Santa Barbara Group
of Mutual Funds
The Bender Growth Fund
Semi-Annual Report
September 30, 2000
<PAGE>
Letter from the Investment Advisor
Dear Fellow Shareholders,
The worldwide telecommunications services industry is undergoing dramatic
changes as deregulation has expanded competition for local and long distance
services. Voice services, traditionally a lucrative revenue stream for service
providers, are rapidly becoming a commodity. Data services have become the most
important revenue source for service providers as voice moves to the network and
broadband access expands. This has created a much larger market for data
networking companies to address.
Recent concerns regarding a slowdown in capital expenditures for networking
equipment are misleading. We believe mature carriers are reducing spending on
their circuit switched networks, which are built around voice services, and are
focused on providing data and voice services over packet architectures. This
shift in spending has created tremendous opportunities for pure data equipment
vendors to compete in a much broader market and put pressure on vendors of
legacy circuit switched equipment.
Both Cisco Systems and Power-One will be unique beneficiaries of this shift in
capital spending. Cisco maintains the leadership position in most sectors of the
networking market. By providing an end to end solution, Cisco has created strong
brand equity and an impressive installed base. As network speeds increase
through optical technology, research and development requirements will strain
several smaller vendors, and consolidation will continue. This favors highly
efficient competitors like Cisco, as they expand their product portfolio and add
skilled engineers to their workforce.
As data demand soars, so do the power requirements of networking equipment.
Roomfuls of servers and routers all require DC or direct current power due to
the properties of silicon. High nines or 99.999% power reliability has become
imperative to maintain sensitive connections. While the power backbone runs on
AC, or alternating current, the demand for products that convert voltages on
motherboards to direct current is exploding. Power-One provides small-scale
products that convert voltages yet transfer very little heat. They have emerged
as the largest pure play in the business by transferring many of the conversion
tasks to silicon. Power-OneO s main product is called a power brick. Power
bricks can be found in virtually every piece of networking equipment, including
routers and optical switches, and in systems sold by Cisco, EMC, Nortel, and
Ciena. Bricks are also used in wireless telecommunications equipment. With over
75% of sales coming from the telecommunications and networking market, Power-One
is well positioned to benefit from equipment spending trends. We believe
networking speeds will continue to drive power requirements beyond expected
levels, and that power will remain a significant issue for many years.
Yours truly,
/s/ Robert L. Bender /s/ Reed G. Bender
Robert L. Bender Reed G. Bender
<PAGE>
<TABLE>
<CAPTION>
THE SANTA BARBARA GROUP OF MUTUAL FUNDS
SCHEDULE OF INVESTMENTS
BENDER GROWTH FUND SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ -----
COMMON STOCKS - 92.21%
COMMUNICATIONS - 5.39%
<S> <C> <C>
Advanced Fibre Communications, Inc.* 10,770 $ 407,914
Cisco Systems, Inc.* 34,708 1,917,617
QUALCOMM, Inc.* 33,900 2,415,375
------------
4,740,906
------------
COMPONENTS - 3.32%
JDS Uniphase Corporation* 30,880 2,923,950
------------
COMPUTER SERVICES AND SOFTWARE - 36.34%
America Online, Inc.* 42,050 2,260,187
BroadVision, Inc.* 64,980 1,661,051
Check Point Software Technologies, Ltd.* 42,160 6,640,200
DoubleClick, Inc.* 51,020 1,632,640
Legato Systems, Inc.* 41,000 550,937
MarchFIRST, Inc.* 104,800 1,644,050
Microsoft Corporation* 9,090 547,672
Network Appliance, Inc.* 57,520 7,326,610
Oracle Corporation* 29,410 2,316,038
Sapient Corporation* 41,660 1,695,041
SmartForce PLC ADR* 44,086 2,088,574
Synopsys, Inc.* 36,050 1,365,394
VeriSign, Inc.* 11,150 2,258,572
------------
31,986,966
------------
COMPUTER SYSTEMS - 6.74%
Brocade Communications Systems, Inc.* 12,100 2,855,600
Extreme Networks, Inc.* 20,400 2,335,800
Foundry Networks, Inc.* 11,200 749,700
------------
5,941,100
------------
CONSULTING SERVICES - 2.46%
Forrester Research, Inc.* 33,960 2,164,950
------------
2
<PAGE>
THE SANTA BARBARA GROUP OF MUTUAL FUNDS
SCHEDULE OF INVESTMENTS
BENDER GROWTH FUND SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ -----
CONSUMER PRODUCTS - 0.37%
Meade Instruments Corporation* 16,000 323,000
------------
ELECTRONIC EQUIPMENT - 10.45%
CIENA Corporation* 35,560 4,367,213
Power-One, Inc.* 30,300 1,833,623
Sawtek, Inc.* 51,810 1,995,495
Zoran Corporation* 20,550 1,001,813
------------
9,198,144
------------
MEDICAL - 1.02%
Medtronic, Inc. 17,418 902,470
------------
PHARMACEUTICAL - 5.04%
Elan Corporation* 36,840 2,016,990
Watson Pharmaceuticals, Inc.* 37,240 2,415,945
------------
4,432,935
------------
RETAIL - 18.39%
Bed Bath & Beyond, Inc.* 104,340 2,544,918
Best Buy Company, Inc.* 15,000 954,375
CDW Computer Centers, Inc.* 30,080 2,075,520
Elcor Corporation 15,000 217,500
Fastenal Company* 7,440 428,730
Home Depot, Inc. 39,280 2,084,295
Kohl's Corporation* 32,460 1,872,536
P.F. Chang's China Bistro, Inc.* 31,100 1,074,894
Staples, Inc.* 82,000 1,163,375
Starbucks Corporation* 53,360 2,137,735
The Cheesecake Factory, Inc.* 37,800 1,634,850
------------
16,188,728
------------
SERVICES - 2.69%
Paychex, Inc. 30,520 1,602,300
Quintiles Transnational Corporation* 47,870 762,928
------------
2,365,228
------------
3
<PAGE>
THE SANTA BARBARA GROUP OF MUTUAL FUNDS
SCHEDULE OF INVESTMENTS
BENDER GROWTH FUND SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ -----
TOTAL COMMON STOCKS - 92.21% 81,168,377
------------
(Cost $43,854,777)
CASH EQUIVALENT - 6.13%
United Missouri
Bank AFM (Cost $ 5,393,975) 5,393,975 5,393,975
------------
TOTAL INVESTMENTS- 98.33% 86,562,352
(Cost $49,248,752)
CASH AND OTHER ASSETS LESS LIABILITIES- 1.66% 1,465,899
------------
NET ASSETS- 100.00% $ 88,028,251
============
<FN>
* Non-income producing security
ADR -- American Depositary Receipts
AFM -- Automated Funds Management
PLC -- Public Limited Company
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
THE SANTA BARBARA GROUP OF MUTUAL FUNDS
STATEMENT OF ASSETS & LIABILITIES
BENDER GROWTH FUND SEPTEMBER 30, 2000 (UNAUDITED)
------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in Securities at
Market Value (identified cost $49,248,752)(Note 2) $86,562,352
Receivables:
Capital Stock Sold 1,678,016
Dividends and Interest 22,439
Other 97,402
-----------
TOTAL ASSETS 88,360,209
-----------
LIABILITIES
Due to Advisor (Note 3) 16,272
Capital Stock Redeemed 40,531
Accrued Distribution Fees 190,633
Accrued Expenses and Other Liabilities 84,522
-----------
TOTAL LIABILITIES 331,958
-----------
NET ASSETS $88,028,251
===========
CLASS A SHARES (NOTE 1):
Net Assets (Unlimited shares of $0.001 par beneficial
interest authorized; 287,330 shares outstanding) $12,376,791
===========
Net Asset Value and Redemption Price Per Class A Share
($12,376,791/287,330 shares) $ 43.08
===========
Offering Price Per Share ($43.08/0.9425) $ 45.71
===========
CLASS Y SHARES (NOTE 1):
Net Assets (Unlimited shares of $0.001 par beneficial
interest authorized; 758,260 shares outstanding) $35,163,105
===========
Net Asset Value, Offering and Redemption Price Per Class Y Share
($35,163,105/758,260 shares) $ 46.37
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
THE SANTA BARBARA GROUP OF MUTUAL FUNDS
STATEMENT OF ASSETS & LIABILITIES
BENDER GROWTH FUND (CONTINUED) SEPTEMBER 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
CLASS C SHARES (NOTE 1):
<S> <C>
Net Assets (Unlimited shares of $0.001 par beneficial
interest authorized; 904,493 shares outstanding) $40,488,355
===========
Net Asset Value and Offering Price Per Class C Share
($40,488,355/904,493 shares) $ 44.76
===========
Redemption Price Per Share ($44.76 X 0.99) $ 44.31
===========
SOURCE OF NET ASSETS
At September 30, 2000, Net Assets consisted of:
Paid-in-Capital 51,459,919
Net Investment Loss (684,993)
Accumulated Net Realized Loss on Investments (60,275)
Net Unrealized Appreciation on Investments 37,313,600
-----------
NET ASSETS $88,028,251
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
THE SANTA BARBARA GROUP OF MUTUAL FUNDS
STATEMENT OF OPERATIONS
BENDER GROWTH FUND FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C>
Interest Income $ 99,514
Dividend Income 7,414
-----------
Total Investment Income 106,928
-----------
EXPENSES:
Investment Advisory Fees (Note 3) 166,212
Service Fees-Class A 36,342
Service Fees-Class Y 147,278
Service Fees-Class C 227,169
Distribution Fees-Class A 8,260
Distribution Fees-Class Y 30,909
Distribution Fees-Class C 175,751
-----------
Total Expenses 791,921
-----------
Net Investment Loss (684,993)
-----------
NET REALIZED AND UNREALIZED LOSSES
ON INVESTMENTS: (NOTE 2)
Net Realized Loss on Investments (60,275)
Net Change in Net Unrealized Appreciation of Investments 4,594,685
-----------
Net Realized and Unrealized Gain on Investments 4,534,410
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,849,417
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
THE SANTA BARBARA GROUP OF MUTUAL FUNDS
STATEMENT OF CHANGES IN NET ASSETS
BENDER GROWTH FUND
---------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2000 YEAR ENDED
(UNAUDITED) MARCH 31, 2000
----------- --------------
OPERATIONS:
<S> <C> <C>
Net Investment Loss $ (684,993) $ (636,289)
Net Realized Gain (Loss) on Investments (60,275) 445,176
Net Change in Unrealized Appreciation on Investments 4,594,685 28,778,700
------------ ------------
Net Increase in Net Assets Resulting From Operations 3,849,417 28,587,587
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Realized Capital Gain
Class A 0 (14,282)
Class Y 0 (207,265)
Class C 0 (570,031)
------------ ------------
0 (791,578)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Class A:
Proceeds from Shares Issued (168,160 and 131,356
shares, respectively) 6,925,623 4,109,181
Reinvestment of Dividends (0 and 610 shares, respectively) 0 14,282
Cost of Shares Redeemed (10,077 and 4,829
shares, respectively) (389,266) (178,426)
------------ ------------
Total Class A Transactions 6,536,357 3,945,037
------------ ------------
Class Y:
Proceeds from Shares Issued (339,547 and 306,401 shares,
respectively) 14,699,418 10,241,920
Reinvestment of Dividends (0 and 9,779 shares, respectively) 0 206,555
Cost of Shares Redeemed (36,588 and 27,943 shares, respectively) (1,536,344) (922,448)
------------ ------------
Total Class Y Transactions 13,163,074 9,526,027
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
THE SANTA BARBARA GROUP OF MUTUAL FUNDS
STATEMENT OF CHANGES IN NET ASSETS
BENDER GROWTH FUND (CONTINUED)
---------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2000 YEAR ENDED
(UNAUDITED) MARCH 31, 2000
----------- --------------
<S> <C> <C>
Class C:
Proceeds from Shares Issued (150,429 and 304,397 shares,
respectively) $ 6,117,153 $ 8,931,341
Reinvestment of Dividends (0 and 27,813 shares, respectively) 0 561,316
Cost of Shares Redeemed (45,717 and 69,853 shares,
respectively) (1,836,994) (2,116,896)
------------ ------------
Total Class C Transactions 4,280,159 7,375,761
------------ ------------
Net Increase in Net Assets From Capital Share Transactions 23,979,590 20,846,825
------------ ------------
TOTAL INCREASE IN NET ASSETS 27,829,007 48,642,834
------------ ------------
NET ASSETS:
Beginning of Period 60,199,244 11,556,410
------------ ------------
NET ASSETS:
End of Period $ 88,028,251 $ 60,199,244
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
CLASS A
---------------------------------------
SIX MONTHS
ENDED FOR THE PERIOD
SEPTEMBER 30, 2000 YEAR ENDED OCTOBER 1, 1998** TO
(UNAUDITED) MARCH 31, 2000 MARCH 31, 1999
----------- -------------- --------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 41.32 $ 15.44 $ 10.00
------------- ------------ ---------
Income From Investment Operations:
Net investment loss (0.18) (0.55) (0.20)
Net gains on securities
(both realized and unrealized) 1.94 27.39 5.64
------------- ------------ ---------
Total from investment operations 1.76 26.84 5.44
------------- ------------ ---------
Distributions to shareholders from
net realized capital gains -- (0.96) --
------------- ------------ ---------
NET ASSET VALUE, END OF PERIOD $ 43.08 $ 41.32 $ 15.44
============= ============ =========
Total Return 4.26% 181.21% 54.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 12,377 $ 5,341 $ 33
Ratio of expenses to average net assets:
Before expense reimbursement 1.84%(1) 1.86% 1.82%(1)
After expense reimbursement 1.84%(1) 1.85% 1.82%(1)
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement (1.52)%(1) (1.56)% (3.85)%(1)
After expense reimbursement (1.52)%(1) (1.55)% (3.85)%(1)
Portfolio turnover rate 1.59% 7.61% 24.91%
<FN>
(1) Annualized
** The Bender Growth Fund Class A commenced operations on October 1, 1998.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
CLASS C
-------------------------------------------
SIX MONTHS FOR THE PERIOD
ENDED DECEMBER
SEPTEMBER 30, YEAR ENDED YEAR ENDED YEAR ENDED 10, 1996** TO
2000 MARCH 31, MARCH 31, MARCH 31, MARCH 31,
(UNAUDITED) 2000 1999 1998 1997
------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 43.21 $ 16.27 $ 13.61 $ 8.24 $ 10.00
----------- ------------- ------------ ------------ ------------
Income From Investment Operations:
Net investment loss (0.48) (0.73) (0.55) (0.28) (0.06)
Net gains (losses) on securities
(both realized and unrealized) 2.03 28.63 3.21 5.65 (1.70)
----------- ------------- ------------ ------------ ------------
Total from investment operations 1.55 27.90 2.66 5.37 (1.76)
----------- ------------- ------------ ------------ ------------
Distributions to shareholders from
net realized capital gains -- (0.96) -- -- --
----------- ------------- ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 44.76 $ 43.21 $ 16.27 $ 13.61 $ 8.24
=========== ============= ============ ============ ============
TOTAL RETURN 3.99% 178.39% 19.54% 65.17% (17.60)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 40,488 $ 34,556 $ 8,743 $ 6,728 $ 2,640
Ratio of expenses to average
net assets:
Before expense reimbursement 2.79%(1) 3.09% 4.23% 5.34% 8.70%(1)
After expense reimbursement 2.79%(1) 2.98% 4.23% 3.50% 3.50%(1)
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement (2.47)%(1) (2.67)% (5.49)% (5.09)% (8.08)%(1)
After expense reimbursement (2.47)%(1) (2.56)% (5.49)% (3.25)% (2.88)%(1)
Portfolio turnover rate 1.59% 7.61% 24.91% 7.44% 3.00%
<FN>
1 Annualized
** The Bender Growth Fund Class C commenced operations on December 10, 1996.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
CLASS Y
-----------------------------------------
SIX MONTHS FOR THE PERIOD
ENDED DECEMBER 10,
SEPTEMBER 30, YEAR ENDED YEAR ENDED YEAR ENDED 1996** TO
2000 MARCH 31, MARCH 31, MARCH 31, MARCH 31,
(UNAUDITED) 2000 1999 1998 1997
------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 44.59 $ 16.64 $ 13.74 $ 8.26 $ 10.00
Income From Investment Operations:
Net investment loss (0.26) (0.55) (0.47) (0.22) (0.04)
Net gains (losses) on securities
(both realized and unrealized) 2.04 29.46 3.37 5.70 (1.70)
Total from investment operations 1.78 28.91 2.90 5.48 (1.74)
Distributions to shareholders from
net realized capital gains -- (0.96) -- -- --
Net Asset Value, End of Period $ 46.37 $ 44.59 $ 16.64 $ 13.74 $ 8.26
Total Return 3.99% 180.55% 21.11% 66.34% (17.40)%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $ 35,163 $ 20,302 $ 2,781 $ 2,312 $ 937
Ratio of expenses to average net assets:
Before expense reimbursement 1.94%(1) 2.22% 3.49% 4.59% 7.88%(1)
After expense reimbursement 1.94%(1) 2.13% 3.49% 2.75% 2.75%(1)
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement (1.61)%(1) (1.82)% (4.74)% (4.34)% (7.29)%(1)
After expense reimbursement (1.61)%(1) (1.73)% (4.74)% (2.50)% (2.16)%(1)
Portfolio turnover rate 1.59% 7.61% 24.91% 7.44% 3.00%
<FN>
1 Annualized
** The Bender Growth Fund Class Y commenced operations on December 10, 1996.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS September 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
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 one fund: the
Bender Growth Fund (the "Fund"). The Company is registered to offer three
classes of shares, Class A, Class Y and Class C. The Fund's investment objective
is long-term capital appreciation.
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 not 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 -- Common 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. Class specific expenses are charged directly to the
responsible class of shares.
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.
The amounts of distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations, which
may differ from those amounts determined under generally accepted accounting
principles. To the extent these book/tax differences are permanent, they are
charged or credited to paid-in capital in the period that the difference arises.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued) September 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
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 Fund's assets,
less liabilities, by the number of shares outstanding. A sales charge may apply
when purchasing Class A shares. Class C shares redeemed within one year of
purchase may be subject to a contingent deferred sales charge equal to
one-percent. The redemption price disclosed in the financial statements for
Class C shares does not reflect the contingent deferred sales charge.
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. ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, investment advisory services are
provided to the Company by SBG Capital Management (the "Advisor"). Under the
terms of the investment advisory agreement, the Advisor receives a monthly fee
at an annual rate of 0.50% of the average daily net assets of the Fund. For the
six months ended September 30, 2000, the Advisor received advisory fees of
$166,211. For the six months ended September 30, 2000, the Advisor reimbursed
expenses of $18,781.
Sub-Advisory services are provided to the Advisor for the
Fund by Robert Bender & Associates, Inc. (the "Sub-Advisor") pursuant to a
sub-advisory agreement. Under the terms of the sub-advisory 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 and payment of fees to the Sub-Advisor in
connection with its services.
Under the terms of an Operational Services Agreement, the Advisor will provide
day-to-day operational services to the Fund. The services agreement provides
that the Advisor pays all fees and expenses associated with the Fund. Under the
terms of the agreement, the Fund will pay to the Advisor the following fees: a
monthly fee at an annual rate of 1.10% of the average daily net assets of Class
A, a monthly fee at an annual rate of 2.00% of the average daily net assets of
Class Y up to $2,500,000 and 1.10% in excess of $2,500,000, and 2.00% of the
average daily net assets of Class C up to $7,500,000 and 1.10% in excess of
$7,500,000. For the six months ended September 30, 2000, the Advisor received
service fees of $410,790.
American Data Services, Inc. serves as Administrator
to and provides accounting services to the Fund pursuant to an administration
agreement. Under terms of such agreement, the Administrator is paid an annual
fee which is computed daily and payable monthly, based on a percentage of
average daily net assets, subject to certain minimums.
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.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued) September 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
The Fund and American Data Services, Inc. (the "Transfer Agent) are parties to a
servicing agreement, under which the Transfer Agent provides transfer agency,
dividend disbursing and administrative services for the Fund.
Certain directors and officers of the Fund are directors and officers of the
Advisor.
4. INVESTMENT TRANSACTIONS
The cost of security purchases and the proceeds from the sale of securities,
other than short-term securities for the period from April 1, 2000 to September
30, 2000, were $20,791,922 and $485,401, respectively.
As of September 30, 2000, net unrealized appreciation on investment securities
for book and federal income tax purposes aggregated $37,313,600 of which
$40,859,929 related to appreciated securities and $3,546,329 related to
depreciated securities. There was no difference between book and tax realized
gains on securities for the period from April 1, 2000 to September 30, 2000.
15
<PAGE>
FUND MANAGER
SBG Capital Management, Inc.
107 South Fair Oaks Boulevard, Suite 315
Pasadena, CA 91105
INVESTMENT ADVISOR
Robert Bender & Associates
245 South Los Robles, Suite 620
Pasadena, CA 90272
ADMINISTRATOR, TRANSFER AGENT
& DIVIDEND DISBURSING AGENT
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
CUSTODIAN
UMB Bank
928 Grand Boulevard
Kansas City, MO 84141
PRINCIPAL UNDERWRITER
Capital Research Brokerage Services, LLC
107 South Fair Oaks Avenue, Suite 315
Pasadena, CA 91105
INDEPENDENT ACCOUNTANTS
McCurdy & Company
Westlake, Ohio
For more complete information about any other fund in the Santa Barbara Group of
Mutual Funds, including charges and expenses, please call (626) 844-1440 or
(800) 723-8637 or write to Capital Research Brokerage Services, LLC and request
a free prospectus. Read the prospectus carefully before you invest or send
money.
