<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1996.
REGISTRATION NO. 33-56546
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
[X]
PRE-EFFECTIVE AMENDMENT NO. 5
POST-EFFECTIVE AMENDMENT NO. [_]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
[X]
AMENDMENT NO. 5
(CHECK APPROPRIATE BOX OR BOXES)
SANTA BARBARA GROUP OF MUTUAL FUNDS, INC.
(FORMERLY THE ASCHER FUNDS, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
333 SOUTH GRAND AVENUE, SUITE 4075, LOS ANGELES, CALIFORNIA 90071
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER: (213) 628-2907
STEVEN W. ARNOLD
333 SOUTH GRAND AVENUE, SUITE 4075
LOS ANGELES, CALIFORNIA 90071
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
ROBERT A. GRAHAM, JR., ESQ. PAUL F. ROYE, ESQ.
LAW OFFICES OF ROBERT A. GRAHAM, JR. DECHERT PRICE & RHOADS
41 E. FOOTHILL BLVD., SUITE 106 1500 K STREET, N.W., SUITE 500
ARCADIA, CA 91006 WASHINGTON, D.C. 20005
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. Registrant intends to file the notice required by Rule 24f-2 with
respect to its fiscal year ending March 31, 1997 on or before May 31, 1997.
The Registrant hereby amends this Registration Statement on such dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
THE STARBUCK TISDALE GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET
REQUIRED BY RULE 404 UNDER THE SECURITIES ACT OF 1933
PART A
<TABLE>
<CAPTION>
ITEM HEADING
---- -------
<C> <S> <C>
1. Cover Page........................................ Cover Page
2. Synopsis.......................................... Fund Expenses
3. Condensed Financial Information................... Not Applicable
4. General Description of Registrant................. The Fund; Investment Objective
and Policies; Other Investment
Policies and Their Related Risks
5. Management of the Fund............................ Management of the Company and the
Fund; Brokerage Commissions;
Other Information
6. Capital Stock and Other Securities................ Other Information; Taxation;
Dividends and Distributions
7. Purchase of Securities Being Offered.............. Purchase of Shares; Net Asset
Value
8. Redemption or Repurchase.......................... Redemption of Shares
9. Pending Legal Proceedings......................... Not Applicable
PART B
10. Cover Page........................................ Cover Page
11. Table of Contents................................. Table of Contents
12. General Information and History................... Not Applicable
13. Investment Objectives and Policies................ Investment Objective and Policies
and Associated Risks; Investment
Restrictions
14. Management of the Fund............................ Directors and Officers;
Investment Advisory and Other
Services
15. Control Persons and Principal..................... Not Applicable Holders of
Securities
16. Investment Advisory and Other Services............ Investment Advisory
17. Brokerage Allocation and Other Practices.......... Brokerage Allocation and
Portfolio Transactions
18. Capital Stock and Other Securities................ Other Information--Part A
19. Purchase, Redemption and Pricing of Securities
Being Offered.................................... Purchases, Redemption and Pricing
of Shares
20. Tax Status........................................ Tax Status
21. Underwriters...................................... Distribution of Fund Shares
22. Financial Statements.............................. Financial Statements
</TABLE>
<PAGE>
PROSPECTUS
THE STARBUCK TISDALE GROWTH AND INCOME FUND
333 South Grand Avenue, Suite 4075
Los Angeles, California 90071
Telephone No. (213) 628-2907
The Starbuck Tisdale Growth and Income Fund (the "Fund") is currently the sole
series of shares issued by The Santa Barbara Group of Mutual Funds, Inc. (the
"Company"), an open-end management investment company. The Fund's investment
objective is to provide shareholders with long-term capital appreciation and
reasonable current income. It seeks to achieve this objective by investing
primarily in a diversified portfolio of equity securities of companies that
have demonstrated superior prospects for long term earnings growth, increasing
cash flow returns on corporate assets and financial stability. Income is an
important consideration in the selection of investments and the Investment
Adviser will seek to minimize volatility (below that of the S&P 500) in
managing the Fund's portfolio. The Fund may invest in fixed income securities
to increase the Fund's overall return, reduce volatility of performance, and
protect portfolio value when bond yields are attractive relative to inflation
and individual stock price valuations. There can be no assurance that the
Fund's investment objective will be achieved. The net asset value per share of
the Fund will fluctuate in response to changes in market conditions and other
factors.
The Fund will be managed by SBG Capital Management, Inc (the "Fund Manager").
To provide primary investment advice to the Fund, SBG Capital Management has
entered into a Sub-Investment Advisory Contract with Starbuck, Tisdale &
Associates (the "Investment Adviser"). As of August 31, 1996, Starbuck Tisdale
& Associates, Inc. managed over $400 million of assets of institutional and
individual clients. Of this amount, approximately 65% was invested in equity
securities. See "Investment Adviser."
Under the Fund's Variable Pricing System, investors may select Class Y or
Class C shares, each with a public offering price that reflects different
sales charges and expense levels. See "Variable Pricing System," "Purchase of
Shares," and "Redemption of Shares." Class Y shares are offered at net asset
value without an initial or contingent deferred sales charge, and are
available only to institutional investors (as defined herein) with an initial
investment in the Fund of $25,000, and to Directors, officers and employees of
the Company, the Investment Adviser, or Fund Manager and the Distributor, as
well as private advisory clients of the Investment Adviser or Fund Manager.
Class C shares are offered at net asset value without an initial sales charge,
but subject to an annual Distribution and Service fee. See "Purchase of
Shares."
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund, including expenses. Please retain it
for future reference. A Statement of Additional Information, dated October ,
1996 containing additional and more detailed information about the Fund has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference into this Prospectus. It is available without charge
and may be obtained by writing or calling the Fund at 333 South Grand Avenue,
Los Angeles, California 90071/(805) SB FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is October , 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
PROSPECTUS 1
FUND EXPENSES 3
Example 4
VARIABLE PRICING SYSTEM 5
Differences Among the Classes 5
Factors to Consider in Choosing a Class of Shares 5
Sales Charges 5
Ongoing Annual Expenses 5
Other Information 6
THE FUND 6
INVESTMENT OBJECTIVE AND POLICIES 6
OTHER INVESTMENT POLICIES AND THEIR RELATED RISKS 8
Real Estate Investor Trusts 9
Commercial Paper 9
Repurchase Agreements 9
Borrowing 9
Lending of Portfolio Securities 10
MANAGEMENT OF THE COMPANY AND THE FUND 10
Fund Manager 10
Investment Adviser 10
Advisory Agreements 11
Administrator 12
DISTRIBUTOR 12
PURCHASE OF SHARES 13
REDEMPTION OF SHARES 14
Involuntary Redemption 15
Contingent Deferred Sales Charge--Class C Shares 15
NET ASSET VALUE 16
DIVIDENDS AND DISTRIBUTIONS 16
BROKERAGE COMMISSIONS 16
TAXATION 17
General Tax Information 17
Other Tax Laws 17
OTHER INFORMATION 17
Description of Shares 17
Performance Information 17
Custodian, Dividend Disbursing Agent, Transfer Agent and Registrar 18
Legal Matters 18
Financial Statements and Experts 18
Shareholder Inquiries 18
Voting Rights 18
</TABLE>
<PAGE>
FUND EXPENSES
The following expense table lists the costs and expenses that an investor will
incur either directly or indirectly as a shareholder of the Fund based on the
Fund's operating expenses.
<TABLE>
<CAPTION>
Class Y Class C
-------- --------
<S> <C> <C>
Shareholder Transaction Expenses:
Maximum Initial Sales Charge None None
(as a percentage of offering price)
Maximum contingent deferred sales charge None 1.00%/1/
(as a percentage of redemption proceeds)
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management fees 0.00%/2/ 0.00%/2/
(after expense reimbursement)
12b-1 fees None 1.00%/3/
Other Expenses 1.50%/4/ 1.50%/4/
-------- --------
Total Fund Operating Expenses 1.50% 2.50%
(after expense reimbursements)
</TABLE>
/1/ Investments in Class C shares are not subject to an initial sales charge;
however, a contingent deferred sales charge of 1% is imposed in the event of
certain redemption transactions within one year following such investments.
See "Redemption of Shares."
/2/ During the current fiscal year the Fund Manager and Investment Adviser
have agreed to voluntarily waive their Management Fees, which total 1.00%, to
the extent necessary to prevent the Total Operating Expenses from exceeding
1.50% for Class Y shares and 2.50% for Class C Shares. Absent such waivers the
total operating expenses for Class Y Shares and Class C shares would be 2.50%
and 3.50% respectfully.
/3/ Long term shareholders may pay more than the economic equivalent of the
maximum front end sales charge permitted by the National Association of
Securities Dealers.
/4/ Other Expenses are estimated.
The nature of the services for which the Fund is obligated to pay management
fees is described under "Management of the Company and the Fund." "Other
expenses" in the above table are estimated and include fees for shareholder
services, custodial fees, legal and accounting fees, printing costs,
registration fees, fees for any portfolio valuation service, the cost of
regulatory compliance, the costs associated with maintaining the Fund's legal
existence and the costs involved in communicating with shareholders. The
Fund's Fund Manager and Investment Adviser will voluntarily waive their
management fees to the extent necessary to prevent the Fund's Management Fees
and Other Expenses from exceeding 1.50% during the current fiscal year and to
prevent total operating expenses from exceeding any applicable state
limitation on mutual fund
3
<PAGE>
expenses. During the current fiscal year the Fund Manager has also voluntarily
agreed to reimburse the Fund to the extent necessary to prevent other expenses
to the Fund from exceeding 1.50% after waiver of the management fee of 1.00%.
After a substantial period, the Service and Distribution fees, applicable to
the Class C shares, may total more than the maximum sales expenses that would
have been permissible if imposed entirely as an initial sales charge.
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
an investment in the Fund. These amounts are based on payment by the Fund of
operating expenses at the levels set forth in the above table, and are also
based upon the following assumptions:
A shareholder would pay the following expenses on a $1,000 investment, (1)
assuming 5% annual return and (2) redemption at the end of the following time
periods:
Shareholder expenses with
Redemption at the end of one
year and three years
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
---------------
<S> <C> <C>
Class Y shares $ 15.00 $47.00
Class C shares $ 35.00 $78.00
</TABLE>
Shareholder expenses with no
Redemption
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
---------------
<S> <C> <C>
Class Y shares $ 15.00 $47.00
Class C shares $ 25.00 $78.00
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
The example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of future performance of the Fund.
4
<PAGE>
VARIABLE PRICING SYSTEM
Differences Among the Classes
The primary distinctions among the classes of the Fund's shares are in their
sales charge structures and ongoing expenses, as summarized in the table
below. Each class has distinct advantages and disadvantages for different
investors, and investors may choose the class that best suits their
circumstances and objectives.
<TABLE>
<CAPTION>
Annual 12b-1 Fees
Initial (as a % of average
Sales Charge daily net assets) Other Information
------------ ------------------ -----------------
<S> <C> <C> <C>
Class Y None None Minimum investment
of $25,000
required; available
only to
institutional
investors
Class C None Service fee of Shares subject to
0.25%; distribution contingent deferred
fee of 0.75% sales charge of 1%
for shares redeemed
within 1 year from
date of purchase
</TABLE>
Factors to Consider in Choosing a Class of Shares
In deciding which class of shares to purchase, investors should consider the
cost of sales charges, together with the cost of the ongoing annual expenses
described below, as well as any other relevant facts and circumstances.
Institutional Investors should purchase Class Y shares if the applicable
minimum investment can be met.
Sales Charges
Class Y and Class C shareholders pay no initial or contingent deferred sales
charges except as noted below. Thus, the entire amount of Class Y or C
shareholder's purchase price is immediately invested in the Fund. Class C
shares, are subject to a 1% contingent deferred sales charge if redeemed
within one year of the date of purchase.
Ongoing Annual Expenses
Class C shares pay an annual 12b-1 service fee of 0.25% of average daily net
assets. Class C shares pay an annual 12b-1 distribution fee of 0.75% of
average daily net assets. An investor should consider both ongoing annual
expenses in estimating the costs of investing in the Class C shares of the
Fund shares over other available investments.
5
<PAGE>
Expenses borne by classes may differ slightly in the event that other class-
specific expenses, such as transfer agency fees, printing and postage expenses
related to shareholder reports, prospectuses and proxies, and securities
registration fees, are allocated to a specific class. The example set forth
above under "Fund Expenses" shows the cumulative expenses an investor would pay
over periods of one and three years on a hypothetical investment in each class
of Fund shares, assuming an annual return of 5%.
Other Information
Investors should understand that distribution fees are intended to compensate
Ascher/Decision Services, Inc., principal underwriter of the Fund's shares, for
distribution services.
See "Distributor, " "Purchase of Shares," and "Redemption of Shares" for a more
complete description of the sales charges, service fees and distribution fees
applicable to the Class C shares of the Fund.
THE FUND
The Starbuck Tisdale Growth and Income Fund (the "Fund") is currently the sole
series of shares issued by The Santa Barbara Group of Mutual Funds, Inc. (the
"Company"), a diversified open-end management investment company. The Fund was
incorporated under the laws of the State of Maryland on December 30, 1992, and
has registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Fund's principal office is located at 333 South Grand Avenue, Suite
4075, Los Angeles, California 90071.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide shareholders with long-term
capital appreciation and reasonable current income. It seeks to achieve this
objective by investing primarily in a diversified portfolio of equity
securities of companies that have demonstrated superior prospects for long-term
earnings growth, increasing cash flow returns on corporate assets, financial
stability, and lower price per share volatility. Equity securities include
common and preferred stocks and securities convertible into or exchangeable for
common stocks, such as convertible preferred stocks, convertible debentures or
warrants. Income is an important consideration in the selection of investments
and the Investment Adviser will seek to minimize volatility (below that of the
S&P 500) in managing the Fund's portfolio. The Fund may invest in fixed income
securities to increase the Fund's overall return, reduce volatility of
performance, and protect portfolio value when bond yields are attractive
relative to inflation and individual stock price valuations.
Under normal market conditions, the Fund will invest a minimum of 65% of its
total assets in income producing equity and convertible securities. The Fund
may also invest in fixed income securities, including obligations of the United
States Government, its agencies and
6
<PAGE>
instrumentalities, corporate debt, preferred stocks, and warrants when, in the
view of the Investment Adviser, such investments are consistent with meeting
the Fund's investment objective. Fixed income securities purchased by the Fund
must be rated at least investment grade or better (within the four highest
rating categories of Standard & Poor's Corporation ("S&P") or Moody's Investor
Service, Inc. ("Moody's") or, if unrated, be of comparable quality as
determined by the Investment Adviser. These rating limitations apply at the
time of acquisition of the securities. If the rating of a security is
downgraded after purchase, the Fund may continue to hold such security if
deemed appropriate by the investment adviser. The Fund will not purchase or
hold securities below investment grade. Up to 20% of the Fund's total assets
may be held in the form of convertible debt which is unrated by S&P or Moody's
but must be judged by the Investment Advisor as investment grade or better.
The Fund's investment in equity securities will emphasize companies that have
a history of profit growth and dividend increases. Equity investments will be
concentrated primarily in larger capitalized companies. The Fund will also
invest in small and medium capital companies which are believed to exhibit
good prospects for long term appreciation.
The analysis used in the selection of investments in equity securities takes
into account the prospects for future growth and a company's competitive
leadership. The analysis also includes measures of profitability, such as a
company's ability to manage its business effectively by increasing cash flow
returns on corporate assets. In addition, economic valuations will be
considered relative to other companies with respect to assets, and expected
dividend and earnings growth.
Equity investments will be oriented towards long term holding periods as
opposed to short term market timing or trading. Under normal market
conditions, the Fund expects to be fully invested and management will not try
to time market swings. During periods of rising inflation rates, the Fund may
reduce its exposure to longer-term, fixed-income securities, if any, and
possibly equities to some degree.
Convertible securities may be emphasized in growth oriented companies where
there are no dividends paid on the common shares, or the current dividend
yields are low.
The Investment Adviser uses a bottom-up approach which focuses on the
fundamentals of individual stocks. This process leads to further analysis of
other opportunities in an industry group. At the same time, the investment
adviser is sensitive to the overall economics of an industry or sector and
will avoid groups with weak fundamentals.
No more than 5% of the Fund's assets, taken at market value at the time of
purchase, will be invested in the securities of any one company and the Fund
will own no more than 10% of any one company's outstanding voting securities.
No further investment will be made in any given industry group, if upon making
the proposed investment, 25% or more of the Fund's total assets will be
invested in such industry group.
7
<PAGE>
The Fund may invest in equity securities of companies that are real estate
investment trusts (REITS) traded on major U.S. exchanges or NASDAQ. No more
than 15% of the Funds total assets may be held in securities of REITS. The
specific risks of investments in REITS are summarized under "Other Investment
Policies and their Related risks."
The Fund may invest up to 15% of the value of its total assets in equity
securities of foreign issuers through sponsored or unsponsored American
Depositary Receipts ("ADRs") listed on a domestic securities exchange or
included in the NASDAQ National Market System. Ownership of unsponsored ADRs
may not entitle the Fund to material financial, or other reports from the
issuer, to which it would be entitled as the owner of sponsored ADRs. Dividend
payments on such securities may be subject to foreign withholding taxes and
other foreign taxes may apply. The investment by the Fund in foreign
securities involves considerations not typically associated with investing in
securities of domestic companies, including unfavorable changes in currency
rates and exchange control regulations, reduced and less reliable information
about issuers and markets, different accounting standards, illiquidity of
securities and markets, local economic or political instability and greater
market risk in general.
The Fund may invest up to 35% of its total assets in obligations of the U.S.
Government, its agencies or instrumentalities ("U.S. Government Securities"),
and money market instruments. The Fund could invest up to 100% of its assets
in U.S. Government securities and money market instruments for temporary
defensive purposes. The money market instruments in which the Fund may invest
are U.S. Government Securities, commercial paper, repurchase agreements, and
certificates of deposit and banker's acceptances issued by domestic branches
of U.S. banks having total assets in excess of $1 billion that are members of
the Federal Deposit Insurance Corporation. Debt securities with longer
maturities, which tend to produce higher yields, are subject to potentially
greater capital appreciation and depreciation than obligations with shorter
maturities. The market value of the Fund's debt securities will change in
response to changes in interest rates or the relative financial strengths of
each issuer.
The Fund intends to purchase and hold securities for long-term capital
appreciation and does not expect to trade for short-term gain. Accordingly, it
is anticipated that the annual portfolio turnover rate normally will not
exceed 40%.
The Fund's investment objective is a fundamental policy and may not be changed
without the authorization of the holders of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act). The Fund's non-
fundamental investment policies may be changed by the Company's Board of
Directors without shareholder approval.
OTHER INVESTMENT POLICIES AND THEIR RELATED RISKS
The Fund has adopted certain other policies as set forth below. For more
detailed information on the Fund's investment techniques and the associated
risks, see "Investment Objective and Policies and Associated Risks" in the
Statement of Additional Information.
8
<PAGE>
Real Estate Investor Trusts
The Fund may invest in REITS, which are trusts that pool investors funds for
investment primarily in commercial real estate. The investment in REITS may be
affected by changes in the value of the underlying property owned by the trust.
They are dependent upon management skill, may not be diversified and are
subject to the risk of financing real estate projects. REITS are also subject
to heavy cash flow dependency, defaults by borrowers, self liquidation and the
possibility of failing to qualify for the beneficial tax treatment available to
REITS under the Internal Revenue Code of 1986, as amended and to maintain
exemption from the 1940 Act. REITS may be subject to interest rate risks
similar to fixed income securities. In general, fixed income security prices
vary inversely with interest rates (when interest rates rise, prices fall; and,
conversely, when interest rates fall, prices rise). By investing in real estate
investment trusts indirectly through the Fund, a shareholder will bear not only
his or her proportionate share of expenses of the Fund, but also, indirectly,
similar expenses of the real estate investment trusts.
Commercial Paper
The Fund may invest in commercial paper which, at the date of investment, is
rated A-2 or higher by Standard & Poor's Corporation or Prime-2 or higher by
Moody's Investor's Service, Inc. Commercial paper represents short-term
unsecured promissory notes issued in bearer form by bank holding companies,
corporations and finance companies.
Repurchase Agreements
The Fund may, from time to time, enter into "repurchase agreements" pertaining
to the securities in which it may invest with securities dealers or member
banks of the Federal Reserve System. A repurchase agreement is considered a
loan and arises when a buyer such as the Fund purchases a security and
simultaneously agrees to resell it to the vendor at an agreed-upon future date,
normally one day or a few days later. The resale price is greater than the
purchase price, reflecting an agreed-upon interest rate which is effective for
the period of time the buyer's money is invested in the security and which is
related to the current market rate rather than the coupon rate on the purchased
security. Such agreements permit the Fund to keep all of its assets at work
while retaining "overnight" flexibility in pursuit of investments of a longer-
term nature. In the event of a vendor's bankruptcy, the Fund might be delayed
in, or prevented from, selling the collateral for the Fund's benefit.
Borrowing
The Fund is authorized to borrow money in amounts up to 5% of the value of its
total assets at the time of such borrowing for temporary purposes. However, the
Fund is authorized to borrow money up to 33 1/3 of its assets, as permitted by
the 1940 Act, for the purpose of meeting redemption requests. Borrowing by the
Fund creates an opportunity for greater total return but, at the same time,
increases exposure to capital risk. In addition, borrowed funds are subject to
interest costs that may offset or exceed the return earned on the borrowed
funds. However, the
9
<PAGE>
Fund will not purchase portfolio securities while borrowings exceed 5% of the
Fund's total assets. For more detailed information with respect to the risks
associated with borrowing, see the heading "Borrowing" in the Statement of
Additional Information.
Lending of Portfolio Securities
To enhance the return on its portfolio, the Fund may lend securities in its
portfolio representing up to 25% of its total assets, taken at market value, to
securities firms and financial institutions, provided that each loan is secured
continuously by collateral in the form of cash, high quality money market
instruments or short-term U.S. Government securities adjusted daily to have a
market value at least equal to or higher than the current market value of the
securities loaned. The risk in lending portfolio securities, as with other
extensions of credit, consists of possible delay in the recovery of the
securities or possible loss of rights in the collateral should the borrower
fail financially.
MANAGEMENT OF THE COMPANY AND THE FUND
The business and affairs of the Company are managed under the direction of the
Board of Directors. Information about the Company's Directors and executive
officers may be found in the Statement of Additional Information.
Fund Manager
SBG Capital Management, Inc. (the "Fund Manager") will manage the Fund's
business affairs and has entered into an Investment Advisory Agreement with The
Fund. Its principal office is located at 333 South Grand Avenue, Suite 4075,
Los Angeles, California 90071. A Sub-Investment Advisory Agreement (the "Sub-
advisory Agreement") has been entered into between the Fund Manager and
Starbuck, Tisdale & Associates, Inc. (the "Investment Adviser") who will
provide the primary and ongoing investment advice to the Fund. Neither the Fund
Manager nor the Investment Adviser have previously served as an investment
adviser to a registered investment company. Stephen Y. Ascher and Steven A.
Arnold own controling interests in the Fund Manager.
Investment Adviser
The Investment Adviser was founded in 1933 and was subsequently incorporated in
December, 1961. The Investment Adviser is located at 111 West Micheltorena
Street, Suite 210, Santa Barbara, California 93101. As of August 31, 1996, the
Investment Adviser managed $400 million of assets for various institutional
clients, including pension and profit sharing plans, foundations and companies,
as well as high net worth individuals. In addition, the Investment Adviser has
entered into wrap fee agreements with approximately three securities firms and
provides investment advisory services to individuals through the wrap fee
agreements.
The following Portfolio Managers share responsibility in managing the Fund's
portfolio:
L. David Tisdale, CFA--President and majority owner of Starbuck, Tisdale &
Associates is a native Californian who graduated from San Diego State
University in 1958 with a BA in Economics. He started with the Investment
Adviser in August of 1966. In 1968 he obtained his
10
<PAGE>
Chartered Financial Analyst (CFA) designation and in 1976 he gained the
Chartered Investment Counselor (C.I.C.) designation. Prior to joining Starbuck,
Tisdale, he managed bank assets and trust investments for San Diego Trust &
Savings Bank.
Donn V. Tognazzini--Executive Vice President of Starbuck, Tisdale & Associates
since December of 1986. Before joining the firm, he was Vice President and
Manager for First Boston Corporation in Zurich and later for Bache, Halsey,
Shields in Geneva. Mr. Tognazzini received his B.A. from Stanford in 1956 and
his MBA from Harvard in 1960. He is the portfolio manager for approximately 75
accounts and also is active in new business development and client contact.
Jon S. Bull, CFA--Executive Vice President was President and CEO of Santa
Barbara Capital Management (formerly Argus Investment Management) when it
merged with Starbuck Tisdale & Associates. Educated at the University of
California, Irvine, he is a Chartered Financial Analyst and a Chartered
Investment Counselor. He is a portfolio manager, and a member of the firm's
Investment Committee. Mr. Bull has twenty years experience in investment
management.
Todd D. Sullivan, CFA--Vice President and Portfolio Manager has been with
Starbuck, Tisdale & Associates since 1989. Formerly with Santa Barbara Savings
& Loan, he held a supervisory position in the Investment Operations Department.
He has a B.S. degree in Finance from California State University at Long Beach
and is a Chartered Financial Analyst.
Robin P. Purcell, CFA--Vice President joined Starbuck, Tisdale & Associates in
1995 as a portfolio manager. Prior to joining the firm, she was Vice President
of Santa Barbara Capital Management, where she served as an analyst and
portfolio manager. She received her B.A. in Business Economics from University
of California at Santa Barbara, is a Chartered Financial Analyst and a
Chartered Investment Counselor. Ms. Purcell has over 11 years experience in
investment management.
Advisory Agreements
Under the terms of an Investment Advisory Agreement with the Company on behalf
of the Fund, (the "Advisory Agreement"), the Fund Manager furnishes continuing
investment supervision to the Fund and is responsible for the management of the
Fund's portfolio. The responsibility for making decisions to buy, sell or hold
a particular security rests with the Investment Adviser, subject to review by
the Board of Directors. The Investment Adviser, pursuant to the Sub-Advisory
Agreement, makes the day-to-day decisions with regard to the Fund.
The Fund Manager and Investment Adviser furnish office space, equipment and
personnel in connection with the performance of their responsibilities. The
Fund pays all other expenses incurred in the operation of the Fund including,
but not limited to, brokerage and commission expenses; interest charges; fees
and expenses of legal counsel and independent auditors; the Fund's
organizational and offering expenses, whether or not advanced by the Fund
Manager; taxes and governmental fees; cost of share certificates and any other
expenses (including clerical expenses) of issuance, sale or repurchase of the
Fund's shares; membership fees in trade
11
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associations; expenses of registering and qualifying shares of the Fund for
sale under federal and state securities laws; expenses of printing and
distributing reports, notices and proxy materials to existing shareholders;
expenses of annual and special shareholders meetings; expenses of filing
reports and other documents with governmental agencies; charges and expenses
of the Fund's Administrator, custodian and registrar, transfer agent and
dividend disbursing agent; distribution and service fees; expenses of
disbursing dividends and distributions; compensation of the Fund's officers,
directors and employees who are not affiliated with the Fund Manager,
Investment Adviser or Administrator; travel expenses of Directors of the
Company for attendance at Board meetings; insurance expenses; indemnification
and other expenses not expressly provided for in the Advisory Agreement; and
any extraordinary expenses of a nonrecurring nature.
The Fund Manager and Investment Adviser have agreed that if in any fiscal year
the aggregate expenses of the Fund (including advisory and administrative
fees, but generally excluding 12b-1 fees, interest, taxes, brokerage and
extraordinary expenses) exceed the expense limitation of any state having
jurisdiction over the Fund, the Fund Manager and the Investment Adviser will,
to the extent required by law, reduce their fees from the Fund by the amount
of such excess expense, such amount to be allocated between them in the
proportions that the respective fees bear to the aggregate of such fees paid
by the Fund.
For its services, the Fund Manager will receive from the Fund a monthly fee at
an annual rate of 1.00% of the Fund's average daily net assets. The Fund
Manager pays the Investment Adviser a monthly fee at an annual rate of 0.50%
of the Fund's average daily net assets. The Management Fees payable by the
Fund are higher than the rate payable by most mutual Funds.
Administrator
Under the terms of an administration agreement between SEI Fund Resources (the
"Administrator") and the Fund (the "Administration Agreement"), the
Administrator performs or arranges for the performance of the administrative
services (i.e., services other than investment advice and related portfolio
activities) necessary for the operation of the Fund. For the services rendered
to the Fund, the Fund will pay the Administrator a fee equal on an annual
basis the higher of 0.15% of the Fund's average daily net assets, reduced to
0.125% of such net assets in excess of $50 million, and further reduced to
0.10% of such net assets in excess of $100 million or $60,000. The principal
address of the Administrator is 680 E. Swedesford Road, Wayne, Pennsylvannia
19087-1658.
DISTRIBUTOR
Pursuant to a Distribution Agreement with the Fund dated September 17, 1996
Ascher/Decision Services, Inc. (the "Distributor"), located at 333 South Grand
Avenue, Suite 4075, Los Angeles, California 90071, is the principal
underwriter of the Fund's shares. The Distributor is a broker-dealer
registered with the Securities and Exchange Commission and is a member of the
National Association of Securities Dealers, Inc.
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The Fund has adopted a Service and Distribution Plan (the "Plan") with respect
to its Class C shares, pursuant to which it uses its assets to finance
activities relating to the distribution of its shares to investors and
provision of certain shareholder services. Under the Plan, the Distributor is
paid a service fee at an annual rate of 0.25%, and a distribution fee at an
annual rate of 0.75%, of the value of average daily net assets of the Class C
shares.
Under the Plan, the Distributor uses the service fees primarily to compensate
securities dealers (which may include the Distributor itself) and other
financial institutions and organizations (collectively, the "Service
Organizations") who provide shareholder services for the Fund. These services
include, among other things, processing new shareholder account applications,
preparing and transmitting to the Fund's Transfer Agent computer processable
tapes of all transactions by customers and serving as the primary source of
information to customers in answering questions concerning the Fund and their
transactions with the Fund.
The Plan pertaining to Class C shares permits payments to be made by the Fund
to the Distributor for expenditures incurred by it in connection with the
distribution of Fund shares to investors and provision of certain shareholder
services including but not limited to the payment of compensation, including
incentive compensation to Service Organizations to obtain various distribution
related services for the Fund. The Distributor is also authorized to engage in
advertising, the preparation and distribution of sales literature, and other
promotional activities on behalf of the Fund. In addition, the Plan authorizes
payment by the Fund of the cost of preparing, printing and distributing Fund
Prospectuses and Statements of Additional Information to prospective investors
and of implementing and operating the Plan. Distribution expenses also include
an allocation of overhead of the Distributor and accruals for interest on the
amount of distribution expenses that exceed distribution fees received by the
Distributor.
Payments under the Plan are not tied exclusively to the distributions and/or
shareholder services expenses actually incurred by the Distributor and the
payments may exceed distribution and/or service expenses actually incurred. The
Company's Board of Directors evaluates the Plan on a regular basis.
PURCHASE OF SHARES
Shares of the Fund are sold on a continuous basis and may be purchased on any
day the New York Stock Exchange is open through authorized investment dealers
or directly from the Fund's Distributor, or the Fund's transfer agent if the
purchase is made by mail. Only the Distributor and investment dealers that have
a sales agreement with the Distributor are authorized to sell shares of the
Fund.
Shares will be credited to a shareholder's account at the net asset value next
computed after an order is received by the Distributor or a dealer. No stock
certificates representing shares purchased will be issued except upon written
request to the Fund's Transfer Agent. The Fund's management reserves the right
to reject any purchase order if, in its opinion, it is in the Fund's best
interest to do so and to suspend the offering of shares of any class for any
period of time.
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The minimum initial investment for Class C shares is $2,500 ($1,000 for IRA
accounts) and subsequent investments must be at least $100. The minimum initial
investment for Class Y shares is $25,000 and subsequent investments must be at
least $10,000.
Class Y shares are sold without an initial or a contingent deferred sales
charge. Class Y shares are offered only to institutional investors with a
minimum investment in the Fund of $25,000, and to directors, officers and
employees of the Company, the Fund Manager, the Investment Adviser, and the
Distributor, as well as private advisory clients of the Investment Adviser or
Fund Manager. As used herein, "institutional investors" includes financial
institutions (such as banks, savings institutions and credit unions); pension,
profit sharing and employee benefit plans and trusts; insurance companies;
investment companies; investment advisers; and broker-dealers acting for their
own accounts or for the accounts of their customers through an omnibus account.
Class C shares are sold without an initial sales charge. However, a 1.00%
contingent deferred sales charge will be imposed in the event of certain
redemption transactions within one year following such investments.
An account may be opened by mailing a check or other negotiable bank draft,
payable to The Starbuck Tisdale Growth & Income Fund for $2,500 ($1,000 for an
IRA account) for Class C shares, or $25,000 for Class Y shares, together with
the completed Investment Application Form included with this Prospectus to the
Transfer Agent at National Financial Data Services ("NFDS"), 1004 Baltimore,
Kansas City, MO 64105-1807. All such investments are made at the net asset
value next computed following receipt of payment by the Transfer Agent.
Confirmations of the opening of an account and of all subsequent transactions
in the account are forwarded by the Transfer Agent to the shareholder's address
of record. When placing purchase orders, investors should specify the class of
shares being purchased. All share purchase orders that fail to specify a class
will automatically be invested in Class C shares, unless the purchase order
meets the investment criteria for purchase of Class Y shares, in which case,
the purchase order will be invested in Class Y shares. There is no right to
convert Class C shares to Class Y shares or vice versa.
REDEMPTION OF SHARES
Shareholders may require the Fund to redeem their shares by sending a written
request, signed by the record owner(s), to NFDS, 1004 Baltimore, Kansas City,
MO 64105-1807. If stock certificates have been issued for shares being
redeemed, such certificates must accompany the written request with the
shareholder's signature guaranteed by a commercial bank, trust company, savings
association or credit union as defined by the Federal Deposit Insurance Act, or
by a registered securities broker-dealer member of a recognized national
securities exchange. No signature guarantees are required for shares for which
certificates have not been issued when an application is on file with the
Transfer Agent and payment is made to the shareholder of record at the
shareholder's address of record. However, if the proceeds of the redemption are
greater than $50,000, or are to be paid to someone other than the registered
holder, or to other than the
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<PAGE>
shareholder's address of record, or if the shares are to be transferred, the
owner's signature must be guaranteed as described above. The redemption price
shall be the net asset value per share next computed after receipt of the
redemption request in proper order. See "Net Asset Value."
The right of redemption and payment of redemption proceeds are subject to
suspension for any period during which the New York Stock Exchange is closed,
other than customary weekend and holiday closing, or when trading on the New
York Stock Exchange is restricted as determined by the Securities and Exchange
Commission; during any period when an emergency as defined by the rules and
regulations of the Securities and Exchange Commission exists; or during any
period when the Securities and Exchange Commission has by order permitted such
suspension. The Fund will not mail redemption proceeds until checks (including
certified checks or cashier's checks) received for the shares purchased have
cleared, which can be as long as 15 days from the purchase date.
The value of shares on redemption may be more or less than the investor's cost
depending upon the market value of the Fund's portfolio securities at the time
of redemption. No redemption fee is charged for the redemption of shares.
Involuntary Redemption
The Fund may at its discretion redeem an investor's shares if the net asset
value of such shares is less than $500; provided that such involuntary
redemptions will not result from fluctuations in the value of an investor's
shares. In addition, the Fund may at its discretion redeem the shares of any
investor who has failed to provide the Fund with a certified taxpayer
identification number or such other tax-related certifications as the Fund may
require. It should be noted that involuntary redemptions of IRA accounts could
have adverse tax consequences.
See the Statement of Additional Information for further information regarding
redemption of the Fund's shares.
Contingent Deferred Sales Charge--Class C Shares
In order to recover commissions paid to dealers on investments in Class C
shares, a contingent deferred sales charge of 1% applies to certain redemptions
of such shares made within the first year after investing. No charge is imposed
to the extent that the net asset value of the shares redeemed does not exceed
(a) the current net asset value of shares purchased through reinvestment of
dividends or capital gains distributions plus (b) the current net asset value
of shares purchased more than one year prior to the redemption, plus (c)
increases in the net asset value of the shareholder's shares above the purchase
payments made during the preceding one year.
15
<PAGE>
NET ASSET VALUE
The net asset value of the Fund's shares will be determined as of the close of
the New York Stock Exchange (currently 4:00 p.m. Eastern Standard Time) on each
day that the New York Stock Exchange is open for trading.
Net asset value per share is determined by dividing the value of the net assets
of the Fund by the total number of shares outstanding. The per share net asset
values and total returns of the various classes will differ due to differing
expenses borne by each class.
Portfolio securities that are traded on a national securities exchange or on
the NASDAQ National Market System are valued at the last sale price on such
exchange or market as of the close of business on the date of valuation.
Securities traded on a national securities exchange or on the NASDAQ National
Market System for which there were no sales on the date of valuation and
securities traded on other over-the-counter markets, including listed
securities for which the primary market is believed to be over-the-counter, are
valued at the mean between the most recently quoted bid and asked prices.
Securities for which market quotations are not available are valued at fair
value as determined in good faith by or under the direction of the Board of
Directors of the Fund. Short-term investments that mature in 60 days or less
are valued at amortized cost, unless the Board of Directors determines that
such valuation does not constitute fair value.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute at least annually to shareholders substantially
all of the Fund's net investment income. Net realized capital gains, if any,
will be distributed at least annually to shareholders. All dividends and
distributions will be automatically reinvested in shares of the Fund unless the
shareholder elects to be paid in cash by notifying the Transfer Agent in
writing. The per share dividends on Class Y shares will be higher than the per
share dividends on Class C shares as a result of lower expenses applicable to
Class Y shares.
BROKERAGE COMMISSIONS
All portfolio transactions will be effected at the best price and execution
obtainable within the scope of the Fund's brokerage policies, which are
described under the heading "Brokerage Allocation and Portfolio Transactions"
in the Statement of Additional Information. The Fund's brokerage policies
provide that the receipt of research services from a broker and the sale of
Fund shares by a broker are factors which may be taken into account in
allocating securities transactions.
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<PAGE>
TAXATION
General Tax Information
The Fund intends to be treated as a regulated investment company under the
federal tax law. As such, the Fund generally will not pay federal income tax on
the income and gains it pays as dividends to its shareholders. In order to
avoid a 4% federal excise tax, the Fund intends to distribute each year
substantially all of its income and gains.
Shareholders will be subject to tax on dividends received from the Fund,
regardless of whether received in cash or reinvested in additional shares.
Shareholders must treat dividends, other than capital gain dividends, as
ordinary income. Dividends designated as capital gain dividends are taxable to
shareholders as long-term capital gain. Certain dividends declared in October,
November, or December of a calendar year are taxable to shareholders as though
received on December 31 of that year if paid to shareholders during January of
the following calendar year. The Fund will advise shareholders annually of the
amount and nature of dividends paid to them.
Other Tax Laws
The preceding discussion relates only to federal income taxes; the consequences
under other tax laws may differ. For additional information relating to the tax
aspects of investing in the Fund, see "Tax Status" in the Statement of
Additional Information.
OTHER INFORMATION
Description of Shares
The Company was organized as a Maryland corporation on December 30, 1992. The
Fund currently issues two classes of common stock, $.01 par value per share,
designated Class Y, and Class C shares. All shares represent interests in the
same assets of the Fund and are identical in all respects except that each
class bears different distribution expenses and may bear various class-specific
expenses, and each class has exclusive voting rights with respect to its
service and/or distribution plan. The Registrant is controlled by the Starbuck
Tisdale & Associates Pension and Profit Sharing plan which owns 100% of the
currently issued and outstanding shares of the Company. See "Other
Information--Voting Rights." Class C shares are subject to a distribution and
service fee which will cause Class C shares to have a higher expense ratio and
pay lower dividends than Class Y shares. Shares of the Fund issued are fully
paid, non-assessable, fully transferable and redeemable at the option of the
holder.
Performance Information
The Fund may include its total return in advertisements or reports to
shareholders or prospective investors. Quotations of average annual total
return will be expressed in terms of the average annual compounded rate of
return on a hypothetical investment in the Fund over a period of one, five and
ten years (or up to the life of the Fund), will reflect the deduction of a
proportional share of Fund expenses (on an annual basis), and will assume that
all dividends and distributions are
17
<PAGE>
reinvested when paid. Total return may be expressed in terms of the cumulative
value of an investment in the Fund at the end of a defined period of time. For
a description of the methods used to determine total return for the Fund, see
"Performance Information" in the Statement of Additional Information.
Custodian, Dividend Disbursing Agent, Transfer Agent and Registrar
The transfer agent, dividend disbursing agent and registrar for the shares of
the Fund will be National Financial Data Services. Its address is 1004
Baltimore, Kansas City, MO 64105. The Fund's securities and cash are held
under a Custodial Agreement with UMB Bank, 928 Grand Boulevard, Kansas City,
MO 64141.
Legal Matters
Dechert Price & Rhoads, Washington, D.C. has passed upon certain legal matters
in connection with the shares offered by this Prospectus, and also acts as
counsel to the Fund.
Financial Statements and Experts
The Statement of Assets and Liabilities of the Fund as of September 20, 1996
which has been audited by Deloitte & Touche LLP, is included in the Statement
of Additional Information and incorporated by reference herein.
Shareholder Inquiries
Shareholder inquires should be directed to 333 South Grand Ave., Suite 4075,
Los Angeles, California 90071 or by Calling (800) SB FUNDS.
Voting Rights
All shares have equal voting rights and equal rights with respect to
dividends, assets and liquidation, except only the shares of a given class
vote on matters pertaining to that class and classes differ with respect to
sales load structure and certain fees.
The Company does not intend to hold annual shareholder meetings, but does
intend to hold periodic information meetings for shareholders, at the
Investment Adviser's expense, at which the Fund's performance and prospects
will be reviewed. The Directors will call a meeting for any purpose upon
written request of shareholders holding at least 10% of the Company's
outstanding shares.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the Statement
of Additional Information and/or in the Fund's official sales literature in
connection with the offering of the Fund's shares and, if given or made, such
other information or representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
18
<PAGE>
FUND MANAGER
SBG Capital Management Inc
333 S. Grand Avenue, Suite 4075
Los Angeles, CA 91007
INVESTMENT ADVISER
Starbuck, Tisdale & Associates
111 West Micheltorena Street
Suite 210
Santa Barbara, CA 93101
TRANSFER AGENT
National Financial Data Service
1004 Baltimore
Kansas City, MO 64105-1807
CUSTODIAN
UMB Bank
928 Grand Boulevard
Kansas City, MO 64141
PRINCIPAL UNDERWRITER
Ascher/Decision Services, Inc.
333 South Grand Avenue
40th Floor
Los Angeles, CA 90071
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
1000 Wilshire Blvd.
Los Angeles, CA 90017
For more complete information about any other fund in the Santa Barbara Group
of Mutual Funds, including charges and expenses, please call (213) 628-2907 or
(800) SB FUNDS or write to Ascher/Decision Services, Inc. and request a free
prospectus. Read the prospectus carefully before you invest or send money.
[LOGO OF SANTA BARBARA GROUP]
The
Starbuck Tisdale
Growth & Income
Fund
------------------
The date of this Prospectus is .
<PAGE>
THE STARBUCK TISDALE GROWTH AND INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER __, 1996
The Starbuck Tisdale Fund (the "Fund") is currently the sole series of
shares of Santa Barbara Group of Mutual Funds Inc. (the "Company"), a newly
organized, open-end investment management company. The Fund has entered into an
Investment Agreement with SBG Capital Management, Inc. (the "Fund Manager"),
which has entered into a Sub-Investment Advisory Agreement with Starbuck Tisdale
& Associates ("Investment Adviser") which will provide primary and ongoing
investment advice to the Fund.
This Statement of Additional Information is intended to supplement the
information provided to investors in the Prospectus dated October 2, 1996 of
the Fund and has been filed with the Securities and Exchange Commission as part
of the Fund's Registration Statement. Investors should note, however, that this
Statement of Additional Information is not itself a prospectus and should be
read carefully in conjunction with the Fund's Prospectus and retained for future
reference. The contents of this Statement of Additional Information are
incorporated by reference in the Prospectus in their entirety. A copy of the
Prospectus may be obtained free of charge from the Fund by writing to or calling
the Fund at 333 South Grand Ave., Suite 4075, Los Angeles, California
90071/(800) SB FUNDS.
1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INVESTMENT OBJECTIVE AND POLICIES AND
ASSOCIATES RISKS 3
U.S. Government Securities 3
Commercial Paper 3
Repurchase Agreements 3
Foreign Securities 4
Loans of Portfolio Securities 4
Borrowing 5
INVESTMENT RESTRICTIONS 5
DIRECTORS AND OFFICERS 7
INVESTMENT ADVISORY AND OTHER SERVICES 8
Investment Adviser/Fund Manager 8
Custodian, Dividend Disbursing Agent,
Transfer Agent and Registrar 9
Independent Accountants 9
Counsel 9
BROKERAGE ALLOCATION AND PORTFOLIO TRANSACTIONS 9
PURCHASE, REDEMPTION AND PRICING OF SHARES 10
Pricing of Shares 10
TAX STATUS 11
Currency Fluctuations -- "Section 988" -- Gains or Losses 12
Investment in Passive Foreign Investment Companies 12
Debt Securities Acquired at a Discount 13
Distributions 13
Disposition of Shares 14
Backup Withholding 14
Other Taxation 15
DISTRIBUTION OF FUND SHARES 15
PERFORMANCE INFORMATION 15
REGISTRATION STATEMENT 17
FINANCIAL STATEMENTS 18
</TABLE>
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INVESTMENT OBJECTIVE AND POLICIES AND ASSOCIATED RISKS
The Fund's investment objective and policies are described in the
Prospectus under the heading "Investment Objective and Policies." Additional
information concerning the characteristics of certain of the Fund's investments
are set forth below.
The Fund's investment objective is a fundamental policy and may not be
changed without the authorization of the holders of a majority of the Fund's
outstanding shares. As used in this Statement of Additional Information and the
Prospectus, a "majority of the Fund's outstanding shares" means the lesser of
(i) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares.
U.S. GOVERNMENT SECURITIES
The Fund may invest in U.S. Government securities. U.S. Government
securities are obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities. Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes, and bonds) and (2) Federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury (such as GNMA certificates, which are
mortgage-backed securities). With respect to these securities, the payment of
principal and interest is unconditionally guaranteed by the U.S. Government, and
thus they are of the highest possible credit quality. Such securities are
subject to variations in market value due to fluctuations in interest rates,
but, if held to maturity, will be paid in full.
Securities issued by U.S. Government instrumentalities and certain federal
agencies are neither direct obligations of nor guaranteed by the U.S. Treasury.
However, they involve Federal sponsorship in one way or another; some are backed
by specific types of collateral; some are supported by the issuer's right to
borrow from the Treasury; some are supported by the discretionary authority of
the Treasury to purchase certain obligations of the issuer; others are supported
only by the credit of the issuing government agency or instrumentality. These
agencies and instrumentalities include, but are not limited to, Federal Land
Banks, Farmers Home Administration, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, Federal Home Loan Banks, Federal National Mortgage
Association, and Student Loan Marketing Association.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes issued in
bearer from by bank holding companies, corporations and finance companies.
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<PAGE>
The Fund may invest in commercial paper which, at the date of investment, is
rated A-1 or higher by Standard & Poor's Corporations or Prime-1 or higher by
Moody Investors Services, Inc.
REPURCHASE AGREEMENTS
The Fund may, from time to time, enter into "repurchase agreements"
pertaining to the securities in which it may invest with securities dealers or
member banks of the Federal Reserve System. A repurchase agreement is
considered a loan and arises when a buyer, such as the Fund, purchases as
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally one day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate which is
effective for the period of time the buyer's money is invested in the security
and which is related to the current market rate rather than the coupon rate on
the purchased security. Such agreements permit the Fund to keep all of its
assets at work while retaining "overnight" flexibility in pursuit of investments
of a longer-term nature. The Fund requires continual maintenance by its
custodian for its account in the Federal Reserve/Treasury Book Entry System of
collateral in an amount equal to, or in excess of, the resale price. In the
event of a vendor's bankruptcy, the Fund might be delayed in, or prevented from,
selling the collateral for the Fund's benefit. The Fund's Board of Directors
has established procedures, which are periodically reviewed by the Board,
pursuant to which the Investment Adviser will monitor the credit worthiness of
the dealers and banks with which the Fund enters into repurchase agreement
transactions.
FOREIGN SECURITIES
The Fund may invest up to 15% of the value of its total assets in
securities of foreign issuers represented by American Depositary Receipts listed
on a domestic securities exchange or included in the NASDAQ National Market
System, or foreign securities listed directly on a domestic securities exchange.
Income and gains on such securities may be subject to foreign withholding taxes.
Investors should consider carefully the substantial risks involved in securities
of companies and governments of foreign nations, which are in addition to the
usual risks inherent in domestic investments.
There may be less publicly available information about foreign companies
comparable to the reports and ratings published about companies in the United
States. Foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to United States
companies. Foreign markets have substantially less volume than the New York
Stock Exchange and securities of some foreign companies are less liquid and more
volatile than securities of comparable United States companies.
4
<PAGE>
Commission rates in foreign countries, which are generally fixed rather than
subject to negotiation as in the United States, are likely to be higher. In many
foreign countries there is less government supervision and regulation of stock
exchanges, brokers, and listed companies than in the United States.
LOANS OF PORTFOLIO SECURITIES
To enhance the return on its portfolio, the Fund may lend securities in its
portfolio representing up to 25% of its total assets, taken at market value, to
securities firms and financial institutions, provided that each loan is secured
continuously by collateral in the form of cash, high quality money market
instruments or short-term U.S. Government securities adjusted daily to have a
market value at least equal to the current market value of the securities
loaned. These loans are terminable at any time, and the Fund will receive any
interest or dividends paid on the loaned securities. In addition, it is
anticipated that the Fund may share with the borrower some of the income
received on the collateral for the loan or the Fund will be paid a premium for
the loan. The risk in lending portfolio securities, as with other extensions of
credit, consists of possible delay in recovery of the securities or possible
loss of rights in the collateral should the borrower fail financially. In
determining whether the Fund will lend securities, the Investment Adviser will
consider all relevant facts and circumstances. The Fund will only enter into
loan arrangements with broker-dealers, banks or other institutions which the
Investment Adviser has determined are creditworthy under guidelines established
by the Board of Directors.
BORROWING
The Fund is authorized to borrow money from a bank in amounts up to 5% of
the value of its total assets at the time of such borrowing for temporary
purposes, and is authorized to borrow money in excess of the 5% limit as
permitted by the Investment Company Act of 1940 ("1940 Act") to meet redemption
requests. The Fund will not purchase portfolio securities while borrowing
exceed 5% of the Fund's total assets. This borrowing may be unsecured. The
1940 Act requires the Fund to maintain continuous asset coverage of 300% of the
amount borrowed. If the 300% asset coverage should decline as a result of
market fluctuations or other reasons, the Fund may be required to sell some of
its portfolio holdings within three days to reduce the debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. Borrowing may exaggerate the effect
on net asset value of any increase of decrease in the market value of the Fund.
Money borrowed will be subject to interest costs which may or may not be
recovered by an appreciation of the securities purchased. The Fund may also be
required to maintain minimum average balances in connection with such borrowing
or to pay a commitment or other fee to maintain a line of credit; either of
these requirements would
5
<PAGE>
increase the cost of borrowing over the stated interest rate. The Fund may, in
connection with permissible borrowing, transfer as collateral securities owned
by the Portfolio.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions that
may not be changed without the affirmative vote of the holders of a majority of
the Fund's outstanding voting securities. The Fund may not:
1. make further investments when 25% or more of its total assets
would be invested in any one industry (securities issued or guaranteed
by the United States Government, its agencies or instrumentalities are
not considered to represent industries);
2. invest more than 5% of the Fund's assets (taken at market value
at the time of purchase) in the securities of any single issuer or own
more than 10% of the outstanding voting securities of any one issuer
(other than securities issued or guaranteed by the United States
Government, its agencies or instrumentalities);
3. borrow money or issue senior securities (as defined in the 1940
Act) except that the Fund may borrow (i) for temporary purposes in
amounts not exceeding 5% of its total assets and (ii) to meet
redemption requests, in amounts (when aggregated with amounts borrowed
under clause (i)) not exceeding 33 1/3% of its total assets;
4. pledge, mortgage or hypothecate its assets other than to secure
borrowing permitted by restriction 3 above;
5. make loans of securities to other persons except loans of portfolio
securities and provided the Fund may invest without limitation in
short-term obligations (including repurchase agreements) and publicly
distributed obligations;
6. underwrite securities of other issuers, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in
selling portfolio securities;
7. purchase or sell real estate or mortgages on real estate,
(although the Fund may invest in marketable securities secured by real
estate or interests therein or issued by companies or investment
trusts that invest in real estate or interests
6
<PAGE>
therein);
8. purchase securities on margin, or make short sales of
securities, except for the use of short-term credit necessary for the
clearance of purchases and sales of portfolio securities; or,
9. make investments for the purpose of exercising control or
management.
10. invest in commodities or commodity futures contracts, provided that
this limitation shall not prohibit the purchase or sale of forward
foreign currency exchange contracts, financial futures contracts, and
options on financial futures contracts and options on securities and
on securities indices.
Additional investment restrictions adopted by the Fund, which may be
changed by the Board of Directors, provide that the Fund may not:
1. invest in securities issued by an investment company;
2. invest more than 15% of its net assets in securities which
cannot be readily resold because of legal or contractual restrictions
and which are not otherwise marketable;
3. invest in warrants if at the time of acquisition more than 5%
of its net assets, taken at market value at the time of purchase,
would be invested in warrants, and if at the time of acquisition more
than 2% of its total assets, taken at market value at the time of
purchase, would be invested in warrants not traded on the New York
Stock Exchange or American Stock Exchange. For purposes of this
restriction, warrants acquired by the Fund in units or attached to
securities may be deemed to be without value; or,
4. Invest more than 10% of its total assets in securities of
issuers which together with any predecessors have a record of less
than three years of continuous operation.
With the exception of the restriction on borrowing, if a percentage
restriction set forth above is adhered to at the time a transaction is effected,
later changes in percentage resulting from changes in value or in
7
<PAGE>
the number of outstanding securities of an issuer will not be considered a
violation.
DIRECTORS AND OFFICERS
The Board of Directors of the Company is responsible for the overall
management and operation of the Fund. The Directors and officers of the Company
and their principal occupations during the last five years are set forth below:
<TABLE>
<CAPTION>
Principal Occupation
Name Position with Company During Past 5 Years
---- --------------------- -------------------
<S> <C> <C>
Stephen Y. Ascher(1) Director, Chief Chairman, Director and
Executive Officer; Chief Executive Officer
Chief Financial of the Underwriter;
Officer, Treasurer Chairman, Director and
Shareholder of Capital
Management Group
registered investment
adviser.
Steven W. Arnold(1) Director, President Officer, Director and
and Secretary Shareholder of Capital
Management Group; Marketing
Manager for Robert Bender
& Associates.
L. David Tisdale(1)(2) Director Chairman of the Board
of Directors, Chief
Executive Officer,
Shareholder and President
of the Sub-Investment
Adviser
Robert L. Bender(1) Director Chairman of the Board of
Directors, Chief Executive
Officer, Shareholder and
President of Robert Bender
& Associates, a registered
investment adviser
Hugh M. Grant Director Partner with Ernst &
Young, certified public
accountants
Watson M. Laetsch Director Former Vice-chancellor,
University of California,
Berkeley; Consultant to
non-profit corporations
and foreign entities.
John W. Svendsen Director Investor
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation
Name Position with Company During Past 5 Years
---- --------------------- -------------------
<S> <C> <C>
Robert A. Graham, Jr. Assistant Secretary Attorney
</TABLE>
(1) Director who is an "interested person" of the Company, as defined in the
1940 Act.
(2) "Controlling person" of the Investment Adviser, as defined in the 1940 Act.
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Benefits Estimated Compensation
Compensation from Accrued As Part of Benefits from Company
Name of Director Company Company Expenses Upon Retirement and
Fund Complex
<S> <C> <C> <C> <C>
Hugh M. Grant $1,000 per year -0- -0- $2,000
plus $250 per meeting
Watson M. Laetsch $1,000 per year -0- -0- $2,000
plus $250 per meeting
John W. Svendsen $1,000 per year -0- -0- $2,000
plus $250 per meeting
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The investment adviser of the Fund is Starbuck, Tisdale & Associates (the
"Investment Adviser"), in which L. David Tisdale owns a controlling interest.
It has been retained under an Investment Advisory Agreement (the "Advisory
Agreement") with the Fund Manager, SBG Capital Management, subject to the
authority of the Board of Directors. The Investment Adviser was incorporated in
December, 1961.
Under the terms of the Advisory Agreement, the Fund Manager furnishes
continuing investment supervision to the Fund and is responsible for the
management of the Fund's portfolio. The responsibility for making decisions to
buy, sell or hold a particular security rests with the Investment Adviser,
subject to review by the Board of Directors. However, pursuant to the Sub-
Advisory Agreement, the Investment Adviser makes the day to day decisions with
regard to the Fund.
For its services, the Fund Manager receives from the Fund a monthly fee at
an annual rate of 1.00% of the Fund's average daily net assets.
The Investment Adviser is paid by the Fund Manager monthly at an annual
rate of 0.50% of the Fund's average daily net assets.
The Advisory Agreement and Sub-Advisory Agreement will continue in effect
for a period of two years from their effective date. If not sooner terminated,
the Advisory Agreement and Sub-Advisory Agreement will continue in effect for
successive one year periods thereafter, provided that each continuance is
specifically approved annually by (a) the vote of a
9
<PAGE>
majority of the Company's Board of Directors who are not parties to the
Agreement or interested persons (as defined in the 1940 Act), cast in person at
a meeting called for the purpose of voting on approval; and, (b) either (i) the
vote of a majority of the outstanding voting securities of the Fund or (ii) the
vote of a majority of the Company's Board of Directors. The Advisory Agreement
and Sub-Advisory Agreement may be terminated at any time by the Fund on 60 days'
written notice, without the payment of any penalty, upon the vote of a majority
of the Company's Board of Directors of a majority of the outstanding voting
securities of the Fund. The Advisory Agreement will terminate automatically in
the event of its assignment (as defined in the 1940 Act). The Investment Adviser
may terminate the Advisory Agreement and Sub-Advisory Agreement without penalty
on 90 days written notice to the Fund.
CUSTODIAN, DIVIDEND DISBURSING AGENT, TRANSFER AGENT AND REGISTRAR
The transfer agent, dividend disbursing agent and registrar for the shares
of the Fund is National Financial Data Services ("Transfer Agent"). Its address
is 1004 Baltimore, Kansas City, Missouri 64105. The Fund's securities and cash
are held under a Custodial Agreement with UMB Bank. Its address is 928 Grand
Boulevard, Kansas City, Missouri 64141.
INDEPENDENT ACCOUNTANTS
Deliotte Touche, LLP serves as the independent public audit services, tax
and accounting assistance, and consultation in connection with Securities and
Exchange Commission filings. Its address is 1000 Wilshire Blvd., Los Angeles,
California 90017.
COUNSEL
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C. 20005, has
passed upon certain legal matters in connection with the shares offered by the
Fund, and also acts as counsel to the Fund.
BROKERAGE ALLOCATION AND PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors of the Fund, the
Investment Adviser is responsible for investment decisions and for the execution
of the Fund's portfolio transactions. The Fund has no obligation to deal with
any particular broker or dealer in the execution of transactions in portfolio
securities. In executing such transactions, the Investment Adviser seeks to
obtain the best price and execution for its transactions. While the Investment
Adviser generally seeks reasonably competitive commission rates, the Fund does
not necessarily pay the lowest commission.
10
<PAGE>
Where best price and execution may be obtained from more than one broker or
dealer, the Investment Adviser may, in its discretion, purchase and sell
securities through dealers who provide research, statistical and other
information to the Investment Adviser. Information so received will be in
addition to and not in lieu of the services required to be performed by the
Investment Adviser under the Sub-Advisory Agreement and the expenses of the
Investment Adviser will not necessarily be reduced as a result of the receipt of
such supplemental information. Although certain research, market and
statistical information from brokers and dealers can be useful to the Fund and
the Investment Adviser, the Investment Adviser has advised that such information
is, in its opinion, only supplementary to the Investment Adviser's own research
activities and the information must still be analyzed, weighed and reviewed by
the Investment Adviser.
The Fund will not purchase securities from, or sell securities to, the Fund
Manager or Investment Adviser. The Investment Adviser may take into account
the sale of Fund shares by a broker in allocating brokerage transactions.
It is anticipated that the Fund's annual portfolio turnover rate will not
exceed 40%. The portfolio turnover rate is calculated by dividing the lesser of
sales or purchases of portfolio securities by the average monthly value of the
Fund's portfolio securities. For purposes of this calculation, portfolio
securities exclude securities having a maturity when purchased of one year or
less. The turnover rate has a direct effect on the transaction costs (including
brokerage costs) to be borne by the Fund.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchase and redemptions are discussed in the Prospectus under the headings
"Purchase of Shares," "Redemption of Shares," and "Net Asset Value", and that
information is incorporated herein by reference.
The Fund reserves the right to suspend or postpone redemptions during any
period when: (i) trading on the New York Stock Exchange is restricted, as
determined by the Securities and Exchange Commission, or that Exchange is closed
for other than customary weekend and holiday closing; (ii) the Securities and
Exchange Commission has by order permitted such suspension or postponement for
the protection of shareholders; or (iii) an emergency, as determined by the
Securities and Exchange Commission, exists, making disposal of portfolio
securities or valuation of net assets of the Fund not reasonably practicable.
The Fund may, at its discretion, redeem an investor's shares if the net
asset value of such shares is less than $ 500; provided that involuntary
redemptions will not result from fluctuations in the value of an investor's
shares. In addition, the Fund may redeem the shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
11
<PAGE>
such other tax-related certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's address of record, will
fix a date not less than 30 days after the mailing date, and shares will be
redeemed at the net asset value at the close of business on that date unless
sufficient additional shares are purchased to bring the aggregate account value
up to $500 or more, or unless a certified taxpayer identification number (or
such other information as the Fund has requested) has been provided, as the case
may be. A check for the redemption proceeds payable to the investor will be
mailed to the investor at the address of record.
PRICING OF SHARES
As indicated under "Net Asset Value" in the Prospectus, the Fund's net
asset value per share for the purpose of pricing purchase and redemption orders
is determined at or about 4:00 p.m. Eastern Standard Time on each day the Fund
is open for business and the New York Stock Exchange is open for trading. Net
asset value will not be determined on the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and the Monday's
before New Year's Day, Independence Day, and Christmas Day if any of these
holidays fall on a Tuesday, and the Friday's after New Year's Day, Independence
Day, or Christmas Day if any of these holidays falls on a Thursday, and the
Friday after Thanksgiving Day. The value of portfolio securities that are
traded on stock exchange outside the United States are based upon the price on
the exchange as of the close of business of the exchange immediately preceding
the time of valuation.
TAX STATUS
The Fund intends to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, the Fund generally must, among other things, (a) derive in each
taxable year at least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, and gains from the sale or other
disposition of stock, other securities or other income derived with respect to
its business of investing in such stock or other, securities; (b) derive in each
taxable year less than 30% of its gross income from the sale or other
disposition of assets held less than three months, (i) stock or securities; and
(c) diversify its holdings so that, at the end of each fiscal
12
<PAGE>
quarter, (i) at least 50% of the market value of the Fund's assets is
represented by cash, U.S. Government securities, the securities of other
regulated investment companies and other securities, with cash other securities
limited, in respect of any one issuer, to an amount not greater than 5% of the
value of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities and the securities of other regulated investment companies).
As a regulated investment company, the Fund generally will not be subject
to U.S. Federal income tax on its income and gains that it distributes to
shareholders, if at least 90% of its investment company taxable income (which
includes, among other items, dividends, interest and the excess of any short-
term capital gains over long-term capital losses) for the taxable year is
distributed. The Fund intends to distribute substantially all of such income.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax at
the Fund level. To avoid the tax, the Fund must distribute during each
calendar year, (1) at least 98% of its ordinary income (not taking into account
any capital gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for certain ordinary
losses) for a one-year period generally ending on October 31 of the calendar
year, and (3) all ordinary income and capital gains for previous years that were
not distributed during such years. To avoid application of the excise tax, the
Fund intends to make distributions in accordance with the calendar year
distribution requirements. A distribution will be treated as paid on December
31 of the current calendar year if it is declared by the Fund in October,
November or December of the year with a record date in such
13
<PAGE>
a month and paid by the Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar year the
distributions are declared, rather than the calendar year in which the
distributions are received.
CURRENTLY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time the Fund accrues income or other receivables
or accrues expenses or other liabilities denominated in a foreign currency and
the time the Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities and certain other instruments denominated in a
foreign currency, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security and the date of
disposition also are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses, may increase or
decrease the amount of the Fund's investment company taxable income to be
distributed to its shareholders as ordinary income. If section 988 losses
exceed other net investment income during a taxable year, the Fund generally
would not be able to make ordinary dividend distributions, or distributions made
before the losses were realized would be recharacterized as return of capital to
shareholders for federal income tax purposes, rather than as an ordinary
dividend, reducing each shareholder's basis in his Fund shares, or as capital
gain.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC if at least one-half of
its assets constitute investment-type assets or 75% or more of its gross income
is investment-type income. If the Fund receives a so-called "excess
distribution" with respect to PFIC stock, the Fund itself may be subject to a
tax on a portion of the excess distribution, whether or not the corresponding
income is distributed by the Fund to shareholders. In general, under the PFIC
rules, an excess distribution is treated as having been realized ratably over
the period during which the Fund held the PFIC shares. The Fund itself will be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior Fund taxable years and an interest factor will be added to
the tax, as if the tax had been payable in such prior taxable years. Certain
distributions from a PFIC as well as gain from the sale of PFIC shares are
treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
14
<PAGE>
The Fund may be eligible to elect alternative tax treatment with respect to
PFIC shares. Under an election that currently is available in some
circumstances, the Fund generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis regardless of
whether distributions are received from the PFIC in a given year. If this
election were made, the special rules, discussed above, relating to the taxation
of excess distributions, would not apply. In addition, another election may be
available that would involve marking to market the Fund's PFIC shares at the end
of each taxable year (and on certain other dates prescribed in the Code), with
the result that unrealized gains are treated as though they were realized. If
this election were made, tax at the fund level under the PFIC rules would
generally be eliminated, but the Fund could, in limited circumstances, incur
nondeductible interest charges. In addition, other elections may become
available that would affect the tax treatment of PFIC shares held by the Fund.
The Fund's intention to qualify annually as a regulated investment company may
limit its elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among other things,
the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, as well as subject the Fund
itself to tax on certain income from PFIC shares, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a Fund that did not invest in PFIC shares.
In addition, investment income and gains received by the Fund from sources
outside the United States may be subject to foreign taxes which were withheld at
the source. Since the percentage of the Fund's total assets which will be
invested in foreign stocks and securities will not be more than 50%, any foreign
tax credits or deductions associated with such foreign taxes will not be
available for use by its shareholders. The effective rate of foreign taxes to
which the Fund will be subject depends on the specific countries in which the
Fund's assets will be invested and the extent of the assets invested in each
such country and therefore cannot be determined in advance.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities that may be acquired by the Fund may be subject
to the special rules for obligations issued or acquired at a discount.
Generally, under these rules, the amount of the discount is treated as ordinary
income and, depending upon the circumstances, the discount is included in income
(i) over the term of the debt security, even though payment of the discount is
not received until a later time, usually when the debt security matures, or (ii)
upon the disposition of, and any partial payment of principal on, the debt
security.
15
<PAGE>
The Fund generally will be required to distribute dividends to shareholders
representing discount on debt securities that is currently includible in income,
even though cash representing such income may not have been received by the
Fund. Cash to pay such dividends may be obtained from sales proceeds of
securities held by the Fund or by borrowing.
DISTRIBUTIONS
Distributions of investment company taxable income are taxable to a U.S.
shareholder as ordinary income, whether paid in cash or shares. Dividends paid
by the Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received from U.S. corporations by the Fund, may
qualify for the dividends received deduction. However, the revised alternative
minimum tax applicable to corporations may reduce the value of the dividends
received deduction. Distributions of net capital gains (the excess of net long-
term capital gains over net short-term capital losses), if any, designated by
the Fund as capital gain dividends, are taxable as long-term capital gains,
whether paid in cash or in shares, regardless of how long the shareholder has
held the Fund's shares and are not eligible for the dividends received
deduction. Shareholders receiving distributions in the form of newly issued
shares will have a cost basis in each share received equal to the net asset
value of a share of the Fund on the distribution date. Shareholders will be
notified annually as to the U.S. federal tax status of distributions and
shareholders receiving distributions in the form of newly issued shares will
receive a report as to the net asset value of the shares received.
If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by the Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors
should be careful to consider the tax implications of buying shares just prior
to distribution. The price of shares purchased at this time may reflect the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution which generally will be taxable to
them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares, a shareholder
will realize a taxable gain or loss depending upon his or her basis in the
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands and generally will be long-term or
short-term, depending upon the shareholder's holding period for the shares. Any
loss realized on a redemption, sale or exchange will be disallowed to the extent
the shares disposed of are replaced (including
16
<PAGE>
through reinvestment of dividends) within a period of 61 days beginning 30 days
before and ending 30 days after the shares are disposed of. In such a case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.
Any loss realized by a shareholder on the sale of Fund shares held by the
shareholder for six months or less will be treated for tax purposes as a long-
term capital loss to the extent of any distributions of capital gain dividends
received or treated as having been received by the shareholder with respect to
such shares.
BACKUP WITHHOLDING
The Fund will be required to report to the Internal Revenue Service (the
"IRS") all distributions as well as gross proceeds from the redemption of the
Fund's shares, except in the base of certain exempt shareholders. All such
distributions and proceeds will be subject to withholding of federal income tax
at a rate of 31% ("backup withholding") in the case of non-exempt shareholders
if (1) the shareholder fails to furnish the fund with and to certify the
shareholder's correct taxpayer identification number or social security number,
(2) the IRS notifies the shareholder or the Fund that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. If the withholding provisions are applicable, any such
distributions or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amounts required to be withheld.
OTHER TAXATION
Distributions may also be subject to additional state, local and foreign
taxes depending on each shareholder's particular situation. Non-U.S.
shareholders may be subject to U.S. tax rules that differ significantly from
those summarized above. This discussion does not purport to deal with all of
the tax consequences applicable to the Fund or shareholders. Shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
DISTRIBUTION OF FUND SHARES
Ascher/Decision Services, Inc. serves as the Fund's Distributor pursuant to
a Distribution Contract ("Distribution Contract") with the Fund. The
Distributor is not obligated to sell any specific amount of Fund shares.
17
<PAGE>
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and total return in
advertisements, sales literature, or reports to shareholders or prospective
investors.
Quotations of yield for the Fund will be based on all investment income per
share during a particular 30-day (or one accrued during the period ("net
investment income"), and are computed by dividing net investment income by the
maximum offering price per share on the last day of the period, according to the
following formula:
6
2 [ (a-b + 1) - 1]
-------
cd
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; and,
d = the maximum offering price per share on the last day of the
period.
Quotations of average annual total return for the Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the Fund over periods of 1, 5, and 10 years (up to the life of the
Fund), calculated pursuant to the following formula:
n
P (1 + T) = ERV
where P = a hypothetical initial payment of $1,000;
T = the average annual total return;
n = the number of years; and,
ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.
Quotations of aggregate total return for the Fund may be shown for periods of
less than one year, calculated pursuant to the following formula: P (1 + T) =
ERV, where P and ERV have the same meaning as indicated above, and T = the
aggregate total return. All total return figures reflect the deduction of Fund
expenses on an annual basis, and assume that all dividends and
18
<PAGE>
distributions are reinvested when paid. Quotations of total return may also be
shown for other periods.
In reports or other communications to shareholders or in advertising
material, the Fund's performance may be compared with that of other mutual funds
listed in the rankings prepared by Lipper Analytical Services, Inc. or similar
independent services that monitor the performance of mutual funds or with other
appropriate indices of investment securities such as the Standard & Poor's 500
Composite Stock Price Index and the Dow Jones Industrial Average. The
performance information may also include evaluations of the Fund published by
nationally recognized financial publications such as Barron's, Business Week,
CDA Investment Technologies, Inc., Forbes, Fortune, Institutional Investor,
Investor's Daily, Kiplinger's Personal Finance Magazine, Money, Morningstar
Mutual Fund Values, The New York Times, USA Today and The Wall Street Journal.
The Investment Adviser may also report to shareholders or to the public in
advertisements on the comparative performance or standing of the Investment
Adviser in relation to other money managers. Such comparative information may
be compiled or provided by independent ratings services or by news
organizations. Any performance information, whether related to the Fund or the
Investment Adviser, should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Fund's portfolio,
and the market conditions during the given time period, and should not be
considered to be representative of what may be achieved in the future.
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not contain
all the information included in the Fund's registration statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 with respect
to the securities offered hereby, certain portions of which have been omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
The registration statement, including the exhibits filed therewith, may be
examined at the offices of the Securities and Exchange Commission in Washington,
D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract of other documents referred to are not necessarily complete, and, in
such instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respect by such reference.
19
<PAGE>
FINANCIAL STATEMENTS
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
INDEPENDENT AUDITORS' REPORT
Santa Barbara Group of Mutual Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of the
Santa Barbara Group of Mutual Funds, Inc. (the "Company"), including the
schedule of investments as of September 20, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at September 20, 1996 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Los Angeles, CA
September 26, 1996
20
<PAGE>
SANTA BARBARA GROUP OF MUTUAL FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 20, 1996
<TABLE>
<CAPTION>
STARBUCK TISDALE
GROWTH AND INCOME
FUND
-----------------
<S> <C>
ASSETS:
Cash $ 30,000
Investment Securities at Market (Cost $104,008) 104,008
Deferred Organization Costs 68,000
--------
Total Assets 202,008
--------
LIABILITIES:
Accrued Expenses 68,000
--------
Total Liabilities 68,000
--------
NET ASSETS:
Fund Shares of Class Y (unlimited Shares Authorized--$.01
par value) based on 13,400 outstanding shares of common
stock 134,008
--------
Total Net Assets $134,008
========
</TABLE>
1. SIGNIFICANT ACCOUNTING POLICIES
The Santa Barbara Group of Mutual Funds, Inc. (the "Company") was organized on
December 30, 1992 as a diversified open-end management investment company
formed under Maryland law. The Company will operate as a series mutual fund
initially consisting of one investment portfolio (the "Fund"). To date, the
Company has had no transactions other than those relating to organization
matters and the issuance of 13,400 shares of common stock to certain
affiliates of Starbuck Tisdale and Associates Inc. (the "Sub-Advisor"). The
Company is registered under the Investment Company Act of 1940, as amended
(the "Act").
The Fund's investment objective is to provide shareholders with long-term
capital appreciation and reasonable current net income by investing primarily
in a diversified portfolio of equity securities of companies that have
demonstrated superior prospects for long-term earnings growth, increasing cash
flow returns on corporate assets, financial stability and lower price per
share volatility.
Investment securities that are traded on a national securities exchange (or on
the NASDAQ national market) are valued at the last reported sales on the date
of valuation. Securities traded on a national securities exchange or on the
NASDAQ national market for which no sale was reported on that date are valued
at the mean between the most recently quoted bid and asked prices. Securities
for which market quotations are not available are valued at fair value as
determined in good faith by or under the direction of the Board of Directors
of the Fund. Short-term investments that mature in 60 days or less are valued
at amortized cost, unless the Board of Directors determines that such
violation does not constitute fair value.
21
<PAGE>
USE OF ESTIMATES The preparation of the accompanying 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. Actual results could
differ from the estimates.
2. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES
The Company has entered into an Investment Advisory and Management Agreement
with SBG Capital Management, Inc. (the "Fund Manager"). For its services, the
Fund Manager is entitled to receive a fee, which is calculated daily and paid
quarterly, at an annual rate of 1.00% of the average daily net assets of the
Fund. The Fund Manager and Starbuck Tisdale & Associates, Inc. are parties to a
Sub-Advisory Agreement in which the Sub-Advisor is entitled to receive a fee
from the Fund Manager, which is calculated daily and paid quarterly, at an
annual rate of .50% of the average daily net assets of the Fund. The Fund
Manager and the Sub-Advisor have agreed to voluntarily waive to 1.5% of their
fees in order to limit the operating expenses of the Fund.
The Company has entered into a Distribution Agreement with Ascher/Decision
Services, Inc. (the "Distributor"), an affiliate of the Company, to provide
non-exclusive distribution of shares of the Fund. Certain officers and/or
directors of the Company are officers and/or directors of the Sub-Advisor
and/or the Distributor.
SEI Fund Resources (the "Administrator"), a Delaware business trust, serves as
administrator to the Company. SEI Financial Management Corporation, a wholly-
owned subsidiary of SEI Corporation, is the owner of all beneficial interest
in the Administrator. The Company and the Administrator are parties to an
Administrator Agreement under which the Administrator provides the Company
with management and administrative services for an annual fee as follows,
based on the Fund's average daily net assets: .15% on the first $50 million;
.125% on the next $50 million; .10% in excess of $100 million, or a minimum
annual fee based on the terms of the Agreement.
3. FEDERAL INCOME TAXES
The Company intends to comply with the requirements of the Internal Revenue
Code that are necessary to qualify as a regulated investment company. As such,
the Fund will not be subject to federal income tax on taxable income
(including net realized capital gains) which is distributed to shareholders.
4. ORGANIZATIONAL COSTS
Certain organization costs in the amount of $68,000 have been deferred by the
Fund and will be amortized over a five-year period from commencement of
operations. In the event that the Sub-Advisor or certain of its affiliates or
any holder thereof redeem any of their original shares from the Funds prior to
the end of the five-year period, the proceeds of the redemptions payable in
respect of such shares will be reduced by the pro rata share (based on the
proportionate share of the original shares redeemed to the total number of
original shares outstanding at the time of such redemption) of the unamortized
deferred organization costs as of the date of such redemption. In the event that
the Fund liquidates prior to the end of the five-year period, the Sub-Advisor
will reimburse the Fund for any unamortized deferred organization expenses.
22
<PAGE>
SCHEDULE OF INVESTMENTS
STARBUCK TISDALE GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
SEPTEMBER 20,
1996
---------------
SHARES MARKET
AMOUNT VALUE
------ --------
<S> <C> <C>
COMMON STOCKS (96.6%)
COMMUNICATIONS EQUIPMENT (22.6%)
Exide Electronics Group 300 $ 2,738
MCI Communications 200 5,575
Pacific Telesis 200 6,875
Sprint 200 8,275
--- --------
23,463
COMPUTER & SOFTWARE SERVICES (20.8%)
Metatools 800 18,400
Novell 300 3,188
--- --------
21,588
COSMETICS, SOAPS & TOILETRIES (17.9%)
Procter & Gamble 200 18,650
--- --------
DRUGS (5.1%)
Alza 200 5,300
--- --------
ELECTRICAL MACHINERY (3.2%)
Valence Technology 600 3,337
--- --------
RAILROADS (7.1%)
Union Pacific 100 7,412
--- --------
REAL ESTATE INVESTMENT TRUST (16.2%)
Burnham Pacific Properties 600 6,975
Thornburg Mtg. Asset 600 9,825
--- --------
16,800
--------
TRUCKING (3.7%)
Wabash National 250 3,875
--- --------
Total Common Stock (Cost $100,425) 100,425
--------
PREFERRED STOCK (3.4%)
COMPUTER & SOFTWARE SERVICES (3.4%)
Network Imaging Conv. Pfd. Series A 245 3,583
--- --------
Total Preferred Stock (Cost $3,583) 3,583
--------
Total Investments (100.0%) (Cost $104,008) $104,008
========
</TABLE>
23
<PAGE>
The Fund's audited Statement of assets and liabilities, including the
schedule of investments and notes thereto, dated as of September 20, 1996,
have been audited by Deloitte & Touche LLP and are included in this Statement of
Additional Information.
24
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
An audited Statement of Assets and Liabilities will be filed by
Pre-Effective Amendment
(b) Exhibits (the number of each exhibit relates to the exhibit
designation in Form N-1A):
(1)(a) Articles of Incorporation*
(b) Articles of Amendment*
(2) By-Laws*
(3) Not Applicable
(4) Not Applicable
(5) Form of Investment Advisory Agreement
(6) Form of Distribution Agreement*
(7) Not Applicable
(8) Custodial Agreement*
(9)(a) Form of Transfer Agency and Service Agreement*
(10) Opinion of Counsel*
(10)(b) Consent of Counsel
(11) Consent of Independent Auditors
(12) Not Applicable
(13) Initial Capital Agreement*
(14) Not Applicable
(15) Service and Distribution Plan*
(16) Not Applicable
(17) Not Applicable
(18) Multi-Class Plan*
- --------------------
* Filed in the Registrant's initial Registration Statement on December 30,
1992 and incorporated by reference herein.
** To be filed by Amendment.
Item 25. Persons Controlled by or Under Common Control with Registrant.
-------------------------------------------------------------
As of the date of this Pre-Effective Amendment, the Starbuck Tisdale &
Associates Pension and Profit Sharing Plan (the "Plan") and the vested
accounts of the Plan for the benefit of L. David Tisdale and Jon S.
Bull own all of the issue and outstanding shares of the Registrant
which were acquired in connection with investing statutory seed money
in the Registrant.
<PAGE>
Item 26. Number of Holders of Securities.
-------------------------------
As of the date of this Registration Statement, there are three
shareholders of record of Registrant's shares.
Item 27. Indemnification.
---------------
Reference is made to Article 7.6 in the Registrant's Articles of
Incorporation, which are incorporated by reference herein.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Fund's Articles of Incorporation,
its By-Laws or otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is 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 directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such directors, officers or
controlling persons in connection with shares 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
issues.
Item 28. Business and Other Connections of the Fund Manager and Investment
-----------------------------------------------------------------
Adviser
-------
FUND MANAGER
------------
SBG Capital Management, Inc.
----------------------------
<TABLE>
<CAPTION>
Name Position with Other Affiliations
- ---- ------------- ------------------
Fund Manager
------------
<S> <C> <C>
Stephen Y. Ascher Chief Executive Director, Chief Executive
Officer, Chief Officer, Chief Financial
Financial Officer Officer, Treasurer of the
Company
Steven W. Arnold President, Secretary Director, Chief Financial
Officer, Secretary of the
</TABLE>
<PAGE>
Company
INVESTMENT ADVISER
------------------
Starbuck, Tisdale & Associates
------------------------------
<TABLE>
<CAPTION>
Name Position with Advisor Other Affiliations
- ---- --------------------- ------------------
<S> <C> <C>
L. David Tisdale Director, President, Director of the Registrant
Chief Executive Officer
Donn V. Tognazzini Director, Senior Vice
President
Clare Miner-McMahon Secretary, Treasurer
Patrick Storm Steele Vice President
</TABLE>
Item 29. Principal Underwriters
----------------------
(a) Ascher/Decision Services, Inc. ("Ascher") serves as Distributor
of shares of the Fund.
(b) The directors and officers of Ascher are set forth below. Unless
otherwise indicated, their address is 333 South Grand Ave, Suite
4075, Los Angeles, California 90071.
<TABLE>
<CAPTION>
Name Positions and Positions and
- ---- ------------- -------------
Registrant Offices with Ascher Offices with Registrant
- ---------- ------------------- -----------------------
<S> <C> <C>
Stephen Y. Ascher Director, President Director, Chief
and Treasurer Executive Officer,
Chief Financial
Officer, Treasurer
Sheldyn Ascher Montagne Secretary None
John McCutcheon Director None
517-1177 W. Hastings
Vancouver, B.C. Canada
</TABLE>
(c) Not Applicable
<PAGE>
Item 30. Location of Accounts and Records
--------------------------------
The account books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder will be maintained at the offices of SBG Capital
Management, Inc., 333 S. Grand Avenue, Los Angeles, California 90071; the
offices of Starbuck Tisdale & Associates, 111 West Micheltorena Street, Suite
210, Santa Barbara, California 93101 and SEI Fund Resources, 680 E. Swedesford
Road, Wayne, Pennsylvania 19087-1658.
Item 31. Management Services
-------------------
Not Applicable.
Item 32. Undertakings
------------
(a) Not Applicable.
(b) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to
six months from the effective date of Registrant's Registration
Statement under the Securities Act of 1933.
(c) Registrant undertakes to call a meeting of Shareholders for the
purpose of voting upon the question of removal of a Director of
Directors when requested to do so by the holders of at lease 10%
of the Registrant's outstanding shares of beneficial interest and
in connection with such meeting to comply with the shareholders
communications provisions of Section 16(c) of the Investment
Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this pre-
Effective Amendment No. 5 to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the City of Los Angeles,
and State of California on this 4th day of October, 1996.
THE SANTA BARBARA GROUP OF MUTUAL FUNDS, INC.
BY: /s/ Stephen Y. Ascher
__________________________________________
Stephen Y. Ascher
Chief Executive Officer
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment No. 5 to the Registration Statement on Form N-1A has been
signed below by the following persons on behalf of The Santa Barbara Group of
Mutual Funds, Inc. in the capacity and on the date indicated:
DATED: October 15, 1996 /s/ Stephen Y. Ascher
___________________________________
Stephen Y. Ascher, Chairman
Director, Chief Executive Officer,
Chief Financial Officer, Secretary
and Treasurer
DATED: October 15, 1996 /s/ Steven W. Arnold
___________________________________
Steven W. Arnold
Director, President, and Chief Investment
Officer, Secretary
DATED: October 15, 1996 /s/ L. David Tisdale
___________________________________
L. David Tisdale
Director
<PAGE>
DATED: October 15, 1996 /s/ Watson M. Laetsch
___________________________________
Watson M. Laetsch
Director
DATED: October 15, 1996 /s/ Hugh M. Grant
___________________________________
Hugh M. Grant
Director
DATED: October 15, 1996 /s/ John W. Svendsen
___________________________________
John W. Svendsen
Director
DATED: October 15, 1996 /s/ Robert L. Bender
___________________________________
Robert L. Bender
Director
<PAGE>
EXHIBIT 5(a)
INVESTMENT ADVISER AGREEMENT
AGREEMENT, made this ___ day of September __, 1996, between The Santa
Barbara Group of Mutual Funds (the "Company") on behalf of the Starbuck Tisdale
Growth and Income Fund and SBG Captial Management, Inc. (the "Adviser"), a
California Corporation.
WHEREAS, the Company is a Maryland Corporation authorized to issue shares
in series and is registered as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and the Fund is
the initial series of the Company;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Company and the Adviser as follows:
1. Appointment
-----------
The Company hereby appoints the Adviser to act as Investment Adviser to the
Fund for the periods and on the terms set forth herein. The Adviser accepts the
appointment and agrees to furnish the services set forth herein for the
compensation provided herein.
2. Services as Investment Adviser
------------------------------
Subject to the general supervision and direction of the Board of Directors
of the Company, the Adviser will (a) manage the Fund in accordance with the
Fund's investment objective and policies as stated in the Fund's Prospectus and
the Statement of Additional Information filed with the Securities and Exchange
Commission, as they may be amended from time to time; (b) make investment
decisions for the Fund; (c) place
<PAGE>
purchase and sale orders on behalf of the Fund; and, (d) employ professional
portfolio managers and securities analysts to provide research services to the
Fund. In providing those services, the Adviser will provide the Fund with
ongoing research, analysis, advice, and judgments regarding individual
investments, general economic conditions and trends and long-range investment
policy. In addition, the Adviser will furnish the Fund with whatever statistical
information the Fund may reasonably request with respect to the securities that
the Fund may hold or contemplate purchasing.
The Adviser further agrees that, in performing its duties hereunder, it
will:
a. comply with the 1940 Act and all rules and regulations thereunder, the
Advisers Act, the Internal Revenue Code of 1986, as amended (the "Code") and all
other applicable federal and state laws and regulations, and with any applicable
procedures adopted by the Directors;
b. use reasonable efforts to manage the Fund so that it will qualify, and
continue to qualify, as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder;
c. maintain books and records with respect to the Fund's securities
transactions, render to the Board of Directors of the Company such periodic and
special reports as the Board may reasonably request, and keep the Directors
informed of developments materially affecting the Fund's portfolio;
d. make available to the Fund's administrator, and the Company, promptly
upon their request, such copies of its investment records and ledgers with
respect to the Fund as may be required to assist the administrator and the
Company in their compliance with applicable laws and regulations. The Adviser
will furnish the Directors with such periodic and special reports regarding the
Fund as they may reasonably request;
e. immediately notify the Company in the event that the Adviser or any of
its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment adviser
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the Securities and Exchange
Commission or other regulatory authority. The Adviser further agrees to notify
the Company immediately of any material fact known to the Adviser respecting or
relating to the Adviser
2
<PAGE>
that is not contained in the Company's Registration Statement regarding the
Fund, or any amendment or supplement thereto, but that is required to be
disclosed therein, and of any statement contained therein that becomes untrue in
any material respect.
3. Investment Adviser
------------------
The Company authorizes Adviser to enter into such Investment Advisory
Agreements as the Adviser deems necessary to carry out the terms of this
Agreement and to meet investment objectives of the individual series of Funds
that may be offered from time to time by the Company. Adviser is responsible for
the payment of all compensation to any sub-investment Advisor.
4. Documents
---------
The Fund has delivered properly certified or authenticated copies of each
of the following documents to the Adviser and will deliver to it all future
amendments and supplements thereto, if any:
a. certified resolution of the Board of Directors of the Company
authorizing the appointment of the Adviser and approving the form of this
Agreement;
b. The Registration Statement as filed with the Securities and Exchange
Commission and any amendments thereto;
c. exhibits, powers of attorneys, certificates and any and all other
documents relating to or filed in connection with the Registration Statement
described above.
5. Brokerage
---------
In selecting brokers or dealers to execute transactions on behalf of the
Fund, the Adviser will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any Fund
transaction, the Adviser will consider all factors it deems relevant, including,
but not limited to, the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing
3
<PAGE>
basis. In selecting brokers or dealers to execute a particular transaction, and
in evaluating the best overall terms available, the Adviser is authorized to
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the securities Exchange Act of 1934, as amended (the "1934
Act")) provided to the Fund and/or other accounts over which the Adviser or its
affiliates exercise investment discretion. In accordance with Section 11(a) of
the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other applicable
laws and regulations, the Adviser and its affiliates are authorized to effect
portfolio transactions for the Fund and to retain brokerage commissions on such
transactions. Advisers may also take into account sale of Sub shares in
selecting brokers.
6. Records
-------
The Adviser agrees to maintain and to preserve for the periods prescribed
under the 1940 Act any such records as are required to be maintained by the
Adviser with respect to the Fund by the 1940 Act. The Adviser further agrees
that all records which it maintains for the Fund are the property of the Fund
and it will promptly surrender any of such records upon request.
7. Standard of Care
----------------
The Adviser shall exercise its best judgment in rendering the services
under this Agreement. The Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Fund or the Fund's
shareholders in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
the Adviser against any liability to the Fund or to its shareholders to which
the Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or by
reason of the Adviser's reckless disregard of its obligations and duties under
this Agreement. As used in this Section 7, the term "Adviser" shall include any
officers, directors, employees, or other affiliates of the Adviser performing
services with respect to the Fund.
8. Compensation
------------
In consideration of the services rendered pursuant to this Agreement, the
Fund will pay the Adviser a fee at an annual rate equal to
4
<PAGE>
1% of the average daily net assets of the Fund. This fee shall be computed and
accrued daily and payable monthly. For the purpose of determining fees payable
to the Adviser, the value of the Fund's average daily net assets shall be
computed at the times and in the manner specified in the Fund's Prospectus or
Statement of Additional Information.
9. Expenses
--------
The Adviser will bear all expenses in connection with the performance of
its services under this Agreement. The Fund will bear certain other expenses to
be incurred in its operation, including: taxes, interest, brokerage fees and
commission, if any, fees of Directors of the Company who are not officers,
directors, or employees of the Adviser; Securities and Exchange Commission fees
and state blue sky qualification fees; charges of custodians and transfer and
dividend disbursing agents; the Fund's proportionate share of insurance
premiums; outside auditing and legal expenses; costs of maintenance of the
Fund's existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; charges of an independent pricing
service; costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
shareholders' costs of shareholders' reports and meetings of the shareholders of
the Fund and of the officers or Board of Directors of the Company; and any
extraordinary expenses. In addition, the Fund will pay distribution fees
pursuant to a Distribution Plan adopted under Rule 12b-1 of the 1940 Act.
10. Reduction of Fees or Reimbursement to the Fund
----------------------------------------------
If in any fiscal year the aggregate expenses of the Fund (including fees
pursuant to this Agreement and the Fund's administration agreement, but
excluding distribution fees, interest, taxes, brokerage and extraordinary
expenses) exceed the expense limitation of any state having jurisdiction over
the Fund, the Adviser will reduce its fees or reimburse the Fund for such excess
expense in the same proportion as its advisory fee bears to the Fund's combined
fee for investment advice and administration. The Adviser's obligation to reduce
its fees or reimburse the Fund will be limited to the amount of its fees
received pursuant to this Agreement. Such reduction in fees or reimbursement, if
any, will be estimated, reconciled and, in the case of reimbursement, paid on a
quarterly basis.
5
<PAGE>
11. Services to Other Companies or Accounts
---------------------------------------
The investment advisory services of the Adviser to the Fund under this
Agreement are not to be deemed exclusive, and the Adviser, or any affiliate
thereof, shall be free to render similar services to other investment companies
and other clients (whether or not their investment objectives and policies are
similar to those of the Fund) and to engage in other activities, so long as it
services hereunder are not impaired thereby.
12. Duration and Termination
------------------------
This Agreement shall become effective on September 17, 1996,in effect,
unless sooner terminated as provided herein, for two years from such date and
shall continue from year to year thereafter, provided each continuance is
specifically approved at least annually by (i) the vote of a majority of the
Board of Directors of the Company or (ii) a vote of a "majority" (as defined in
the 1940 Act) of the Fund's outstanding voting securities, provided that in
either event the continuance is also approved by a majority of the Board of
Directors who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable, without
penalty, on sixty (60) days' written notice by the Board of Directors of the
Company or by bote of holders of a majority of the Fund's shares or upon ninety
90) days' written notice by the Adviser. This Agreement will also terminate
automatically in the event of its "assignment" (as defined in the 1940 Act).
13. Amendment
---------
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
an affirmative vote of (i) a majority of the outstanding voting securities of
the Fund, and (ii) a majority of the Directors of the Company, including a
majority of Directors who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law.
6
<PAGE>
15. Miscellaneous
-------------
a. This Agreement constitutes the full and complete agreement of the
parties hereto with respect to the subject matter hereof.
b. Titles or captions of Sections contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any provisions thereof.
c. This Agreement may be executed in several counterparts, all of which
together shall for all purposes constitute one Agreement, binding on all the
parties.
d. This Agreement and the rights and obligations of the parties hereunder
shall be governed by, and interpreted, construed and enforced in accordance with
the laws of the State of California.
e. If any provision of this Agreement or the application thereof to any
party or circumstances shall be determined by any court of competent
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Agreement or the application of such provision to such person or circumstance,
other than those as to which it is so determined to be invalid or unenforceable,
shall not be affected thereby, and each provision hereof shall be valid and
shall be enforced to the fullest extent permitted by law.
7
<PAGE>
f. Notices of any kind to be given to the Adviser by the Company shall be
in writing and shall be duly given if mailed or delivered to the Adviser at SBG
Capital's address, or at such other address or to such individual as shall be
specified by the Adviser to the Company. Notices of any kind to be given to the
Company by the Adviser shall be in writing and shall be duly given if mailed or
delivered to 333 S. Grand Ave., Suite 4075, Los Angeles, California 90071, or at
such other address or to such individual as shall be specified by the Company to
the Adviser.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
Santa Barbara Group of Mutual Funds
By:_________________________________
Stephen Y. Ascher
Chief Executive Officer
SBG CAPITAL MANAGEMENT, INC.
By:_________________________________
Steven W. Arnold
President
9
<PAGE>
EXHIBIT 5(b)
SUB-INVESTMENT ADVISER AGREEMENT
AGREEMENT, made this ___ day of September __, 1996, between The SBG Capital
Management, Inc. (the "Fund Manager") on behalf of the Starbuck Tisdale Growth
and Income Fund (the "Fund") and Starbuck Tisdale & Associates, Inc. (the
"Sub-Adviser"), a California Corporation.
WHEREAS the Fund Manager has entered into an Investment Advisory with The
Santa Barbara Group of Mutual Funds, Inc. (the "Company").
WHEREAS, the Company is a Maryland Corporation authorized to issue shares
in series and is registered as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and the Fund is
the initial series of the Company;
WHEREAS, the Sub-Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
WHEREAS, the Fund Manager wishes to retain the Sub-Adviser to render
investment advisory services to the Fund, and the Sub-Adviser is willing to
furnish such services to the Fund;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Fund Manager and the Sub-Adviser as
follows:
1. Appointment
-----------
The Fund Manager, with the consent and approval of the Company, hereby
appoints the Sub-Adviser to act as Sub-Investment Adviser to the Fund for the
periods and on the terms set forth herein. The Sub-Adviser accepts the
appointment and agrees to furnish the services set forth herein for the
compensation provided herein.
2. Services as Sub-Investment Adviser
----------------------------------
Subject to the general supervision and direction of the Board of Directors
of the Company, the Sub-Adviser will (a) manage the Fund in accordance with the
Fund's investment objective and policies as stated in the Fund's Prospectus and
the Statement of Additional Information filed
10
<PAGE>
with the Securities and Exchange Commission, as they may be amended from time to
time; (b) make investment decisions for the Fund; (c) place purchase and sale
orders on behalf of the Fund; and, (d) employ professional portfolio managers
and securities analysts to provide research services to the Fund. In providing
those services, the Sub-Adviser will provide the Fund with ongoing research,
analysis, advice, and judgments regarding individual investments, general
economic conditions and trends and long-range investment policy. In addition,
the Sub-Adviser will furnish the Fund with whatever statistical information the
Fund may reasonably request with respect to the securities that the Fund may
hold or contemplate purchasing.
The Sub-Adviser further agrees that, in performing its duties hereunder, it
will:
a. comply with the 1940 Act and all rules and regulations thereunder, the
Advisers Act, the Internal Revenue Code of 1986, as amended (the "Code") and all
other applicable federal and state laws and regulations, and with any applicable
procedures adopted by the Directors;
b. use reasonable efforts to manage the Fund so that it will qualify, and
continue to qualify, as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder;
c. maintain books and records with respect to the Fund's securities
transactions, render to the Board of Directors of the Company such periodic and
special reports as the Board may reasonably request, and keep the Directors
informed of developments materially affecting the Fund's portfolio;
d. make available to the Fund's administrator, and the Company, promptly
upon their request, such copies of its investment records and ledgers with
respect to the Fund as may be required to assist the administrator and the
Company in their compliance with applicable laws and regulations. The Sub-
Adviser will furnish the Directors with such periodic and special reports
regarding the Fund as they may reasonably request;
e. immediately notify the Company in the event that the Sub-Adviser or
any of its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Sub-Adviser from serving as sub-investment
adviser pursuant to this Agreement; or (2) becomes aware that it is the subject
of an administrative proceeding or enforcement action by the Securities and
Exchange Commission or other
11
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regulatory authority. The Sub-Adviser further agrees to notify the Company
immediately of any material fact known to the Sub-Adviser respecting or relating
to the Sub-Adviser that is not contained in the Company's Registration Statement
regarding the Fund, or any amendment or supplement thereto, but that is required
to be disclosed therein, and of any statement contained therein that becomes
untrue in any material respect.
4. Documents
---------
The Fund has delivered properly certified or authenticated copies of each
of the following documents to the Sub-Adviser and will deliver to it all future
amendments and supplements thereto, if any:
a. certified resolution of the Board of Directors of the Company
authorizing the appointment of the Sub-Adviser and approving the form of this
Agreement;
b. The Registration Statement as filed with the Securities and Exchange
Commission and any amendments thereto;
c. exhibits, powers of attorneys, certificates and any and all other
documents relating to or filed in connection with the Registration Statement
described above.
5. Brokerage
---------
In selecting brokers or dealers to execute transactions on behalf of the
Fund, the Sub-Adviser will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any Fund
transaction, the Sub-Adviser will consider all factors it deems relevant,
including, but not limited to, the breadth of the market
12
<PAGE>
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis. In
selecting brokers or dealers to execute a particular transaction, and in
evaluating the best overall terms available, the Sub-Adviser is authorized to
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the securities Exchange Act of 1934, as amended (the "1934
Act")) provided to the Fund and/or other accounts over which the Sub-Adviser or
its affiliates exercise investment discretion. In accordance with Section 11(a)
of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations, the Sub-Adviser and its affiliates are
authorized to effect portfolio transactions for the Fund and to retain brokerage
commissions on such transactions. Sub-Adviser may take into account sales of
Fund shares in selecting a broker.
6. Records
-------
The Sub-Adviser agrees to maintain and to preserve for the periods
prescribed under the 1940 Act any such records as are required to be maintained
by the Sub-Adviser with respect to the Fund by the 1940 Act. The Sub-Adviser
further agrees that all records which it maintains for the Fund are the property
of the Fund and it will promptly surrender any of such records upon request.
7. Standard of Care
----------------
The Sub-Adviser shall exercise its best judgment in rendering the services
under this Agreement. The Sub-Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the Fund's
shareholders in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
the Sub-Adviser against any liability to the Fund or to its shareholders to
which the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of the Sub-Adviser's reckless disregard of its obligations
and duties under this Agreement. As used in this Section 7, the term "Sub-
Adviser" shall include any officers, directors, employees, or other affiliates
of the Sub-Adviser performing services with respect to the Fund.
8. Compensation
------------
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In consideration of the services rendered pursuant to this Agreement, the
Fund Manager will pay the Sub-Adviser a fee at an annual rate equal to 0.50% of
the average daily net assets of the Fund. This fee shall be computed and accrued
daily and payable monthly. For the purpose of determining fees payable to the
Sub-Adviser, the value of the Fund's average daily net assets shall be computed
at the times and in the manner specified in the Fund's Prospectus or Statement
of Additional Information.
9. Expenses
--------
The Sub-Adviser will bear all expenses in connection with the performance
of its services under this Agreement. The Fund will bear certain other expenses
to be incurred in its operation, including: taxes, interest, brokerage fees and
commission, if any, fees of Directors of the Company who are not officers,
directors, or employees of the Sub-Adviser; Securities and Exchange Commission
fees and state blue sky qualification fees; charges of custodians and transfer
and dividend disbursing agents; the Fund's proportionate share of insurance
premiums; outside auditing and legal expenses; costs of maintenance of the
Fund's existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; charges of an independent pricing
service; costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
shareholders' costs of shareholders' reports and meetings of the shareholders of
the Fund and of the officers or Board of Directors of the Company; and any
extraordinary expenses. In addition, the Fund will pay distribution fees
pursuant to a Distribution Plan adopted under Rule 12b-1 of the 1940 Act.
10. Reduction of Fees or Reimbursement to the Fund
----------------------------------------------
If in any fiscal year the aggregate expenses of the Fund (including fees
pursuant to this Agreement and the Fund's administration agreement, but
excluding distribution fees, interest, taxes, brokerage and extraordinary
expenses) exceed the expense limitation of any state having jurisdiction over
the Fund, the Sub-Adviser will reduce its fees or reimburse the Fund for such
excess expense in the same proportion as its advisory fee bears to the Fund's
combined fee for investment advice and administration. The Sub-Adviser's
obligation to reduce its fees or reimburse the Fund will be limited to the
amount of its fees received pursuant to this Agreement. Such reduction in fees
or reimbursement, if any, will be estimated, reconciled and, in the case of
reimbursement, paid on a quarterly basis.
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11. Services to Other Companies or Accounts
---------------------------------------
The investment advisory services of the Sub-Adviser to the Fund under this
Agreement are not to be deemed exclusive, and the Sub-Adviser, or any affiliate
thereof, shall be free to render similar services to other investment companies
and other clients (whether or not their investment objectives and policies are
similar to those of the Fund) and to engage in other activities, so long as it
services hereunder are not impaired thereby.
12. Duration and Termination
------------------------
This Agreement shall become effective on September 17, 1996,in effect,
unless sooner terminated as provided herein, for two years from such date and
shall continue from year to year thereafter, provided each continuance is
specifically approved at least annually by (i) the vote of a majority of the
Board of Directors of the Company or (ii) a vote of a "majority" (as defined in
the 1940 Act) of the Fund's outstanding voting securities, provided that in
either event the continuance is also approved by a majority of the Board of
Directors who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable, without
penalty, on sixty (60) days' written notice by the Board of Directors of the
Fund or by vote of holders of a majority of the Fund's shares or upon ninety 90)
days' written notice by the Sub-Adviser 90 terminates by SBG Capital. This
Agreement will also terminate automatically in the event of its "assignment" (as
defined in the 1940 Act).
13. Amendment
---------
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
an affirmative vote of (i) a majority of the outstanding voting securities of
the Fund, and (ii) a majority of the Directors of the Company, including a
majority of Directors who are not
15
<PAGE>
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is required
by applicable law.
14. Use of Name
-----------
It is understood that the name of Starbuck Tisdale & Associates, Inc. or
any derivative thereof or logo associated with that name is the valuable
property of the Sub-Adviser and its affiliates, and that the Fund has the right
to use such name (or derivative or logo) only so long as this Agreement shall
continue with respect to the Fund. Upon termination of this Agreement, the Fund
shall forthwith cease to use such name (or derivative or logo) and shall
promptly amend its Articles of Incorporation to change its name to comply
herewith.
15. Miscellaneous
-------------
a. This Agreement constitutes the full and complete agreement of the
parties hereto with respect to the subject matter hereof.
b. Titles or captions of Sections contained in this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any provisions thereof.
c. This Agreement may be executed in several counterparts, all of which
together shall for all purposes constitute one Agreement, binding on all the
parties.
d. This Agreement and the rights and obligations of the parties hereunder
shall be governed by, and interpreted, construed and enforced in accordance with
the laws of the State of California.
e. If any provision of this Agreement or the application thereof to any
party or circumstances shall be determined by any court of competent
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Agreement or the application of such provision to such person or circumstance,
other than those as to which it is so determined to be invalid or unenforceable,
shall not be affected thereby, and each provision hereof shall be valid and
shall be enforced to the fullest
16
<PAGE>
extent permitted by law.
f. Notices of any kind to be given to the Sub-Adviser by the Company
shall be in writing and shall be duly given if mailed or delivered to the Sub-
Adviser at 111 West Micheltorena Street, Suite 210, Santa Barbara California
93101, or at such other address or to such individual as shall be specified by
the Sub-Adviser to the Company. Notices of any kind to be given to the Company
by the Sub-Adviser shall be in writing and shall be duly given if mailed or
delivered to 333 S. Grand Ave., Suite 4075, Los Angeles, California 90071, or at
such other address or to such individual as shall be specified by the Company to
the Sub-Adviser.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
SBG CAPITAL MANAGEMENT, INC.
By:_________________________________
Stephen Y. Ascher
Chief Executive Officer
STARBUCK TISDALE & ASSOCIATES
By:_________________________________
L. David Tisdale
President
17
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EXHIBIT 10(b)
[LETTERHEAD OF DECHERT PRICE & RHOADS]
October 15, 1996
The Santa Barbara Group
of Mutual Funds, Inc.
333 South Grand Avenue
Suite 4075
Los Angeles, California 90071
Gentlemen:
In connection with Pre-Effective Amendment No. 5 of the Registration
Statement under the Securities Act of 1933 of the Santa Barbara Group of Mutual
Fund, Inc., we hereby consent to all references to our firm therein.
Very truly yours,
/s/ Dechert Price & Rhoads
<PAGE>
EXHIBIT 11
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
CONSENT OF INDEPENDENT AUDITORS
SANTA BARBARA GROUP OF MUTUAL FUNDS, INC.:
We consent to (a) the use in this Pre-Effective Amendment No. 5 to Registration
Statement No. 33-56546 on Form N-1A of our report on the financial statements of
the Santa Barbara Group of Mutual Funds, Inc. as of September 20, 1996 dated
September 26, 1996 appearing in Part B, the Statement of Additional Information
of such Registration Statement, (b) the reference to us under the heading "Other
Information" in the Prospectus which is part of such Registration Statement, and
(c) the reference to us under the heading "Investment Advisory and Other
Services" in the Part B, the Statement of Additional Information of such
Registration Statement.
/s/ Deloitte & Touche LLP
October 11, 1996
