors and assigns does hereby
release the Trust, Brundage, Story and Rose LLC, MGF Service Corp., Midwest
Group Financial Services, Inc., and their respective officers, employees,
agents and affiliates from any and all liability in the performance of the
acts instructed herein. Neither the Trust, MGF Service Corp., nor their
respective affiliates will be liable for complying with telephone instructions
they reasonably believe to be genuine or for any loss, damage, cost or expense
in acting on such telephone instructions. The investor(s) will bear the risk
of any such loss. The Trust or MGF Service Corp., or both, will employ
reasonable procedures to determine that telephone instructions are genuine. If
the Trust and/or MGF Service Corp. do not employ such procedures, they may be
liable for losses due to unauthorized or fraudulent instructions. These
procedures may include, among others, requiring forms of personal
identification prior to acting upon telephone instructions, providing written
confirmation of the transactions and/or tape recording telephone instructions.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
- ---------------------------------------------- --------------------------------
Signature of Individual Owner, Corporate Signature of Joint Owner, if Any
Officer, Trustee, etc.
- ---------------------------------------------- --------------------------------
Title of Corporate Officer, Trustee, etc. Date
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST COMPLETE THE
RESOLUTION FORM ON THE REVERSE SIDE. UNLESS OTHERWISE SPECIFIED, EACH JOINT
OWNER SHALL HAVE FULL AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT.
<PAGE>
AUTOMATIC INVESTMENT PLAN (COMPLETE FOR INVESTMENTS INTO THE FUND(S))
The Automatic Investment Plan is available for all established accounts of
Brundage, Story and Rose Investment Trust. There is no charge for this
service, and it offers the convenience of automatic investing on a regular
basis. The minimum investment is $50.00 per month. For an account that is
opened by using this Plan, the minimum initial and subsequent investments must
be $50.00. Though a continuous program of 12 monthly investments is
recommended, the Plan may be discontinued by the shareholder at any time.
Please invest $ _________________per month in (Check applicable Fund)
ABA Routing Number__________________________________________
o Equity Fund o Short/Intermediate Term Fixed-Income Fund
FI Account Number___________________________________________
o Checking Account o Savings Account
- ----------------------------------------------------------------------
Name of Financial Institution (FI) Please make my automatic investment on:
o the last business day of each month
o the 15th day of each month
o both the 15th and last business day
- ----------------------------------------------------------------------
City State
X_____________________________________________________________________
(Signature of Depositor EXACTLY as it appears on FI Records)
X___________________________________________________________
(Signature of Joint Tenant - if any)
(Joint Signatures are required when bank account is in joint names. Please
sign exactly as signature appears on your FI's records.)
PLEASE ATTACH A VOIDED CHECK FOR THE AUTOMATIC INVESTMENT PLAN.
INDEMNIFICATION TO DEPOSITOR'S BANK
In consideration of your participation in a plan which MGF Service Corp.
("MGF") has put into effect, by which amounts, determined by your depositor,
payable to the applicable Fund designated above, for purchase of shares of
said Fund, are collected by MGF, MGF hereby agrees:
MGF will indemnify and hold you harmless from any liability to any person
or persons whatsoever arising out of the payment by you of any amount drawn by
the Funds to their own order on the account of your depositor or from any
liability to any person whatsoever arising out of the dishonor by you whether
with or without cause or intentionally or inadvertently, of any such checks.
MGF will defend, at its own cost and expense, any action which might be
brought against you by any person or persons whatsoever because of your
actions taken pursuant to the foregoing request or in any manner arising by
reason of your participation in this arrangement. MGF will refund to you any
amount erroneously paid by you to the Funds on any such check if the claim for
the amount of such erroneous payment is made by you within six (6) months from
the date of such erroneous payment; your participation in this arrangement and
that of the Funds may be terminated by thirty (30) days written notice from
either party to the other.
AUTOMATIC WITHDRAWAL PLAN (COMPLETE FOR WITHDRAWALS FROM THE FUND(S))
This is an authorization for you to withdraw $_________ from my mutual fund
account beginning the last business day of the month of
.
Please Indicate Withdrawal Schedule (Check One): Please indicate which Fund:
o Equity Fund o Short/Intermediate Term Fixed-Income Fund
o MONTHLY -- Withdrawals will be made on the last business day of each month.
o QUARTERLY -Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
o ANNUALLY --Please make withdrawals on the last business day of the month of:
______________________________________.
Please Select Payment Method (Check One):
o EXCHANGE: Please exchange the withdrawal proceeds into another account
number: ____ ____ -- ____ ____ ____ ____ ____ ____ -- ____
o CHECK: Please mail a check for my withdrawal proceeds to the mailing
address on this account.
o ACH TRANSFER: Please send my withdrawal proceeds via ACH transfer to
my bank checking or savings account as indicated below. I
understand that the transfer will be completed in two to three
_______________________________________________________ business
days and that there is no charge.
o BANK WIRE: Please send my withdrawal proceeds via bank wire, to the
account indicated below. I understand that the wire will be completed in
one business day and that there is an $8.00 fee.
PLEASE ATTACH A VOIDED _________________________________________________
CHECK FOR ACH OR BANK WIRE Bank Name Bank Address
_________________________________________________
Bank ABA# Account #
Account
Name
o SEND TO SPECIAL PAYEE (OTHER THAN APPLICANT): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee__________________________________________________________________
Please send to:________________________________________________________________
Street address City State Zip
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of
Brundage, Story and Rose Investment Trust (the Trust) and that
_______________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf
of the corporation or organization and to take any action for it as may be
necessary or appropriate with respect to its shareholder account with the
Trust, and it is FURTHER RESOLVED: That any one of the above noted officers is
authorized to sign any documents necessary or appropriate to appoint MGF
Service Corp. as redemption agent of the corporation or organization for
shares of the applicable series of the Trust, to establish or acknowledge
terms and conditions governing the redemption of said shares and to otherwise
implement the privileges elected on the Application, and it is (If
checkwriting privilege is not desired, please cross out the following
resolution.) FURTHER RESOLVED: That the corporation or organization
participate in the Brundage, Story and Rose Investment Pay Through Draft
Account (PTDA) and that until otherwise ordered in writing, MGF Service Corp.
is authorized to make redemptions of shares held by the corporation or
organization, and to make payment from PTDA upon and according to the check,
draft, note or order of this corporation or organization when signed by
_______________________________________________________________________________
and to receive the same when so signed to the credit of, or payment to, the
payee or any other holder without inquiry as to the circumstances of issue or
the disposition or proceeds, whether drawn to the individual order or tendered
in payment of individual obligations of the persons above named or other
officers of this corporation or organization or otherwise.
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
_______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on at which a quorum was
present and acting throughout, and that the same are now in full force and
effect. I further certify that the following is (are) duly elected officer(s)
of the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
NAME TITLE
_____________________________________ _______________________________________-
_____________________________________ _______________________________________
_____________________________________ _______________________________________
Witness my hand and seal of the corporation or organization this __________ day
of_______________________________________, 19_______
_____________________________________ _______________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
April 1, 1996
Brundage, Story and Rose Equity Fund
Brundage, Story and Rose Short/Intermediate Term Fixed-Income Fund
This Statement of Additional Information is not a
prospectus. It should be read in conjunction with the Prospectus
of Brundage, Story and Rose Investment Trust dated April 1, 1996.
A copy of the Prospectus can be obtained by writing the Trust at
312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202-4094, or by
calling the Trust nationwide toll-free 800-320-2212, in
Cincinnati 629-2070.
<PAGE>
March 27, 1996
STATEMENT OF ADDITIONAL INFORMATION
Brundage, Story and Rose Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TABLE OF CONTENTS
PAGE
THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS. . . . . . . . . . . . . 3
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS. . . . . . . . 22
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . 25
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . 27
THE INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . . . . . 29
DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
THE UNDERWRITER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECURITIES TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . 33
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . 35
CALCULATION OF SHARE PRICE. . . . . . . . . . . . . . . . . . . . . . 35
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
REDEMPTION IN KIND . . . . . . . . . . . . . . . . . . . . . . . . . . 37
HISTORICAL PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . 37
PRINCIPAL SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . 40
CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
MGF SERVICE CORP.. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ANNUAL REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
<PAGE>
THE TRUST
Brundage, Story and Rose Investment Trust (the "Trust") was
organized as an Ohio business trust on October 3, 1990. The
Trust currently offers two series of shares to investors, the
Brundage, Story and Rose Equity Fund (formerly the Brundage,
Story and Rose Growth & Income Fund) and the Brundage, Story and
Rose Short/Intermediate Term Fixed-Income Fund (referred to
individually as a "Fund" and collectively as the "Funds"). Each
Fund has its own investment objective and policies.
Each share of a Fund represents an equal proportionate
interest in the assets and liabilities belonging to that Fund
with each other share of that Fund and is entitled to such
dividends and distributions out of the income belonging to the
Fund as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights,
and the Trustees have the authority from time to time to divide
or combine the shares of any Fund into a greater or lesser number
of shares of that Fund so long as the proportionate beneficial
interest in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any
liquidation of a Fund, the holders of shares of the Fund being
liquidated will be entitled to receive as a class a distribution
out of the assets, net of the liabilities, belonging to that
Fund. Expenses attributable to any Fund are borne by that Fund.
Any general expenses of the Trust not readily identifiable as
belonging to a particular Fund are allocated by or under the
direction of the Trustees in such manner as the Trustees
determine to be fair and equitable. Generally, the Trustees
allocate such expenses on the basis of relative net assets or
number of shareholders. No shareholder is liable to further
calls or to assessment by the Trust without his express consent.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
A more detailed discussion of some of the terms used and
investment policies described in the Prospectus (see "Investment
Objectives, Investment Policies and Risk Considerations") appears
below:
MAJORITY. As used in the Prospectus and this Statement of
Additional Information, the term "majority" of the outstanding
shares of the Trust (or of either Fund) means the lesser of (1)
67% or more of the outstanding shares of the Trust (or the
applicable Fund) present at a meeting, if the holders of more
than 50% of the outstanding shares of the Trust (or the
applicable Fund) are present or represented at such meeting or
(2) more than 50% of the outstanding shares of the Trust (or the
applicable Fund).
<PAGE>
COMMERCIAL PAPER. Commercial paper consists of short-term
(usually from one to two hundred seventy days) unsecured
promissory notes issued by corporations in order to finance their
current operations. Each Fund will only invest in commercial
paper rated in one of the three highest categories by either
Moody's Investors Service, Inc. (Prime-1, Prime-2 or Prime-3) or
Standard & Poor's Ratings Group (A-1, A-2 or A-3), or which, in
the opinion of the Adviser, is of equivalent investment quality.
Certain notes may have floating or variable rates. Variable and
floating rate notes with a demand notice period exceeding seven
days will be subject to each Fund's restriction on illiquid
investments (see "Investment Limitations") unless, in the
judgment of the Adviser, such note is liquid.
The rating of Prime-1 is the highest commercial paper rating
assigned by Moody's Investors Service, Inc. Among the factors
considered by Moody's in assigning ratings are the following:
valuation of the management of the issuer; economic evaluation of
the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas;
evaluation of the issuer's products in relation to competition
and customer acceptance; liquidity; amount and quality of long-
term debt; trend of earnings over a period of 10 years; financial
strength of the parent company and the relationships which exist
with the issuer; and recognition by the management of obligations
which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These
factors are all considered in determining whether the commercial
paper is rated Prime-1, Prime-2 or Prime-3. Commercial paper
rated A (highest quality) by Standard & Poor's Ratings Group has
the following characteristics: liquidity ratios are adequate to
meet cash requirements; long-term senior debt is rated "A" or
better, although in some cases "BBB" credits may be allowed; the
issuer has access to at least two additional channels of
borrowing; basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances; typically, the issuer's
industry is well established and the issuer has a strong position
within the industry; and the reliability and quality of
management are unquestioned. The relative strength or weakness
of the above factors determines whether the issuer's commercial
paper is rated A-1, A-2, or A-3.
<PAGE>
BANK DEBT INSTRUMENTS. Bank debt instruments in which the
Funds may invest consist of certificates of deposit, bankers'
acceptances and time deposits issued by national banks and state
banks, trust companies and mutual savings banks, or of banks or
institutions the accounts of which are insured by the Federal
Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation. Certificates of deposit are negotiable
certificates evidencing the indebtedness of a commercial bank to
repay funds deposited with it for a definite period of time
(usually from fourteen days to one year) at a stated or variable
interest rate. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft which has been
drawn on it by a customer, which instruments reflect the
obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Time deposits are non-
negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Each Fund
will not invest in time deposits maturing in more than seven days
if, as a result thereof, more than 10% of the value of its net
assets would be invested in such securities and other illiquid
securities.
<PAGE>
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The average
life of mortgage-backed securities varies with the maturities of
the underlying mortgage instruments (generally up to 30 years)
and with the extent of prepayments of the mortgages themselves.
Any such prepayments are passed through to the certificate
holder, reducing the stream of future payments. Prepayments tend
to rise in periods of falling interest rates, decreasing the
average life of the certificate and generating cash which must be
invested in a lower interest rate environment. This could limit
the appreciation potential of the certificates when compared to
similar debt obligations which may not be paid down at will. The
coupon rates of mortgage-backed securities are lower than the
interest rate on the underlying mortgages by the amount of fees
paid to the issuing agencies, usually approximately 1/2 of 1%.
When prevailing interest rates increase, the value of the
mortgage-backed securities may decrease, as do other non-
redeemable debt securities. However, when interest rates
decline, the value of mortgage-backed securities may not rise on
a comparable basis with other non-redeemable debt securities.
Mortgage-backed securities include certificates issued by
the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation and the Government National Mortgage
Association. The Federal National Mortgage Association ("FNMA")
is a government sponsored corporation owned entirely by private
stockholders. The guarantee of payments under these instruments
is that of FNMA only. They are not backed by the full faith and
credit of the U.S. Treasury but the U.S. Treasury may extend
credit to FNMA through discretionary purchases of its securities.
The average life of the mortgages backing newly issued FNMA
Certificates is approximately 10 years. The Federal Home Loan
Mortgage Corporation ("FHLMC") is a corporate instrumentality of
the U.S. Government whose stock is owned by the Federal Home Loan
Banks. Certificates issued by FHLMC represent interests in
mortgages from its portfolio. FHLMC guarantees payments under
its certificates but this guarantee is not backed by the full
faith and credit of the United States and FHLMC does not have
authority to borrow from the U.S. Treasury. The average life of
the mortgages backing newly issued FHLMC Certificates is
approximately 10 years. The Government National Mortgage
Association ("GNMA") Certificates represent pools of mortgages
insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. The
guarantee of payments under GNMA Certificates is backed by the
full faith and credit of the United States. The average life of
the mortgages backing newly issued GNMA Certificates is
approximately 12 years.
<PAGE>
The Short/Intermediate Term Fixed-Income Fund may also
purchase mortgage-backed securities issued by financial
institutions, mortgage banks, and securities broker-dealers (or
affiliates of such institutions established to issue these
securities) in the form of collateralized mortgage obligations
("CMOs"). CMOs are obligations fully collateralized directly or
indirectly by a pool of mortgages on which payments of principal
and interest are passed through to the holders of the CMOs,
although not necessarily on a pro rata basis, on the same
schedule as they are received. The most common structure of a
CMO contains four classes of securities; the first three pay
interest at their stated rates beginning with the issue date, the
final one is typically an accrual class (or Z bond). The cash
flows from the underlying mortgage collateral are applied first
to pay interest and then to retire securities. The classes of
securities are retired sequentially. All principal payments are
directed first to the shortest-maturity class (or A bonds). When
those securities are completely retired, all principal payments
are then directed to the next-shortest-maturity security (or B
bond). This process continues until all of the classes have been
paid off. Because the cash flow is distributed sequentially
instead of pro rata as with pass-through securities, the cash
flows and average lives of CMOs are more predictable, and there
is a period of time during which the investors in the longer-
maturity classes receive no principal paydowns.
Commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage banks, and other secondary
market issuers also create pass-through pools of conventional
residential mortgage loans. In addition, such issuers may be the
originators and/or servicers of the underlying mortgage loans as
well as the guarantors of the mortgage-backed securities. Pools
created by non-governmental issuers generally offer a higher rate
of interest than government and government-related pools because
of the absence of direct or indirect government or agency
guarantees. Timely payment of interest and principal of these
pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard
insurance, and letters of credit. The insurance and guarantees
are issued by governmental entities, private insurers, and the
mortgage poolers. Such insurance, guarantees, and the
creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-backed security meets the Fund's
investment quality standards. There can be no assurance that the
private insurers or guarantors can meet their obligations under
the insurance policies or guarantee arrangements. The Fund may
buy mortgage-backed securities without insurance or guarantees,
if the Adviser determines that the securities meet the Fund's
quality standards. The Fund will not purchase mortgage-backed
securities or any other assets which, in the opinion of the
Adviser, are illiquid if, as a result, more than 10% of the value
of the Fund's net assets will be illiquid. The Adviser will,
consistent with the Fund's investment objectives, policies, and
quality standards, consider making investments in new types of
mortgage-backed securities as such securities are developed and
offered to investors.
<PAGE>
The Short/Intermediate Term Fixed-Income Fund may also
purchase other asset-backed securities (unrelated to mortgage
loans) such as Certificates for Automobile ReceivablesSM
("CARS"SM) and Credit Card Receivable Securities. CARS represent
undivided fractional interests in a trust whose assets consist of
a pool of motor vehicle retail installment sales contracts and
security interests in the vehicles securing the contracts.
Payments of principal and interest on CARS are "passed-through"
monthly to certificate holders, and are guaranteed up to certain
amounts by a letter of credit issued by a financial institutional
unaffiliated with the trustee or originator of the trust.
Underlying sales contracts are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate
holders may also experience delays in payment or losses on CARS
if the full amounts due on underlying sales contracts are not
realized by the trust because of unanticipated legal or
administrative costs of enforcing the contracts, or because of
depreciation, damage, or loss of the vehicles securing the
contracts, or other factors. Credit Card Receivable Securities
are backed by receivables from revolving credit card agreements.
Credit balances on revolving credit card agreements ("Accounts")
are generally paid down more rapidly than are automobile
contracts. Most of the Credit Card Receivable Securities issued
publicly to date have been pass-through certificates. In order
to lengthen the maturity of Credit Card Receivable Securities,
most such securities provide for a fixed period during which only
interest payments on the underlying Accounts are passed through
to the security holder and principal payments received on such
Accounts are used to fund the transfer to the pool of assets
supporting the securities of additional credit card charges made
on an Account. The initial fixed period usually may be shortened
upon the occurrence of specified events which signal a potential
deterioration in the quality of the assets backing the security,
such as the imposition of a cap on interest rates. The ability
of the issuer to extend the life of an issue of Credit Card
Receivable Securities thus depends upon the continued generation
of additional principal amounts in the underlying Accounts and
the non-occurrence of specified events. The Internal Revenue
Code of 1986, which phased out the deduction for consumer
interest, as well as competitive and general economic factors,
could adversely affect the rate at which new receivables are
created in an Account and conveyed to an issuer, shortening the
expected weighted average life of the related security, and
reducing its yield. An acceleration in cardholders' payment
rates or any other event which shortens the period during which
additional credit card charges on an Account may be transferred
to the pool of assets supporting the related security could have
a similar effect on the weighted average life and yield. Credit
card holders are entitled to the protection of state and federal
consumer credit laws, many of which give such holder the right to
set off certain amounts against balances owed on the credit card,
thereby reducing amounts paid on Accounts. In addition, unlike
most other asset-backed securities, Accounts are unsecured
obligations of the cardholder.
<PAGE>
WHEN-ISSUED SECURITIES AND SECURITIES PURCHASED ON A TO-BE-
ANNOUNCED BASIS. The Short/Intermediate Term Fixed-Income Fund
may purchase debt obligations on a "when-issued" or "to-be-
announced" basis. The Fund will only make commitments to
purchase securities on a when-issued or to-be-announced ("TBA")
basis with the intention of actually acquiring the securities.
In addition, the Fund may purchase securities on a when-issued or
TBA basis only if delivery and payment for the securities takes
place within 120 days after the date of the transaction. In
connection with these investments, the Fund will direct the
Custodian to place cash, U.S. Government obligations or other
liquid high-grade debt obligations in a segregated account in an
amount sufficient to make payment for the securities to be
purchased. When a segregated account is maintained because the
Fund purchases securities on a when-issued or TBA basis, the
assets deposited in the segregated account will be valued daily
at market for the purpose of determining the adequacy of the
securities in the account. If the market value of such
securities declines, additional cash or securities will be placed
in the account on a daily basis so that the market value of the
account will equal the amount of the Fund's commitments to
purchase securities on a when-issued or TBA basis. To the extent
funds are in a segregated account, they will not be available for
new investment or to meet redemptions. Securities purchased on a
when-issued or TBA basis and the securities held in the Fund's
portfolio are subject to changes in market value based upon
changes in the level of interest rates (which will generally
result in all of those securities changing in value in the same
way, i.e., all those securities experiencing appreciation when
interest rates decline and depreciation when interest rates
rise). Therefore, if in order to achieve higher returns, the
Fund remains substantially fully invested at the same time that
it has purchased securities on a when-issued or TBA basis, there
will be a possibility that the market value of the Fund's assets
will experience greater fluctuation. The purchase of securities
on a when-issued or TBA basis may involve a risk of loss if the
broker-dealer selling the securities fails to deliver after the
value of the securities has risen.
<PAGE>
When the time comes for the Fund to make payment for
securities purchased on a when-issued or TBA basis, the Fund will
do so by using then available cash flow, by sale of the
securities held in the segregated account, by sale of other
securities or, although it would not normally expect to do so, by
directing the sale of the securities purchased on a when-issued
or TBA basis themselves (which may have a market value greater or
less than the Fund's payment obligation). Although the Fund will
only make commitments to purchase securities on a when-issued or
TBA basis with the intention of actually acquiring the
securities, the Fund may sell these securities before the
settlement date if it is deemed advisable by the Adviser as a
matter of investment strategy.
REPURCHASE AGREEMENTS. Repurchase agreements are
transactions by which a Fund purchases a security and
simultaneously commits to resell that security to the seller at
an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or
other default by the seller of a repurchase agreement, a Fund
could experience both delays in liquidating the underlying
security and losses. To minimize these possibilities, each Fund
intends to enter into repurchase agreements only with its
Custodian, with banks having assets in excess of $10 billion and
with broker-dealers who are recognized as primary dealers in U.S.
Government obligations by the Federal Reserve Bank of New York.
Collateral for repurchase agreements is held in safekeeping in
the customer-only account of the Funds' Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement
not terminable within seven days if, as a result thereof, more
than 10% of the value of its net assets would be invested in such
securities and other illiquid securities.
<PAGE>
Although the securities subject to a repurchase agreement
might bear maturities exceeding one year, settlement for the
repurchase would never be more than one year after the Fund's
acquisition of the securities and normally would be within a
shorter period of time. The resale price will be in excess of
the purchase price, reflecting an agreed upon market rate
effective for the period of time the Fund's money will be
invested in the securities, and will not be related to the coupon
rate of the purchased security. At the time a Fund enters into a
repurchase agreement, the value of the underlying security,
including accrued interest, will equal or exceed the value of the
repurchase agreement, and, in the case of a repurchase agreement
exceeding one day, the seller will agree that the value of the
underlying security, including accrued interest, will at all
times equal or exceed the value of the repurchase agreement. The
collateral securing the seller's obligation must be of a credit
quality at least equal to a Fund's investment criteria for
portfolio securities and will be held by the Custodian or in the
Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a
repurchase agreement is deemed to be a loan from a Fund to the
seller subject to the repurchase agreement and is therefore
subject to that Fund's investment restriction applicable to
loans. It is not clear whether a court would consider the
securities purchased by a Fund subject to a repurchase agreement
as being owned by that Fund or as being collateral for a loan by
the Fund to the seller. In the event of the commencement of
bankruptcy or insolvency proceedings with respect to the seller
of the securities before repurchase of the security under a
repurchase agreement, a Fund may encounter delay and incur costs
before being able to sell the security. Delays may involve loss
of interest or decline in price of the security. If a court
characterized the transaction as a loan and a Fund has not
perfected a security interest in the security, that Fund may be
required to return the security to the seller's estate and be
treated as an unsecured creditor of the seller. As an unsecured
creditor, a Fund would be at the risk of losing some or all of
the principal and income involved in the transaction. As with
any unsecured debt obligation purchased for a Fund, the Adviser
seeks to minimize the risk of loss through repurchase agreements
by analyzing the creditworthiness of the obligor, in this case,
the seller. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to
repurchase the security, in which case a Fund may incur a loss if
the proceeds to that Fund of the sale of the security to a third
party are less than the repurchase price. However, if the market
value of the securities subject to the repurchase agreement
becomes less than the repurchase price (including interest), the
Fund involved will direct the seller of the security to deliver
additional securities so that the market value of all securities
subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be
unsuccessful in seeking to enforce the seller's contractual
obligation to deliver additional securities.
<PAGE>
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its
portfolio securities subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral must, on each business
day, at least equal the value of the loaned securities. To be
acceptable as collateral, letters of credit must obligate a bank
to pay amounts demanded by a Fund if the demand meets the terms
of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. The Funds receive amounts equal to the
dividends or interest on loaned securities and also receive one
or more of (a) negotiated loan fees, (b) interest on securities
used as collateral, or (c) interest on short-term debt securities
purchased with such collateral; either type of interest may be
shared with the borrower. The Funds may also pay fees to placing
brokers as well as custodian and administrative fees in
connection with loans. Fees may only be paid to a placing broker
provided that the Trustees determine that the fee paid to the
placing broker is reasonable and based solely upon services
rendered, that the Trustees separately consider the propriety of
any fee shared by the placing broker with the borrower, and that
the fees are not used to compensate the Adviser or any affiliated
person of the Trust or an affiliated person of the Adviser or
other affiliated person. The terms of the Funds' loans must meet
applicable tests under the Internal Revenue Code and permit the
Funds to reacquire loaned securities on five days' notice or in
time to vote on any important matter.
INTEREST RATE FUTURES CONTRACTS. Interest rate futures
contracts ("futures" or "futures contracts") may be used as a
hedge against changes in prevailing levels of interest rates in
order to establish more definitely the effective return on
securities held or intended to be acquired by the Short/
Intermediate Term Fixed-Income Fund. In this regard, the Fund
could sell interest rate futures as an offset against the effect
of expected increases in interest rates and purchase such futures
as an offset against the effect of expected declines in interest
rates. The Fund will enter into futures contracts which are
traded on national futures exchanges and are standardized as to
maturity date and underlying financial instrument. The principal
interest rate futures exchanges in the United States are the
Board of Trade of the City of Chicago and the Chicago Mercantile
Exchange. Futures exchanges and trading are regulated under the
Commodity Exchange Act by the Commodity Futures Trading
Commission. Although techniques other than sale and purchase of
futures contracts could be used for these purposes, futures
contracts offer an effective and relatively low cost means of
implementing the Fund's objectives in these areas.
<PAGE>
The Fund will not enter into a futures contract if, as a
result thereof, (i) the then current aggregate futures market
prices of financial instruments required to be delivered under
open futures contract sales plus the then current aggregate
purchase prices of financial instruments required to be purchased
under open futures contract purchases would exceed 30% of the
Fund's total assets (taken at market value at the time of
entering into the contract) or (ii) more than 5% of the Fund's
total assets (taken at market value at the time of entering into
the contract) would be committed to margin deposits on such
futures contracts. In instances involving the purchase of
futures contracts by the Fund, an amount of cash, U.S. Government
obligations or other liquid, high-grade debt securities, equal to
the market value of the futures contracts (less any related
margin deposits), will be deposited in a segregated account with
the Custodian to cover the position, or alternative cover will be
employed thereby insuring that the use of such futures contracts
is unleveraged.
As an alternative to bona fide hedging as defined by the
CFTC, the Fund may comply with a different standard established
by CFTC rules with respect to futures contracts purchased by the
Fund incidental to the Fund's activities in the securities
markets, under which the value of the assets underlying such
positions will not exceed the sum of (a) cash set aside in an
identifiable manner or short-term U.S. Government obligations or
other U.S. dollar-denominated high-grade short-term debt
securities segregated for this purpose, (b) cash proceeds on
existing investments due within thirty days and (c) accrued
profits on the particular futures contract or option thereon. In
addition, CFTC regulations may impose limitations on the Fund's
ability to engage in certain yield enhancement and risk
management strategies. If the CFTC or other regulatory
authorities adopt different (including less stringent) or
additional restrictions, the Fund would comply with such new
restrictions.
<PAGE>
A futures contract provides for the future sale by one party
and purchase by another party of a specified amount of a specific
financial instrument (debt security) for a specified price, date,
time and place designated at the time the contract is made.
Brokerage fees are incurred when a futures contract is bought or
sold and margin deposits must be maintained. Entering into a
contract to buy is commonly referred to as buying or purchasing a
contract or holding a long position. Entering into a contract to
sell is commonly referred to as selling a contract or holding a
short position. Unlike when the Fund purchases or sells a
security, no price would be paid or received by the Fund upon the
purchase or sale of a futures contract. Upon entering into a
futures contract, and to maintain the Fund's open positions in
futures contracts, the Fund would be required to deposit with the
Custodian in a segregated account in the name of the futures
broker an amount of cash, U.S. Government obligations, suitable
money market instruments, or liquid, high-grade debt securities,
known as "initial margin." The margin required for a particular
futures contract is set by the exchange on which the contract is
traded, and may be significantly modified from time to time by
the exchange during the term of the contract. Futures contracts
are customarily purchased and sold on margins that may range
upward from less than 5% of the value of the contract being
traded.
If the price of an open futures contract changes (by
increase in the case of a sale or by decrease in the case of a
purchase) so that the loss on the futures contract reaches a
point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin.
However, if the value of a position increases because of
favorable price changes in the futures contract so that the
margin deposit exceeds the required margin, the broker will pay
the excess to the Fund. These subsequent payments, called
"variation margin," to and from the futures broker, are made on a
daily basis as the price of the underlying assets fluctuate
making the long and short positions in the futures contract more
or less valuable, a process known as "marking to the market."
The Fund expects to earn interest income on its margin deposits.
<PAGE>
Although futures contracts typically require actual future
delivery of and payment for financial instruments, in practice
most futures contracts are usually closed out before the delivery
date. Closing out an open futures contract sale or purchase is
effected by entering into an offsetting futures contract purchase
or sale, respectively, for the same aggregate amount of the
identical type of financial instrument and the same delivery
date. If the offsetting purchase price is less than the original
sale price, the Fund realizes a gain; if it is more, the Fund
realizes a loss. Conversely, if the offsetting sale price is
more than the original purchase price, the Fund realizes a gain;
if it is less, the Fund realizes a loss. The transaction costs
must also be included in these calculations. There can be no
assurance, however, that the Fund will be able to enter into an
offsetting transaction with respect to a particular contract at a
particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund will continue to be required to
maintain the margin deposits on the contract. As an example of
an offsetting transaction in which the financial instrument is
not delivered, the contractual obligations arising from the sale
of one contract of September Treasury Bills on an exchange may be
fulfilled at any time before delivery of the contract is required
(i.e., on a specified date in September, the "delivery month") by
the purchase of one contract of September Treasury Bills on the
same exchange. In such instance, the difference between the
price at which the futures contract was sold and the price paid
for the offsetting purchase, after allowance for transaction
costs, represents the profit or loss to the Fund.
The prices of futures contracts are volatile and are
influenced, among other things, by actual and anticipated changes
in interest rates, which in turn are affected by fiscal and
monetary policies and national and international political and
economic events. Most United States futures exchanges limit the
amount of fluctuation permitted in futures contract prices during
a single trading day. The daily limit establishes the maximum
amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a
particular type of contract, no trades may be made on that day at
a price beyond that limit. The daily limit governs only price
movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices
have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting
some futures traders to substantial losses.
<PAGE>
Because of the low margin deposits required, futures trading
involves an extremely high degree of leverage. As a result, a
relatively small price movement in a futures contract may result
in immediate and substantial loss or gain to the investor. For
example, if at the time of purchase, 10% of the value of the
futures contract is deposited as margin, a subsequent 10%
decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original
margin deposit, if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. However,
the Fund would presumably have sustained comparable losses if,
instead of the futures contract, it had invested in the
underlying financial instrument and sold it after the decline.
Furthermore, in the case of a futures contract purchase, in order
to be certain that the Fund has sufficient assets to satisfy its
obligations under a futures contract, the Fund earmarks to the
futures contract money market instruments equal in value to the
current value of the underlying instrument less the margin
deposit.
The Fund may elect to close some or all of its futures
positions at any time prior to their expiration. The Fund would
do so to reduce exposure represented by long futures positions or
increase exposure represented by short futures positions. The
Fund may close its positions by taking opposite positions which
would operate to terminate the Fund's position in the futures
contracts. Final determinations of variation margin would then
be made, additional cash would be required to be paid by or
released to the Fund, and the Fund would realize a loss or a
gain. Futures contracts may be closed out only on the exchange
or board of trade where the contracts were initially traded.
Although the Fund intends to purchase or sell futures contracts
only on exchange or boards of trade where there appears to be an
active market, there is no assurance that a liquid market on an
exchange or board of trade will exist for any particular contract
at any particular time. In such event, it might not be possible
to close a futures contract, and in the event of adverse price
movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event futures
contracts have been used to hedge portfolio securities, the Fund
would continue to hold securities subject to the hedge until the
futures contracts could be terminated. In such circumstances, an
increase in the price of the securities, if any, might partially
or completely offset losses on the futures contract. However, as
described below, there is no guarantee that the price of the
securities will, in fact, correlate with the price movements in
the futures contract and thus provide an offset to losses on a
futures contract.
<PAGE>
A decision of whether, when and how to hedge involves skill
and judgment, and even a well-conceived hedge may be unsuccessful
to some degree because of interest rate trends. There are
several risks in connection with the use by the Fund of futures
contracts as a hedging device. One risk arises because of the
imperfect correlation between movements in the prices of the
futures contracts and movements in the prices of securities which
are the subject of the hedge. The Adviser will, however, attempt
to reduce this risk by entering into futures contracts whose
movements, in its judgment, will have a significant correlation
with movements in the prices of the Fund's portfolio securities
sought to be hedged. Successful use of futures contracts by the
Fund for hedging purposes is also subject to the Adviser's
ability to correctly predict movements in the direction of the
market. It is possible that, when the Fund has sold futures to
hedge its portfolio against decline in the securities on which
the futures are written might advance and the value of securities
held in the Fund's portfolio might decline. If this were to
occur, the Fund would lose money on the futures and also would
experience a decline in value in its portfolio securities.
However, while this might occur to a certain degree, the Adviser
believes that over time the value of the Fund's portfolio will
tend to move in the same direction as the securities underlying
the futures, which are intended to correlate to the price
movements of the portfolio securities sought to be hedged. It is
also possible that if the Fund were to hedge against the
possibility of a decline in the market (adversely affecting
securities held in its portfolio) and prices instead increased,
the Fund would lose part or all of the benefit of increased value
of those securities that it has hedged, because it would have
offsetting losses in its futures positions. In addition, in such
situations, if the Fund had insufficient cash, it might have to
sell securities to meet daily variation margin requirements.
Such sales of securities might be, but would not necessarily be,
at increased prices (which would reflect the rising market). The
Fund might have to sell securities at a time when it would be
disadvantageous to do so.
<PAGE>
In addition to the possibility that there might be an
imperfect correlation, or no correlation at all, between price
movements in the futures contracts and the portion of the
portfolio being hedged, the price movements of futures contracts
might not correlate perfectly with price movements in the
underlying security due to certain market distortions. First,
all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors might close
futures contracts through offsetting transactions which could
distort the normal relationship between the underlying
instruments and futures markets. Second, the margin requirements
in the futures market are less onerous than margin requirements
in the securities markets, and as a result the futures market
might attract more speculators than the securities markets do.
Increased participation by speculators in the futures market
might also cause temporary price distortions. Due to the
possibility of price distortion in the futures market and also
because of the imperfect correlation between price movements in
the underlying instruments and movements in the prices of futures
contracts, even a correct forecast of general market trends by
the Adviser might not result in a successful hedging transaction
over a very short time period.
Generally, the Fund is required, for federal income tax
purposes, to recognize as income for each taxable year its net
unrealized gains and losses on futures contracts as of the end of
the year as well as those actually realized during the year.
Gain or loss recognized with respect to a futures contract will
generally be 60% long-term capital gain or loss and 40% short-
term capital gain or loss, without regard to the holding period
of the contract. Futures contracts which are intended to hedge
against a change in the value of securities may be classified as
"mixed straddles," in which case the recognition of losses may be
deferred to a later year. In addition, sales of such futures
contracts on securities may affect the holding period of the
hedged security and, consequently, the nature of the gain or loss
on such security on disposition. In order for the Fund to
continue to qualify for federal income tax treatment as a
regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e.,
dividends, interest, income derived from loans of securities, and
gains from the sale of securities. In addition, gains realized
on the sale or other disposition of securities, including futures
contracts on securities held for less than three months, must be
limited to less than 30% of the Fund's annual gross income. In
order to avoid realizing excessive gains on securities held less
than three months, the Fund may be required to defer the closing
out of futures contracts beyond the time when it would otherwise
be advantageous to do so. It is anticipated that unrealized
gains on futures contracts, which have been open for less than
three months as of the end of the Fund's fiscal year and which
are recognized for tax purposes, will not be considered gains on
securities held less than three months for purposes of the 30%
test.
<PAGE>
The Fund will distribute to shareholders annually any net
gains which have been recognized for federal income tax purposes
from futures transactions (including unrealized gains at the end
of the Fund's fiscal year). Such distributions will be combined
with distributions of ordinary income or capital gains realized
on the Fund's other investments. Shareholders will be advised of
the nature of the payments.
COVERED CALL AND PUT OPTIONS. The Short/Intermediate Term
Fixed-Income Fund may write (sell) "covered" call options and
purchase covered put options, and purchase call and write put
options to close out options previously entered into by the Fund.
The purpose of writing covered call options and purchasing
covered put options will be to reduce the effect of price
fluctuations of the securities owned by the Fund (and involved in
the options) on the Fund's net asset value per share. Although
additional revenue may be generated through the use of covered
call options, the Adviser does not consider the additional
revenues which may be generated as the primary reason for writing
covered call options.
A call option gives the holder (buyer) the "right to
purchase" a security at a specified price (the exercise price) at
any time until a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he may
be assigned an exercise notice by the broker-dealer through whom
such option was sold, requiring him to deliver the underlying
security against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such
earlier time at which the writer effects a closing purchase
transaction by repurchasing an option identical to that
previously sold. To secure his obligation to deliver the
underlying security in the case of a call option, a writer is
required to deposit in escrow the underlying security or other
assets in accordance with the rules of the clearing corporation
and of the Exchanges. A put option gives the holder (buyer) the
"right to sell" a security at a specified price (the exercise
price) at any time until a certain date (the expiration date).
The Fund will only write covered call options and purchase
covered put options. This means that the Fund will only write a
call option or purchase a put option on a security which the Fund
already owns. The Fund will not write call options on when-
issued securities. In order to comply with the requirements of
the securities laws in several states, the Fund will not write a
covered call option or purchase a put option if, as a result, the
aggregate market value of all portfolio securities covering call
options or subject to put options exceeds 25% of the market value
of the Fund's net assets. Should these state laws change or
should the Fund obtain a waiver of their application, the Fund
reserves the right to increase this percentage.
<PAGE>
Portfolio securities on which put options will be purchased
and call options may be written will be purchased solely on the
basis of investment considerations consistent with the Fund's
investment objective. The writing of covered call options is a
conservative investment technique believed to involve relatively
little risk (in contrast to the writing of naked or uncovered
options, which the Fund will not do), but capable of enhancing
the Fund's total return. When writing a covered call option, the
Fund, in return for the premium, gives up the opportunity for
profit from a price increase in the underlying security above the
exercise price, but conversely retains the risk of loss should
the price of the security decline. Unlike one who owns
securities not subject to an option, the Fund has no control over
when it may be required to sell the underlying securities, since
it may be assigned an exercise notice at any time prior to the
expiration of its obligation as a writer. If a call option which
the Fund has written expires, the Fund will realize a gain in the
amount of the premium; however, such gain may be offset by a
decline in the market value of the underlying security during the
option period. If the call option is exercised, the Fund will
realize a gain or loss from the sale of the underlying security.
The Fund will purchase put options involving portfolio securities
only when the Adviser believes that a temporary defensive
position is desirable in light of market conditions, but does not
desire to sell the portfolio security. Therefore, the purchase
of put options will be utilized to protect the Fund's holdings in
an underlying security against a substantial decline in market
value. Such protection is, of course, only provided during the
life of the put option when the Fund, as the holder of the put
option, is able to sell the underlying security at the put
exercise price regardless of any decline in the underlying
security's market price. By using put options in this manner,
the Fund will reduce any profit it might otherwise have realized
in its underlying security by the premium paid for the put option
and by transaction costs. The security covering the call or put
option will be maintained in a segregated account of the Fund's
custodian. The Fund does not consider a security covered by a
call or put option to be "pledged" as that term is used in the
Fund's policy which limits the pledging or mortgaging of its
assets.
<PAGE>
The premium received is the market value of an option. The
premium the Fund will receive from writing a call option, or
which the Fund will pay when purchasing a put option, will
reflect, among other things, the current market price of the
underlying security, the relationship of the exercise price to
such market price, the historical price volatility of the
underlying security, the length of the option period, the general
supply of and demand for credit, and the general interest rate
environment. Once the decision to write a call option has been
made, the Adviser, in determining whether a particular call
option should be written on a particular security, will consider
the reasonableness of the anticipated premium and the likelihood
that a liquid secondary market will exist for those options. The
premium received by the Fund for writing covered call options
will be recorded as a liability of the Fund. This liability will
be adjusted daily to the option's current market value, which
will be the latest sale price at the time at which the net asset
value per share of the Fund is computed (close of the regular
session of trading on the New York Stock Exchange) or, in the
absence of such sale, the latest asked price. The option will be
terminated upon expiration of the option, the purchase of an
identical option in a closing transaction, or delivery of the
underlying security upon the exercise of the option. The premium
paid by the Fund when purchasing a put option will be recorded as
an asset of the Fund. This asset will be adjusted daily to the
option's current market value, which will be the latest sale
price at the time at which the net asset value per share of the
Fund is computed (close of the regular session of trading on the
New York Stock Exchange) or, in the absence of such sale, the
latest bid price. The assets will be terminated upon expiration
of the option, the selling (writing) of an identical option in a
closing transaction, or the delivery of the underlying security
upon the exercise of the option.
The Fund will only purchase a call option to close out a
covered call option it has written. The Fund will only write a
put option to close out a put option it has purchased. Such
closing transactions will be effected in order to realize a
profit on an outstanding call or put option, to prevent an
underlying security from being called or put, or to permit the
sale of the underlying security. Furthermore, effecting a
closing transaction will permit the Fund to write another call
option, or purchase another put option, on the underlying
security with either a different exercise price or expiration
date or both. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, or
purchased a put option, it will seek to effect a closing
transaction prior to, or concurrently with, the sale of the
security. There is, of course, no assurance that the Fund will
be able to effect such closing transactions at a favorable price.
If the Fund cannot enter into such a transaction, it may be
required to hold a security that it might otherwise have sold.
When the Fund writes a covered call option, or purchases a put
option, it runs the risk of not being able to participate in the
appreciation of the underlying security above the exercise price,
as well as the risk of being required to hold onto securities
that are depreciating in value. The Fund will pay transaction
costs in connection with the writing or purchasing of options to
close out previously written options. Such transaction costs are
normally higher than those applicable to purchases and sales of
portfolio securities.
<PAGE>
Options written by the Fund will normally have expiration
dates of less than three and nine months from the date written.
The exercise price of the options may be below, equal to, or
above the current market values of the underlying securities at
the time the options are written. From time to time, the Fund
may purchase an underlying security for delivery in accordance
with an exercise notice of a call option assigned to it, rather
than delivering such security from its portfolio. In such cases,
additional costs will be incurred. The Fund will realize a
profit or loss from a closing purchase transaction if the cost of
the transaction is less or more than the premium received from
the writing of the option; however, any loss so incurred in a
closing purchase transaction may be partially or entirely offset
by the premium received from a simultaneous or subsequent sale of
a different call or put option. Also, because increases in the
market price of a call option will generally reflect increases in
the market price of the underlying security, any loss resulting
from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned
by the Fund.
The Fund may engage in transactions involving dealer
options. Certain risks are specific to dealer options. While
the Fund would look to the Clearing Corporation to exercise
exchange-traded options, if the Fund were to purchase a dealer
option, it would rely on the dealer from whom it purchased the
option to perform if the option were exercised. Failure by the
dealer to do so would result in the loss of premium paid by the
Fund as well as loss of the expected benefit of the transaction.
Exchange-traded options generally have a continuous liquid market
while dealer options have none. Consequently, the Fund will
generally be able to realize the value of a dealer option it has
purchased only by exercising it or reselling it to the dealer who
issued it. Similarly, when the Fund writes a dealer option, it
generally will be able to close out the option transaction with
the dealer to which the Fund originally wrote the option. While
the Fund will seek to enter into dealer options only with dealers
who will agree to and which are expected to be capable of
entering into closing transactions with the Fund, there can be no
assurance that the Fund will be able to liquidate a dealer option
at a favorable price at any time prior to expiration. Until the
Fund, as a covered dealer call option writer, is able to effect a
closing purchase transaction, it will not be able to liquidate
securities (or other assets) used as cover until the option
expires or is exercised. In the event of insolvency of the
contra party, the Fund may be unable to liquidate a dealer
option. With respect to options written by the Fund, the
inability to enter into a closing transaction may result in
material losses to the Fund. For example, since the Fund must
maintain a secured position with respect to any call option on a
security it writes, the Fund may not sell the assets which it has
segregated to secure the position while it is obligated under the
option. This requirement may impair the Fund's ability to sell
portfolio securities at a time when such a sale might be
advantageous. The Staff of the Securities and Exchange
Commission has taken the position that purchased dealer options
and the assets used to secure written dealer options are illiquid
securities. Accordingly, the Fund will treat dealer options as
subject to the Fund's limitation on investments in illiquid
securities. If the Commission changes its position on the
liquidity of dealer options, the Fund will change its treatment
of such instruments accordingly.
<PAGE>
Certain option transactions have special tax results for the
Fund. Listed non-equity options will be considered to have been
closed out at the end of the Fund's fiscal year and any gains or
losses will be recognized for tax purposes at that time. Such
gains or losses would be characterized as 60% long-term capital
gain or loss and 40% short-term capital gain or loss regardless
of the holding period of the option. In addition, losses on
purchased puts and written covered calls, to the extent they do
not exceed the unrealized gains on the securities covering the
options, may be subject to deferral until the securities covering
the options have been sold. The holding period of the securities
covering these options will be deemed not to begin until the
option is terminated. For securities covering a purchase put,
this adjustment of the holding period may increase the gain from
sales of securities held less than three months. Losses on
written covered calls and purchased puts on securities may be
long-term capital losses, if the security covering the option was
held for more than twelve months prior to the writing of the
option.
FOREIGN SECURITIES. Subject to each Fund's investment
policies and quality and maturity standards, the Funds may invest
in the securities (payable in U.S. dollars) of foreign issuers
and in the securities of foreign branches of U.S. banks such as
negotiable certificates of deposit (Eurodollars). The Equity
Fund may also invest up to 10% of its net assets in non-U.S.
dollar-denominated securities principally traded in financial
markets outside the United States. Because the Funds may invest
in foreign securities, investment in the Funds involves risks
that are different in some respects from an investment in a fund
which invests only in securities of U.S. domestic issuers.
Foreign investments may be affected favorably or unfavorably by
changes in currency rates and exchange control regulations.
There may be less publicly available information about a foreign
company than about a U.S. company, and foreign companies may not
be subject to accounting, auditing and financial reporting
standards and requirements comparable to those applicable to U.S.
companies. There may be less governmental supervision of
securities markets, brokers and issuers of securities.
Securities of some foreign companies are less liquid or more
volatile than securities of U.S. companies, and foreign brokerage
commissions and custodian fees are generally higher than in the
United States. Settlement practices may include delays and may
differ from those customary in United States markets.
Investments in foreign securities may also be subject to other
risks different from those affecting U.S. investments, including
local political or economic developments, expropriation or
nationalization of assets, restrictions on foreign investment and
repatriation of capital, imposition of withholding taxes on
dividend or interest payments, currency blockage (which would
prevent cash from being brought back to the United States), and
difficulty in enforcing legal rights outside the United States.
<PAGE>
WARRANTS AND RIGHTS. Warrants are options to purchase
equity securities at a specified price and are valid for a
specific time period. Rights are similar to warrants, but
normally have a short duration and are distributed by the issuer
to its shareholders. The Equity Fund may purchase warrants and
rights, provided that the Fund does not invest more than 5% of
its net assets at the time of purchase in warrants and rights
other than those that have been acquired in units or attached to
other securities. Of such 5%, no more than 2% of the Fund's
assets at the time of purchase may be invested in warrants which
are not listed on either the New York Stock Exchange or the
American Stock Exchange.
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
The ratings of Moody's Investors Service, Inc. and Standard
& Poor's Ratings Group for corporate bonds in which the Funds may
invest are as follows:
MOODY'S INVESTORS SERVICE, INC.
Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A - Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
<PAGE>
STANDARD & POOR'S RATINGS GROUP
AAA - Bonds rated AAA have the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest
and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated
issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for bonds
in this category than for bonds in higher rated categories.
The ratings of Moody's Investors Service, Inc. and Standard
& Poor's Ratings Group for preferred stocks in which the Funds
may invest are as follows:
<PAGE>
MOODY'S INVESTORS SERVICE, INC.
aaa - An issue which is rated aaa is considered to be a top-
quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within the
universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade
preferred stock. This rating indicates that there is reasonable
assurance that earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a - An issue which is rated a is considered to be an upper-
medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classifications,
earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium
grade, neither highly protected nor poorly secured. Earnings and
asset protection appear adequate at present but may be
questionable over any great length of time.
STANDARD & POOR'S RATINGS GROUP
AAA - This is the highest rating that may be assigned by
Standard & Poor's to a preferred stock issue and indicates an
extremely strong capacity to pay the preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a
high-quality fixed income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay
the preferred stock obligations, although it is somewhat more
susceptible to the diverse effects of changes in circumstances
and economic conditions.
BBB - An issue rated BBB is regarded as backed by an
adequate capacity to pay the preferred stock obligations.
Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a
preferred stock in this category than for issues in the A
category.
<PAGE>
INVESTMENT LIMITATIONS
The Trust has adopted certain fundamental investment
limitations designed to reduce the risk of an investment in the
Funds. These limitations may not be changed with respect to
either Fund without the affirmative vote of a majority of the
outstanding shares of that Fund.
The limitations applicable to each Fund are:
1. BORROWING MONEY. The Fund will not borrow money,
except (a) from a bank, provided that immediately after such
borrowing there is asset coverage of 300% for all borrowings of
the Fund; or (b) from a bank or other persons for temporary
purposes only, provided that, when made, such temporary
borrowings are in an amount not exceeding 5% of the Fund's total
assets.
2. PLEDGING. The Fund will not mortgage, pledge,
hypothecate or in any manner transfer, as security for
indebtedness, any security owned or held by the Fund except as
may be necessary in connection with borrowings described in
limitation (1) above. The Fund will not mortgage, pledge or
hypothecate more than one-third of its assets in connection with
borrowings.
3. MARGIN PURCHASES. The Fund will not purchase any
securities on "margin" (except such short-term credits as are
necessary for the clearance of transactions). The deposit of
funds in connection with transactions in options, futures
contracts, and options on such contracts will not be considered a
purchase on "margin."
4. SHORT SALES. The Fund will not make short sales of
securities other than short sales "against the box."
5. COMMODITIES. The Fund will not purchase or sell
commodities or commodities futures except that the Fund may
purchase or sell financial futures contracts and related options.
6. MINERAL LEASES. The Fund will not purchase oil, gas or
other mineral leases, rights or royalty contracts.
7. UNDERWRITING. The Fund will not act as underwriter of
securities issued by other persons. This limitation is not
applicable to the extent that, in connection with the disposition
of portfolio securities, a Fund may be deemed an underwriter
under certain federal securities laws.
<PAGE>
8. ILLIQUID INVESTMENTS. The Fund will not purchase
securities for which no readily available market exists or engage
in a repurchase agreement maturing in more than seven days if, as
a result thereof, more than 10% of the value of the net assets of
the Fund would be invested in such securities.
9. REAL ESTATE. The Fund will not purchase, hold or deal
in real estate or real estate mortgage loans, except that the
Fund may purchase (a) securities of companies (other than limited
partnerships) which deal in real estate or (b) securities which
are secured by interests in real estate or by interests in
mortgage loans including securities secured by mortgage-backed
securities.
10. LOANS. The Fund will not make loans to other persons,
except (a) by loaning portfolio securities, or (b) by engaging in
repurchase agreements. For purposes of this limitation, the term
"loans" shall not include the purchase of marketable bonds,
debentures, commercial paper or corporate notes, and similar
marketable evidences of indebtedness which are part of an issue
for the public.
11. INVESTING FOR CONTROL. The Fund will not invest in
companies for the purpose of exercising control.
12. OTHER INVESTMENT COMPANIES. The Fund will not invest
more than 10% of its total assets in securities of other
investment companies. The Fund will not invest more than 5% of
its total assets in the securities of any single investment
company. The Fund will not hold more than 3% of the outstanding
voting stock of any single investment company.
13. AMOUNT INVESTED IN ONE ISSUER. The Fund will not
invest more than 5% of its total assets in the securities of any
issuer; provided, however, that there is no limitation with
respect to investments and obligations issued or guaranteed by
the United States Government or its agencies or instrumentalities
or repurchase agreements with respect thereto.
14. VOTING SECURITIES OF ANY ISSUER. The Fund will not
purchase more than 10% of the outstanding voting securities of
any issuer.
15. SECURITIES OWNED BY AFFILIATES. The Fund will not
purchase or retain the securities of any issuers if those
officers and Trustees of the Trust or officers, directors, or
partners of its Adviser, owning individually more than one-half
of 1% of the securities of such issuer, own in the aggregate more
than 5% of the securities of such issuer.
<PAGE>
16. INDUSTRY CONCENTRATION. The Fund will not invest more
than 25% of its total assets in any particular industry.
17. SENIOR SECURITIES. The Fund will not issue or sell any
senior security as defined by the Investment Company Act of 1940
except in so far as any borrowing that the Fund may engage in may
be deemed to be an issuance of a senior security.
With respect to the percentages adopted by the Trust as
maximum limitations on a Fund's investment policies and
restrictions, an excess above the fixed percentage (except for
the percentage limitations relative to the borrowing of money and
the holding of illiquid securities) will not be a violation of
the policy or restriction unless the excess results immediately
and directly from the acquisition of any security or the action
taken.
The Trust has never pledged, mortgaged or hypothecated the
assets of either Fund, and the Trust presently intends to
continue this policy. The Trust has never made, nor does it
presently intend to make, short sales of securities "against the
box." The Trust has never acquired, nor does it presently intend
to acquire, securities issued by any other investment company or
investment trust. As long as the rules promulgated under the
California Corporate Securities Law prohibit a Fund from
acquiring or retaining securities of any open-end investment
company, the Funds will not acquire or retain such securities,
unless the acquisition is part of a merger or acquisition of
assets or other reorganization. The statements of intention in
this paragraph reflect nonfundamental policies which may be
changed by the Board of Trustees without shareholder approval.
TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive
officers of the Trust and their aggregate compensation from the
Trust for the fiscal year ended November 30, 1995. Each Trustee
who is an "interested person" of the Trust, as defined by the
Investment Company Act of 1940, is indicated by an asterisk.
COMPENSATION
NAME AGE POSITION HELD FROM TRUST
*Malcolm D. Clarke, Jr. 60 President/Trustee $ 0
*Charles G. Watson 64 Vice President/Trustee 0
*James G. Pepper 51 Vice President/Trustee 0
*Francis S. Branin, Jr. 49 Vice President/Trustee 0
*Cheryl L. Grandfield 44 Vice President/Trustee 0
+Jerome B. Lieber 75 Trustee 4,800
+Antoinette Geyelin Hoar 46 Trustee 4,300
+William M.R. Mapel 64 Trustee 4,800
+Crosby R. Smith 60 Trustee 4,800
Robert G. Dorsey 39 Vice President 0
John F. Splain 39 Secretary 0
Mark J. Seger 34 Treasurer 0
Eric P. Spiegel 44 Assistant Treasurer 0
* Messrs. Clarke, Watson, Pepper and Branin and Miss
Grandfield, as principals of Brundage, Story and Rose LLC,
the Trust's investment adviser, are "interested persons" of
the Trust within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940.
<PAGE>
+ Member of Audit Committee.
The principal occupations of the remaining Trustees and
executive officers of the Trust during the past five years are
set forth below:
JEROME B. LIEBER, 40th Floor, One Oxford Centre, Pittsburgh,
Pennsylvania, is Senior Counsel with Klett Lieber Rooney &
Schorling, Attorneys at Law. He is also Secretary and a director
of Decorator Industries, Inc. (a manufacturer of draperies and
bedspreads).
ANTOINETTE GEYELIN HOAR, 16 East 96th Street, New York, New
York, is Vice President of Bankers Trust Company.
WILLIAM M. R. MAPEL, 18 Stephanie Lane, Darien, Connecticut,
is Chairman of Mercantile & General Reinsurance Company of
America and a director of Mercantile & General Life Reassurance
Company of America. He is also a director of Churchill Capital
Partners (investments), Galey & Lord (textiles), NSC Corporation
(environmental services) and USLIFE Income Fund, Inc.
(investments).
CROSBY R. SMITH, 1330 Avenue of the Americas, 27th Floor,
New York, New York, is Chairman of Keswick Management Inc., a
financial management firm. He is President and a director of The
Dillon Fund (a private foundation) and a trustee of the Clarence
& Anne Dillon Dunwalke Trust (a charitable trust). He is also a
general partner of New England Land Associates (timberland owner)
and a director of Bedminster Bio Conversion Corp. (composting and
waste disposal).
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio, is
President and Treasurer of MGF Service Corp. (a registered
transfer agent) and Treasurer of Midwest Group Financial
Services, Inc. (a registered broker-dealer and the Trust's
principal underwriter) and Leshner Financial, Inc. (a financial
services company and parent of Midwest Group Financial Services,
Inc. and MGF Service Corp.). He is also Vice President of Leeb
Personal FinanceTM Investment Trust, Markman MultiFund Trust and
PRAGMA Investment Trust and Assistant Vice President of
Williamsburg Investment Trust, The Tuscarora Investment Trust,
Schwartz Investment Trust and Fremont Mutual Funds, Inc. (all of
which are registered investment companies).
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio, is
Secretary and General Counsel of Midwest Group Financial
Services, Inc., MGF Service Corp. and Leshner Financial, Inc. He
is also Secretary of Midwest Trust, Midwest Group Tax Free Trust,
Midwest Strategic Trust, Leeb Personal FinanceTM Investment
Trust, Markman MultiFund Trust, PRAGMA Investment Trust, The
Tuscarora Investment Trust and Williamsburg Investment Trust and
Assistant Secretary of Schwartz Investment Trust and Fremont
Mutual Funds, Inc. (all of which are registered investment
companies).
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio,
is Vice President of Leshner Financial, Inc. and MGF Service
Corp. He is also Treasurer of Midwest Trust, Midwest Group Tax
Free Trust, Midwest Strategic Trust, Leeb Personal FinanceTM
Investment Trust, Markman MultiFund Trust, PRAGMA Investment
Trust and Williamsburg Investment Trust, Assistant Treasurer of
Schwartz Investment Trust and The Tuscarora Investment Trust and
Assistant Secretary of Fremont Mutual Funds, Inc.
ERIC P. SPIEGEL, One Broadway, New York, New York, is the
Comptroller of Brundage, Story and Rose LLC.
<PAGE>
THE INVESTMENT ADVISER
Brundage, Story and Rose LLC (the "Adviser") is the Trust's
investment manager. Messrs. Clarke, Watson, Pepper and Branin
and Miss Grandfield, as principals of the Adviser, may directly
or indirectly receive benefits from the advisory fees paid to the
Adviser. Under the terms of the investment advisory agreement
between the Trust and the Adviser, the Adviser manages the Funds'
investments. The Equity Fund pays the Adviser a fee computed and
accrued daily and paid monthly at an annual rate of .65% of its
average daily net assets. The Short/Intermediate Term Fixed-
Income Fund pays the Adviser a fee computed and accrued daily and
paid monthly at an annual rate of .5% of its average daily net
assets.
For the fiscal years ended November 30, 1995, 1994 and 1993,
the Equity Fund paid advisory fees of $138,193, $127,701 and
$101,269 (net of voluntary fee waivers of $14,070), respectively.
For the fiscal years ended November 30, 1995, 1994 and 1993, the
Short/Intermediate Term Fixed-Income Fund accrued advisory fees
of $174,030, $207,725 and $190,384, respectively; however, in
order to reduce the operating expenses of the Fund, the Adviser
voluntarily waived $171,125 of such fees for the fiscal year
ended November 30, 1995 and voluntarily waived its entire
advisory fee and reimbursed the Fund $23,853 and $40,663 for
other expenses for the fiscal years ended November 30, 1994 and
1993, respectively.
The Funds are responsible for the payment of all expenses
incurred in connection with the organization, registration of
shares and operations of the Funds, including such extraordinary
or non-recurring expenses as may arise, such as litigation to
which the Trust may be a party. The Funds may have an obligation
to indemnify the Trust's officers and Trustees with respect to
such litigation, except in instances of willful misfeasance, bad
faith, gross negligence or reckless disregard by such officers
and Trustees in the performance of their duties. The Adviser
bears promotional expenses in connection with the distribution of
the Funds' shares to the extent that such expenses are not
assumed by the Funds under their plan of distribution (see below)
and has agreed to reimburse the Underwriter for any expenses
incurred by it in the performance of its obligations under the
Underwriting Agreement with the Trust. The compensation and
expenses of any officer, Trustee or employee of the Trust who is
an officer, principal or employee of the Adviser are paid by the
Adviser.
By its terms, the Trust's investment advisory agreement will
remain in force until December 31, 1996 and from year to year
thereafter, subject to annual approval by (a) the Board of
Trustees or (b) a vote of the majority of a Fund's outstanding
voting securities; provided that in either event continuance is
also approved by a majority of the Trustees who are not
interested persons of the Trust, by a vote cast in person at a
meeting called for the purpose of voting such approval. The
Trust's investment advisory agreement may be terminated at any
time, on sixty days' written notice, without the payment of any
penalty, by the Board of Trustees, by a vote of the majority of a
Fund's outstanding voting securities, or by the Adviser. The
investment advisory agreement automatically terminates in the
event of its assignment, as defined by the Investment Company Act
of 1940 and the rules thereunder.
The Adviser will reimburse the Funds to the extent that the
expenses of a Fund for any fiscal year exceed the applicable
expense limitations imposed by state securities administrators,
as such limitations may be lowered or raised from time to time.
The most restrictive limitation is presently 2.5% of the first
$30 million of average daily net assets, 2% of the next $70
million of average daily net assets and 1.5% of average daily net
assets in excess of $100 million. If any such reimbursement is
required, the payment of the advisory fee at the end of any month
will be reduced or postponed or, if necessary, a refund will be
made to the Funds at the end of such month. Certain expenses
such as brokerage commissions, if any, taxes, interest,
extraordinary items and other expenses subject to approval of
state securities administrators are excluded from such
limitations. If the expenses of a Fund approach the applicable
limitation in any state, the Trust will consider the various
actions that are available to it, including suspension of sales
to residents of that state.
The name "Brundage, Story and Rose" is a property right of
the Adviser. The Adviser may use the name "Brundage, Story and
Rose" in other connections and for other purposes, including in
the name of other investment companies. The Trust has agreed to
discontinue any use of the name "Brundage, Story and Rose" if the
Adviser ceases to be employed as the Trust's investment manager.
<PAGE>
DISTRIBUTION PLAN
As stated in the Prospectus, the Funds have adopted a plan
of distribution (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940 which permits each Fund to pay for
expenses incurred in the distribution and promotion of the Funds'
shares, including but not limited to, the printing of
prospectuses, statements of additional information and reports
used for sales purposes, advertisements, expenses of preparation
and printing of sales literature, promotion, marketing and sales
expenses and other distribution-related expenses, including any
distribution fees paid to securities dealers or other firms who
have executed a distribution or service agreement with the
Underwriter. The Plan expressly limits payment of the
distribution expenses listed above in any fiscal year to a
maximum of .25% of the average daily net assets of each Fund.
Unreimbursed expenses will not be carried over from year to year.
For the fiscal year ended November 30, 1995, the aggregate
expenditures of the Equity Fund and the Short/Intermediate Term
Fixed-Income Fund under the Plan were $1,484 and $2,509,
respectively, which was spent for the preparation of prospectuses
and reports for prospective shareholders.
Agreements implementing the Plan (the "Implementation
Agreements"), including an agreement with the Adviser wherein the
Adviser agrees to adhere to the terms of the Plan and agreements
with dealers wherein such dealers agree for a fee to act as
agents for the sale of the Funds' shares, are in writing and have
been approved by the Board of Trustees. All payments made
pursuant to the Plan are made in accordance with written
agreements.
The continuance of the Plan and the Implementation
Agreements must be specifically approved at least annually by a
vote of the Trust's Board of Trustees and by a vote of the
Trustees who are not interested persons of the Trust and have no
direct or indirect financial interest in the Plan or any
Implementation Agreement (the "Independent Trustees") at a
meeting called for the purpose of voting on such continuance.
The Plan may be terminated at any time by a vote of a majority of
the Independent Trustees or by a vote of the holders of a
majority of the outstanding shares of a Fund. In the event the
Plan is terminated in accordance with its terms, the affected
Fund will not be required to make any payments for expenses
incurred by the Adviser after the termination date. Each
Implementation Agreement terminates automatically in the event of
its assignment and may be terminated at any time by a vote of a
majority of the Independent Trustees or by a vote of the holders
of a majority of the outstanding shares of a Fund on not more
than 60 days' written notice to any other party to the
Implementation Agreement. The Plan may not be amended to
increase materially the amount to be spent for distribution
without shareholder approval. All material amendments to the
Plan must be approved by a vote of the Trust's Board of Trustees
and by a vote of the Independent Trustees.
<PAGE>
In approving the Plan, the Trustees determined, in the
exercise of their business judgment and in light of their
fiduciary duties as Trustees, that there is a reasonable
likelihood that the Plan will benefit the Funds and their
shareholders. The Board of Trustees believes that expenditure of
the Funds' assets for distribution expenses under the Plan should
assist in the growth of the Funds which will benefit the Funds
and their shareholders through increased economies of scale,
greater investment flexibility, greater portfolio diversification
and less chance of disruption of planned investment strategies.
The Plan will be renewed only if the Trustees make a similar
determination for each subsequent year of the Plan. There can be
no assurance that the benefits anticipated from the expenditure
of the Funds' assets for distribution will be realized. While
the Plan is in effect, all amounts spent by the Funds pursuant to
the Plan and the purposes for which such expenditures were made
must be reported quarterly to the Board of Trustees for its
review. In addition, the selection and nomination of those
Trustees who are not interested persons of the Trust are
committed to the discretion of the Independent Trustees during
such period.
As principals of the Adviser, Messrs. Clarke, Watson, Pepper
and Branin and Miss Grandfield may be deemed to have a financial
interest in the operation of the Plan and the Implementation
Agreements.
THE UNDERWRITER
Midwest Group Financial Services, Inc. (the "Underwriter")
is the principal underwriter of the Funds and, as such, the
exclusive agent for distribution of shares of the Funds. The
Underwriter is obligated to sell the shares on a best efforts
basis only against purchase orders for the shares. Shares of
each Fund are offered to the public on a continuous basis.
The Funds may compensate dealers, including the Underwriter
and its affiliates, based on the average balance of all accounts
in the Funds for which the dealer is designated as the party
responsible for the account. See "Distribution Plan" above.
SECURITIES TRANSACTIONS
Decisions to buy and sell securities for the Funds and the
placing of the Funds' securities transactions and negotiation of
commission rates where applicable are made by the Adviser and are
subject to review by the Board of Trustees of the Trust. In the
purchase and sale of portfolio securities, the Adviser seeks best
execution for the Funds, taking into account such factors as
price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and
responsiveness of the broker or dealer and the brokerage and
research services provided by the broker or dealer. The Adviser
generally seeks favorable prices and commission rates that are
reasonable in relation to the benefits received. For the fiscal
years ended November 30, 1995, 1994 and 1993, the Equity Fund
paid brokerage commissions of $19,400, $19,449 and $16,172,
respectively.
Generally, the Funds attempt to deal directly with the
dealers who make a market in the securities involved unless
better prices and execution are available elsewhere. Such
dealers usually act as principals for their own account. On
occasion, portfolio securities for the Funds may be purchased
directly from the issuer. Because the portfolio securities of
the Short/Intermediate Term Fixed-Income Fund are generally
traded on a net basis and transactions in such securities do not
normally involve brokerage commissions, the cost of portfolio
securities transactions of the Fund will consist primarily of
dealer or underwriter spreads. No brokerage commissions were
paid by the Short/Intermediate Term Fixed-Income Fund during the
last three fiscal years.
<PAGE>
The Adviser is specifically authorized to select brokers who
also provide brokerage and research services to the Funds and/or
other accounts over which the Adviser exercises investment
discretion and to pay such brokers a commission in excess of the
commission another broker would charge if the Adviser determines
in good faith that the commission is reasonable in relation to
the value of the brokerage and research services provided. The
determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the
Funds and to accounts over which it exercises investment
discretion. During the fiscal year ended November 30, 1995, the
amount of brokerage transactions and related commissions for the
Equity Fund directed to brokers due to research services provided
were $8,533,609 and $11,975, respectively.
Research services include securities and economic analyses,
reports on issuers' financial conditions and future business
prospects, newsletters and opinions relating to interest trends,
general advice on the relative merits of possible investment
securities for the Funds and statistical services and information
with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to
the Funds and the Adviser, it is not possible to place a dollar
value on it. Research services furnished by brokers through whom
the Funds effect securities transactions may be used by the
Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Funds.
The Adviser may aggregate purchase and sale orders for the
Funds and its other clients if it believes such aggregation is
consistent with its duty to seek best execution for the Funds and
its other clients. The Adviser will not favor any advisory
account over any other account, and each account that
participates in an aggregated order will participate at the
average share price for all transactions of the Adviser in that
security on a given business day, with all transaction costs
shared on a pro rata basis. The Adviser will prepare, before
entering an aggregated order, a written Allocation Statement as
to how the order will be allocated among the various accounts.
If the aggregated order is filled in its entirety, it shall be
allocated among the accounts in accordance with the Allocation
Statement; if the order is partially filled, it shall be
allocated pro rata based on the Allocation Statement.
Notwithstanding the foregoing, the order may be allocated on a
basis different from that specified in the Allocation Statement
if all accounts of clients whose orders are allocated receive
fair and equitable treatment and the reason for such different
allocation is explained in writing and is approved in writing by
the Adviser's compliance officer no later than one hour after the
opening of the markets on the trading day following the day on
which the order is executed.
As of November 30, 1995, the Short/Intermediate Term Fixed-
Income Fund held securities of the following of the Trust's
regular broker-dealers or their parents: Salomon Brothers (the
market value of which was $1,015,904 as of November 30, 1995);
and PaineWebber Incorporated (the market value of which was
$1,579,196 as of November 30, 1995).
CODE OF ETHICS. The Fund, the Adviser and the Underwriter have
each adopted a Code of Ethics under Rule 17j-1 of the Investment
Company Act of 1940. The code significantly restricts the
personal investing activities of all employees of the Adviser.
No employee may purchase or sell any security which at the time
is being purchased or sold (as the case may be), or to the
knowledge of the employee is being considered for purchase or
sale, by the Fund. Furthermore, the Code provides for trading
"blackout periods" which prohibit trading by employees of the
Adviser within periods of trading by the Fund in the same (or
equivalent) security.
<PAGE>
PORTFOLIO TURNOVER
A Fund's portfolio turnover rate is calculated by dividing
the lesser of purchases or sales of portfolio securities for the
fiscal year by the monthly average of the value of the portfolio
securities owned by the Fund during the fiscal year. High
portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne
directly by the Funds. The Adviser anticipates that the
portfolio turnover rate for each Fund normally will not exceed
100%. A 100% turnover rate would occur if all of a Fund's
portfolio securities were replaced once within a one year period.
Generally, each Fund intends to invest for long-term
purposes. However, the rate of portfolio turnover will depend
upon market and other conditions, and it will not be a limiting
factor when the Adviser believes that portfolio changes are
appropriate. For the fiscal years ended November 30, 1995 and
1994, the Equity Fund's portfolio turnover rate was 42% and 44%,
respectively, and the Short/Intermediate Term Fixed-Income Fund's
portfolio turnover rate was 39% and 57%, respectively.
CALCULATION OF SHARE PRICE
The share price (net asset value) of the shares of each Fund
is determined as of the close of the regular session of trading
on the New York Stock Exchange (currently 4:00 p.m., Eastern
time) on each day the Trust is open for business. The Trust is
open for business on every day except Saturdays, Sundays and the
following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
and Christmas. The Trust may also be open for business on other
days in which there is sufficient trading in either Fund's
portfolio securities that its net asset value might be materially
affected. For a description of the methods used to determine the
share price, see "Calculation of Share Price" in the Prospectus.
TAXES
The Prospectus describes generally the tax treatment of
distributions by the Funds. This section of the Statement of
Additional Information includes additional information concerning
federal taxes.
<PAGE>
Each Fund has qualified and intends to qualify annually for
the special tax treatment afforded a "regulated investment
company" under Subchapter M of the Internal Revenue Code so that
it does not pay federal taxes on income and capital gains
distributed to shareholders. To so qualify a Fund must, among
other things, (i) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of
stock, securities or foreign currency, or certain other income
(including but not limited to gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currencies; (ii) derive less
than 30% of its gross income in each taxable year from the sale
or other disposition of the following assets held for less than
three months: (a) stock or securities, (b) options, futures or
forward contracts not directly related to its principal business
of investing in stock or securities; and (iii) diversify its
holdings so that at the end of each quarter of its taxable year
the following two conditions are met: (a) at least 50% of the
value of the Fund's total assets is represented by cash, U.S.
Government securities, securities of other regulated investment
companies and other securities (for this purpose such other
securities will qualify only if the Fund's investment is limited
in respect to any issuer to an amount not greater than 5% of the
Fund's assets and 10% of the outstanding voting securities of
such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than
U.S. Government securities or securities of other regulated
investment companies).
A Fund's net realized capital gains from securities
transactions will be distributed only after reducing such gains
by the amount of any available capital loss carryforwards.
Capital losses may be carried forward to offset any capital gains
for eight years, after which any undeducted capital loss
remaining is lost as a deduction. As of December 1, 1995, the
Short/Intermediate Term Fixed-Income Fund had a capital loss
carryforward for federal income tax purposes of $513,223, which
expires on November 30, 2002.
A federal excise tax at the rate of 4% will be imposed on
the excess, if any, of a Fund's "required distribution" over
actual distributions in any calendar year. Generally, the
"required distribution" is 98% of a Fund's ordinary income for
the calendar year plus 98% of its net capital gains recognized
during the one year period ending on November 30 of the calendar
year plus undistributed amounts from prior years. The Funds
intend to make distributions sufficient to avoid imposition of
the excise tax.
The Trust is required to withhold and remit to the U.S.
Treasury a portion (31%) of dividend income on any account unless
the shareholder provides a taxpayer identification number and
certifies that such number is correct and that the shareholder is
not subject to backup withholding.
<PAGE>
REDEMPTION IN KIND
Under unusual circumstances, when the Board of Trustees
deems it in the best interests of a Fund's shareholders, the Fund
may make payment for shares repurchased or redeemed in whole or
in part in securities of the Fund taken at current value. If any
such redemption in kind is to be made, each Fund intends to make
an election pursuant to Rule 18f-1 under the Investment Company
Act of 1940. This election will require the Funds to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the
net asset value of each Fund during any 90 day period for any one
shareholder. Should payment be made in securities, the redeeming
shareholder will generally incur brokerage costs in converting
such securities to cash. Portfolio securities which are issued
in an in-kind redemption will be readily marketable.
HISTORICAL PERFORMANCE INFORMATION
From time to time, each Fund may advertise average annual
total return. Average annual total return quotations will be
computed by finding the average annual compounded rates of return
over 1, 5 and 10 year periods that would equate the initial
amount invested to the ending redeemable value, according to the
following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 and 10 year
periods at the end of the 1, 5 or 10 year periods (or
fractional portion thereof)
The calculation of average annual total return assumes the
reinvestment of all dividends and distributions. If a Fund has
been in existence less than one, five or ten years, the time
period since the date of the initial public offering of shares
will be substituted for the periods stated. The average annual
total returns of the Funds for the periods ended December 31,
1995 are as follows:
EQUITY FUND
1 year 27.22%
Since inception (January 2, 1991) 11.92%
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
1 year 15.53%
Since inception (January 2, 1991) 8.09%
Each Fund may also advertise total return (a
"nonstandardized quotation") which is calculated differently from
average annual total return. A nonstandardized quotation of
total return may be a cumulative return which measures the
percentage change in the value of an account between the
beginning and end of a period, assuming no activity in the
account other than reinvestment of dividends and capital gains
distributions. The total returns of the Funds as calculated in
this manner for each year since inception are as follows:
<TABLE>
<CAPTION>
Short/Intermediate
Year Ended Equity Fund Term Fixed-Income Fund
----------------- ------------ ----------------------
<S> <C> <C>
December 31, 1991 22.73% 13.22%
December 31, 1992 2.50% 6.47%
December 31, 1993 10.26% 8.37%
December 31, 1994 -0.54% -2.27%
December 31, 1995 27.22% 15.53%
</TABLE>
A nonstandardized quotation may also indicate average annual
compounded rates of return over periods other than those
specified for average annual total return. For example, the
average annual compounded rates of return of the Equity Fund for
the 1 year ended November 30, 1995, the 3 years ended November
30, 1995 and for the period since inception through November 30,
1995 were 26.08%, 10.93% and 11.78%, respectively. The average
annual compounded rates of return for the Short/Intermediate Term
Fixed-Income Fund for the 1 year ended November 30, 1995, the 3
years ended November 30, 1995 and for the period since inception
through November 30, 1995 were 14.84%, 7.06% and 8.02%,
respectively. A nonstandardized quotation of total return will
always be accompanied by a Fund's average annual total return as
described above.
From time to time, each of the Funds may advertise its
yield. A yield quotation is based on a 30-day (or one month)
period and is computed by dividing the net investment income per
share earned during the period by the maximum offering price per
share on the last day of the period, according to the following
formula:
Yield = 2[(a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Solely for the purpose of computing yield, dividend income is
recognized by accruing 1/360 of the stated dividend rate of the
security each day that a Fund owns the security. Generally,
interest earned (for the purpose of "a" above) on debt
obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation
(including actual accrued interest) at the close of business on
the last business day prior to the start of the 30-day (or one
month) period for which yield is being calculated, or, with
respect to obligations purchased during the month, the purchase
price (plus actual accrued interest). With respect to the
treatment of discount and premium on mortgage or other
receivables-backed obligations which are expected to be subject
to monthly paydowns of principal and interest, gain or loss
attributable to actual monthly paydowns is accounted for as an
increase or decrease to interest income during the period and
discount or premium on the remaining security is not amortized.
The yields of the Equity Fund and the Short/Intermediate Term
Fixed-Income Fund for November 1995 were 0.43% and 5.72%,
respectively.
<PAGE>
The performance quotations described above are based on
historical earnings and are not intended to indicate future
performance.
To help investors better evaluate how an investment in a
Fund might satisfy their investment objective, advertisements
regarding each Fund may discuss various measures of Fund
performance, including current performance ratings and/or
rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements
may also compare performance (using the calculation methods set
forth in the Prospectus) to performance as reported by other
investments, indices and averages. When advertising current
ratings or rankings, the Funds may use the following publications
or indices to discuss or compare Fund performance:
Lipper Mutual Fund Performance Analysis and Lipper Fixed
Income Fund Performance Analysis measure total return and average
current yield for the mutual fund industry and rank individual
mutual fund performance over specified time periods assuming
reinvestment of all distributions, exclusive of sales loads. The
Equity Fund may provide comparative performance information
appearing in the Growth and Income Funds category and the
Short/Intermediate Term Fixed-Income Fund may provide comparative
performance information appearing in the Short-Term Investment
Grade Debt Funds category. In addition, the Funds may use
comparative performance information of relevant indices,
including the S&P 500 Index and the Dow Jones Industrial Average.
The S&P 500 Index is an unmanaged index of 500 stocks, the
purpose of which is to portray the pattern of common stock price
movement. The Dow Jones Industrial Average is a measurement of
general market price movement for 30 widely held stocks listed on
the New York Stock Exchange.
In assessing such comparisons of performance an investor
should keep in mind that the composition of the investments in
the reported indices and averages is not identical to the Funds'
portfolios, that the averages are generally unmanaged and that
the items included in the calculations of such averages may not
be identical to the formula used by the Funds to calculate their
performance. In addition, there can be no assurance that the
Funds will continue this performance as compared to such other
averages.
<PAGE>
PRINCIPAL SECURITY HOLDERS
As of March 4, 1996, the Adviser, principals of the Adviser
and employee benefit plans sponsored by the Adviser owned of
record 18.3% of the Trust's outstanding shares (including 29.0%
of the outstanding shares of the Equity Fund and 12.1% of the
outstanding shares of the Short/Intermediate Term Fixed-Income
Fund). The Adviser may be deemed to control the Equity Fund by
virtue of the fact that it owns of record or beneficially more
than 25% of the Fund's shares. For purposes of voting on matters
submitted to shareholders, any person who owns more than 50% of
the outstanding shares of a Fund generally would be able to cast
the deciding vote.
As of March 4, 1996, the Brundage Story and Rose Profit
Sharing Plan, One Broadway, New York, New York, owned of record
10.5% of the Trust's outstanding shares, including 19.0% of the
outstanding shares of the Equity Fund and 5.5% of the outstanding
shares of the Short/Intermediate Term Fixed-Income Fund. As of
March 4, 1996, JM Fam Enterprises Inc., Agreement of Trust dtd
6/12/90, 100 NW 12th Avenue, Deerfield Beach, Florida, owned of
record 5.3% of the Short/Intermediate Term Fixed-Income Fund.
As of March 4, 1996, the Trustees and officers of the Trust
as a group owned of record or beneficially 18.6% of the Trust's
outstanding shares, including 29.2% of the outstanding shares of
the Equity Fund and 12.5% of the outstanding shares of the
Short/Intermediate Term Fixed-Income Fund.
CUSTODIAN
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati,
Ohio, has been retained to act as Custodian for each Fund's
investments. The Fifth Third Bank acts as each Fund's
depository, safekeeps its portfolio securities, collects all
income and other payments with respect thereto, disburses funds
as instructed and maintains records in connection with its
duties.
AUDITORS
The firm of Arthur Andersen LLP has been selected as
independent public accountants for the Trust for the fiscal year
ending November 30, 1996. Arthur Andersen LLP, 425 Walnut
Street, Cincinnati, Ohio, performs an annual audit of the Trust's
financial statements and advises the Funds as to certain
accounting matters.
<PAGE>
MGF SERVICE CORP.
The Trust's transfer agent, MGF Service Corp. ("MGF"),
maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes
purchases and redemptions of the Funds' shares, acts as dividend
and distribution disbursing agent and performs other shareholder
service functions. MGF is an affiliate of the Underwriter by
reason of common ownership. MGF receives for its services as
transfer agent a fee payable monthly at an annual rate of $15 per
account from the Equity Fund and $19.50 per account from the
Short/Intermediate Term Fixed-Income Fund, provided, however,
that the minimum fee is $1,200 per month for each Fund. In
addition, the Funds pay out-of-pocket expenses, including but not
limited to, postage, envelopes, checks, drafts, forms, reports,
record storage and communication lines.
MGF also provides accounting and pricing services to the
Funds. For calculating daily net asset value per share and
maintaining such books and records as are necessary to enable MGF
to perform its duties, the Funds pay MGF a fee in accordance with
the following schedule:
<TABLE>
<CAPTION>
Monthly Fee
---------------------------
Short/
Intermediate
Equity Term Fixed-
Asset Size of Fund Fund Income Fund
- -------------------- ------ -------------
<S> <C> <C>
0 - $ 50,000,000 $2,700 $3,000
50 - 100,000,000 3,200 3,500
100 - 150,000,000 3,700 4,000
150 - 200,000,000 4,200 4,500
200 - 250,000,000 4,700 5,000
Over 250,000,000 5,500 6,000
</TABLE>
In addition, each Fund pays all costs of external pricing
services.
In addition, MGF is retained to provide administrative
services to the Funds. In this capacity, MGF supplies non-
investment related statistical and research data, internal
regulatory compliance services and executive and administrative
services. MGF supervises the preparation of tax returns, reports
to shareholders of the Funds, reports to and filings with the
Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees.
For the performance of these administrative services, each Fund
pays MGF a fee at the annual rate of .2% of the average value of
its daily net assets up to $50,000,000, .175% of such assets from
$50,000,000 to $100,000,000 and .15% of such assets in excess of
$100,000,000; provided, however, that the minimum fee is $1,000
per month for each Fund.
<PAGE>
ANNUAL REPORT
The Funds' financial statements as of November 30, 1995
appear in the Trust's annual report which is attached to this
Statement of Additional Information.
BRUNDAGE, STORY AND ROSE
INVESTMENT TRUST
ANNUAL REPORT
NOVEMBER 30, 1995
SHORT/INTERMEDIATE TERM
FIXED-INCOME FUND
GROWTH & INCOME FUND
LOGO
BRUNDAGE,
STORY AND ROSE
INVESTMENT TRUST
Investment Counsel Since 1932
LETTER TO SHAREHOLDERS January 18, 1996
- -----------------------------------------------------------------------------
I am pleased to report to you on the progress of your investments during 1995,
which was the fifth year of the Brundage, Story and Rose Investment Trust.
REVIEW OF WORLD ECONOMIES
AND THE U.S. FINANCIAL MARKETS
During the first half of the Trust's fiscal year, which ended November 30,
1995, U.S. economic growth slowed noticeably; the second calendar quarter
experienced only nominal growth. However, the third quarter rebounded
sharply, while the fourth quarter slowed once again. Europe experienced a
reasonable level of economic growth, but restrictive policies in Germany
bolstered the relative value of the Deutsche Mark which, in turn, forced other
European governments to exercise monetary restraint to defend their
currencies. The upshot was economic stagnation in much of Europe. Despite a
recent modest reduction in German interest rates, the European outlook for
1996 remains rather dull. In Central and South America, problems in Mexico
following the December 1994 Peso devaluation cast a pallor over the whole
region. During the second half of 1995, a few bright spots in countries such
as Brazil, Chile and Peru were beginning to emerge, while in Mexico and others
such as Venezuela and Argentina problems still dominated the economic scene.
Asia, excluding Japan, continued robust, and the strong Japanese stock market
during the second half of the year may point to better times ahead despite
continuing financial asset deflation.
Turning again to the U.S. economy, capital spending continued strong, thanks
in part to very strong corporate earnings. However, this was offset by
continuing weak consumer spending in the face of high installment debt. In
fact, just about the only area of the retail sector which experienced high
growth was, as in 1994, consumer electronics and, in particular, personal
computers.
After suffering a severe one-year decline in 1994, the bond market reversed
and posted an exceedingly strong return in 1995. Low inflation and a modest
amount of easing by the Federal Reserve in conjunction with substantial
inflows of foreign capital and a number of other factors all combined to make
1995 a banner year. There is often a positive correlation between the bond
and equity markets, and 1995 was no exception. The conjunction of low
inflation, strong corporate earnings and a strong bond market helped common
stock prices to chalk up one of their strongest gains in many years. However,
during the fourth quarter the budget impasse began to take a toll on investor
enthusiasm. In particular, the technology area, which had enjoyed speculative
excesses approaching manic proportions, began to show signs of stress.
As we look into 1996, the continuing stalemate in Washington poses a high
level of uncertainty which may damage investor confidence in both bonds and
equities. We feel that both markets have factored into their valuations the
assumption that a significant deficit reduction agreement will be reached soon
and will be followed by more aggressive lowering of short term interest rates
by the Federal Reserve. Although the economic outlook remains positive, with
slowing but still satisfactory growth and a flattening in corporate profits,
the battle between the legislative and executive branches of the government is
at center stage, and if it is not resolved in the near future, the impasse may
pose problems for investors during 1996.
<PAGE>
BRUNDAGE, STORY AND ROSE
GROWTH & INCOME FUND
For the fiscal year ended November 30, 1995, the Brundage, Story and Rose
Growth & Income Fund generated a return of 26.1%, a substantial improvement
from the modest returns of 1994 when the market as a whole was very weak.
Relative to the overall market, strong performance in the second half of the
year did not make up for the defensive posture that the Fund employed so
successfully in 1994, and investment results of 26.1% lagged the 37.0% return
of the S&P 500, though still ahead of the 24.9% return of the Lipper All
Equity Funds Average.
Looking back, cyclical issues came under pressure as growth in the economy
slowed to a standstill in the first half of the year, while conversely, a
frenzy of mergers and speculation in the banking industry and lower interest
rates drove regional banks and financial service companies to almost
unprecedented gains. Meanwhile, technology oriented companies showed both
sides of their volatile nature, first racking up substantial gains through the
third quarter, and then, through year-end and into early 1996, retracing the
lion's share of their advance.
Looking forward, we are unlikely to see gains in the market in 1996 that
match the strong performance of 1995. Indeed, with slowing corporate profit
growth and a mediocre economy, we expect that rewards earned in the market
this year will be hard-fought. Given this outlook, we have de-emphasized the
more cyclical areas of the market while building up holdings in less cyclical
growth oriented companies. Regarding the technology area, we think these
companies are most attractive when near term fears blind investors to the long
term creation of value. Accordingly, we would expect to rebuild investments
in these areas where profits were taken at the end of last year. In all, we
remain cautiously optimistic regarding the equity market and have redoubled
our emphasis on quality long term investments.
BRUNDAGE, STORY AND ROSE
SHORT/INTERMEDIATE TERM
FIXED-INCOME FUND
In our letter last year, we indicated there were good reasons to invest in the
Fixed Income Fund given the relatively high level of interest rates. Interest
rates on 3 year and 5 year maturity Treasury obligations were 7.61% and 7.79%,
respectively.
During the ensuing 12 months of fiscal 1995, these rates dropped to 5.40% and
5.52%, producing significant price gains on bonds held in the portfolio on top
of interest income collected. The total rate of return of the Fund, including
both the price change and interest income components of investment return was
14.84% during the period. This was a very attractive absolute return and
compared favorably with market returns. For example, the Lehman Brothers
Intermediate Government/Corporate Bond Index (which has the same duration as
the Fund and includes a large number of corporate and government bonds)
produced a total return of 14.51% while the Merrill Lynch 3-Year Treasury
Index produced a total return of 13.02% during the period.
<PAGE>
The Fund's good results were due in part to good individual issue selection as
well as to exposure to the corporate and mortgage-backed sectors. Corporate
bonds of 3-5 year maturities produced returns better than 3-5 year Treasuries.
The mortgage-backed issues in our portfolio, on average, also outperformed the
3-5 year Treasury Index.
We believe that the Fund continues to offer extremely good value, particularly
versus money market (very short maturity) alternatives. The yield on money
market funds versus longer maturity bonds is narrow by historical standards
but we believe it will become wider as money market yields fall relative to
the yield on the Fund.
SUMMARY
As you will infer from the foregoing discussion, we will not be surprised if
1996 is a challenging year for generating high absolute returns. However, we
feel that both Funds are very well structured to generate good relative
returns during 1996, and we continue to find attractive opportunities in both
the bond and stock markets.
Sincerely yours,
/S/ Malcolm D. Clarke, Jr.
Malcolm D. Clarke, Jr.
President
<PAGE>
<TABLE>
Comparison of Change in Value of $10,000 Investment in the Brundage, Story and
Rose Growth & Income Fund and the Standard & Poor's 500 Index
Brundage, Story and Rose Growth & Income Fund
Average Annual Total Returns
1 Year 26.08%
Since Inception* 11.78%
<FN>
*The public offering of shares commenced on January 2, 1991.
</FN>
BSR GROWTH & INCOME FUND CHART
<CAPTION>
BSR GROWTH & INCOME FUND
STANDARD & POOR'S 500 INDEX: BSR GROWTH & INCOME FUND:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
<S> <C> <C> <C> <C> <C>
01/01/91 10,000 01/01/91 10,000
03/31/91 14.53% 11,453 03/31/91 11.00% 11,100
06/30/91 -0.23% 11,427 06/30/91 -3.28% 10,736
09/30/91 5.35% 12,038 09/30/91 5.07% 11,280
12/31/91 8.38% 13,047 12/31/91 8.80% 12,273
03/31/92 -2.53% 12,717 03/31/92 -3.12% 11,890
06/30/92 1.90% 12,958 06/30/92 -0.74% 11,802
09/30/92 3.15% 13,367 09/30/92 4.82% 12,371
12/31/92 5.03% 14,039 12/31/92 1.69% 12,579
03/31/93 4.36% 14,651 03/31/93 2.35% 12,875
06/30/93 0.48% 14,721 06/30/93 0.25% 12,907
09/30/93 2.58% 15,101 09/30/93 3.70% 13,385
12/31/93 2.32% 15,452 12/31/93 3.63% 13,870
03/31/94 -3.79% 14,866 03/31/94 -5.21% 13,148
06/30/94 0.42% 14,928 06/30/94 0.06% 13,156
09/30/94 4.88% 15,657 09/30/94 7.20% 14,103
12/31/94 -0.02% 15,654 12/31/94 -2.18% 13,795
03/31/95 9.74% 17,178 03/31/95 7.22% 14,791
06/30/95 9.55% 18,818 06/30/95 5.08% 15,543
09/30/95 7.95% 20,314 09/30/95 8.57% 16,875
11/30/95 4.02% 21,130 11/30/95 2.40% 17,281
Past performance is not predictive of future performance.
Comparison of Change in Value of $10,000 Investment in the Brundage, Story and
Rose Short/Intermediate Term Fixed-Income Fund and Merrill Lynch 3-Year
Treasury Index
Brundage, Story and Rose Short/Intermediate Term Fixed-Income Fund
Average Annual Total Returns
1 Year 14.84%
Since Inception* 8.02%
<FN>
*The public offering of shares commenced on January 2, 1991.
</FN>
BSR SHORT/INTERMEDIATE TERM FUND CHART
<CAPTION>
ML 3-YEAR TREASURY INDEX: BSR SHORT/INTERMEDIATE TERM FUND:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
<S> <C> <C> <C> <C> <C>
01/01/91 10,000 01/01/91 10,000
03/31/91 2.00% 10,200 03/31/91 1.58% 10,158
06/30/91 1.80% 10,384 06/30/91 1.96% 10,357
09/30/91 4.44% 10,845 09/30/91 4.89% 10,864
12/31/91 4.69% 11,353 12/31/91 4.21% 11,322
03/31/92 -1.15% 11,223 03/31/92 -0.72% 11,240
06/30/92 3.84% 11,654 06/30/92 3.96% 11,685
09/30/92 4.37% 12,163 09/30/92 3.81% 12,130
12/31/92 -0.48% 12,105 12/31/92 -0.63% 12,054
03/31/93 3.12% 12,482 03/31/93 3.60% 12,488
06/30/93 1.45% 12,663 06/30/93 2.07% 12,747
09/30/93 1.69% 12,878 09/30/93 2.04% 13,007
12/31/93 0.42% 12,931 12/31/93 0.43% 13,063
03/31/94 -1.57% 12,728 03/31/94 -1.64% 12,848
06/30/94 -0.53% 12,661 06/30/94 -0.76% 12,751
09/30/94 0.78% 12,759 09/30/94 0.60% 12,828
12/31/94 -0.19% 12,734 12/31/94 -0.48% 12,766
03/31/95 4.22% 13,271 03/31/95 4.70% 13,366
06/30/95 4.27% 13,837 06/30/95 5.01% 14,036
09/30/95 1.55% 14,051 09/30/95 1.62% 14,263
11/30/95 2.20% 14,360 11/30/95 2.43% 14,610
Past performance is not predictive of future performance.
</TABLE>
<PAGE>
<TABLE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST STATEMENTS OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995
<CAPTION>
SHORT/
INTERMEDIATE
TERM GROWTH
FIXED-INCOME & INCOME
FUND FUND
<S> <C> <C>
ASSETS
Investments in securities:
At amortized cost (original cost $33,574,046 and
$18,390,519, respectively) $33,548,518 $18,390,519
============ ===========
At market value (Note 1) $34,234,636 $23,328,600
Investments in repurchase agreements (Note 1) 760,000 1,210,000
Cash 281 258
Receivable for capital shares sold 5,188 15,851
Interest and principal paydowns receivable 370,635 188
Dividends receivable -- 37,625
Organization expenses, net (Note 1) 391 391
Other assets 2,044 1,159
------------ -----------
TOTAL ASSETS 35,373,175 24,594,072
------------ -----------
LIABILITIES
Payable for capital shares redeemed 41,367 46,809
Dividends payable 24,508 --
Payable for securities purchased -- 290,805
Payable to affiliates (Note 3) 23,841 46,354
Other accrued expenses and liabilities 11,950 19,552
------------ -----------
TOTAL LIABILITIES 101,666 403,520
------------ -----------
NET ASSETS $35,271,509 $24,190,552
============ ===========
Net assets consist of:
Capital shares $35,098,614 $18,093,024
Accumulated net realized gains (losses)
from security transactions ( 513,223) 1,134,441
Undistributed net investment income -- 25,006
Net unrealized appreciation on investments 686,118 4,938,081
------------ -----------
Net assets $35,271,509 $24,190,552
============ ===========
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 4) 3,288,115 1,621,993
============ ===========
Net asset value, offering and redemption price per share (Note 1) $ 10.73 $ 14.91
============ ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1995
<CAPTION>
SHORT/
INTERMEDIATE
TERM GROWTH
FIXED-INCOME & INCOME
FUND FUND
<S> <C> <C>
INVESTMENT INCOME
Interest $ 2,370,970 $ 14,004
Dividends -- 405,594
------------ -----------
TOTAL INVESTMENT INCOME 2,370,970 419,598
------------ -----------
EXPENSES
Investment advisory fees (Note 3) 174,030 138,193
Administrative services fees (Note 3) 69,563 42,514
Accounting services fees (Note 3) 44,300 40,700
Professional fees 19,513 19,513
Trustees' fees and expenses 13,255 13,255
Shareholder service and transfer agent fees (Note 3) 12,500 12,500
Insurance expense 14,424 7,814
Registration fees 6,994 7,669
Postage and supplies 6,601 3,798
Reports to shareholders 4,753 4,848
Amortization of organization expenses (Note 1) 4,688 4,688
Custodian fees 4,008 4,333
Distribution expenses (Note 3) 2,509 1,484
Other expenses 3,415 6,642
------------ -----------
TOTAL EXPENSES 380,553 307,951
Fees waived by the Adviser (Note 3) ( 171,125) --
------------ -----------
NET EXPENSES 209,428 307,951
------------ -----------
NET INVESTMENT INCOME 2,161,542 111,647
------------ -----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 109,142 1,134,441
Net change in unrealized appreciation/depreciation
on investments 2,531,772 3,708,141
------------ -----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 2,640,914 4,842,582
------------ -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,802,456 $ 4,954,229
============ ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED NOVEMBER 30, 1995 AND 1994
<CAPTION>
SHORT/INTERMEDIATE TERM
FIXED-INCOME FUND GROWTH & INCOME FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 2,161,542 $ 2,356,183 $ 111,647 $ 99,764
Net realized gains (losses) from security
transactions 109,142 (622,365) 1,134,441 835,887
Net change in unrealized appreciation/depreciation
on investments 2,531,772 (2,673,507) 3,708,141 ( 623,718)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations 4,802,456 (939,689) 4,954,229 311,933
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (2,161,542) (2,356,183) ( 97,033) ( 95,266)
From net realized gains from security transactions -- (143,558) ( 835,887) ( 571,879)
----------- ----------- ----------- -----------
Decrease in net assets from distributions to
shareholders (2,161,542) ( 2,499,741) ( 932,920) ( 667,145)
----------- ----------- ----------- -----------
FROM CAPITAL SHARE TRANSACTIONS (Note 4):
Proceeds from shares sold 5,618,482 13,646,655 3,006,767 2,567,254
Net asset value of shares issued in reinvestment of
distributions to shareholders 1,847,043 1,976,411 920,285 654,877
Payments for shares redeemed 10,224,592) (20,065,740) ( 2,578,708) (3,196,222)
----------- ------------ ----------- -----------
Net increase (decrease) in net assets
from capital share transactions (2,759,067) (4,442,674) 1,348,344 25,909
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS ( 118,153) (7,882,104) 5,369,653 ( 329,303)
NET ASSETS:
Beginning of year 35,389,662 43,271,766 18,820,899 19,150,202
----------- ----------- ----------- -----------
End of year $35,271,509 $35,389,662 $24,190,552 $18,820,899
=========== =========== =========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME $ -- $ -- $ 25,006 $ 10,392
=========== =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FROM DATE OF
PUBLIC OFFERING
YEAR YEAR YEAR YEAR (JAN. 2, 1991)
ENDED ENDED ENDED ENDED THROUGH
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 9.94 $ 10.77 $ 10.49 $ 10.43 $ 10.00
------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.64 0.59 0.64 0.69 0.62
Net realized and unrealized
gains (losses) on investments 0.79 ( 0.79) 0.28 0.06 0.43
------- ------- ------- ------- -------
Total from investment operations 1.43 ( 0.20) 0.92 0.75 1.05
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income ( 0.64) ( 0.59) ( 0.64) ( 0.69) ( 0.62)
Distributions from net realized gains -- ( 0.04) -- -- --
------- ------- ------- ------- -------
Total distributions ( 0.64) ( 0.63) ( 0.64) ( 0.69) ( 0.62)
------- ------- ------- ------- -------
Net asset value at end of period $ 10.73 $ 9.94 $ 10.77 $ 10.49 $ 10.43
======= ======= ======= ======= =======
Total return 14.84% ( 1.98%) 9.00% 7.38% 11.87%(B)
======= ======= ======= ======= =======
Net assets at end of period (000's) $35,272 $35,390 $43,272 $32,025 $12,871
======= ======= ======= ======= =======
Ratio of expenses to average net assets(A) 0.60% 0.50% 0.50% 0.50% 0.50%(B)
Ratio of net investment income to average
net assets 6.21% 5.67% 5.95% 6.50% 7.05%(B)
Portfolio turnover rate 39% 57% 29% 24% 12%(B)
<FN>
(A)Absent fee waivers and/or expense reimbursements by the Adviser, the ratios
of expenses to average net assets would have been 1.09%, 1.06%, 1.11%, 1.30% and
2.54%(B) for the periods ended November 30, 1995, 1994, 1993, 1992 and 1991,
respectively (Note 3).
(B)Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
<CAPTION>
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FROM DATE OF
PUBLIC OFFERING
YEAR YEAR YEAR YEAR (JAN. 2, 1991)
ENDED ENDED ENDED ENDED THROUGH
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 12.43 $ 12.70 $ 12.26 $ 10.85 $ 10.00
------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.07 0.06 0.09 0.12 0.15
Net realized and unrealized gains on
investments 3.02 0.11 0.76 1.40 0.92
------- ------- ------- ------- -------
Total from investment operations 3.09 0.17 0.85 1.52 1.07
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income ( 0.06) ( 0.06) ( 0.10) ( 0.11) ( 0.15)
Distributions from net realized gains ( 0.55) ( 0.38) ( 0.31) -- ( 0.07)
------- ------- ------- ------- -------
Total distributions ( 0.61) ( 0.44) ( 0.41) ( 0.11) ( 0.22)
------- ------- ------- ------- -------
Net asset value at end of period $ 14.91 $ 12.43 $ 12.70 $ 12.26 $ 10.85
======= ======= ======= ======= =======
Total return 26.08% 1.35% 6.83% 14.39% 11.64%(B)
======= ======= ======= ======= =======
Net assets at end of period (000's) $24,191 $18,821 $19,150 $15,081 $ 9,103
======= ======= ======= ======= =======
Ratio of expenses to average net assets(A) 1.45% 1.50% 1.50% 1.50% 1.48%(B)
Ratio of net investment income to average
net assets 0.52% 0.51% 0.74% 1.05% 1.51%(B)
Portfolio turnover rate 42% 44% 45% 44% 37%(B)
<FN>
(A)Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 1.58%, 1.78% and 2.35%(B) for the periods ended
November 30, 1993, 1992 and 1991, respectively.
(B)Annualized.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995
<CAPTION>
PAR MARKET
VALUE INVESTMENT SECURITIES -- 97.1% RATE MATURITY VALUE
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 14.9%
$ 1,000,000 U.S. Treasury Notes 6.750% 5/31/97 $1,019,062
1,000,000 U.S. Treasury Notes 6.250 2/15/03 1,030,937
1,000,000 U.S. Treasury Notes 5.750 8/15/03 1,000,625
1,000,000 U.S. Treasury Notes 7.250 5/15/04 1,097,187
1,000,000 U.S. Treasury Notes 7.250 8/15/04 1,098,750
---------- ----------
$ 5,000,000 TOTAL U.S. TREASURY OBLIGATIONS $5,246,561
---------- ----------
(Amortized Cost $5,109,685)
U.S. GOVERNMENT AGENCY SECURITIES -- 2.9%
$ 1,000,000 Federal Home Loan Bank Notes (Amortized Cost $970,156) 6.100% 3/22/99$ 1,006,721
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES -- 46.0%
$ 253,672 Federal Home Loan Mortgage Corp. GOLD #M-13854 7.500% 5/01/97$ 257,353
614,158 Federal Home Loan Mortgage Corp. GOLD #M-14868 7.500 8/01/97 623,069
342,369 Federal Home Loan Mortgage Corp. GOLD #N-90875 7.500 2/01/99 349,801
18,089 Government National Mortgage Assoc. #114468 9.500 7/15/99 18,890
858,960 Federal Home Loan Mortgage Corp. GOLD #G-50274 7.500 6/01/00 880,761
21,360 Federal Home Loan Mortgage Corp. GNOME #200068 8.000 3/01/02 21,922
80,495 Federal National Mortgage Assoc. DWARF #51935 8.000 4/01/02 83,080
400,272 Federal Home Loan Mortgage Corp. REMIC #1219-E 6.500 3/15/03 400,248
113,537 Federal Home Loan Mortgage Corp. REMIC #1034-E 8.400 1/15/05 115,008
1,000,000 Federal National Mortgage Assoc. REMIC #93-52E 6.000 4/25/05 1,001,790
82,116 Federal Home Loan Mortgage Corp. #140094 7.500 5/01/05 82,606
500,000 Federal Home Loan Mortgage Corp. REMIC #1404-D 6.800 1/15/06 514,350
112,642 Federal National Mortgage Assoc. DWARF #50480 8.000 9/01/06 116,328
700,000 Federal National Mortgage Assoc. REMIC #92-24H 7.500 11/25/06 723,723
805,952 Government National Mortgage Assoc. #362109 9.000 9/15/08 852,802
500,000 Federal Home Loan Mortgage Corp. REMIC #1348-PD 6.250 6/15/11 498,950
1,000,000 Federal National Mortgage Assoc. REMIC #93-4D 6.750 11/25/13 1,006,450
1,500,000 Federal Home Loan Mortgage Corp. REMIC #1523-PE 6.000 10/15/15 1,499,940
1,000,000 Federal National Mortgage Assoc. REMIC #93-20PE 5.900 5/25/16 995,590
1,000,000 Federal Home Loan Mortgage Corp. REMIC #1522-C 6.000 8/15/16 999,940
131,070 Federal National Mortgage Assoc. REMIC #89-60C 8.900 2/25/17 131,331
1,000,000 Federal National Mortgage Assoc. REMIC #94-29PE 6.000 5/25/18 996,550
1,000,000 Federal National Mortgage Assoc. REMIC #93-223PD 5.650 7/25/19 985,110
27,012 Government National Mortgage Assoc. #285639 9.000 2/15/20 28,566
1,000,000 Federal Home Loan Mortgage Corp. REMIC #1699-C 6.200 2/15/24 1,005,680
1,007,006 Federal National Mortgage Assoc. #250322 7.500 7/01/25 1,024,628
996,428 Government National Mortgage Assoc. #410063 7.500 7/15/25 1,017,283
---------- ----------
$ 16,065,138 TOTAL U.S. GOVERNMENT AGENCY
----------
MORTGAGE-BACKED SECURITIES $ 16,231,749
----------
(Amortized Cost $16,130,341)
<PAGE>
<CAPTION>
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND (CONT'D)
PAR MARKET
VALUE INVESTMENT SECURITIES -- 97.1% RATE MATURITY VALUE
<S> <C> <C> <C> <C>
OTHER MORTGAGE-BACKED SECURITIES -- 5.4%
$ 875,702 Advanta Home Equity Loan Trust #92-1A 7.875% 9/25/08$ 907,227
1,000,000 CMC Securities Corp. III #94-B 6.000 2/25/09 992,200
$ 1,875,702 TOTAL OTHER MORTGAGE-BACKED SECURITIES
$ 1,899,427
(Amortized Cost $1,875,398)
ASSET-BACKED SECURITIES -- 6.3%
$ 200,000 Standard Credit Card Master Trust #1991-1A 8.500% 6/07/96$ 202,892
400,000 MBNA Credit Card Master Trust #1991-1A 7.750 10/15/98 406,432
541,791 Nissan Auto Receivables Trust #1994-A 6.450 9/15/99 545,746
1,000,000 Circuit City Credit Card Master Trust #1994-2A 8.000 11/15/99 1,072,980
---------- ----------
$ 2,141,791 TOTAL ASSET-BACKED SECURITIES $2,228,050
---------- ----------
(Amortized Cost $2,138,181)
CORPORATE BONDS -- 18.6%
$ 700,000 General Motors Acceptance Corp. Medium Term Notes 7.600% 1/09/97 $713,272
200,000 Sears Roebuck & Co. Medium Term Notes 7.440 1/15/97 203,61
100,000 Champion International, Inc. 9.800 2/01/98 107,712
1,000,000 Smith Barney 5.500 1/15/99 985,998
1,000,000 Salomon Brothers 7.250 1/15/00 1,015,904
1,000,000 Paine Webber, Inc. 7.000 3/01/00 1,016,901
700,000 Progressive Corp. 10.000 12/15/00 814,594
500,000 Paine Webber, Inc. 9.250 12/15/01 562,295
1,000,000 Quebec Province 8.800 4/15/03 1,134,290
---------- ----------
$ 6,200,000 TOTAL CORPORATE BONDS (Amortized Cost $6,323,626) $6,554,578
---------- ----------
MUNICIPAL BONDS -- 3.0%
$ 1,000,000 Los Angeles Co., CA, Taxable Pension Obligation Bond 8.300% 6/30/02 $1,067,550
---------- ----------
(Amortized Cost $1,001,131)
$ 33,282,631 TOTAL INVESTMENTS AT VALUE -- 97.1%
===========
(Amortized Cost $33,548,518) $34,234,636
-----------
<PAGE>
<CAPTION>
Face Market
Amount Value
<S> <C> <C>
REPURCHASE AGREEMENTS(1) -- 2.1%
$ 760,000 Fifth Third Bank, 5.60%, dated 11/30/95, due 12/01/95,
------- repurchase proceeds $760,118 $ 760,000
-----------
$ 760,000 TOTAL REPURCHASE AGREEMENTS 760,000
======= -----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE -- 99.2% $34,994,636
OTHER ASSETS AND LIABILITIES, NET -- 0.8% 276,873
-----------
NET ASSETS -- 100.0% $35,271,509
===========
<FN>
(1)Repurchase agreements are fully collateralized by U.S. Government obligations.
DWARF - A 15 year mortgage pool issued by FNMA.
REMIC - Real Estate Mortgage Investment Conduit.
GNOME - A 15 year mortgage pool issued by FHLMC.
GOLD - A 30 year mortgage pool issued by FHLMC with a shorter coupon payment delay period.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995
<CAPTION>
MARKET
INVESTMENTS IN COMMON STOCK -- 96.4% SHARES VALUE
<S> <C> <C>
FINANCIAL AND INSURANCE -- 10.4%
American Express Co. 10,500 $ 446,250
American International Group, Inc. 5,750 516,063
Federal National Mortgage Assoc. 5,000 547,500
General Re Corp. 3,000 448,875
J.P. Morgan & Company, Inc. 7,000 549,500
-----------
$ 2,508,188
-----------
ENERGY AND RESOURCES -- 10.3%
Apache Corp. 10,000 $ 266,250
Mobil Corp. 5,000 521,875
Noble Affiliates, Inc. 20,000 542,500
Pandhandle Eastern Corp. 18,000 510,750
Royal Dutch Petroleum Co. 5,000 641,875
-----------
$ 2,483,250
-----------
INDUSTRIAL -- 9.6%
Illinois Tool Works, Inc. 7,100 $ 449,962
Ingersoll-Rand Co. 9,000 345,375
Thermo Electron Corp.* 18,000 891,000
Watts Industries, Inc. Class A 6,000 123,000
York International Corp. 11,500 514,625
-----------
$ 2,323,962
-----------
HEALTH CARE -- 8.4%
Abbot Laboratories 17,500 $ 710,937
Mallinckrodt Group, Inc. 7,000 238,875
Merck & Co., Inc. 8,000 495,000
U.S. Healthcare, Inc. 13,000 591,500
-----------
$ 2,036,312
-----------
ELECTRICAL EQUIPMENT -- 6.9%
AMP, Inc. 8,000 $ 321,000
General Electric Co. 9,000 605,250
Molex, Inc. Class A 18,812 587,875
Thomas & Betts Corp. 2,000 146,750
-----------
$ 1,660,875
-----------
TELECOMMUNICATIONS -- 6.1%
Cabletron Systems, Inc.* 7,000 $ 581,000
ECI Telecommunications, Ltd. 18,500 393,125
Newbridge Networks Corp.* 12,100 515,763
-----------
$ 1,489,888
-----------
<PAGE>
<CAPTION>
GROWTH & INCOME FUND (CONT'D)
MARKET
INVESTMENTS IN COMMON STOCK -- 96.4% SHARES VALUE
<S> <C> <C>
BASIC AND SPECIALTY CHEMICALS -- 5.7%
Avery-Dennison Corp. 8,000 $ 381,000
Great Lakes Chemical Corp. 8,500 604,563
Nalco Chemical Co. 6,000 183,750
Schulman (A.), Inc. 11,000 207,625
-----------
$ 1,376,938
-----------
MISCELLANEOUS -- 5.0%
Airtouch Communications, Inc.* 24,800 $ 722,300
Minnesota Mining & Manufacturing Co. 7,500 491,250
-----------
$ 1,213,550
-----------
HOUSEHOLD PRODUCTS -- 4.3%
Gillette Co. 7,000 $ 363,125
International Flavors & Fragrances, Inc. 7,500 383,437
Rubbermaid, Inc. 10,500 288,750
-----------
$ 1,035,312
-----------
UTILITIES-TELEPHONE -- 4.2%
BellSouth Corp. 6,600 $ 256,575
GTE Corp. 18,000 767,250
-----------
$ 1,023,825
-----------
RETAILING -- 3.8%
Bed Bath & Beyond, Inc.* 10,000 $ 328,750
Price/Costco, Inc.* 18,000 299,250
Toys R Us, Inc.* 13,000 302,250
-----------
$ 930,250
COMPUTER SYSTEMS AND SOFTWARE -- 3.1%
Adobe Systems, Inc. 6,000 $ 405,750
Sequent Computer Systems, Inc.* 21,500 341,312
-----------
$ 747,062
-----------
FOOD AND BEVERAGES -- 3.0%
PepsiCo, Inc. 9,000 $ 497,250
Sysco Corp. 7,500 229,688
-----------
$ 726,938
-----------
ELECTRONICS -- 2.8%
Motorola, Inc. 11,000 $ 673,750
-----------
PAPER AND FOREST PRODUCTS -- 2.7%
Union Camp Corp. 6,000 $ 294,750
Willamette Industries, Inc. 6,000 363,000
$ 657,750
-----------
LEISURE TIME -- 2.4%
Viacom, Inc. Class B* 12,000 $ 579,000
-----------
CONTAINERS -- 1.6%
Sonoco Products Co. 16,000 $ 400,000
-----------
<PAGE>
<CAPTION>
GROWTH & INCOME FUND (CONT'D)
MARKET
INVESTMENTS IN COMMON STOCK -- 96.4% SHARES VALUE
<S> <C> <C>
UTILITIES-ELECTRIC -- 1.6%
Montana Power Co. 17,000 $ 386,750
-----------
AEROSPACE/DEFENSE -- 1.5%
Boeing Co. 5,000 $ 364,375
-----------
MEDIA -- 1.1%
Donnelley (R.R.) & Sons Co. 7,000 $ 268,625
-----------
TRUCKING AND LEASING -- 1.0%
Landstar System, Inc.* 9,000 $ 231,750
-----------
STEEL -- 0.9%
LTV Corp.* 14,500 $ 210,250
-----------
TOTAL COMMON STOCK -- 96.4% (Cost $18,390,519) $ 23,328,600
-----------
<CAPTION>
FACE MARKET
REPURCHASE AGREEMENTS(1) -- 5.0% AMOUNT VALUE
<S> <C> <C>
Fifth Third Bank, 5.60%, dated 11/30/95, due 12/01/95
repurchase proceeds $1,210,188 $ 1,210,000 $ 1,210,000
----------- -----------
TOTAL REPURCHASE AGREEMENTS $ 1,210,000 $ 1,210,000
=========== -----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT
VALUE -- 101.4% $ 24,538,600
OTHER ASSETS AND LIABILITIES, NET -- (1.4)% ( 348,048)
-----------
NET ASSETS -- 100.0% $ 24,190,552
===========
<FN>
*Non-income producing security.
(1)Repurchase agreements are fully collateralized by U.S. Government obligations.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Brundage, Story and Rose Investment Trust (the Trust) was organized as an Ohio
business trust on October 1, 1990. The Trust offers two series of shares to
investors: the Brundage, Story and Rose Short/Intermediate Term Fixed-Income
Fund (the Bond Fund) and the Brundage, Story and Rose Growth & Income Fund
(the Equity Fund), (collectively, the Funds). The Trust commenced operations
on December 3, 1990, when Brundage, Story and Rose (the Adviser) purchased the
initial 5,000 shares of each Fund at $10 per share. The public offering of
shares commenced on January 2, 1991.
The following is a summary of the Trust's significant accounting policies:
Securities valuation -- The Funds' portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time). Portfolio securities listed on stock
exchanges and securities traded in the over-the-counter market are valued at
the last sale price as of the close of business on the day the securities are
being valued. Securities not traded on a particular day, or for which the
last sale price is not readily available, are valued at the closing bid price
quoted by brokers that make markets in the securities. U.S. Government and
agency obligations, asset-backed securities and corporate bonds are valued at
their most recent bid price as obtained from one or more of the major market
makers for such securities or are valued at an estimated fair value obtained
from an independent pricing service based upon such factors as maturity,
coupon, issuer and type of security. If market quotations are not readily
available, securities may be valued at fair value as determined in good faith
by the Adviser consistent with procedures established by the Board of
Trustees.
Repurchase agreements, which are collateralized by U.S. Government
obligations, are valued at cost which, together with accrued interest,
approximates market. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' custodian at the
Federal Reserve Bank. At the time each Fund enters into a repurchase
agreement, the seller agrees that the value of the underlying securities,
including accrued interest, will be equal to or exceed the face amount of the
repurchase agreement. Each Fund enters into repurchase agreements only with
institutions deemed to be creditworthy by the Adviser, including the Funds'
custodian, banks having assets in excess of $10 billion and primary U.S.
Government securities dealers.
Share valuation -- The net asset value of each Fund is calculated daily by
dividing the total value of that Fund's assets, less liabilities, by the
number of shares outstanding. The offering and redemption price per share of
each Fund are equal to the net asset value per share.
Investment income -- Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date. Discounts and premiums on securities
purchased are accreted/amortized in accordance with income tax regulations
which approximate generally accepted accounting principles.
Distributions to shareholders -- Dividends arising from net investment income
for the Bond Fund are declared daily and paid monthly. Dividends arising from
net investment income for the Equity Fund are declared and paid quarterly.
With respect to each Fund, net realized short-term capital gains, if any, may
be distributed throughout the year and net realized long-term capital gains,
if any, are distributed at least once each year. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Securities traded on a to-be-announced basis -- The Bond Fund frequently
trades portfolio securities on a "to-be-announced" (TBA) basis. In a TBA
transaction, the Fund has committed to purchase securities for which all
specific information is not yet known at the time of the trade, particularly
the face amount and maturity date in mortgage-backed and asset-backed
securities transactions. Securities purchased on a TBA basis are recorded on
the trade date, however, they are not settled until they are delivered to the
Fund, normally 15 to 45 days later. These transactions are subject to market
fluctuations and their current value is determined in the same manner as for
other portfolio securities. When effecting such transactions, assets of a
dollar amount sufficient to make payment for the portfolio securities to be
purchased are placed in a segregated account on the trade date.
<PAGE>
Organization expenses -- Expenses of organization, net of certain expenses
paid by the Adviser, have been capitalized and are being amortized on a
straight-line basis over five years.
Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a 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.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during
the fiscal year ended November 30) plus undistributed amounts from prior
years.
The following information is based upon federal income tax cost of portfolio
investments (excluding repurchase agreements) as of November 30, 1995:
<TABLE>
<CAPTION>
SHORT/
INTERMEDIATE
TERM GROWTH
FIXED-INCOME & INCOME
FUND FUND
<S> <C> <C>
Gross unrealized appreciation 784,843 $5,115,317
Gross unrealized depreciation ( 98,725) ( 177,236)
----------- ----------
Net unrealized appreciation $686,118 $4,938,081
=========== ==========
Federal income tax cost $33,548,518 $18,390,519
=========== ===========
</TABLE>
As of November 30, 1995, the Bond Fund had a capital loss carryforward of
$513,223 for federal income tax purposes, which expires on November 30, 2002.
This capital loss carryforward may be utilized in future years to offset net
realized capital gains prior to distributing such gains to shareholders.
<PAGE>
2. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investment securities,
other than short-term investments, amounted to $13,020,019 and $15,435,014,
respectively, for the Bond Fund and $8,822,411 and $9,124,262, respectively,
for the Equity Fund during the year ended November 30, 1995.
3. TRANSACTIONS WITH AFFILIATES
Certain Trustees and officers of the Trust are partners of Brundage, Story and
Rose (the Adviser). Certain officers of the Trust are officers of MGF Service
Corp. (MGF), the administrative services agent, shareholder servicing and
transfer agent, and accounting services agent for the Trust, and of Midwest
Group Financial Services, Inc. (MGFS), the underwriter of the Funds' shares.
At November 30, 1995, the Adviser, partners of the Adviser and certain
employee benefit plans of the Adviser collectively owned 13% and 35% of the
shares of beneficial interest outstanding of the Bond Fund and the Equity
Fund, respectively.
ADVISORY AGREEMENT
Each Fund's investments are managed by the Adviser pursuant to the terms of an
Advisory Agreement. Under the Advisory Agreement, the Bond Fund and the Equity
Fund each pay the Adviser a fee, computed and accrued daily and paid monthly,
at an annual rate of .50% and .65%, respectively, of its average daily net
assets.
In order to reduce the operating expenses of the Bond Fund, the Adviser
voluntarily waived $171,125 of its investment advisory fees during the year
ended November 30, 1995.
ADMINISTRATIVE SERVICES AGREEMENT
Under the terms of the Administrative Services Agreement between the Trust and
MGF, MGF supplies non-investment related statistical and research data,
internal regulatory compliance services and executive and administrative
services for the Funds. MGF supervises the preparation of tax returns,
reports to shareholders of the Funds, reports to and filings with the
Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For the performance of these
administrative services, MGF receives a monthly fee based on each Fund's
average daily net assets.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between the Trust and MGF, MGF maintains the records of
each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, MGF receives a monthly fee based on the
number of shareholder accounts in each Fund. In addition, each Fund pays
out-of-pocket expenses, including but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and
MGF, MGF calculates the daily net asset value per share and maintains the
financial books and records of each Fund. For these services, MGF receives a
monthly fee from each Fund.
<PAGE>
UNDERWRITING AGREEMENT
Under the terms of the Underwriting Agreement between the Trust and MGFS, MGFS
serves as the exclusive underwriter of the Funds' shares.
PLAN OF DISTRIBUTION
The Trust has a plan of distribution (the Plan) under which each Fund may
incur or reimburse the Adviser for expenses related to the distribution and
promotion of capital shares. The annual limitation for payment of such
expenses under the Plan is .25% of the average daily net assets of each Fund.
4. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital shares sold and redeemed as shown in the
Statements of Changes in Net Assets are the result of the following capital
share transactions for the years ended November 30, 1995 and 1994:
<TABLE>
<CAPTION>
SHORT/INTERMEDIATE TERM
FIXED-INCOME FUND GROWTH & INCOME FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Shares sold 540,529 1,304,715 228,968 205,874
Shares issued in reinvestment
of distributions to shareholders 177,844 190,946 76,457 52,894
Shares redeemed ( 991,151) ( 1,951,915) ( 197,103) ( 253,261)
---------- ------------ ---------- ----------
Net increase (decrease) in shares outstanding ( 272,778) ( 456,254) 108,322 5,507
Shares outstanding, beginning of year 3,560,893 4,017,147 1,513,671 1,508,164
---------- ------------ ---------- ----------
Shares outstanding, end of year 3,288,115 3,560,893 1,621,993 1,513,671
========== ============ ========== ==========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP Logo
To the Shareholders and Board of Trustees
of the Brundage, Story and Rose Investment Trust:
We have audited the accompanying statements of assets and liabilities of the
Short/Intermediate Term Fixed-Income Fund and the Growth & Income Fund of the
Brundage, Story and Rose Investment Trust (an Ohio business trust), including
the portfolios of investments, as of November 30, 1995, the related statements
of operations for the year then ended, and the statements of changes in net
assets and the financial highlights for the periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights 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
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of November 30, 1995, by correspondence with the custodian and
brokers. 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 financial highlights referred to
above present fairly, in all material respects, the financial position of the
Short/Intermediate Term Fixed-Income Fund and the Growth & Income Fund of the
Brundage, Story and Rose Investment Trust as of November 30, 1995, the results
of their operations for the year then ended, and the changes in their net
assets and the financial highlights for the periods indicated thereon, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cincinnati, Ohio,
December 22, 1995
<PAGE>
BRUNDAGE,
STORY AND ROSE
INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Nationwide: (Toll Free) 800-543-8721
Cincinnati: 629-2000
BOARD OF TRUSTEES
Francis S. Branin, Jr.
Malcolm D. Clarke, Jr.
Cheryl Grandfield
Antoinette Geyelin Hoar
Jerome B. Lieber
William M.R. Mapel
James G. Pepper
Crosby R. Smith
Charles G. Watson
INVESTMENT ADVISER
Brundage, Story and Rose
One Broadway
New York, New York 10004
UNDERWRITER
Midwest Group Financial
Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
TRANSFER AGENT
MGF Service Corp.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICES
Nationwide: (Toll Free) 800-320-2212
Cincinnati: 629-2070
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) (i) Financial Statements included in Part
A:
Financial Highlights
(ii) Financial Statements included in Part B:
Statements of Assets and Liabilities, November
30, 1995
Statements of Operations for the Year Ended
November 30, 1995
Statements of Changes in Net Assets for the
Years Ended November 30, 1995 and November 30,
1994
Financial Highlights for the Periods Ended
November 30, 1995, 1994, 1993, 1992 and 1991
Notes to Financial Statements, November 30, 1995
Portfolios of Investments, November 30, 1995
(b) Exhibits
(1) (i) Agreement and Declaration of Trust*
(ii) Amendments to Agreement and Declaration of
Trust
(2) Bylaws*
(3) Inapplicable
(4) Specimen of Share Certificate*
(5) (i) Advisory Agreement with Brundage, Story and
Rose*
(ii) Agreement to Transfer Investment Advisory
Contract
(6) (i) Underwriting Agreement with Midwest Group
Financial Services, Inc. (formerly MGF
Distributors, Inc.)*
(ii) Form of Underwriter's Dealer Agreement*
(7) Inapplicable
(8) Custody Agreement with The Fifth
Third Bank*
<PAGE>
(9) (i) Administration Agreement with MGF Service
Corp.*
(ii) Accounting Services Agreement with MGF
Service Corp.
(iii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement with MGF
Service Corp.
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Public Accountants
(12) Inapplicable
(13) Inapplicable
(14)(i) Brundage, Story and Rose Individual
Retirement Account Plan*
(ii) Brundage, Story and Rose 403(b) Retirement
Plan*
(iii) Midwest Group Prototype Defined Contribution
Plan*
(15) (i) Plan of Distribution Pursuant to Rule 12b-1*
(ii) Implementation Agreement with Brundage, Story
and Rose LLC*
(16) Computations of Performance Quotations
Provided in Response to Item 22*
(17) (i) Financial Data Schedule -- Brundage, Story
and Rose Equity Fund
(ii) Financial Data Schedule -- Brundage, Story
and Rose Short/Intermediate Term Fixed-Income
Fund
(18) Inapplicable
_____________________________________
* Incorporated by reference to the Trust's registration
statement on Form N-1A
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Set forth below are the number of record holders, as of
March 1, 1996, of the shares of beneficial interest of the
Registrant.
Number of
Title of Class Record Holders
- -------------- --------------
Brundage, Story and Rose
Equity Fund 502
Brundage, Story and Rose Short/
Intermediate Term Fixed-Income Fund 421
ITEM 27. INDEMNIFICATION
Article VI of the Registrant's Agreement and
Declaration of Trust provides for indemnification of
officers and Trustees as follows:
"SECTION 6.4 INDEMNIFICATION OF TRUSTEES,
OFFICERS, ETC. The Trust shall indemnify each of
its Trustees and officers, including persons who
serve at the Trust's request as directors,
officers or trustees of another organization in
which the Trust has any interest as a shareholder,
creditor or otherwise (hereinafter referred to as
a "Covered Person") against all liabilities,
including but not limited to amounts paid in
satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred
by any Covered Person in connection with the
defense or disposition of any action, suit or
other proceeding, whether civil or criminal,
before any court or administrative or legislative
body, in which such Covered Person may be or may
have been involved as a party or otherwise or with
which such person may be or may have been
threatened, while in office or thereafter, by
reason of being or having been such a Trustee or
officer, director or trustee, and except that no
Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to
which such Covered Person would otherwise be
subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered
Person's office.
<PAGE>
SECTION 6.5 ADVANCES OF EXPENSES. The Trust
shall advance attorneys' fees or other expenses
incurred by a Covered Person in defending a
proceeding to the full extent permitted by the
Securities Act of 1933, as amended, the 1940 Act,
and Ohio Revised Code Chapter 1707, as amended.
In the event any of these laws conflict with Ohio
Revised Code Section 1701.13(E), as amended, these
laws, and not Ohio Revised Code Section
1701.13(E), shall govern.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC.
The right of indemnification provided by this
Article VI shall not be exclusive of or affect any
other rights to which any such Covered Person may
be entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs,
executors and administrators. Nothing contained
in this article shall affect any rights to
indemnification to which personnel of the Trust,
other than Trustees and officers, and other
persons may be entitled by contract or otherwise
under law, nor the power of the Trust to purchase
and maintain liability insurance on behalf of any
such person."
Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and
will be governed by the final adjudication of such
issue.
The Registrant maintains a standard mutual fund and
investment advisory professional and directors and
officers liability policy. The policy provides
coverage to the Registrant, its Trustees and officers,
its Adviser and its Underwriter. Coverage under the
policy includes losses by reason of any act, error,
omission, misstatement, misleading statement, neglect
or breach of duty.
The Advisory Agreement with Brundage, Story and Rose
LLC (the "Adviser") provides that the Adviser shall not
be liable for any action taken, omitted or suffered to
be taken by it in its reasonable judgment, in good
faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by the
Agreement, or in accordance with (or in the absence of)
specific directions or instructions from Registrant,
provided, however, that such acts or omissions shall
not have resulted from Adviser's willful misfeasance,
bad faith or gross negligence, a violation of the
standard of care established by and applicable to the
Adviser in its actions under the Agreement or breach of
its duty or of its obligations thereunder.
The Underwriting Agreement with Midwest Group Financial
Services, Inc. (the "Underwriter") provides that the
Underwriter, its directors, officers, employees,
partners, shareholders and control persons shall not be
liable for any error of judgment or mistake of law or
for any loss suffered by Registrant in connection with
the matters to which the Agreement relates, except a
loss resulting from willful misfeasance, bad faith or
gross negligence on the part of any of such persons in
the performance of Underwriter's duties or from the
reckless disregard by any of such persons of
Underwriter's obligations and duties under the
Agreement. Registrant will advance attorneys' fees or
other expenses incurred by any such person in defending
a proceeding, upon the undertaking by or on behalf of
such person to repay the advance if it is ultimately
determined that such person is not entitled to
indemnification.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT
ADVISER
(a) The Adviser is a registered investment adviser
providing investment advisory services to the
Registrant. The Adviser has been engaged since
1932 in the business of providing investment
advisory services to individual and institutional
clients.
<PAGE>
(b) The following list sets forth the principals of
the Adviser. No principal of the Adviser was
engaged in any other business, profession,
vocation or employment of a substantial nature
during the past two years. The business address
of each principal of the Adviser is One Broadway,
New York, New York 10004
(1) Charles G. Watson
(2) Malcolm D. Clarke, Jr.
(3) Jeanne M. Harrington
(4) James G. Pepper
(5) Francis S. Branin, Jr.
(6) Cheryl L. Grandfield
(7) Paul R. Barkus
(8) Brandon Reid
(9) H. Dean Benner
(10) Gregory E. Ratte
(11) Deborah C. Foord
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Midwest Group Financial Services, Inc. also acts
as underwriter for the three investment companies
comprising the Midwest Group of Funds, namely
Midwest Strategic Trust, Midwest Trust and Midwest
Group Tax Free Trust.
Position Position
with with
(b) Name Underwriter Registrant
---- ----------- ----------
Robert H. Leshner Chairman of None
the Board
and Director
James A. Markley, Jr. Director None
Michael F. Andrews President None
Sharon L. Karp Vice President None
Maryellen Peretzky Vice President, None
Assistant
Secretary and
Director
Susan F. Flischel Vice President- None
Investments
John F. Splain Secretary and Secretary
General Counsel
Robert G. Dorsey Treasurer Vice
President
John J. Goetz Chief Investment None
Officer
Scott D. Weston Assistant Vice None
President-
Investments
Michele M. Hawkins Assistant None
Vice President
Dara Abel Assistant None
Portfolio Manager
Terrie A. Wiedenheft Controller None
Elizabeth A. Santen Assistant None
Secretary
The address of all of the above-named persons is
312 Walnut Street, Cincinnati, Ohio 45202.
(c) Inapplicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940
and the Rules promulgated thereunder will be maintained by the
Registrant at its principal office located at 312 Walnut Street,
Cincinnati, Ohio 45202 as well as at the office of the Adviser
located at One Broadway, New York, New York 10004.
ITEM 31. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A OR B
Inapplicable
ITEM 32. UNDERTAKINGS
(a) Inapplicable
(b) Inapplicable
(c) The Registrant undertakes that, if so requested,
it will furnish each person to whom a prospectus
is delivered with a copy of Registrant's latest
annual report without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration
Statement to be signed below on its behalf by the undersigned,
thereunto duly authorized, in the City of Cincinnati and State of
Ohio on the 31st day of March, 1996.
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
By: /s/John F. Splain By: /s/ John A. Dudley
John F. Splain, John A. Dudley,
Attorney-in-Fact Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title
__________________________ President
Malcolm D. Clarke, Jr.* and Trustee
/s/Mark J. Seger Treasurer March 31, 1996
Mark J. Seger
_________________________ Vice President
Charles G. Watson* and Trustee
_________________________ Vice President
James G. Pepper* and Trustee
_________________________ Vice President
Francis S. Branin, Jr.* and Trustee
_________________________ Vice President
Cheryl L. Grandfield* and Trustee
_________________________ Trustee By:/s/John F. Splain
Jerome B. Lieber* John F. Splain,
Attorney-in-Fact*
_________________________ Trustee March 31, 1996
Antoinette Geyelin Hoar*
__________________________ Trustee By:/s/John A. Dudley
William M.R. Mapel* John A. Dudley
Attorney-in-Fact*
__________________________ Trustee March 31, 1996
Crosby R. Smith*
INDEX TO EXHIBITS
(1)(i) Agreement and Declaration of Trust*
(1)(ii) Amendments to Agreement and Declaration of Trust
(2) Bylaws*
(3) Inapplicable
(4) Specimen of Share Certificate*
(5)(i) Advisory Agreement*
(5)(ii) Agreement to Transfer Investment Advisory Contract
(6)(i) Underwriting Agreement*
(6)(ii) Form of Underwriter's Dealer Agreement*
(7) Inapplicable
(8) Custody Agreement*
(9)(i) Administrative Services Agreement*
(9)(ii) Accounting Services Agreement
(9)(iii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Public Accountants
(12)-(13) Inapplicable
(14)(i) Brundage, Story and Rose Individual Retirement
Account Plan*
(14)(ii) Brundage, Story and Rose 403(b) Retirement Plan*
(14)(iii) Midwest Group Prototype Defined Contribution Plan*
(15)(i) Plan of Distribution Pursuant to Rule 12b-1*
(15)(ii) Implementation Agreement*
(16) Computations of Performance Quotations*
(17)(i) Financial Data Schedule -- Brundage, Story and Rose Equity
Fund
(ii) Financial Data Schedule -- Brundage, Story and Rose
Short/Intermediate Term Fixed-Income Fund
(18) Inapplicable
____________________________
* Incorporated by reference to the Trust's registration statement
on Form N-1A.
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
AMENDMENT NO. 1 TO AGREEMENT AND DECLARATION OF TRUST
Pursuant to Section 4.1 of the Agreement and Declaration of Trust
of Brundage, Story and Rose Investment Trust and effective upon the
execution of this instrument, the undersigned, being a majority of the
Trustees the Trust, hereby redesignate the Brundage, Story and Rose
Short/Intermediate Term Bond Fund series of the Trust the "Brundage,
Story and Rose Short/Intermediate Term Fixed-Income Fund." The
relative rights and preferences of the Brundage, Story and Rose
Short/Intermediate Term Fixed-Income Fund shall remain those rights
and preferences set forth in Section 4.2 of the Agreement and
Declaration of Trust of Brundage, Story and Rose Investment Trust.
This instrument shall have the status of an amendment to the
Agreement and Declaration of Trust of Brundage, Story and Rose
Investment Trust.
IN WITNESS WHEREOF, the undersigned Trustees have executed one or
more counterparts of this instrument as of December 28, 1990.
/s/ Donald F. Daly
- ------------------------- -------------------------
Donald F. Daly Crosby R. Smith
- ------------------------- -------------------------
Charles G. Watson Jerome B. Lieber
/s/ James G. Pepper
- ------------------------- -------------------------
James G. Pepper William M.R. Mapel
/s/ Francis S. Branin, Jr. /s/ Antoinette Geyelin Hoar
- ------------------------- ---------------------------
Francis S. Branin, Jr. Antoinette Geyelin Hoar
/s/ Cheryl L. Grandfield
- -------------------------
Cheryl L. Grandfield
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
AMENDMENT NO. 2 TO AGREEMENT AND DECLARATION OF TRUST
The undersigned hereby certifies that he is the duly elected
Secretary of Brundage, Story and Rose Investment Trust and that
pursuant to Section 7.3 of the Agreement and Declaration of Trust, the
Trustees, at a meeting at which a quorum was present on October 17,
1995, adopted the following resolutions:
"RESOLVED, that pursuant to Section 7.3 of the Agreement and
Declaration of Trust and effective as of April 1, 1996, the
name of the Brundage, Story and Rose Growth & Income Fund, a
series of the Trust, be changed to the Brundage, Story and
Rose Equity Fund; and
FURTHER RESOLVED, that the Trust's Agreement and Declaration
of Trust or other Trust documents and records, as necessary
or appropriate, be amended to reflect the name change of
this series; and
FURTHER RESOLVED, that the officers of the Trust be, and
they hereby are, authorized and directed to take such
further actions as are necessary to effect the purpose of
these resolutions."
The undersigned certifies that the actions to effect the
foregoing Amendment were duly taken in the manner provided by the
Agreement and Declaration of Trust, that said Amendment is to be
effective April 1, 1995 and that he is causing this Certificate to be
signed and filed as provided in Section 7.3 of the Agreement and
Declaration of Trust.
WITNESS my hand this 29th day of February, 1996.
/s/ John F. Splain
----------------------------
John F. Splain, Secretary
AGREEMENT TO TRANSFER INVESTMENT ADVISORY CONTRACT
AGREEMENT made as of this 31st day of December by and between
Brundage, Story and Rose, a general partnership organized under the
laws of the State of New York (the "Partnership") and Brundage, Story
and Rose LLC, a limited liability company organized under the laws of
the State of New York ("BSR LLC").
WHEREAS, Brundage, Story and Rose Investment Trust (the "Trust")
is registered as a management investment company under the Investment
Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Partnership provides investment advisory services to
the Brundage, Story and Rose Growth & Income Fund and the Brundage,
Story and Rose Short/Intermediate Term Fixed-Income Fund (each a
"Fund" and collectively the "Funds"), each a series of the Trust,
pursuant to an investment advisory contract (the "Advisory Agreement")
between the Trust and the Partnership; and
WHEREAS, on or about January 2, 1996, the Partnership intends to
contribute all of the assets and liabilities of the Partnership to BSR
LLC, after which the Partnership will cease to operate as a legal
entity; and
WHEREAS, the Partnership proposes to make a formal transfer of
its rights and obligations under the Advisory Agreement to BSR LLC, a
registered investment adviser; and
WHEREAS, the proposed transfer will result in no change in
actual control or management of the entity responsible for performance
of the Advisory Agreement; and
WHEREAS, the personnel performing research and analysis as well
as those making investment recommendations and decisions for BSR LLC
on behalf of the Funds will not differ in any respect from those
performing such services for the Partnership; and
WHEREAS, counsel to the Partnership and BSR LLC is of the opinion
that the proposed transfer of the Advisory Agreement to BSR LLC does
not constitute an "assignment" within the meaning of Section 2(a)(4)
of the 1940 Act pursuant to Rule 2a-6 of the 1940 Act; and
WHEREAS, the Board of Trustees of the Trust has approved the
proposed transfer by the Partnership of its rights and obligations
under the Advisory Agreement to BSR LLC;
NOW, THEREFORE, in consideration of the promises and agreements
of the parties contained herein, the parties agree as follows:
<PAGE>
1. TRANSFER OF ADVISORY AGREEMENT. The Partnership hereby
transfers all of its rights and obligations under the Advisory
Agreement to BSR LLC.
2. ACCEPTANCE OF APPOINTMENT. BSR LLC accepts its appointment
as discretionary portfolio manager of the Funds and agrees to use its
best professional judgment to make timely investment decisions for the
Funds.
3. REPRESENTATIONS OF BSR LLC. BSR LLC represents and warrants
that it has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act. BSR LLC further
represents and warrants that it will immediately notify the Trust of
the occurrence of any event which would disqualify BSR LLC from
serving as an investment adviser of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise.
4. EFFECTIVE DATE. This Agreement shall become effective on
the date first above written and shall remain in force so long as the
Advisory Agreement remains in force.
IN WITNESS WHEREOF, the Partnership and BSR LLC have each caused
this Agreement to be signed in duplicate on their behalf, all as of
the date first above written.
BRUNDAGE, STORY AND ROSE
By: /s/ Malcolm D. Clarke
-------------------------
Partner
BRUNDAGE, STORY AND ROSE LLC
By: /s/ Francis S. Branin
------------------------
President
The above described transfer is accepted on behalf of Brundage, Story
and Rose Investment Trust.
By: /s/ Cheryl L. Grandfield
-------------------------
Vice President
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT effective as of December 31, 1990 by and between
Brundage, Story and Rose Investment Trust, an Ohio business trust (the
"Trust"), and MGF SERVICE CORP., an Ohio corporation ("MGF").
WITNESSETH THAT:
WHEREAS, the Trust has been organized to operate as an open-end
management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust desires to hire MGF to provide the Trust with
certain accounting and pricing services, and MGF is willing to provide
such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. APPOINTMENT.
MGF is hereby appointed to provide the Trust with certain
accounting and pricing services, and MGF accepts such appointment and
agrees to provide such services under the terms and conditions set
forth herein.
2. CALCULATION OF NET ASSET VALUE.
MGF will calculate the net asset value of each series of the
Trust and the per share net asset value of each series of the Trust,
in accordance with the Trust's current prospectus and statement of
additional information, once daily as of the time selected by the
Trust's Board of Trustees. MGF will prepare and maintain a daily
valuation of all securities and other assets of the Trust in
accordance with instructions from a designated officer of the Trust or
its investment adviser and in the manner set forth in the current
prospectus and statement of additional information. In valuing
securities of the Trust, MGF may contract with, and rely upon market
quotations provided by, outside services.
3. BOOKS AND RECORDS.
MGF will maintain and keep current the general ledger for
each series of the Trust, recording all income and expenses, capital
share activity and security transactions of the Trust.
<PAGE>
MGF will maintain such further books and records as are necessary to
enable it to perform its duties under this Agreement, and will
periodically provide reports to the Trust and its authorized agents
regarding share purchases and redemptions and trial balances of each
series of the Trust. MGF will prepare and maintain complete, accurate
and current all records with respect to the Trust required to be
maintained by the Trust under the Internal Revenue Code of 1986, as
amended (the "Code"), and under the rules and regulations of the 1940
Act, and will preserve said records in the manner and for the periods
prescribed in the Code and the 1940 Act. The retention of such
records shall be at the expense of the Trust.
All of the records prepared and maintained by MGF pursuant
to this Section 3 which are required to be maintained by the Trust
under the Code and the 1940 Act will be the property of the Trust. In
the event this Agreement is terminated, all such records shall be
delivered to the Trust or to any person designated by the Trust at the
Trust's expense, and MGF shall be relieved of responsibility for the
preparation and maintenance of any such records delivered to the Trust
or any such person.
4. PAYMENT OF TRUST EXPENSES.
MGF shall process each request received from the Trust or
its authorized agents for payment of the Trust's expenses. Upon
receipt of written instructions signed by an officer or other
authorized agent of the Trust, MGF shall prepare checks in the
appropriate amounts which shall be signed by an authorized officer of
MGF and mailed to the appropriate party.
5. FORM N-SAR.
MGF shall maintain such records within its control and as
shall be requested by the Trust to assist the Trust in fulfilling the
requirements of Form N-SAR.
6. COOPERATION WITH ACCOUNTANTS.
MGF shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary
information is made available to such accountants for the expression
of their unqualified opinion where required for any document for the
Trust.
<PAGE>
7. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes
hereof.
8. FEES.
For performing its services under this Agreement, each
series of the Trust shall pay MGF a monthly fee in accordance with the
schedule attached hereto as Schedule A. The fees with respect to any
month shall be paid to MGF on the last business day of such month.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require MGF to perform any
services for the Trust which services could cause MGF to be deemed an
"investment adviser" of the Trust within the meaning of Section
2(a)(20) of the 1940 Act or to supersede or contravene the prospectus
or statement of additional information of the Trust or any provisions
of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information
furnished to it by MGF, the Trust assumes full responsibility for
complying with all applicable requirements of the 1940 Act, the
Securities Act of 1933, as amended, and any laws, rules and
regulations of governmental authorities having jurisdiction.
10. REFERENCES TO MGF.
The Trust shall not circulate any printed matter which
contains any reference to MGF without the prior written approval of
MGF, excepting solely such printed matter as merely identifies MGF as
Administrative Services Agent, Transfer, Shareholder Servicing and
Dividend Disbursing Agent and Accounting Services Agent. The Trust
will submit printed matter requiring approval to MGF in draft form,
allowing sufficient time for review by MGF and its counsel prior to
any deadline for printing.
11. EQUIPMENT FAILURES.
In the event of equipment failures beyond MGF's control, MGF
shall take all steps necessary to minimize service interruptions but
shall have no liability with respect thereto. MGF shall endeavor to
enter into one or more agreements making provision for emergency use
of electronic data processing equipment to the extent appropriate
equipment is available.
<PAGE>
12. INDEMNIFICATION OF MGF.
MGF may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the
1940 Act and the rules thereunder, neither MGF nor its shareholders,
officers, directors, employees, agents, control persons or affiliates
of any thereof shall be subject to any liability for, or any damages,
expenses or losses incurred by the Trust in connection with, any error
of judgment, mistake of law, any act or omission connected with or
arising out of any services rendered under or payments made pursuant
to this Agreement or any other matter to which this Agreement relates,
except by reason of willful misfeasance, bad faith or gross negligence
on the part of any such persons in the performance of the duties of
MGF under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of MGF under this
Agreement.
Any person, even though also a director, officer, employee,
shareholder or agent of MGF, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be
deemed, when rendering services to the Trust or acting on any business
of the Trust, to be rendering such services to or acting solely as an
officer, trustee, employee or agent of the Trust and not as a
director, officer, employee, shareholder or agent of or one under the
control or direction of MGF or any of its affiliates, even though paid
by one of those entities.
Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless MGF, its directors, officers,
employees, shareholders, agents, control persons and affiliates, from
and against any and all claims, demands, expenses and liabilities
(whether with or without basis in fact or law) of any and every nature
which MGF may sustain or incur or which may be asserted against MGF by
any person, by reason of, or as a result of: (i) any action taken or
omitted to be taken by MGF in good faith in reliance upon any
certificate, instrument, order or stock certificate believed by it to
be genuine and to be signed, countersigned or executed by any duly
authorized person, upon the oral instructions or written instructions
of an authorized person of the Trust or upon the opinion of legal
counsel for the Trust or its own counsel; or (ii) any action taken or
omitted to be taken by MGF in connection with its appointment in good
faith in reliance upon any law, act, regulation or interpretation of
the same even though the same may thereafter have been altered,
changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of MGF or its
directors, officers, employees, shareholders or agents in cases of its
or their own gross negligence, willful misconduct, bad faith, or
reckless disregard of its or their own duties hereunder.
<PAGE>
13. TERMINATION.
The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from
that date and shall continue in force from year to year thereafter,
but only so long as such continuance is approved (1) by MGF, (2) by
vote, cast in person at a meeting called for the purpose, of a
majority of the Trust's trustees who are not parties to this Agreement
or interested persons (as defined in the 1940 Act) of any such party,
and (3) by vote of a majority of the Trust's Board of Trustees or a
majority of the Trust's outstanding voting securities.
Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice
of such termination specifying the date fixed therefor. Upon
termination of this Agreement, the Trust shall pay to MGF such
compensation as may be due as of the date of such termination.
In the event that in connection with the termination of this
Agreement a successor to any of MGF's duties or responsibilities under
this Agreement is designated by the Trust by written notice to MGF,
MGF shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by MGF under this Agreement and
shall cooperate in the transfer of such duties and responsibilities,
including provision for assistance from MGF's cognizant personnel in
the establishment of books, records and other data by such successor.
14. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent MGF or any
affiliated person (as defined in the 1940 Act) of MGF from providing
services for any other person, firm or corporation (including other
investment companies); provided, however, that MGF expressly
represents that it will undertake no activities which, in its
judgment, will adversely affect the performance of its obligations to
the Trust under this Agreement.
15. MISCELLANEOUS.
The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
<PAGE>
16. LIMITATION OF LIABILITY.
The term "Brundage, Story and Rose Investment Trust" means
and refers to the trustees from time to time serving under the Trust's
Agreement and Declaration of Trust as the same may subsequently
thereto have been, or subsequently hereto may be, amended. It is
expressly agreed that the obligations of the Trust hereunder shall not
be binding upon any of the trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust
property of the Trust. The execution and delivery of this Agreement
has been authorized by the trustees of the Trust and signed by an
officer of the Trust acting as such, and neither such authorization by
such trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust
property of the Trust.
17. SEVERABILITY.
In the event any provision of this Agreement is determined
to be void or unenforceable, such determination shall not affect the
remainder of this Agreement, which shall continue to be in force.
18. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any,
by the United States Courts or in the absence of any controlling
decision of any such court, by rules, regulations or orders of the
Securities and Exchange Commission issued pursuant to said 1940 Act.
In addition, where the effect of a requirement of the 1940 Act,
reflected in any provision of this Agreement, is revised by rule,
regulation or order of the Securities and Exchange Commission, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
19. NOTICES.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such
notice. Until further notice to the other party, it is agreed that
the address of the Trust and of MGF for this purpose shall be 312
Walnut Street, Cincinnati, Ohio 45202.
20. BINDING EFFECT.
Each of the undersigned expressly warrants and represents
that he has the full power and authority to sign this Agreement on
behalf of the party indicated, and that his signature will operate to
bind the party indicated to the foregoing terms.
<PAGE>
21. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
22. FORCE MAJEURE.
If MGF shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes
or events beyond its control, including and without limitation, acts
of God, interruption of power or other utility, transportation or
communication services, acts of civil or military authority,
sabotages, national emergencies, explosion, flood, accident,
earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or
regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a
reasonable time for performance in connection with this Agreement
shall be extended to include the period of such delay or non-
performance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
BRUNDAGE, STORY AND ROSE
INVESTMENT TRUST
By:/s/ Donald F. Daly
---------------------
Its: President
--------------------
MGF SERVICE CORP.
By:/s/ Robert H. Leshner
----------------------
Its: Chairman of the Board
---------------------
<PAGE>
Effective December 31, 1995
SCHEDULE A
COMPENSATION
For Fund Accounting and Portfolio Pricing:
<TABLE>
<CAPTION>
Monthly Fee
-------------------------------
Short/
Intermediate
Equity Term Fixed-
Asset Size of Fund Fund Income Fund
- ------------------ ------ -----------
<S> <C> <C>
0 - $ 50,000,000 $2,700 $3,000
50 - 100,000,000 3,200 3,500
100 - 150,000,000 3,700 4,000
150 - 200,000,000 4,200 4,500
200 - 250,000,000 4,700 5,000
Over 250,000,000 5,500 6,000
</TABLE>
In addition, each Fund pays all costs of external pricing services.
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT
THIS AGREEMENT effective as of December 31, 1990 by and between ,
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST, an Ohio business trust (the
"Trust"), and MGF SERVICE CORP., an Ohio corporation (the "T/A").
WITNESSETH THAT:
WHEREAS, the Trust has been organized to operate as an open-end
management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust desires to appoint the T/A as its transfer
agent, dividend disbursing agent, shareholder service agent, plan
agent and shareholder purchase and redemption agent, and the T/A is
willing to act in such capacities upon the terms and conditions herein
set forth;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. APPOINTMENT OF TRANSFER AGENT.
The T/A is hereby appointed transfer agent for the shares of
the Trust and dividend disbursing agent for the Trust and shall also
act as plan agent, shareholder service agent and purchase and
redemption agent for shareholders of the Trust, and the T/A accepts
such appointment and agrees to act in such capacities under the terms
and conditions set forth herein.
2. DOCUMENTATION.
The Trust will furnish from time to time the following
documents:
A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities
and Exchange Commission and amendments thereof;
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the By-Laws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
the T/A;
<PAGE>
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;
F. Such other certificates, documents or opinions which
the T/A may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in
effect;
H. Copies of all Advisory Agreements in effect; and
I. Copies of all documents relating to special investment
or withdrawal plans which are offered or may be offered
in the future by the Trust and for which the T/A is to
act as plan agent.
3. T/A TO RECORD SHARES.
The T/A shall record the issuance of shares of the Trust and
maintain pursuant to applicable rules of the Securities and Exchange
Commission a record of the total number of shares of the Trust which
are authorized, issued and outstanding, based upon data provided to it
by the Trust. The T/A shall also provide the Trust on a regular basis
or upon reasonable request the total number of shares which are
authorized, issued and outstanding, based upon data provided to it by
the Trust. The T/A shall also provide the Trust on a regular basis or
upon reasonable request the total number of shares which are
authorized, issued and outstanding, but shall have no obligation when
recording the issuance of the Trust's shares, except as otherwise set
forth herein, to monitor the issuance of such shares or to take
cognizance of any laws relating to the issue or sale of such shares,
which functions shall be the sole responsibility of the Trust.
4. T/A TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon
surrender to the T/A of certificates, if any, in proper form for
transfer, the T/A shall approve such transfer and shall take all
necessary steps to effectuate the transfer as indicated in the
transfer request. Upon approval of the transfer, the T/A shall notify
the Trust in writing of each such transaction and shall make
appropriate entries on the shareholder records maintained by the T/A.
<PAGE>
5. SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificates
and an investor requests a share certificate, the T/A will countersign
and mail, by insured first class mail, a share certificate to the
investor at his address as set forth on the transfer books of the
Trust, subject to any other instructions for delivery of certificates
representing newly purchased shares and subject to the limitation that
no certificates representing newly purchased shares shall be mailed to
the investor until the cash purchase price of such shares has been
collected and credited to the account of the Trust maintained by the
Custodian. The Trust shall supply the T/A with a sufficient supply of
blank share certificates and from time to time shall renew such supply
upon request of the T/A. Such blank share certificates shall be
properly signed, manually or, if authorized by the Trust, by
facsimile; and notwithstanding the death, resignation or removal of
any officers of the Trust authorized to sign share certificates, the
T/A may continue to countersign certificates which bear the manual or
facsimile signature of such officer until otherwise directed by the
Trust. In case of the alleged loss or destruction of any share
certificate, no new certificate shall be issued in lieu thereof,
unless there shall first be furnished an appropriate bond satisfactory
to the T/A and the Trust, and issued by a surety company satisfactory
to the T/A and the Trust.
6. RECEIPT OF FUNDS.
Upon receipt of any check or other instrument drawn or
endorsed to it as agent for, or identified as being for the account
of, the Trust or MGF Distributors, Inc., as underwriter of the Trust
(the "Underwriter"), the T/A shall stamp the check or instrument with
the date of receipt, determine the amount thereof due the Trust and
the Underwriter, respectively, and shall forthwith process the same
for collection. Upon receipt of notification of receipt of funds
eligible for share purchases and payment of sales charges in
accordance with the Trust's then current prospectus and statement of
additional information, the T/A shall notify the Trust, at the close
of each business day, in writing of the amount of said funds credited
to the Trust and deposited in its account with the Custodian, and
shall similarly notify the Underwriter of the amount of said funds
credited to the Underwriter and deposited in its account with its
designated bank.
<PAGE>
7. PURCHASE ORDERS.
Upon receipt of a check or other order for the purchase of
shares of the Trust, accompanied by sufficient information to enable
the T/A to establish a shareholder account, the T/A shall, as of the
next determination of net asset value after receipt of such order in
accordance with the Trust's then current prospectus and statement of
additional information, compute the number of shares due to the
shareholder, credit the share account of the shareholder, subject to
collection of the funds, with the number of shares so purchased, shall
notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall mail to the shareholder
and/or dealer of record a notice of such credit when requested to do
so by the Trust.
8. RETURNED CHECKS.
In the event that the T/A is notified by the Trust's
Custodian that any check or other order for the payment of money is
returned unpaid for any reason, the T/A will:
A. Give prompt notification to the Trust and the
Underwriter of the non-payment of said check;
B. In the absence of other instructions from the Trust or
the Underwriter, take such steps as may be necessary to
redeem any shares purchased on the basis of such
returned check and cause the proceeds of such
redemption plus any dividends declared with respect to
such shares to be credited to the account of the Trust
and to request the Trust's Custodian to forward such
returned check to the person who originally submitted
the check; and
C. Notify the Trust of such actions and correct the
Trust's records maintained by the T/A pursuant to this
Agreement.
9. SALES CHARGE.
In computing the number of shares to credit to the account
of a shareholder, the T/A will calculate the total of the applicable
Underwriter and dealer of record sales charges with respect to each
purchase as set forth in the Trust's current prospectus and statement
of additional information and in accordance with any notification
filed with respect to combined and accumulated purchases. The T/A
will also determine the portion of each sales charge payable by the
Underwriter to the dealer of record participating in the sale in
accordance with such schedules as are from time to time delivered by
the Underwriter to the T/A; provided, however, the T/A shall have no
liability hereunder arising from the incorrect selection by the T/A of
the gross rate of sales charges except that this exculpation shall not
apply in the event the rate is specified by the Underwriter or the
Trust and the T/A fails to select the rate specified.
10. DIVIDENDS AND DISTRIBUTIONS.
The Trust shall furnish the T/A with appropriate evidence of
trustee action authorizing the declaration of dividends and other
distributions. The T/A shall establish procedures in accordance with
the Trust's then current prospectus and statement of additional
information and with other authorized actions of the Trust's Board of
Trustees under which it will have available from the Custodian of the
Trust or the Trust any required information for each dividend and
other distribution. After deducting any amount required to be
withheld by any applicable laws, the T/A shall, as agent for each
shareholder who so requests, invest the dividends and other
distributions in full and fractional shares in accordance with the
Trust's then current prospectus and statement of additional
information. If a shareholder has elected to receive dividends or
other distributions in cash, then the T/A shall disburse dividends to
shareholders of record in accordance with the Trust's then current
prospectus and statement of additional information. The T/A shall, on
or before the mailing date of such checks, notify the Trust and the
Custodian of the estimated amount of cash required to pay such
dividend or distribution, and the Trust shall instruct the Custodian
to make available sufficient funds therefor in the appropriate account
of the Trust. The T/A shall mail to the shareholders periodic
statements, as requested by the Trust, showing the number of full and
fractional shares and the net asset value per share of shares so
credited. When requested by the Trust, the T/A shall prepare and file
with the Internal Revenue Service, and when required, shall address
and mail to shareholders, such returns and information relating to
dividends and distributions paid by the Trust as are required to be so
prepared, filed and mailed by applicable laws, rules and regulations.
11. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
The T/A shall, at least annually, furnish in writing to the
Trust the names and addresses, as shown in the shareholder accounts
maintained by the T/A, of all shareholders for which there are, as of
the end of the calendar year, dividends, distributions or redemption
proceeds for which checks or share certificates mailed in payment of
distributions have been returned. The T/A shall use its best efforts
to contact the shareholders affected and to follow any other written
instructions received from the Trust concerning the disposition of any
such unclaimed dividends, distributions or redemption proceeds.
<PAGE>
12. REDEMPTIONS AND EXCHANGES.
A. The T/A shall process, in accordance with the Trust's
then current prospectus and statement of additional information, each
order for the redemption of shares accepted by the T/A. Upon its
approval of such redemption transactions, the T/A, if requested by the
Trust, shall mail to the shareholder and/or dealer of record a
confirmation showing trade date, number of full and fractional shares
redeemed, the price per share and the total redemption proceeds. For
such redemption, the T/A shall either: (a) prepare checks in the
appropriate amounts for approval and verification by the Trust and
signature by an authorized officer of the T/A and mail the checks to
the appropriate person, or (b) in the event redemption proceeds are to
be wired through the Federal Reserve Wire system or by bank wire,
cause such proceeds to be wired in federal funds to the bank account
designated by the shareholder, or (c) effectuate such other redemption
procedures which are authorized by the Trust's Board of Trustees or
its then current prospectus and statement of additional information.
The requirements as to instruments of transfer and other
documentation, the applicable redemption price and the time of payment
shall be as provided in the then current prospectus and statement of
additional information, subject to such supplemental instructions as
may be furnished by the Trust and accepted by the T/A. If the T/A or
the Trust determines that a request for redemption does not comply
with the requirements for redemptions, the T/A shall promptly notify
the shareholder and/or dealer of record indicating the reason
therefor.
B. If shares of the Trust are eligible for exchange with
shares of any other investment company, the T/A, in accordance with
the then current prospectus and statement of additional information
and exchange rules of the Trust and such other investment company, or
such other investment company's transfer agent, shall review and
approve all exchange requests and shall, on behalf of the Trust's
shareholders, process such approved exchange requests.
C. The T/A shall notify the Trust, the Custodian and the
Underwriter on each business day of the amount of cash required to
meet payments made pursuant to the provisions of this Paragraph 12,
and, on the basis of such notice, the Trust shall instruct the
Custodian to make available from time to time sufficient funds
therefor in the appropriate account of the Trust. Procedures for
effecting redemption orders accepted from shareholders or dealers of
record by telephone or other methods shall be established by mutual
agreement between the T/A and the Trust consistent with the then
current prospectus and statement of additional information.
<PAGE>
D. The authority of the T/A to perform its
responsibilities under Paragraph 7, Paragraph 10 and this Paragraph 12
shall be suspended upon receipt of notification by it of the
suspension of the determination of the Trust's net asset value.
13. AUTOMATIC WITHDRAWAL PLANS.
The T/A will process automatic withdrawal orders pursuant to
the provisions of the withdrawal plans duly executed by shareholders
and the current prospectus and statement of additional information of
the Trust. Payments upon such withdrawal order shall be made by the
T/A from the appropriate account maintained by the Trust with the
Custodian on approximately the 25th day of each month in which a
payment has been requested, and the T/A, on or after the seventh day
prior to the payment date, will withdraw from a shareholder's account
and present for repurchase or redemption as many shares as shall be
sufficient to make such withdrawal payment pursuant to the provisions
of the shareholder's withdrawal plan and the current prospectus and
statement of additional information of the Trust. From time to time
on new automatic withdrawal plans a check for payment date already
past may be issued upon request by the shareholder.
14. LETTERS OF INTENT.
The T/A will process such letters of intent for investing in
shares of the Trust as are provided for in the Trust's current
prospectus and statement of additional information. The T/A will make
appropriate deposits to the account of the Underwriter for the
adjustment of sales charges as therein provided and will currently
report the same to the Underwriter.
15. WIRE-ORDER PURCHASES.
The T/A will send written confirmations to the dealers of
record containing all details of the wire-order purchases placed by
each such dealer by the close of business on the business day
following receipt of such orders by the T/A or the Underwriter, with
copies to the Underwriter. Upon receipt of any check drawn or
endorsed to the Trust (or the T/A, as agent) or otherwise identified
as being payment of an outstanding wire-order, the T/A will stamp said
check with the date of its receipt and deposit the amount represented
by such check to the T/A's deposit accounts maintained with the
Custodian. The T/A will compute the respective portions of such
deposit which represent the sales charge and the net asset value of
the shares so purchased, will cause the Custodian to transfer federal
funds in an amount equal to the net asset value of the shares so
purchased to the Trust's account with the Custodian, and will notify
the Trust and the Underwriter before noon of each business day of the
total amount deposited in the Trust's deposit accounts, and in the
event that payment for a purchase order is not received by the T/A or
the Custodian on the tenth business day following receipt of the
order, prepare an NASD "notice of failure of dealer to make payment"
and forward such notification to the Underwriter.
<PAGE>
16. OTHER PLANS.
The T/A will process such accumulation plans, group programs
and other plans or programs for investing in shares of the Trust as
are now provided for in the Trust's current prospectus and statement
of additional information and will act as plan agent for shareholders
pursuant to the terms of such plans and programs duly executed by such
shareholders.
17. BOOKS AND RECORDS.
The T/A shall maintain records for each shareholder account
showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record;
C. Number of shares held of each series;
D. Historical information regarding the account of each
shareholder, including dividends and distributions in
cash or invested in shares;
E. Information with respect to the source of all dividends
and distributions allocated among income, realized
short-term gains and realized long-term gains;
F. Any instructions from a shareholder including all forms
furnished by the Trust and executed by a shareholder
with respect to (i) dividend or distribution elections
and (ii) elections with respect to payment options in
connection with the redemption of shares;
G. Any correspondence relating to the current maintenance
of a shareholder's account;
H. Certificate numbers and denominations for any
shareholder holding certificates;
I. Any stop or restraining order placed against a
shareholder's account;
J. Information with respect to withholding in the case of
a foreign account or any other account for which
withholding is required by the Internal Revenue Code of
1986, as amended; and
K. Any information required in order for the T/A to
perform the calculations contemplated under this
Agreement.
<PAGE>
All of the records prepared and maintained by the T/A
pursuant to this Agreement will be the property of the Trust. In the
event this Agreement is terminated, all records shall be delivered to
the Trust or to any person designated by the Trust at the Trust's
expense, and the T/A shall be relieved of responsibility for the
preparation and maintenance of any such records delivered to the Trust
or any such person.
18. TAX RETURNS AND REPORTS.
The T/A will prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies and, if
required, mail to shareholders of the Trust such returns for reporting
dividends and distributions paid by the Trust as are required to be so
prepared, filed and mailed and shall withhold such sums as are
required to be withheld under applicable federal and state income tax
laws, rules and regulations.
19. OTHER INFORMATION TO THE TRUST.
Subject to such instructions, verification and approval of
the Custodian and the Trust as shall be required by any agreement or
applicable law, the T/A will also maintain such records as shall be
necessary to furnish to the Trust the following: annual shareholder
meeting lists, proxy lists and mailing materials, shareholder reports
and confirmations and checks for disbursing redemption proceeds,
dividends and other distributions or expense disbursements.
20. ACCESS TO SHAREHOLDER INFORMATION.
Upon request, the T/A shall arrange for the Trust's
investment adviser to have direct access to shareholder information
contained in the T/A's computer system, including account balances,
performance information and such other information which is available
to the T/A with respect to shareholder accounts.
21. COOPERATION WITH ACCOUNTANTS.
The T/A shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary
information is made available to such accountants for the expression
of their unqualified opinion where required for any document for the
Trust.
<PAGE>
22. SHAREHOLDER SERVICE AND CORRESPONDENCE.
The T/A will provide and maintain adequate personnel,
records and equipment to receive and answer all shareholder and dealer
inquiries relating to account status, share purchases, redemptions and
exchanges and other investment plans available to Trust shareholders.
The T/A will answer written correspondence from shareholders relating
to their share accounts and such other written or oral inquiries as
may from time to time be mutually agreed upon, and the T/A will notify
the Trust of any correspondence or inquiries which may require an
answer from the Trust.
23. PROXIES.
The T/A shall assist the Trust in the mailing of proxy cards
and other material in connection with shareholder meetings of the
Trust, shall receive, examine and tabulate returned proxies and shall,
if requested by the Trust, provide at least one inspector of election
to attend and participate as required by law in shareholder meetings
of the Trust.
24. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes
hereof.
25. FEES AND CHARGES.
For performing its services under this Agreement, each
series of the Trust shall pay the T/A in accordance with the schedule
attached hereto as Schedule A. Fees shall be paid monthly. The Trust
shall promptly reimburse the T/A for any out of pocket expenses and
advances which are to be paid by the Trust in accordance with
Paragraph 26.
26. EXPENSES.
The T/A shall furnish, at its expense and without cost to
the Trust (i) the services of its personnel to the extent that such
services are required to carry out its obligations under this
Agreement and (ii) use of data processing equipment. All costs and
expenses not expressly assumed by the T/A under this Paragraph 26
shall be paid by the Trust, including, but not limited to costs and
expenses for postage, envelopes, checks, drafts, continuous forms,
reports, communications, statements and other materials, telephone,
telegraph and remote transmission lines, use of outside mailing firms,
necessary outside record storage, media for storage of records (e.g.,
microfilm, microfiche, computer tapes), printing, confirmations and
any other shareholder correspondence and any and all assessments,
taxes or levies assessed on the T/A for services provided under this
Agreement. Postage for mailings of dividends, proxies, reports and
other mailings to all shareholders shall be advanced to the T/A three
business days prior to the mailing date of such materials.
<PAGE>
27. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require the T/A to perform any
services for the Trust which services could cause MGF to be deemed an
"investment adviser" of the Trust within the meaning of Section
2(a)(20) of the 1940 Act or to supersede or contravene the prospectus
or statement of additional information of the Trust or any provisions
of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information
furnished to it by the T/A, the Trust assumes full responsibility for
complying with all applicable requirements of the 1940 Act, the
Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction.
28. REFERENCES TO THE T/A.
The Trust shall not circulate any printed matter which
contains any reference to the T/A without the prior written approval
of the T/A, excepting solely such printed matter as merely identifies
the T/A as Administrative Services Agent, Transfer, Shareholder
Servicing and Dividend Disbursing Agent and Accounting Services Agent.
The Trust will submit printed matter requiring approval to the T/A in
draft form, allowing sufficient time for review by the T/A and its
counsel prior to any deadline for printing.
29. EQUIPMENT FAILURES.
In the event of equipment failures beyond the T/A's control,
the T/A shall take all steps necessary to minimize service
interruptions but shall have no liability with respect thereto. The
T/A shall endeavor to enter into one or more agreements making
provision for emergency use of electronic data processing equipment to
the extent appropriate equipment is available.
30. INDEMNIFICATION OF THE T/A.
A. The T/A may rely on information reasonably believed by
it to be accurate and reliable. Except as may otherwise be required
by the 1940 Act and the rules thereunder, neither the T/A nor its
shareholders, officers, directors, employees, agents, control persons
or affiliates of any thereof shall be subject to any liability for, or
any damages, expenses or losses incurred by the Trust in connection
with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which
this Agreement relates, except by reason of willful misfeasance, bad
faith or gross negligence on the part of any such persons in the
performance of the duties of the T/A under this Agreement or by reason
of reckless disregard by any of such persons of the obligations and
duties of the T/A under this Agreement.
<PAGE>
B. Any person, even though also a director, officer,
employee, shareholder or agent of the T/A, or any of its affiliates,
who may be or become an officer, trustee, employee or agent of the
Trust, shall be deemed, when rendering services to the Trust or acting
on any business of the Trust, to be rendering such services to or
acting solely as an officer, trustee, employee or agent of the Trust
and not as a director, officer, employee, shareholder or agent of or
one under the control or direction of the T/A or any of its
affiliates, even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement,
the Trust shall indemnify and hold harmless the T/A, its directors,
officers, employees, shareholders and agents from and against any and
all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which the T/A may
sustain or incur or which may be asserted against the T/A by any
person by reason of, or as a result of: (i) any action taken or
omitted to be taken by the T/A in good faith in reliance upon any
certificate, instrument, order or share certificate believed by it to
be genuine and to be signed, countersigned or executed by any duly
authorized person, upon the oral instructions or written instructions
of an authorized person of the Trust or upon the opinion of legal
counsel for the Trust or its own counsel; or (ii) any action taken or
omitted to be taken by the T/A in connection with its appointment in
good faith in reliance upon any law, act, regulation or interpretation
of the same even though the same may thereafter have been altered,
changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of the T/A or its
directors, officers, employees, shareholders or agents in cases of its
or their own gross negligence, willful misconduct, bad faith, or
reckless disregard of its or their own duties hereunder.
31. TERMINATION.
A. The provisions of this Agreement shall be effective on
the date first above written, shall continue in effect for two years
from that date and shall continue in force from year to year
thereafter, but only so long as such continuance is approved (1) by
the T/A, (2) by vote, cast in person at a meeting called for the
purpose, of a majority of the Trust's trustees who are not parties to
this Agreement or interested persons (as defined in the 1940 Act) of
any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date
by giving the other party at least sixty (60) days' prior written
notice of such termination specifying the date fixed therefor. Upon
termination of this Agreement, the Trust shall pay to the T/A such
compensation as may be due as of the date of such termination, and
shall likewise reimburse the T/A for any out-of-pocket expenses and
disbursements reasonably incurred by the T/A to such date.
<PAGE>
C. In the event that in connection with the termination of
this Agreement a successor to any of the T/A's duties or
responsibilities under this Agreement is designated by the Trust by
written notice to the T/A, the T/A shall, promptly upon such
termination and at the expense of the Trust, transfer all records
maintained by the T/A under this Agreement and shall cooperate in the
transfer of such duties and responsibilities, including provision for
assistance from the T/A's cognizant personnel in the establishment of
books, records and other data by such successor.
32. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent the T/A or any
affiliated person (as defined in the 1940 Act) of the T/A from
providing services for any other person, firm or corporation
(including other investment companies); provided, however, that the
T/A expressly represents that it will undertake no activities which,
in its judgment, will adversely affect the performance of its
obligations to the Trust under this Agreement.
33. MISCELLANEOUS.
The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
34. LIMITATION OF LIABILITY.
The term "Brundage, Story and Rose Investment Trust" means
and refers to the trustees from time to time serving under the Trust's
Agreement and Declaration of Trust as the same may subsequently
thereto have been, or subsequently hereto may be, amended. It is
expressly agreed that the obligations of the Trust hereunder shall not
be binding upon any of the trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust
property of the Trust. The execution and delivery of this Agreement
have been authorized by the trustees of the Trust and signed by an
officer of the Trust, acting as such, and neither such authorization
by such trustees nor such execution and delivery by such officer shall
be deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the trust
property of the Trust.
35. SEVERABILITY.
In the event any provision of this Agreement is determined
to be void or unenforceable, such determination shall not affect the
remainder of this Agreement, which shall continue to be in force.
<PAGE>
36. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any,
by the United States Courts or in the absence of any controlling
decision of any such court, by rules, regulations or orders of the
Securities and Exchange Commission issued pursuant to said 1940 Act.
In addition, where the effect of a requirement of the 1940 Act,
reflected in any provision of this Agreement, is revised by rule,
regulation or order of the Securities and Exchange Commission, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
37. NOTICES.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at
such address as such other party may designate for the receipt of such
notice. Until further notice to the other party, it is agreed that
the address of the Trust and the T/A for this purpose shall be 312
Walnut Street, Cincinnati, Ohio 45202.
38. BINDING EFFECT.
Each of the undersigned expressly warrants and represents
that he has the full power and authority to sign this Agreement on
behalf of the party indicated, and that his signature will operate to
bind the party indicated to the foregoing terms.
39. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
40. FORCE MAJEURE.
If the T/A shall be delayed in its performance of services
or prevented entirely or in part from performing services due to
causes or events beyond its control, including and without limitation,
acts of God, interruption of power or other utility, transportation or
communication services, acts of civil or military authority,
sabotages, national emergencies, explosion, flood, accident,
earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or
regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a
reasonable time for performance in connection with this Agreement
shall be extended to include the period of such delay or non-
performance.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
BRUNDAGE, STORY AND ROSE
INVESTMENT TRUST
By:/s/ Donald F. Daly
-----------------------
Its: President
-----------------------
MGF SERVICE CORP.
By:/s/ Robert H. Leshner
-----------------------
Its:Chairman of the Board
<PAGE>
Effective December 31, 1995
Schedule A
COMPENSATION
As Transfer, Dividend Disbursing and
Shareholder Service Agent:
Brundage, Story and Rose payable monthly at
Equity Fund: rate of $15/account per year;
subject to minimum of $1,200
per month
Brundage, Story and Rose Short/ payable monthly at
Intermediate Term Fixed-Income Fund: rate of $19.50/
account per year; subject
to minimum of $1,200 per
month
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in
this Post-Effective Amendment No. 7 of our report dated December 22,
1995 and to all references to our Firm included in or made a part of
this Post-Effective Amendment.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Cincinnati, Ohio,
March 27, 1996
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<PERIOD-START> DEC-1-1994
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