THE SANTA BARBARA GROUP OF MUTUAL FUNDS
BENDER GROWTH FUND
REPORT TO SHAREHOLDERS
AS OF MARCH 31, 1997
<PAGE>
ANNUAL REPORT - CHAIRMAN'S LETTER
DEAR SHAREHOLDERS:
It is my pleasure to write this first letter to you as a shareholder. The Bender
Growth Fund was opened in the Fall of 1996 as one of a series of funds of The
Santa Barbara Group of Mutual Funds, Inc. Each fund within the series will be
representative of a different investment style. The advisor selected to provide
investment advice to each fund will be chosen for their outstanding record for
that style of investment. We have a further requirement that each advisor place
their or their firm's name on the fund. Also, the advisor is expected to make a
substantial investment in the fund with you. These and other arrangements were
created to incite the advisor to do the very best job for you... the
shareholders of the fund.
As this is The Santa Barbara Group's first fund, I am most pleased to have Bob
and Reed Bender of Robert Bender and Associates as the advisor to the fund. You
are investors in a fund that seeks above average growth over the longer term.
The accompanying letter succinctly explains the advisor's method of investing.
As the Fund Company, we continue to compare performance of The Bender Growth
Fund to other funds with similar investment style. Robert Bender & Associates'
long term investment record to date is enviable. That, of course, was the reason
they were selected. Their record continues to be enviable. The Bender Growth
Fund is performing just the way it should. It suffered the decline as most small
cap and technology related funds did, but roared back as the companies held came
through with attractive earnings and the market continued to reward these
selections favorably. We are very pleased.
What can we tell you about the future? When the "nineties" began, we stated this
would be the very best decade in this century for investors. This has proven to
be the case. We see nothing on the horizon to make us change our outlook now.
That is why we think this is a good period to continue to open funds with
independent advisors. Equities remain as the premier asset class of investing
for the rest of this decade and beyond. We believe Robert Bender and Associates'
method is a premier way of investing in equities. When we look at the stocks the
fund has accumulated in the portfolio, it is an outstanding list of growing
companies. That is what gives us comfort that the fund is expected to achieve
above average returns that are associated with this style of investing over a
long period of time.
We look forward to continuing good investing with you.
Sincerely,
/S/ SIGNATURE
Stephen Y. Ascher
Chairman
Santa Barbara Group of Mutual Funds
May 28, 1997
<PAGE>
LETTER FROM THE INVESTMENT ADVISOR
TO THE SHAREHOLDERS OF THE BENDER GROWTH FUND:
The Bender Growth Fund focuses on growth stocks that we believe are of high
quality and have the ability to grow earnings per share 20% or more for 5 to 7
years. Our research is done using both a top down and bottom up approach. We
first identify the fastest growing sectors of the economy, and then focus on the
two best companies in each sector that we view as having the best growth
prospects. All companies included in The Bender Growth Fund have both a history
and the prospect of being profitable. We feel the equity market rewards nothing
greater than consistent earnings growth over time. The Bender Growth Fund owns
both large and small capitalization stocks, diversified among several
industries.
Although the equity markets have seen considerable appreciation in the last few
years, we feel the current dynamics of the economy will continue to be favorable
for growth stocks. Moderate economic growth with little inflation should
continue throughout the 90's. The combination of productivity gains and
increasing global competition limit pricing options.
Sectors of the economy that are represented in The Bender Growth Fund include
technology, health care, and retail. We feel there is tremendous opportunity in
the technology sector in both computer networks and wireless telecommunications.
Our investments in these areas focus on the infrastructure of wide area networks
and digital telecommunications. Our health care investments are in companies
involved with cost containment in the industry, as this remains the most
important issue going forward. Although retailing continues to become more
competitive, we feel selected operations have the ability to dominate their
businesses. Over the longer term, we are optimistic about the potential of our
investments, and look for above average returns for The Bender Growth Fund.
Thank you for your support.
Very truly yours,
/S/ SIGNATURE /S/ SIGNATURE
Robert Bender Reed Bender
President Vice President
Robert Bender & Associates
<PAGE>
STATEMENT OF NET ASSETS THE SANTA BARBARA GROUP OF MUTUAL FUNDS
March 31, 1997
BENDER GROWTH FUND
Market
Shares Value
-------- --------
COMMON STOCKS (93.0%)
AUTOMOTIVE (2.4%)
Autozone* 3,890 $ 87,525
- ----------------------------------------------------------------------
COMMUNICATIONS (10.7%)
Abacus Direct* 4,550 96,687
Ascend Communications* 2,110 85,983
P-Com* 3,610 93,860
Sawtek* 3,665 105,369
- ----------------------------------------------------------------------
381,899
- ----------------------------------------------------------------------
COMPUTERS & SERVICES (37.6%)
CBT Group PLC ADR* 2,378 118,603
Checkpoint Software* 5,540 113,570
Cisco Systems* 2,270 109,244
Gartner Group, Cl A* 3,680 79,580
Hummingbird Communications* 3,960 103,950
Informix* 3,225 48,777
Legato Systems* 4,960 82,578
Microsoft* 1,150 105,441
Network Appliance* 3,105 100,912
Oracle* 3,050 117,615
Sun Microsystems* 2,980 86,047
Synopsys* 3,600 90,000
Verifone* 2,970 97,268
Versatility* 9,490 92,528
- ----------------------------------------------------------------------
1,346,113
- ----------------------------------------------------------------------
DRUGS (2.9%)
Watson Pharmaceuticals* 2,850 101,888
- ----------------------------------------------------------------------
MEDICAL (9.1%)
Arterial Vascular Engineering* 6,620 115,850
Gulf South Medical Supply* 5,440 105,400
Quintiles Transnational* 1,920 103,440
- ----------------------------------------------------------------------
324,690
- ----------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES (5.5%)
Forrester Research* 5,400 98,550
Paychex 2,420 99,523
- ----------------------------------------------------------------------
198,073
- ----------------------------------------------------------------------
RETAIL (21.8%)
Bed Bath & Beyond* 4,165 100,741
CDW Computer Centers* 2,200 99,137
Fastenal 2,670 93,450
Home Depot 2,020 108,070
Kohl's* 2,390 101,276
Lone Star Steakhouse* 3,920 89,670
Outback Steakhouse* 4,440 88,800
Starbucks* 3,310 98,059
- ----------------------------------------------------------------------
779,203
- ----------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS THE SANTA BARBARA GROUP OF MUTUAL FUNDS
March 31, 1997
BENDER GROWTH FUND (CONTINUED)
Market
Shares Value
-------- --------
SEMICONDUCTORS (3.0%)
Intel 770 $ 107,126
- ----------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $3,976,500) 3,326,517
- ----------------------------------------------------------------------
CASH EQUIVALENT (7.5%)
United Missouri Bank AFM
(Cost $267,013) 267,013 267,013
- ----------------------------------------------------------------------
TOTAL INVESTMENTS (100.5%)
(COST $4,243,513) 3,593,530
- ----------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-0.5%) (16,574)
- ----------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Y Class ($.001 par value - unlimited
authorization) based on 113,532 outstanding shares 1,117,997
Portfolio Shares of C Class ($.001 par value - unlimited
authorization) based on 320,474 outstanding shares 3,143,107
Accumulated net realized loss on investments (34,165)
Net unrealized depreciation on investments (649,983)
- ----------------------------------------------------------------------
Total Net Assets: (100.0%) $ 3,576,956
- ----------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - Y CLASS $ 8.26
- ----------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - C CLASS $ 8.24
- ----------------------------------------------------------------------
* Non-income producing security
ADR - American Depository Receipt
AFM - Automated Funds Management
Cl - Class
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS THE SANTA BARBARA GROUP OF MUTUAL FUNDS
For the Period Ended March 31, 1997
BENDER
GROWTH
FUND (1)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest Income $ 5,125
Dividend Income 353
- --------------------------------------------------------------------------------
Total Investment Income 5,478
- --------------------------------------------------------------------------------
EXPENSES:
Administrator Fees 18,480
Investment Advisory Fees 11,172
Custodian Fees 1,060
Transfer Agent Fees 10,217
Professional Fees 16,144
Director Fees 4,540
Registration Fees 1,859
Distribution Fees - Y Class 585
Distribution Fees - C Class 6,594
Printing Fees 2,018
Pricing Fees 504
Amortization of Deferred Organizational Costs 2,645
- --------------------------------------------------------------------------------
Total Expense before Waiver of Investment Advisory Fees
and Contribution from Advisor 75,818
- --------------------------------------------------------------------------------
Waiver of Investment Advisory Fees (11,172)
Contribution from Advisor (35,131)
- --------------------------------------------------------------------------------
Total Expenses 29,515
- --------------------------------------------------------------------------------
Net Investment Loss (24,037)
- --------------------------------------------------------------------------------
Net Realized Loss on Investments (34,165)
Net Unrealized Depreciation on Investments (649,983)
- --------------------------------------------------------------------------------
Net Realized and Unrealized Loss on Investments (684,148)
- --------------------------------------------------------------------------------
Net Decrease in Net Assets
Resulting From Operations $ (708,185)
- --------------------------------------------------------------------------------
(1) The Bender Growth Fund commenced operations on December 10, 1996.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS THE SANTA BARBARA GROUP OF MUTUAL FUNDS
For the Period Ended March 31,1997
BENDER
GROWTH
FUND (1)
- -------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net Investment Loss $ (24,037)
Net Realized Loss on Investments (34,165)
Net Unrealized Depreciation of Investments (649,983)
- -------------------------------------------------------------------------------
Decrease in Net Assets Resulting From Operations (708,185)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Y Class:
Proceeds from Shares Issued (114,467 shares) 1,127,565
Cost of Shares Redeemed (11,435 shares) (108,371)
- -------------------------------------------------------------------------------
Total Y Class Transactions 1,019,194
- -------------------------------------------------------------------------------
C Class:
Proceeds from Shares Issued (333,060 shares) 3,283,062
Cost of Shares Redeemed (12,586 shares) (122,115)
- -------------------------------------------------------------------------------
Total C Class Transactions 3,160,947
- -------------------------------------------------------------------------------
Net Increase in Net Assets from Capital Share Transactions 4,180,141
- -------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 3,471,956
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period (10,500 shares) 105,000
- -------------------------------------------------------------------------------
NET ASSETS:
End of Period (434,006 shares) $ 3,576,956
- -------------------------------------------------------------------------------
(1) The Bender Growth Fund commenced operations on December 10, 1996.
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS THE SANTA BARBARA GROUP OF MUTUAL FUNDS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Income from
Investment Activities
Net ---------------------------- Ratio of
Asset Net Realized Net Net Ratio Net Investment
Value Net and Unrealized Asset Value Assets of Expenses Income
Beginning Investment Loss on End Total End to Average to Average
of Period Income Investments of Period Return of Period Net Assets Net Assets
- ----------------------------------------------------------------------------------------------------------
- ------------------
BENDER GROWTH FUND
- ------------------
Y CLASS
FOR THE PERIOD DECEMBER 10,1996 THRU MARCH 31, 1997,:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $10.00 (0.044) (1.696) $8.26 (17.40)% ** $937,321 2.75% * (2.16)% *
C CLASS
FOR THE PERIOD DECEMBER 10,1996 THRU MARCH 31, 1997,:
1997 $10.00 (0.059) (1.701) $8.24 (17.60)% ** $2,639,635 3.50% * (2.88)% *
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Ratio of Net Investment
of Expenses Income
to Average to Average
Net Assets Net Assets
(Excluding (Excluding Portfolio Average
Waivers and Waivers and Turnover Commission
Contributions) Contributions) Rate Rate (A)
- --------------------------------------------------------------
Y CLASS
FOR THE PERIOD DECEMBER 10,1996 THRU MARCH 31, 1997,:
<S> <C> <C> <C> <C>
1997 7.88% * (7.29)% * 3% $0.0893
C CLASS
FOR THE PERIOD DECEMBER 10,1996 THRU MARCH 31, 1997,:
1997 8.70% * (8.08)% * 3% $0.0893
<FN>
(A) AVERAGE COMMISSION RATE PAID PER SHARE FOR THE SECURITY PURCHASES AND SALES
MADE DURING THE PERIOD.
* ANNUALIZED
** RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
BENDER GROWTH FUND -- MARCH 31, 1997
1. ORGANIZATION
The Santa Barbara Group of Mutual Funds, Inc. (the "Company"), was organized as
a Maryland corporation under Articles of Incorporation dated December 30, 1992.
The Company is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company with two funds: the
Bender Growth Fund and the Starbuck Tisdale Growth and Income Fund (the
"Funds"). The assets of each Fund are segregated, and a shareholder's interest
is limited to the Fund in which shares are held. The financial statements of the
Bender Growth Fund (the "Fund") are included herein. The Starbuck Tisdale Growth
and Income Fund is presented separately. The Company is registered to offer two
classes of shares, Class Y and Class C. Each Fund's prospectus provides a
description of the Fund's investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund.
SECURITY VALUATION -- Investment securities which are listed on a national
securities exchange or on the NASDAQ National Market System for which market
quotations are available are valued by an independent pricing service at the
last reported sale price for such security 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 the over-the-counter market 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 market value as
determined in good faith by the Board of Directors. 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.
SECURITY TRANSACTION AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date of the security purchase or sale. Costs used in
determining net realized capital gains and losses on the sale of securities will
be those of the specific securities sold. Dividend income is recorded on the
ex-dividend date, and interest income is recorded on the accrual basis. Purchase
discounts and premiums on securities held by the Fund are accreted and amortized
to maturity using the scientific interest method, which approximates the
effective interest method.
FEDERAL INCOME TAXES -- The Company's policy is to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Accordingly no provision
for Federal income taxes is required in the financial statements.
EXPENSES -- Expenses that are directly related to the Fund are charged to the
Fund. Other operating expenses of the Company will be prorated to the Funds on
the basis of relative net assets when the Starbuck Tisdale Growth and Income
Fund commences sales of its shares to the public. Expenses, income and gains and
losses are allocated daily among share classes of each Fund based on the
relative proportion of net assets represented by each class.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS -- The financial
statements have been prepared in conformity with generally accepted accounting
principles which requires management to make certain estimates and assumptions
that affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared and paid at least annually. Any net realized capital gains on sales of
securities are distributed annually.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
================================================================================
BENDER GROWTH FUND -- MARCH 31, 1997
The amounts of distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations, which
may differ from those amounts determined under generally accepted accounting
principles. To the extent these book/tax differences are permanent, they are
charged or credited to paid-in capital in the period that the difference arises.
$24,037 relating to permanent differences attributable to cumulative net
operating losses of the Bender Growth Fund as of March 31, 1997, has been
reclassified from that portfolio's accumulated net investment losses to paid-in
capital. This reclassification has no effect on net assets or net asset value
per share.
NET ASSET VALUE PER SHARE -- The net asset value per share of the Fund is
calculated each business day by dividing the total value of the Funds assets,
less liabilities, by the number of shares outstanding. Class C shares redeemed
within one year of purchase may be subject to a contingent deferred sales charge
equal to one-percent.
ORGANIZATIONAL COSTS -- Organizational costs approximating $43,100 have been
deferred in the account of the Fund and are being amortized on a straight line
basis over a period of sixty months commencing with operations. In the event any
of the initial shares of the Fund are redeemed by any holder thereof during the
period that the Fund is amortizing it's organizational costs, the redemption
proceeds payable to the holders thereof by the Fund will be reduced by the pro
rata share (based on the proportionate share of the original shares redeemed to
the total number of shares outstanding at the time of such redemption) of the
unamortized deferred organizational costs as of the date of such redemption.
3. SERVICE AGREEMENTS
Pursuant to an investment advisory agreement, investment advisory services are
provided to the Company by SBG Capital Management (the "Advisor"). The Advisor
receives a monthly fee at an annual rate of 1.25% of the average daily net
assets of the Fund. The Advisor has agreed to waive a portion of their fees in
order to limit the operating expenses of the Fund to 2.5% of average net assets.
Sub-Advisory services are provided to the Advisor for the Fund by Robert Bender
& Associates, Inc. (the "Sub-Advisor") pursuant to a sub-advisory agreement.
Under terms of the agreement, the Sub-Advisor receives a monthly fee at an
annual rate of 0.50% of the average daily net assets of the fund and is paid by
the Advisor. The Advisor is responsible for the supervision of and payment of
fees to the Sub-Advisor in connection with it's services.
Ascher/Decision Services, Inc. (an affiliate of the Advisor) serves as
distributor to the Fund pursuant to a Service and Distribution Plan (the
Plan). Under terms of the Plan, the Distributor is paid a distribution fee at
an annual rate of 0.25% and 0.75% of the average daily net assets of the Class Y
and C shares respectively. Class C shares are subject to a shareholder services
fee which is paid to the Distributor, at an annual rate of 0.25% of the average
daily net assets of the Class C shares of the Fund.
SEI Fund Resources (the "Administrator") serves as administrator to the Fund
pursuant to an administration agreement. Under terms of such agreement the
Administrator is paid an annual fee equal to the greater of 0.15% of the first
$50 million in average daily net assets, 0.125% for the next $50 million in
average daily net assets and 0.10% for such daily net assets in excess of $100
million or a minimum of $60,000.
The Fund and United Missouri Bank (the "Custodian") are parties to a custodial
agreement under which the custodian holds cash, securities and other assets of
the Fund as required by the Investment Company Act of 1940. The Custodian plays
no role in determining the investment policies of the Fund or which securities
are to be purchased or sold by the Fund.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
===============================================================================
BENDER GROWTH FUND -- MARCH 31, 1997
The Fund and National Financial Data Services (the "Transfer Agent") are parties
to a servicing agreement, under which the Transfer Agent provides transfer
agency and dividend disbursing services for the Fund.
4. INVESTMENT TRANSACTIONS
The cost of security purchases and the proceeds from the sale of securities,
other than temporary cash investments for the period from December 10, 1996 to
March 31, 1997, were $4,080,000 and $69,000, respectively.
As of March 31, 1997, net unrealized depreciation on investment securities for
book and federal income tax purposes aggregated $650,000 of which $37,000
related to appreciated securities and $687,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities for the period from December 10, 1996 to March 31, 1997.
The Fund had capital loss carry forwards at March 31, 1997, to the extent
provided in the regulations for Federal income tax in the amount of $34,000
which is available to offset future taxable gains through 2005.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE
GENERAL INFORMATION OF THE SHAREHOLDERS OF THE COMPANY. THE REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE COMPANY, UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. NEITHER THE COMPANY NOR SEI
FINANCIAL SERVICES COMPANY IS A BANK AND COMPANY SHARES ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK OR INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY. INVESTING IN MUTUAL FUNDS INVOLVES RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. SEI FINANCIAL SERVICES COMPANY AND
UMB BANK ARE NOT AFFILIATED.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of the Bender Growth Fund:
We have audited the accompanying statement of net assets of the Bender Growth
Fund (the Fund), as of March 31, 1997, and the related statements of
operations, changes in net assets, and financial highlights for the period
December 10, 1996 (inception) to March 31, 1997. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights 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 and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at March 31, 1997 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Bender Growth Fund at March 31, 1997, and the results of its operations, changes
in net assets, and financial highlights for the period December 10, 1996
(inception) to March 31, 1997, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
May 22, 1997
