U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No.
Post-Effective Amendment No. 8
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 8
(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, 1996 was filed with the
Commission on January 16, 1997.
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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
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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
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PART B
Caption in Statement
of Additional
Item No. Registration Statement Caption Information
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
(i)
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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
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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.
(ii)
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Brundage,
Story and Rose
Investment Trust
Prospectus
April 1, 1997
Equity Fund
Short/Intermediate Term
Fixed-Income Fund
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
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BRUNDAGE, STORY AND ROSE LLC
One Broadway
New York, New York 10004
Underwriter
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COUNTRYWIDE INVESTMENTS, INC.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Transfer Agent
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COUNTRYWIDE FUND SERVICES, INC.
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................................ 18
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.
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PROSPECTUS
April 1, 1997
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, 1997 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.
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FOR INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
Nationwide (Toll-Free)...........................................800-320-2212
Cincinnati.......................................................513-629-2070
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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.
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EXPENSE INFORMATION
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SHAREHOLDER TRANSACTION EXPENSES
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*
* 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."
Annual Fund Operating Expenses (as a percentage of average net assets)
SHORT/INTER.
EQUITY TERM FIXED-
FUND INCOME FUND
Management Fees................................ .65% .06%(A)
12b-1 Fees(B).................................. .01% .01%
Other Expenses................................. .64% .58%
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Total Fund Operating Expenses.................. 1.30% .65%(C)
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(A)Absent waivers of management fees, such fees would have been .50% for the
fiscal year ended November 30, 1996.
(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, 1996.
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. 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:
EQUITY SHORT/INTER. TERM
FUND FIXED-INCOME FUND
1 Year $ 13 $ 7
3 Years 41 21
5 Years 71 36
10 Years 157 81
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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, 1996 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 Countrywide Fund Services, Inc. (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.
Equity Fund
Per Share Data for a Share Outstanding Throughout Each Period
===================================================================================================================
From Date of
Public Offering
Year Year Year Year Year (Jan. 2, 1991)
Ended Ended Ended Ended Ended Through
Nov. 30 Nov. 30, Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1996 1995 1994 1993 1992 1991
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Net asset value at beginning of period..... $ 14.91 $ 12.43 $ 12.70 $ 12.26 $ 10.85 $ 10.00
---------- ---------- --------- --------- --------- ----------
Income from investment operations:
Net investment income................... 0.06 0.07 0.06 0.09 0.12 0.15
Net realized and unrealized gains on
investments........................... 2.97 3.02 0.11 0.76 1.40 0.92
---------- ---------- --------- --------- --------- ----------
Total from investment operations........... 3.03 3.09 0.17 0.85 1.52 1.07
---------- ---------- --------- --------- --------- ----------
Less distributions:
Dividends from net investment income.... (0.07) (0.06) (0.06) (0.10) (0.11) (0.15)
Distributions from net realized gains... (0.69) (0.55) (0.38) (0.31) -- (0.07)
---------- ---------- --------- --------- --------- ----------
Total distributions........................ (0.76) (0.61) (0.44) (0.41) (0.11) (0.22)
---------- ---------- --------- --------- --------- ----------
Net asset value at end of period........... $ 17.18 $ 14.91 $ 12.43 $ 12.70 $ 12.26 $ 10.85
========== ========== ========= ========= ========= ==========
Total return............................... 21.27% 26.08% 1.35% 6.83% 14.39% 11.64%(B)
========== ========== ========= ========= ========= ==========
Net assets at end of period (000's)........ $ 27,540 $ 24,191 $ 18,821 $ 19,150 $15,081 $ 9,103
========== ========== ========= ========= ========= ==========
Ratio of expenses to average net assets(A) 1.30% 1.45% 1.50% 1.50% 1.50% 1.48%(B)
Ratio of net investment income to average
net assets................................. 0.42% 0.52% 0.51% 0.74% 1.05% 1.51%(B)
Portfolio turnover rate.................... 44% 42% 44% 45% 44% 37% (B)
Average commission rate.................... $ 0.0490 -- -- -- -- --
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<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.
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Short/Intermediate Term Fixed-Income Fund
Per Share Data for a Share Outstanding Throughout Each Period
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From Date of
Public Offering
Year Year Year Year Year (Jan. 2, 1991)
Ended Ended Ended Ended Ended Through
Nov. 30, Nov. 30, Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1996 1995 1994 1993 1992 1991
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Net asset value at beginning of period..... $ 10.73 $ 9.94 $ 10.77 $ 10.49 $ 10.43 $ 10.00
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Income from investment operations:
Net investment income................... 0.62 0.64 0.59 0.64 0.69 0.62
Net realized and unrealized
gains (losses) on investments......... (0.04) 0.79 (0.79) 0.28 0.06 0.43
---------- ---------- --------- --------- --------- ----------
Total from investment operations........... 0.58 1.43 (0.20) 0.92 0.75 1.05
---------- ---------- --------- --------- --------- ----------
Less distributions:
Dividends from net investment income.... (0.62) (0.64) (0.59) (0.64) (0.69) (0.62)
Distributions from net realized gains... -- -- (0.04) -- -- --
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Total distributions........................ (0.62) (0.64) (0.63) (0.64) (0.69) (0.62)
---------- ---------- --------- --------- --------- ----------
Net asset value at end of period........... $ 10.69 $ 10.73 $ 9.94 $ 10.77 $ 10.49 $ 10.43
========== ========== ========= ========= ========= ==========
Total return............................... 5.65% 14.84% (1.98%) 9.00% 7.38% 11.87%(B)
========== ========== ========= ========= ========= ==========
Net assets at end of period (000's)........ $ 33,377 $ 35,272 $ 35,390 $43,272 $32,025 $12,871
========== ========== ========= ========= ========= ==========
Ratio of expenses to average net assets(A) 0.65% 0.60% 0.50% 0.50% 0.50% 0.50%(B)
Ratio of net investment income to average
net assets 5.90% 6.21% 5.67% 5.95% 6.50% 7.05%(B)
Portfolio turnover rate.................... 40% 39% 57% 29% 24% 12%(B)
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<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%, 1.09%, 1.06%, 1.11%,
1.30% and 2.54%(B) for the periods ended November 30, 1996, 1995, 1994, 1993,
1992 and 1991, respectively .
(B)Annualized.
</FN>
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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.
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
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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.
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.
<PAGE>
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.
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.
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
<PAGE>
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.
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.
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
<PAGE>
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 debt obligations in an amount at
least equal to these commitments.
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 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.
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
<PAGE>
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.
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
<PAGE>
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.
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,
Countrywide Fund Services, Inc. (the "Transfer Agent"), 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 the Transfer Agent by 5:00 p.m., Eastern time. Dealers
may charge a fee for effecting purchase orders. Direct purchase orders received
by the Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's
net asset value. Direct investments received by the Transfer Agent 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.
You may open an account and make an initial investment in either Fund by sending
a check and a completed account application form to Countrywide Fund Services,
Inc., 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 the
Transfer Agent. 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.
<PAGE>
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Transfer Agent 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 the Transfer Agent in the
transaction.
You may also purchase shares of the Funds by wire. Please telephone the Transfer
Agent (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 the Transfer Agent. Your bank may impose a charge for sending your wire.
There is presently no fee for receipt of wired funds, but the Transfer Agent
reserves the right to charge shareholders for this service upon thirty days'
prior notice to shareholders.
You may purchase and add shares to your account by mail or by bank wire. Checks
should be sent to Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati,
Ohio 45201-5354. Checks should be made payable 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 the Transfer Agent (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
<PAGE>
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.
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. The Transfer Agent 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 the Transfer Agent 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 the Transfer
Agent (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 the Transfer Agent
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
the Transfer Agent 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.
Neither the Trust, the Transfer Agent, 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 the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent 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 the Transfer Agent. 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
<PAGE>
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, the Transfer Agent, 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.
The Transfer Agent 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. The Transfer Agent charges shareholders its costs for each
stop payment and each check returned for insufficient funds. In addition, the
Transfer Agent 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 the Transfer Agent.
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 the Transfer Agent for more information about ACH
transactions.
If a certificate for the shares was issued, it must be delivered to the Transfer
Agent, 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.
At the discretion of the Trust or the Transfer Agent, 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
<PAGE>
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 Countrywide Investment
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 Countrywide 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 the Transfer Agent.
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 the Transfer Agent.
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 the Transfer Agent 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.
<PAGE>
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.
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.
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
<PAGE>
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.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Tranfer Agent"), to serve as the Funds' transfer agent,
dividend paying agent and shareholder service agent. The Transfer Agent is an
indirect wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New
York Stock Exchange listed company principally engaged in the business of
residential mortgage lending.
The Transfer Agent also provides accounting and pricing services to the Funds.
The Transfer Agent 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, the Transfer Agent has been retained to provide administrative
services to the Funds. In this capacity, the Transfer Agent 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 the Transfer Agent 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.
Countrywide Investments, 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 an indirect wholly-owned subsidiary of Countrywide Credit Industries, 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.
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
<PAGE>
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 the Transfer Agent; 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.
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
<PAGE>
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.
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.
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 the
Transfer Agent (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>
ACCOUNT APPLICATION (check appropriate Fund)
Please mail account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
o EQUITY FUND $_____________________
o SHORT/INTERMEDIATE 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 I.D.#
________________________________________________ ___________________________
Name of Individual, Corporation, (In case of custodial account
Organization, 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.
==============================================================================
<PAGE>
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.
o By Check o By ACH to my bank checking or savings account.
PLEASE ATTACH A VOIDED CHECK.
==============================================================================
REDEMPTION OPTIONS
I (we) authorize the Trust or Countrywide Fund Services, Inc. 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 Countrywide Fund Services, Inc. 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
Countrywide Fund Services, Inc. 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, Countrywide Fund Services,Inc., Countrywide
Investments, 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, Countrywide Fund Services, Inc., 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 Countrywide Fund Services, Inc., or both, will employ
reasonable procedures to determine that telephone instructions are genuine. If
the Trust and/or Countrywide Fund Services, Inc. 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, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
____________________________________ ______________________________________
Title of Corporate Officer, Date
Trustee, etc.
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 ABA Routing Number__________________
in (Check applicable Fund)
o Equity Fund o Short/Intermediate FI Account Number___________________
Term Fixed-Income
Fund 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
City State o both the 15th and last business day
X_____________________________________ X____________________________________
(Signature of Depositor EXACTLY as (Signature of Joint Tenant - if any)
it appears on FI Records)
(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 Countrywide Fund
Services, Inc. ("CFS") 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 CFS, CFS hereby agrees:
CFS 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 amount. CFS 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. CFS will
refund to you any amount erroneously paid by you to the Funds 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
===============================================================================
<PAGE>
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 Countrywide
Fund Services, Inc. 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, Countrywide Fund Services, Inc. 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, 1997
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, 1997. 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>
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................................................... 24
TRUSTEES AND OFFICERS.................................................... 27
THE INVESTMENT ADVISER................................................... 30
DISTRIBUTION PLAN. . . . ................................................ 32
THE UNDERWRITER.......................................................... 32
SECURITIES TRANSACTIONS.................................................. 33
PORTFOLIO TURNOVER....................................................... 34
CALCULATION OF SHARE PRICE............................................... 34
TAXES.................................................................... 35
REDEMPTION IN KIND....................................................... 36
HISTORICAL PERFORMANCE INFORMATION....................................... 36
PRINCIPAL SECURITY HOLDERS............................................... 39
CUSTODIAN................................................................ 40
AUDITORS . .............................................................. 40
COUNTRYWIDE FUND SERVICES, INC........................................... 40
ANNUAL REPORT............................................................ 41
<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.
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
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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.
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 institution
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
<PAGE>
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.
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
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
<PAGE>
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.
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.
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
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
obligations or other liquid 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.
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 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.
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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.
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. 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.
<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.
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
<PAGE>
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
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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:
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.
<PAGE>
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.
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:
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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, 1996. Each Trustee who is an "interested person" of the Trust, as
defined by the Investment Company Act of 1940, is indicated by an asterisk.
<TABLE>
<CAPTION>
COMPENSATION
NAME AGE POSITION HELD FROM TRUST
- ---- --- ------------- -----------
<S> <C> <C> <C>
*Malcolm D. Clarke, Jr. 61 President/Trustee $ 0
*Charles G. Watson 65 Vice President/Trustee 0
*James G. Pepper 52 Vice President/Trustee 0
*Francis S. Branin, Jr. 50 Vice President/Trustee 0
*Cheryl L. Grandfield 45 Vice President/Trustee 0
+Jerome B. Lieber 76 Trustee 5,400
+Antoinette Geyelin Hoar 47 Trustee 4,550
+William M.R. Mapel 65 Trustee 5,400
+Crosby R. Smith 61 Trustee 5,400
Robert G. Dorsey 40 Vice President 0
John F. Splain 40 Secretary 0
Mark J. Seger 35 Treasurer 0
Eric P. Spiegel 45 Assistant Treasurer 0
<FN>
* 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.
+ Member of Audit Committee.
</FN>
</TABLE>
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).
<PAGE>
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 Countrywide Fund Services, Inc. (a registered transfer
agent) and Treasurer of Countrywide Investments, Inc. (a registered
broker-dealer and the Trust's principal underwriter) and Countrywide
Financial Services, Inc. (a financial services company and parent of Countrywide
Investments, Inc. and Countrywide Fund Services, Inc.). He is also Vice
President of Markman MultiFund Trust, PRAGMA Investment Trust, Maplewood
Investment Trust, a series company, The Thermo Opportunity Fund, Inc. and
Capitol Square Funds and Assistant Vice President of Williamsburg Investment
Trust, The Tuscarora Investment Trust, Schwartz Investment Trust, Fremont Mutual
Funds, Inc., The Gannett Welsh & Kotler Funds and Interactive Investments
(all of which are registered investment companies).
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio, is Secretary and
General Counsel of Countrywide Investments, Inc. and Countrywide Financial
Services, Inc. and Vice President, Secretary and General Counsel of Countrywide
Fund Services, Inc. He is also Secretary of Countrywide Investment Trust,
Countrywide Tax-Free Trust, Countrywide Strategic Trust, Markman MultiFund
Trust, PRAGMA Investment Trust, The Tuscarora Investment Trust, Williamsburg
Investment Trust, Maplewood Investment Trust, a series company, and The Thermo
Opportunity Fund, Inc. and Assistant Secretary of Schwartz Investment Trust,
Fremont Mutual Funds, Inc., Capitol Square Funds, The Gannett Welsh & Kotler
Funds and Interactive Investments (all of which are registered investment
companies).
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio,
is Vice President and Fund Controller of Countrywide Fund
Services, Inc. He is also Treasurer of Countrywide Investment
<PAGE>
Trust, Countrywide Tax-Free Trust, Countrywide Strategic Trust, Markman
MultiFund Trust, PRAGMA Investment Trust, Williamsburg Investment Trust,
Maplewood Investment Trust, a series company, The Thermo Opportunity Fund, Inc.
and Capitol Square Funds, Assistant Treasurer of Schwartz Investment Trust, The
Tuscarora Investment Trust, The Gannett Welsh & Kotler Funds and Interactie
Investments 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.
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, 1996, 1995 and 1994, the Equity
Fund paid advisory fees of $164,902, $138,193 and $127,701, respectively. For
the fiscal years ended November 30, 1996, 1995 and 1994, the Short/Intermediate
Term Fixed-Income Fund accrued advisory fees of $162,321, $174,030 and $207,725,
respectively; however, in order to reduce the operating expenses of the Fund,
the Adviser voluntarily waived $145,018 and $171,125 of such fees for the fiscal
years ended November 30, 1996 and 1995, respectively, and voluntarily waived its
entire advisory fee and reimbursed the Fund $23,853 for other expenses for the
fiscal year ended November 30, 1994.
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
<PAGE>
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, 1997 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 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.
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, 1996, the aggregate expenditures
of the Equity Fund and the Short/Intermediate Term Fixed-Income Fund under the
Plan were $1,297 and $1,702, respectively, which was spent for the preparation
of prospectuses and reports for prospective shareholders.
<PAGE>
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.
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
<PAGE>
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
Countrywide Investments, 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, 1996, 1995 and 1994, the Equity Fund paid brokerage commissions of
$20,833, $19,400 and $19,449, 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, 1996,
the amount of brokerage transactions and related commissions for the Equity Fund
directed to brokers due to research services provided were $11,271,466 and
$12,355, 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.
<PAGE>
As of November 30, 1996, the Equity Fund held securities (the market
value of which was $660,625) of J.P. Morgan & Company, Inc., the parent of one
of the Trust's regular broker-dealers. As of November 30, 1996, the
Short/Intermediate Term Fixed-Income Fund held securities of the following of
the Trust's regular broker-dealers or their parents: Smith Barney (the market
value of which was $990,058 as of November 30, 1996); Citicorp (the market value
of which was $1,027,152 as of November 30, 1996); and Lehman Brothers, Inc. (the
market value of which was $984,931 as of November 30, 1996).
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.
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, 1996 and 1995,
the Equity Fund's portfolio turnover rate was 44% and 42%, respectively, and the
Short/Intermediate Term Fixed-Income Fund's portfolio turnover rate was 40% and
39%, 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
<PAGE>
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.
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
<PAGE>
remaining is lost as a deduction. As of November 30, 1996, the
Short/Intermediate Term Fixed-Income Fund had a capital loss carryforward for
federal income tax purposes of $349,216, 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.
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
<PAGE>
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, 1996 are as follows:
Equity Fund
1 year 19.28%
5 years 11.27%
Since inception (January 2, 1991) 13.11%
Short/Intermediate Term Fixed-Income Fund
1 year 4.09%
5 years 6.28%
Since inception (January 2, 1991) 7.41%
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:
Short/Intermediate
Year Ended Equity Fund Term Fixed-Income Fund
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%
December 31, 1996 19.28% 4.09%
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, 1996, the 3 years ended November 30, 1996, the
five yeras ended November 30, 1996 and for the period since inception through
November 30, 1996 were 21.27%, 15.72%, 13.62% and 13.33%, respectively. The
average annual compounded rates of return for the Short/Intermediate Term Fixed-
Income Fund for the 1 year ended November 30, 1996, the 3 years ended November
30, 1996, the five years ended November 30, 1996
<PAGE>
and for the period since inception through November 30, 1996 were 5.65%, 5.95%,
6.84% and 7.62%, 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 1996 were 0.74% and
5.80%, respectively.
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
<PAGE>
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.
PRINCIPAL SECURITY HOLDERS
As of March 14, 1997, the Adviser, principals of the Adviser and
employee benefit plans sponsored by the Adviser owned of record 19.0% of the
Trust's outstanding shares (including 29.0% of the outstanding shares of the
Equity Fund and 13.4% 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 14, 1997, the Brundage Story and Rose Profit Sharing Plan,
One Broadway, New York, New York, owned of record 9.1% of the Trust's
outstanding shares, including 18.0% of the
<PAGE>
outstanding shares of the Equity Fund. As of March 14, 1997, JM Fam Enterprises
Inc., Agreement of Trust dtd 6/12/90, 100 NW 12th Avenue, Deerfield Beach,
Florida 33442, owned of record 5.4% of the outstanding shares of the
Short/Intermediate Term Fixed- Income Fund; Charles Schwab & Co., Inc., 101
Montgomery Street, San Francisco, California 94104, owned of record 9.8% of the
outstanding shares of the Short/Intermediate Term Fixed-Income Fund; and Charles
G. Watson, 566 Weed Street, New Canaan, Connecticut 06840, owned of record 6.9%
of the outstanding shares of the Short/Intermediate Term Fixed-Income Fund.
As of March 14, 1997, the Trustees and officers of the Trust as a group
owned of record or beneficially 19.7% of the Trust's outstanding shares,
including 29.1% of the outstanding shares of the Equity Fund and 14.3% 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, 1997. 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.
COUNTRYWIDE FUND SERVICES, INC.
The Trust's transfer agent, Countrywide Fund Services, Inc.
("Countrywide"), 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. Countrywide is an
affiliate of the Underwriter by reason of common ownership. Countrywide 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.
<PAGE>
Countrywide 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 Countrywide to perform its duties, the Funds
pay Countrywide a fee in accordance with the following schedule:
Monthly Fee
Short/
Intermediate
Equity Term Fixed-
Asset Size of Fund Fund Income Fund
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
In addition, each Fund pays all costs of external pricing services.
In addition, Countrywide is retained to provide administrative services
to the Funds. In this capacity, Countrywide supplies non-investment related
statistical and research data, internal regulatory compliance services and
executive and administrative services. Countrywide 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 Countrywide 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.
ANNUAL REPORT
The Funds' financial statements as of November 30, 1996 appear in the
Trust's annual report which is attached to this Statement of Additional
Information.
<PAGE>
BRUNDAGE,
STORY AND ROSE
INVESTMENT
Annual Report
November 30, 1996
Short/Intermediate Term
Fixed-Income Fund
Equity Fund
Brundage, Story & Rose
Investment Counsel Since 1932
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 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, LLC
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>
LETTER TO SHAREHOLDERS January 17, 1997
ECONOMIC AND FINANCIAL MARKETS OUTLOOK
ECONOMIC REVIEW
Looking back at 1996, we are struck by the irony of having had a good sense of
the direction of the economy, interest rates, inflation and corporate profits,
but being too conservative regarding our cautious optimism toward the equity
markets. Specifically, our forecast at the beginning of last year was for
economic growth close to its long-term sustainable rate of +2 1/2% and a
resulting improvement in corporate profits, but with upward pressure on
interest rates and inflation.
While hardly in an even fashion, growth for the full year looks to have come
in within the 2-3% range, the rate of inflation did accelerate to 3.3%, and
interest rates ended the year higher than where they began. On the other hand,
the equity market, driven by strong investor demand, was only briefly troubled
by higher rates and inflation; it delivered a second strong year, one of
well-above-average returns.
Our outlook for the economy in 1997 is straightforward: we think growth for
the year will again be in the 2-3% range, and that corporate profits will
improve but at a more moderate rate. We also see inflation continuing the
pattern of gradual acceleration in place since 1995, and we expect interest
rates to face upward pressure in the first half of the year, but likely end
the year at levels similar to those prevailing currently.
This forecast would result in an environment generally conducive to equity
investors and neutral to fixed income investors. In fact, it is very close to
the consensus view that has been nicknamed by a number of Wall Street pundits
as the "Goldilocks scenario" -- not too hot, not too cold, but just right for
the financial investor. Where our forecast differs from the consensus is that
we believe the progress to these "just right" results will be uneven and
fraught with volatility. In fact, we find it ironic that the much embraced
"Goldilocks" analogy ignores that in the story the poor girl awoke from her
complacent rest to confront a family of snarling, hungry bears.
CURRENT MARKET OUTLOOK
As was the case last year, understanding what events in 1997 have the
potential to upset consensus expectations will be just as important as
predicting what will actually happen in the economy. One potential negative
could be higher-than-expected inflation. Thus far, increasing energy costs
have only modestly permeated the broader price levels in our economy. As the
full effect of much higher energy prices begins to be felt, the market's focus
is likely at least temporarily to shift from the "core" inflation rate,
excluding food and energy, to the actual impact that energy prices are having
on the total inflation picture. Beyond this one economic uncertainty, our
concerns focus upon the overall equity market itself. Valuations are at very
high, if not unprecedented, levels as measured by most traditional statistical
benchmarks, and investor enthusiasm is becoming tinged with a speculative
bias.
Our nervousness regarding the short-term outlook for the equity market is
further increased by the fact that the Federal Reserve Board, as witnessed by
a speech that Chairman Alan Greenspan made in early December describing the
"irrational exuberance" of the markets, is fearful that further financial
asset inflation could eventually have negative repercussions for the real
economy.
If higher inflation, concerns about valuation and a pro-active Federal Reserve
Board occur simultaneously, it could be temporarily destabilizing to the stock
market and lead to the first period since 1994 when equity prices pause or
retrench in their relentless march upward. In many ways, while uncomfortable
for the equity investor in the short term, a small deflation in expectations
and a challenge to investors' complacency are pre-conditions to the long-term
health of the stock market.
<PAGE>
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
Interest rates on very short maturity money market issues fell during the
fiscal year ended November 30, 1996, but interest levels for longer maturity
notes and bonds drifted up about one quarter of a percentage point during the
year. As interest rates rise, bond prices decline. This environment produced
price declines for bonds with 3 and 5 year maturities of approximately 0.6%
and 1.7%, respectively. The total return (price change plus interest income)
of three year Treasury bonds for the fiscal year was 5.3%, while the longer
five year Treasury issues produced a lower 4.5%.
Your Fund's total return during the fiscal year was 5.65%. Comparison of this
return with the results for 3 and 5 year Treasury issues is appropriate, given
the Fund's average maturity of four years and its focus on 3 to 5 year issues.
The Fund's superior return resulted principally from its investment in
corporate bonds and mortgage-backed securities. Corporate bonds in the 3 to 5
year sector produced returns of 6.8% during the year while mortgage-backed
securities experienced even better results of 7.5%. Approximately 70% of your
Fund was invested in these two sectors through individual issues selected by
our portfolio managers.
The 30-day yield on the Fund at fiscal year-end was 5.80%. This compares
favorably to money market alternatives such as the 3 month Treasury Bill at
5.12% and to 3 year Treasury issues at 5.68%.
EQUITY FUND
In the Equity Fund, the year ended December 31, 1996 was another period of
extraordinary returns. Specifically, during the calendar year, your Fund was
up 19.28% after rising more than 27% in 1995. The S&P 500 Index returned
22.96% during 1996, while the average for Lipper General Equity Funds was
19.47%. For the fiscal year ended November 30, 1996, your Fund's total return
was 21.27%, versus 27.86% for the S&P 500 Index. Given our focus on
out-of-favor mid-sized companies and an ongoing effort to provide a measure of
defensiveness in the Fund against a more uncertain environment, we are pleased
to have performed comparably with the median results of other equity mutual
funds during 1996.
Looking back, performance was aided during the year by a continued
overweighting in technology and related issues as well as by an overweighting
in capital goods companies and, late in the year, by an increase in our
exposure to telecommunications companies. In addition, results in the Fund
were favorably impacted by a number of acquisitions of companies held in the
Fund including Loctite and PanEnergy amongst others.
Looking forward, our growing caution toward the markets and our expectation
for only modest growth has led us to look for investments in traditionally
defensive areas, while we still find some of the fast growing,
technology-oriented companies to have compelling long-term valuations. We are
also finding that high-quality, mid-sized companies, which have again
significantly lagged their larger capitalization brethren, are more attractive
on both an absolute and relative basis.
SUMMARY
Given the uncertainties in the market outlook and high levels of valuation, we
feel that somewhat reduced common stock expectations for 1997 are warranted.
At the same time, the shorter end of the bond market looks fairly valued. We
feel that both Funds are very well structured to generate good relative
returns during 1997, 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>
<CAPTION>
A REPRESENTATION OF THE GRAPHIC MATERIAL CONTAINED IN THE BRUNDAGE, STORY
AND ROSE INVESTMENT TRUST NOVEMBER 30, 1996 ANNUAL REPORT IS SET FORTH BELOW:
Comparison of the Change in Value of a $10,000 Investment in the Brundage,
Story and Rose Short/Intermediate Term Fixed-Income Fund and the Merrill Lynch
3-Year Treasury Index
MERRILL LYNCH 3-YEAR TREASURY INDEX: BSR SHORT/INTERMEDIATE TERM FIXED-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 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
12/31/95 3.17% 14,496 12/31/95 3.41% 14,749
03/31/96 -0.51% 14,423 03/31/96 -0.69% 14,647
06/30/96 0.57% 14,505 06/30/96 0.59% 14,734
09/30/96 1.64% 14,743 09/30/96 1.80% 14,999
11/30/96 2.53% 15,116 11/30/96 2.91% 15,435
Past performance is not predictive of future performance.
Brundage, Story and Rose Short/Intermediate Term Fixed-Income Fund
Average Annual Total Returns
<CAPTION>
1 Year 5 Year Since Inception*
<S> <C> <C>
5.65% 6.84% 7.62%
* The public offering of shares commenced on January 2, 1991.
</TABLE>
<TABLE>
<CAPTION>
Comparison of the Change in Value of a $10,000 Investment in the Brundage,
Story and Rose Equity Fund and the Standard & Poor's 500 Index
STANDARD & POOR'S 500 INDEX: BSR EQUITY 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
12/31/95 6.02% 21,537 12/31/95 4.01% 17,551
03/31/96 5.37% 22,693 03/31/96 2.08% 17,916
06/30/96 4.49% 23,711 06/30/96 5.60% 18,920
09/30/96 3.09% 24,444 09/30/96 1.42% 19,188
11/30/96 10.53% 27,017 11/30/96 9.22% 20,957
Past performance is not predictive of future performance.
Brundage, Story and Rose Equity Fund
Average Annual Total Returns
<CAPTION>
1 Year 5 Years Since Inception*
<S> <C> <C>
21.27% 13.62% 13.33%
* The public offering of shares commenced on January 2, 1991.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1996
SHORT/
INTERMEDIATE
TERM
FIXED-INCOME EQUITY
FUND FUND
<S> <C> <C>
ASSETS
Investments in securities:
At amortized cost (original cost $32,014,305 and
$19,040,386, respectively) $ 32,033,453 $ 19,040,386
============== ===============
At market value (Note 2).............................................. $ 32,471,011 $ 26,539,685
Investments in repurchase agreements (Note 2)............................ 642,000 931,000
Cash .................................................................... 128 696
Receivable for capital shares sold....................................... 4,857 14,983
Interest and principal paydowns receivable............................... 333,813 259
Dividends receivable..................................................... -- 32,992
Receivable for securities sold........................................... -- 112,737
Other assets............................................................. 1,276 1,109
-------------- ---------------
TOTAL ASSETS.......................................................... 33,453,085 27,633,461
-------------- ---------------
LIABILITIES
Payable for capital shares redeemed...................................... 26,602 53,169
Dividends payable........................................................ 24,217 --
Payable to affiliates (Note 4)........................................... 10,564 22,609
Other accrued expenses and liabilities................................... 15,151 17,561
-------------- ---------------
TOTAL LIABILITIES..................................................... 76,534 93,339
-------------- ---------------
NET ASSETS .............................................................. $ 33,376,551 $ 27,540,122
============== ===============
Net assets consist of:
Capital shares........................................................... $ 33,288,209 $ 17,729,308
Accumulated net realized gains (losses) from security transactions....... (349,216) 2,298,821
Undistributed net investment income...................................... -- 12,694
Net unrealized appreciation on investments............................... 437,558 7,499,299
-------------- ---------------
Net assets .............................................................. $ 33,376,551 $ 27,540,122
============== ===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5).................................... 3,122,514 1,602,870
============== ===============
Net asset value, offering and redemption price per share (Note 2)........ $ 10.69 $ 17.18
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENTS OF OPERATIONS
For the Year Ended November 30, 1996
SHORT/
INTERMEDIATE
TERM
FIXED-INCOME EQUITY
FUND FUND
<S> <C> <C>
INVESTMENT INCOME
Interest.............................................................. $ 2,138,069 $ 38,490
Dividends............................................................. -- 395,852
-------------- ---------------
TOTAL INVESTMENT INCOME............................................. 2,138,069 434,342
-------------- ---------------
EXPENSES
Investment advisory fees (Note 4)..................................... 162,321 164,902
Administrative services fees (Note 4)................................. 65,281 50,766
Accounting services fees (Note 4)..................................... 36,700 33,100
Professional fees..................................................... 19,147 19,147
Trustees' fees and expenses........................................... 14,832 14,832
Transfer agent and shareholder service fees (Note 4).................. 14,250 14,250
Registration fees..................................................... 10,281 11,385
Insurance expense..................................................... 9,834 7,180
Reports to shareholders............................................... 4,091 4,313
Custodian fees........................................................ 3,918 4,028
Pricing expense....................................................... 6,364 1,293
Postage and supplies.................................................. 5,442 1,613
Distribution expenses (Note 4)........................................ 1,702 1,297
Other expenses........................................................ 3,153 391
-------------- ---------------
TOTAL EXPENSES...................................................... 357,316 328,497
Fees waived by the Adviser (Note 4)................................... (145,018) --
-------------- ---------------
NET EXPENSES........................................................ 212,298 328,497
-------------- --------------
NET INVESTMENT INCOME ................................................... 1,925,771 105,845
-------------- --------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions......................... 164,007 2,298,821
Net change in unrealized appreciation/depreciation on investments..... (248,560) 2,561,218
-------------- ---------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS ............... (84,553) 4,860,039
-------------- ---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............................. $ 1,841,218 $ 4,965,884
============== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended November 30, 1996 and 1995
SHORT/INTERMEDIATE TERM
FIXED-INCOME FUND EQUITY FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income....................... $ 1,925,771 $ 2,161,542 $ 105,845 $ 111,647
Net realized gains from security transactions 164,007 109,142 2,298,821 1,134,441
Net change in unrealized appreciation/depreciation
on investments............................ (248,560) 2,531,772 2,561,218 3,708,141
------------ -------------- ------------- --------------
Net increase in net assets from operations..... 1,841,218 4,802,456 4,965,884 4,954,229
------------ -------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.................. (1,925,771) (2,161,542) (118,157) (97,033)
From net realized gains from security transactions -- -- (1,134,441) (835,887)
------------ -------------- ------------- --------------
Decrease in net assets from distributions to
shareholders................................ (1,925,771) (2,161,542) (1,252,598) (932,920)
------------ -------------- ------------- --------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold................... 4,540,639 5,618,482 2,369,871 3,006,767
Net asset value of shares issued in reinvestment of
distributions to shareholders............. 1,615,646 1,847,043 1,235,320 920,285
Payments for shares redeemed................ (7,966,690) (10,224,592) (3,968,907) (2,578,708)
------------ -------------- ------------- --------------
Net increase (decrease) in net assets
from capital share transactions............. (1,810,405) (2,759,067) (363,716) 1,348,344
------------ -------------- ------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS ......... (1,894,958) (118,153) 3,349,570 5,369,653
NET ASSETS:
Beginning of year........................... 35,271,509 35,389,662 24,190,552 18,820,899
------------ -------------- ------------- --------------
End of year................................. $ 33,376,551 $ 35,271,509 $27,540,122 $24,190,552
============ ============== ============= ==============
UNDISTRIBUTED NET INVESTMENT INCOME ........... $ -- $ -- $ 12,694 $ 25,006
============ ============== ============= ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 10.73 $ 9.94 $ 10.77 $ 10.49 $ 10.43
---------- --------- ---------- --------- -----------
Income from investment operations:
Net investment income........................ 0.62 0.64 0.59 0.64 0.69
Net realized and unrealized
gains (losses) on investments.............. (0.04) 0.79 (0.79) 0.28 0.06
---------- --------- ---------- --------- -----------
Total from investment operations................ 0.58 1.43 (0.20) 0.92 0.75
---------- --------- ---------- --------- -----------
Less distributions:
Dividends from net investment income......... (0.62) (0.64) (0.59) (0.64) (0.69)
Distributions from net realized gains........ -- -- (0.04) -- --
---------- --------- ---------- --------- -----------
Total distributions............................. (0.62) (0.64) (0.63) (0.64) (0.69)
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 10.69 $ 10.73 $ 9.94 $ 10.77 $ 10.49
========== ========= ========== ========= ===========
Total return.................................... 5.65% 14.84% (1.98%) 9.00% 7.38%
========== ========= ========== ========= ===========
Net assets at end of year (000's)............... $ 33,377 $ 35,272 $ 35,390 $43,272 $32,025
========== ========= ========== ========= ===========
Ratio of expenses to average net assets(A) ..... 0.65% 0.60% 0.50% 0.50% 0.50%
Ratio of net investment income to average net assets 5.90% 6.21% 5.67% 5.95% 6.50%
Portfolio turnover rate......................... 40% 39% 57% 29% 24%
<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%, 1.09%,
1.06%, 1.11% and 1.30% for the years ended November 30, 1996, 1995, 1994,
1993, and 1992, respectively (Note 4).
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
EQUITY FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year............ $ 14.91 $ 12.43 $ 12.70 $ 12.26 $ 10.85
---------- --------- ---------- --------- -----------
Income from investment operations:
Net investment income........................ 0.06 0.07 0.06 0.09 0.12
Net realized and unrealized
gains on investments....................... 2.97 3.02 0.11 0.76 1.40
---------- --------- ---------- --------- -----------
Total from investment operations................ 3.03 3.09 0.17 0.85 1.52
---------- --------- ---------- --------- -----------
Less distributions:
Dividends from net investment income......... (0.07) (0.06) (0.06) (0.10) (0.11)
Distributions from net realized gains........ (0.69) (0.55) (0.38) (0.31) --
---------- --------- ---------- --------- -----------
Total distributions............................. (0.76) (0.61) (0.44) (0.41) (0.11)
---------- --------- ---------- --------- -----------
Net asset value at end of year.................. $ 17.18 $ 14.91 $ 12.43 $ 12.70 $ 12.26
========== ========= ========== ========= ===========
Total return.................................... 21.27% 26.08% 1.35% 6.83% 14.39%
========== ========= ========== ========= ===========
Net assets at end of year (000's)............... $ 27,540 $ 24,191 $ 18,821 $ 19,150 $15,081
========== ========= ========== ========= ===========
Ratio of expenses to average net assets(A) ..... 1.30% 1.45% 1.50% 1.50% 1.50%
Ratio of net investment income to average net assets 0.42% 0.52% 0.51% 0.74% 1.05%
Portfolio turnover rate......................... 44% 42% 44% 45% 44%
Average commission rate ........................ $ 0.0490 -- -- -- --
<FN>
(A) Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 1.58% and 1.78% for the years ended November 30, 1993
and 1992, respectively.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
PORTFOLIO OF INVESTMENTS
November 30, 1996
PAR MARKET
VALUE INVESTMENT SECURITIES-- 97.3% RATE MATURITY VALUE
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 27.6%
$ 1,000,000 U.S. Treasury Notes......................................... 5.000% 1/31/98 $ 994,375
750,000 U.S. Treasury Notes......................................... 5.875 10/31/98 753,516
1,250,000 U.S. Treasury Notes......................................... 6.250 5/31/00 1,269,141
1,000,000 U.S. Treasury Notes......................................... 6.250 2/15/03 1,018,125
2,000,000 U.S. Treasury Notes......................................... 5.750 8/15/03 1,979,376
1,000,000 U.S. Treasury Notes......................................... 7.250 5/15/04 1,075,938
1,000,000 U.S. Treasury Notes......................................... 7.500 2/15/05 1,094,375
1,000,000 U.S. Treasury Notes......................................... 6.500 8/15/05 1,030,625
- -------------- ------------
$ 9,000,000 TOTAL U.S. TREASURY OBLIGATIONS
- -------------- (Cost $9,102,310)...................................... $ 9,215,471
------------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES -- 39.5%
$ 176,439 Federal Home Loan Mortgage Corp. GOLD #M-13854.............. 7.500% 5/01/97 $ 177,333
380,513 Federal Home Loan Mortgage Corp. GOLD #M-14868.............. 7.500 8/01/97 382,442
255,808 Federal Home Loan Mortgage Corp. GOLD #N-90875.............. 7.500 2/01/99 261,003
11,752 Government National Mortgage Assoc. #114468................. 9.500 7/15/99 12,218
685,061 Federal Home Loan Mortgage Corp. GOLD #G-50274.............. 7.500 6/01/00 697,194
15,609 Federal Home Loan Mortgage Corp. GNOME #200068.............. 8.000 3/01/02 16,039
55,389 Federal National Mortgage Assoc. DWARF #51935............... 8.000 4/01/02 56,990
26,393 Federal Home Loan Mortgage Corp. REMIC #1034-E.............. 8.400 1/15/05 26,469
1,000,000 Federal National Mortgage Assoc. REMIC #93-52E.............. 6.000 4/25/05 998,040
67,690 Federal Home Loan Mortgage Corp. #140094.................... 7.500 5/01/05 68,609
500,000 Federal Home Loan Mortgage Corp. REMIC #1404-D.............. 6.800 1/15/06 509,599
94,825 Federal National Mortgage Assoc. DWARF #50480............... 8.000 9/01/06 98,134
700,000 Federal National Mortgage Assoc. REMIC #92-24H.............. 7.500 11/25/06 722,490
728,982 Government National Mortgage Assoc. #362109................. 9.000 9/15/08 770,898
987,337 Federal National Mortgage Assoc. REMIC #93-4D............... 6.750 11/25/13 989,701
1,500,000 Federal Home Loan Mortgage Corp. REMIC #1523-PE............. 6.000 10/15/15 1,495,924
1,000,000 Federal National Mortgage Assoc. REMIC #93-20PE............. 5.900 5/25/16 993,539
1,000,000 Federal Home Loan Mortgage Corp. REMIC #1522-C.............. 6.000 8/15/16 998,660
1,000,000 Federal National Mortgage Assoc. REMIC #94-29PE............. 6.000 5/25/18 993,332
22,734 Government National Mortgage Assoc. #285639................. 9.000 2/15/20 24,362
1,000,000 Federal Home Loan Mortgage Corp. REMIC #1699-C.............. 6.200 2/15/24 1,002,230
917,169 Federal National Mortgage Assoc. #250322.................... 7.500 7/01/25 928,441
936,050 Government National Mortgage Assoc. #410063................. 7.500 7/15/25 949,698
- -------------- ------------
$ 13,061,751 TOTAL U.S. GOVERNMENT AGENCY
- -------------- MORTGAGE-BACKED SECURITIES
(Cost $13,103,791)..................................... $13,173,345
------------
<PAGE>
<CAPTION>
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND (continued)
PAR MARKET
VALUE INVESTMENT SECURITIES-- 97.3% RATE MATURITY VALUE
<S> <C> <C> <C> <C>
OTHER MORTGAGE-BACKED SECURITIES -- 7.9%
$ 623,849 Advanta Home Equity Loan Trust #92-1A....................... 7.875% 9/25/08 $ 643,671
1,000,000 CMC Securities Corp. III #94-B.............................. 6.000 2/25/09 991,600
1,000,000 Bear Stearns Mortgage Securities, Inc. #96-3-A2............. 7.240 6/25/27 1,009,040
- -------------- ------------
$ 2,623,849 TOTAL OTHER MORTGAGE-BACKED SECURITIES
- -------------- (Cost $2,615,132) ..................................... $ 2,644,311
------------
ASSET-BACKED SECURITIES -- 4.0%
$ 266,112 Nissan Auto Receivables Trust #1994-A....................... 6.450% 9/15/99 $ 267,945
1,000,000 Circuit City Credit Card Master Trust #1994-2A.............. 8.000 11/15/99 1,053,155
- -------------- ------------
$ 1,266,112 TOTAL ASSET-BACKED SECURITIES
- -------------- (Cost $1,263,955)...................................... $ 1,321,100
------------
CORPORATE BONDS -- 18.3%
$ 700,000 General Motors Acceptance Corp. Medium Term Notes........... 7.600% 1/09/97 $ 701,505
200,000 Sears Roebuck & Co. Medium Term Notes....................... 7.440 1/15/97 200,466
100,000 Champion International Corp................................. 9.800 2/01/98 104,255
1,000,000 Smith Barney................................................ 5.500 1/15/99 990,058
1,000,000 Lehman Brothers, Inc........................................ 6.125 2/01/01 984,931
1,000,000 Ford Motor Credit Corp. Medium Term Notes................... 5.900 2/23/01 986,297
1,000,000 Quebec Province............................................. 8.800 4/15/03 1,122,120
1,000,000 Citicorp.................................................... 7.125 5/15/06 1,027,152
- -------------- ------------
$ 6,000,000 TOTAL CORPORATE BONDS
- -------------- (Cost $5,948,265)...................................... $ 6,116,784
------------
$ 31,951,712 TOTAL INVESTMENTS AT VALUE
============== (Cost $32,033,453) .................................... $32,471,011
------------
<CAPTION>
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(1)-- 1.9% VALUE
<S> <C> <C>
$ 642,000 Fifth Third Bank, 5.00%, dated 11/29/96, due 12/02/96,
- -------------- repurchase proceeds $642,268.............................................. $ 642,000
------------
$ 642,000 TOTAL REPURCHASE AGREEMENTS ................................................... $ 642,000
============== ------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 99.2% .................. $33,113,011
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.8% .................................. 263,540
------------
NET ASSETS-- 100.0% ........................................................... $33,376,551
============
<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.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
EQUITY FUND
PORTFOLIO OF INVESTMENTS
November 30, 1996
MARKET
COMMON STOCK -- 96.4% SHARES VALUE
<S> <C> <C>
FINANCIAL AND INSURANCE -- 12.3%
American Express Co...................................................... 13,500 $ 705,375
American International Group............................................. 5,750 661,250
Federal National Mortgage Assoc.......................................... 22,700 936,375
General Re Corp.......................................................... 2,500 421,875
J.P. Morgan & Company, Inc............................................... 7,000 660,625
---------------
$ 3,385,500
---------------
HEALTH CARE -- 10.7%
Abbot Laboratories....................................................... 16,500 $ 919,875
Merck & Co., Inc......................................................... 7,000 581,000
Physicians Health Services Class A*...................................... 5,100 76,500
Schering-Plough Corp..................................................... 7,200 513,000
Smithkline Beecham PLC-ADR............................................... 12,400 854,050
---------------
$ 2,944,425
---------------
INDUSTRIAL -- 10.3%
AlliedSignal, Inc........................................................ 8,000 $ 586,000
Illinois Tool Works, Inc................................................. 7,000 600,250
Thermo Electron Corp.*................................................... 25,500 924,375
York International Corp.................................................. 14,000 735,000
---------------
$ 2,845,625
---------------
ENERGY AND RESOURCES -- 10.0%
Amoco Corp............................................................... 6,500 $ 504,563
Mobil Corp............................................................... 5,000 605,000
Noble Affiliates, Inc.................................................... 5,500 259,187
PanEnergy Corp........................................................... 18,000 792,000
Royal Dutch Petroleum Co................................................. 3,500 594,563
---------------
$ 2,755,313
---------------
TELECOMMUNICATIONS -- 8.0%
AT&T Corp................................................................ 18,700 $ 733,975
Airtouch Communications, Inc.*........................................... 29,900 766,188
Cabletron Systems, Inc.*................................................. 13,000 524,875
ECI Telecommunications, Ltd.............................................. 8,100 162,000
---------------
$ 2,187,038
---------------
HOUSEHOLD PRODUCTS -- 7.6%
Colgate-Palmolive Co..................................................... 5,500 $ 509,437
Gillette Co.............................................................. 7,000 516,250
International Flavors & Fragrances, Inc.................................. 11,000 500,500
Tupperware Corp.......................................................... 10,500 556,500
---------------
$ 2,082,687
---------------
<PAGE>
<CAPTION>
EQUITY FUND (continued)
MARKET
COMMON STOCK -- 96.4% SHARES VALUE
<S> <C> <C>
COMPUTER SYSTEMS AND SOFTWARE -- 5.7%
Adobe Systems, Inc....................................................... 12,600 $ 497,700
Sequent Computer Systems, Inc.*.......................................... 31,000 523,125
VeriFone, Inc.*.......................................................... 16,500 556,875
---------------
$ 1,577,700
---------------
ELECTRICAL EQUIPMENT -- 4.9%
General Electric Co...................................................... 4,000 $ 416,000
Molex, Inc. Class A...................................................... 26,312 927,498
---------------
$ 1,343,498
---------------
BASIC AND SPECIALTY CHEMICALS -- 4.3%
Avery-Dennison Corp...................................................... 8,000 $ 565,000
Ecolab, Inc.............................................................. 11,600 450,950
Great Lakes Chemical Co.................................................. 3,000 160,875
---------------
$ 1,176,825
---------------
RETAILING -- 3.5%
AutoZone, Inc.*.......................................................... 19,500 $ 480,187
Price/Costco, Inc.*...................................................... 21,000 488,250
---------------
$ 968,437
---------------
FOOD AND BEVERAGES -- 3.4%
PepsiCo, Inc............................................................. 14,300 $ 427,212
Sysco Corp............................................................... 15,000 511,875
---------------
$ 939,087
---------------
UTILITIES-TELEPHONE -- 3.1%
BellSouth Corp........................................................... 6,600 $ 266,475
GTE Corp................................................................. 13,000 583,375
---------------
$ 849,850
---------------
LEISURE TIME -- 2.2%
The Walt Disney Co....................................................... 4,000 $ 295,000
Viacom, Inc. Class B*.................................................... 8,000 302,000
---------------
$ 597,000
---------------
ELECTRONICS -- 2.0%
Motorola, Inc............................................................ 10,000 $ 553,750
---------------
CONTAINERS -- 1.8%
Sonoco Products Co....................................................... 18,500 $ 504,125
---------------
TRUCKING & LEASING -- 1.5%
Landstar System, Inc.*................................................... 17,400 $ 400,200
---------------
PAPER AND FOREST PRODUCTS -- 1.5%
Willamette Industries, Inc............................................... 6,000 $ 408,000
---------------
AEROSPACE/DEFENSE -- 1.4%
Boeing Co................................................................ 4,000 $ 397,500
---------------
<PAGE>
<CAPTION>
EQUITY FUND (continued)
MARKET
COMMON STOCK -- 96.4% SHARES VALUE
<S> <C> <C>
UTILITIES-ELECTRIC -- 1.2%
Montana Power Co......................................................... 16,000 $ 344,000
---------------
ELECTRONICS/SEMICONDUCTORS -- 1.0%
Intel Corp............................................................... 2,200 $ 279,125
---------------
TOTAL COMMON STOCK
(Cost $19,040,386).................................................. $ 26,539,685
---------------
<CAPTION>
FACE MARKET
REPURCHASE AGREEMENTS(1) -- 3.4% AMOUNT VALUE
<S> <C> <C>
Fifth Third Bank, 5.00%, dated 11/29/96, due 12/02/96,
repurchase proceeds $931,388........................................ $ 931,000 $ 931,000
-------------- ---------------
TOTAL REPURCHASE AGREEMENTS ............................................. $ 931,000 $ 931,000
============== ---------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS AT VALUE-- 99.8% ............ $ 27,470,685
OTHER ASSETS IN EXCESS OF LIABILITIES-- 0.2% ............................ 69,437
---------------
NET ASSETS-- 100.0% ..................................................... $ 27,540,122
===============
<FN>
* Non-income producing securities.
(1) Repurchase agreements are fully collateralized by U.S. Government obligations.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
1. ORGANIZATION
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 and the Brundage, Story and Rose Equity Fund (collectively, the Funds).
The Trust commenced operations on December 3, 1990, when Brundage, Story and
Rose, LLC (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 Brundage, Story and Rose Short/Intermediate Term Fixed-Income Fund (the
Bond 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 Bond Fund invests
primarily in short and intermediate-term fixed-income securities.
The Brundage, Story and Rose Equity Fund (the Equity Fund) seeks to provide
protection and enhancement of capital, current income and growth of income.
The Equity Fund invests primarily in common stocks and securities convertible
into common stock.
2. SIGNIFICANT ACCOUNTING POLICIES
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 -- 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.
<PAGE>
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.
Use of estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
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, 1996:
<TABLE>
<CAPTION>
BOND EQUITY
FUND FUND
<S> <C> <C>
Gross unrealized appreciation......................... $ 543,250 $ 7,821,106
Gross unrealized depreciation......................... (105,692) (321,807)
-------------- ---------------
Net unrealized appreciation........................... $ 437,558 $ 7,499,299
============== ===============
Federal income tax cost............................... $ 32,033,453 $ 19,040,386
============== ===============
</TABLE>
As of November 30, 1996, the Bond Fund had a capital loss carryforward of
$349,216 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.
3. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investment securities,
other than short-term investments, amounted to $12,782,462 and $14,422,361,
respectively, for the Bond Fund and $10,925,003 and $12,556,961, respectively,
for the Equity Fund during the year ended November 30, 1996.
4. TRANSACTIONS WITH AFFILIATES
Certain Trustees and officers of the Trust are principals of 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., the exclusive underwriter of the Funds' shares.
At November 30, 1996, the Adviser, principals of the Adviser and certain
employee benefit plans of the Adviser collectively owned 16% and 34% 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 0.50% and 0.65%, respectively, of average daily net
assets.
In order to reduce the operating expenses of the Bond Fund, the Adviser
voluntarily waived $145,018 of its investment advisory fees during the year
ended November 30, 1996.
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
Under the terms of the Administrative Services Agreement with the Trust, 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 these 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 with the Trust, 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 with the Trust, 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. In addition, each Fund pays certain out-of-pocket expenses
incurred by MGF in obtaining valuations of such Fund's portfolio securities.
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 0.25% of the average daily net assets of each Fund.
5. 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, 1996 and 1995:
<TABLE>
<CAPTION>
BOND FUND EQUITY FUND
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Shares sold.................................... 430,192 540,529 157,706 228,968
Shares issued in reinvestment
of distributions to shareholders............ 152,952 177,844 85,211 76,457
Shares redeemed................................ (748,745) (991,151) (262,040) (197,103)
------------ -------------- ------------- --------------
Net increase (decrease) in shares outstanding (165,601) (272,778) (19,123) 108,322
Shares outstanding, beginning of year.......... 3,288,115 3,560,893 1,621,993 1,513,671
------------ -------------- ------------- --------------
Shares outstanding, end of year................ 3,122,514 3,288,115 1,602,870 1,621,993
============ ============== ============= ==============
</TABLE>
<PAGE>
Report of Independent Public Accountants
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
Brundage, Story and Rose Short/Intermediate Term Fixed-Income Fund and the
Brundage, Story and Rose Equity Fund (formerly the Brundage, Story and Rose
Growth & Income Fund) of the Brundage, Story and Rose Investment Trust (an
Ohio business trust), including the portfolios of investments, as of November
30, 1996, 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, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Brundage, Story and Rose Short/Intermediate Term Fixed-Income Fund and the
Brundage, Story and Rose Equity Fund of the Brundage, Story and Rose
Investment Trust as of November 30, 1996, 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 30, 1996
<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, 1996
Statements of Operations for the Year Ended
November 30, 1996
Statements of Changes in Net Assets for the Years
Ended November 30, 1996 and November 30, 1995
Financial Highlights for the Periods Ended
November 30, 1996, 1995, 1994, 1993 and 1992
Notes to Financial Statements, November 30, 1996
Portfolios of Investments, November 30, 1996
(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*
<PAGE>
(6) (i) Underwriting Agreement with Countrywide
Investments, Inc.*
(ii) Form of Underwriter's Dealer Agreement*
(7) Inapplicable
(8) Custody Agreement with The Fifth
Third Bank*
(9) (i) Administration Agreement with Countrywide
Fund Services, Inc.
(ii) Accounting Services Agreement with
Countrywide Fund Services, Inc.
(iii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement with
Countrywide Fund Services, Inc.
(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
<PAGE>
(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
February 28, 1997, of the shares of beneficial interest of the Registrant.
Number of
Title of Class Record Holders
Brundage, Story and Rose
Equity Fund 492
Brundage, Story and Rose Short/
Intermediate Term Fixed-Income Fund 372
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
<PAGE>
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.
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
<PAGE>
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 Countrywide Investments, 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.
<PAGE>
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.
(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) Countrywide Investments, Inc. also acts as
underwriter for the three investment companies
comprising the Countrywide Funds, namely Countrywide
Strategic Trust, Countrywide Investment Trust and
Countrywide Tax-Free Trust.
<PAGE>
<TABLE>
<CAPTION>
Position Position
with with
(b) Name Underwriter Registrant
<S> <C> <C>
Angelo R. Mozilo Chairman of None
the Board
and Director
Andrew S. Bielanski Director None
Thomas H. Boone Director None
Marshall M. Gates Director None
David Sambol Director None
Robert H. Leshner President None
and Director
Sharon L. Karp Vice President None
Maryellen Peretzky Vice President None
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
Terrie A. Wiedenheft Controller None
Elizabeth A. Santen Assistant None
Secretary
</TABLE>
The address of all of the above-named persons is 312
Walnut Street, Cincinnati, Ohio 45202.
(c) Inapplicable
<PAGE>
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, 1997.
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, 1997
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, 1997
Antoinette Geyelin Hoar*
__________________________ Trustee By:/s/John A. Dudley
William M.R. Mapel* John A. Dudley
Attorney-in-Fact*
__________________________ Trustee March 31, 1997
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.
UNDERWRITING AGREEMENT
This Agreement made as of February 28, 1997 by and between Brundage,
Story and Rose Investment Trust, an Ohio business trust (the "Trust"), and
Countrywide Investments, Inc., an Ohio corporation ("Underwriter").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the
Securities and Exchange Commission and a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of beneficial
interest (the "Shares") of the Brundage, Story and Rose Equity Fund and the
Brundage, Story and Rose Short/Intermediate Term Fixed-Income Fund, each a
series of shares of the Trust (the "Series");
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
The Trust hereby appoints Underwriter as its exclusive agent
for the distribution of the Shares, and Underwriter hereby accepts such
appointment under the terms of this Agreement. While this Agreement is in force,
the Trust shall not sell any
<PAGE>
Shares except on the terms set forth in this Agreement. Notwithstanding any
other provision hereof, the Trust may terminate, suspend or withdraw the
offering of Shares whenever, in its sole discretion, it deems such action to be
desirable.
2. Sale and Repurchase of Shares.
(a) Underwriter will have the right, as agent for the Trust,
to enter into dealer agreements with responsible investment dealers, and to sell
Shares to such investment dealers against orders therefor at the public offering
price (as defined in subparagraph 2(e) hereof) less a discount determined by
Underwriter, which discount shall not exceed the amount of the sales charge
stated in the Trust's effective Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, including the then current prospectus and
statement of additional information (the "Registration Statement"). Upon receipt
of an order to purchase Shares from a dealer with whom Underwriter has a dealer
agreement, Underwriter will promptly cause such order to be filled by the Trust.
(b) Underwriter will also have the right, as agent for the
Trust, to sell such Shares to the public against orders therefor at the public
offering price.
(c) Underwriter will also have the right, as agent for the
Trust, to sell Shares at their net asset value to clients of Brundage, Story and
Rose and such other persons as may be approved by the Trustees of the Trust, all
such sales to comply with the provisions of the Act and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
(d) Underwriter will also have the right to take, as
agent for the Trust, all actions which, in Underwriter's
<PAGE>
judgment, are necessary to carry into effect the distribution of
the Shares.
(e) The public offering price for the Shares of each Series
shall be the respective net asset value of the Shares of that Series then in
effect, plus any applicable sales charge determined in the manner set forth in
the Registration Statement or as permitted by the Act and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder. In
no event shall any applicable sales charge exceed the maximum sales charge
permitted by the Rules of Fair Practice of the NASD.
(f) The net asset value of the Shares of each Series shall be
determined in the manner provided in the Registration Statement, and when
determined shall be applicable to transactions as provided for in the
Registration Statement. The net asset value of the Shares of each Series shall
be calculated by the Trust or by another entity on behalf of the Trust.
Underwriter shall have no duty to inquire into or liability for the accuracy of
the net asset value per Share as calculated.
(g) On every sale, the Trust shall receive the applicable net
asset value of the Shares promptly, but in no event later than the tenth
business day following the date on which Underwriter shall have received an
order for the purchase of the Shares. Underwriter shall have the right to retain
the sales charge less any applicable dealer discount.
(h) Upon receipt of purchase instructions, Underwriter
will transmit such instructions to the Trust or its transfer
agent for registration of the Shares purchased.
(i) Nothing in this Agreement shall prevent
Underwriter or any affiliated person (as defined in the Act) of
<PAGE>
Underwriter from acting as underwriter or distributor for any other person, firm
or corporation (including other investment companies) or in any way limit or
restrict Underwriter or any such affiliated person from buying, selling or
trading any securities for its or their own account or for the accounts of
others for whom it or they may be acting; provided, however, that Underwriter
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.
(j) Underwriter, as agent of and for the account of the Trust,
may repurchase the Shares at such prices and upon such terms and conditions as
shall be specified in the Registration Statement.
3. Sale of Shares by the Trust.
The Trust reserves the right to issue any Shares at any time
directly to the holders of Shares ("Shareholders"), to sell Shares to its
Shareholders or to other persons approved by Underwriter at not less than net
asset value and to issue Shares in exchange for substantially all the assets of
any corporation or trust or for the shares of any corporation or trust.
4. Basis of Sale of Shares.
Underwriter does not agree to sell any specific number of
Shares. Underwriter, as agent for the Trust, undertakes to sell Shares on a best
efforts basis only against orders therefor.
5. Rules of NASD, etc.
(a) Underwriter will conform to the Rules of Fair Practice of
the NASD and the securities laws of any jurisdiction in which it sells, directly
or indirectly, any Shares.
(b) Underwriter will require each dealer with whom
<PAGE>
Underwriter has a dealer agreement to conform to the applicable provisions
hereof and the Registration Statement with respect to the public offering price
of the Shares, and neither Underwriter nor any such dealers shall withhold the
placing of purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust sufficient
copies of any agreements, plans or other materials it intends to use in
connection with any sales of Shares in adequate time for the Trust to file and
clear them with the proper authorities before they are put in use, and not to
use them until so filed and cleared.
(d) Underwriter, at its own expense, will qualify as dealer or
broker, or otherwise, under all applicable State or federal laws required in
order that Shares may be sold in such States as may be mutually agreed upon by
the parties.
(e) Underwriter shall not make, or permit any representative,
broker or dealer to make, in connection with any sale or solicitation of a sale
of the Shares, any representations concerning the Shares except those contained
in the then current prospectus and statement of additional information covering
the Shares and in printed information approved by the Trust as information
supplemental to such prospectus and statement of additional information. Copies
of the then effective prospectus and statement of additional information and any
such printed supplemental information will be supplied by the Trust to
Underwriter in reasonable quantities upon request.
6. Records to be Supplied by Trust.
The Trust shall furnish to Underwriter copies of all
information, financial statements and other papers which
<PAGE>
Underwriter may reasonably request for use in connection with the distribution
of the Shares, and this shall include, but shall not be limited to, one
certified copy, upon request by Underwriter, of all financial statements
prepared for the Trust by independent public accountants.
7. Expenses.
In the performance of its obligations under this Agreement,
Underwriter will pay only the costs incurred in qualifying as a broker or dealer
under state and federal laws and in establishing and maintaining its
relationships with the dealers selling the Shares. All other costs in connection
with the offering of the Shares will be paid by the Trust or the Trust's
investment adviser (the "Adviser") in accordance with agreements between them as
permitted by applicable law, including the Act and rules and regulations
promulgated thereunder.
8. Indemnification of Trust.
Underwriter, to the extent of the net commission received by
it from the sale of Shares but to no greater amount, agrees to indemnify and
hold harmless the Trust, the Adviser and each person who has been, is, or may
hereafter be a trustee, director, officer, employee, partner, shareholder or
control person of the Trust or the Adviser, against any loss, damage or expense
(including the reasonable costs of investigation) reasonably incurred by any of
them in connection with any claim or in connection with any action, suit or
proceeding to which any of them may be a party, which arises out of or is
alleged to arise out of or is based upon any untrue statement or alleged untrue
statement of a material fact, or the omission or alleged omission to state a
material fact necessary to make the
<PAGE>
statements not misleading, on the part of Underwriter or any agent or employee
of Underwriter or any other person for whose acts Underwriter is responsible,
unless such statement or omission was made in reliance upon written information
furnished by the Trust or the Adviser. Underwriter likewise, to the extent of
the net commission received by it from the sale of Shares but to no greater
amount, agrees to indemnify and hold harmless the Trust, the Adviser and each
such person in connection with any claim or in connection with any action, suit
or proceeding which arises out of or is alleged to arise out of Underwriter's
failure to exercise reasonable care and diligence with respect to its services,
if any, rendered in connection with investment, reinvestment, automatic
withdrawal and other plans for Shares. The term "expenses" for purposes of this
and the next paragraph includes amounts paid in satisfaction of judgments or in
settlements which are made with Underwriter's consent. The foregoing rights of
indemnification shall be in addition to any other rights to which the Trust, the
Adviser or each such person may be entitled as a matter of law.
9. Indemnification of Underwriter.
Underwriter, its directors, officers, employees,
shareholders and control persons shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust in connection with the
matters to which this 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 this Agreement. The
Trust will advance attorneys'
<PAGE>
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.
Any person employed by Underwriter who may also be or become an officer or
employee of the Trust shall be deemed, when acting within the scope of his
employment by the Trust, to be acting in such employment solely for the Trust
and not as an employee or agent of Underwriter.
10. Termination and Amendment of this Agreement.
This Agreement shall automatically terminate, without
the payment of any penalty, in the event of its assignment. This Agreement may
be amended only if such amendment is approved (i) by Underwriter, (ii) either by
action of the Board of Trustees of the Trust or at a meeting of the Shareholders
of the Trust by the affirmative vote of a majority of the outstanding Shares,
and (iii) by a majority of the Trustees of the Trust who are not interested
persons of the Trust or of Underwriter by vote cast in person at a meeting
called for the purpose of voting on such approval.
Either the Trust or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
11. Effective Period of this Agreement.
This Agreement shall take effect upon its execution and
shall remain in full force and effect for a period of two (2) years from the
date of its execution (unless terminated automatically as set forth in Section
10), and from year to year thereafter, subject to annual approval (i) by
Underwriter, (ii)
<PAGE>
by the Board of Trustees of the Trust or a vote of a majority of the outstanding
Shares, and (iii) by a majority of the Trustees of the Trust who are not
interested persons of the Trust or of Underwriter by vote cast in person at a
meeting called for the purpose of voting on such approval.
12. 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 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, as provided in the Agreement and Declaration of
Trust of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees and Shareholders of the Trust and signed by an
officer of the Trust, acting as such, and neither such authorization by such
Trustees and Shareholders 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
<PAGE>
on any of them personally, but shall bind only the trust property of the Trust
as provided in its Agreement and Declaration of Trust.
13. New Series.
The terms and provisions of this Agreement shall become
automatically applicable to any additional series of the Trust established
during the initial or renewal term of this Agreement.
14. Successor Investment Company.
Unless this Agreement has been terminated in accordance with
Paragraph 10, the terms and provisions of this Agreement shall become
automatically applicable to any investment company which is a successor to the
Trust as a result of reorganization, recapitalization or change of domicile.
15. 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.
16. Questions of Interpretation.
(a) This Agreement shall be governed by the laws of
the State of Ohio.
(b) 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 Act shall be resolved by reference to such term or provision of
the Act and to interpretation 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 Act.
In addition, where the
<PAGE>
effect of a requirement of the 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.
17. 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 Underwriter for this purpose shall be 312 Walnut Street, Cincinnati, Ohio
45202.
<PAGE>
IN WITNESS WHEREOF, the Trust and Underwriter have each caused
this Agreement to be signed in duplicate on their behalf, all as of the day and
year first above written.
BRUNDAGE, STORY AND ROSE
INVESTMENT TRUST
By: /s/ Malcolm D. Clarke, Jr.
Its: President
COUNTRYWIDE INVESTMENTS, INC.
By: /s/ Robert H. Leshner
Its: President
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated as of February 28, 1997 between Brundage, Story and
Rose Investment Trust (the "Trust"), an Ohio business trust, and Countrywide
Fund Services, Inc. ("Countrywide"), an Ohio corporation.
WHEREAS, the Trust has been organized to operate as an open-end
management investment company registered under the Investment Company Act of
1940; and
WHEREAS, the Trust wishes to avail itself of the information, advice,
assistance and facilities of Countrywide to perform on behalf of the Trust the
services as hereinafter described; and
WHEREAS, Countrywide wishes to provide such services to the
Trust under the conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. Employment. The Trust, being duly authorized, hereby
employs Countrywide to perform those services described in this
Agreement. Countrywide shall perform the obligations thereof
upon the terms and conditions hereinafter set forth.
2. Trust Administration. Subject to the direction and control of the
Trust, Countrywide shall supervise the Trust's business affairs not otherwise
supervised by other agents of the Trust. To the extent not otherwise the primary
responsibility of, or provided by, other agents of the Trust, Countrywide shall
supply (i) non-investment related statistical and research data, (ii) internal
regulatory compliance services, and (iii) executive and administrative services.
Countrywide shall supervise the preparation of (i) tax returns, (ii) reports to
shareholders of the Trust, (iii) reports to and filings with the Securities and
Exchange Commission, state securities commissions and Blue Sky authorities
including preliminary and definitive proxy materials and post-effective
amendments to the Trust's registration statement, and (iv) necessary materials
for meetings of the Trust's Board of Trustees unless prepared by other parties
under agreement with the Trust. Countrywide shall provide personnel to serve as
officers of the Trust if so elected by the Board of Trustees; provided, however,
that the Trust shall reimburse Countrywide for the expenses incurred by such
personnel in attending Board of Trustees' meetings and shareholders' meetings of
the Trust.
<PAGE>
3. Record Keeping and Other Information. Countrywide shall create and
maintain all necessary records in accordance with all applicable laws, rules and
regulations, including but not limited to records required by Section 31(a) of
the Investment Company Act of 1940 and the rules thereunder, as the same may be
amended from time to time, pertaining to the various functions performed by it
and not otherwise created and maintained by another party pursuant to contract
with the Trust. Where applicable, such records shall be maintained by
Countrywide for the periods and in the places required by Rule 31a-2 under the
Investment Company Act of 1940.
4. Audit, Inspection and Visitation. Countrywide shall make available
to the Trust during regular business hours all records and other data created
and maintained pursuant to the foregoing provisions of this Agreement for
reasonable audit and inspection by the Trust or any regulatory agency having
authority over the Trust.
5. Compensation. For the performance of Countrywide's obligations under
this Agreement, each series shall pay Countrywide, on the first business day
following the end of each month, a fee equal to the annual rate of .20% of the
average value during such month 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 shall be $1,000
per month for each series. Countrywide shall not be required to reimburse the
Trust or the Trust's investment adviser for (or have deducted from its fees) any
expenses in excess of expense limitations imposed by certain state securities
commissions having jurisdiction over the Trust.
6. Limitation of Liability. Countrywide 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 this Agreement, or in accordance with
instructions from the Adviser, provided, however, that such acts or omissions
shall not have resulted from Countrywide's willful misfeasance, bad faith or
gross negligence.
7. Services for Others. Nothing in this Agreement shall prevent
Countrywide or any affiliated person of Countrywide from providing services for
any other person, firm or corporation, including other invesmtent companies;
provided, however, that Countrywide 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.
8. Compliance with the Investment Company Act of 1940.
The parties hereto acknowledge and agree that nothing contained
herein shall be construed to require Countrywide to perform any
services for the Trust which services could cause Countrywide to
<PAGE>
be deemed an "investment adviser" of the Trust within the meaning of Section
2(a)(20) of the Investment Company Act of 1940 or to supersede or contravene the
Prospectus or Statement of Additional Information of the Trust or any provisions
of the Investment Company Act of 1940 and the rules thereunder.
9. Renewal and Termination. This Agreement shall become effective on
the date first above written and shall remain in force for a period of two (2)
years from such date, and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the vote of a majority
of the Trustees who are not interested persons of the Trust or Countrywide, cast
in person at a meeting called for the purpose of voting on such approval and by
a vote of the Board of Trustees or of a majority of the Trust's outstanding
voting securities. This Agreement may be terminated without the payment of any
penalty by either party upon sixty (60) days' written notice to the other party.
This Agreement shall terminate automatically in the event of its assignment.
Upon the termination of this Agreement, the Trust shall pay Countrywide such
compensation as may be payable for the period prior to the effective date of
such termination.
10. 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.
11. Miscellaneous. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
<PAGE>
BRUNDAGE, STORY AND ROSE
INVESTMENT TRUST
By: /s/ Malcolm D. Clarke, Jr.
Its:President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
Its: President
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT effective as of February 28, 1997 by and between
Brundage, Story and Rose Investment Trust, an Ohio business trust (the "Trust"),
and COUNTRYWIDE FUND SERVICES,
INC., an Ohio corporation ("Countrywide").
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 Countrywide to provide the Trust
with certain accounting and pricing services, and Countrywide 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.
Countrywide is hereby appointed to provide the Trust with
certain accounting and pricing services, and Countrywide accepts such
appointment and agrees to provide such services under the terms and conditions
set forth herein.
2. CALCULATION OF NET ASSET VALUE.
Countrywide 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. Countrywide 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, Countrywide may contract with, and rely upon
market quotations provided by, outside services.
3. BOOKS AND RECORDS.
Countrywide 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
<PAGE>
Trust. Countrywide 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. Countrywide 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 Countrywide
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 Countrywide
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.
Countrywide 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, Countrywide shall prepare checks in the appropriate amounts which shall
be signed by an authorized officer of Countrywide and mailed to the appropriate
party.
5. FORM N-SAR.
Countrywide 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.
Countrywide 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 Countrywide a monthly fee in accordance with the schedule
attached hereto as Schedule A. The fees with respect to any month shall be paid
to Countrywide on the last business day of such month. The Trust shall also
promptly reimburse Countrywide for the cost of external pricing services
utilized by Countrywide.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require Countrywide to perform any
services for the Trust which services could cause Countrywide 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 Countrywide, 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 COUNTRYWIDE.
The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Administrative Services Agent, Transfer, Shareholder Servicing
and Dividend Disbursing Agent and Accounting Services Agent. The Trust will
submit printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.
11. EQUIPMENT FAILURES.
In the event of equipment failures beyond Countrywide's
control, Countrywide shall take all steps necessary to minimize service
interruptions but shall have no liability with respect thereto. Countrywide
shall endeavor to enter into one or more
<PAGE>
agreements making provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
12. INDEMNIFICATION OF COUNTRYWIDE.
Countrywide 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 Countrywide 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
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, 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 Countrywide 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 Countrywide, 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 Countrywide may
sustain or incur or which may be asserted against Countrywide by any person, by
reason of, or as a result of: (i) any action taken or omitted to be taken by
Countrywide 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 Countrywide in connection with its appointment in good faith in
reliance upon any law, act, regulation or interpretation
<PAGE>
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 Countrywide 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.
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 Countrywide, (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 Countrywide 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 Countrywide's duties or responsibilities under
this Agreement is designated by the Trust by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of the
Trust, transfer all records maintained by Countrywide under this Agreement and
shall cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Countrywide'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 Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide 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.
<PAGE>
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.
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.
<PAGE>
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 Countrywide 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.
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 Countrywide 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/ Malcolm D. Clarke, Jr.
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
Its: President
<PAGE>
Schedule A
Compensation
For Fund Accounting and Portfolio Pricing:
Monthly Fee
Equity Short/Intermediate
Asset Size Fund Term Fixed-Income Fund
$ 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
TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT
THIS AGREEMENT effective as of February 28, 1997 by and between ,
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST, an Ohio business trust (the "Trust"),
and COUNTRYWIDE FUND SERVICES, INC., 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;
<PAGE>
D. Certified copies of each resolution of the Board
of Trustees authorizing officers to give
instructions to the T/A;
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
<PAGE>
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.
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 Countrywide Investments, 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
<PAGE>
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
<PAGE>
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.
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.
<PAGE>
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.
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
<PAGE>
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.
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;
<PAGE>
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.
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
<PAGE>
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.
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.
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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.
36. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the
<PAGE>
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
<PAGE>
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/ Malcolm D. Clarke, Jr.
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
Its: President
<PAGE>
Schedule A
Compensation
As Transfer, Dividend Disbursing and
Shareholder Service Agent:
Brundage, Story and Rose Equity Fund: payable monthly at
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. 8 of our report dated December 30, 1996 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 28, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000868662
<NAME> BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
<SERIES>
<NUMBER> 1
<NAME> EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 19,971,386
<INVESTMENTS-AT-VALUE> 27,470,685
<RECEIVABLES> 160,971
<ASSETS-OTHER> 696
<OTHER-ITEMS-ASSETS> 1,109
<TOTAL-ASSETS> 27,633,461
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,339
<TOTAL-LIABILITIES> 93,339
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,729,308
<SHARES-COMMON-STOCK> 1,602,870
<SHARES-COMMON-PRIOR> 1,621,993
<ACCUMULATED-NII-CURRENT> 12,694
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,298,821
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,499,299
<NET-ASSETS> 27,540,122
<DIVIDEND-INCOME> 395,852
<INTEREST-INCOME> 38,490
<OTHER-INCOME> 0
<EXPENSES-NET> 328,497
<NET-INVESTMENT-INCOME> 105,845
<REALIZED-GAINS-CURRENT> 2,298,821
<APPREC-INCREASE-CURRENT> 2,561,218
<NET-CHANGE-FROM-OPS> 4,965,884
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 118,157
<DISTRIBUTIONS-OF-GAINS> 1,134,441
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 157,706
<NUMBER-OF-SHARES-REDEEMED> 262,040
<SHARES-REINVESTED> 85,211
<NET-CHANGE-IN-ASSETS> 3,349,570
<ACCUMULATED-NII-PRIOR> 25,006
<ACCUMULATED-GAINS-PRIOR> 1,134,441
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 164,902
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 328,497
<AVERAGE-NET-ASSETS> 25,372,984
<PER-SHARE-NAV-BEGIN> 14.91
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 2.97
<PER-SHARE-DIVIDEND> .07
<PER-SHARE-DISTRIBUTIONS> .69
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.18
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000868662
<NAME> BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
<SERIES>
<NUMBER> 2
<NAME> SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 32,675,453
<INVESTMENTS-AT-VALUE> 33,113,011
<RECEIVABLES> 338,670
<ASSETS-OTHER> 128
<OTHER-ITEMS-ASSETS> 1,276
<TOTAL-ASSETS> 33,453,085
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 76,534
<TOTAL-LIABILITIES> 76,534
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,288,209
<SHARES-COMMON-STOCK> 3,122,514
<SHARES-COMMON-PRIOR> 3,288,115
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (349,216)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 437,558
<NET-ASSETS> 33,376,551
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,138,069
<OTHER-INCOME> 0
<EXPENSES-NET> 212,298
<NET-INVESTMENT-INCOME> 1,925,771
<REALIZED-GAINS-CURRENT> 164,007
<APPREC-INCREASE-CURRENT> (248,560)
<NET-CHANGE-FROM-OPS> 1,841,218
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,925,771
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 430,192
<NUMBER-OF-SHARES-REDEEMED> 748,745
<SHARES-REINVESTED> 152,952
<NET-CHANGE-IN-ASSETS> (1,894,958)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (513,223)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 162,321
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 357,316
<AVERAGE-NET-ASSETS> 32,648,359
<PER-SHARE-NAV-BEGIN> 10.73
<PER-SHARE-NII> .62
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> .62
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.69
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
