PROSPECTUS
THE BENDER GROWTH FUND
107 South Fair Oaks Blvd., Suite 315
Pasadena, California 91105
Telephone No. (626) 844-1446
Dated June 1, 1998
Supplemented November 6, 1998
The Bender Growth Fund (the "Fund") is one of a 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. It seeks to achieve this
objective by investing in equity securities of companies that are leaders or
potential leaders in rapidly growing and economically sensitive sectors of the
economy. The companies that the Fund invests in demonstrate superior annual
growth in earnings and financial stability. Income is a secondary consideration
in the selection of securities. There can be no assurance that the Funds'
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.
See "Investment Objective and Policies."
The Fund is 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 Robert Bender &Associates
(the "Investment Adviser"). As of December 31, 1997, Robert Bender & Associates,
Inc. managed $170 million of assets of institutional and individual clients. See
"Investment Adviser."
Under the Fund's Variable Pricing System, investors may select Class Y, Class A
or Class C shares, each with a public offering price that reflects different
sales charges and expense levels. Class Y shares are offered at net asset value
without an initial or contingent deferred sales charge, but subject to an annual
Distribution Fee, 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.
Class A shares are offered with an initial sales charge and are subject to an
annual Service Fee. See "Purchase of Shares," "Redemption of Shares," and
"Variable Pricing System."
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 June 1,1998
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 107 South Fair Oaks Blvd., Suite 315,
Pasadena, California 91105 (626) 844-1446.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIESAND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THEACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY ISA CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS
FUND EXPENSES
Example
FINANCIAL HIGHLIGHTS
VARIABLE PRICING SYSTEM
Differences Among the Classes
Factors to Consider in Choosing a Class of Shares
Sales Charges
Transaction Fees
Ongoing Annual Expenses
Other Information
THE FUND
INVESTMENT OBJECTIVE AND POLICIES
OTHER INVESTMENT POLICIES AND THEIR RELATED RISKS
Commercial Paper
Borrowing
RISK FACTORS
Net Asset Value Fluctuation
Foreign Securities
MANAGEMENT OF THE COMPANY AND THE FUND
Fund Manager
Investment Adviser
Portfolio Managers
Advisory Agreements
Administrator
DISTRIBUTOR
PURCHASE OF SHARES
REDEMPTION OF SHARES
Involuntary Redemption
Contingent Deferred Sales Charge--Class A Shares
Contingent Deferred Sales Charge--Class C Shares
NET ASSET VALUE
DIVIDENDS AND DISTRIBUTIONS
BROKERAGE COMMISSIONS
TAXATION
General Tax Information
Other Tax Laws
OTHER INFORMATION
Description of Shares
Performance Information
Custodian, Dividend Disbursing Agent, Transfer Agent and Registrar
Legal Matters
Shareholder Inquiries
Voting Rights
<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 A Class Y Class C
------- ------- -------
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C> <C>
Maximum Initial Sales Charge 5.75% None None
(as a percentage of offering price)
Maximum Contingent Deferred Sales Charge None(*) None 1.00%/1/
(as a percentage of redemption proceeds)
ANNUAL FUND OPERATING EXPENSES: (For the period ending 3/31/98)
(as a percentage of average net assets)
Management fees 0.00%/2/ 0.00%/2/ 0.00%/2/
(after revenues)
12b-1 fees 0.25% 0.25% 1.00%
Other Expenses 2.50% 2.50% 2.50%
(after expense reimbursement) ----- ----- -----
Total Fund Operating Expenses 2.75%(3) 2.75%(3) 3.50%(3)
(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 1.25%, and
to reimburse the Fund for other expenses, to the extent necessary to
prevent the Total Operating Expenses from exceeding 2.75% for Class A and
Class Y shares and 3.50% for Class C Shares. Without these expense
limitations, "Other Expenses" would be 3.09% for each class and "Total Fund
Operating Expenses" would be 4.59%, 4.59% and 5.34% for Class A, Class Y
and Class C, respectively.
(3) ON SEPTEMBER 30, 1998, THE SHAREHOLDERS OF THE FUND APPROVED A NEW
INVESTMENT ADVISORY CONTRACT AND A NEW SUB-ADVISORY CONTRACT FOR THE FUND
WITH THE MANAGER AND ADVISER, RESPECTIVELY. AS A RESULT, TOTAL MANAGEMENT
FEES WERE REDUCED FROM 1.25% TO 0.50%. IN ADDITION, THE BOARD OF THE FUND
APPROVED A NEW OPERATING SERVICES AGREEMENT WITH THE MANAGER. THE EFFECT OF
THESE ACTIONS WILL BE TO PLACE A CAP ON THE FUNDS NORMAL OPERATING EXPENSES
AS FOLLOWS: 1.85% FOR ALL ASSETS IN CLASS A SHARES. FOR AMOUNTS OVER $2.5
MILLION IN CLASS Y SHARES AND $7.5 MILLION IN CLASS C SHARES, TOTAL
EXPENSES WILL BE 1.85% AND 2.60%, RESPECTIVELY. FOR AMOUNTS UNDER $2.5
MILLION IN CLASS Y SHARES AND $7.5 MILLION IN CLASS C SHARES, "TOTAL
EXPENSES" WILL BE 2.75% AND 3.50%, RESPECTIVELY. EXCLUDED FROM THE EXPENSE
CAP ARE EXTRAORDINARY EXPENSES, BROKERAGE TRANSACTION EXPENSES, LEGAL FEES
RELATING TO LITIGATION, TAXES AND INTEREST.
(*) The contingent deferred sales charge is imposed on certain redemptions made
within one year of purchase in accounts held in the name of a qualified
employee benefit plan which was not subject to an initial sales charge. 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 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. After
a substantial period, the Service and Distribution fees, applicable to the
Class A, Class C and Class Y shares, may total more than the economic
equivalent of the maximum sales charge that would have been permissible if
imposed entirely as an initial sales charge.
1
<PAGE>
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, assuming (1) 5% annual return and (2)
redemption at the end of the following time periods:
Assuming Redemption at the end of the period
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A shares $84 $138 $195 $348
Class Y shares $28 $ 85 $145 $308
Class C shares $45 $107 $182 $377
Assuming no Redemption
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A shares $84 $138 $195 $348
Class Y shares $28 $ 85 $145 $308
Class C shares $35 $107 $182 $377
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.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for each share
outstanding, total investment return, ratios to average net assets and other
supplemental data for the year ended March 31, 1998 and the period from December
10, 1996 to March 31, 1997. This information is included in the notes to the
financial statements for that period which have been audited by Deloitte &
Touche LLP, the Fund's independent public accountants, whose report thereon is
contained in the March 31, 1998 annual report to shareholders. The financial
data included in this table should be read in conjunction with the financial
statements and related notes incorporated by reference in the Statement of
Additional Information. During the period shown, the Company did not offer Class
A shares of the Fund. As of September 30, 1998, the Board of Directors of the
Company approved, and the shareholders ratified, the selection of McCurdy &
Company, C.P.A.'s, as the Company's independent auditors for the fiscal year
ending March 31, 1999.
2
<PAGE>
<TABLE>
<CAPTION>
BENDER FUND CLASS Y SHARES CLASS C SHARES
- ----------- ----------------------------- -----------------------------
FOR PERIOD ENDING: MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1998** 1997* 1998** 1997*
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value beginning of period $ 8.26 $ 10.00 $ 8.24 $ 10.00
Net investment income (0.224) (0.044) (0.276) (0.059)
Realized and unrealized gains
or losses on securities 5.704 (1.696) 5.646 (1.701)
Net asset value end of period 13.74 8.26 13.61 8.24
Total return (A) 66.34% (17.4)% 65.17% (17.6)%
Net assets end of period 2,312,027 937,321 6,728,128 2,639,635
Ratio of expenses to average net assets (B) 2.75% 2.75% 3.50% 3.50%
Ratio of income to average net assets (B) (2.50)% (2.16)% (3.25)% (2.88)%
Ratio of expenses to average net assets
(excluding waivers and contributions) (B) 4.59% 7.88% 5.34% 8.70%
Ratio of net income to average net assets
(excluding waivers and contributions) (B) (4.34)% (7.29)% (5.09)% (8.08)%
Portfolio turnover rate 7.44% 3.00% 7.44% 3.00%
Average commission rate (C) $ 0.0971 $ 0.0893 $ 0.0971 $ 0.0893
</TABLE>
- --------------
**For the year ended March 31, 1998.
*For the period ended March 31, 1997. The Bender Growth Fund commenced on
December 10, 1996.
(A) Return is for the period indicated and has not been annualized.
(B) Annualized.
(C) Average commission rate paid per share for the security purchases and sales
made during the period.
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 A 5.75% Service fee of Investments of
0.25% $25,000 or more are subject to a
lower initial sales charge.
Class Y None Service fee of Minimum investment
0.25% 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>
3
<PAGE>
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 Shares
Class Y and Class C shareholders pay no initial or contingent deferred sales
charges except as noted below. Thus, the entire amount of a Class Y or Class 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. Class A shares are subject to an initial sales
charge.
Transaction Fees
Investors may be charged a fee if they effect transactions in fund shares
through a broker or agent.
Ongoing Annual Expenses
Class A and 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. Class Y shares pay an annual 12b-1 distribution fee of
0.25% 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.
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, three, five and ten 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
Declaration Distributors, 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 shares of the Fund.
THE FUND
The Bender Growth Fund (the "Fund") is one of a 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 107 South Fair oaks Blvd., Suite 315, Pasadena,
California 91105.
4
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to provide shareholders with long-term
capital appreciation. The Fund seeks to achieve this objective by investing in
equity securities of companies that are leaders or have the potential to be
leaders in rapidly growing and economically sensitive sectors of the economy.
These companies often possess proprietary skills or products.
The Fund will generally invest in companies which have a higher than average
annual rate of earnings growth on a sustained basis. The Fund will also invest
in companies where it is anticipated that the companies will have a higher than
average annual rate of earnings growth. These companies should also demonstrate
financial stability, including strong management history, improving operating
margins, pricing flexibility, higher rates of return on equity, and positive
cash flow. The Fund may at times invest in companies where the financial
stability of the company and its leadership in the particular economic sector
leads the Fund to believe that the company's securities may appreciate in value
on a long term basis. The Fund looks unfavorably on companies which have large
debt positions on their balance sheets. The Fund may invest in securities of
foreign companies that meet the Fund's investment objective.
The Fund anticipates that under normal conditions at least 80% of the Fund's
assets will be invested in equity securities. Equity Securities include common
and preferred stocks and securities convertible into or exchangeable for common
stock, such as convertible preferred stocks, convertible debentures or warrants.
In addition to investing in equity securities, the Fund is authorized to invest
in high quality short-term fixed income securities as cash reserves or for
temporary defensive purposes.
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.
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.
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 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.
RISK FACTORS
Net Asset Value Fluctuation
Due to the nature of the companies in which the Fund will invest, the net asset
value of the Fund may be subject to price fluctuation. Factors contributing to
such fluctuation include: competition within an economic sector, economic forces
affecting a particular economic sector and the individual companies performance
compared
5
<PAGE>
against an industry as a whole. General changes in the national and
international economy and the market for equity securities may have an impact of
the fluctuation of the net asset value of the Fund. Therefore, the current net
asset value of the Fund's shares may vary significantly. Accordingly, the Fund
should not be considered suitable for investors who are unable or unwilling to
assume the risks of loss inherent in such an investment program, nor should
investment in the Fund be considered a balanced or complete investment program.
Foreign Securities
Transactions involving foreign equity securities involve considerations and
risks not typically associated with investing in U.S. markets. These include
changes in currency rates, exchange control regulations, reduced and less
reliable information about issuers and markets, different accounting standards,
illiquidity of securities and markets, local economic and political stability,
the possible imposition of withholding taxes and possible seizure or
nationalization of foreign holdings. Additionally, investing in foreign
securities involves higher costs than investing in U.S. securities.
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 107 South Fair Oaks Blvd., Suite 315,
Pasadena, California 91105. A Sub-Investment Advisory Agreement (the
"Sub-advisory Agreement") has been entered into between the Fund Manager and
Robert Bender & Associates, Inc.(the "Investment Adviser") who will provide the
primary and ongoing investment advice to the Fund. John P. Odell and Steven A.
Arnold own controlling interests in the Fund Manager.
Investment Adviser
The Investment Adviser was founded in 1972 and was subsequently incorporated in
1978. The Investment Adviser is located at 525 Starlight Crest Drive, La Canada,
California 91011. As of December 31, 1997, the Investment Adviser managed $170
million of assets for various institutional clients, including pension and
profit sharing plans, foundations and companies, as well as high net worth
individuals. The Investment Adviser serves as a sub-investment adviser to
another registered investment company. Robert L. Bender owns a controlling
interest in the Investment Adviser.
Portfolio Managers
Robert L. Bender--President. After earning a Masters in Business Administration
from the University of California at Los Angeles, Mr. Bender began his
investment career, with Douglas Aircraft Co. as a member of the treasury staff.
Between 1966 and 1970 Mr. Bender was a portfolio manager with Pennsylvania Life
and the Shamrock Fund. His last position before founding the Investment Adviser
was with BWA Inc. as portfolio manager from 1970 to 1972.In 1972, Mr. Bender
formed his own capital management firm. He subsequently incorporated the
Investment Adviser in 1978. Since that time, Mr. Bender has been the sole
shareholder, president, and treasurer of the Investment Adviser.
6
<PAGE>
Reed G. Bender--Vice President. Joined Robert Bender & Associates in 1990 and
currently is responsible for research as well as portfolio management. He is a
1990 graduate of the University of the Pacific.
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 investment 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 not expressly
provided for in the Advisory Agreement; and any extraordinary expenses of a
nonrecurring nature.
As of September 30, 1998, for its services, the Fund Manager will receive from
the Fund a monthly fee at an annual rate of 0.50% of the Fund's average daily
net assets. The Fund Manager pays the Investment Adviser a monthly fee at an
annual rate of 0.40%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.
OPERATIONAL SERVICES AGREEMENT. Under the terms of the Services Agreement, the
Manager, subject to the supervision of the Board of Directors, will provide
day-to-day operational services to the Fund including, but not limited to,
providing or arranging to provide accounting, administrative, legal (except
litigation), dividend disbursing, transfer agent, registrar, custodial, fund
share distribution, shareholder reporting, sub-accounting and record keeping
services. The Services Agreement provides that the Manager pays all fees and
expenses associated with these and other functions, including but not limited
to, expenses of legal compliance, shareholder communications, and meetings of
the shareholders. Under the Services Agreement, the Fund will pay to the Manager
on the last day of each month, the following fees:
<TABLE>
<CAPTION>
OPERATING
EXPENSE CATEGORY CLASS A CLASS Y CLASS C
- ---------------- ------- ------- -------
less than greater than less than greater than
2.5 million 2.5 million 7 million 7 million
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Service Fees 1.05% 1.75% 1.05% 1.75% 1.05%
</TABLE>
The Manager and the Fund have entered into an Investment Company Services
Agreement with Declaration Service Company ("DSC" of "Transfer Agent") to
provide Transfer Agent and essentially all administrative services for the Fund.
The Manager and the Fund have also entered into a Distribution Agreement with
Declaration Distributors, Inc. ("DDI" or "Distributor") wherein DDI will act as
principal underwriter for the Fund's shares. The Manager will pay all fees
charged by DSC and DDI.
From time to time, the Manager and/or Adviser may waive receipt of its fees and/
or voluntarily assume certain fund expenses, which would have the effect of
lowering the Fund's expense ratio and increasing yield to investors during the
time such amounts are waived or assumed. The Fund will not be required to pay
the Manager or Adviser for any amounts voluntarily waived or assumed, nor will
the Fund be required to reimburse the Adviser for any amounts waived or assumed
during a prior fiscal year.
7
<PAGE>
The Fund pays all expenses incident to its operations and business not
specifically assumed by the Manager, including expenses relating to custodial,
legal, and auditing charges; printing and mailing of reports and prospectuses to
existing shareholders; taxes and corporate fees; maintaining registration of the
Fund under the Investment Company Act of 1940, and registration of its shares
under the Securities Act of 1933; and qualifying and maintaining qualification
of its shares under the securities laws of certain states.
The Fund has adopted a Service and Distribution Plan (the "Plan") with respect
to its Class A shares, Class C shares and Class Y 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. The Distributor is paid a Distribution Fee at an annual rate of
0.25% of the value of the average daily net assets of the Class Y shares. The
Distributor is paid a Service Fee at an annual rate of 0.25% of the value of the
average daily net assets of the Class A shares.
Under the Plans for Class A and Class C shares, 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 and Class Y 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 public offering price
next computed after an order is received by the Distributor or a dealer, less
any applicable initial sales charge. 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.
8
<PAGE>
The minimum initial investment for Class A and 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.
SALES CHARGES--CLASS A SHARES
A sales charge may apply as described below, when purchasing Class A shares.
Sales charges may be reduced for larger purchases as indicated below.
SALES CHARGE SALES CHARGE
AS PERCENTAGE AS PERCENTAGE
OF OFFERING OF NET AMOUNT DEALER
AMOUNT OF PURCHASE PRICE INVESTED REALLOWANCE
- ------------------ ------------- ------------- -----------
Less than $25,000 5.75% 6.10% 5.00%
$25,000 but less than $50,000 5.25% 5.54% 4.50%
$50,000 but less than $100,00 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.83% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.60%
$1,000,000 or more None None See Below
Class A share purchases (or subsequent purchases of any amount) by an account
held in the name of a qualified employee benefit plan with at least 100eligible
employees are sold with no initial sales charge. A 1% contingent deferred sales
charge may be imposed on certain redemptions made within one year of purchase by
these accounts. A dealer concession of 1% may be paid on these investments. On
investments of Class A shares of $1,000,000 or more (or subsequent investments
in any amount), excluding purchases by qualified employee benefit plans as
described above, the Fund Manager may pay broker/dealers, from its own profits
and resources, a percentage of the net asset value of any shares sold as set
forth in the table below. If part or all of such investment, including
investments by qualified employee benefit plans, is subsequently redeemed within
one year of the investment date, the selling broker/dealer must refund to the
Fund Manager any amounts paid with respect to the investment.
PURCHASE AMOUNT PAYMENT TO BROKER/DEALER
- --------------- ------------------------
$1,000,000--$2,000,000 1.00%
$2,000,000--$3,000,000 0.80%
$3,000,000 or more 0.50%
9
<PAGE>
ADDITIONAL DEALER COMPENSATION
The distributor will pay a quarterly fee of .25% annually of average net assets
to qualified brokers for providing certain services to the Fund's Shareholders.
Qualifying dealers must have an aggregate value of $50,000 or more in the Fund
to qualify for payment.
OPENING AN ACCOUNT
An account may be opened by mailing a check or other negotiable bank draft,
payable to The Bender Growth Fund for $2,500 ($1,000 for an IRA account) for
Class A and Class C shares, or $25,000 for Class Y shares, together with the
completed Investment Application Form included with this Prospectus to The
Bender Growth Fund, c/o Declaration Service Company, 555 North Lane, Suite 6160,
Conshohocken, PA 19428. 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 between
the various classes of 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 Declaration Service Company, 555
North Lane, Suite 6160, Conshohocken, PA 19428. 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 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
10
<PAGE>
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 A Shares
A contingent deferred Sales charge applies to the redemption of Class A Shares
in certain situations. See Sales Charges--Class A 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.
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 (normally 4:00 p.m. New York 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.
11
<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 three classes of common stock, $.01 par value per share,
designated Class Y, Class A and Class C shares. The Company currently has one
series of shares, in addition to the Fund, the Starbuck, Tisdale Growth and
Income Fund. 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. 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 A and 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 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.
12
<PAGE>
Custodian, Dividend Disbursing Agent, Transfer Agent and Registrar
The transfer agent, dividend disbursing agent and registrar for the shares of
the Fund is Declaration Service Company. Its address is 555 North Lane, Suite
6160, Conshohocken, PA 19428. The Fund's securities and cash are held under a
Custodial Agreement with UMB Bank, 928 Grand Boulevard, Kansas City, MO 64141.
Legal Matters
The Law Offices of David D. Jones, P.C., Conshohocken, PA has passed upon
certain legal matters in connection with the shares offered by this Prospectus,
and also acts as counsel to the Fund.
Shareholder Inquiries
Shareholder inquires should be directed to 107 South Fair Oaks Blvd, Suite 315,
Pasadena, CA 91105 or by Calling (800) 723-8637.
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.
13
<PAGE>
FUND MANAGER
SBG Capital Management Inc.
107 South Fair Oaks Blvd., Suite 315
Pasadena, CA 91105
INVESTMENT ADVISER
Robert Bender & Associates
525 Starlight Crest Drive
La Canada, CA 91011
TRANSFER AGENT
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
CUSTODIAN
UMB Bank
928 Grand Boulevard
Kansas City, MO 64141
PRINCIPAL UNDERWRITER
Declaration Distributors, Inc.
555 North Lane, Suite 6160
Conshohocken, PA 19428
INDEPENDENT ACCOUNTANTS
McCurdy & Company
Cincinnatti, Ohio
For more complete information about any other fund in the Santa Barbara Group of
Mutual Funds, including charges and expenses, please call (626) 844-1441 or
(800) 723-8637 or write to Declaration Distributors, Inc. and request a free
prospectus. Read the prospectus carefully before you invest or send money.
[LOGO OF SANTA BARBARA GROUP OF MUTUAL FUNDS]
The Bender Growth Fund
------------------
The date of this Prospectus is June 1, 1998.
As Supplemented on November 6, 1998
<PAGE>
THE BENDER GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
June 1, 1998
The Bender Growth Fund (the "Fund") is currently one of a series of shares of
Santa Barbara Group of Mutual Funds Inc. (the "Company"), an open-end management
investment 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 Robert Bender & 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 June 1, 1998 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 107 South Fair Oaks, Blvd., Suite 315, Pasadena, California 91105
(800) 723-8637.
TABLE OF CONTENTS
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
<PAGE>
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.
2
<PAGE>
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by bank holding companies, corporations and finance companies. 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.
FOREIGN SECURITIES
The Fund may invest up to 15% of the value of its total assets insecurities 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. 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.
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 borrowings exceed 5% of the
Fund's total assets. This borrowing may be unsecured. The1940 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 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.
3
<PAGE>
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 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 the number of
outstanding securities of an issuer will not be considered aviolation.
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:
4
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation
Name Position During Past 5 Years
- ------- --------------------- -------------------
<S> <C> <C>
(1)(2)STEVEN W. ARNOLD* (8/6/55) Co-President, Director Marketing Manager for Robert Bender
and Shareholder Of SBG & Associates, Inc. President,
Capital Management Director And Shareholder of SBGMF.
Company, Inc.
(1)(2) JOHN P. ODELL* (3/22/66) Co-President, Director Marketing manger for Manager.
shareholder of SBG
Capital Management
Company, Inc. Shareholder
of SBGMF.
(1)ROBERT L. BENDER* (5/28/37) Director President of Robert L. Bender &
Associates, Inc.
WILLIAM H. PHELPS (8/24/54) Director Vice President & Associate General
Counsel, Kidder, Peabody & Co.,
since 1991. Attorney and general
counsel to securities Industry
firms since 1979. B.A., Colorado
College, 1976. J.D., University of
California, Hastings College of
Law, 1979.
JOHN W. SVENDSEN (5/2/40) Director Retired private Investor. Director
And Shareholder of SBGMF.
HARVEY MARSH (10/15/38) Director Self-employed financial consultant
since Vice President, Finance, FACT
Retirement Services, from 1993-
1996.Certified Public Accountant.
B.B.A., Loyola Marymount
University, 1961. Shareholder of
SBGMF.
WAYNE TURKHEIMER (11/30/52) Director Attorney in solo practice since
1986, specializing In general
business, probate and estate law.
A.B from UCLA, Cum laude, 1974.
J.D., USC Law Center, 1977.
GLORY BURNS (12/29/52) Director Professor, Colorado State
University since 1991. B.S.,
university of Colorado, 1975.
M.B.A., UniversityOf Denver, 1980.
J.D., University of Puget Sound,
1978.
</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.
5
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF THE FUND
As of March 31, 1998, there were no Control Persons (as defined in the 1940 Act)
of the Fund. To the knowledge of management, as of March 31, 1998, no person
owned, beneficially or of record, 5% or more of the Fund's shares.
COMPENSATION OF DIRECTORS AND OFFICERS
Each Independent Director receives an annual retainer of $1,000 and a fee of
$250 for each meeting attended. Officers of the Fund and Directors who are
interested persons of the Fund do not receive any compensation from the Fund or
any other funds of the Company. The following table sets forth information
regarding compensation of Directors by the Company for the fiscal year ended
March 31, 1998.
Name of Director Compensation Pension Annual Total Compensation
from Company Benefits Benefits Paid to Director
- --------------------------------------------------------------------------------
Hugh M. Grant * $2,000 $0.00 $0.00 $2,000
Watson M. Laetsch * $1,750 $0.00 $0.00 $1,750
John W. Svendsen $2,000 $0.00 $0.00 $2,000
William H. Phelps* $2,000 $0.00 $0.00 $2,000
*Resigned prior to September 30, 1998.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The investment adviser of the Fund is Robert Bender & Associates (the
"Investment Adviser"), in which Robert L. Bender 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, 1978.
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.
Pursuant to the Advisory Agreement, the Fund Manager is entitled to receive from
the Fund a monthly fee at an annual rate of 0.50% of the Fund's average daily
net assets. During the fiscal year ended March 31, 1998, the Fund Manager waived
all fees payable under the Advisory Agreement, which amounted to$76,604.
The Investment Adviser is paid by the Fund Manager monthly at an annual rate of
0.40% of the Fund's average daily net assets.
6
<PAGE>
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 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 or 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 Declaration Service Company ("Transfer Agent"). Its address is 555
North Lane, Suite 6160, Conshohocken, PA 19428. 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
McCurdy & Company serves as the independent public accountant to the Funds
providing audit services and tax and accounting consultation. Its address is
27955 Clemens Road, Westlake Ohio, 44145.
COUNSEL
The Law Offices of David D. Jones, P.C., Conshohocken, PA 19428, 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.
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. During the fiscal year ended March 31, 1998, the Fund
paid brokerage commissions of $8,270.97.
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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 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 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
8
<PAGE>
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 December31 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 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.
CURRENCY 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.
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<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.
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.
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<PAGE>
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 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
Declaration Distributors, Inc., Conshohocken, PA 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.
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.
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<PAGE>
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 distributions are reinvested
when paid. Quotations of total return may also be shown for other periods. The
average annual total return for the year ended March 31, 1998 and since
inception was 66.34% and 27.52%, respectively, for Class Y and 64.17% and
26.66%, respectively for Class C.
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 500Composite
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 maybe
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.
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FINANCIAL STATEMENTS
The audited financial statements contained in the Fund's annual report to
shareholders dated March 31, 1998 are incorporated herein by reference.
