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. 11
--------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 11
--------
(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:
David M. Leahy, Esq.
Sullivan & Worcester
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on April 1, 2000 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / 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, 1999 was filed with the
Commission on February 28, 2000.
<PAGE>
BRUNDAGE,
STORY AND ROSE
INVESTMENT TRUST
PROSPECTUS
APRIL 1, 2000
EQUITY FUND
SHORT/INTERMEDIATE TERM
FIXED-INCOME FUND
BRUNDAGE,
STORY & ROSE
Investment Counsel Since 1932
<PAGE>
PROSPECTUS
April 1, 2000
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 stock 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 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 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 has information you should know before you invest. Please
read it carefully and keep it with your investment records. Although these
securities have been registered with the Securities and Exchange Commission, the
Commission has not approved or disapproved them for investment merit and has not
passed on the accuracy or adequacy of the information in this Prospectus. Anyone
who informs you otherwise is committing a criminal offense.
- --------------------------------------------------------------------------------
FOR INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
Nationwide (Toll-Free)............................................. 800-320-2212
Cincinnati ........................................................ 513-629-2070
- --------------------------------------------------------------------------------
-2-
<PAGE>
TABLE OF CONTENTS
Risk/Return Summary...................................................... 4
Expense Information...................................................... 6
Investment Objectives, Investment Strategies and
Risk Considerations.................................................... 7
How to Purchase Shares................................................... 14
How to Redeem Shares..................................................... 16
Shareholder Services..................................................... 19
Exchange Privilege....................................................... 20
Dividends and Distributions.............................................. 20
Taxes.................................................................... 21
Operation of the Funds................................................... 22
Distribution Plan........................................................ 22
Calculation of Share Price............................................... 23
Financial Highlights..................................................... 24
<PAGE>
RISK/RETURN SUMMARY
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
The Equity Fund seeks to provide protection and enhancement of capital,
current income and growth of income.
The Short/Intermediate Term Fixed-Income Fund (the "Fixed-Income 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 Fund invests primarily in short and intermediate-term
fixed-income securities.
WHAT ARE THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES?
The Equity Fund invests primarily in a diversified portfolio of common
stocks and securities convertible into common stock. The Fund invests both in
securities currently paying dividends and in securities that are not paying
dividends but offer prospects for growth of capital or future income.
The Fixed-Income Fund invests in a diversified portfolio of short and
intermediate-term fixed-income securities, consisting primarily of U.S.
Government obligations, 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. Under normal market conditions, at least 90% of the Fund's total
assets are invested in fixed-income securities with remaining maturities or, in
the case of mortgage-backed and asset-backed securities, remaining average lives
of between 1 and 10 years, and at no time will the Fund be less than 65%
invested in such securities. The Fund invests in securities which are rated
within the 4 highest grades assigned by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Group ("S&P"), or unrated securities
determined by the Adviser to be of comparable quality.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
The return on and value of an investment in the Equity Fund will fluctuate
in response to stock market movements. Stocks and other equity securities are
subject to market risks (rapid increase or decrease in value or liquidity of the
security) and fluctuations in value due to earnings, economic conditions and
other factors beyond the control of the Adviser. As a result, there is a risk
that you could lose money by investing in the Equity Fund.
The return on and value of an investment in the Fixed-Income Fund will
fluctuate with changes in interest rates. Typically a rise in interest rates
causes a decline in the market value of
-4-
<PAGE>
fixed-income securities. To the extent that the Fund invests in mortgage-backed
and asset-backed securities, it will also be subject to extension (underlying
loans are not paid as soon as anticipated) and prepayment risks (underlying
loans are paid sooner than anticipated). Other factors may affect the market
price and yield of the Fund's securities, including investor demand, changes in
the financial condition of issuers of securities, and domestic and worldwide
economic conditions. There is a risk that you could lose money by investing in
the Fixed-Income Fund.
An investment in the Funds is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
PERFORMANCE SUMMARY
The bar charts and performance tables shown below provide an indication of
the risks of investing in the Funds by showing the changes in the performance of
the Funds from year to year since the Funds' inception and by showing how the
average annual returns of the Funds compare to those of a broad-based securities
market index. How the Funds have performed in the past is not necessarily an
indication of how the Funds will perform in the future.
EQUITY FUND
22.73% 2.50% 10.26% -0.54% 27.22% 19.28% 27.27% 13.27% 27.97%
[bar chart]
1991 1992 1993 1994 1995 1996 1997 1998 1999
During the period shown in the bar chart, the highest return for a quarter was
17.73% during the quarter ended June 30, 1997 and the lowest return for a
quarter was -12.46% during the quarter ended September 30, 1998.
FIXED-INCOME FUND
13.22% 6.47% 8.37% -2.27% 15.53% 4.09% 7.63% 7.72% 0.07%
[bar chart]
1991 1992 1993 1994 1995 1996 1997 1998 1999
During the period shown in the bar chart, the highest return for a quarter was
5.01% during the quarter ended June 30, 1995 and the lowest return for a quarter
was -1.64% during the quarter ended March 31, 1994
-5-
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1999
Since Inception
One Year Five Years (January 2, 1991)
-------- ---------- -----------------
Equity Fund 27.97% 22.86% 16.19%
Standard & Poor's 500 Index* 20.89% 28.24% 20.60%
Fixed-Income Fund 0.07% 6.89% 6.62%
Merrill Lynch 3-Year
Treasury Index** 1.43% 6.82% 6.56%
* The Standard & Poor's 500 Index is a widely recognized, unmanaged index of
common stock prices.
** The Merrill Lynch 3-Year Treasury Index measures the total return of
auctioned U.S. Treasury notes with 3 years to maturity.
EXPENSE INFORMATION
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU BUY AND HOLD
SHARES OF THE FUNDS.
SHAREHOLDER FEES (fees paid directly from your investment)
Sales Load Imposed on Purchases........................................ None
Sales Load Imposed on Reinvested Dividends............................. None
Exchange Fee .......................................................... None
Redemption Fee ........................................................ None
Check Redemption Processing Fee (per check)............................$0.50
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Equity Fixed-
Fund Income Fund
Management Fees ................................... .65% .50%(A)
Distribution (12b-1) Fees(B) ...................... .00% .00%
Other Expenses .................................... .50% .55%
----- -----
Total Annual Fund Operating Expenses............... 1.15% 1.05%(C)
===== =====
(A) After waivers of management fees, such fees were .10% for the fiscal year
ended November 30, 1999.
(B) Each Fund may incur distribution (12b-1) fees in an amount up to .25% of
its average net assets.
(C) After waivers of management fees, total Fund operating expenses were .65%
for the fiscal year ended November 30, 1999.
-6-
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds. It assumes that you
invest $10,000 in a Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year, that all dividends and distributions were
reinvested, and that a Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
Equity Fund Fixed-Income Fund
----------- -----------------
1 Year $ 117 $ 107
3 Years 365 334
5 Years 633 579
10 Years 1,398 1,283
INVESTMENT OBJECTIVES, INVESTMENT STRATEGIES AND RISK CONSIDERATIONS
Brundage, Story and Rose Investment Trust (the "Trust") has two Funds. Each
Fund has its own portfolio and investment objective. Each Fund's investment
objective may be changed by the Board of Trustees without shareholder approval,
as long as notice has been given to shareholders. Unless otherwise indicated,
all investment practices and limitations of the Funds are non-fundamental
policies which may be changed by the Board of Trustees without shareholder
approval.
BRUNDAGE, STORY AND ROSE EQUITY FUND
- ------------------------------------
INVESTMENT TECHNIQUES AND STRATEGIES
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 are
determined and reviewed. From within such industries, the Adviser selects as
candidates for investment 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.
The Fund invests in securities currently paying dividends and in 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
-7-
<PAGE>
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 4
highest grades assigned by Moody's (Aaa, Aa, A or Baa) or S&P (AAA, AA, A or
BBB) or unrated securities determined by the Adviser to be of comparable
quality.
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 Depositary
Receipts. American Depositary Receipts are receipts typically issued by a U.S.
bank or trust company that evidence ownership of underlying securities issued by
a foreign corporation. 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 it appropriate, 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 1
year or repurchase agreements. The Fund may not achieve its investment objective
during periods when the Fund has taken such a temporary defensive position.
INVESTMENT RISKS
The Fund is designed for investors who are investing for the long term and
it is not intended for investors seeking assured income or preservation of
capital. Changes in market prices can occur at any time. Accordingly, there is
no assurance that the Fund will achieve its investment objective. When you
redeem your shares, they may be worth more or less than what you paid for them.
Because the Fund normally invests most, or a substantial portion, of its
assets in stocks, the value of the Fund's portfolio will be affected by changes
in the stock markets. Stock markets and stock prices can be volatile. Market
action will affect the Fund's net asset value per share, which fluctuates as the
values of the Fund's portfolio securities change. Not all stock prices change
uniformly or at the same time and not all stock markets move in the same
direction at the same time. Various factors can affect a stock's price (for
example, poor earnings reports by an issuer, loss of major customers, major
litigation against an issuer, or changes in general economic conditions or in
government regulations affecting an industry). Not all of these factors can be
predicted.
The Fund may invest in companies with lower market capitalizations,
which present higher near-term risks than larger capitalization companies. Small
capitalization stocks are more
-8-
<PAGE>
likely to experience higher price volatility and may have limited liquidity
(which means that the Fund might have difficulty selling them at an acceptable
price when it wants to).
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.
Foreign investments may be subject to special risks, including future
political and economic developments and the possibility of seizure or
nationalization of companies, imposition of withholding taxes on income,
establishment of exchange controls or adoption of other restrictions, that might
affect an investment adversely. When investments in foreign securities are made
in foreign currencies, 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.
BRUNDAGE, STORY AND ROSE SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
- ------------------------------------------------------------------
INVESTMENT TECHNIQUES AND STRATEGIES
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.
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 1 and 10 years, and at no time will the Fund be less than 65% invested
in such securities. Under normal market conditions, the Fund will maintain a
dollar-weighted average maturity of between 2 and 5 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.
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, that is, the Fund's yield will not change as
rapidly as a money market fund during periods of fluctuating interest rates.
During periods of
-9-
<PAGE>
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 securities sooner than the Fund.
The Fund may invest in securities which are rated at the time of purchase
within the 4 highest grades assigned by Moody's (Aaa, Aa, A or Baa) or S&P (AAA,
AA, A or BBB), or unrated securities determined by the Adviser to be of
comparable quality. At least 65% of the Fund's assets will be invested in a
combination of U.S. Government obligations and securities rated at the time of
purchase in one of the two highest categories of Moody's (Aaa or Aa) or S&P (AAA
or AA), or unrated securities determined by the Adviser to be of comparable
quality.
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, but are
not limited to, the Federal Home Loan Banks, the Federal Land Bank, the
Government National Mortgage Association and the Federal National Mortgage
Association. 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. These 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
-10-
<PAGE>
Fund will be either (1) issued by United States Government sponsored
corporations or (2) rated at least Aa by Moody's or AA by S&P 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
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
-11-
<PAGE>
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 40 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 40-year mortgages may have an average life
of as short as 2 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. 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
(1) 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, (2) in the case of U.S.
banks, it is a member of the Federal Deposit Insurance Corporation, and (3) in
the case of foreign banks, the security is, in the opinion of the Adviser, of an
investment quality comparable with other debt securities which may be purchased
by the Fund. These limitations do not prohibit investments in securities issued
by foreign branches of U.S. banks, provided such U.S. banks meet the foregoing
requirements.
Foreign Securities. The Fund may invest in U.S. dollar-denominated
fixed-income securities issued by foreign issuers, foreign branches of U.S.
banks and U.S. branches of foreign banks. Investment in securities of foreign
issuers and in foreign branches of domestic banks involves somewhat different
investment risks from those affecting securities of domestic issuers.
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.
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
or liquid securities in an amount at least equal to these commitments.
-12-
<PAGE>
Interest Rate Futures Contracts. The Fund may enter into futures contracts
as a hedge against or to minimize adverse principal fluctuations, or as an
efficient means of adjusting its exposure to the market, but not for
speculation. An interest rate futures contract between two parties locks in the
price of a specified package of securities (primarily U.S. Treasury Bills, U.S.
Treasury Notes or U.S. Treasury Bonds) to be delivered at a future date. Selling
an interest rate futures contract has a similar effect to selling a portion of
the Fund's securities. While the value of the Fund's securities would decline if
interest rates were to rise, the value of the futures contract would increase,
offsetting the decline in the Fund's net asset value to that extent. Conversely,
an increase in the value of the Fund's securities resulting from a decline in
interest rates would be offset by a decline in value of the futures contract.
The Fund will limit its use of futures contracts so that (1) no more than 5% of
the Fund's total assets will be committed to initial margin deposits and (2)
immediately after entering into such contracts, no more than 30% of the Fund's
total assets would be represented by such contracts.
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.
INVESTMENT RISKS
Because the Fund invests primarily in debt securities, its major risks are
those of bond investing, including the tendency of prices to fall when interest
rates rise. Such a fall would lower the Fund's share price and the value of your
investment. There is no assurance, therefore, that the Fund will achieve its
investment objective.
In general, the price of a bond will move in the opposite direction from
interest rates, for the reason that new bonds issued after a rise in rates will
offer higher yields to investors; the only way an existing bond with a lower
yield can appear attractive to investors is by selling at a lower price. This
principle works in reverse as well, that is, a fall in interest rates will tend
to cause a bond's price to rise.
Mortgage-backed securities can offer attractive yields, but carry
additional risks. The prices and yields of mortgage-backed securities typically
assume that the securities will be redeemed at a given time before maturity.
When interest rates fall substantially, these securities are usually redeemed
early because the underlying mortgages are often prepaid. The Fund would then
have to reinvest the money at a lower rate. In addition, the price or yield of
mortgage-backed securities may fall if they are redeemed after that date.
-13-
<PAGE>
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 15% of its net
assets in securities rated Baa or BBB.
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.
Interest rate futures 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 or liquid 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. Futures transactions will only be used for bona fide hedging
purposes.
Although options will primarily be used to minimize principal fluctuations
or to generate additional income, they do involve certain risks. Writing covered
call options involves the risk of not being able to effect closing transactions
at a favorable price or participate in the appreciation of the underlying
securities above the exercise price. Purchasing put options involves the risk of
losing the entire purchase price of the option. The Fund will only write a call
option or purchase a put option on a security which the Fund already owns.
The success of the Fund's investment strategy depends largely on the
portfolio manager's skill in assessing the direction and impact of interest rate
movements and the creditworthiness of the Fund's non-U.S. Government
obligations.
HOW TO PURCHASE SHARES
Your initial investment in either Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). The Trust may, in the Adviser's sole
discretion, accept certain accounts with less than the stated minimum initial
investment. Shares of each Fund are sold on a
-14-
<PAGE>
continuous basis at the net asset value ("NAV") next determined after receipt of
a purchase order by the Trust. Direct purchase orders received by the Trust's
Transfer Agent by the close of the regular session of trading on the New York
Stock Exchange on any business day, generally 4:00 p.m., Eastern time, are
confirmed at that day's NAV. Purchase orders received by dealers prior to the
close of the regular session of trading on the New York Stock Exchange on any
business day, generally 4:00 p.m., Eastern time, and transmitted to the Transfer
Agent by 5:00 p.m., Eastern time, that day are confirmed at that day's NAV. 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 investments received by
the Transfer Agent after the close of the regular session of trading on the New
York Stock Exchange, and orders received from dealers after 5:00 p.m., Eastern
time, are confirmed at the NAV next determined on the following business day.
INITIAL INVESTMENTS BY MAIL. You may open an account and make an initial
investment in either Fund by sending a check and a completed account application
form to Brundage, Story and Rose Investment Trust, 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 issued. The Trust and the
Adviser reserve the rights to limit the amount of investments and to refuse to
sell to any person.
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.
If an order to purchase shares is 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.
INITIAL INVESTMENTS BY WIRE. You may also purchase shares of the Funds by
bank 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 provide, by mail or facsimile, a completed, signed account
application.
Your investment will be made at the NAV 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. Your bank may
impose a charge for sending your wire. There is presently
-15-
<PAGE>
no fee for receipt of wired funds, but the Transfer Agent reserves the right to
charge shareholders for this service upon 30 days' prior notice.
ADDITIONAL INVESTMENTS. You may purchase and add shares to your account by
mail or by bank wire. Checks should be sent to Brundage, Story and Rose
Investment Trust, 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 account name and number to permit proper
crediting. While there is no minimum amount required for subsequent investments,
the Trust reserves the right to impose such requirement.
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 NAV per share next determined after receipt by
the Transfer Agent of your redemption request in the form described below.
Payment is normally made within 3 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 15 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 having a value of less than $25,000 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 3 business days after receipt of your telephone
instructions. IRA accounts are not redeemable by telephone.
Unless you have specifically notified the Transfer Agent not to honor
redemption requests by telephone, the telephone redemption privilege is
automatically available to your account. 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, 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.
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account has been changed within the previous 30 days.
-16-
<PAGE>
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
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. If
the name(s) or the address on your account has been changed within 30 days of
your redemption request, you must request the redemption in writing with your
signature guaranteed, regardless of the value of the shares being redeemed.
Written redemption requests may also direct that the proceeds be deposited
directly in a domestic bank or brokerage account designated on your account
application for telephone redemptions. Proceeds of redemptions requested by mail
are normally mailed within 3 business days following receipt of instructions in
proper form.
BY CHECK (FIXED-INCOME FUND ONLY). You may establish a special checking
account with the 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 NAV 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. You should consider potential
fluctuations in the NAV of the Fund's shares when writing checks. A check
representing a redemption request will take precedence over any other redemption
instructions issued by you.
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 will charge you 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
-17-
<PAGE>
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
You should be aware that writing a check will be treated as a sale of Fund
shares and any gain on the transaction may be subject to federal income tax.
THROUGH BROKER-DEALERS. You may also redeem shares of either Fund by
placing a wire redemption request through a securities broker or dealer. You
will receive the NAV 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. If the shares to be
redeemed have a value of $25,000 or more, or if the name(s) or the address on
your account has been changed within 30 days of your redemption request, you
must request the redemption in writing with your signature guaranteed.
ADDITIONAL REDEMPTION INFORMATION. If your instructions request a
redemption by wire, the proceeds will be wired directly to your existing account
in any commercial bank or brokerage firm in the United States as designated on
your application and you will be charged an $8 processing fee by the Funds'
Custodian. The Trust reserves the right, upon 30 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 by way of an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
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
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 30 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 3 business days under unusual
circumstances as determined by the Securities and Exchange Commission. Under
unusual circumstances, when the Board of
-18-
<PAGE>
Trustees deems it appropriate, the Funds may make payment for shares redeemed in
portfolio securities of the Funds taken at current value.
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, including Roth IRAs and Education IRAs
-- Qualified pension and profit-sharing plans for employees, including
those profit-sharing plans with a 401(k) provision
-- 403(b)(7) custodial accounts for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code
Direct Deposit Plans
--------------------
Shares of either Fund may be purchased through direct deposit plans offered
by certain employers and government agencies. These plans enable you to have all
or a portion of your 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 30 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.
-19-
<PAGE>
EXCHANGE PRIVILEGE
Shares of the Funds may be exchanged for each other at NAV. Shares of
either Fund may also be exchanged for the following money market funds:
Short Term Government Income Fund (a series of Touchstone 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 Touchstone 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 NAV.
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 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 NAV 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 you. 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 Fixed-Income Fund is declared as a dividend to shareholders of
record on each business day of the Trust and paid monthly.
Each Fund expects to distribute any net realized long-term capital gains at
least once each year. Management will determine the timing and frequency of the
distributions of any net realized short-term capital gains.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains distributions
reinvested in additional shares.
-20-
<PAGE>
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 NAV 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 6 months, your dividends may be reinvested in your account at the
then-current NAV and your account will be converted to the Share Option. No
interest will accrue on amounts represented by uncashed distribution checks.
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
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 capital gains (the excess of net long-term capital
gains over net short-term capital losses) by a Fund to its shareholders are
taxable to the recipient shareholders as capital gains, without regard to the
length of time a shareholder has held Fund shares. Capital gains distributions
may be taxable at different rates depending on the length of time a Fund holds
its assets. Due to the nature of the investment strategies used, the
distributions of the Equity Fund are expected to consist primarily of net
capital gains and the distributions of the Fixed-Income Fund are expected to
consist primarily of net investment income. Please note, however, that the
nature of each Fund's distributions could vary in any given year.
Redemptions of shares of the Funds are taxable events on which you may
realize a gain or loss. An exchange of a Fund's shares for shares of another
fund will be treated as a sale of such shares and any gain on the transaction
may be subject to federal income tax.
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. The Funds' distributions may be subject to federal income tax whether
received in cash or reinvested in additional shares. In addition to federal
taxes, shareholders of the Funds may be subject to state and local taxes on
distributions.
-21-
<PAGE>
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. 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 10004 (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 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.
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 Fixed-Income Fund. Mr. Benner has
been employed by the Adviser since 1990 and has been managing the Fixed-Income
Fund's portfolio since January 1991.
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 expenses related to the sale and
distribution of their shares, including:
o 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;
o 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;
o expenses of formulating and implementing marketing and promotional
activities, including direct mail promotions and mass media advertising;
o 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;
o 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
o 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. Because these fees are paid out of the
Funds' assets on an on-going basis, over time these fees will increase the cost
of your investment and may cost you more
-22-
<PAGE>
than paying other types of sales charges. 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.
CALCULATION OF SHARE PRICE
On each day that the Trust is open for business, the share price (NAV) of
the shares of each Fund is determined as of the close of the regular session of
trading on the New York Stock Exchange (normally 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 NAV might be materially affected. The NAV 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. The price at which a purchase or redemption of Fund shares
is effected is based on the next calculation of NAV after the order is placed.
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:
(1) securities which are traded on stock exchanges or are quoted by NASDAQ are
valued at the last reported sale price as of the close of the regular
session of trading on the New York Stock Exchange on the day the securities
are being valued, or, if not traded on a particular day, at the closing bid
price;
(2) 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;
(3) 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
(4) 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 NAV per share of each Fund will fluctuate with the value of the
securities it holds.
-23-
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Funds' financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Funds (assuming reinvestment of all dividends and distributions). This
information has been audited by Arthur Andersen LLP, whose report, along with
the Funds' financial statements, are included in the Statement of Additional
Information, which is available upon request.
EQUITY FUND
-----------
<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>
-24-
<PAGE>
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
-----------------------------------------
<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.
-25-
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
Nationwide: (Toll-Free) 800-543-8721
Cincinnati: 513-629-2000
BOARD OF TRUSTEES
Malcolm D. Clarke, Jr.
Francis S. Branin, Jr.
John M. Kingsley, Jr.
Jerome B. Lieber
William M.R. Mapel
James G. Pepper
Crosby R. Smith
INVESTMENT ADVISER
BRUNDAGE, STORY AND ROSE LLC
One Broadway
New York, New York 10004
SHAREHOLDER SERVICE
Nationwide: (Toll-Free) 800-320-2212
Cincinnati: 513-629-2070
Rate Line
- ---------
Nationwide: (Toll-Free) 800-852-4052
Additional information about the Funds is included in the Statement of
Additional Information ("SAI") and which is incorporated by reference in its
entirety. Additional information about the Funds' investments is available in
the Funds' annual and semiannual reports to shareholders. In the Funds' annual
report, you will find a discussion of the market conditions and strategies that
significantly affected the Funds' performance during their last fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Funds, or to make inquiries about the Funds, please call
1-800-320-2212 (Nationwide) or 629-2070 (in Cincinnati).
Information about the Funds (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. Information about the operation of the public reference room can be
obtained by calling the Commission at 1-202-942-8090. Reports and other
information about the Funds are available on the EDGAR Database on the
Commission's Internet site at http://www.sec.gov. Copies of information on the
Commission's Internet site may be obtained, upon payment of a duplicating fee,
by electronic request at the following e-mail address: [email protected], or by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-0102.
File No. 811-6185
-26-
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
-----------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
April 1, 2000
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, 2000. 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.......................18
INVESTMENT LIMITATIONS........................................................20
TRUSTEES AND OFFICERS.........................................................23
THE INVESTMENT ADVISER........................................................24
DISTRIBUTION PLAN.............................................................25
THE UNDERWRITER...............................................................26
SECURITIES TRANSACTIONS.......................................................27
PORTFOLIO TURNOVER............................................................28
CALCULATION OF SHARE PRICE....................................................29
TAXES.........................................................................29
REDEMPTION IN KIND............................................................30
HISTORICAL PERFORMANCE INFORMATION............................................30
PRINCIPAL SECURITY HOLDERS....................................................33
CUSTODIAN.....................................................................33
AUDITORS......................................................................33
COUNTRYWIDE FUND SERVICES, INC................................................33
ANNUAL REPORT.................................................................34
-2-
<PAGE>
THE TRUST
- ---------
Brundage, Story and Rose Investment Trust (the "Trust"), an open-end
management investment company, 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 is a diversified series and has its own investment objective
and policies.
Shares of each Fund have equal voting rights and liquidation rights, and
are voted in the aggregate and not by Fund except in matters where a separate
vote is required by the Investment Company Act of 1940 or when the matter
affects only the interest of a particular Fund. When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each full
share owned and fractional votes for fractional shares owned. The Trust does not
normally hold annual meetings of shareholders. The Trustees shall promptly call
and give notice of a meeting of shareholders for the purpose of voting upon
removal of any Trustee when requested to do so in writing by shareholders
holding 10% or more of the Trust's outstanding shares. The Trust will comply
with the provisions of Section 16(c) of the Investment Company Act of 1940 in
order to facilitate communications among shareholders.
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)
-3-
<PAGE>
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).
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 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
-4-
<PAGE>
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 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
-5-
<PAGE>
three pay interest at their stated rates beginning with the issue date, the
final one is typically an accrual class (or Z bond). The cash flows from the
underlying mortgage collateral are applied first to pay interest and then to
retire securities. The classes of securities are retired sequentially. All
principal payments are directed first to the shortest-maturity class (or A
bonds). When those securities are completely retired, all principal payments are
then directed to the next-shortest-maturity security (or B bond). This process
continues until all of the classes have been paid off. Because the cash flow is
distributed sequentially instead of pro rata as with pass-through securities,
the cash flows and average lives of CMOs are more predictable, and there is a
period of time during which the investors in the longer-maturity classes receive
no principal paydowns.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage banks, and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. In addition, such
issuers may be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-backed securities. Pools created by
non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because of the absence of direct or
indirect government or agency guarantees. Timely payment of interest and
principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance, and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers, and the mortgage poolers. Such insurance,
guarantees, and the creditworthiness of the issuers thereof will be considered
in determining whether a mortgage-backed security meets the Fund's investment
quality standards. There can be no assurance that the private insurers or
guarantors can meet their obligations under the insurance policies or guarantee
arrangements. The Fund may buy mortgage-backed securities without insurance or
guarantees, if the Adviser determines that the securities meet the Fund's
quality standards. The Fund will not purchase mortgage-backed securities or any
other assets which, in the opinion of the Adviser, are illiquid if, as a result,
more than 10% of the value of the Fund's net assets will be illiquid. The
Adviser will, consistent with the Fund's investment objectives, policies, and
quality standards, consider making investments in new types of mortgage-backed
securities as such securities are developed and offered to investors.
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
-6-
<PAGE>
down more rapidly than are automobile contracts. Most of the Credit Card
Receivable Securities issued publicly to date have been pass-through
certificates. In order to lengthen the maturity of Credit Card Receivable
Securities, most such securities provide for a fixed period during which only
interest payments on the underlying Accounts are passed through to the security
holder and principal payments received on such Accounts are used to fund the
transfer to the pool of assets supporting the securities of additional credit
card charges made on an Account. The initial fixed period usually may be
shortened upon the occurrence of specified events which signal a potential
deterioration in the quality of the assets backing the security, such as the
imposition of a cap on interest rates. The ability of the issuer to extend the
life of an issue of Credit Card Receivable Securities thus depends upon the
continued generation of additional principal amounts in the underlying Accounts
and the non-occurrence of specified events. The Internal Revenue Code of 1986,
which phased out the deduction for consumer interest, as well as competitive and
general economic factors, could adversely affect the rate at which new
receivables are created in an Account and conveyed to an issuer, shortening the
expected weighted average life of the related security, and reducing its yield.
An acceleration in cardholders' payment rates or any other event which shortens
the period during which additional credit card charges on an Account may be
transferred to the pool of assets supporting the related security could have a
similar effect on the weighted average life and yield. Credit card holders are
entitled to the protection of state and federal consumer credit laws, many of
which give such holder the right to set off certain amounts against balances
owed on the credit card, thereby reducing amounts paid on Accounts. In addition,
unlike most other asset-backed securities, Accounts are unsecured obligations of
the cardholder.
WHEN-ISSUED SECURITIES AND SECURITIES PURCHASED ON A TO-BE-ANNOUNCED BASIS.
The Short/Intermediate Term Fixed-Income Fund may purchase debt securities 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 securities
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
-7-
<PAGE>
market value of the Fund's assets will experience greater fluctuation. The
purchase of securities on a when-issued or TBA basis may involve a risk of loss
if the broker-dealer selling the securities fails to deliver after the value of
the securities has risen.
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. 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. 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 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
-8-
<PAGE>
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, from time to time, lend
securities on a short-term basis (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. To be acceptable as collateral, letters of credit must obligate a bank
to pay amounts demanded by a Fund if the demand meets the terms of the letter.
Such terms and the issuing bank must be satisfactory to the Fund.
The Funds receive amounts equal to the dividends or interest on loaned
securities and also receive one or more of (a) negotiated loan fees, (b)
interest on securities used as collateral, or (c) interest on short-term debt
securities purchased with such collateral; either type of interest may be shared
with the borrower. The Funds may also pay fees to placing brokers as well as
custodian and administrative fees in connection with loans. Fees may only be
paid to a placing broker provided that the Trustees determine that the fee paid
to the placing broker is reasonable and based solely upon services rendered,
that the Trustees separately consider the propriety of any fee shared by the
placing broker with the borrower, and that the fees are not used to compensate
the Adviser or any affiliated person of the Trust or an affiliated person of the
Adviser or other affiliated person.
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
-9-
<PAGE>
affords 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. 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.
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). Borrowing
magnifies the potential for gain or loss on the portfolio securities of the
Funds and increases the possibility of fluctuation in a Fund's net asset value.
This is 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. High turnover involves correspondingly greater
commission expenses and transaction costs and 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."
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.
-10-
<PAGE>
The Fund will not enter into a futures contract if, as a result thereof,
(i) the then current aggregate futures market prices of financial instruments
required to be delivered under open futures contract sales plus the then current
aggregate purchase prices of financial instruments required to be purchased
under open futures contract purchases would exceed 30% of the Fund's total
assets (taken at market value at the time of entering into the contract) or (ii)
more than 5% of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to margin deposits on such
futures contracts. In instances involving the purchase of futures contracts by
the Fund, an amount of cash, U.S. Government obligations or other liquid
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 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 other liquid securities, known as "initial margin." The margin
required for a particular futures contract is set by the exchange on which the
contract is traded, and may be significantly modified from time to time by the
exchange during the term of the contract. Futures contracts are customarily
purchased and sold on margins that may range upward from less than 5% of the
value of the contract being traded.
If the price of an open futures contract changes (by increase in the case
of a sale or by decrease in the case of a purchase) so that the loss on the
futures contract reaches a point at which the margin on deposit does not satisfy
margin requirements, the broker will require an increase in the margin. However,
if the value of a position increases because of favorable price
-11-
<PAGE>
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 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%
-12-
<PAGE>
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 liquid securities equal in
value to the current value of the underlying instrument less the margin deposit.
The Fund may elect to close some or all of its futures positions at any
time prior to their expiration. The Fund would do so to reduce exposure
represented by long futures positions or increase exposure represented by short
futures positions. The Fund may close its positions by taking opposite positions
which would operate to terminate the Fund's position in the futures contracts.
Final determinations of variation margin would then be made, additional cash
would be required to be paid by or released to the Fund, and the Fund would
realize a loss or a gain. Futures contracts may be closed out only on the
exchange or board of trade where the contracts were initially traded. Although
the Fund intends to purchase or sell futures contracts only on exchange or
boards of trade where there appears to be an active market, there is no
assurance that a liquid market on an exchange or board of trade will exist for
any particular contract at any particular time. In such event, it might not be
possible to close a futures contract, and in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have been used to
hedge portfolio securities, the Fund would continue to hold securities subject
to the hedge until the futures contracts could be terminated. In such
circumstances, an increase in the price of the securities, if any, might
partially or completely offset losses on the futures contract. However, as
described below, there is no guarantee that the price of the securities will, in
fact, correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.
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
-13-
<PAGE>
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.
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.
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.
-14-
<PAGE>
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.
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
-15-
<PAGE>
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 with 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 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.
-16-
<PAGE>
Options written by the Fund will normally have expiration dates of less
than nine months from the date written. The exercise price of the options may be
below, equal to, or above the current market values of the underlying securities
at the time the options are written. From time to time, the Fund may purchase an
underlying security for delivery in accordance with an exercise notice of a call
option assigned to it, rather than delivering such security from its portfolio.
In such cases, additional costs will be incurred. The Fund will realize a profit
or loss from a closing purchase transaction if the cost of the transaction is
less or more than the premium received from the writing of the option; however,
any loss so incurred in a closing purchase transaction may be partially or
entirely offset by the premium received from a simultaneous or subsequent sale
of a different call or put option. Also, because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
The Fund may engage in transactions involving dealer options. Certain risks
are specific to dealer options. While the Fund would look to the Clearing
Corporation to exercise exchange-traded options, if the Fund were to purchase a
dealer option, it would rely on the dealer from whom it purchased the option to
perform if the option were exercised. Failure by the dealer to do so would
result in the loss of premium paid by the Fund as well as loss of the expected
benefit of the transaction. Exchange-traded options generally have a continuous
liquid market while dealer options have none. Consequently, the Fund will
generally be able to realize the value of a dealer option it has purchased only
by exercising it or reselling it to the dealer who issued it. Similarly, when
the Fund writes a dealer option, it generally will be able to close out the
option transaction with the dealer to which the Fund originally wrote the
option. While the Fund will seek to enter into dealer options only with dealers
who will agree to and which are expected to be capable of entering into closing
transactions with the Fund, there can be no assurance that the Fund will be able
to liquidate a dealer option at a favorable price at any time prior to
expiration. Until the Fund, as a covered dealer call option writer, is able to
effect a closing purchase transaction, it will not be able to liquidate
securities (or other assets) used as cover until the option expires or is
exercised. In the event of insolvency of the contra party, the Fund may be
unable to liquidate a dealer option. With respect to options written by the
Fund, the inability to enter into a closing transaction may result in material
losses to the Fund. For example, since the Fund must maintain a secured position
with respect to any call option on a security it writes, the Fund may not sell
the assets which it has segregated to secure the position while it is obligated
under the option. This requirement may impair the Fund's ability to sell
portfolio securities at a time when such a sale might be advantageous. The Staff
of the Securities and Exchange Commission has taken the position that purchased
dealer options and the assets used to secure written dealer options are illiquid
securities. Accordingly, the Fund will treat dealer options as subject to the
Fund's limitation on investments in illiquid securities. If the Commission
changes its position on the liquidity of dealer options, the Fund will change
its treatment of such instruments accordingly.
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
-17-
<PAGE>
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. Losses on written covered calls and purchased puts on securities
may be long-term capital losses, if the security covering the option was held
for more than twelve months prior to the writing of the option.
FOREIGN SECURITIES. Subject to each Fund's investment policies and quality
and maturity standards, the Funds may invest in the securities (payable in U.S.
dollars) of foreign issuers and in the securities of foreign branches of U.S.
banks such as negotiable certificates of deposit (Eurodollars). The Equity Fund
may also invest up to 10% of its net assets in non-U.S. dollar-denominated
securities principally traded in financial markets outside the United States.
Because the Funds may invest in foreign securities, investment in the Funds
involves risks that are different in some respects from an investment in a fund
which invests only in securities of U.S. domestic issuers. Foreign investments
may be affected favorably or unfavorably by changes in currency rates and
exchange control regulations. There may be less publicly available information
about a foreign company than about a U.S. company, and foreign companies may not
be subject to accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies. There may be less
governmental supervision of securities markets, brokers and issuers of
securities. Securities of some foreign companies are less liquid or more
volatile than securities of U.S. companies, and foreign brokerage commissions
and custodian fees are generally higher than in the United States. Settlement
practices may include delays and may differ from those customary in United
States markets. Investments in foreign securities may also be subject to other
risks different from those affecting U.S. investments, including local political
or economic developments, expropriation or nationalization of assets,
restrictions on foreign investment and repatriation of capital, imposition of
withholding taxes on dividend or interest payments, currency blockage (which
would prevent cash from being brought back to the United States), and difficulty
in enforcing legal rights outside the United States.
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:
-18-
<PAGE>
Moody's Investors Service, Inc.
-------------------------------
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
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.
-19-
<PAGE>
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.
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.
-20-
<PAGE>
The limitations applicable to each Fund are:
1. BORROWING MONEY. The Fund will not borrow money, except (a) from a bank,
provided that immediately after such borrowing there is asset coverage of 300%
for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that, when made, such temporary borrowings are
in an amount not exceeding 5% of the Fund's total assets.
2. PLEDGING. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any security owned or held by the
Fund except as may be necessary in connection with borrowings described in
limitation (1) above. The Fund will not mortgage, pledge or hypothecate more
than one-third of its assets in connection with borrowings.
3. MARGIN PURCHASES. The Fund will not purchase any securities on "margin"
(except such short-term credits as are necessary for the clearance of
transactions). The deposit of funds in connection with transactions in options,
futures contracts, and options on such contracts will not be considered a
purchase on "margin."
4. SHORT SALES. The Fund will not make short sales of securities other than
short sales "against the box."
5. COMMODITIES. The Fund will not purchase or sell commodities or
commodities futures except that the Fund may purchase or sell financial futures
contracts and related options.
6. MINERAL LEASES. The Fund will not purchase oil, gas or other mineral
leases, rights or royalty contracts.
7. UNDERWRITING. The Fund will not act as underwriter of securities issued
by other persons. This limitation is not applicable to the extent that, in
connection with the disposition of portfolio securities, a Fund may be deemed an
underwriter under certain federal securities laws.
8. ILLIQUID INVESTMENTS. The Fund will not purchase securities for which no
readily available market exists or engage in a repurchase agreement maturing in
more than seven days if, as a result thereof, more than 10% of the value of the
net assets of the Fund would be invested in such securities.
9. REAL ESTATE. The Fund will not purchase, hold or deal in real estate or
real estate mortgage loans, except that the Fund may purchase (a) securities of
companies (other than limited partnerships) which deal in real estate or (b)
securities which are secured by interests in real estate or by interests in
mortgage loans including securities secured by mortgage-backed securities.
10. LOANS. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, or (b) by engaging in repurchase agreements. For
purposes of this limitation,
-21-
<PAGE>
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.
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.
-22-
<PAGE>
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, 1999. Each Trustee who is an "interested person" of the Trust, as
defined by the Investment Company Act of 1940, is indicated by an asterisk.
COMPENSATION
NAME AGE POSITION HELD FROM TRUST
- ---- --- ------------- ----------
*Malcolm D. Clarke, Jr. 64 President/Trustee $ 0
*James G. Pepper 55 Vice President/Trustee 0
*Francis S. Branin, Jr. 53 Vice President/Trustee 0
+John M. Kingsley, Jr. 67 Trustee $ 1,475
+Jerome B. Lieber 79 Trustee $ 5,400
+William M.R. Mapel 68 Trustee $ 4,550
+Crosby R. Smith 64 Trustee $ 4,550
Cheryl L. Grandfield 48 Vice President 0
Charles G. Watson 68 Vice President 0
Tina D. Hosking 31 Secretary 0
Eric P. Spiegel 48 Treasurer 0
* Messrs. Clarke, Pepper and Branin, 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.
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 & Schloring, Attorneys at Law. He is
also Secretary and a director of Decorator Industries, Inc. (a manufacturer of
draperies and bedspreads).
JOHN M. KINGSLEY, JR., 111 Prospect Street, Stanford, Connecticut, is
President of Kingsley Consulting, LLC, a financial consulting firm. He is also a
Director of the Neurological Institute of New Jersey and Sturm, Ruger & Company,
Inc., a manufacturer of sporting and law enforcement firearms. Mr. Kingsley
previously was Executive Vice President of Sturm, Ruger & Company, Inc.
WILLIAM M. R. MAPEL, 18 Stephanie Lane, Darien, Connecticut, is a director
of Churchill Capital Partners (investments), Galey & Lord (textiles) and NSC
Corporation (environmental services).
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
-23-
<PAGE>
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).
CHERYL L. GRANDFIELD, One Broadway, New York, New York, is a principal of
Brundage, Story and Rose LLC.
CHARLES G. WATSON, One Broadway, New York, New York, is a retired former
principal of Brundage, Story and Rose LLC.
TINA D. HOSKING, 312 Walnut Street, Cincinnati, Ohio, is Vice President and
Associate General Counsel of Countrywide Fund Services, Inc. and CW Fund
Distributors, Inc., the Trust's principal underwriter. She is also Secretary of
Touchstone Tax-Free Trust, Touchstone Strategic Trust and Touchstone Investment
Trust (formerly Countrywide Tax-Free Trust, Countrywide Strategic Trust and
Countrywide Investment Trust).
ERIC P. SPIEGEL, One Broadway, New York, New York, is the Treasurer of
Brundage, Story and Rose LLC.
THE INVESTMENT ADVISER
- ----------------------
Brundage, Story and Rose LLC (the "Adviser"), One Broadway, New York, New
York 10004, is the Trust's investment manager. Messrs. Clarke, Pepper and
Branin, 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 .50% of
its average daily net assets.
For the fiscal years ended November 30, 1999, 1998 and 1997, the Equity
Fund paid advisory fees of $304,766, $251,720 and $204,053, respectively. For
the fiscal years ended November 30, 1999, 1998 and 1997, the Short/Intermediate
Term Fixed-Income Fund accrued advisory fees of $194,381, $190,291 and $167,570,
respectively; however, in order to reduce the operating expenses of the Fund,
the Adviser voluntarily waived $156,565, $146,587 and $140,249 of such fees for
the fiscal years ended November 30, 1999, 1998 and 1997, respectively.
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-
-24-
<PAGE>
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 Funds may have an obligation to indemnify the Trust's officers and
Trustees with respect to such litigation, except in instances of willful
misfeasance, bad faith, gross negligence or reckless disregard by such officers
and Trustees in the performance of their duties. The Adviser bears promotional
expenses in connection with the distribution of the Funds' shares to the extent
that such expenses are not assumed by the Funds under their plan of distribution
(see below) and has agreed to reimburse the Underwriter for any expenses
incurred by it in the performance of its obligations under the Underwriting
Agreement with the Trust. The compensation and expenses of any officer, Trustee
or employee of the Trust who is an officer, principal or employee of the Adviser
are paid by the Adviser.
By its terms, the Trust's investment advisory agreement will remain in
force until December 31, 2000 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, 1999, the aggregate expenditures of
the Equity Fund and the Short/Intermediate Term Fixed-Income Fund under the Plan
were $1,096 and $845, respectively, which was spent for the preparation of
prospectuses and reports for prospective shareholders.
-25-
<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 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, Pepper and Branin may be
deemed to have a financial interest in the operation of the Plan and the
Implementation Agreements.
THE UNDERWRITER
- ---------------
CW Fund Distributors, 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 a wholly-owned,
-26-
<PAGE>
indirect subsidiary of Fort Washington Investment Advisors, Inc., a registered
investment adviser, which in turn is a wholly-owned subsidiary of The Western
and Southern Life Insurance Company.
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, 1999, 1998 and 1997, the Equity Fund paid brokerage commissions of
$39,054, $38,868 and $25,162, 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.
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.
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
-27-
<PAGE>
possible to place a dollar value on it. Research services furnished by brokers
through whom the Funds effect securities transactions may be used by the Adviser
in servicing all of its accounts and not all such services may be used by the
Adviser in connection with the Funds.
The Adviser may aggregate purchase and sale orders for the Funds and its
other clients if it believes such aggregation is consistent with its duty to
seek best execution for the Funds and its other clients. The Adviser will not
favor any advisory account over any other account, and each account that
participates in an aggregated order will participate at the average share price
for all transactions of the Adviser in that security on a given business day,
with all transaction costs shared on a pro rata basis. The Adviser will prepare,
before entering an aggregated order, a written Allocation Statement as to how
the order will be allocated among the various accounts. If the aggregated order
is filled in its entirety, it shall be allocated among the accounts in
accordance with the Allocation Statement; if the order is partially filled, it
shall be allocated pro rata based on the Allocation Statement. Notwithstanding
the foregoing, the order may be allocated on a basis different from that
specified in the Allocation Statement if all accounts of clients whose orders
are allocated receive fair and equitable treatment and the reason for such
different allocation is explained in writing and is approved in writing by the
Adviser's compliance officer no later than one hour after the opening of the
markets on the trading day following the day on which the order is executed.
As of November 30, 1999, the Short/Intermediate Term Fixed-Income Fund held
securities of the following of the Trust's regular broker-dealers or their
parents: Salomon Smith Barney Holdings, Inc. (the market value of which was
$986,819 as of November 30, 1999); Lehman Brothers, Inc. (the market value of
which was $989,620 as of November 30, 1999). As of November 30, 1999, the Equity
Fund held securities of the following of the Trust's regular broker-dealers or
their parents: Citigroup, Inc. (the market value of which was $1,293,000 as of
November 30, 1999).
CODE OF ETHICS. The Trust, the Adviser and the Underwriter have each
adopted a Code of Ethics under Rule 17j-1 of the Investment Company Act of 1940.
These Codes of Ethics allow Access Persons to invest in securities for their own
accounts but they significantly restrict the personal investing activities of
all Access Persons and impose additional, more onerous, restrictions on certain
investment personnel. These Codes of Ethics are filed as exhibits to the Trust's
registration statement and instructions concerning how these documents can be
obtained may be found on the back cover of the Funds' prospectus.
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.
-28-
<PAGE>
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, 1999 and 1998, the
Equity Fund's portfolio turnover rate was 37% and 50%, respectively, and the
Short/Intermediate Term Fixed-Income Fund's portfolio turnover rate was 53% and
90%, respectively. The Short/Intermediate Term Fixed-Income Fund's increased
portfolio turnover rate was due in part to the increased volatility of the fixed
income market during 1998.
CALCULATION OF SHARE PRICE
- --------------------------
The share price (net asset value) of the shares of each Fund is determined
as of the close of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time) on each day the Trust is open for business.
The Trust is open for business on every day except Saturdays, Sundays and the
following holidays: New Year's Day, Martin Luther King, Jr. 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; and (ii) 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
-29-
<PAGE>
be carried forward to offset any capital gains for eight years, after which any
undeducted capital loss remaining is lost as a deduction.
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:
n
P (1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 and 10 year periods at the end of the 1, 5 or 10
year periods (or fractional portion thereof)
The calculation of average annual total return assumes the reinvestment of all
dividends and
-30-
<PAGE>
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, 1999 are as follows:
Equity Fund
- -----------
1 year 27.97%
5 years 22.86%
Since inception (January 2, 1991) 16.19%
Short/Intermediate Term Fixed-Income Fund
- -----------------------------------------
1 year 0.07%
5 years 6.89%
Since inception (January 2, 1991) 6.56%
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%
December 31, 1997 27.27% 7.63%
December 31, 1998 13.27% 7.72%
December 31, 1999 27.97% 0.07%
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, 1999 the 3 years ended November 30, 1999, the
5 years ended November 30, 1999 and for the period since inception through
November 30, 1999 were 25.43%, 20.30%, 21.63% and 15.63%, respectively. The
average annual compounded rates of return for the Short/Intermediate Term
Fixed-Income Fund for the 1 year ended November 30, 1999, the 3 years ended
November 30, 1999, the 5 years ended November 30, 1998 and for the period since
inception through November 30, 1999 were 0.80%, 5.02%, 7.05% and 6.74%,
respectively. A nonstandardized quotation of total return will always be
accompanied by a Fund's average annual total return as described above.
-31-
<PAGE>
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:
6
Yield = 2[(a-b/cd + 1) - 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 1999 were 0.02% and
6.08%, respectively.
The performance quotations described above are based on historical earnings
and are not intended to indicate future performance.
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.
-32-
<PAGE>
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 10, 2000, the Brundage, Story and Rose Profit Sharing Plan and
the Brundage, Story and Rose 401(k) Plan, One Broadway, New York, New York,
collectively owned of record 13.4% of the Trust's outstanding shares, including
23.1% of the outstanding shares of the Equity Fund and 0.07% of the outstanding
shares of the Short/Intermediate Term Fixed-Income Fund. As of March 10, 2000,
JM Family Enterprises Inc., Agreement of Trust dtd 6/12/90, 100 NW 12th Avenue,
Deerfield Beach, Florida 33442, owned of record 6.4% 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 17.3% of
the Trust's outstanding shares, including 10.4% of the outstanding shares of the
Equity Fund and 21.9% 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 5.1% of the outstanding shares of the Equity
Fund.
As of March 10, 2000, the Trustees and officers of the Trust as a group
owned of record or beneficially 6.5% of the Trust's outstanding shares,
including 6.3% of the outstanding shares of the Equity Fund and 6.6% 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, 2000. 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
-33-
<PAGE>
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.
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, 1999 appear in the
Trust's annual report which is attached to this Statement of Additional
Information.
-34-
<PAGE>
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
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
-----------------------------------------
PART C. OTHER INFORMATION
-----------------
Item 23. (a) Agreement and Declaration of Trust, as amended*
- -------
(b) Bylaws*
(c) Incorporated by reference to Agreement and Declaration of
Trust and Bylaws
(d) (i) Advisory Agreement with Brundage, Story and Rose*
(ii) Agreement to Transfer Investment Advisory Contract*
(e) (i) Underwriting Agreement with CW Fund Distributors, Inc.
(ii) Form of Underwriter's Dealer Agreement*
(f) Inapplicable
(g) Custody Agreement with The Fifth Third Bank*
(h) (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.
(i) Opinion and Consent of Counsel*
(j) Consent of Independent Public Accountants
(k) Inapplicable
(l) Initial Capital Agreement*
(m) (i) Plan of Distribution Pursuant to Rule 12b-1*
(ii) Implementation Agreement with Brundage, Story and Rose*
(n) Financial Data Schedules were filed with Registrant's Form
N-SAR.
-1-
<PAGE>
(o) Inapplicable
(p) (i) Code of Ethics of Brundage, Story and Rose Investment Trust
(ii) Code of Ethics of Brundage, Story and Rose LLC
(iii) Code of Ethics of CW Fund Distributors, Inc.
- -----------------------------
* Incorporated by reference to the Trust's registration statement on Form
N-1A
Item 24. Persons Controlled by or Under Common Control with Registrant.
- ------- -------------------------------------------------------------
None
Item 25. Indemnification
- -------- ---------------
Article VI of the Registrant's Agreement and Declaration of Trust
provides for indemnification of officers and Trustees as follows:
"Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The
Trust shall indemnify each of its Trustees and officers,
including persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person") against all
liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and
counsel fees, incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person
may be or may have been involved as a party or otherwise or with
which such person may be or may have been threatened, while in
office or thereafter, by reason of being or having been such a
Trustee or officer, director or trustee, and except that no
Covered Person shall be indemnified against any liability to the
Trust or its Shareholders to which such Covered Person would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of such Covered Person's office.
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.
-2-
<PAGE>
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person may be entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors and
administrators. Nothing contained in this article shall affect
any rights to indemnification to which personnel of the Trust,
other than Trustees and officers, and other persons may be
entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of
any such person."
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability policy. The
policy provides coverage to the Registrant, its Trustees and officers
and its Adviser. 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.
-3-
<PAGE>
The Underwriting Agreement with CW Fund Distributors, Inc. (the
"Underwriter") provides that the Underwriter, its directors, officers,
employees, partners, shareholders and control persons shall not be
liable for any error of judgment or mistake of law or for any loss
suffered by Registrant in connection with the matters to which the
Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of any of such persons in
the performance of Underwriter's duties or from the reckless disregard
by any of such persons of Underwriter's obligations and duties under
the Agreement. Registrant will advance attorneys' fees or other
expenses incurred by any such person in defending a proceeding, upon
the undertaking by or on behalf of such person to repay the advance if
it is ultimately determined that such person is not entitled to
indemnification.
Item 26. 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) Malcolm D. Clarke, Jr.
(2) Jeanne M. Harrington
(3) James G. Pepper
-4-
<PAGE>
(4) Francis S. Branin, Jr.
(5) Cheryl L. Grandfield
(6) Paul R. Barkus
(7) Brandon Reid
(8) H. Dean Benner
(9) Gregory E. Ratte~
(10) Deborah C. Foord
Item 27. Principal Underwriters
- -------- ----------------------
(a) CW Fund Distributors, Inc. also acts as underwriter for the
following open-end investment companies: The Bjurman Funds, The
Caldwell & Orkin Funds, Inc., Flippin Bruce & Porter Funds, The
James Advantage Funds, The Jamestown Funds, the Lake Shore Family
of Funds, Profit Funds Investment Trust, StockJungle.com
Investment Trust, UC Investment Trust, The Westport Funds and The
Winter Harbor Fund .
(b) The following list sets forth the directors and executive
officers of the Distributor. The address of the persons named
below is 312 Walnut Street, Cincinnati, Ohio 45202.
Position Position
with with
Name Distributor Registrant
William F. Ledwin Director None
Jill T. McGruder Director None
Maryellen Peretzky Senior Vice President- None
Administrative Secretary
Tina D. Hosking Vice President Secretary
and Associate
General Counsel
-5-
<PAGE>
Theresa M. Samocki Vice President- None
Fund Accounting
Manager
Terrie A. Wiedenheft First Vice President, None
Chief Financial Officer
and Treasurer
(c) Inapplicable
Item 28. 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 29. Management Services Not Discussed in Parts A or B
- ------- -------------------------------------------------
Inapplicable
Item 30. Undertakings
- -------- ------------
Inapplicable
<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 the 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, 2000.
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
By: /s/Tina D. Hosking By: /s/ David M. Leahy
------------------- -------------------
Tina D. Hosking, David M. Leahy,
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
- ------------------------------ and Trustee
Malcolm D. Clarke, Jr.*
/s/ Eric P. Spiegel Treasurer March 31, 2000
- ------------------------------
Eric P. Spiegel
Vice President
- ------------------------------ and Trustee
James G. Pepper*
Vice President
- ------------------------------ and Trustee
Francis S. Branin, Jr.*
Trustee
- ------------------------------
John M. Kingsley, Jr.
Trustee
- ------------------------------
Jerome B. Lieber*
Trustee By: /s/ Tina D. Hosking
- ------------------------------ -------------------
William M.R. Mapel* Tina D. Hosking
Attorney-in-Fact*
March 31, 2000
Trustee
- ------------------------------ By: /s/ David M. Leahy
Crosby R. Smith* ------------------
David M. Leahy
Attorney-in-Fact*
March 31, 2000
<PAGE>
INDEX TO EXHIBITS
-----------------
(a) Agreement and Declaration of Trust, as amended*
(b) Bylaws*
(c) Incorporated by reference to Agreement and Declaration of Trust and
Bylaws
(d)(i) Advisory Agreement*
(ii) Agreement to Transfer Investment Advisory Contract*
(e)(i) Underwriting Agreement
(ii) Form of Underwriter's Dealer Agreement*
(f) Inapplicable
(g) Custody Agreement*
(h)(i) Administrative Services Agreement
(ii) Accounting Services Agreement
(iii) Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement
(i) Opinion and Consent of Counsel*
(j) Consent of Independent Public Accountants
(k) Inapplicable
(l) Initial Capital Agreement*
(m)(i) Plan of Distribution Pursuant to Rule 12b-1*
(ii) Implementation Agreement*
(n) Financial Data Schedules were filed with Registrant's Form N-SAR
(o) Inapplicable
(p)(i) Code of Ethics of Brundage, Story and Rose Investment Trust
(ii) Code of Ethics of Brundage, Story and Rose LLC
(iii) Code of Ethics of CW Fund Distributors, Inc.
- ----------------------------
* Incorporated by reference to the Trust's registration statement on Form N-1A.
UNDERWRITING AGREEMENT
----------------------
This Agreement made as of October 29, 1999 by and between Brundage, Story
and Rose Investment Trust, an Ohio business trust (the "Trust"), and CW Fund
Distributors, 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 "1940 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 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.
<PAGE>
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 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
2
<PAGE>
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 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 1940 Act) of 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
3
<PAGE>
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 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 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.
4
<PAGE>
(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 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.
5
<PAGE>
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 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
6
<PAGE>
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' 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.
7
<PAGE>
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.
The Trust may at any time terminate this Agreement on sixty (60) days'
written notice delivered or mailed by registered mail, postage prepaid, to the
Underwriter. The Underwriter may terminate this Agreement on ninety (90) days'
written notice delivered or mailed by registered mail, postage prepaid, to the
Trust.
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 one (1) year 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) 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.
8
<PAGE>
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 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 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.
9
<PAGE>
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 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.
10
<PAGE>
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.
11
<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
CW FUND DISTRIBUTORS, INC.
By: /s/ David E. Dennison
----------------------
Its: President
ADMINISTRATIVE SERVICES AGREEMENT
---------------------------------
AGREEMENT dated as of October 29, 1999 between Brundage, Story and Rose
Investment Trust, an Ohio business trust (the "Trust"), and Countrywide Fund
Services, Inc., an Ohio corporation ("Countrywide").
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 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 1940 Act 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 1940 Act.
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 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.
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 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.
9. RENEWAL AND TERMINATION. This Agreement shall become effective on the
date first above written and shall remain in force for a period of one (1) year
from such date, and from
-2-
<PAGE>
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 the Trust upon
sixty (60) days' written notice to Countrywide. This Agreement may be terminated
by Countrywide without the payment of any penalty upon one hundred and twenty
(120) days' written notice to the Trust. 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.
BRUNDAGE, STORY AND ROSE
INVESTMENT TRUST
By: /s/ Malcolm D. Clarke, Jr.
---------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ David E. Dennison
-----------------------
Its: Chief Operating Officer
ACCOUNTING SERVICES AGREEMENT
-----------------------------
THIS AGREEMENT effective as of October 29, 1999 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.
7. FURTHER ACTIONS.
---------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
-2-
<PAGE>
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 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
-3-
<PAGE>
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 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 one year 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.
The Trust may terminate this Agreement on any date by giving
Countrywide at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefor. Countrywide may terminate this Agreement on
any date by giving the Trust at least one hundred twenty (120) days' prior
written notice of such termination specifying the date fixed therefor.
-4-
<PAGE>
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.
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.
-5-
<PAGE>
18. QUESTIONS OF INTERPRETATION.
---------------------------
This Agreement shall be governed by the laws of the State of Ohio. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission issued pursuant to said 1940 Act. In
addition, where the effect of a requirement of the 1940 Act, reflected in any
provision of this Agreement, is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
19. NOTICES.
-------
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and of
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.
-6-
<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/ David E. Dennison
Its: Chief Operating Officer
<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 October 29, 1999 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 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
-2-
<PAGE>
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.
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
-3-
<PAGE>
such steps as may be necessary to redeem any shares purchased on
the basis of such returned check and cause the proceeds of such
redemption plus any dividends declared with respect to such
shares to be credited to the account of the Trust and to request
the Trust's Custodian to forward such returned check to the
person who originally submitted the check; and
C. Notify the Trust of such actions and correct the Trust's records
maintained by the T/A pursuant to this Agreement.
9. SALES CHARGE.
------------
In computing the number of shares to credit to the account of a
shareholder, the T/A will calculate the total of the applicable Underwriter and
dealer of record sales charges with respect to each purchase as set forth in the
Trust's current prospectus and statement of additional information and in
accordance with any notification filed with respect to combined and accumulated
purchases. The T/A will also determine the portion of each sales charge payable
by the Underwriter to the dealer of record participating in the sale in
accordance with such schedules as are from time to time delivered by the
Underwriter to the T/A; provided, however, the T/A shall have no liability
hereunder arising from the incorrect selection by the T/A of the gross rate of
sales charges except that this exculpation shall not apply in the event the rate
is specified by the Underwriter or the Trust and the T/A fails to select the
rate specified.
10. DIVIDENDS AND DISTRIBUTIONS.
---------------------------
The Trust shall furnish the T/A with appropriate evidence of trustee
action authorizing the declaration of dividends and other distributions. The T/A
shall establish procedures in accordance with the Trust's then current
prospectus and statement of additional information and with other authorized
actions of the Trust's Board of Trustees under which it will have available from
the Custodian of the Trust or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, the T/A shall, as agent for each shareholder
who so requests, invest the dividends and other distributions in full and
fractional shares in accordance with the Trust's then current prospectus and
statement of additional information. If a shareholder has elected to receive
dividends or other distributions in cash, then the T/A shall disburse dividends
to shareholders of record in accordance with the Trust's then current prospectus
and statement of additional information. The T/A shall, on or before the mailing
date of such checks, notify the Trust and the Custodian of the estimated amount
of cash required to pay such dividend or distribution, and the Trust shall
instruct the Custodian to make available sufficient funds therefor in the
appropriate account of the Trust. The T/A shall mail to the shareholders
periodic statements, as requested by the Trust, showing the number of full and
fractional shares and the net asset value per share of shares so credited. When
requested by the Trust, the T/A shall prepare and file with the Internal
-4-
<PAGE>
Revenue Service, and when required, shall address and mail to shareholders, such
returns and information relating to dividends and distributions paid by the
Trust as are required to be so prepared, filed and mailed by applicable laws,
rules and regulations.
11. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
-----------------------------------------------------
The T/A shall, at least annually, furnish in writing to the Trust the
names and addresses, as shown in the shareholder accounts maintained by the T/A,
of all shareholders for which there are, as of the end of the calendar year,
dividends, distributions or redemption proceeds for which checks or share
certificates mailed in payment of distributions have been returned. The T/A
shall use its best efforts to contact the shareholders affected and to follow
any other written instructions received from the Trust concerning the
disposition of any such unclaimed dividends, distributions or redemption
proceeds.
12. REDEMPTIONS AND EXCHANGES.
-------------------------
A. The T/A shall process, in accordance with the Trust's then current
prospectus and statement of additional information, each order for the
redemption of shares accepted by the T/A. Upon its approval of such redemption
transactions, the T/A, if requested by the Trust, shall mail to the shareholder
and/or dealer of record a confirmation showing trade date, number of full and
fractional shares redeemed, the price per share and the total redemption
proceeds. For such redemption, the T/A shall either: (a) prepare checks in the
appropriate amounts for approval and verification by the Trust and signature by
an authorized officer of the T/A and mail the checks to the appropriate person,
or (b) in the event redemption proceeds are to be wired through the Federal
Reserve Wire system or by bank wire, cause such proceeds to be wired in federal
funds to the bank account designated by the shareholder, or (c) effectuate such
other redemption procedures which are authorized by the Trust's Board of
Trustees or its then current prospectus and statement of additional information.
The requirements as to instruments of transfer and other documentation, the
applicable redemption price and the time of payment shall be as provided in the
then current prospectus and statement of additional information, subject to such
supplemental instructions as may be furnished by the Trust and accepted by the
T/A. If the T/A or the Trust determines that a request for redemption does not
comply with the requirements for redemptions, the T/A shall promptly notify the
shareholder and/or dealer of record indicating the reason therefor.
B. If shares of the Trust are eligible for exchange with shares of any
other investment company, the T/A, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
C. The T/A shall notify the Trust, the Custodian and the Underwriter
on each business day of the amount of cash required to meet payments made
pursuant to the provisions of this Paragraph 12, and, on the basis of such
notice, the Trust shall instruct the Custodian to make available from time to
time sufficient funds therefor in the appropriate account of the Trust.
Procedures for effecting redemption orders accepted from shareholders or dealers
of record by
-5-
<PAGE>
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 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.
-6-
<PAGE>
16. OTHER PLANS.
-----------
The T/A will process such accumulation plans, group programs and other
plans or programs for investing in shares of the Trust as are now provided for
in the Trust's current prospectus and statement of additional information and
will act as plan agent for shareholders pursuant to the terms of such plans and
programs duly executed by such shareholders.
17. BOOKS AND RECORDS.
-----------------
The T/A shall maintain records for each shareholder account showing
the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record;
C. Number of shares held of each series;
D. Historical information regarding the account of each shareholder,
including dividends and distributions in cash or invested in
shares;
E. Information with respect to the source of all dividends and
distributions allocated among income, realized short-term gains
and realized long-term gains;
F. Any instructions from a shareholder including all forms furnished
by the Trust and executed by a shareholder with respect to (i)
dividend or distribution elections and (ii) elections with
respect to payment options in connection with the redemption of
shares;
G. Any correspondence relating to the current maintenance of a
shareholder's account;
H. Certificate numbers and denominations for any shareholder holding
certificates;
I. Any stop or restraining order placed against a shareholder's
account;
J. Information with respect to withholding in the case of a foreign
account or any other account for which withholding is required by
the Internal Revenue Code of 1986, as amended; and
K. Any information required in order for the T/A to perform the
calculations contemplated under this Agreement.
-7-
<PAGE>
All of the records prepared and maintained by the T/A pursuant to this
Agreement will be the property of the Trust. In the event this Agreement is
terminated, all records shall be delivered to the Trust or to any person
designated by the Trust at the Trust's expense, and the T/A shall be relieved of
responsibility for the preparation and maintenance of any such records delivered
to the Trust or any such person.
18. TAX RETURNS AND REPORTS.
-----------------------
The T/A will prepare in the appropriate form, file with the Internal
Revenue Service and appropriate state agencies and, if required, mail to
shareholders of the Trust such returns for reporting dividends and distributions
paid by the Trust as are required to be so prepared, filed and mailed and shall
withhold such sums as are required to be withheld under applicable federal and
state income tax laws, rules and regulations.
19. OTHER INFORMATION TO THE TRUST.
------------------------------
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
the T/A will also maintain such records as shall be necessary to furnish to the
Trust the following: annual shareholder meeting lists, proxy lists and mailing
materials, shareholder reports and confirmations and checks for disbursing
redemption proceeds, dividends and other distributions or expense disbursements.
20. ACCESS TO SHAREHOLDER INFORMATION.
---------------------------------
Upon request, the T/A shall arrange for the Trust's investment adviser
to have direct access to shareholder information contained in the T/A's computer
system, including account balances, performance information and such other
information which is available to the T/A with respect to shareholder accounts.
21. COOPERATION WITH ACCOUNTANTS.
----------------------------
The T/A shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
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.
-8-
<PAGE>
23. PROXIES.
-------
The T/A shall assist the Trust in the mailing of proxy cards and other
material in connection with shareholder meetings of the Trust, shall receive,
examine and tabulate returned proxies and shall, if requested by the Trust,
provide at least one inspector of election to attend and participate as required
by law in shareholder meetings of the Trust.
24. FURTHER ACTIONS.
---------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
25. FEES AND CHARGES.
----------------
For performing its services under this Agreement, each series of the
Trust shall pay the T/A in accordance with the schedule attached hereto as
Schedule A. Fees shall be paid monthly. The Trust shall promptly reimburse the
T/A for any out of pocket expenses and advances which are to be paid by the
Trust in accordance with Paragraph 26.
26. EXPENSES.
--------
The T/A shall furnish, at its expense and without cost to the Trust
(i) the services of its personnel to the extent that such services are required
to carry out its obligations under this Agreement and (ii) use of data
processing equipment. All costs and expenses not expressly assumed by the T/A
under this Paragraph 26 shall be paid by the Trust, including, but not limited
to costs and expenses for postage, envelopes, checks, drafts, continuous forms,
reports, communications, statements and other materials, telephone, telegraph
and remote transmission lines, use of outside mailing firms, necessary outside
record storage, media for storage of records (e.g., microfilm, microfiche,
computer tapes), printing, confirmations and any other shareholder
correspondence and any and all assessments, taxes or levies assessed on the T/A
for services provided under this Agreement. Postage for mailings of dividends,
proxies, reports and other mailings to all shareholders shall be advanced to the
T/A three business days prior to the mailing date of such materials.
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
-9-
<PAGE>
regulations of governmental authorities having jurisdiction.
28. REFERENCES TO THE T/A.
---------------------
The Trust shall not circulate any printed matter which contains any
reference to the T/A without the prior written approval of the T/A, excepting
solely such printed matter as merely identifies the T/A as Administrative
Services Agent, Transfer, Shareholder Servicing and Dividend Disbursing Agent
and Accounting Services Agent. The Trust will submit printed matter requiring
approval to the T/A in draft form, allowing sufficient time for review by the
T/A and its counsel prior to any deadline for printing.
29. EQUIPMENT FAILURES.
------------------
In the event of equipment failures beyond the T/A's control, the T/A
shall take all steps necessary to minimize service interruptions but shall have
no liability with respect thereto. The T/A shall endeavor to enter into one or
more agreements making provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
30. INDEMNIFICATION OF THE T/A.
--------------------------
A. The T/A may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither the T/A nor its shareholders, officers, directors,
employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by the Trust
in connection with, any error of judgment, mistake of law, any act or omission
connected with or arising out of any services rendered under or payments made
pursuant to this Agreement or any other matter to which this Agreement relates,
except by reason of willful misfeasance, bad faith or gross negligence on the
part of any such persons in the performance of the duties of the T/A under this
Agreement or by reason of reckless disregard by any of such persons of the
obligations and duties of the T/A under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of the T/A, or any of its affiliates, who may be or become
an officer, trustee, employee or agent of the Trust, shall be deemed, when
rendering services to the Trust or acting on any business of the Trust, to be
rendering such services to or acting solely as an officer, trustee, employee or
agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of the T/A or any of its
affiliates, even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless the T/A, its directors, officers, employees,
shareholders and agents from and against any and all claims, demands, expenses
and liabilities (whether with or without basis in fact or law) of any and every
nature which the T/A may sustain or incur or which may be asserted against the
T/A by any person by reason of, or as a result of: (i) any action taken or
omitted to be taken by the T/A in good faith in reliance upon any certificate,
instrument, order or share certificate believed by it to be genuine and to be
signed, countersigned or executed by any
-10-
<PAGE>
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 one year 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. The Trust may terminate this Agreement on any date by giving the
T/A at least sixty (60) days' prior written notice of such termination
specifying the date fixed therefor. The T/A may terminate this Agreement on any
date by giving the Trust at least one hundred and twenty (120) 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 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
-11-
<PAGE>
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 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.
-12-
<PAGE>
39. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
40. FORCE MAJEURE.
-------------
If the T/A shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
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/ David E. Dennison
-------------------------
Its: Chief Operating Officer
<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 $1,200 per
month
Brundage, Story and Rose Short/ payable monthly at rate of
Intermediate Term Fixed-Income Fund: $19.50/account per year; subject to
minimum $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. 11 of our report dated December 28, 1999 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 29, 2000
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
CODE OF ETHICS
1. Coverage of the Code.
This Code of Ethics governs the duties and responsibilities of the Trustees
of Brundage, Story and Rose Investment Trust (the "Trust") who are not
"interested persons" of the Trust within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940 (the "1940 Act"). All other "access persons," as
defined in Rule 17j-1(e)(1) under the 1940 Act, of the Trust or the Trust's
investment adviser or principal underwriter are not subject to the provisions of
this Code of Ethics. Such access persons are covered under a code of ethics,
adopted pursuant to Rule 17j-1, of either the Trust's investment adviser or
principal underwriter.
2. Statement of General Fiduciary Principles.
This Code of Ethics is based on the principles that (i) Trustees of the
Trust owe a fiduciary duty to the Trust and its shareholders to conduct their
personal transactions in securities in a manner which neither interferes with
the Trust's portfolio transactions nor otherwise takes unfair or inappropriate
advantage of their relationship to the Trust; (ii) in complying with this
fiduciary duty, Trustees owe the Trust and its shareholders the highest duty of
trust and fair dealing; and (iii) Trustees must, in all instances, place the
interests of the Trust and its shareholders ahead of their own personal
interests.
3. Prohibited Transactions and Activities.
(a) No Trustee shall purchase or sell, directly or indirectly, any
security in which he or she has, or by reason of such transaction
acquires, a direct or indirect beneficial ownership interest and which
he or she knows at the time of such purchase or sale:
(i) is being considered for purchase or sale by the Trust; or
(ii) is being purchased or sold by the Trust.
(b) Beneficial ownership interest in a security includes ownership by the
Trustee's spouse or relatives living in the same household.
<PAGE>
4. Reporting.
(a) A Trustee of the Trust need only report a personal transaction in any
security in which such Trustee has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership, if such
Trustee, at the time of that personal transaction, knew or, in the
ordinary course of fulfilling his or her official duties as a Trustee
of the Trust, should have known that, during the 15-day period
immediately preceding or following the date of the personal
transaction by the Trustee, such security was purchased or sold by the
Trust or was being considered for purchase or sale by the Trust or its
investment adviser.
(b) If a Trustee must report a personal transaction pursuant to paragraph
(a), then the report shall be made to the Secretary of the Trust not
later than 10 calendar days after the end of the calendar quarter in
which the transaction to which the report relates was effected, shall
be dated and signed by the Trustee submitting the report, and shall
contain the following information:
(i) the date of the transaction, the title and the number of shares,
and the principal amount of each security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank through whom the
transaction was effected.
Any such report may contain a statement that the report shall not
be construed as an admission by the person making such report
that he or she has any direct or indirect beneficial ownership in
the security to which the report relates.
5. Exempted Transactions.
The prohibitions of Section 2 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the Trustee has
no direct or indirect influence or control.
- 2 -
<PAGE>
(b) Purchases or sales which are non-volitional on the part of either the
Trustee or the Trust.
(c) Purchases which are either: made solely with the dividend proceeds
received in a dividend reinvestment plan; or part of an automatic
payroll deduction plan, whereby an employee purchases securities
issued by an employer.
(d) Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and any sales of such rights so
acquired.
6. Sanctions.
Upon discovering a violation of this Code, the Board of Trustees of the
Trust may take such actions or impose such sanctions, if any, as it deems
appropriate under the circumstances.
- 3 -
AMENDED AND RESTATED CODE OF ETHICS
DATED OCTOBER 13, 1997
FOR PRINCIPALS AND EMPLOYEES OF
BRUNDAGE, STORY AND ROSE, LLC
-----------------------------
PREAMBLE
The Class A principals ("principals") of Brundage, Story and Rose, LLC hereby
adopt this Amended and Restated Code of Ethics (the "Code") for the principals
and employees of our firm. As a registered investment adviser, we owe a duty of
loyalty to each of our advisory clients. We must endeavor to avoid even the
appearance of a conflict that might compromise the trust clients have placed in
us.
The purpose of the Code is to set forth for each individual's reference and
guidance our firm's policies with respect to avoiding actual or potential
conflicts of interest, our substantive restrictions on personal investing to
avoid such conflicts, and the procedures used to monitor compliance with such
restrictions. The Code has been adopted to comply with Rule 17j-1 under the
Investment Company Act of 1940 (as well as other general fiduciary standards
under applicable law) and is designed to prevent any act, practice or course of
business prohibited by paragraph (a) of that Rule. Additionally, the Code is
intended to comply with the provisions of paragraph (a)(12) of Rule 204-2 under
the Investment Advisers Act of 1940 (the "Advisers Act"), which requires us to
maintain records of securities transactions in which our principals and certain
of our employees have beneficial ownership. (To comply with Section 204A of the
Advisers Act, however, our firm has adopted a separate document entitled
"Brundage, Story and Rose, LLC Insider Trading Policies.")
The concept of investment counsel was developed to make it possible for
investors to obtain sound and continuous investment advice from a professional
source in situations in which the interests of investment counsel and clients
are compatible and in which there is no conflict of interest. This standard
requires that each of us reaches as high a level of professional competence as
possible and that each of us behaves in an ethical manner in every action
undertaken professionally or personally.
<PAGE>
It is reasonable for each of us, as principals and employees of Brundage, Story
and Rose, LLC to own for investment purposes securities identical to those
recommended to our clients. Our firm's recommendations are based upon
convictions related to broad economic considerations of a long-term nature.
These considerations are applied upon the basis of the circumstances of the
individual client. Our long-term orientation toward our clients' capital is
antithetical to short-term trading; therefore, we discourage such activity on
the part of our principals and employees. For this purpose, short-term is
considered to be less than 30 days; however, the Compliance Officer may grant
exceptions (for example, in connection with tax loss sales).
While recognizing the right of our principals and employees to own securities
identical to those of our clients, we must be cognizant of the fact that, by
choice, we are in a profession that is morally bound to avoid actions that
present conflicts of interest with our clients' interests. Such conflicts of
interest could arise if our portfolios compete with our clients' portfolios in
the purchase or sale of securities. Simply stated, our clients' interests come
first, ahead of the interests of any person within our firm.
To assure that the highest standards are maintained in our firm, to help avoid
conflicts of interest between our personnel and our clients, and to protect the
good reputation of our firm developed over many years, the Code has been adopted
by the principals at their meeting on October 6, 1997. It supersedes all Codes
of Ethical Conduct that were in effect prior to this date.
CODE OF ETHICS
I. APPLICABILITY
-------------
The Code applies to each principal and employee of Brundage, Story and
Rose, LLC.
II. GENERAL RULE
------------
Each principal and employee must avoid investment activities and
practices that may work to the detriment of our firm or that would
impair such individual's ability to act for the clients in an
objective and unbiased' manner. Investment information received may
not be used for one's "personal" benefit to the detriment of our
clients.
-2-
<PAGE>
The term "personal" in this context means, oneself, one's spouse,
minor children, other persons living in the same household, and any
non-client relationships in which one has beneficial interest, present
or future and exercises investment control or offers specific
investment recommendations. Portfolios of spouses and other relatives
who are our clients are not included in the term "personal" since
their security holdings and transactions are fully reflected on our
firm's records as clients of equal standing with all other clients.
Spouses and other non-employees covered by this Code are required to
report personal investment transactions as specified in the Code.
Transactions executed by such persons in the course of performing
their professional responsibilities for their employer and their
employer's clients need not be reported. One spouse may not act on
information supplied by the other if the other would violate his or
her own Code of Ethics by undertaking the transaction. (Standard
prohibitions against acting on inside information in the securities
business also apply in this area, but these prohibitions are set forth
in our Insider Trading Policies.)
III. PROHIBITED TRANSACTIONS AND ACTIVITIES
--------------------------------------
A. GENERAL PROHIBITED TRANSACTIONS
-------------------------------
1) INITIAL PUBLIC OFFERINGS. No purchases of an initial public
offering of securities may be made. ("Security" is defined in
Annex A to the Code.) Such purchases, however, are allowed one
month after trading begins assuming no other restrictions in the
Code are applicable.
2) SHORT SALES. Short-selling of securities is prohibited.
3) PURCHASES ON MARGIN. Purchase of securities on margin is
prohibited. This provision does not preclude the making of
"nonpurpose" collateral loans or the ownership of securities in
the event one's home is mortgaged. The intent of this restriction
is to prohibit the use of borrowed funds to maintain a continuing
leveraged position in securities.
4) PREFERENTIAL TREATMENT, FAVORS, AND GIFTS. No special favors
or gifts of material value may be sought or accepted from any
broker-dealer or financial intermediary.
B. BLACKOUT PERIODS
----------------
The following transactions are prohibited during the proscribed
periods set forth in this Section III.B, and any profits realized on trades
within the proscribed periods described below shall be disgorged:
1. WITH RESPECT TO ALL CLIENTS:
-3-
<PAGE>
a) CANDIDATES FOR APPROVED LIST. If a security is under
active consideration for addition to the Approved List, it may
not be purchased by any principal or employee who is privy to
such information. More specifically, if the individual intends to
recommend a security to our firm or knows that a security is
being actively considered by the research working groups for
inclusion on the Approved List, it may not be purchased by that
individual.
b) SECURITIES ON APPROVED LIST. When a security is added to
the Approved List, it may not be purchased personally by a
principal or employee for one month. If a personal purchase is
made within the one month period, the Compliance Officer will
require the individual to sell the security and to absorb any
loss of capital that may occur; if the sale produces a profit,
the individual will be required to turn over such profit, in the
form of cash.
c) SECURITIES ON (OR ANTICIPATED CANDIDATES FOR) RECOMMENDED
SELL LIST. A security that is widely held by clients may not be
sold personally by a principal or employee on the basis of
investment considerations if it is known or can reasonably be
anticipated that the security may be recommended for sale
generally to clients. If the firm recommends the sale of a stock
to clients, the stock may not be sold for one month, or the date
following the elimination of such security from clients'
portfolios, whichever comes first.
d) SECURITIES ON PROSCRIBED LIST. A security that is on the
"Proscribed List" may not be purchased by any principal or
employee. If, however, a purchase is proscribed because of the
size of our clients' holdings of an issue, an investment may be
made, or an existing investment increased, up to a total value of
$50,000 at cost.
2. WITH RESPECT TO REGISTERED INVESTMENT COMPANY CLIENTS:
-4-
<PAGE>
a) PORTFOLIO MANAGERS AND CERTAIN OTHER ADVISORY PERSONNEL;
OTHER PRINCIPALS AND EMPLOYEES. Each portfolio manager for a
registered investment company client, and any principal or
employee who is privy to information available to such portfolio
manager, is prohibited from buying or selling a security within
at least seven calendar days before and after such client trades
in that security. Notwithstanding the foregoing, a transaction by
a portfolio manager, principal or employee that had been approved
by the Compliance Officer (defined in Article V below) and
occurring prior to a client transaction shall not be prohibited.
Each other person covered by the Code is prohibited from
executing a securities transaction on the day during which any
registered investment company client of our firm has a pending
"buy" or "sell" order in that same security until that order is
executed or withdrawn.
b) SHORT-TERM TRADING PROFITS. Principals and employees are
prohibited from profiting from a purchase and sale, or sale and
purchase, of the same or an equivalent security within any 30
calendar day period.
C. DISCLOSURE AS A CONDITION TO TRANSACTIONS
-----------------------------------------
1) STOCK PROPONENT'S PERSONAL OWNERSHIP. No principal or employee
may propose our firm's recommending the purchase of a specific
security to clients, unless such proponent first discloses to our
firm's investment committee his or her personal position in that
security and discloses any transaction in the security during the
preceding six months.
2) PRIVATE PLACEMENTS. No principal or employee who has been
authorized pursuant to Section V.2 to acquire securities in a
private placement may participate in any subsequent investment
consideration by, or on behalf of, one of our clients in such
issuer, unless that individual first discloses his or her
investment to such client and our firm's investment committee. In
such circumstances, the client's decision to purchase securities
of the issuer will be subject to an independent review by
appropriate personnel of our firm who have no personal interest
in the issuer.
D. OUTSIDE ACTIVITIES
------------------
1) SERVICE AS A DIRECTOR OR TRUSTEE. Unless prior permission is
granted by a vote of the principals, no principal or employee of
our firm may serve as a director of a corporation, or trustee of
a trust, whose interests are publicly traded.
-5-
<PAGE>
2) PARTICIPATION IN, OR SUBSTANTIVE OWNERSHIP OF, OTHER BUSINESS.
Outside business or investment activities that detract from an
individual's effectiveness as an investment counselor are
undesirable and, therefore, are strongly discouraged.
Participation in outside business or investment activities must
be reported to our firm. This includes substantive ownership, in
any form, of other businesses.
3) APPROVAL OF FIDUCIARY APPOINTMENTS. No principal or employee
shall accept an appointment or act in a fiduciary capacity as an
executor, trustee, or attorney in fact for non-clients (other
than for family members) until such appointment is approved by
the head of the Private Client Group. This activity is
discouraged because it is time-consuming by nature, although it
is recognized that it cannot always be avoided. The firm
encourages its principals to act as trustees for clients,
although this must be pre-approved by the head of the Private
Client Group.
IV. EXEMPTED TRANSACTIONS
---------------------
The prohibitions of Section III.B will not apply to the following
transactions (subject to any preclearance requirements of Article V
below):
1) Purchases or sales effected in any account over which the principal
or employee has no direct or indirect influence or control or in any
account of the principal or employee that is managed on a
discretionary basis by a person other than such principal or employee
and with respect to which such principal or employee does not in fact
influence or control such transactions.
2) Purchases or sales of securities that are not eligible for purchase
or sale by any of our clients.
3) Purchases or sales that are non-volitional on the part of our
personnel or any of our clients.
4) Purchases that are part of an automatic dividend reinvestment plan.
5) Purchases effected upon the exercise of rights issued by an issuer
PRO RATA to all holders of a class of its securities, to the extent
such rights were acquired from such issuer, and sales of such rights
so acquired.
-6-
<PAGE>
6) Any equity securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 500
shares or less in the aggregate, if the issuer is listed on The New
York Stock Exchange or has a market capitalization (outstanding shares
multiplied by the current price per share) greater than $1 billion (or
a corresponding market capitalization in foreign markets).
7) Any fixed income securities transaction, or series of related
transactions effected over a 30 calendar day period, involving 25
units ($25,000 principal amount) or less in the aggregate.
8) Purchases or sales of securities that receive the prior approval of
the "Preclearance Officer," as defined in Article V below, based on a
determination that no client accounts are prejudiced and that such
purchases or sales are not likely to have any economic impact on any
of our clients or on their ability to purchase or sell securities of
the same class or other securities of the same issuer.
V. PRECLEARANCE
------------
1) GENERAL RULE. Principals and employees must preclear all personal
securities investments with the exception of those identified in
Sections 1, 3 and 4 of Article IV above. All requests for preclearance
must be submitted for approval to the "Preclearance Officer" who shall
be any of the firm's transaction coordinators or, in such persons'
absence or in the event of any such person's personal interest in such
transaction, the Compliance Officer. All approved orders must be
executed by the close of business on the day preclearance is granted;
provided, however, that approved orders for securities traded in
foreign markets may be executed within two business days from the date
preclearance is granted. If any order is not timely executed, a
request for preclearance must be resubmitted.
2) PRIVATE PLACEMENTS. Prior to a principal's or an employee's
purchasing an interest in a private offering or a closely held
security, the Compliance Officer must grant express approval upon a
determination that any client account for which such investment would
be suitable was already considered with respect to such investment
opportunity.
3) GREATER THAN 1/2 OF 1% INTEREST IN PUBLIC COMPANY. Without the
express prior approval of the Preclearance Officer, no principal or
employee shall purchase, directly or indirectly, the stock of any
public company if immediately after such transaction his or her
interest in the company would be more than 1/2 of 1% of its
outstanding stock.
-7-
<PAGE>
VI. REPORTING REQUIREMENTS AND PROCEDURES
-------------------------------------
1) Within 10 days after the end of each month, each principal and each
employee must report all personal security transactions for that month
to the Compliance Department.
2) Each principal and each employee having investment responsibilities
must provide reports of no trading activity within the same 10-day
period. If any other employee who is covered by the Code does not
submit a monthly report, it will be assumed that such employee had no
reportable trading activity during the month.
3) Except as may otherwise be required by Section VI.2 of the Code, if
an employee has no trading activity during a calendar quarter, a
report to that effect is required from such employee within 10 days
after the end of the quarter.
4) All reports made pursuant to this Article VI of the Code with
respect to transactions not executed through the firm's transaction
coordinators shall be in writing and submitted to the Compliance
Officer on the form provided as Annex C to the Code. (Copies of this
form are available from the Compliance Department).
VII. RECORDS OF SECURITIES TRANSACTIONS AND POST-TRADE REVIEW
--------------------------------------------------------
Each principal and employee is required to direct his or her broker(s)
to supply to the Compliance Officer, on a timely basis, duplicate
copies of confirmations of all personal securities transactions with
respect to transactions not executed through the firm's transaction
coordinators and in which such persons have a beneficial ownership
interest. (For purposes of the Code, "beneficial ownership" shall be
determined in accordance with the definition of beneficial ownership
in paragraph (a)(2) of Rule 16a-1 under the Securities Exchange Act of
1934, which is set forth in Annex B to the Code, except that the
determination of direct or indirect beneficial ownership shall apply
to all securities that a principal or employee has or acquires.) Each
principal and employee is required, upon adoption of the Code or
commencement of employment, to identify each of his or her brokers on
the form attached as Annex D to the Code.
-8-
<PAGE>
The Compliance Officer will periodically review the personal
investment activity of all principals and employees, and a principal
of the firm will periodically review the personal investment activity
of the Compliance Officer.
VIII. CONFIDENTIALITY OF RELATIONSHIPS WITH CLIENTS
----------------------------------------------
1) Names of present and former clients should not be disclosed to any
person not associated with our firm. An exception may be made if the
client/firm relationship is a matter of public knowledge.
2) A client's name may not be given as a reference to a prospective
client without the client's prior approval.
3) All information concerning our clients' financial and other
circumstances must be kept confidential.
IX. INTERPRETATIONS
---------------
Any questions concerning any provision of the Code should be raised
with the Compliance Officer.
X. INDEPENDENT DIRECTORS/TRUSTEES OF INVESTMENT COMPANY CLIENTS
------------------------------------------------------------
It is believed that the provisions of the Code will provide adequate
protection to shareholders of our investment company clients. We do
not inform such clients' independent directors/trustees of investment
company transactions until 15 days after they have been effected;
hence, the directors/trustees are sheltered from such sensitive
information.
XI. DISCLOSURE OF PERSONAL HOLDINGS
-------------------------------
Upon adoption of the Code or commencement of employment, and annually
thereafter, principals and employees must disclose in writing to the
Compliance Officer all personal securities holdings on the form
attached as Annex E to the Code.
XII. CERTIFICATION OF COMPLIANCE WITH THE CODE
-----------------------------------------
Principals and employees are required to certify annually, on the form
attached as Annex E to the Code, the following:
a) that they have read and understand the Code;
-9-
<PAGE>
b) that they recognize that they are subject to the Code;
c) that they have complied with the requirements of the Code; and
d) that they have disclosed or reported all personal securities
transactions required to be disclosed or reported pursuant to the
requirements of the Code.
XIII. CODE VIOLATIONS
---------------
All violations of the Code will be reported to the principals of our
firm at least quarterly. The principals may take such action as they
deem appropriate, including, among other things, censure, suspension
or termination of service.
XIV. REVIEW BY THE PRINCIPALS
------------------------
The Compliance Officer of the firm shall furnish our principals with
an annual report that at a minimum:
a) summarizes existing procedures concerning personal investing and
any changes in the procedures made during the preceding year;
b) identifies any violations requiring significant remedial action
during the preceding year; and
c) identifies any recommended changes in existing restrictions or
procedures based upon our experience under the Code, evolving
industry practices, or developments in applicable laws and
regulations.
Attachments
-10-
<PAGE>
ANNEX A
"Security" means any note, stock, treasury stock, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any profit-sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option or privilege on
any security (including a certificate of deposit) or on any group or index of
securities (including any interest therein or based on the value thereof), or
any put, call, straddle, option or privilege entered into on a national
securities exchange relating to foreign currency, or, in general, any interest
or instrument commonly known as a "security", or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of, or warrant or right to subscribe to or purchase, any of the foregoing, but
the term "security" shall not include securities issued or guaranteed as to
principal or interest by the United States, or by a person controlled or
supervised by and acting as an instrumentality of the Government of the United
States pursuant to authority granted by the Congress of the United States,
certificates of deposit for any of the foregoing, bankers' acceptances, bank
certificates of deposit, commercial paper and shares of registered open-end
investment companies.*
- ---------------------
* It is important to reiterate that any shares of our CLOSED-END
investment company client, Thermo Opportunity Fund, that are held,
purchased or sold by our principals or employees are subject to
reporting under the Code. Such shares held, purchased or sold by our
principals and certain professional associates are also subject to
reporting (on Forms 3 and 4, and possibly Form 5) under Section 16(a)
of the Securities Exchange Act of 1934.
A-1
<PAGE>
ANNEX B
". . . [T]he term "beneficial owner" shall mean any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares a direct or indirect pecuniary interest
in the equity securities, subject to the following:
(i) The term "pecuniary interest" in any class of equity securities
shall mean the opportunity, directly or indirectly, to profit or share in any
profit derived from a transaction in the subject securities.
(ii) The term "indirect pecuniary interest" in any class of equity
securities shall include, but not be limited to:
(A) Securities held by members of a person's immediate family
sharing the same household; provided, however that the presumption of
such beneficial ownership may be rebutted; see also Rule 16a-1(a)(4);
(B) A general partner's proportionate interest in the portfolio
securities held by a general or limited partnership. The general
partner's proportionate interest, as evidenced by the partnership
agreement in effect at the time of the transaction and the
partnership's most recent financial statements, shall be the greater
of: (1) the general partner's share of the partnership's profits,
including profits attributed to any limited partnership interests held
by the general partner and any other interests in profits that arise
from the purchase and sale of the partnership's portfolio securities;
or (2) the general partner's share of the partnership capital account,
including the share attributable to any limited partnership interest
held by the general partner.
(C) A performance-related fee, other than an asset-based fee,
received by any broker, dealer, bank, insurance company, investment
company, investment adviser, investment manager, trustee or person or
entity performing a similar function; provided, however, that no
pecuniary interest shall be present where: (1) the performance-related
fee, regardless of when payable, is calculated based upon net capital
gains and/or net capital appreciation generated from the portfolio or
from the fiduciary's overall performance over a period of one year or
more; and (2) equity securities of the issuer do not account for more
than 10 percent of the market value of the portfolio. A right to a
nonperformance-related fee alone shall not represent a pecuniary
interest in the securities;
(D) A person's right to dividends that is separated or separable
from the underlying securities. Otherwise, a right to dividends alone
shall not represent a pecuniary interest in the securities;
B-1
<PAGE>
(E) A person's interest in securities held by a trust, as
specified in Rule 16a-8(b); and
(F) A person's right to acquire equity securities through the
exercise or conversion of any derivative security, whether or not
presently exercisable.
(iii) A shareholder shall not be deemed to have a pecuniary interest
in the portfolio securities held by a corporation or similar entity in which the
person owns securities if the shareholder is not a controlling shareholder of
the entity and does not have or share investment control over the entity's
portfolio.
B-2
<PAGE>
ANNEX C
REPORT OF SECURITIES TRANSACTIONS
______________________________ For Month Ended _________________________
Name (Please Print) (see Sections VI.1 & VI.2 of Code)
OR
For Calendar Quarter Ended ______________
(see Section VI.3 of Code)
<TABLE>
<CAPTION>
==================================================================================================================================
Trade Date Check Type of Account
- ----------------------------------------------------------------------------------------------------------------------------------
No. of Shares Title of Security Bought Sold Price Name of Broker, Dealer or Personal Immed. Fiduciary*
Bank Family
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
==================================================================================================================================
</TABLE>
PLEASE CHECK APPROPRIATE BOX, THEN SIGN BELOW EVEN IF NO TRANSACTIONS ARE
REPORTED
[ ] The attached list and/or confirmations of outside brokers represents every
transaction in a security (reportable securities transactions do not
include U.S. Government Securities, money market instruments or open-end
investment companies) in which I had or by reason of which I acquired,
during the period covered by this report, any direct or indirect beneficial
ownership, as defined in Annex B to the Code of Ethics, or by accounts
(excluding client accounts of Brundage, Story and Rose, LLC) in connection
with which I participated in the decision-making.
[ ] I had NO reportable securities transactions during the period covered by
this report. (Reportable securities transactions do not include U.S.
Government securities, money market instruments or open-end investment
companies).
[ ] I received pre-clearance for each security transaction that is reported
herein. My related pre-clearance certificates are attached to this report.
(This requirement is applicable to each principal and to each employee
having investment responsibilities or access to information relating to
security transactions.)
Signature: ______________________________________
If the transaction is other than a sale or purchase, please explain the nature
of the transaction on the reverse side of this form.
* If "fiduciary", please explain.
NOTE 1: This report shall not be construed as an admission by me that I have any
direct or indirect beneficial ownership in the securities reported herein that
have been marked by me with an asterisk(*). Such transactions are reported
solely to meet the standard imposed by Rule 17j-1 and Release No. 11421 under
the Investment Company Act of 1940.
C-1
<PAGE>
ANNEX D
BROKERAGE ACCOUNT INFORMATION
The following is a list of all brokerage accounts in which I maintain
beneficial ownership (as defined in Annex B to the Code of Ethics):
FIRM/ADDRESS/BROKER ACCOUNT NUMBER
------------------- --------------
- ------------------------------------------ --------------------------------
- ------------------------------------------ --------------------------------
- ------------------------------------------ --------------------------------
- ------------------------------------------ --------------------------------
- ------------------------------------------ --------------------------------
________ I do not maintain any type of brokerage account.
- ---------------------------- -----------------------------------
Date Signature
-----------------------------------
Print
D-1
<PAGE>
ANNEX E
CERTIFICATION
-------------
I hereby acknowledge receipt of the Amended and Restated Code of Ethics
dated October 13, 1997 (the "Code"). I certify that I have read and understand
the Code and I agree that I am subject to its provisions.
Furthermore, I certify that with respect to the preceding calendar year I
have complied with the Code and that I have reported all personal securities
transactions in accordance with the requirements of the Code.
Attached to this Certification [IS] [ARE]* my year-end brokerage
statement[S]* disclosing as of the date stated on such brokerage statement[S]*
all securities holdings in which I have a beneficial ownership (as defined in
Annex B to the Code). [SET FORTH BELOW IS A LIST OF SECURITIES THAT I
BENEFICIALLY OWN THAT ARE NOT REFLECTED ON MY BROKERAGE STATEMENT[S]* (E.G.,
PRIVATE PLACEMENTS):]*
- ------------------------------ -----------------------------------
Date Signature
-----------------------------------
Please Print
- ------------------------------
*
AMENDED CODE OF ETHICS
COUNTRYWIDE FINANCIAL SERVICES, INC.
Adopted May 25, 1999
I. STATEMENT OF GENERAL PRINCIPLES
This Code of Ethics has been adopted by Countrywide Financial Services,
Inc., Countrywide Investments, Inc., Countrywide Fund Services, Inc. and CW
Fund Distributors, Inc. (collectively "Countrywide") for the purpose of
instructing all employees, officers and directors of Countrywide in their
ethical obligations and to provide rules for their personal securities
transactions. All employees, officers and directors owe a fiduciary duty to
the clients of Countrywide. A fiduciary duty means a duty of loyalty,
fairness and good faith towards clients, and the obligation to adhere not
only to the specific provisions of this Code but to the general principles
that guide the Code. These general principles are:
o The duty at all times to place the interests of clients first;
o The requirement that all personal securities transactions be
conducted in a manner consistent with the Code of Ethics and in
such a manner as to avoid any actual or potential conflict of
interest or any abuse of any individual's position of trust and
responsibility; and
o The fundamental standard that employees, officers and directors
should not take inappropriate advantage of their positions, or of
their relationship with clients.
<PAGE>
It is imperative that the personal trading activities of the employees,
officers and directors of Countrywide be conducted with the highest
regard for these general principles in order to avoid any possible
conflict of interest, any appearance of a conflict, or activities that
could lead to disciplinary action. This includes executing transactions
through or for the benefit of a third party when the transaction is not
in keeping with the general principles of this Code. All personal
securities transactions must also comply with our Insider Trading
Policy and Procedures of Countrywide Investments, Inc. and the
Securities and Exchange Commission's Rule 17j-1. Under this rule, no
Employee may:
o employ any device, scheme or artifice to defraud any client of
Countrywide;
o make to any client of Countrywide any untrue statement of a
material fact or omit to state to such client a material fact
necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading;
o engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any client of
Countrywide; or
-2-
<PAGE>
o engage in any manipulative practice with respect to any client of
Countrywide.
II. DEFINITIONS
A. ADVISORY CLIENTS: all Countrywide Funds and all privately managed
advisory accounts of Countrywide.
B. ADVISORY EMPLOYEES: Employees of Countrywide Investments, Inc. who
participate in or make recommendations with respect to the purchase or sale
of securities including fund portfolio managers and assistant fund
portfolio managers. The Compliance Officer will maintain a current list of
all Advisory Employees.
C. BENEFICIAL INTEREST: ownership or any benefits of ownership, including
the opportunity to directly or indirectly profit or otherwise obtain
financial benefits from any interest in a security.
D. COMPLIANCE OFFICER: Michele Hawkins or, in her absence, an alternate
Compliance Officer (Maryellen Peretzky, Robert Leshner or Susan Flischel),
or their respective successors in such positions.
E. EMPLOYEE ACCOUNT: each account in which an Employee or a member of his
or her family has any direct or indirect Beneficial Interest or over which
such person exercises control or influence, including, but not limited to,
any joint account, partnership, corporation, trust or estate. An Employee's
family members include the Employee's spouse, minor children, any person
living in the home of the Employee, and any
-3-
<PAGE>
relative of the Employee (including in-laws) to whose support an Employee
directly or indirectly contributes.
F. EMPLOYEES: the employees, officers, and directors of Countrywide,
including Advisory Employees. The Compliance Officer will maintain a
current list of all Employees.
G. EXEMPT TRANSACTIONS: transactions which are 1) effected in an amount or
in a manner over which the Employee has no direct or indirect influence or
control, 2) pursuant to a systematic dividend reinvestment plan, systematic
cash purchase plan or systematic withdrawal plan, 3) in connection with the
exercise or sale of rights to purchase additional securities from an issuer
and granted by such issuer pro-rata to all holders of a class of its
securities, 4) in connection with the call by the issuer of a preferred
stock or bond, 5) pursuant to the exercise by a second party of a put or
call option, 6) closing transactions no more than five business days prior
to the expiration of a related put or call option, or 7) with respect to
any affiliated or unaffiliated registered open-end investment company.
H. COUNTRYWIDE FUNDS: any series of Countrywide Investment Trust,
Countrywide Strategic Trust or Countrywide Tax-Free Trust.
I. RECOMMENDED LIST: the list of those Securities which Countrywide
currently is recommending to Advisory Clients for purchase or sale.
-4-
<PAGE>
J. RELATED SECURITIES: securities issued by the same issuer or issuer under
common control, or when either security gives the holder any contractual
rights with respect to the other security, including options, warrants or
other convertible securities.
K. SECURITIES: any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, pre-organization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas or other mineral rights, or, in general, any
interest or instrument commonly known as a "security," or any certificate
or interest or participation in temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to subscribe to or purchase
(including options) any of the foregoing; except for the following: 1)
securities issued by the government of the United States, 2) bankers'
acceptances, 3) bank certificates of deposit, 4) commercial paper, 5) debt
securities, provided that (a) the security has a credit rating of Aa or Aaa
from Moody's Investor Services, AA or AAA from Standard & Poor's Ratings
Group, or an
-5-
<PAGE>
equivalent rating from another rating service, or is unrated but comparably
creditworthy, (b) the security matures within twelve months of purchase,
(c) the market is very broad so that a large volume of transactions on a
given day will have relatively little effect on yields, and (d) the market
for the instrument features highly efficient machinery permitting quick and
convenient trading in virtually any volume, and 6) shares of registered
open-end investment companies.
L. SECURITIES TRANSACTION: the purchase or sale, or any action to
accomplish the purchase or sale, of a Security for an Employee Account.
III. PERSONAL INVESTMENT GUIDELINES
A. Personal Accounts and Pre-Clearance
1. Employees must conduct all securities transactions for Employee
Accounts through a Countrywide account, unless the Employee gives
prior written notice to the Compliance Officer of an account with
another brokerage firm for transactions in registered, open-end
investment company shares only. If such notice is given, the
Employee may, subject to this Code, conduct registered, open-end
investment company transactions through that brokerage firm.
2. Employees must obtain prior written permission from the
Compliance Officer to open or maintain a margin
-6-
<PAGE>
account, or a joint or partnership account with persons other
than the Employee's spouse, parent, or child (including custodial
accounts).
3. No Employee may execute a Securities Transaction without first
obtaining Pre-Clearance from the Compliance Officer. Prior to
execution the Employee must submit the Pre-Clearance form to the
Compliance Officer, or in the case of a Pre-Clearance request by
the Compliance Officer, to the alternate Compliance Officer. An
Employee may not submit a Pre-Clearance request if, to the
Employee's knowledge at the time of the request, the same
Security or a Related Security is being actively considered for
purchase or sale, or is being purchased or sold, by an Advisory
Client.
4. Advisory Employees may not execute a Securities Transaction while
at the same time recommending contrary action to clients.
5. Settlement of Securities Transactions must be made on or before
settlement date. Extensions and pre-payments are not permitted.
6. The Personal Investment Guidelines in this section III do not
apply to Exempt Transactions. Employees must remember that
regardless of the transaction's status as exempt or not exempt,
the Employee's fiduciary obligations remain unchanged.
-7-
<PAGE>
7. Directors of Countrywide who (i) are not directly employed by
Countrywide and (ii) do not in the ordinary course of fulfilling
the duties of that position participate in or make
recommendations with respect to the purchase or sale of
Securities by Advisory Clients, are subject at all times to the
fiduciary obligations described in this Code; provided, however,
that the Personal Investment Guidelines and Compliance Procedures
in Section III and IV of this Code apply to such directors only
if the director knew or, in the ordinary course of fulfilling the
duties of that position, should have known, that during the
fifteen days immediately preceding or after the date of the
director's transaction that the same Security or a Related
Security was or was to be purchased or sold by an Advisory Client
or that such purchase or sale for an Advisory Client was being
considered, in which case such Sections apply only to such
transaction.
B. Limitations on Pre-Clearance
1. After receiving a Pre-Clearance request, the Compliance Officer
will promptly review the request and will deny the request if the
Securities Transaction will violate this Code.
-8-
<PAGE>
2. Employees may not execute a Securities Transaction on a day
during which a purchase or sell order in that same Security or a
Related Security is pending for, or is being actively considered
on behalf of, an Advisory Client. In order to determine whether a
Security is being actively considered on behalf of an Advisory
Client, the Compliance Officer will consult the current
Recommended List and, in the case of non-equity Securities,
consult each Advisory Employee responsible for investing in
non-equity Securities for any Advisory Client. Securities
Transactions executed in violation of this prohibition shall be
unwound or, if not possible or practical, the Employee must
disgorge to the appropriate Countrywide Fund, as determined by
the Compliance Officer (or, if disgorgement to a Countrywide Fund
is inappropriate, to a charity chosen by the Compliance Officer),
the value received by the Employee due to any favorable price
differential received by the Employee. For example, if the
Employee buys 100 shares at $10 per share, and a Countrywide Fund
buys 1000 shares at $11 per share, the Employee would pay $100
(100 shares x $1 differential) to the Countrywide Fund.
-9-
<PAGE>
3. An Advisory Employee may not execute a Securities Transaction
within seven (7) calendar days after a transaction in the same
Security or a Related Security has been executed on behalf of a
Countrywide Fund unless the Countrywide Fund's entire position in
the Security has been sold prior to the Advisory Employee's
Securities Transaction and the Advisory Employee is also selling
the Security. If the Compliance Officer determines that a
transaction has violated this prohibition, the transaction shall
be unwound or, if not possible or practical, the Advisory
Employee must disgorge to the appropriate Countrywide Fund or
Funds the value received by the Advisory Employee due to any
favorable price differential received by the Advisory Employee.
4. Pre-Clearance requests involving a Securities Transaction by an
Employee within fifteen calendar days after any Advisory Client
has traded in the same Security or a Related Security will be
evaluated by the Compliance Officer to ensure that the proposed
transaction by the Employee is consistent with this Code and that
all contemplated Advisory Client activity in the Security has
been completed. It is wholly within the Compliance Officer's
discretion to
-10-
<PAGE>
determine when Pre-Clearance will or will not be given to an
Employee if the proposed transaction falls within the fifteen day
period.
5. Pre-Clearance procedures apply to any Securities Transactions in
a private placement. In connection with a private placement
acquisition, the Compliance Officer will take into account, among
other factors, whether the investment opportunity should be
reserved for Advisory Clients, and whether the opportunity is
being offered to the Employee by virtue of the Employee's
position with Countrywide. Employees who have been authorized to
acquire securities in a private placement will, in connection
therewith, be required to disclose that investment if and when
the Employee takes part in any subsequent investment in the same
issuer. In such circumstances, the determination by an Advisory
Client to purchase Securities of that issuer will be subject to
an independent review by personnel of the Countrywide with no
personal interest in the issuer.
6. Employees are prohibited from acquiring any Securities in an
initial public offering. This restriction is imposed in order to
preclude any possibility of an Employee profiting improperly from
the Employee's
-11-
<PAGE>
position with Countrywide, and applies only to the Securities
offered for sale by the issuer, either directly or through an
underwriter, and not to Securities purchased on a securities
exchange or in connection with a secondary distribution.
7. Employees are prohibited from acquiring low priced equity
securities (or "penny stock"), defined as those equity securities
trading below $5 per share.
C. Other Restrictions
1. If a Securities Transaction is executed on behalf of a
Countrywide Fund within seven (7) calendar days after an Advisory
Employee executed a transaction in the same Security or a Related
Security, the Compliance Officer will review the Advisory
Employee's and the Countrywide Fund's transactions to determine
whether the Advisory Employee did not meet his or her fiduciary
duties to Advisory Clients in violation of this Code. If the
Compliance Officer determines that the Advisory Employee's
transaction violated this Code, the transaction shall be unwound
or, if not possible or practical, the Advisory Employee must
disgorge to the appropriate Countrywide Fund or Funds the value
received by the Advisory Employee due to any favorable price
differential received by the Advisory Employee.
-12-
<PAGE>
2. Employees are prohibited from serving on the boards of directors
of publicly traded companies, absent prior authorization in
accord with the general procedures of this Code. The
consideration of prior authorization will be based upon a
determination that the board service will be consistent with the
interests of Advisory Clients. In the event that board service is
authorized, Employees serving as directors will be isolated from
other Employees making investment decisions with respect to the
securities of the company in question.
3. No Employee may accept from a customer or vendor an amount in
excess of $100 per year in the form of gifts or gratuities, or as
compensation for services. If there is a question regarding
receipt of a gift, gratuity or compensation, it is to be reviewed
by the Compliance Officer.
IV. COMPLIANCE PROCEDURES
A. Employee Disclosure and Certification
1. At the commencement of employment with Countrywide, each Employee
must certify that he or she has read and understands this Code
and recognizes that he or she is subject to it, and must disclose
all personal Securities holdings.
-13-
<PAGE>
2. The above disclosure and certification is also required annually,
along with an additional certification that the Employee has
complied with the requirements of this Code and has disclosed or
reported all personal Securities Transactions required to be
disclosed or reported pursuant to the requirements of this Code.
B. Pre-Clearance
1. Advisory Employees will maintain an accurate and current
Recommended List at all times, updating the list as necessary.
The Advisory Employees will submit all Recommended Lists to the
Compliance Officer as they are generated, and the Compliance
Officer will retain the Recommended Lists for use when reviewing
Employee compliance with this Code. Upon receiving a
Pre-Clearance request, the Compliance Officer will contact the
trading desk and all Advisory Employees to determine whether the
Security the Employee intends to purchase or sell is or was owned
within the past fifteen (15) days by an Advisory Client, and
whether there are any pending purchase or sell orders for the
Security. The Compliance Officer will determine whether the
Employee's request violates any prohibitions or restrictions set
out in this Code.
-14-
<PAGE>
2. If authorized, the Pre-Clearance is valid for orders placed by
the close of business on the second trading day after the
authorization is granted. If during the two day period the
Employee becomes aware that the trade does not comply with this
Code or that the statements made on the request form are no
longer true, the Employee must immediately notify the Compliance
Officer of that information and the Pre-Clearance may be
terminated. If during the two day period the trading desk is
notified that a purchase or sell order for the same Security or
Related Security is pending, or is being considered on behalf of
an Advisory Client, the trading desk will not execute the
Employee Transaction and will notify the Employee and the
Compliance Officer that the Pre-Clearance is terminated.
C. Compliance
1. All Employees must direct their broker, dealer or bank to send
duplicate copies of all confirmations and periodic account
statements directly to the Compliance Officer. Each Employee must
report, no later than ten (10) days after the close of each
calendar quarter, on the Securities Transaction Report form
provided by
-15-
<PAGE>
Countrywide, all transactions in which the Employee acquired any
direct or indirect Beneficial Interest in a Security and certify
that he or she has reported all transactions required to be
disclosed pursuant to the requirements of this Code.
2. The Compliance Officer will spot check the trading confirmations
provided by brokers to verify that the Employee obtained any
necessary Pre-Clearance for the transaction. On a quarterly basis
the Compliance Officer will compare all confirmations with the
Pre-Clearance records, to determine, among other things, whether
any Advisory Client owned the Securities at the time of the
transaction or purchased or sold the security within fifteen (15)
days of the transaction. The Employee's annual disclosure of
Securities holdings will be reviewed by the Compliance Officer
for compliance with this Code, including transactions that reveal
a pattern of trading inconsistent with this Code.
3. If an Employee violates this Code, the Compliance Officer will
report the violation to the management personnel of Countrywide
for appropriate remedial action which, in addition to the actions
specifically delineated in other sections of this Code, may
include a reprimand of the Employee, or suspension or termination
of the Employee's relationship with Countrywide.
-16-
<PAGE>
4. The management personnel of Countrywide will prepare an annual
report to the board of directors of Countrywide that summarizes
existing procedures and any changes in the procedures made during
the past year. The report will identify any violations of this
Code, any significant remedial action during the past year and
any instances when a Securities Transaction was executed on
behalf of a Countrywide Fund within seven (7) calendar days after
an Advisory Employee executed a transaction but no remedial
action was taken. The report will also identify any recommended
procedural or substantive changes to this Code based on
management's experience under this Code, evolving industry
practices, or legal developments.
-17-
<PAGE>
EMPLOYEE ACKNOWLEDGMENT FORM
I hereby acknowledge that I have received, read and understand the Code of
Ethics of Countrywide Investments, Inc. and confirm that I agree to abide by it.
Employee Name (please print):
Signature: Date:
-------------------------------------
Comments:
-18-
<PAGE>
PRE-CLEARANCE OF SECURITY TRANSACTION
To: Michele Hawkins, Compliance Officer
From: __________________________________________
(Name of Employee)
Date: __________________________________
1. I hereby seek approval for the |_| purchase/|_| sale of _________ shares
or $__________ par value of _________________ for the cash or margin account of
_____________________.
2. The price per share or contract is approximately $_________________.
3. The transaction |_| is/|_| is not in connection with a private
placement.
4. Said transaction was recommended to me by _____________________________.
I have no knowledge of any Fund of Countrywide Investments or other account
managed by Countrywide Investments actively considering the purchase or sale of
this Security.
I have read the Countrywide Code of Ethics within the past year and
recognize that I am subject to it.
After inquiry, I am satisfied that this transaction is consistent with the
Code of Ethics and the Countrywide Investments, Inc.'s Insider Trading Policy.
If I become aware that the trade does not comply with this Code or that the
statements made on the request are no longer true, I will immediately notify the
Compliance Officer.
--------------------------------------
Signature of Employee
APPROVED: ______________________________ DATE: ______________________
TRANSACTION COMPLETED: Date ______ No. of Shares _________ Price
TRANSACTION UNFILLED: ____________________
-19-
<PAGE>
COMMENTS/FOLLOW UP:
- ------------------
(This authorization is valid until close of business on the second trading
day following authorization.
-20-
<PAGE>
_________ Quarter 199
Countrywide Funds
*Includes: Countrywide Investments, Inc., Countrywide Fund Services, Inc. and
Countrywide Financial Services, Inc.
QUARTERLY SECURITIES TRANSACTIONS REPORT FOR EMPLOYEES,
OFFICERS AND INTERESTED TRUSTEES
All employees, officers, and interested Trustees are required to report All
securities transactions in accounts over which they have direct or indirect
control or influence. Transactions in direct obligations of the United States
Treasury and transactions in shares of any mutual funds are exempt and need not
be reported. Each non-exempt transaction MUST be listed. DO NOT ATTACH BROKERAGE
REPORTS. If no transactions occurred during the reporting period, please check
NONE, sign and date the report. The report must be returned to the Legal
Department before the 10th day of the month following the end of the quarter.
|_| I have executed no Securities Transactions (other than those specifically
exempted by the Code) during the quarter.
|_| The following is a complete list of my Securities Transactions:
<TABLE>
<CAPTION>
============================================================================================================================
# OF SHARES OR
TRANSACTION PURCHASE, SALE, PRINCIPAL AMOUNT EXECUTING
SECURITY DATE OR OTHER OF SECURITY PRICE BROKER
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
============================================================================================================================
</TABLE>
I certify that I have read and understand the Code of Ethics and that I
have complied with the requirements of the Code of Ethics, including disclosure
of all Securities Transactions that require disclosure.
Printed Name: _______________________ Signature:_________________
Date: ____________________
THIS REPORT SHALL NOT BE CONSTRUED AS AN ADMISSION THAT THE REPORTING PERSON HAS
ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP IN ANY SECURITY TO WHICH THIS REPORT
RELATES.
