BRUNDAGE, BRUNDAGE,
STORY AND ROSE STORY AND ROSE
INVESTMENT TRUST INVESTMENT TRUST
- -------------------------------------
312 Walnut Street, 21st Floor -----------------------
Cincinnati, Ohio 45202-4094 Annual Report
-----------------------
BOARD OF TRUSTEES November 30,1999
- ------------------------------------- -----------------------
Francis S. Branin, Jr.
Malcolm D. Clarke, Jr. Short/Intermediate Term
John M. Kingsley, Jr. -----------------------
Jerome B. Lieber Fixed-Income Fund
William M.R. Mapel -----------------------
James G. Pepper
Crosby R. Smith Equity Fund
-----------------------
INVESTMENT ADVISER
- ------------------------------------- [LOGO] BRUNDAGE,
Brundage, Story and Rose, LLC STORY AND ROSE
One Broadway Investment Counsel
New York, New York 10004 Since 1932
UNDERWRITER
- -------------------------------------
CW Fund Distributors, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
- -------------------------------------
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICES
- -------------------------------------
Nationwide: (Toll Free) 800-320-2212
1
<PAGE>
LETTER TO SHAREHOLDERS January 20, 2000
- --------------------------------------------------------------------------------
ECONOMIC AND FINANCIAL
MARKETS OUTLOOK
We ran out of superlatives a long time ago to describe the stock market's
performance of the last few years. Suffice to say it was another great year. In
fact, the strong rally in stocks in the last quarter of 1999 led to an
unprecedented fourth straight year of returns greater than 20% for the S&P 500.
Yet, even the S&P's return pales in comparison to the 86% return delivered by
the technology and Internet-heavy NASDAQ Composite Index. And, by the way, the
real-world U.S. economy was strong again and corporate profits achieved a
double-digit improvement for 1999. We believe that S&P profits could again
increase at double-digit rates in 2000. Essentially, strong domestic demand,
robust productivity growth and improving demand overseas should overwhelm the
dampening effect of higher interest rates and lack of pricing power.
Our forecast for 2000 is as repetitive as it is consoling: We expect our economy
to deliver another solid year, up roughly 3% over 1999, extending this economic
expansion to a record 9th year. Overseas, growth in the Asian economies--
excluding Japan-- and a resurgent Europe will probably be even better. In fact,
we expect global growth to be between 3% and 4% this year, with even lagging
Japan showing better, if modest, progress.
In this context, we would not be surprised to see the rate of U.S. inflation
accelerate by 0.5% to a pace greater than 2.5% for the full year-- cyclically
higher, but not threateningly so. Given strong global growth and modestly higher
inflation, we expect to see short-term interest rates pushed 0.50% higher by the
Federal Reserve Bank (FED) in the first half of 2000, with long-term interest
rates, as represented by 30 year Treasury bonds, rising to a trading range
between 6.25% and 7%.
Given our rather exuberant (not irrational, we hope) optimism for the economy
and profit growth, one might infer that our outlook for the market was equally
rosy. In fact, it is not-- at least not for the popular benchmarks. We do expect
2000 to be a good year for many stocks, but we also see a number of factors
weighing on returns.
To begin with, there is the question of valuations. The longer the market
appreciates faster than the underlying rate of profit improvement, the more
onerous the day of reckoning when it comes. We should add that many within the
professional investment community concede that day-to-day changes in stock
prices are now the result of decisions by "momentum players" and day traders,
not long-term investors. In other words, the market is in the hands of
speculators whose definition of long-term is hardly more than overnight.
More important than today's froth in stock prices is the second of our concerns:
the impact of potentially higher interest rates, given the evident intention of
the FED to keep raising them. Why does the FED wish to continue to tighten rates
in the face of only modest inflationary pressures? Putting aside the fact that
last year's 0.75% tightening merely reversed the easing of monetary policy
during the liquidity crisis of 1998, we believe that in focusing only on CPI
inflation, one misses the primary rationale underlying the FED's motivation for
tighter monetary policy.
In our opinion the FED, under Alan Greenspan, has come to understand the
salutary impact on our economy from the spread of information technology. It
dampens the traditional business
2
<PAGE>
cycle through enhancement of productivity. The sine waves of inventory shortages
and excesses that historically have been the cause of inflationary pressures and
subsequent recessions should be smaller in magnitude and more easily dealt with.
However, we believe the FED has also begun to take serious note of the potential
for inflation in asset prices to affect the economy in both positive and
negative ways. For instance, note the change in the U.S. personal savings rate
over the last 8 years: Savings have fallen from over 8% of personal income to a
negative number currently. The increase in the value of the assets of U.S.
households, primarily the value of real estate and equity investments, has
enabled U.S. consumers to spend virtually all of their income while still seeing
growth in their net worth. Ironically then, excessive consumer demand fueled by
appreciating equity prices and robust real estate values has become a factor
driving the FED to tighten monetary policy, thereby potentially threatening
those very price levels.
The issue for the economy going forward is how the U.S. will be able to fund
growing capital investment. The answer is not likely to be through higher
domestic savings, as any significant shift from spending (consumers make up 60%
of our economy) would itself induce recession. By implication then, either
government surpluses must continue growing or the current account deficit will
continue worsening. Given recent budget agreements and tax-cut initiatives, it
seems unreasonable to expect government surpluses to grow. In fact, they are
likely to shrink somewhat should any of the current tax-cut proposals be
implemented.
The weight of this shortfall in savings then would appear to fall mainly on the
shoulders of foreign investors, whose willingness to continue funding this gap
is questionable. With the rest of the world economy now improving, incremental
foreign capital is likely to stay at home. The expected result would be a
declining U.S. dollar relative to the currencies of its major trading partners,
which would in turn have negative implications for domestic interest rates and
inflation. The FED is aware of the risks in these imbalances and, we believe,
will use monetary policy to slow the U.S. economy enough to prevent the lack of
domestic savings, a dependency on foreign capital and a capital markets-driven
consumption binge from leading to a larger problem. We are optimistic on the
economy precisely because we don't believe the excesses in the equity market
will be allowed to go much further.
The technology segment of the S&P 500, now 30% of the index, was up a staggering
74.8% in the year vs. a 20.9% return on the index as a whole. Looked at another
way, the technology sector contributed 15 percentage points to the S&P 500's
return for the year, accounting for just over two-thirds of the market's gain.
Conversely, consumer staples, healthcare, transportation and utilities were all
down for 1999 while the financial services sector was barely positive with a
3.6% return. As a consequence, the capitalization weighted S&P 500 excluding
technology appreciated a paltry 5.3% last year, roughly matching the return on
U. S. Treasury bills.
Although the technology segment of the market is the fastest growing and most
dynamic part of the U.S. -- and the global -- economy, the gains of recent
years, and 1999 in particular, leave it, in our opinion, "priced for
perfection." Investors are now valuing a sector, whose fortunes have always been
difficult to forecast, at more than 50 times expected year 2000 profits.
Do some companies in this group deserve generous valuations? Of course. Are the
opportunities for growth and the size of the information technology markets
greater than most of us could have imagined only a few years ago? Definitely.
And does the growth and
3
<PAGE>
spread of technology and the Internet render some of the old rules and
methodologies for analyzing and valuing companies and their prospects obsolete?
Again, yes.
Yet the basic laws of the capital markets and of capitalism in general still
apply. Eventually, investors (i.e. owners of businesses) will want to see an
economic return (cash flow and profits) on the companies they own to justify
continued ownership. Furthermore, the easier it is for competitors to enter a
market, to raise money in the capital markets at attractive rates (through high
stock prices), the lower the returns are for all competitors. In some ways then,
the fantastic valuations awarded to companies that are often little more than
good ideas -- especially in the Internet space -- are sowing the seeds of their
own declines. As capital is essentially free for these companies, returns on
capital are likely to be driven toward zero.
In the future, we believe that an understanding of how the growth of technology
has fundamentally altered the landscape of our economy will be of paramount
importance.
SHORT/ INTERMEDIATE TERM
FIXED-INCOME FUND
Interest rates rose significantly across the yield curve during the fiscal year
ended November 30, 1999. After the dramatic drop in 1998, interest rates
reversed course and Treasuries gave back most of their 1998 gains. U.S. Treasury
bill yields rose by about 90 basis points (0.90%), five to ten year Treasuries
rose about 150 basis points and long Treasuries rose about 120 basis points.
Absolute returns for the bond market were the worst since 1994. The return for
the intermediate Treasury market year-over-year from November 1998 to November
1999 was 1.15%.
Other sectors of the bond market also suffered but substantially outperformed
U.S. Treasuries as liquidity returned to the market, particularly for U.S.
corporate bonds and Yankee bonds (dollar denominated foreign issues). Moving
down the quality spectrum produced even stronger performance. BBB-rated
corporate issues outperformed Treasuries by about 200 basis points (3.15%
absolute).
Mortgage-backed securities also exhibited strong relative performance as rising
rates often have a beneficial effect. They outperformed Treasuries by about 125
basis points (2.40% absolute). Your Fund's total return for the fiscal year was
0.80%. This was slightly below the market index against which we judge
performance, the Lehman Brothers Intermediate Government/Corporate index, which
returned 1.12%. On a positive note within a pretty dreary bond market, the fund
benefited from exposure to mortgage-backed issues and a heavy weighting in
corporate bonds.
Going forward we will continue to focus on individual issue selection as the
primary source of added return. In short maturities, we intend to overweight
Non-Treasury issues to provide incremental yield. The yield of the Fund at
fiscal year-end was 6.67% (gross) which compared favorably to money market rates
of approximately 5.00% and the 3-year Treasury yield of 6.00%. If interest rates
stabilize this year, Fund returns should be much improved over those of 1999.
BRUNDAGE, STORY AND ROSE EQUITY FUND
We are happy to report that the Equity Fund had a return of 25.43% for fiscal
year 1999 ended November 30th. This compares with a return of 20.89% for the
Standard & Poor's 500 Index. In a pattern remarkably similar to 1998, returns in
the equity markets again were driven by remarkably strong performance in an
4
<PAGE>
extremely narrow sector, in a few of the very largest companies in a general
sense and, more specifically, in the technology sector. Fortunately, our focus
on telecommunications and on wireless communications, in particular, enhanced
the portfolio's performance despite the fact that we were somewhat underweighted
in the sector. In other words, security selection was strongly positive and far
outweighed our asset allocation to the sector. The Fund also benefited from a
rebound in the capital goods and basic material industries where, again,
security selection had a strong positive impact.
The upward trend of interest rates during 1999 caused the financial sector to
sharply underperform the general market. However, our emphasis upon specialized
companies such as American International Group, American Express and Citigroup
helped the portfolio to generate above-market gains. On the other hand, the
heavy weighting in healthcare, specifically pharmaceutical companies, proved to
be a drag during the year, despite the excellent long-term record of growth
achieved by the portfolio's drug companies. We continue to feel that healthcare,
despite the long shadow of politics, should continue to be an area of technology
- -- let us call it "medical" as opposed to "information" technology -- which
provides great benefits to society and generous economic and market returns to
the owners of the individual businesses -- shareholders like ourselves.
As we look out into the year 2000 and beyond, we continue to be impressed by
what one might call the "two-tier" market. While share prices are at record high
valuations as measured by most traditional statistical benchmarks, high
valuations are concentrated, to reiterate, in a handful of very large companies,
particularly in the technology area. Thus there continues to be a great many
smaller but still substantial businesses with good management, excellent
products and very good growth prospects that are selling at reasonable prices.
Although we plan to maintain holdings in some of the very generously valued
big-cap stocks, we continue to seek investment opportunities among a broad range
of more attractively valued mid-size enterprises in the belief that today's
disparate valuations will not continue to widen in the future as they have in
the past.
SUMMARY
We believe that the economic environment should continue to be very favorable
for equity investment over the coming year. However, we suspect that popular
stock market indices may experience less dramatic gains than we have experienced
over recent years because valuations are already so lofty. At the same time,
average valuations are so much lower than capitalization-weighted measures, such
as the S&P 500 Index, that there should be no shortage of attractive investment
opportunities. On the other hand, bond markets which performed very poorly in
1999 seem poised to provide substantially better investment returns in the year
2000. In other words, it seems likely to us that both common stock and bond
indices will move back toward their historically normal, or average, investment
returns from last year's experience which was skewed dramatically in favor of
common stocks and against fixed income securities.
Sincerely yours,
/s/ Malcolm D. Clarke, Jr.
Malcolm D. Clarke, Jr.
President
5
<PAGE>
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
[GRAPHIC OMITTED]
- ---------------------------------------
Brundage, Story and Rose
Equity Fund
Average Annual Total Returns
1 Year 5 Years Since Inception*
25.43% 21.63% 15.63%
- ---------------------------------------
11/99
-----
Brundage, Story, and Rose Equity Fund $36,487
Standard & Poor's 500 Index $51,908
* The public offering of shares commenced on January 2, 1991.
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
[GRAPHIC OMITTED]
- -----------------------------------------
Brundage, Story and Rose
Short/Intermediate Term Fixed-Income Fund
Average Annual Total Returns
1 Year 5 Years Since Inception*
0.80% 7.05% 6.74%
- -----------------------------------------
11/99
-----
Brundage, Story and Rose Short/Intermediate
Term Fixed-Income Fund $17,881
Merrill Lynch 3-Year Treasury Index $17,736
* The public offering of shares commenced on January 2, 1991.
6
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1999
<TABLE>
<CAPTION>
=============================================================================================================
SHORT/
INTERMEDIATE
TERM
FIXED-INCOME EQUITY
FUND FUND
- -------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Investment securities:
At amortized cost (original cost $37,844,223 and $31,489,953, respectively) $ 37,856,175 $ 31,489,953
============ ============
At market value (Note 2) .................................................. $ 36,978,601 $ 49,863,258
Investments in repurchase agreements (Note 2) ................................ 1,201,000 1,933,000
Cash ......................................................................... 583 724
Interest and principal paydowns receivable ................................... 489,706 278
Dividends receivable ......................................................... -- 54,775
Receivable for securities sold ............................................... -- 274,441
Receivable for capital shares sold ........................................... 750 3,725
Other assets ................................................................. 6,408 9,278
------------ ------------
TOTAL ASSETS .............................................................. 38,677,048 52,139,479
------------ ------------
LIABILITIES
Dividends payable ............................................................ 19,341 --
Payable for capital shares redeemed .......................................... 59,455 180,099
Payable for securities purchased ............................................. -- 654,775
Payable to affiliates (Note 4) ............................................... 10,700 39,985
Other accrued expenses and liabilities ....................................... 20,411 25,588
------------ ------------
TOTAL LIABILITIES ......................................................... 109,907 900,447
------------ ------------
NET ASSETS ................................................................... $ 38,567,141 $ 51,239,032
============ ============
Net assets consist of:
Paid-in capital .............................................................. $ 39,595,175 $ 28,720,169
Undistributed net investment income .......................................... 3,535 --
Accumulated net realized gains (losses) from security transactions ........... (153,995) 4,145,558
Net unrealized appreciation (depreciation) on investments .................... (877,574) 18,373,305
------------ ------------
Net assets ................................................................... $ 38,567,141 $ 51,239,032
============ ============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) (Note 5) ........................................ 3,709,392 2,246,131
============ ============
Net asset value, offering price and redemption price per share (Note 2) ...... $ 10.40 $ 22.81
============ ============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
=================================================================================================
SHORT/
INTERMEDIATE
TERM
FIXED-INCOME EQUITY
FUND FUND
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest ........................................................ $ 2,362,989 $ 72,440
Dividends ....................................................... -- 471,634
----------- -----------
TOTAL INVESTMENT INCOME ...................................... 2,362,989 544,074
----------- -----------
EXPENSES
Investment advisory fees (Note 4) ............................... 194,381 304,766
Administrative services fees (Note 4) ........................... 77,780 93,696
Accounting services fees (Note 4) ............................... 36,000 32,900
Professional fees ............................................... 26,373 25,759
Transfer agent and shareholder service fees (Note 4) ............ 14,400 14,400
Registration fees ............................................... 12,545 12,264
Trustees' fees and expenses ..................................... 11,783 11,783
Insurance expense ............................................... 10,951 11,514
Postage and supplies ............................................ 8,619 8,490
Reports to shareholders ......................................... 5,084 6,758
Pricing expense ................................................. 7,182 1,225
Custodian fees .................................................. 3,098 3,216
Distribution expenses (Note 4) .................................. 845 1,096
Other expenses .................................................. 216 11,335
----------- -----------
TOTAL EXPENSES ............................................... 409,257 539,202
Fees waived by the Adviser (Note 4) ................................ (156,565) --
----------- -----------
NET EXPENSES ................................................. 252,692 539,202
----------- -----------
NET INVESTMENT INCOME .............................................. 2,110,297 4,872
----------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from security transactions .......... (148,056) 4,258,788
Net change in unrealized appreciation/depreciation on investments (1,685,649) 6,063,505
----------- -----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS .......... (1,833,705) 10,322,293
----------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ......................... $ 276,592 $10,327,165
=========== ===========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED NOVEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
=========================================================================================================================
SHORT/INTERMEDIATE TERM
FIXED-INCOME FUND EQUITY FUND
-------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income ................................ $ 2,110,297 $ 2,122,402 $ 4,872 $ 93,926
Net realized gains (losses) from security transactions (148,056) 619,402 4,258,788 2,509,249
Net change in unrealized appreciation/depreciation
on investments .................................... (1,685,649) 337,491 6,063,505 1,698,676
------------ ------------ ------------ ------------
Net increase in net assets from operations .............. 276,592 3,079,295 10,327,165 4,301,851
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ........................... (2,106,762) (2,122,402) (21,064) (91,102)
From net realized gains from security transactions ... (245,416) -- (2,622,479) (3,535,218)
------------ ------------ ------------ ------------
Decrease in net assets from distributions to
shareholders ......................................... (2,352,178) (2,122,402) (2,643,543) (3,626,320)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE
TRANSACTIONS (Note 5):
Proceeds from shares sold ............................ 4,395,836 4,423,714 3,793,019 3,608,905
Net asset value of shares issued in reinvestment of
distributions to shareholders ..................... 2,036,777 1,717,736 2,624,110 3,581,991
Payments for shares redeemed ......................... (5,025,647) (4,515,399) (3,548,244) (2,522,915)
------------ ------------ ------------ ------------
Net increase in net assets
from capital share transactions ...................... 1,406,966 1,626,051 2,868,885 4,667,981
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ................... (668,620) 2,582,944 10,552,507 5,343,512
NET ASSETS:
Beginning of year .................................... 39,235,761 36,652,817 40,686,525 35,343,013
------------ ------------ ------------ ------------
End of year .......................................... $ 38,567,141 $ 39,235,761 $ 51,239,032 $ 40,686,525
============ ============ ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ..................... $ 3,535 $ -- $ -- $ 16,192
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=============================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
=============================================================================================================
YEARS ENDED NOVEMBER 30,
------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year ............... $ 10.96 $ 10.69 $ 10.69 $ 10.73 $ 9.94
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income ........................... 0.58 0.60 0.62 0.62 0.64
Net realized and unrealized
gains (losses) on investments ................ (0.49) 0.27 -- (0.04) 0.79
--------- --------- --------- --------- ---------
Total from investment operations ................ 0.09 0.87 0.62 0.58 1.43
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income ............ (0.58) (0.60) (0.62) (0.62) (0.64)
Distributions from net realized gains ........... (0.07) -- -- -- --
--------- --------- --------- --------- ---------
Total distributions ................................ (0.65) (0.60) (0.62) (0.62) (0.64)
--------- --------- --------- --------- ---------
Net asset value at end of year ..................... $ 10.40 $ 10.96 $ 10.69 $ 10.69 $ 10.73
========= ========= ========= ========= =========
Total return ....................................... 0.80% 8.39% 6.03% 5.65% 14.84%
========= ========= ========= ========= =========
Net assets at end of year (000's) ................. $ 38,567 $ 39,236 $ 36,653 $ 33,377 $ 35,272
========= ========= ========= ========= =========
Ratio of net expenses to average net assets(A) ..... 0.65% 0.65% 0.65% 0.65% 0.60%
Ratio of net investment income to average net assets 5.43% 5.58% 5.88% 5.90% 6.21%
Portfolio turnover rate ............................ 53% 90% 46% 40% 39%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios
of expenses to average net assets would have been 1.05%, 1.04%, 1.07%,
1.09%, and 1.09% for the years ended November 30, 1999, 1998, 1997, 1996
and 1995 respectively (Note 4).
See accompanying notes to financial statements.
10
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
EQUITY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
=============================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
=============================================================================================================
YEARS ENDED NOVEMBER 30,
------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year ............... $ 19.47 $ 19.40 $ 17.18 $ 14.91 $ 12.43
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income ........................... 0.00 0.04 0.06 0.06 0.07
Net realized and unrealized gains on investments 4.61 2.01 3.65 2.97 3.02
--------- --------- --------- --------- ---------
Total from investment operations ................... 4.61 2.05 3.71 3.03 3.09
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income ............ (0.01) (0.04) (0.06) (0.07) (0.06)
Distributions from net realized gains ........... (1.26) (1.94) (1.43) (0.69) (0.55)
--------- --------- --------- --------- ---------
Total distributions ................................ (1.27) (1.98) (1.49) (0.76) (0.61)
--------- --------- --------- --------- ---------
Net asset value at end of year ..................... $ 22.81 $ 19.47 $ 19.40 $ 17.18 $ 14.91
========= ========= ========= ========= =========
Total return ....................................... 25.43% 11.96% 23.98% 21.27% 26.08%
========= ========= ========= ========= =========
Net assets at end of year (000's) ................. $ 51,239 $ 40,687 $ 35,343 $ 27,540 $ 24,191
========= ========= ========= ========= =========
Ratio of net expenses to average net assets ........ 1.15% 1.15% 1.19% 1.30% 1.45%
Ratio of net investment income to average net assets 0.01% 0.24% 0.34% 0.42% 0.52%
Portfolio turnover rate ............................ 37% 50% 49% 44% 42%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
============================================================================================
PAR MARKET
VALUE INVESTMENT SECURITIES -- 95.9% RATE MATURITY VALUE
- --------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 34.6%
<S> <C> <C> <C> <C>
$ 200,000 U.S. Treasury Notes .................... 6.625% 7/31/01 $ 201,938
300,000 U.S. Treasury Notes .................... 5.875 11/30/01 299,250
800,000 U.S. Treasury Notes .................... 6.625 3/31/02 810,000
1,200,000 U.S. Treasury Notes .................... 6.000 7/31/02 1,199,250
1,000,000 U.S. Treasury Notes .................... 5.750 8/15/03 988,125
550,000 U.S. Treasury Notes .................... 7.500 2/15/05 580,422
1,500,000 U.S. Treasury Notes .................... 6.500 5/15/05 1,519,220
1,000,000 U.S. Treasury Notes .................... 6.500 8/15/05 1,012,500
650,000 U.S. Treasury Notes .................... 5.875 11/15/05 639,437
3,400,000 U.S. Treasury Notes .................... 7.000 7/15/06 3,531,750
1,900,000 U.S. Treasury Notes .................... 6.125 8/15/07 1,880,407
700,000 U.S. Treasury Notes .................... 6.000 8/15/09 691,250
- ------------ -----------
$ 13,200,000 TOTAL U.S. TREASURY OBLIGATIONS
- ------------
(Amortized Cost $13,663,075) ........... $13,353,549
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.3%
$ 1,000,000 FHLMC .................................. 5.750 7/15/03 $ 975,650
1,500,000 FNMA ................................... 5.625 5/15/04 1,444,557
- ------------ -----------
$ 2,500,000 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
- ------------
(Amortized Cost $2,525,137) ............ $ 2,420,207
-----------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES -- 10.0%
$ 51,495 FHLMC GOLD #G-50274 .................... 7.500 6/01/00 $ 51,540
3,934 FHLMC GNOME #200068 .................... 8.000 3/01/02 3,995
12,402 FNMA DWARF #51935 ...................... 8.000 4/01/02 12,600
153,029 FNMA REMIC #93-52E ..................... 6.000 4/25/05 152,493
36,842 FHLMC GOLD #140094 ..................... 7.500 5/01/05 36,891
500,000 FHLMC REMIC #1404-D .................... 6.800 1/15/06 501,055
29,295 FNMA DWARF #50480 ...................... 8.000 9/01/06 29,988
400,449 FNMA REMIC #92-24H ..................... 7.500 11/25/06 404,210
351,547 GNMA #362109 ........................... 9.000 9/15/08 365,116
378,686 FHLMC REMIC #1523-PE ................... 6.000 10/15/15 377,982
60,485 FNMA REMIC #93-20PE .................... 5.900 5/25/16 60,177
299,108 FHLMC REMIC #1522-C .................... 6.000 8/15/16 298,423
567,974 FNMA REMIC #94-29PE .................... 6.000 5/25/18 565,293
6,322 GNMA #285639 ........................... 9.000 2/15/20 6,664
615,144 FHLMC REMIC #1699-C .................... 6.200 2/15/24 613,822
365,691 FNMA REMIC #250322 ..................... 7.500 8/01/25 365,026
- ------------ -----------
$ 3,832,403 TOTAL U.S. GOVERNMENT AGENCY
- ------------
MORTGAGE-BACKED SECURITIES (Amortized Cost $3,817,260) $ 3,845,275
-----------
</TABLE>
12
<PAGE>
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
============================================================================================
PAR MARKET
VALUE INVESTMENT SECURITIES -- 95.9% RATE MATURITY VALUE
- --------------------------------------------------------------------------------------------
OTHER MORTGAGE-BACKED SECURITIES -- 1.5%
<S> <C> <C> <C> <C>
$ 197,567 Advanta Home Equity Loan Trust #92-1A .. 7.875% 9/25/08 $ 197,863
366,987 CMC Securities Corp. III #94-B ......... 6.000 2/25/09 365,259
- ------------ -----------
$ 564,554 TOTAL OTHER MORTGAGE-BACKED SECURITIES
- ------------
(Amortized Cost $564,184) .............. $ 563,122
-----------
ASSET-BACKED SECURITIES -- 3.9%
$ 292,510 J.C. Penney Credit Card Trust #B-A ..... 8.950 10/15/01 $ 294,394
1,225,000 First Bank Corporate Card Trust #97-1-A 6.400 2/15/03 1,218,630
- ------------ -----------
$ 1,517,510 TOTAL ASSET-BACKED SECURITIES
- ------------
(Amortized Cost $1,523,506) ............ $ 1,513,024
-----------
CORPORATE BONDS -- 39.6%
$ 1,000,000 Lehman Brothers, Inc. .................. 6.125 2/01/01 $ 989,620
1,000,000 Ford Motor Credit Co. Medium Term Notes 5.900 2/23/01 992,525
1,000,000 General Motors Acceptance Corp. ........ 6.000 2/01/02 984,616
1,175,000 EOP Operating LP ....................... 6.376 2/15/02 1,150,004
1,000,000 Asian Development Bank ................. 5.750 5/19/03 975,998
1,000,000 Sears Roebuck Acceptance Corp.
Medium Term Notes ................... 6.760 6/25/03 981,776
1,000,000 Salomon Smith Barney Holdings, Inc. .... 6.625 11/15/03 986,819
1,000,000 Potomac Electric Power ................. 6.000 4/01/04 958,721
800,000 Penney (J.C.) Co. ...................... 7.375 6/15/04 773,179
1,300,000 Household Finance Corp. ................ 5.875 9/25/04 1,233,806
1,100,000 Finova Capital ......................... 7.250 11/8/04 1,096,047
1,000,000 Lockheed Martin ........................ 7.950 12/1/05 994,261
1,000,000 Chilgener S.A. ......................... 6.500 1/15/06 898,692
1,280,000 Lucent Technologies, Inc. .............. 5.500 11/15/08 1,152,486
500,000 Toyota Motor Credit .................... 5.500 12/15/08 442,480
725,000 Wachovia Corp. ......................... 6.150 3/15/09 672,394
- ------------ -----------
$ 15,880,000 TOTAL CORPORATE BONDS (Amortized Cost $15,763,013) $15,283,424
- ------------ -----------
$ 37,494,467 TOTAL INVESTMENT SECURITIES (Amortized Cost $37,856,175) $36,978,601
============ -----------
</TABLE>
13
<PAGE>
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(A) -- 3.1% VALUE
- --------------------------------------------------------------------------------
$ 1,201,000 Fifth Third Bank, 5.18%, dated 11/30/99,
============ due 12/01/99, repurchase proceeds $1,201,173 $ 1,201,000
------------
TOTAL INVESTMENT SECURITIES AND REPURCHASE
AGREEMENTS-- 99.0% ......................... $ 38,179,601
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.0% .. 387,540
------------
NET ASSETS-- 100.0% ........................... $ 38,567,141
============
(A) Repurchase agreements are fully collateralized by U.S. Government
obligations.
FHLMC - Federal Home Loan Mortgage Corporation.
FNMA - Federal National Mortgage Association.
GNMA - Government National Mortgage Association.
DWARF - A 15-year mortgage pool issued by FNMA.
GNOME - A 15-year mortgage pool issued by FHLMC.
REMIC - Real Estate Mortgage Investment Conduit.
GOLD - A 30-year mortgage pool issued by FHLMC with a shorter coupon payment
delay period.
See accompanying notes to financial statements.
14
<PAGE>
EQUITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1999
================================================================================
MARKET
COMMON STOCKS -- 97.3% SHARES VALUE
- --------------------------------------------------------------------------------
TECHNOLOGY -- 18.9%
Applied Materials, Inc.* .................... 6,000 $ 584,625
Compaq Computer Corp. ....................... 41,000 1,001,938
EMC Corp.* .................................. 12,500 1,044,531
Hewlett-Packard Co. ......................... 12,600 1,195,425
Intel Corp. ................................. 14,000 1,073,625
Microsoft Corp.* ............................ 5,000 455,234
Motorola, Inc. .............................. 7,000 799,750
Nortel Networks Corp. ....................... 24,000 1,776,000
QUALCOMM, Inc.* ............................. 2,000 724,625
Siebel Systems, Inc.* ....................... 136 9,537
Vodafone Airtouch Plc ....................... 22,000 1,038,125
------------
9,703,415
------------
FINANCIAL SERVICES -- 14.7%
American Express Co. ........................ 8,500 1,286,156
American International Group, Inc. .......... 14,108 1,456,651
Chubb Corp. ................................. 18,500 990,906
Citigroup, Inc. ............................. 24,000 1,293,000
Fannie Mae .................................. 23,200 1,545,700
Fleet Boston Corp. .......................... 25,688 971,328
------------
7,543,741
------------
CAPITAL GOODS -- 12.7%
AlliedSignal, Inc. .......................... 15,200 909,150
Avery Dennison Corp. ........................ 21,000 1,246,875
Danaher Corp. ............................... 14,000 687,750
Illinois Tool Works, Inc. ................... 6,400 414,400
Molex, Inc. - Class A ....................... 53,806 2,189,232
Thermo Electron Corp.* ...................... 69,750 1,046,250
------------
6,493,657
------------
HEALTH CARE -- 12.2%
Abbott Laboratories ......................... 35,700 1,356,600
American Home Products Corp. ................ 21,300 1,107,600
Becton, Dickinson & Co. ..................... 35,000 953,750
Lilly (Eli) & Co. ........................... 17,500 1,255,625
Schering-Plough Corp. ....................... 24,000 1,227,000
SmithKline Beecham Plc - ADR ................ 5,500 365,750
------------
6,266,325
------------
CONSUMER STAPLES -- 12.1%
Bestfoods ................................... 23,500 1,288,094
Gillette Co. ................................ 17,500 703,281
McDonald's Corp. ............................ 25,000 1,125,000
PepsiCo, Inc. ............................... 27,800 960,837
Sysco Corp. ................................. 33,500 1,275,094
The Walt Disney Co. ......................... 10,000 278,750
Young Broadcasting, Inc. - Class A* ......... 14,000 562,625
------------
6,193,681
------------
15
<PAGE>
EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
================================================================================
MARKET
COMMON STOCKS -- 97.3% (CONTINUED) SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 6.9%
AutoZone, Inc.* ............................. 16,700 $ 460,294
Catalina Marketing Corp.* ................... 8,000 762,500
H&R Block, Inc. ............................. 21,000 903,000
Nike, Inc. - Class B ........................ 22,500 1,035,000
Office Depot Inc. ........................... 32,500 361,562
------------
3,522,356
------------
ENERGY -- 6.6%
Apache Corp. ................................ 29,500 1,056,469
Conoco Inc. ................................. 25,968 680,037
Exxon Corp. ................................. 6,000 475,875
Mobil Corp. ................................. 10,000 1,043,125
Noble Affiliates, Inc. ...................... 5,500 121,000
------------
3,376,506
------------
BASIC MATERIALS -- 4.9%
Du Pont (E. I.) de Nemours and Co. .......... 6,587 391,515
Ecolab, Inc. ................................ 27,300 945,262
Monsanto Co. ................................ 16,500 696,094
Willamette Industries, Inc. ................. 11,300 467,538
------------
2,500,409
------------
COMMUNICATION SERVICES -- 3.9%
AT&T Corp. .................................. 25,500 1,424,812
Leap Wireless International, Inc.* .......... 1,750 89,469
MCI Worldcom, Inc. .......................... 6,000 496,125
------------
2,010,406
------------
TRANSPORTATION -- 3.3%
Landstar System, Inc.* ...................... 42,200 1,690,638
------------
UTILITIES -- 1.1%
Duke Energy Corp. ........................... 11,090 562,124
------------
TOTAL COMMON STOCKS (Cost $31,489,953) ...... $ 49,863,258
------------
================================================================================
FACE MARKET
REPURCHASE AGREEMENTS(A) -- 3.8% AMOUNT VALUE
- --------------------------------------------------------------------------------
Fifth Third Bank, 5.18%, dated 11/30/99, due
12/01/99, repurchase proceeds $1,933,278 $ 1,933,000 $ 1,933,000
============ ------------
TOTAL COMMON STOCKS AND REPURCHASE
AGREEMENTS-- 101.1% ...................... $ 51,796,258
LIABILITIES IN EXCESS OF OTHER ASSETS-- (1.1%) (557,226)
------------
NET ASSETS-- 100.0% ......................... $ 51,239,032
============
* Non-income producing security.
(A) Repurchase agreements are fully collateralized by U.S. Government
obligations.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
16
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
================================================================================
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 but with more volatility and with more principal stability than a
mutual fund investing in intermediate and long-term fixed-income securities but
at a lower level of income. 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.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' 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 (normally
4:00 p.m., Eastern time). Securities which are traded on stock exchanges or are
quoted by NASDAQ are valued at the last reported sale price or, if not traded on
a particular day, at the closing bid price. Securities traded in the
overthe-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price, if available, otherwise, at the last quoted bid price. 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 on the basis of prices
provided by an independent pricing service giving consideration to such factors
as maturity, coupon, issuer and type of security. Securities for which market
quotations are not readily available are valued at 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.
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 amortized in accordance with income tax regulations.
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 trade date.
Securities sold are accounted for on a specific identification basis.
17
<PAGE>
Securities traded on a to-be-announced basis-- The Bond Fund periodically 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.
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 income 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, 1999:
- --------------------------------------------------------------------------------
BOND EQUITY
FUND FUND
- --------------------------------------------------------------------------------
Gross unrealized appreciation ............ $ 81,893 $ 19,134,519
Gross unrealized depreciation ............ (959,467) (893,968)
------------ ------------
Net unrealized appreciation (depreciation) $ (877,574) $ 18,240,551
============ ============
Federal income tax cost .................. $ 37,856,175 $ 31,622,707
============ ============
- --------------------------------------------------------------------------------
The difference between the financial statement cost and the federal income tax
cost of portfolio investments is due to certain timing differences in the
recognition of capital losses under generally accepted accounting principles and
income tax regulations.
As of November 30, 1999, the Bond Fund had capital loss carryforwards for
federal income tax purposes of $153,995 which expire on November 30, 2007.
3. INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales and maturities of investment
securities, other than short-term investments, amounted to $21,279,350 and
$19,199,143, respectively, for the Bond Fund, and $18,599,279 and $16,460,357,
respectively, for the Equity Fund during the year ended November 30, 1999.
4. TRANSACTIONS WITH AFFILIATES
Certain Trustees and officers of the Trust are principals of the Adviser.
Certain officers of the Trust are officers of Countrywide Fund Services, Inc.
(CFS), the administrative services agent, shareholder servicing and transfer
agent, and accounting services agent for the Trust, or of CW Fund Distributors,
Inc., the exclusive underwriter of the Funds' shares.
As of November 30, 1999, the Adviser, principals of the Adviser and certain
employee benefit plans of the Adviser were, collectively, a significant
shareholder of record of each Fund.
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.
18
<PAGE>
In order to reduce the operating expenses of the Bond Fund, the Adviser
voluntarily waived $156,565 of its investment advisory fees during the year
ended November 30, 1999.
ADMINISTRATIVE SERVICES AGREEMENT
Under the terms of an Administrative Services Agreement with the Trust, CFS
supplies non-investment related statistical and research data, internal
regulatory compliance services and executive and administrative services for the
Funds. CFS 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, CFS receives a monthly fee from each Fund at an
annual rate of 0.20% on each Fund's respective average daily net assets up to
$50 million; 0.175% on such net assets between $50 and $100 million; and 0.15%
on such net assets in excess of $100 million, subject to a $1,000 minimum
monthly fee from each Fund.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement with the Trust, CFS 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, CFS receives a monthly fee at an annual
rate of $19.50 per shareholder account from the Bond Fund and $15.00 per
shareholder account from the Equity Fund, subject to a $1,200 minimum monthly
fee from each Fund. In addition, each Fund pays CFS 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, CFS
calculates the daily net asset value per share and maintains the financial books
and records of each Fund. For these services, CFS receives a monthly fee, based
on current asset levels, of $3,000 from the Bond Fund and $2,700 from the Equity
Fund. In addition, each Fund pays certain out-of-pocket expenses incurred by CFS
in obtaining valuations of such Fund's portfolio securities.
PLAN OF DISTRIBUTION
The Trust has adopted a plan of distribution (the Plan) under which each Fund
may directly incur or reimburse the Adviser for expenses related to the
distribution and promotion of Fund 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 periods shown:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
BOND FUND EQUITY FUND
------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................ 412,442 409,114 183,550 195,597
Shares issued in reinvestment
of distributions to shareholders .... 191,704 158,469 145,475 208,604
Shares redeemed ........................ (473,265) (417,652) (173,018) (135,661)
--------- --------- --------- ---------
Net increase in shares outstanding ..... 130,881 149,931 156,007 268,540
Shares outstanding, beginning of year .. 3,578,511 3,428,580 2,090,124 1,821,584
--------- --------- --------- ---------
Shares outstanding, end of year ........ 3,709,392 3,578,511 2,246,131 2,090,124
========= ========= ========= =========
- ------------------------------------------------------------------------------------------------
</TABLE>
6. FEDERAL TAX INFORMATION FOR SHAREHOLDERS (UNAUDITED)
On December 10, 1998, the Equity Fund declared and paid a long-term capital gain
distribution of $1.2524 per share and the Bond Fund declared and paid a
long-term capital gain distribution of $0.0684 per share. In January of 1999,
shareholders were provided with Form 1099-DIV which reported the amounts and tax
status of such capital gain distributions paid during calendar year 1998.
19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
================================================================================
ARTHUR ANDERSEN LLP [LOGO]
To the Shareholders and Board of Trustees
of the Brundage, Story and Rose Investment Trust:
We have audited the accompanying statements of assets and liabilities of the
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 (an Ohio business trust), including the portfolios of investments, as of
November 30, 1999, the related statements of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended and the financial highlights for 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, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
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, 1999, the results of their operations for the year then
ended, and the changes in their net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended in conformity, with generally accepted accounting principles.
/S/ Arthur Andersen LLP
Cincinnati, Ohio,
December 28, 1999
20
