THE SANTA BARBARA GROUP OF MUTUAL FUNDS
STARBUCK TISDALE GROWTH & INCOME FUND
ANNUAL REPORT TO SHAREHOLDERS
AS OF MARCH 31, 1998
<PAGE>
LETTER TO SHAREHOLDERS
FROM THE CHAIRMAN OF THE SANTA BARBARA GROUP OF MUTUAL FUNDS
Dear Shareholder,
As I look over my forty years in the investment industry, I can not recall being
involved with a Fund and fund managers where the performance was as good as the
fiscal year just turned in by the Bender Growth Fund managed by Bob and Reed
Bender. The Bender Growth Fund's Class C shares were up 65.17%. According to the
Lipper organization, this placed it in the top forty funds for the period. Many
of the funds that outperformed it were specialty funds. For a "broad spectrum
fund", the Bender Growth Fund's performance was extraordinary. Our hats off to
Reed and Bob.
What do we foresee happening for the 1999 fiscal year? Will it be a continuation
of 1998? No one can predict, but as we look at today's remarkably changed
investment climate we do not have a sense of fear and trepidation about the
level of the market. Just to cite several reasons. Interest rates have nothing
to drive them upward. The impetus is for interest rates to remain steady or
decline. Inflation has disappeared. Money flows into the market from retirement
plans and foreign sources will not abate. Our continuing improving efficiency of
our economy resulting from events of the eighties and early nineties are long
term and also will not abate. Finally, the strong competitive nature of today's
international or global economy will continue to keep prices down. The economic
picture for the 1999 fiscal year is a good one. We certainly would not run from
equities.
The forthcoming year for the Santa Barbara Group of Mutual Funds will be a
pivotal one. The concept of the Santa Barbara Group of Mutual Funds, is to have
a fund group of individual funds managed by the very best investment managers
one can find--organizations such as Bob and Reed's. Actually we have such an
organization and another Fund--The Starbuck Tisdale Fund. If it were open for
public investing, its past fiscal year would rank it as one of the top funds in
Lipper's Growth and Income category. It is a shame not to get this fund and
other capable fund manager's further exposure in the public marketplace. Our
intention is to do that or recognize such effort dilutes our commitment to the
Bender Fund.
On behalf of the Board of Directors, we thank you for participating with us in a
year that has proven to be truly noteworthy. We are confident there will be more
in the future.
Very truly yours,
[/S/SIGNATURE]
Stephen Y. Ascher
Chairman
<PAGE>
LETTER FROM THE INVESTMENT ADVISOR
TO THE SHAREHOLDERS OF THE STARBUCK TISDALE GROWTH & INCOME FUND:
This year has been good for growth stocks. Moderate economic growth and minimal
inflation have both helped keep interest rates in check and provided support for
equity valuations.
Over the twelve month period ending March 31, 1998, the Starbuck Tisdale Growth
& Income Fund returned 36.83% versus 47.97% for the S&P 500 Composite Index and
40.14% for the Lipper Growth and Income Investment Objective Universe Average.
We remain confident in the long term attractiveness of our growth and income
strategy and appreciate your investment with us.
Thank you for your support.
Sincerely,
[/S/SIGNATURE OMITTED]
<PAGE>
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE STARBUCK TISDALE GROWTH & INCOME FUND,
VERSUS THE S&P 500 COMPOSITE INDEX
Starbuck Tisdale Growth & Income Fund S&P 500 Composite Index
8/96 $10,000 $10,000
3/97 10,961 11,748
3/98 14,998 17,384
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
One Annualized
Year Inception to Date
- --------------------------------------------------------------------------------
Starbuck Tisdale Growth
& Income Fund 36.83% 29.17%
- --------------------------------------------------------------------------------
FOR THE PERIOD ENDED MARCH 31, 1998. PAST PERFORMANCE OF THE PERIOD IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF
AN INVESTMENT WILL FLUCTUATE, SO AN INVESTOR'S SHARE, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE FUND COMMENCED OPERATIONS ON
AUGUST 31, 1996.
<PAGE>
STATEMENT OF NET ASSETS THE SANTA BARBARA GROUP OF MUTUAL FUNDS
March 31, 1998
STARBUCK TISDALE GROWTH & INCOME FUND
Market
COMMON STOCKS (92.4%) Shares Value
----------- -------------
BANKS (7.8%)
Citicorp 50 $ 7,100
Norwest 200 8,312
- ----------------------------------------------------------------------------
15,412
- ----------------------------------------------------------------------------
COMPUTER & SERVICES (10.2%)
Adobe Systems 100 4,513
Cisco Systems* 90 6,154
Hewlett Packard 75 4,753
Zebra Tech* 125 4,734
- ----------------------------------------------------------------------------
20,154
- ----------------------------------------------------------------------------
DRUGS (20.4%)
Abbott Labs 75 5,648
Agouron Pharmaceuticals* 150 5,681
American Home Products 60 5,723
Bristol-Myers Squibb 80 8,345
Ecolab 200 5,800
Merck 50 6,419
North American Vaccine* 150 2,625
- ----------------------------------------------------------------------------
40,241
- ----------------------------------------------------------------------------
FOOD & BEVERAGE (10.6%)
H.J. Heinz 125 7,297
Pepsico 100 4,268
Sara Lee 150 9,244
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20,809
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HOUSEHOLD PRODUCTS (3.5%)
Clorox 80 6,855
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MEDICAL PRODUCTS & SERVICES (4.4%)
HBO & Company 100 6,031
Mentor 100 2,750
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8,781
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MISCELLANEOUS MANUFACTURING (5.4%)
Illinois Tool Works 100 6,475
Expeditors International of Washington 100 4,238
- ----------------------------------------------------------------------------
10,713
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PETROLEUM REFINING (3.1%)
Chevron 75 6,023
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REAL ESTATE INVESTMENT TRUST (3.6%)
Merry Land & Investment 100 2,237
Security Capital Pacific 200 4,813
- ----------------------------------------------------------------------------
7,050
- ----------------------------------------------------------------------------
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, 1998
STARBUCK TISDALE GROWTH & INCOME FUND Shares/ Market
Face Amount Value
----------- -------------
SEMI-CONDUCTORS (3.5%)
Linear Technology 100 $ 6,894
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SUPPLIES (8.4%)
Avery Dennison 200 10,675
Valspar 150 5,888
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16,563
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TELEPHONES & TELECOMMUNICATIONS (11.5%)
GTE 125 7,484
SBC Communications 200 8,725
Worldcom* 150 6,450
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22,659
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TOTAL COMMON STOCKS
(Cost $124,111) 182,154
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PREFERRED STOCK (3.3%)
Security Capital Industrial Trust
7.0% Series (Cost $6,088) 250 6,406
- ----------------------------------------------------------------------------
CONVERTIBLE BOND (2.5%)
Xilinx, Convertible to 19.608 shares,
5.25%, 11/01/02 (Cost $4,990) $5,000 4,988
- ----------------------------------------------------------------------------
CASH EQUIVALENT (1.9%)
United Missouri Bank AFM
(Cost $3,716) 3,716 3,716
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS (100.1%)
(Cost $132,575) 197,264
- ----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.1%)
Deferred Organizational Costs 36,906
Accounts Payable to Administrator (36,906)
Other Assets and Liabilities (176)
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Other Assets and Liabilities, Net (176)
- ----------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Y Class ($.001 par value - unlimited
shares authorized) based on 13,401 outstanding shares 134,008
Distribution in excess of net investment income (27)
Accumulated net realized loss on investments (1,582)
Net unrealized appreciation on investments 64,689
- ----------------------------------------------------------------------------
Total Net Assets: (100.0%) $197,088
- ----------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE - Y CLASS $14.71
============================================================================
* Non-income producing security
AFM-Automated Funds Management
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS THE SANTA BARBARA GROUP OF MUTUAL FUNDS
For the Year Ended March 31, 1998
Starbuck Tisdale
Growth and Income
Fund
- ----------------------------------------------------------------------
Investment Income:
Interest Income $ 284
Dividend Income 3,068
- ----------------------------------------------------------------------
Total Investment Income 3,352
- ----------------------------------------------------------------------
Expenses:
Administrator Fees 60,000
Investment Advisory Fees 1,750
Registration Fees 26,188
Amortization of Deferred Organizational Costs 16,076
Custodian Fees 479
Transfer Agent Fees 366
Professional Fees 524
Director Fees 182
Printing Fees 657
Miscellaneous Fees 7
- ----------------------------------------------------------------------
Total Expenses before Fee Waivers and
Contribution from Advisor 106,229
- ----------------------------------------------------------------------
Fee Waivers (61,750)
Contribution from Advisor (41,876)
- ----------------------------------------------------------------------
Total Expenses, Net 2,603
- ----------------------------------------------------------------------
Net Investment Income 749
- ----------------------------------------------------------------------
Net Realized Loss on Investments (1,582)
Change in Net Unrealized Appreciation of Investments 54,916
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Net Realized and Unrealized Gain on Investments 53,334
- ----------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $ 54,083
======================================================================
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
Starbuck Tisdale
Growth and Income
Fund
- --------------------------------------------------------------------------------
4/1/1997 9/19/1996 (1)
to to
3/31/1998 3/31/1997
---------- -------------
INVESTMENT ACTIVITIES:
Net Investment Income $ 749 $ 1,358
Net Realized Gain/(Loss) on Investments (1,582) 1,584
Net Unrealized Appreciation of Investments 54,916 9,897
- --------------------------------------------------------------------------------
Increase in Net Assets Resulting
From Operations 54,083 12,839
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income: (2,258) 0
Realized capital gains: (1,584) 0
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Total Distributions (3,842) 0
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TOTAL INCREASE IN NET ASSETS 50,241 12,839
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NET ASSETS:
Beginning of Period (13,401 shares) 146,847 134,008
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NET ASSETS:
End of Period (13,401 shares) $197,088 $146,847
================================================================================
(1) The Starbuck Tisdale Growth and Income Fund was initially seeded on
September 19, 1996 and has not yet commenced sales of its shares
to the public.
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS THE SANTA BARBARA GROUP OF MUTUAL FUNDS
For the periods ended March 31, 1998
For a share outstanding throughout the periods
<TABLE>
<CAPTION>
Realized and Net
Net Asset Unrealized Distributions Asset Ratio of Ratio of Net
Value Net Gains or from Net Distributions Value Expenses to Income to
Beginning Investment Losses on Investment from Capital End of Total Net Assets End Average Net Average Net
of Period Income Securities Income Gains Period Return of Period Assets Assets
=============================================================================================================================
- -------------------------------------
Starbuck Tisdale Growth & Income Fund
- -------------------------------------
Class Y
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998** $10.96 0.063 3.974 (0.169) (0.118) $14.71 36.83% $197,088 1.50% 0.48%
1997* $10.00 0.101 0.859 0.000 0.000 $10.96 9.60% 146,847 0.54% 1.79%
</TABLE>
<TABLE>
<CAPTION>
Ratio of Ratio of Net
Expenses to Income to
Average Net Average Net
Assets Assets
(Excluding (Excluding Portfolio Average
Waivers and Waivers and Turnover Commission
Contributions) Contributions) Rate Rate(A)
==========================================================
- -------------------------------------
Starbuck Tisdale Growth & Income Fund
- -------------------------------------
Class Y
<S> <C> <C> <C> <C>
1998** 60.70% (58.72%) 7% $0.0794
1997* 0.54% 1.79% 79% $0.0746
<FN>
** For the period ended March 31, 1998. The Starbuck Tisdale Growth and Income
Fund has not yet commenced sales of its shares to the public. Shares
outstanding as of March 31, 1998 represent shares issued in conjunction with
the contribution of the seed capital on September 19, 1996.
* For the period ended March 31, 1997. All ratios for the period have been
annualized. Total return for the period has not been annualized.
(A) Average commission rate paid per share for the security purchases and
sales made during the period.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
STARBUCK TISDALE GROWTH & INCOME FUND - MARCH 31, 1998
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
Starbuck Tisdale Growth and Income Fund (the "Fund") are included herein. The
Bender Growth 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. 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 are prorated to the Funds on the
basis of relative net assets. 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.
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.
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.
ORGANIZATIONAL COSTS -- Organizational costs of the Fund have been deferred and
are being amortized on a straight line basis over a period of sixty months
commencing on September 19, 1996. Organizational costs of $16,076 representing
costs for the period beginning on September 19, 1996 (commencement of investment
of seed capital) through
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
STARBUCK TISDALE GROWTH & INCOME FUND - MARCH 31, 1998
March 31, 1998 were amortized during the one year period ended March 31, 1998.
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 its 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.
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.
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 1.00% of the average daily net
assets of the Fund.
Sub-Advisory services are provided to the Advisor for the Fund by Starbuck,
Tisdale & Associates (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 its 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. For the year ended March 31, 1998, SEI Fund
Resources waived their Administration Fee.
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.
4. INVESTMENT TRANSACTIONS
The cost of security purchases and the proceeds from the sale of securities,
other than temporary cash investments for the year ended March 31, 1998, were
$12,740 and $17,018, respectively.
As of March 31, 1998, net unrealized appreciation on investment securities for
book and federal income tax purposes aggregated $64,689 of which $65,850 related
to appreciated securities and $1,161 related to depreciated securities. There
was no difference between book and tax realized gains on securities for the
period from April 1, 1997 to March 31, 1998.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------------
STARBUCK TISDALE GROWTH & INCOME FUND - MARCH 31, 1998
- --------------------------------------------------------------------------------
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. ASCHER/DECISION SERVICES,
INC., THE DISTRIBUTOR, AND UNITED MISSOURI BANK, THE CUSTODIAN, ARE NOT
AFFILIATED.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of the Starbuck Tisdale Growth
and Income Fund:
We have audited the accompanying statement of net assets of the Starbuck Tisdale
Growth and Income Fund (the "Fund") as of March 31, 1998 and the related
statements of operations for the year then ended, and the statements of changes
in net assets and financial highlights for the year ended March 31, 1998 and for
the period from September 19, 1996 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at March
31, 1998 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Starbuck Tisdale Growth and Income Fund at March 31, 1998, the results of its
operations for the year then ended, and the changes in net assets and financial
highlights for the year ended March 31, 1998 and for the period from September
19, 1996 to March 31, 1997 in conformity with generally accepted accounting
principles.
Los Angeles, California
May 13, 1998
<PAGE>
NOTICE TO SHAREHOLDERS OF THE SANTA BARBARA GROUP OF MUTUAL FUNDS
STARBUCK TISDALE GROWTH AND INCOME FUND (UNAUDITED)
For the calendar year ended March 31, 1998, the Starbuck Tisdale Growth and
Income Fund is designating long term and mid term capital gains, qualifying
dividends, and exempt income with regard to distributions paid during the year
as follows:
<TABLE>
<CAPTION>
LONG TERM MID TERM ORDINARY TAX-EXEMPT
CAPITAL GAIN CAPITAL GAIN INCOME INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING FOREIGN TAX
(TAX BASIS) (TAX BASIS) (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS(1) CREDIT
===================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
0% 0% 100% 0% 100% 61% 0%
</TABLE>
Please consult your tax advisor for proper treatment of this information.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
