485BPOS

       1940 Act Registration No. 811-07414

                     1933 Act Registration No. 033-56546

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20546

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 [X]

Pre-Effective Amendment No.

 [   ]                                                         

Post-Effective Amendment No.

             [24]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

[X ]

Amendment No.

[29]

THE SANTA BARBARA GROUP OF MUTUAL FUNDS, INC.

(Exact name of registrant as specified in Charter)

1270 Hillcrest Avenue

Pasadena, California 91106

(Address of Principle Executive Offices and Zip Code)

626-484-5744

(Registrant's Telephone Number including Area Code)

Emile R. Molineaux, General Counsel

Gemini Fund Services, LLC

450 Wireless Blvd.

Hauppauge, New York 11788

 (Name and Address of Agent for Service)

Please send copy of communications to:

JoAnn M. Strasser, Esq.

Thompson Hine LLP

312 Walnut Street , Suite 1400

Cincinnati, Ohio  45202

513-352 - 6725 ( phone )

513-241 - 4771 ( fax )

-----------

Approximate Date of Proposed Public Offering:  

It is proposed that this filing will become effective (check appropriate box):

/   /     immediately upon filing pursuant to paragraph (b)

/X/         on August  1, 2010 pursuant to paragraph (b)

/   /        60 days after filing pursuant to paragraph (a)(1)

/   /        on (date) pursuant to paragraph (a)(1)

/   /        75 days after filing pursuant to paragraph (a)(2)

/   /        on (date) pursuant to paragraph (a)(2) of rule 485

If appropriate, check the following box:

/   /     this post-effective amendment designates a new effective date for a previously filed post-effective amendment.

  SANTA BARBARA GROUP OFMUTUALFUNDS (the “Company”)



                   









PFW Water Fund CLASS A SHARES: PFWAX CLASS C SHARES: PFWCX
The Montecito Fund ALL SHARES: MONAX
    PROSPECTUS     Dated      August 1, 2010
The Securities and Exchange Commission has not approved or disapproved these securities or determined if this Prospectus is truthful or complete and representation to the contrary is a crime.

TABLE OF CONTENTS

FUND SUMMARY: PFW WATER FUND	1
FUND SUMMARY: MONTECITO FUND
PURCHASE AND SALE OF FUND SHARES
TAX INFORMATION
FINANCIAL INTERMEDIARY COMPENSATION
ADDITIONAL INFORMATION ABOUT PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
INVESTMENT OBJECTIVE: PFW WATER FUND
PRINCIPAL INVESTMENT STRATEGIES: PFW WATER FUND
INVESTMENT OBJECTIVE: MONTECITO FUND
PRINCIPAL INVESTMENT STRATEGIES: MONTECITO FUND
PRINCIPAL INVESTMENT RISKS
TEMPORARY INVESTMENTS
PORTFOLIO HOLDINGS DISCLOSURE
MANAGEMENT
INVESTMENT ADVISOR
PORTFOLIO MANAGER
HOW TO BUY AND SELL SHARES
HOW TO PURCHASE SHARES
HOW TO REDEEM SHARES
HOW TO EXCHANGE SHARES
TAX STATUS, DIVIDENDS AND DISTRIBUTIONS
FREQUENT PURCHASES AND REDEMPTIONS OF SHARES
DISTRIBUTION OF SHARES
HOUSEHOLDING
FINANCIAL HIGHLIGHTS
NOTICE OF PRIVACY POLICY & PRACTICES

FUND SUMMARY:  PFW Water Fund

Investment Objective

Long-term growth of capital.  

FEES AND EXPENSES

This table describes the fees and expenses you may pay if you buy and hold shares of the Fund.  You may qualify for sales charge discounts on purchases of Class A shares if you and your family invest, or agree to invest in the future, at least $25,000 in the Fund.  More information about these and other discounts is available from your financial professional and in How to Buy and Sell Shares on page [__] of the Fund’s Prospectus and Purchasing and Redeeming Shares on page [__] of the Fund’ Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)	CLASS A	CLASS C
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.75%	NONE
Maximum Deferred Sales Charge (Load) (as a percentage of redemption proceeds)	NONE	1.00%
Redemption Fee	NONE	NONE
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fees	1.25%	1.25%
Distribution & Servicing (12b-1) Fees	0.25%	1.00%
Other Expenses	0.00%	0.00%
Total Annual Fund Operating Expenses	1.50%	2.25%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all your shares at the end of those periods.  The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same.  Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 YEAR	3 YEARS	5 YEARS	10 YEARS
CLASS A	$719	$1,022	$1,346	$2,263
CLASS C	$331	$703	$1,208	$2,585

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio).  A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account.  These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund’s performance.  During the most recent fiscal year, the Fund’s portfolio turnover rate was 17% of the average value of the portfolio.

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets plus borrowings in water-related companies.  For purposes of this 80% policy, a water-related company is a company that derives at least 50% of its income or profits from, or devotes at least 50% of its resources to the production or delivery of, water-related products or services.  Water-related products and services are those that influence the quality or availability of water.

The Fund may invest in U.S. and foreign equity securities of all market capitalizations.  Equity securities include common stocks and convertible securities rated at least Baa3 by Moody's Investors Service (“Moody’s”) or at least BBB- by Standard and Poor's Rating Group (“S&P”); however, the Fund reserves the right to invest in lower-rated convertible securities that the portfolio manager believes offer the prospect of higher total returns (interest plus capital appreciation) than normally expected from such securities.  The Fund will invest primarily in equity securities of water-related companies that the portfolio manager believes will experience growth due to innovative products and services, a distinct competitive advantage, management changes, or redeployment of company assets to new opportunities. The Fund may invest up to 25% of its total assets in foreign securities, including American D epositary Receipts (“ADRs”).  

The Fund will sell a stock under one or more of the following conditions:

(i)

when the company's business prospects have changed;

(ii)

when a stock has reached its targeted value;

(iii)

when a stock has appreciated significantly and the portfolio manager believes that it is prudent to reduce the position and realize some of the gain.

Principal Investment Risks

All mutual funds carry a certain amount of risk, including the risk that the Fund may not achieve its investment objective.  The Fund’s returns will vary and you could lose money on your investment in the Fund.

Company Risk – Because of changes in the financial condition or prospects of specific companies, the individual stocks selected by the Fund’s portfolio manager may decline in value.

Convertible Security Risk –Securities that can convert into common stock, such as convertible preferred stocks, convertible debentures, may be riskier investments than the stock into which they convert. The main risk of these types of securities is the credit risk and stock price of the issuer.

Foreign Security Risk – Foreign securities, including ADRs, may have greater risks than domestic securities due to differences in political, regulatory, accounting and economic conditions, exposure to currency fluctuations, less liquidity, less developed or efficient trading markets, less publicly available information and the possibility of war or expropriation.

General Risk – There is no assurance that the Fund can achieve its investment objective, since all investments are inherently subject to risks.  When you sell your Fund shares, they may be worth less than what you paid for them.

Growth Risk – If the portfolio manager’s perceptions of a company’s growth potential are wrong, the securities purchased may not perform as expected.  Growth investing may go in and out of favor, which may cause growth-oriented funds to underperform when value investing is in favor.

Management Risk –The portfolio manager may select stocks that decline in value and do not experience growth as anticipated.

Small Cap Risk – The Fund may invest in companies that are considered to be small-cap (less than $3 billion in total market capitalization).  Small-cap companies can be riskier investments than larger capitalized companies due to their lack of experience, product diversification, cash reserves and management depth.  Further, small-cap company stocks can be much more volatile than larger companies and may be less liquid.

Stock Market Risk – The stock market is subject to significant fluctuations in value as a result of political, economic and market developments.  If the stock market declines in value, the Fund is likely to decline in value.  

Water-Related Securities Risk- Investing in water-related companies may expose the Fund to additional risk because some of the companies in the Fund's portfolio can be affected by common economic trends or other changes.  Adverse developments in a particular industry that is water-related may significantly affect the value of other related industries and the Fund's shares.  Some companies involved in water-related activities are subject to environmental considerations, changes in taxation and government regulation, price and supply fluctuations, changes in technology, competition and water conservation.  Unfavorable regulatory rulings, including structural changes to pricing and the competitive playing field, may affect the ability of companies engaged in one or more water-related activities to produce favorable returns.  

Performance

The bar chart and table below provide some indication of the risks of investing in the PFW Water Fund (formerly known as The Bender Growth Fund in addition to the SBG Growth Fund) by showing changes in the performance of Class C shares.  The information in the bar chart and table through May, 31, 2007 reflect Fund performance by a previous investment sub-advisor using investment strategies that are different than those currently in effect.  The bar chart shows changes in the yearly performance of the Fund’s Class C shares over the past 10 calendar years.   The performance table compares the performance of the Fund over time to the performance of the S&P^® 500 Index. You should be aware that the Fund’s past performance (before and after taxes) may not be an indication of how the Fund will perform in the future.

Performance Bar Chart For Class C Shares For Calendar Years Ending On December 31,

During the period shown in the bar chart, the highest return for a quarter was 29.04% during the quarter ended December 31, 2001, and the lowest return for a quarter was -31.86% during the quarter ended September 30, 2001.  For the period January 1, 2010 to June 30, 2010, the Fund’s return was -9.47%.

Average Annual Total Returns

(For the periods ended on December 31, 2009)

PFW Water Fund	Past Year	Past 5 Years	Past 10 Years
Return before taxes Class C	14.28%	0.19%	-3.84%
Return after taxes on distributions Class C	14.28%	0.19%	-3.84%
Return after taxes on distributions and sale of Fund shares Class C	9.28%	0.16%	-3.17%
Return before taxes  Class A	9.50%	0.08%	- -3.29%
S&P 500 ® Index (reflects no deduction for fees, expenses, or taxes)	26.46%	0.42%	- -0.95%

After-tax returns were calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold shares of the Fund through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

In certain cases, the figure representing “Return after taxes on distributions and sale of Fund shares Class C” are higher than the other return figures for the same period. A higher after-tax return results when a capital loss occurs upon redemption and translates into an assumed tax deduction that benefits the shareholder.

Investment Advisor

Hillcrest Wells Advisors, LLC

Portfolio Manager

Ben Murillo, Jr. , the portfolio manager of the PFW Water Fund, is responsible for the day-to-day management of the Fund.  Mr. Murillo began as a portfolio manager for the Fund on July 1, 2010.

PURCHASE AND SALE OF FUND SHARES    

The minimum initial investment to open an account is $2,500 for regular accounts, $1,000 for retirement accounts and $500 for Coverdell ESA accounts. The minimum subsequent investment is $1,000 for regular accounts, $100 for retirement accounts and $500 for Coverdell ESA accounts.  You may purchase and redeem shares of the Fund on any day that the New York Stock Exchange is open.  Purchases and redemptions may be made by mail to PFW Water Fund or Montecito Fund c/o Gemini Fund Services, LLC, 4020 South 147^th Street, Suite 2, Omaha, Nebraska 68137 or by calling 1-800-723-8637.

TAX INFORMATION

Dividends and capital gain distributions you receive from the Fund are taxable to you at either ordinary income or capital gains tax rates unless you are investing through a tax-deferred account such as an IRA or 401(k) plan.

FINANCIAL INTERMEDIARY COMPENSATION

Payments to Broker-Dealers and Other Financial Intermediaries.  

If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services.  These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment.  Ask your salesperson or visit your financial intermediary’s website for more information.

FUND SUMMARY: The Montecito Fund

Investment Objective

Long-term growth of capital.

Fees and Expenses of the Fund

This table describes the fees and expenses you may pay if you buy and hold shares of the Montecito Fund.  You may qualify for sales charge discounts on purchases of shares if you and your family invest, or agree to invest in the future, at least $25,000 in the Fund.  More information about these and other discounts is available from your financial professional.

Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.75%
Maximum Deferred Sales Charge (Load) (as a percentage of redemption proceeds)	NONE
Redemption Fee	NONE
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
Management Fees	0.94%
Distribution & Servicing (12b-1) Fees	0.25%
Other Expenses	0.00%
Acquired Fund Fees and Expenses	0.02%
Total Annual Fund Operating Expenses	1 .21%

Example  

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all your shares at the end of those periods.  The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same.  Although your actual costs may be higher or lower, based on these assumptions your costs would be:   

1 YEAR	3 YEARS	5 YEARS	10 YEARS
$691	$937	$1,202	$1,957

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio).  A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account.  These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund’s performance.  During the most recent fiscal year, the Fund’s portfolio turnover rate was 84% of the average value of the portfolio.

Principal Investment Strategies

The Fund invests principally in the following three asset classes: equity :  equity securities (including common and preferred stock), investment grade fixed income securities of any maturity,  and real estate and asset-based securities (which are securities that represent an interest in commodities related industries). Equity securities include common stocks and convertible securities rated at least Baa3 by Moody’s Investors Service (“Moody’s”) or at least BBB- by Standard and Poor’s Rating Group (“S&P”); however, the Fund reserves the right to invest in lower-rated convertible securities that the portfolio manager believes offer the prospect of higher total returns (interest plus capital appreciation) than normally expected from such securities.  Using a proprietary multiple asset allocation model to determine the exact allocations, the Fund allocates 15% to 50% of its assets to each of the three asset classes, although in most economic environments the allocation is expected to be in approximately equal proportions.  The Fund, under certain circumstances, will invest in exchange-traded and closed-end funds for liquidity and diversification purposes.  Individual securities are selected based on a process of statistical screening followed by fundamental analysis.  Those securities that are deemed fundamentally attractive are then put through a proprietary valuation process to determine at what price levels they would be deemed attractive to own.  The Fund will sell securities when the model indicates that the target price has been reached, a greater value exists in another sector or a new, more desirable security presents better upside potential.  The Fund seeks to achieve long-term growth of capital through both income generation and capital appreciation.

Principal Investment Risks

All mutual funds carry a certain amount of risk, including the risk that the Fund may not achieve its investment objective.  The Fund’s returns will vary and you could lose money on your investment in the Fund.

Commodities Risk - - Investments in companies engaged in exploration, mining, processing, distributing or dealing in gold, other precious metals, minerals and other commodities involves certain risks. These include unpredictable monetary policies and economic and political developments, such as currency devaluation or revaluations; increased environmental costs; concentration of the sources of the supply of commodities, and control over their sale; changes in U.S. or foreign tax, currency, environmental or mining laws; and trade restrictions between countries.

Company Risk - Because of changes in the financial condition or prospects of specific companies, the individual stocks selected by the Fund’s portfolio manager may decline in value.

Credit Risk - The issuer of a fixed income security may not be able to make interest and principal payments when due.  Generally, the lower the credit rating of a security, the greater the risk that the issuer will default on its obligation.

General Risk - There is no assurance that the Fund can achieve its investment objective, since all investments are inherently subject to risks.  When you sell your Fund shares, they may be worth less than what you paid for them.

Government Risk - The U. S. government’s guarantee of ultimate payment of principal and timely payment of interest on certain U. S. government securities owned by the Fund does not imply that the Fund’s shares are guaranteed or that the price of the Fund’s shares will not fluctuate.  

Interest Rate Risk - The value of your investment may decrease when interest rates rise.  Generally, due to changes in interest rates and other factors, the value of a portfolio of bonds with a longer effective maturity will fluctuate more than the value of a portfolio of bonds with a shorter effective maturity.

Junk Bond Risk-  Lower-quality bonds, known as “high yield” or “junk” bonds, present greater risk than bonds of higher quality, including an increased risk of default.  An economic downturn or period of rising interest rates could adversely affect the market for these bonds and reduce the Fund’s ability to sell its bonds.  The lack of a liquid market for these bonds could decrease the Fund’s share price.

Management Risk - The portfolio manager may select investments that decline in value, or allocate the fund’s investments to asset classes that do not perform well.

Prepayment Risk - The value of the mortgage-backed securities held by the Fund may go down as a result of changes in prepayment rates on the underlying mortgages.  During periods of declining interest rates, prepayment of loans underlying mortgage-backed securities usually accelerates.  Prepayment may shorten the effective maturities of these securities, and the Fund may have to reinvest at a lower interest rate.

Real Estate Securities Risk - The Fund’s investments in real estate securities are subject to the same risks as direct investments in real estate.  Real estate values rise and fall in response to many factors, including local, regional and national economic conditions, the demand for rental property, and interest rates. The performance of the real estate securities in which the Fund invests is also largely dependent on the organization, skill and capital funding of the managers and operators of the underlying real estate.

REIT Risk.  In addition to the risks facing real estate securities, the Fund’s investments in Real Estate Investment Trusts (“REITs”) generally involve unique risks. REITs may have limited financial resources, may trade less frequently and in limited volume and may be more volatile than other securities.

Sector Risk - Securities within the same group of industries may decline in price due to sector-specific market or economic developments.  If the Fund invests more heavily in a particular sector, the value of its shares may be especially sensitive to factors and economic risks that specifically affect that sector.  As a result, the Fund’s share price may fluctuate more widely than the value of shares of a mutual fund that invests in a broader range of industries.  

Small-Cap Risk - The Fund will invest in companies that are considered to be small-cap (less than $3 billion in total market capitalization).  Small-cap companies can be riskier investments than larger capitalized companies due to their lack of experience, product diversification, cash reserves and management depth.  Further, small-cap company stocks can be much more volatile than larger companies and may be less liquid.

Stock Market Risk - The stock market is subject to significant fluctuations in value as a result of political, economic and market developments.  If the stock market declines in value, the Fund is likely to decline in value.

Performance

The bar chart and table below provide some indication of the risks of investing in the Montecito Fund by showing changes in the performance of the Fund’s shares.  The bar chart shows changes in the yearly performance of the Fund’s shares over the lifetime of the Fund.  The performance table compares the performance of the Fund over time to the performance of the S&P^® 500 Index. You should be aware that the Fund’s past performance (before and after taxes) may not be an indication of how the Fund will perform in the future.  

Performance Bar Chart For Calendar Years Ending On December 31

          

During the period shown in the bar chart, the highest return for a quarter was 16.22% during the quarter ended June 30, 2009 and the lowest return for a quarter was -22.65% during the quarter ended December 31, 2008.  For the quarter ended June 30, 2010, the Montecito Fund’s return was -10.13%.

Average Annual Total Returns

(For the periods ended on December 31, 2009)

Montecito Fund	Past Year	Past 5 Years	Life of Fund (since 4/15/02)
Return before taxes	19.81%	- -0.76%	0.33%
Return after taxes on distributions	18.37%	- -1.80%	- -0.42%
Return after taxes on distributions and sale of Fund shares	12.76%	- -1.07%	- -0.05%
S&P 500 ® Index (reflects no deductions for fees, expenses or taxes)	26.46%	0.42%	2.14%

After-tax returns were calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold shares of the Fund through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.

In certain cases, the figure representing “Return after taxes on distributions and sale of Fund shares” are higher than the other return figures for the same period. A higher after-tax return results when a capital loss occurs upon redemption and translates into an assumed tax deduction that benefits the shareholder.

Investment Adviser

Hillcrest Wells Advisors, LLC

Portfolio Manager

Blake T. Todd, the portfolio manager of the Montecito Fund, is responsible for the day-to-day management of the Fund.  Mr. Todd has been a Partner at Crowell Weedon & Co. since December 2006 and manages individual investment accounts at Crowell Weedon & Co.  

PURCHASE AND SALE OF FUND SHARES    

The minimum initial investment to open an account is $2,500 for regular accounts, $1,000 for retirement accounts and $500 for Coverdell ESA accounts. The minimum subsequent investment is $1,000 for regular accounts, $100 for retirement accounts and $500 for Coverdell ESA accounts.  You may purchase and redeem shares of the Fund on any day that the New York Stock Exchange is open.  Purchases and redemptions may be made by mail to PFW Water Fund or Montecito Fund c/o Gemini Fund Services, LLC, 4020 South 147^th Street, Suite 2, Omaha, Nebraska 68137 or by calling 1-800-723-8637.

TAX INFORMATION

Dividends and capital gain distributions you receive from the Fund are taxable to you at either ordinary income or capital gains tax rates unless you are investing through a tax-deferred account such as an IRA or 401(k) plan.

FINANCIAL INTERMEDIARY COMPENSATION

Payments to Broker-Dealers and Other Financial Intermediaries.  

If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services.  These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment.  Ask your salesperson or visit your financial intermediary’s website for more information.

ADDITIONAL INFORMATION ABOUT PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS

PFW Water Fund

Investment Objective.  The investment objective of the PFW Water Fund, long-term growth of capital, may not be changed without shareholder approval.

Principal Investment Strategies.  Under normal circumstances, the Fund invests at least 80% of its net assets plus borrowings in water-related companies.  Shareholders will be provided with at least 60 days’ prior notice of any change in this policy.  For purposes of this 80% policy, a water-related company is a company that derives at least 50% of its income or profits from, or devotes at least 50% of its resources to the production or delivery of, water-related products or services.  PFW in the Fund’s name refers to “Portfolio From Water.”  Water-related products and services are those that influence the quality or availability of water, and may include, but are not limited to, any of the following activities:

(i)  the production, collection, treatment and distribution of water to domestic and industrial users;   

(ii)  the purification, desalination, or disinfection of water;

(iii)  the collection, treatment or disposal of domestic and industrial liquid wastes;

(iv)  companies providing equipment, consulting and engineering services in connection with water.

The Fund will invest primarily in equity securities of water-related companies that the portfolio manager believes will experience (i) growth; (ii) strong and improving fundamentals; (iii)  strong industry presence or (iv)  low institutional ownership or sponsorship.

The Fund may invest up to 25% of its total assets in foreign securities, including ADRs.  The Fund may invest, under certain circumstances, in exchange-traded and closed-end funds for liquidity and pending selection of portfolio securities.

The Fund will sell a stock under one or more of the following conditions:

(i)

when the company’s business prospects have changed;

(ii)

when a stock has reached its targeted value;

(iii)

when a stock has appreciated significantly and the portfolio manager believes  that it is prudent to reduce the position and realize some of the gain.                           

Montecito Fund

Investment Objective

The investment objective of the Montecito Fund, long-term growth of capital, may be changed without shareholder approval.

Principal Investment Strategies

The Fund invests principally in the following three asset classes: equity :  equity securities (including common and preferred stock), investment grade fixed income securities of any maturity,  and real estate and asset-based securities (which are securities that represent an interest in commodities related industries).  Equity securities include common stocks and convertible securities rated at least Baa3 by Moody’s Investors Service (“Moody’s”) or at least BBB- by Standard and Poor’s Rating Group (“S&P”); however, the Fund reserves the right to invest in lower-rated convertible securities that the portfolio manager believes offer the prospect of higher total returns (interest plus capital appreciation) than normally expected from such securities.  Using a proprietary multiple asset allocation model to determine the exact allocations, the Fund allocates 15% to 50% of its assets to each of the three asset classes, although in most economic environments the allocation is expected to be in approximately equal proportions.  The Fund, under certain circumstances, will invest in exchange-traded and closed-end funds for liquidity and diversification purposes.  The Fund will sell securities when the model indicates that the target price has been reached, a greater value exists in another sector or a new, more desirable security presents better upside potential.  The Fund seeks to achieve long-term growth of capital through both income generation and capital appreciation.

Principal Investment Risks

All mutual funds carry a certain amount of risk, including the risk that the Fund may not achieve its investment objective.  The Fund’s returns will vary and you could lose money on your investment in the Fund.

Commodities Risk (Montecito Fund only) - - Investments in companies engaged in exploration, mining, processing, distributing or dealing in gold, other precious metals, minerals and other commodities involves certain risks. These include unpredictable monetary policies and economic and political developments, such as currency devaluation or revaluations; increased environmental costs; concentration of the sources of the supply of commodities, and control over their sale; changes in U.S. or foreign tax, currency, environmental or mining laws; and trade restrictions between countries.

Company Risk (Both Funds) – Because of changes in the financial condition or prospects of specific companies, the individual stocks selected by the Funds’ portfolio manager may decline in value, thereby causing the Funds to decline in value.

Convertible Security Risk (PFW Water Fund only) – The Fund may invest in convertible securities. Securities that can convert into common stock, such as convertible preferred stocks, convertible debentures or warrants, are often riskier investments than the stock into which they convert. The main risk of these types of securities is credit risk, which is the risk of loss due to the creditworthiness of the issuer.

Credit Risk (Montecito Fund only) - The issuer of a fixed income security may not be able to make interest and principal payments when due.  Generally, the lower the credit rating of a security, the greater the risk that the issuer will default on its obligation.

Foreign Security Risk (PFW Water Fund only) – The Fund may invest directly in foreign securities or in ADRs.  Investments in foreign securities may involve greater risks compared to domestic investments. Foreign companies are not subject to the regulatory requirements of U.S. companies and, as a result, there may be less publicly available information about issuers than is available in the reports and ratings published about companies in the U.S. Additionally, foreign companies are not subject to uniform accounting, auditing and financial reporting standards. Dividends and interest on foreign securities may be subject to foreign withholding taxes. Such taxes may reduce the net return to shareholders. Although each Fund intends to invest in securities of foreign issuers domiciled in nations that the portfolio manager considers as having stable and friendly governments, there is the possibility of war or expropriation, confiscation, taxation, currency blockage or political or social instability which could affect investments of foreign issuers domiciled in such nations.

General Risk (Both Funds) – There is no assurance that the Fund can achieve its investment objective, since all investments are inherently subject to risks. The Fund generally is appropriate for long-term investors who understand the potential risks and rewards of investing in common stocks.  When you sell your Fund shares, they may be worth less than what you paid for them, because the value of the Fund’s investments will vary from day-to-day.

Government Risk (Montecito Fund only)  - The U. S. government’s guarantee of ultimate payment of principal and timely payment of interest on certain U. S. government securities owned by the Fund does not imply that the Fund’s shares are guaranteed or that the price of the Fund’s shares will not fluctuate.  In addition, certain securities, such as those issued by Freddie Mac, Fannie Mae and the Federal Home Loan Banks are not obligations of, or insured by, the U.S. government.  If a U.S. government agency or instrumentality in which the Fund invests defaults and the U.S. government does not stand behind the obligation, the Fund’s share price or yield could fall.

Growth Risk (PFW Water Fund only) – The Fund invests in companies considered to be growth-oriented companies. If the portfolio manager’s perceptions of a company’s growth potential are wrong, the securities purchased may not perform as expected, reducing the Fund’s return.  Over time, growth investing may go in and out of favor, which may cause growth-oriented funds to underperform when value investing is in favor.

Interest Rate Risk (Montecito Fund only)  - The value of your investment may decrease when interest rates rise.  The specific maturities of fixed income securities in which the Fund invests may fall in value more than other maturities.  Generally, due to changes in interest rates and other factors, the value of a portfolio of bonds with a longer effective maturity will fluctuate more than the value of a portfolio of bonds with a shorter effective maturity.

Junk Bond Risk (Montecito Fund only)-  Lower-quality bonds, known as “high yield” or “junk” bonds, present a significant risk for loss of principal and interest.  These bonds offer the potential for higher return, but also involve greater risk than bonds of higher quality, including an increased possibility that the bond’s issuer, obligor or guarantor may not be able to make its payments of interest and principal (credit quality risk).  If that happens, the value of the bond may decrease, and the Fund’s share price may decrease and its income distribution may be reduced.  An economic downturn or period of rising interest rates (interest rate risk) could adversely affect the market for these bonds and reduce the Fund’s ability to sell its bonds (liquidity risk).  Such securities may also include “Rule 144A” securities, which are subject to resale restrictions.  The lack of a liquid market for these bonds could decrease the Fund’s share price.

Management Risk (Both Funds) –The portfolio manager may select stocks that decline in value and do not experience growth as anticipated.

Prepayment Risk (Montecito Fund only) - The value of the mortgage-backed securities held by the Fund may go down as a result of changes in prepayment rates on the underlying mortgages.  During periods of declining interest rates, prepayment of loans underlying mortgage-backed securities usually accelerates.  Prepayment may shorten the effective maturities of these securities, and the Fund may have to reinvest at a lower interest rate.

Real Estate Securities Risk (Montecito Fund only) - The Fund’s investments in real estate securities are subject to the same risks as direct investments in real estate.  Real estate values rise and fall in response to many factors, including local, regional and national economic conditions, the demand for rental property, and interest rates.  When economic growth is slowing, demand for property decreases and prices may fall.  Rising interest rates, which drive up mortgage and financing costs, can affect the profitability and liquidity of properties in the real estate market.  Property values may also decrease because of overbuilding, extended vacancies, increases in property taxes and operating expenses, zoning laws, environmental regulations, clean-up of and liability for environmental hazards, uninsured casualty or condemnation losses, or a general decline in neighborhood values.   The Fund’s investments and your investment may decline in response to declines in property values or other adverse changes to the real estate market.  The performance of the real estate securities in which the Fund invests is also largely dependent on the organization, skill and capital funding of the managers and operators of the underlying real estate.

REIT Risk (Montecito Fund only) - In addition to the risks facing real estate securities, the Fund’s investments in REITs  generally involve unique risks. REITs may have limited financial resources, may trade less frequently and in limited volume and may be more volatile than other securities.

Sector Risk (Montecito Fund only)  - Securities within the same group of industries may decline in price due to sector-specific market or economic developments.  If the Fund invests more heavily in a particular sector, the value of its shares may be especially sensitive to factors and economic risks that specifically affect that sector.  As a result, the Fund’s share price may fluctuate more widely than the value of shares of a mutual fund that invests in a broader range of industries.  Additionally, some sectors could be subject to greater government regulation than other sectors.  Therefore, changes in regulatory policies for those sectors may have a material effect on the value of securities issued by companies in those sectors.  The sectors in which the Fund may invest more heavily will vary.

Small Cap Risk (Both Funds) – The Fund may invest in companies that are considered to be small-cap (less than $3 billion in total market capitalization).  Small-cap companies can be riskier investments than larger capitalized companies due to their lack of experience, product diversification, cash reserves and management depth.  Further, small-cap company stocks can be much more volatile than larger companies because changes in the economic climate can have a more pronounced effect on smaller companies.  Small cap companies may be more thinly traded than larger capitalization companies and subject to liquidity risk.

Stock Market Risk (Both Funds) – The stock market is subject to significant fluctuations in value as a result of political, economic and market developments.  If the stock market declines in value, the Fund is likely to decline in value.  The stock market trades in cyclical price patterns, with prices generally rising or falling over time.  These cyclical periods may last for significant periods.

Water-Related Securities Risk (PFW Water Fund only) - Investing in water-related companies may expose the Fund to additional risk because some of the companies in the Fund’s portfolio can be affected by common economic trends or other changes.  Adverse developments in a particular industry that is water-related may significantly affect the value of other related industries and the Fund’s shares.  Some companies involved in water related activities are subject to environmental considerations, changes in taxation and government regulation, price and supply fluctuations, changes in technology, competition and water conservation.  Unfavorable regulatory rulings, including structural changes to pricing and the competitive playing field, may affect the ability of companies engaged in one or more water related activities to produce favorable returns.  

Temporary Investments.  Under abnormal market or economic conditions, each Fund may adopt a temporary defensive investment position in the market. When a Fund assumes such a position, cash reserves may be a significant percentage (up to 100%) of the Fund’s total net assets. To the extent a Fund invests in money market mutual funds for cash positions, there will be some duplication of expenses because the Fund pays its pro-rata portion of such money market funds’ advisory fees and operational fees.  During times when a Fund holds a significant portion of its net assets in cash, it will not be investing according to its investment objective, and the Fund’s performance may be negatively affected as a result.  

PORTFOLIO HOLDINGS DISCLOSURE

The Fund’s policies and procedures with respect to the disclosure of its portfolio securities are available in the Fund’s Statement of Additional Information.  

INVESTMENT ADVISORY SERVICES

Fund Manager

Hillcrest Wells Advisors, LLC, 1270 Hillcrest Avenue, Pasadena, CA 91106, (the “Fund Manager”) serves as investment advisor to the Funds.  The Fund Manager is an investment advisory firm whose principal business is providing investment advice and counseling to mutual funds.  The Fund Manager has managed the Funds’ day-to-day business affairs under the general supervision of the Board of Directors since January 19, 2010.  SBG Capital Management, Inc. was the Funds’ manager prior to January 19, 2010.  For the fiscal year ended March 31, 2010, the PFW Water Fund paid the prior Fund Manager a fee equal to 0.50% of each Fund’s average daily net assets for its services as investment advisor.  Management fees include separate fees for investment advisory services and for administrative services and are paid to the Fund Manager.  The PFW Water Fund pays the Fund Manager an annual administrativ e service fee of 0.75% and an annual investment advisory fee of 0.50%.  The Montecito Fund pays the Fund Manager an annual administrative service fee of 0.64% and an annual investment advisory fee of 0.30% on the first $100 million in assets and 0.25% on assets in excess of $100 million.  The Fund Manager is responsible for paying all of each Fund’s expenses except taxes, borrowing costs (such as interest and dividend expenses on securities sold short), underlying fund expenses, 12b-1 fees, litigation expenses and other extraordinary expenses.  

Portfolio Managers

Ben Murillo, Jr. is the portfolio manager of the PFW Water Fund and is responsible for the day-to-day management of the Fund.  Mr. Murillo joined the Fund Manager as the portfolio manager on July 1, 2010.  Mr. Murillo managed Ashland Venture Partners, a venture capital fund, from 2001-2005 and Eagle Point Investments, a hedge fund, from 2004-2006.  Mr. Murillo has been retired since 2007, after having formed and managed various hedge funds and other investment partnerships for over two decades.  Mr. Murillo is also a Partner at MIMC Wealth Management, an investment advisory firm formed in June, 2010.  Mr. Murillo has over 40 years of investment experience in the Equity Markets, Bond market, Venture Capital market, Real Estate market and Mutual Fund Industry.

Blake T. Todd is the portfolio manager responsible for the day-to-day management of the Montecito Fund.  Mr. Todd has been a Partner at Crowell Weedon & Co. since December 2006 and manages individual investment accounts at Crowell Weedon & Co.  Mr. Todd was a Senior Vice President of Seidler and a Portfolio Manager with Seidler Investment Advisors since early 2005 to November 15, 2006.  Prior to joining Seidler, Mr. Todd was employed by Sutro & Co. – RBC Dain Rauscher from 1998 to 2005 as a branch manager, Senior Vice President and Portfolio Manager.  

The Company’s Statement of Additional Information provides information about each portfolio manager’s compensation, other accounts managed and ownership of their managed Fund shares.

A discussion regarding the basis for the Board of Directors’ approval of the Investment Advisory Agreements is available in the Funds’ Proxy Statement for the December 18, 2009 shareholder meeting.

HOW TO BUY AND SELL SHARES

Determination of Share Price

Shares of the Funds are offered at each share’s public offering price (“POP”), which is net asset value (“NAV”) plus any applicable sales charges. NAV per share is calculated by adding the value of a Fund’s investments, cash and other assets, subtracting the Fund’s liabilities, and then dividing the result by the number of shares outstanding. Each Fund generally determines the total value of its shares by using market prices for the securities comprising its portfolio.  Securities for which quotations are not available and any other assets are valued at a fair market value as determined in good faith by the Fund Manager, subject to the review and supervision of the Board of Directors. For example, if trading in a portfolio security is halted and does not resume before the Fund calculates its NAV, the Fund Manager may need to price the security using the Fund’s fair value pricing guidelines.  Without a fair value price, short-term traders could take advantage of the arbitrage opportunity and dilute the NAV of long-term investors.  Fair valuation of a Fund’s portfolio securities can serve to reduce arbitrage opportunities available to short-term traders, but there is no assurance that fair value pricing policies will prevent dilution of the Fund’s NAV by short-term traders. Each Fund’s per share NAV is computed on all days on which the New York Stock Exchange (“NYSE”) is open for business at the close of regular trading hours on the Exchange, currently 4:00 p.m. eastern time.

Share Classes

The Montecito Fund offers only one class of shares.

The PFW Water Fund offers three classes of shares, Class A, Class C and Class I, so that you can choose the class that best suits your investment needs.  The main differences between each class are sales charges and ongoing fees.  In choosing which class of shares to purchase, you should consider which will be most beneficial to you, given the amount of your purchase and the length of time you expect to hold the shares.  The three classes of shares in the Fund represent interests in the same portfolio of investments in the Fund.  Please read Factors to Consider When Choosing a Share Class for information about choosing the share class most appropriate for you.  Class I shares of the PFW Water Fund are offered in a different prospectus.

Sales Charges

The Montecito Fund and Class A Shares of the PFW Water Fund

Shares of the Montecito Fund and Class A shares of the PFW Water Fund are offered at their public offering price, which is net asset value per share plus the applicable initial sales charge. The initial sales charge varies, depending on how much you invest.  There are no sales charges on reinvested distributions. The following initial sales charges apply to your purchases of shares of the Montecito Fund and Class A shares of the PFW Water Fund:

Amount Invested	Sales Charge as a % of Offering Price	Sales Charge as a % of Amount Invested	Dealer Reallowance
Under $25,000	5.75%	6.10%	5.00%
$25,000 to $49,999	5.25%	5.54%	4.50%
$50,000 to $99,999	4.75%	4.99%	4.00%
$100,000 to $249,999	3.75%	3.83%	3.00%
$250,000 to $499,999	2.50%	2.56%	2.00%
$500,000 to $999,999	2.00%	2.04%	1.50%
$1,000,000 and above	1.00%	1.02%	0.75%

Capital Research Brokerage Services, LLC, 15 S. Raymond Avenue, Suite 200, Pasadena, CA 91105 (the “Distributor”), the Fund’s principal underwriter, will pay the appropriate dealer concession to those selected dealers who have entered into an agreement with the Distributor to sell shares of the Funds. The dealer’s concession may be changed from time to time. The Distributor may from time to time offer incentive compensation to dealers who sell shares of the Funds subject to sales charges, allowing such dealers to retain an additional portion of the sales load.

Reducing Your Initial Sales Charge

The Funds permit you to reduce the initial sales charge you pay on shares of the Montecito Fund and Class A shares of the PFW Water Fund by using the Right of Accumulation or a Letter of Intent.  Each of these methods of reducing your initial sales charge is described below.  In taking advantage of each of these methods for reducing the initial sales charge you will pay, you may link purchases of the PFW Water Fund and the Montecito Fund, even if the shares are held in accounts with different financial services firms (such as a broker-dealer, investment adviser or financial institution).  It is your responsibility when investing to inform the Funds or your financial services firm that you would like to have the purchases linked together for purposes of reducing the initial sales charge.

Right of Accumulation:  In calculating the appropriate initial sales charge for your purchases of Class A shares of the PFW Water Fund or the shares of the Montecito Fund, you may add the value of shares of the Funds that you or a person listed below own in either Fund to the amount you currently are purchasing.  The Funds will combine the value of your current purchase of shares with the current market value or cost basis, whichever is higher, of the Class A or Class C shares of the Funds held in:

1.

All of your account(s);

2.

Joint account(s) with your spouse or domestic partner;

3.

Account(s) of your spouse or domestic partner;

4.

Account(s) of you children under age 21 who share your residential address;

5.

Trust or custodial accounts established by any of the individuals in (1) through (3) above; and

6.

Solely controlled business accounts.

To be entitled to the reduced initial charges, you must inform the Funds or your financial services firm of the existence of one or more of the accounts listed above prior to or at the time of purchase.  In order to verify your eligibility for a reduced initial sales charge, you may be required to provide documentation, such as account statements, a social security number or a taxpayer identification number, so that the Funds can verify the holdings in the accounts.  In addition, because you may be eligible for a reduced initial sales charge based on historical cost, you should retain any records necessary to substantiate such costs.  Shares purchased at net asset value without the imposition of a sales charge count toward your total for purposes of calculating the appropriate sales charge.

Letter of Intent:  You may qualify for a reduction in the sales charge on a current purchase of shares of the Montecito Fund and Class A shares of the PFW Water Fund by signing a Letter of Intent committing you to purchase a certain amount of shares of either Fund over the next 13 months.  Provided you meet the minimum initial investment requirement, you may purchase Class A shares of the PFW Water Fund and shares of the Montecito Fund and pay the same sales charge that you would have paid if all shares were purchased at once.  Calculations made to determine whether you have fulfilled your obligation under the Letter of Intent will be made on the basis of net amount invested.  At your request, purchases made during the previous 90 days may be included toward the amount covered by the Letter of Intent.  If you elect to include purchases made during the past 90 days toward the fulfillment of your Letter o f Intent, the 13-month period will be deemed to begin as of the date of the earliest purchase that is counted toward fulfillment of your Letter of Intent.  Please note that the purchase price of these earlier purchases will not be adjusted.  You should inform the Funds or your financial services firm that you have a Letter of Intent each time you make an investment.

A percentage of your investment will be held in escrow until the full amount covered by the Letter of Intent is invested.  If the terms of the Letter of Intent are not fulfilled by the end of the 13th month, the Funds will redeem a sufficient portion of the shares in the escrow account to make up the difference between the sales charges that would normally apply (based on the amount actually purchased) and the reduced sales charges previously paid (based on the amount you intended to purchase).

To take advantage of the Right of Accumulation and/or a Letter of Intent, complete the appropriate sections of the Account Application or contact your financial services firm.  To determine whether you are eligible for these programs, please call 1-800-723-8637 or contact you financial services firm.  The Funds do not have a website where this information may be accessed.  These programs may be amended or terminated at any time.

Eliminating Your Class A Sales Charge

If you are a participant in a qualified employee retirement benefit plan with at least 100 eligible employees, you may purchase shares of the Montecito Fund and Class A shares of the PFW Water Fund without any sales charge. However, if you redeem your shares within one year of purchase, you will be charged a fee of 1.00% of the redemption proceeds.

You also may be eligible for elimination of the initial sales charge if you purchase shares through a financial services firm (such as a broker-dealer, investment adviser or financial institution) that has a special arrangement with the Company or the Distributor. The Company has authorized these firms (and other intermediaries that the firms may designate) to accept orders. When an authorized firm or its designee has received your order, it is considered received by the Fund and will be priced at the next computed POP. Please see the Sub-Section entitled “Purchases through Financial Service Organizations” in the Prospectus for additional information relating to purchases made through these types of entities.

Class C Shares–PFW Water Fund

Class C Shares of the PFW Water Fund are sold at net asset value without an initial sales charge. This means that 100% of your initial investment is placed into shares of the Fund.  However, Class C shares pay an annual 12b-1 service fee of 0.25% of average daily net assets and an additional distribution fee of 0.75% per annum of average daily net assets.

In order to recover commissions paid to dealers on investments in Class C Shares, you will be charged a contingent deferred sales charge (“CDSC”) of 1.00% of the value of your redemption if you redeem your shares within one year from the date of purchase. You will not be charged a CDSC on reinvested dividends or capital gains, amounts purchased more than one year prior to the redemption, and increases in the value of your shares.

Factors to Consider When Choosing a Share Class

When deciding which class of shares of the PFW Water Fund to purchase, you should consider your investment goals, present and future amounts you may invest in the Fund, and the length of time you intend to hold your shares. You should consider, given the length of time you may hold your shares, whether the ongoing expenses of Class C shares will be greater than the front-end sales charge of Class A shares and to what extent such differences may be offset by the lower ongoing expenses on Class A shares. To help you make a determination as to which class of shares to buy, please refer back to the examples of the Fund’s expenses over time in the “FEES AND EXPENSES” Section of this Prospectus. You also may wish to consult with your financial adviser for advice with regard to which share class would be most appropriate for you.

Distribution Fees

The PFW Water Fund has adopted Distribution Plans (“12b-1 Plans”) for Class A and Class C shares, pursuant to which the Fund pays the Distributor a monthly fee for shareholder servicing expenses of 0.25% per annum of the Fund’s average daily net assets on all of its share classes, and a distribution fee of 0.75% per annum of the Fund’s average daily net assets on its Class C shares. The Distributor may, in turn, pay such fees to third parties for eligible services provided by those parties to the Fund.

The Montecito Fund has adopted a 12b-1 Plan pursuant to which the Fund pays the Fund Manager a monthly fee of 0.25% per annum of the Fund’s average daily net assets for distribution and shareholder servicing. The Fund Manager may, in turn, pay such fees to third parties for eligible services provided by those parties to the Fund.

The 12b-1 Plans provide that the Funds may finance activities that are primarily intended to result in the sale of the Funds’ shares. These services include, among other things, processing new shareholder account applications, preparing and transmitting to the Funds’ 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 Funds and their transactions with the Funds.

Payments under the 12b-1 Plans are not tied exclusively to the distribution and/or shareholder servicing expenses actually incurred by the Fund Manager or the Distributor and such payments may exceed the expenses actually incurred.

You should be aware that if you hold your shares for a substantial period of time, you may indirectly pay more than the economic equivalent of the maximum front-end sales charge allowed by the National Association of Securities Dealers due to the recurring nature of distribution (12b-1) fees.

Minimum Investment Amounts

Payments for Fund shares should be in U.S. dollars, and in order to avoid fees and delays, should be drawn on a U.S. bank. Please remember that Fund management reserves the right to reject any purchase order for a Fund’s shares if, in the Fund’s opinion, such an order would cause a material detriment to existing shareholders. Your purchase of Fund shares is subject to the following minimum

investment amounts:

	MINIMUM INVESTMENT TO OPEN AN ACCOUNT	MINIMUM SUBSEQUENT INVESTMENTS
Regular	$2,500	$1,000
IRAs*	$1,000	$   100
Coverdell ESAs	$   500	$   500**

FOR AUTOMATIC INVESTMENT PLAN PARTICIPANTS

	MINIMUM INVESTMENT TO OPEN AN ACCOUNT	MINIMUM SUBSEQUENT INVESTMENTS
Regular	$2,500	$100 per month
IRAs*	$1,000	$100 per month
Coverdell ESAs	$   500	$500**

*Includes traditional IRAs, Roth IRAs and Simple IRAs.

  **Up to a maximum of $2,000 per year.

Opening and Adding to Your Account

You can invest in the Funds by mail, wire transfer or through participating financial service professionals. After you have established your account and made your first purchase, you may also make subsequent purchases by telephone.  You may also invest in the Funds through an automatic payment plan. Any questions you may have can be answered by calling the Company at 1-800-723-8637.

Purchase by Mail

To make your initial investment in a Fund, simply complete the Account Application included with this Prospectus, make a check payable to the appropriate Fund and mail the Application and check to:

PFW Water Fund	The Montecito Fund
c/o Gemini Fund Services, LLC	c/o Gemini Fund Services, LLC
4020 South 147th Street, Suite 2	4020 South 147th Street, Suite 2
Omaha, NE 68137	Omaha, NE 68137

To make subsequent purchases, simply make a check payable to the appropriate Fund and mail the check to the above-mentioned addresses. Be sure to note your Fund account number on the check.

Your purchase order, if accompanied by payment, will be processed upon receipt by Gemini Fund Services, LLC, the Funds’ transfer agent. If the transfer agent receives your order and payment by the close of regular trading on the NYSE (currently 4:00 p.m. Eastern time), your shares will be purchased at the Fund’s POP calculated at the close of regular trading on that day. Otherwise, your shares will be purchased at the POP determined as of the close of regular trading on the next business day. If you do not indicate which share class you wish to purchase, Class A shares will be purchased for your account.

Wire Transfer Purchases

If you wish to wire money to make a subsequent investment in a Fund, please call the Fund at 800-723-8637 for wiring instructions and to notify the Fund that a wire transfer is coming.  Any commercial bank can transfer same-day funds by wire.  The Funds will normally accept wired funds for investment on the day received if they are received by the Funds’ designated bank before the close of regular trading on the NYSE.  Your bank may charge you for wiring same-day funds.  

Purchases through Financial Service Organizations

You may purchase shares of each Fund through participating brokers, dealers, and other financial professionals. Simply call your investment professional to make your purchase. If you are a client of a securities broker, dealer or other financial organization, you should note that such organizations may charge a separate fee for administrative services in connection with investments in Fund shares and may impose account minimums and other requirements. These fees and requirements would be in addition to those imposed by each Fund. If you are investing through a securities broker, dealer or other financial organization, please refer to its program materials for any additional special provisions or conditions that may be different from those described in this Prospectus (for example, some or all of the services and privileges described may not be available to you). Securities brokers, dealers and other financial organizations have the re sponsibility of transmitting purchase orders and funds, and of crediting their customers’ accounts following redemptions, in a timely manner in accordance with their customer agreements and this Prospectus.

Automatic Investment Plan

You may purchase shares of each Fund through an Automatic Investment Plan. The Plan provides a convenient way for you to have money deducted directly from your checking, savings, or other accounts for investment in shares of the Funds. You can take advantage of the Plan by filling out the Automatic Investment Plan application included with this Prospectus. You may only select an account maintained at a domestic financial institution, which is an Automated Clearing House (“ACH”) member for automatic withdrawals under the Plan. Each Fund may alter, modify, amend or terminate the Plan at any time, but will notify you if it does so. For more information, call the Funds’ transfer agent at 1-800-723-8637.

Telephone Purchases

In order to be able to purchase shares by telephone, your account authorizing such purchases must have been established prior to your call. Your initial purchase of shares may not be made by telephone. Shares purchased by telephone will be purchased at the per share POP determined at the close of business on the day that the transfer agent receives the telephone purchase request.  Call the transfer agent for details. You may make purchases by telephone only if you have an account at a bank that is a member of the ACH. Most transfers are completed within three business days of your call. To preserve flexibility, the Funds may revise or eliminate the ability to purchase Fund shares by phone or may charge a fee for such service, although the Funds do not currently expect to charge such a fee.

The transfer agent employs certain procedures designed to confirm that instructions communicated by telephone are genuine. Such procedures may include, but are not limited to, requiring some form of personal identification prior to acting upon telephonic instructions, providing written confirmations of all such transactions, and/or tape recording all telephonic instructions. Assuming procedures such as the above have been followed, neither the transfer agent nor the Fund will be liable for any loss, cost, or expense for acting upon telephone instructions that are believed to be genuine. Each Fund has authority, as your agent, to redeem shares in your account to cover any such loss. As a result of this policy, you will bear the risk of any loss unless the Fund has failed to follow procedures such as the above. However, if the Fund fails to follow such procedures, it may be liable for such losses.

Miscellaneous Purchase Information

All applications to purchase shares of a Fund are subject to acceptance or rejection by authorized officers of the Trust and are not binding until accepted. Applications will not be accepted unless they are accompanied by payment in U.S. funds. Payment must be made by check or wire transfer drawn on a U.S. bank, savings and loan association or credit union. In addition to any loss sustained by the Fund, each Fund’s custodian may charge a fee against your account for any payment check returned to the custodian for insufficient funds.  Each Fund reserves the right to refuse to accept applications under circumstances or in amounts considered disadvantageous to current shareholders.  If you place an order for Fund shares through a securities broker and you place your order in proper form before 4:00 p.m. Eastern time on any business day (a day when the NYSE is open) in accordance with their procedures, your purchase will be processed at the POP calculated at 4:00 p.m. on that day, provided the securities broker transmits your order to the transfer agent before 5:00 p.m. Eastern time. The securities broker must send to the transfer agent immediately available funds in the amount of the purchase price within three business days of your order.

Federal regulations require that you provide certified taxpayer identification number whenever you open or reopen an account. Congress has mandated that if any shareholder fails to provide and certify to the accuracy of the shareholder’s social security number or other taxpayer identification number, the Fund will be required to withhold a percentage, as specified by the Internal Revenue Code, of all dividends, distributions and payments, including redemption proceeds, to such shareholder as a backup withholding procedure.

How to Sell (Redeem) Your Shares

You may sell (redeem) your shares at any time. You may request the sale of your shares either by mail, by telephone or by wire.

By Mail

Sale requests should be mailed via U.S. mail or overnight courier service to:

PFW Water Fund		The Montecito Fund
c/o Gemini Fund Services, LLC	OR	c/o Gemini Fund Services, LLC
4020 South 147th Street, Suite 2		4020 South 147th Street. Suite 2
Omaha, NE 68137		Omaha, NE 68137

The selling price of the shares being redeemed will be the applicable Fund’s per share net asset value next calculated after receipt of all required documents in “good order,” less any applicable CDSC. Payment of redemption proceeds will be made no later than the third business day after the valuation date unless otherwise expressly agreed by the parties at the time of the transaction.

Good order means that the request must include:

1.

Your account number;

2.

The number of shares to be sold (redeemed) or the dollar value of the amount to be redeemed;

3.

The signatures of all account owners exactly as they are registered on the account;

4.

Any required signature guarantees; and

5.

Any supporting legal documentation that is required in the case of estates, trusts, corporations or partnerships and certain other types of accounts.

Medallion Signature Guarantees

A medallion signature guarantee of each owner is required to redeem shares in the following situations, for all size transactions:

1.

if you change the ownership on your account;

2.

when you want the redemption proceeds sent to a different address than is registered on the account;

3.

any redemption transmitted by federal wire transfer to your bank; and

4.

if a change of address request has been received by the Company or Gemini Fund Services within 15 days previous to the request for redemption.

In addition, medallion signature guarantees are required for all redemptions of $25,000 or more from any shareholder account. A redemption will not be processed until the medallion signature guarantee, if required, is received in good order.

Medallion signature guarantees are designed to protect both you and the Funds from fraud.  To obtain a medallion signature guarantee, you should visit a bank, trust company, member of a national securities exchange or other broker-dealer, or other eligible guarantor institution (Notaries public cannot provide medallion signature guarantees).  Guarantees must be signed by an authorized person at one of these institutions, and be accompanied by the words “Medallion Signature Guarantee.”

By Telephone

You may redeem your shares in each Fund by calling the transfer agent at 1-800-723-8637 if you elected to use telephone redemption on your account application when you initially purchased shares. Redemption proceeds must be transmitted directly to you or to your pre-designated account at a domestic bank. You may not redeem by telephone if the Funds or the transfer agent received a change of address request within 15 days previous to the request for redemption.  During periods of substantial economic or market changes, telephone redemptions may be difficult to implement. If you are unable to contact the transfer agent by telephone, shares may be redeemed by delivering the redemption request in person or by mail. You should understand that with the telephone redemption option, you may be giving up a measure of security that you might otherwise have had were you to redeem your shares in writing. In addition, interruptions in telepho ne service may mean that you will be unable to make redemption by telephone if desired. If you purchase your shares by check and then redeem your shares before your check has cleared, the Funds may hold your redemption proceeds until your check clears, or for 15 days, whichever comes first.

By Wire

You may request the redemption proceeds be wired to your designated bank if it is a member bank or a correspondent of a member bank of the Federal Reserve System. The Funds’ custodian charges a $10.00 fee for outgoing wires.

Redemption at the Option Of The Fund

If the value of the shares in your account falls to less than $500, the Company may notify you that, unless your account is increased to $500 in value, it will redeem all your shares and close the account by paying you the redemption proceeds and any dividends and distributions declared and unpaid at the date of redemption. You will have thirty days after notice to bring the account up to $500 before any action is taken. This minimum balance requirement does not apply to IRAs and other tax-sheltered investment accounts. This right of redemption shall not apply if the value of your account drops below $500 as the result of market action. The Company reserves this right because of the expense to each Fund of maintaining very small accounts.

Exchanging Fund Shares

You may exchange Class A shares of the PFW Water Fund for Class A shares of the Montecito Fund, and vice versa.  You will not pay a sales charge on an exchange if you are eligible for a sales charge waiver or if you paid the applicable sales charge on the shares you are exchanging.  Otherwise, you will pay a sales charge equal to the difference between the sales charges you paid on the shares you are exchanging and the sales charge payable on the shares you are receiving.

Exchanges are processed the same business day they are received, provided they are received before 4:00 p.m. eastern time.  The exchange is made at the Net Asset Value per share of each Fund next determined after the exchange request is received.  Generally, an exchange between Funds is considered a sale and generally results in a capital gain or loss for federal income tax purposes.

All exchanges are subject to a Fund’s investment minimum or eligibility requirement.  The Funds do not charge a fee for exchanges.  You may request an exchange by contacting your financial services firm, by calling 1-800-723-8637, or by writing the appropriate Fund at:

c/o Gemini Fund Services, LLC

4020 South 147th Street, Suite 2

Omaha, NE 68137

Before making an exchange request, you should read the section of this Prospectus about the Fund whose shares you would like to purchase by exchange. You can obtain a Prospectus by contacting your financial services firm, by calling 1-800-723-8637 or by writing the Fund at the above address.  Exchanges will be processed only if the Fund into which you are exchanging is registered in your state of residence.  The Company may change the terms and conditions of your exchange privileges upon 60 days’ written notice.  

The exchange privilege is not intended as a way for you to speculate on short-term movements in the market.  Therefore, to prevent disruptions in the management of the Funds, the Funds limit excessive exchange activity as described in “Frequent Purchases and Redemptions of Fund Shares.”  Your exchange privilege will be revoked if the exchange activity is considered excessive.     In addition, a Fund may reject any exchange request for any reason, including if it does not think that it is in the best interests of the Fund and/or its shareholders to accept the exchange.

Anti-Money Laundering and Customer Identification Programs

The USA Patriot Act requires financial institutions, including the Funds, to adopt certain policies and programs to prevent money-laundering activities, including procedures to verify the identity of customers opening new accounts. When completing a new Application Form, you will be required to supply the Funds with information, such as your taxpayer identification number, that will assist the Fund in verifying your identity. As required by law, the Funds may employ various procedures, such as comparing the information to fraud databases or requesting additional information or documentation from you, to ensure that the information supplied by you is correct. A Fund may not be able to open your account or complete a transaction for you until the Fund is able to verify your information. When opening an account for a foreign business, enterprise or non-US. person that does not have an identification number, we require alternative governm ent-issued documentation certifying the existence of the person, business or enterprise.

Frequent Purchases and Redemptions of Fund Shares

Market timing is an investment strategy using frequent purchases, redemptions and/or exchanges in an attempt to profit from short-term market movements.  Frequent purchases and redemptions of Fund shares may result in the dilution of the value of Fund shares held by long-term shareholders, disrupt portfolio management and increase Fund expenses for all shareholders.    Each Fund discourages short-term traders and/ or market timers from investing in the Fund and does not accommodate frequent trading by Fund shareholders.  The Funds monitor purchase, redemption and exchange transactions in an attempt to detect market timing.  If excessive account activity is detected, an investor’s exchange privileges may be revoked or purchase order rejected.  The Board of Directors has adopted a policy establishing what constitutes excessive account activity. The Fund also reserves the right to reject any purcha se order for any reason, including purchase orders that it does not think are in the best interest of the Fund or its shareholders or if it considers the trading to be abusive.  

The Funds will apply their policies and procedures uniformly to all Fund shareholders. While a Fund attempts to deter market timing, there is no assurance that it will be able to identify and eliminate all market timers.  For example, certain accounts called “omnibus accounts” include multiple shareholders.  Omnibus accounts typically provide the Fund with a net purchase or redemption request on any given day.  Purchasers of Fund shares and redeemers of Fund shares are netted against one another and the identity of individual purchasers and redeemers whose orders are aggregated are not known by the Fund.  The netting effect often makes it more difficult to detect market timing activity.  However, the Funds will work with brokers and other financial intermediaries that sell shares of the Funds, including those maintaining omnibus accounts with the Funds, to identify market timing transactions and enforce the Funds’ market timing policies.  The Funds’ agreements with financial intermediaries require that the financial intermediary provide shareholder transaction information, to the extent known to the financial intermediary, to the Funds upon request.

We reserve the right to modify our policies and procedures at any time without prior notice as we deem in our sole discretion to be in the best interests of Fund shareholders, or to comply with state or federal legal requirements.

DIVIDENDS AND DISTRIBUTIONS

Dividends paid by each Fund are derived from its net investment income. Net investment income will be distributed at least annually. Each Fund’s net investment income is made up of dividends received from the stocks it holds, as well as interest accrued and paid on any other obligations that might be held in

its portfolio.

Each Fund realizes capital gains when it sells a security for more than it paid for it. Each Fund may make distributions of its net realized capital gains (after any reductions for capital loss carry forwards), generally, once a year.

Unless you elect to have your distributions paid in cash, your distributions will be reinvested in additional shares of the Fund. You may change the manner in which your dividends are paid at any time by writing to Gemini Fund Services, LLC, 4020 South 147^th Street, Suite 2, Omaha, NE 68137.

TAX CONSIDERATIONS

Each Fund intends to continue to qualify as a regulated investment company under Sub Chapter M of the Internal Revenue Code so as to be relieved of federal income tax on its capital gains and net investment income currently distributed to its shareholders. To qualify as a regulated investment company, a Fund must, among other things, derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities, or other income derived with respect to its business of investing in such stock or securities, and distribute substantially all of such income to its shareholders at least annually.

Dividends from investment income and net short-term capital gains are generally taxable to you as ordinary income. Distributions of long-term capital gains are taxable as long-term capital gains regardless of the length of time shares in the Fund have been held. Distributions are taxable, whether received in cash or reinvested in shares of each Fund.

You will be advised annually of the source of distributions for federal income tax purposes.

If you fail to furnish your social security or other tax identification number or to certify properly that it is correct, the appropriate Fund may be required to withhold federal income tax as specified by the Internal Revenue Code (backup withholding) from your dividend, capital gain and redemption payments. Dividend and capital gain payments may also be subject to backup withholding if you fail to certify properly that you are not subject to backup withholding due to the under-reporting of certain income.

Taxable distributions generally are included in your gross income for the taxable year in which they are received. However, dividends declared in October, November and December and made payable to shareholders of record in such month will be deemed to have been received on December 31^st if paid by a Fund during the following January.

Distributions by a Fund will result in a reduction in the fair market value of the Fund’s shares. Should a distribution reduce the fair market value below your cost basis, such distribution would be taxable to you as ordinary income or as a long-term capital gain, even though, from an investment standpoint, it may constitute a partial return of capital. In particular, you should be careful to consider the tax implications of buying shares of a Fund just prior to a distribution. The price of such shares includes the amount of any forthcoming distribution so that you may receive a return of investment upon distribution that will, nevertheless, be taxable.

A redemption of shares is a taxable event and, accordingly, a capital gain or loss may be recognized. You should consult a tax adviser regarding the effect of federal, state, local, and foreign taxes on an investment in a Fund.

FINANCIAL HIGHLIGHTS

The financial highlights tables below are intended to help you understand each Fund’s recent financial performance.  Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in the various classes of shares of the Fund (assuming reinvestment of all dividends and distributions). The financial highlights are from the Funds’ financial statements, which have been audited by the independent registered public accounting firm of Cohen Fund Audit Services, Ltd, whose report, along with the Funds’ financial statements, are included in the annual report for the fiscal year ended March 31, 2010.  These financial highlights, along with other information concerning the Funds, are included in the Funds’ annual report, which is available without charge upon request.

FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock outstanding throughout each period presented. (a)
			PFW Water Fund- Class A Shares
		For the Year Ended March 31,
		2010	2009	2008	2007	2006
Net Asset Value,						& nbsp;
	Beginning of Year	$         19.20	$  27.42	$  26.43	$  27.92	$  22.89
					&nb sp;
	Income (Loss) From Operations:					& nbsp;
	Net investment income (loss)	0.11	0.10	0.18	(0.45)	(0.44)
	Net gain (loss) from securities					& nbsp;
	(both realized and unrealized)	8.50	(8.26)	0.81	(1.04)	5.47
	Total from operations	8.61	(8.16)	0.99	(1.49)	5.03
					&nb sp;
	Distributions to shareholders from						& nbsp;
	net investment income	(0.13)	(0.06)	-	-	-
					&nb sp;
Net Asset Value,						& nbsp;
	End of Year	$         27.68	$   19.20	$   27.42	$   26.43	$   27.92
					&nb sp;
Total Return (b)		44.86%	(29.79)%	3.75%	(5.34)%	21.97%
Ratios/Supplemental Data						& nbsp;
	Net assets, end of year (in 000's)	$       18,552	$   9,896	$ 10,882	$   1,815	$   3,146
	Ratio of expenses					& nbsp;
	to average net assets	1.50%	1.50%	1.54%	1.86%	1.85%
	Ratio of net investment income					& nbsp;
	(loss) to average net assets	0.45%	0.43%	0.65%	(1.78)%	(1.76)%
	Portfolio turnover rate	17%	47%	112%	14%	27%
__________						& nbsp;
(a) Per share amounts are calculated using the average shares method, which more appropriately presents the per
	share data for the period.
(b) Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gains
	distributions, if any, and do not assume the effects of any sales charges.

FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock outstanding throughout each period presented. (a)
		PFW Water Fund- Class C Shares
		For the Year Ended March 31,
		2010	2009	2008	2007	2006
Net Asset Value,
	Beginning of Year	$         18.07	$   25.92	$   25.25	$   27.07	$   22.48
	Income (Loss) From Operations:
	Net investment loss	(0.06)	(0.08)	(0.15)	(0.78)	(0.74)
	Net gain (loss) from securities
	(both realized and unrealized)	7.97	(7.77)	0.82	(1.04)	5.33
	Total from operations	7.91	(7.85)	0.67	(1.82)	4.59
Net Asset Value,
	End of Year	$         25.98	$   18.07	$  25.92	$   25.25	$   27.07
Total Return (b)		43.77%	(30.29)%	2.65%	(6.72)%	20.42%
Ratios/Supplemental Data
	Net assets, end of year (in 000's)	$         4,059	$   2,350	$   3,617	$   4,800	$ 12,893
	Ratio of expenses
	to average net assets	2.25%	2.25%	2.70%	3.31%	3.11%
	Ratio of net investment income (loss)
	to average net assets	(0.27)%	(0.35)%	(0.57)%	(3.22)%	(3.02)%
	Portfolio turnover rate	17%	47%	112%	14%	27%
__________
(a) Per share amounts are calculated using the average shares method, which more appropriately presents the per
	share data for the period.
(b) Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gains
	distributions, if any, and do not assume the effects of any sales charges.

FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock outstanding throughout each period presented. (a)
		The Montecito Fund
		For the Year Ended March 31,
		2010	2009	2008	2007	2006
Net Asset Value,
	Beginning of Year	$           6.59	$   10.32	$   11.57	$   10.74	$   10.24
	Income (Loss) From Operations:
	Net investment income	0.30	0.23	0.38	0.26	0.19
	Net gain (loss) from securities
	(both realized and unrealized)	2.71	(3.69)	(0.67)	1.05	0.40
	Total from operations	3.01	(3.46)	(0.29)	1.31	0.59
	Distributions to shareholders from
	Net investment income	(0.27)	(0.27)	(0.38)	(0.25)	(0.09)
	Net realized capital gains	-	-	(0.51)	(0.23)	-
	Return of capital	-	-	(0.07)	-	-
	Total distributions	(0.27)	(0.27)	(0.96)	(0.48)	(0.09)
Net Asset Value,
	End of Year	$           9.33	$     6.59	$   10.32	$   11.57	$   10.74
Total Return (b)		46.58%	(34.08)%	(2.88)%	12.33%	5.82%
Ratios/Supplemental Data
	Net assets, end of year (in 000's)	$       11,507	$   8,204	$ 12,697	$ 11,987	$   7,333
	Ratio of expenses
	to average net assets	1.19%	1.19%	1.19%	1.19%	1.19%
	Ratio of net investment income
	to average net assets (c)	3.69%	2.74%	3.33%	2.42%	1.82%
	Portfolio turnover rate	84%	58%	71%	33%	68%
__________
(a) Per share amounts are calculated using the average shares method, which more appropriately presents the per
	share data for the period.
(b) Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gains
	distributions, if any, and do not assume the effects of any sales charges.
(c) Recognition of net investment income (loss) is affected by the timing of the declaration of dividends by the underlying
	investment companies in which the Fund invests.

PRIVACY STATEMENT

At The Santa Barbara Group of Mutual Funds, Inc., we recognize and respect the privacy of each of our investors and their expectations for confidentiality. The protection of investor information is of fundamental importance in our operation and we take seriously our responsibility to protect personal information. We collect, retain and use information that assists us in providing the best service possible. This information comes from the following sources:

·

Account applications and other required forms,

·

Written, oral, electronic or telephonic communications and

·

Transaction history from your account.

We only disclose personal nonpublic information to third parties as necessary and as permitted by law.

We restrict access to personal nonpublic information to employees, affiliates and services providers involved in servicing our account. We require that these entities limit the use of the information provided to the purposes for which it was disclosed and as permitted by law.

We maintain physical, electronic and procedural safeguards that comply with federal standards to guard nonpublic personal information of our investors.  

         

THE SANTA BARBARA GROUP OF MUTUAL FUNDS
PFW WATER FUND THE MONTECITO FUND c/o Gemini Fund Services, LLC 4020 South 147^th Street, Suite 2 Omaha NE 68137 Investment Company Act No. 811-07414
FOR MORE INFORMATION
Additional information about each Fund’s investments is available in the Annual and Semi-Annual Report to shareholders. In the Annual Report, you will find a discussion of the market conditions and investment strategies that significantly affected each Fund’s performance during the previous fiscal year. The Annual and Semi-Annual Reports are available without charge by calling the Funds. You may also get additional information concerning the Funds from the sources listed below:
Statement of Additional Information (SAI) - The SAI contains more detailed information on all aspects of the Funds, including policies and procedures relating to the disclosure of the Fund’s portfolio holdings. A current SAI, dated August 1, 2010, has been filed with the SEC and is incorporated by reference into this Prospectus. To request a free copy of the SAI, or the Funds’ latest Annual Report or Semi-Annual Report, please contact the Funds at: The Santa Barbara Group of Mutual Funds, Inc. c/o Gemini Fund Services, LLC 4020 South 147^th Street, Suite 2 Omaha, NE 68137 800-723-8637
The Funds currently do not have a website. A copy of your requested document(s) will be mailed to you within three days of your request.
Information about the Funds (including the SAI) can also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and information concerning the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. Information about the Funds is also available on the SEC’s EDGAR database at the SEC’s web site (www.sec.gov). Copies of this information can be obtained, after paying a duplicating fee, by electronic request (publicinfo@sec.gov), or by writing the SEC’s Public Reference Section, 100 F Street NE, Washington, DC 20549-0102.        

STATEMENT OF ADDITIONAL INFORMATION

Dated August 1, 2010

PFW WATER FUND

and

MONTECITO FUND

Each a Series of

The Santa Barbara Group of Mutual Funds, Inc.

1270 Hillcrest Avenue

Pasadena, California 91106

1-800-723-8637

This Statement of Additional Information ("SAI") is not a Prospectus and should be read in conjunction with the Prospectus of the PFW Water Fund and the Montecito Fund dated August 1, 2010. This SAI incorporates by reference the Funds’ Annual Report for the fiscal year ended March 31, 2010.  You may obtain a copy of the Prospectus, Annual Report or Semi-Annual Report, free of charge, by writing to the Santa Barbara Group of Mutual Funds, Inc., c/o Gemini Fund Services, LLC, 4020 South 147^th Street, Suite 2, Omaha, NE 68137 or by calling 1-800-723-8637.

The current Prospectus for the PFW Water Fund and the Montecito Fund is incorporated herein by reference for all purposes, and all defined terms in the Prospectus have the same meanings and are used in this SAI for the same purposes.

TABLE OF CONTENTS

About the Funds	3
Investment Policies	3
Investment Restrictions	13
Disclosure of Portfolio Holdings	15
Fund Manager	16
Operating Services Agreement	17
Directors and Officers	18
Compensation of Directors	22
Control Persons and Principal Holders of the Fund	23
Proxy Voting Policies and Procedures	23
Purchasing and Redeeming Shares	24
Tax Information	24
Custodian	26
Custody Administrator	26
Transfer Agent	26
Administration	26
Compliance Services	27
Portfolio Managers	27
Brokerage Allocation and Portfolio Transactions	29
Distributor	30
Independent Registered Public Accounting Firm	30
Distribution Plans	30
Financial Statements	31
Appendix A	32

ABOUT THE FUNDS

The Santa Barbara Group of Mutual Funds, Inc. (the “Company”), an open-end investment management company, currently comprised of the PFW Water Fund (formerly known as the SBG Growth Fund from June 1, 2007 until July 31, 2007 and as the Bender Growth Fund prior to June 1, 2007) and The Montecito Fund (each a “Fund,” together the “Funds”), was incorporated in Maryland on December 30, 1992.  "PFW" in the PFW Water Fund's name refers to "Portfolio From Water." The affairs of the Company are managed by the Company’s Board of Directors, which approves all significant agreements between the Company and the persons and companies that furnish services to each Fund, including agreements with each Fund’s custodian, transfer agent, investment adviser and administrator.  All such agreements are subject to limitations imposed by state and/or federal securities laws, and to the extent that any such cont ract contradicts such statutes, the contract would be unenforceable.

The Board of Directors has the power to designate one or more series of shares of common stock and to classify or reclassify any unissued shares with respect to such series (each series is commonly known as a mutual fund).  Currently, there are two series being offered by the Company.  Shareholders are entitled: (i) to one vote per full share; (ii) to such distributions as may be declared by the Company’s Board of Directors out of funds legally available; and (iii) upon liquidation, to participate ratably in the assets available for distribution.  There are no conversion or sinking fund provisions applicable to the shares, and the holders have no preemptive rights and may not cumulate their votes in the election of directors.  The shares are redeemable and are fully transferable.  All shares issued and sold by the Company will be fully paid and non-assessable.

According to the law of Maryland under which the Company is incorporated and the Company’s bylaws, the Company is not required to hold an annual meeting of shareholders unless required to do so under the Investment Company Act of 1940, as amended (“1940 Act”).  Accordingly, the Company will not hold annual shareholder meetings unless required to do so under the 1940 Act.

Pursuant to Rule 17j-1 under the 1940 Act, the Company, the investment adviser to the Funds and the Funds’ principal underwriter has each adopted a Code of Ethics that governs certain personal investment activities of a person having access to investment information of the Funds.  The Code of Ethics places limits on personal securities transactions for certain persons, and places strict reporting requirements on these people if they effect a personal securities transaction in a security in which a Fund invests.  You may obtain a copy of the code from the Securities and Exchange Commission.

INVESTMENT POLICIES

Each Fund’s investment objective and the manner in which each Fund pursues its investment objectives are generally discussed in the Prospectus.  This section provides additional information concerning the Funds’ investments and their investment restrictions.

Each Fund is a diversified Fund, meaning that as to 75% of the Fund’s assets (valued at the time of investment), the Fund will not invest more than 5% of its assets in securities of any one issuer, except in obligations of the United States Government and its agencies and instrumentalities, thereby reducing the risk of loss.  

The PFW Water 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 SAI 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.  The Montecito Fund’s investment objective is not a fundamental policy and may be changed without shareholder approval.

U.S. GOVERNMENT SECURITIES

Each 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:

(i) direct obligations of the U.S. Treasury (such as Treasury bills, notes, and bonds) and (ii) 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.

For more detailed information regarding the characteristics of securities issued by U.S. government agencies and instrumentalities, please read the section of this SAI entitled MORTGAGE-BACKED SECURITIES.

COMMERCIAL PAPER

Each Fund may invest in commercial paper.  Commercial paper consists of short-term (usually from 1 to 270 days) unsecured promissory notes issued in bearer form by bank holding companies, corporations and finance companies.  The Funds 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 PFW Water Fund may invest up to 25% and the Montecito Fund may invest up to 15% of the value of their respective total assets in securities of foreign issuers represented by American Depositary Receipts listed on a U.S. 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 larger U.S. exchanges and markets, 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

Each 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 1940 Act to meet redemption requests.  Neither Fund will purchase portfolio securities while borrowings exceed 5% of its total assets.  Fund borrowings may be unsecured.  The 1940 Act requires the Funds to maintain continuous asset coverage of 300% of the amount borrowed.  If a Fund's asset coverage should decline below 300% 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 or decrease in t he market value of a Fund.  Money borrowed will be subject to interest costs, which may or may not be recovered by an appreciation of the securities purchased.  The Funds 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.  Each Fund may, in connection with permissible borrowing, pledge securities owned by the Fund as collateral.

EXCHANGE TRADED FUNDS

Each Fund may invest in a range of exchange-traded funds ("ETFs").  The shares of an ETF may be assembled in a block (typically 50,000 shares) known as a creation unit and redeemed in-kind for a portfolio of the underlying securities (based on the ETF's net asset value) together with a cash payment generally equal to accumulated dividends as of the date of redemption.  Conversely, a creation unit may be purchased from the ETF by depositing a specified portfolio of the ETF's underlying securities, as well as a cash payment generally equal to accumulated dividends of the securities (net of expenses) up to the time of deposit.  A Fund may redeem creation units for the underlying  securities (and any applicable cash), and may assemble a portfolio of the underlying securities and use it (and any required cash) to purchase creation units, if the Fund Manager believes it is in the Fund's interest to do so.  A Fund's ability to re deem creation units may be limited by the 1940 Act, which provides that the ETFs will not be obligated to redeem shares held by the Fund in an amount exceeding one percent of their total outstanding securities during any period of less than 30 days.  

There is a risk that the underlying ETFs in which a Fund invests may terminate due to extraordinary events that may cause any of the service providers to the ETFs, such as the trustee or sponsor, to close or otherwise fail to perform their obligations to the ETF. Also, because the ETFs in which the Funds intend to principally invest may be granted licenses by agreement to use the indices as a basis for determining their compositions and/or otherwise to use certain trade names, the ETFs may terminate if such license agreements are terminated.  In addition, an ETF may terminate if its entire net asset value falls below a certain amount.  Although each Fund believes that, in the event of the termination of an underlying ETF, it will be able to invest instead in shares of an alternate ETF tracking the same market index or another market index with the same general market, there is no guarantee that shares of an alternate ETF would be available for inv estment at that time.  To the extent a Fund invests in a sector product, the Fund is subject to the risks associated with that sector.

INVESTMENT COMPANY SECURITIES

Each Fund may invest in the securities of other investment companies to the extent that such an investment would be consistent with the requirements of the 1940 Act and the Fund's investment objectives.  Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses.  By investing in another investment company, the Fund becomes a shareholder of that investment company.  As a result, the Fund’s shareholders indirectly will bear the Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses the Fund’s shareholders directly bear in connection with the Fund’s own operations.

Under Section 12(d)(1) of the 1940 Act, a Fund may only invest up to 5% of its total assets in the securities of any one investment company (the “5% Limitation”), but may not own more than 3% of the outstanding voting stock of any one investment company or invest more than 10% of its total assets in the securities of other investment companies (the “10% Limitation”).

However, each Fund may rely on Rule 12d1-3, which allows unaffiliated mutual funds to exceed the 5% Limitation and the 10% Limitation, provided the aggregate sales loads any investor pays (i.e., the combined distribution expenses of both the acquiring fund and the acquired funds) does not exceed the limits on sales loads established by the Financial Industry Regulatory Authority (“FINRA”) for funds of funds.  In addition, each Fund may rely on Rule 12d1-1, which allows a Fund to invest in money market funds without limitation, provided the aggregate sales loads any investor pays (i.e., the combined distribution expenses of both the acquiring fund and the acquired funds) does not exceed the limits on sales loads established by FINRA for funds of funds, or the Fund's adviser waives its advisory fees in an amount necessary to offset any sales charge or service fee.

EQUITY SECURITIES

Each Fund will invest in equity securities.  Equity securities consist of common stock, convertible preferred stock, rights and warrants.  Common stocks, the most familiar type, represent an equity (ownership) interest in a corporation.  Common stocks generally have voting rights.  Warrants are options to purchase equity securities at a specified price valid for a specific time period.  Warrants may be either perpetual or of limited duration but usually do not have voting rights, pay dividends or have rights with respect to the assets of the corporation issuing them.  Rights are similar to warrants, but normally have shorter durations and are distributed by the issuer to its shareholders.  Although equity securities have a history of long term growth in value, their prices fluctuate based on changes in a company’s financial condition and on overall market and economic conditions.  Convertible securities include c orporate bonds, notes and preferred stock that can be converted into or exchanged for a prescribed amount of common stock, within a particular period of time, at a specified price or formula.  A convertible security generally entitles a holder to receive interest paid or accrued on debt or dividends paid on preferred stock until the convertible stock matures or is redeemed, converted or exchanged.  

Investments in equity securities are subject to inherent market risks and fluctuations in value due to earnings, economic conditions and other factors beyond the control of the Fund Manager.  As a result, the return and net asset value of a Fund will fluctuate.  Securities in a Fund’s portfolio may not increase as much as the market as a whole, and some undervalued securities may continue to be undervalued for long periods of time.  Although profits in some Fund holdings may be realized quickly, it is not expected that most investments will appreciate rapidly.

CORPORATE DEBT SECURITIES

Each Fund may invest in corporate debt securities.  Corporate debt securities are bonds, non-convertible preferred stock that have fixed dividends and give the issuer the right to redeem the stock at a specified date and price, and notes issued by businesses in order to finance credit needs.  Corporate debt securities also include commercial paper.

Corporate debt securities also include zero coupon securities.  Zero coupon securities are debt securities issued or sold at a discount from their face value and do not entitle the holder to any periodic payment of interest prior to maturity or a specified redemption date (or cash payment date).  These securities involve risks that are similar to those of other debt securities, although they may be more volatile, and the values of certain zero coupon securities move in the same direction as interest rates.  The amount of the discount varies depending on the time remaining until maturity or cash payment date, prevailing interest rates, liquidity of the security and perceived credit quality of the issuer.  Zero coupon securities also may take the form of debt securities that have been stripped of their unmatured interest coupons, the coupons themselves and receipts or certificates representing interests in such stripped debt obligations an d coupons.  The market prices of zero coupon securities generally are more volatile than the market prices of interest-bearing securities and are likely to respond to a greater degree to changes in interest rates than interest-bearing securities having similar maturities and credit qualities.

The Montecito Fund will invest only in investment grade debt securities.  The Fund Manager  considers corporate debt securities to be of investment grade quality if they are rated in the investment grade categories by S&P or Moody’s Investors Services, Inc. ("Moody’s"), or if unrated, are determined by the Fund Manager to be of comparable quality.

REPURCHASE AGREEMENTS

The Funds may invest in fully collateralized repurchase agreements.  A repurchase agreement is a short term investment in which the purchaser (i.e., a Fund) acquires ownership of a security and the seller agrees to repurchase the obligation at a future time at a set price, thereby determining the yield during the purchaser’s holding period (usually not more than seven days from the date of purchase).  Any repurchase transactions entered into by the Funds require full collateralization of the seller’s obligation during the entire term of the repurchase agreement.  In the event of a bankruptcy or other default of the seller, the Funds could experience both delays in liquidating the underlying security and losses in value.  However, the Funds intend to enter into repurchase agreements only with its custodian, other banks with assets of $1 billion or more and registered securities dealers determine d by the Fund Manager to be creditworthy.  The Fund Manager monitors the creditworthiness of the banks and securities dealers with which the Funds engages in repurchase transactions.  The Funds may not enter into a repurchase agreement with a term of more than seven days if, as a result, more than 15% of the value of its net assets would then be invested in such repurchase agreements and other illiquid investments.

CONVERTIBLE SECURITIES

Each Fund may invest in convertible securities, including fixed income securities that may be exchanged or converted into a predetermined number of shares of the issuer's underlying common stock at the option of the holder during a specified period. Convertible securities may take the form of convertible preferred stock, convertible bonds or debentures, units consisting of "usable" bonds and warrants or a combination of the features of several of these securities. Convertible securities are senior to common stocks in an issuer's capital structure, but are usually subordinated to similar non-convertible securities. While providing a fixed-income stream (generally higher in yield than the income derivable from common stock but lower than that afforded by a similar nonconvertible security), a convertible security also gives an investor the opportunity, through its conversion feature, to participate in the capital appreciati on of the issuing company depending upon a market price advance in the convertible security's underlying common stock.

ILLIQUID AND 144A SECURITIES

Each Fund may invest up to 15% of its net assets in illiquid securities. Illiquid securities include securities subject to contractual or legal restrictions on resale (e.g., because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act")) and securities that are otherwise not readily marketable (e.g., because trading in the security is suspended or because market makers do not exist or will not entertain bids or offers). Securities that have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Foreign securities that are freely tradable in their principal markets are not considered to be illiquid.

Restricted and other illiquid securities may be subject to the potential for delays on resale and uncertainty in valuation. A Fund might be unable to dispose of illiquid securities promptly or at reasonable prices and might thereby experience difficulty in satisfying redemption requests from shareholders. The Fund might have to register restricted securities in order to dispose of them, resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.

A large institutional market exists for certain securities that are not registered under the Securities Act, including foreign securities. The fact that there are contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such investments. Rule 144A under the Securities Act allows such a broader institutional trading market for securities otherwise subject to restrictions on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the Securities Act for resale of certain securities to qualified institutional buyers. Rule 144A has produced enhanced liquidity for many restricted securities, and market liquidity for such securities may continue to expand as a result of this regulation and the consequent existence of the PORTAL system, which is an automated system for the trading, clearance and settlem ent of unregistered securities of domestic and foreign issuers sponsored by the National Association of Securities Dealers, Inc.

Under guidelines adopted by the Trust's Board, the Fund's Manager may determine that particular Rule 144A securities, and commercial paper issued in reliance on the private placement exemption from registration afforded by Section 4(2) of the Securities Act, are liquid even though they are not registered. A determination of whether such a security is liquid or not is a question of fact. In making this determination, the Manager will consider, as it deems appropriate under the circumstances and among other factors: (1) the frequency of trades and quotes for the security; (2) the number of dealers willing to purchase or sell the security; (3) the number of other potential purchasers of the security; (4) dealer undertakings to make a market in the security; (5) the nature of the security (e.g., debt or equity, date of maturity, terms of dividend or interest payments, and other material terms) and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers, and the mechanics of transfer); and (6) the rating of the security and the financial condition and prospects of the issuer.  In the case of commercial paper, the Manager will also determine that the paper (1) is not traded flat or in default as to principal and interest, and (2) is rated in one of the two highest rating categories by at least two National Statistical Rating Organizations ("NRSRO") or, if only one NRSRO rates the security, by that NRSRO, or, if the security is unrated, the Manager determines that it is of equivalent quality.

Rule 144A securities and Section 4(2) commercial paper that have been deemed liquid as described above will continue to be monitored by the Manager to determine if the security is no longer liquid as the result of changed conditions. Investing in Rule 144A securities or Section 4(2) commercial paper could have the effect of increasing the amount of a Fund's assets invested in illiquid securities if institutional buyers are unwilling to purchase such securities.

MORTGAGE-BACKED SECURITIES

The Montecito Fund may invest in mortgage-backed securities.  Mortgage-backed securities represent participation interests in pools of one-to-four family residential mortgage loans originated by private mortgage originators.  Traditionally, residential mortgage-backed securities have been issued by U.S. governmental agencies such as the Ginnie Mae, Fannie Mae and Freddie Mac.    The Fund does not intend to invest in commercial mortgage-backed securities.  Non-governmental entities that have issued or sponsored residential mortgage-backed securities offerings include savings and loan associations, mortgage banks, insurance companies, investment banks and special purpose subsidiaries of the foregoing.

While residential loans do not typically have prepayment penalties or restrictions, they are often structured so that subordinated classes may be locked out of prepayments for a period of time.  However, in a period of extremely rapid prepayments, during which senior classes may be retired faster than expected, the subordinated classes may receive unscheduled payments of principal and would have average lives that, while longer than the average lives of the senior classes, would be shorter than originally expected.  The types of residential mortgage-backed securities in which the Fund may invest may include the following:

Guaranteed Mortgage Pass-Through Securities.  The Fund may invest in mortgage pass-through securities representing participation interests in pools of residential mortgage loans issued by the U.S. government or guaranteed, to the extent provided in such securities, by the U.S. government or one of its agencies or instrumentalities.  Such securities, which are ownership interests in the underlying mortgage loans, differ from conventional debt securities, which provide for periodic payment of interest in fixed amounts (usually semi-annually) and principal payments at maturity or on specified call dates.  Mortgage pass-through securities provide for monthly payments that are a “pass-through” of the monthly interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans, net of any fees paid to the guarantor of such securities and the servicer of the underlying mortgage loans.  The guaranteed mortgage pass-through securities in which the Fund will invest are those issued or guaranteed by Ginnie Mae, Fannie Mae and Freddie Mac.

Private Mortgage Pass-Through Securities.   Private mortgage pass-through securities (“Private Pass-Throughs”) are structured similarly to the Ginnie Mae, Fannie Mae and Freddie Mac mortgage pass-through securities described above and are issued by originators of and investors in mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing.  Private Pass-Throughs are usually backed by a pool of conventional fixed rate or adjustable rate mortgage loans.

Since Private Pass-Throughs typically are not guaranteed by an entity having the credit status of Ginnie Mae, Fannie Mae or Freddie Mac, such securities generally are structured with one or more types of credit enhancement.

Collateralized Mortgage Obligations.  CMOs are debt obligations collateralized by mortgage loans or mortgage pass-through securities.  Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac Certificates, but also may be collateralized by whole loans or Private Pass-Throughs (“Mortgage Assets”).

Multi-class pass-through securities are equity interests in a fund composed of Mortgage Assets.  Unless the context indicates otherwise, all references herein to CMOs include multi-class pass-through securities.  Payments of principal of and interest on the Mortgage Assets, and any reinvestment income thereon, provide the funds to pay debt service on the CMOs or make scheduled distributions on the multi-class pass-through securities.  CMOs may be sponsored by agencies or instrumentalities of the U.S. government, or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing.  Under current law, every newly created CMO issuer must elect to be treated for federal income tax purposes as a Real Estate Mortgage Investment Conduit (a “REMIC”).

In a CMO, a series of bonds or certificates is issued in multiple classes.  Each class of CMOs, often referred to as a “tranche,” is issued at a specific fixed or floating coupon rate and has a stated maturity or final distribution date.  Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates.  Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semi-annual basis.  The principal of and interest on the Mortgage Assets may be allocated among the several classes of a series of a CMO in innumerable ways.  In one structure, payments of principal, including any principal prepayments, on the Mortgage Assets are applied to the classes of a CMO in the order of their respective stated maturities or final distribution dates, so that no payment of principal will be made on any c lass of CMOs until all other classes having an earlier stated maturity or final distribution date have been paid in full.

The Fund may also invest in, among others, parallel pay CMOs and Planned Amortization Class CMOs (PAC Bonds).  Parallel pay CMOs are structured to provide payments of principal on each payment date to more than one class.  These simultaneous payments are taken into account in calculating the stated maturity date or final distribution date of each class, which, as with other CMO structures, must be retired by its payments of a specified amount of principal on each payment date.

Ginnie Mae Certificates.  Ginnie Mae is a wholly-owned corporate instrumentality of the U.S. government within the Department of Housing and Urban Development.  The National Housing Act of 1934, as amended (the “Housing Act”), authorizes Ginnie Mae to guarantee the timely payment of the principal of and interest on certificates that are based on and backed by a pool of mortgage loans insured by the Federal Housing Administration under the Housing Act, or Title V of the Housing Act of 1949 (“FHA Loans”), or guaranteed by the Veterans’ Administration under the Servicemen’s Readjustment Act of 1944, as amended (“VA Loans”), or by pools of other eligible mortgage loans.  The Housing Act provides that the full faith and credit of the U.S. government is pledged to the payment of all amounts that may be required to be paid under any guarantee.  

Ginnie Mae Certificates will represent a pro rata interest in one or more pools of the following types of mortgage loans:  (i) fixed rate level payment mortgage loans; (ii) fixed rate graduated payment mortgage loans; (iii) fixed rate growing equity mortgage loans; (iv) fixed rate mortgage loans secured by manufactured (mobile) homes; (v) mortgage loans on multifamily residential properties under construction; (vi) mortgage loans on completed multifamily projects; (vii) fixed rate mortgage loans as to which escrowed funds are used to reduce the borrower’s monthly payments during the early years of the mortgage loans (“buydown” mortgage loans); (viii) mortgage loans that provide for adjustments in payments based on periodic changes in interest rates or in other payment terms of the mortgage loans; and (ix) mortgage-backed serial notes.  All of these mortgage loans will be FHA Loans or VA Loans and, except a s otherwise specified above, will be fully-amortizing loans secured by first liens on one-to-four family housing units.

Fannie Mae Certificates.   Fannie Mae is a federally chartered and privately owned corporation organized and existing under the Federal National Mortgage Association Charter Act.  Fannie Mae was originally established in 1938 as a U.S. government agency to provide supplemental liquidity to the mortgage market and was transformed into a stockholder owned and privately managed corporation by legislation enacted in 1968.  Fannie Mae provides funds to the mortgage market primarily by purchasing home mortgage loans from local lenders, thereby replenishing their funds for additional lending.  Fannie Mae acquires funds to purchase home mortgage loans from many capital market investors that may not ordinarily invest in mortgage loans directly, thereby expanding the total amount of funds available for housing.  On September 7, 2008, the U.S. Treasury Department and the Federal Housing Finance Authority (the “FHFA”) announced that Fannie Mae and Freddie Mac had been placed into conservatorship, a statutory process designed to stabilize a troubled institution with the objective of returning the entity to normal business operations.  The U.S. Treasury Department and FHFA at the same time established a secured lending facility and a Secured Stock Purchase Agreement with both Fannie Mae and Freddie Mac to ensure that each entity had the ability to fulfill its financial obligations.  The FHFA announced that it does not anticipate any disruption in pattern of payments or ongoing business operations of Fannie Mae or Freddie Mac.

Each Fannie Mae Certificate entitles its registered holder to receive amounts representing such holder’s pro rata interest in scheduled principal payments and interest payments (at such Fannie Mae Certificate’s pass-through rate, which is net of any servicing and guarantee fees on the underlying mortgage loans), and any principal prepayments on the mortgage loans in the pool represented by such Fannie Mae Certificate and such holder’s proportionate interest in the full principal amount of any foreclosed or otherwise finally liquidated mortgage loan.  The full and timely payment of principal of and interest on each Fannie Mae Certificate will be guaranteed by Fannie Mae, which guarantee is not backed by the full faith and credit of the U.S. government.  In order to meet its obligations under such guarantee, Ginnie Mae is authorized to borrow from the U.S. Treasury with no limitations as to amount.

Each Fannie Mae Certificate will represent a pro rata interest in one or more pools of FHA Loans, VA Loans or conventional mortgage loans (i.e., mortgage loans that are not insured or guaranteed by any governmental agency) of the following types:  (i) fixed rate level payment mortgage loans; (ii) fixed rate growing equity mortgage loans; (iii) fixed rate graduated payment mortgage loans; (iv) variable rate California mortgage loans; (v) other adjustable rate mortgage loans; and (vi) fixed rate mortgage loans secured by multifamily projects.

Freddie Mac Certificates.   Freddie Mac is a corporate instrumentality of the U.S. government created pursuant to the Emergency Home Finance Act of 1970, as amended (the “FHLMC Act”).  Freddie Mac was established primarily for the purpose of increasing the availability of mortgage credit for the financing of needed housing.  The principal activity of Freddie Mac currently consists of the purchase of first lien, conventional, residential mortgage loans and participation interests in such mortgage loans and the resale of the mortgage loans so purchased in the form of mortgage securities, primarily Freddie Mac Certificates.  On September 7, 2008, the U.S. Treasury Department and the Federal Housing Finance Authority (the “FHFA”) announced that Fannie Mae and Freddie Mac had been placed into conservatorship, a statutory process designed to stabilize a troubled institution with the ob jective of returning the entity to normal business operations.  The U.S. Treasury Department and the FHFA at the same time established a secured lending facility and a Secured Stock Purchase Agreement with both Fannie Mae and Freddie Mac to ensure that each entity had the ability to fulfill its financial obligations.  The FHFA announced that it does not anticipate any disruption in pattern of payments or ongoing business operations of Fannie Mae or Freddie Mac.

Freddie Mac guarantees to each registered holder of a Freddie Mac Certificate the timely payment of interest at the rate provided for by such Freddie Mac Certificate, whether or not received.  Freddie Mac also guarantees to each registered holder of a Freddie Mac Certificate ultimate collection of all principal of the related mortgage loans, without any offset or deduction, but does not generally guarantee the timely payment of scheduled principal.  Freddie Mac may remit the amount due on account of its guarantee of collection of principal at any time after default on an underlying mortgage loan, but not later than 30 days following (i) foreclosure sale, (ii) payment of a claim by any mortgage insurer, or (iii) the expiration of any right of redemption, whichever occurs later, but in any event no later than one year after demand has been made upon the mortgagor for acceleration of payment of principal.  The obligati ons of Freddie Mac under its guarantee are obligations solely of Freddie Mac and are not backed by the full faith and credit of the U.S. government.

Freddie Mac Certificates represent a pro rata interest in a group of mortgage loans (a “Freddie Mac Certificate group”) purchased by Freddie Mac.  The mortgage loans underlying the Freddie Mac Certificates will consist of fixed rate or adjustable rate mortgage loans with original terms to maturity of between ten and thirty years, substantially all of which are secured by first liens on one-to-four family residential properties or multifamily projects.  Each mortgage loan must meet the applicable standards set forth in the FHLMC Act.  A Freddie Mac Certificate group may include whole loans, participation interests in whole loans and undivided interests in whole loans and participations comprising another Freddie Mac Certificate group.

Federal Home Loan Bank Securities.  The Federal Home Loan Bank system (“FHLB”) was created in 1932 pursuant to the Federal Home Loan Bank Act (the "FHLB Act").  The FHLB was created to support residential mortgage lending and community investment. The FHLB consists of 12 member banks which are owned by over 8,000 member community financial institutions.  The FHLB provides liquidity for housing finance and community development by making direct loans to these community financial institutions, and through two FHLB mortgage programs, which help expand home ownership by giving lenders an alternative option for mortgage funding.  Each member financial institution (typically a bank or savings and loan) is a shareholder in one or more of 12 regional FHLB banks, which are privately capitalized, separate corporate entities. Federal oversight, in conjunction with normal bank regulation and shar eholder vigilance, assures that the 12 regional banks will remain conservatively managed and well capitalized. The FHLB banks are among the largest providers of mortgage credit in the U.S.

The FHLB is also one of the world’s largest private issuers of fixed-income debt securities, and the Office of Finance serves as the FHLB’s central debt issuance facility. Debt is issued in the global capital markets and the funds are channeled to member financial institutions to fund mortgages, community development, and affordable housing.

Securities issued by the FHLB are not obligations of the U.S. government and are not guaranteed by the U. S. government.  The FHLB may issue either bonds or discount notes. The securities, issued pursuant to the FHLB Act, are joint and several unsecured general obligations of the FHLB banks. The bonds or discount notes will not limit other indebtedness that the FHLB banks may incur and they will not contain any financial or similar restrictions on the FHLB banks or any restrictions on their ability to secure other indebtedness. Under the FHLB Act, the FHLB banks may incur other indebtedness such as secured joint and several obligations of the FHLB banks and unsecured joint and several obligations of the FHL Banks, as well as obligations of individual FHLB banks (although current Federal Housing Finance Board rules prohibit their issuance).

STRIPS  

The Montecito Fund may invest in STRIPS (Separate Trading of Registered Interest and Principal of Securities).  The Federal Reserve creates STRIPS by separating the coupon payments and the principal payment from an outstanding Treasury security and selling them as individual securities.  To the extent the Montecito Fund purchases the principal portion of the STRIP, the Fund will not receive regular interest payments.  Instead they are sold at a deep discount from their face value.  The Fund will accrue income on such STRIPS for tax and accounting purposes, in accordance with applicable law, which income is distributable to shareholders.  Because no cash is received at the time such income is accrued, the Fund may be required to liquidate other Fund securities to satisfy its distribution obligations.  Because the principal portion of the STRIP does not pay current income, its price can be very volatile when interest rates change.  In calculating its dividend, the Fund takes into account as income a portion of the difference between the principal portion of the STRIP’s purchase price and its face value.

REAL ESTATE INVESTMENT TRUSTS ("REITs")

The Montecito Fund may invest in equity interests or debt obligations issued by REITs.  REITs are pooled investment vehicles which invest primarily in income producing real estate or real estate related loans or interests.  REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs.  Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling property that has appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Similar to investment companies, REITs are not taxed on income distributed to shareholders provided they comply with several requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund will indir ectly bear its proportionate share of expenses incurred by REITs in which the Fund invests in addition to the expenses incurred directly by the Fund.

Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs are dependent upon management skills, are not diversified, are subject to heavy cash flow dependency, default by borrowers and self-liquidation. REITs are also subject to the possibilities of failing to qualify for tax free pass-through of income under the Code and failing to maintain their exemption from registration under the 1940 Act.

REITs (especially mortgage REITs) are also subject to interest rate risks.  When interest rates decline, the value of a REIT's investment in fixed rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT's investment in fixed rate obligations can be expected to decline. In contrast, as interest rates on adjustable rate mortgage loans are reset periodically, yields on a REIT's investment in such loans will gradually align themselves to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed rate obligations.

Investment in REITs involves risks similar to those associated with investing in small capitalization companies. These risks include:

•

limited financial resources;

•

infrequent or limited trading; and

•

more abrupt or erratic price movements than larger company securities.

In addition, small capitalization stocks, such as REITs, historically have been more volatile in price than the larger capitalization stocks included in the S&P 500 Index.

INVESTMENT RESTRICTIONS

The PFW Water Fund has adopted the following fundamental investment restrictions that may not be changed without the affirmative vote of the holders of a majority of that Fund’s outstanding voting securities.  The Fund may not:

1.

invest less than 25 % of its total assets in the water supply industry and industries related thereto;  invest 25 % or more of its total assets in any one industry (other than the water supply industry and industries related thereto). (Securities issued or guaranteed by the United States government, its agencies or instrumentalities or repurchase agreements are not considered to represent industries for purposes of this restriction.);

2.

invest in the securities of any issuer if, immediately after such investment, less than 75% of the total assets of the Fund will be invested in cash and cash items (including receivables), government securities, securities of other investment companies or other securities for the purposes of this calculation limited in respect of any one issuer to an amount (determined immediately after the latest acquisition of securities of the issuer) not greater in value than 5% of the total assets of the Fund and to not more than 10% of the outstanding voting securities of such issuer;

3.

borrow money or issue senior securities (as defined in the 1940 Act or interpreted by the SEC or its staff) except that the Fund may borrow (i) from a bank or other person for temporary purposes in amounts not exceeding 5% of its total assets and (ii) from a bank, in amounts (when aggregated with amounts borrowed under clause (i)) not exceeding 33 1/3% of its total assets;

4.

make loans to other persons, except (i) by loaning portfolio securities, (ii) by engaging in repurchase agreements, or (iii) by purchasing non-publicly offered debt securities.  For purposes of this limitation, the term “loans” shall not include the purchase of a portion of an issue of publicly distributed bonds, debentures or other securities;

5.

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;

6.

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); and

7.

invest in commodities, provided that this limitation shall not prohibit the purchase or sale of forward foreign currency exchange contracts, futures contracts, and options on futures contracts and options on securities and on securities indices.

Additional investment restrictions adopted by the PFW Water Fund, which may be changed by the Board of Directors, provide that the Fund may not:

1.   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;

2.   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.

3.

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 make investments for the purpose of exercising control or management.

4.

pledge, mortgage or hypothecate its assets other than to secure borrowing permitted by restriction 3 under “fundamental restrictions” above.

80% NON-FUNDAMENTAL INVESTMENT POLICY FOR THE PFW WATER FUND:

The PFW Water Fund has adopted a nonfundamental 80% investment policy that may be changed by the Board of Directors without shareholder approval.  Shareholders will be provided with at least 60 days' prior notice of any change in the Fund's nonfundamental investment policy.  The notice will be provided in a separate written document containing the following, or similar, statement in boldface type: "Important Notice Regarding Change in Investment Policy."  The statement will also appear on the envelope in which the notice is delivered, unless the notice is delivered separately from other communications to the shareholder.  

The PFW Water Fund's 80% nonfundamental investment policy is, "Under normal circumstances, the Fund will invest at least 80% of its assets (defined as net assets plus the amount of any borrowing for investment purposes) in water-related companies."

The Montecito 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 Montecito Fund may not:

1.

make further investments when 25% or more of its total assets would be invested in any one industry (this limitation is not applicable to investments in obligations issued or guaranteed by the United States Government, its agencies or instrumentalities or repurchase agreements with respect thereto);

2.

invest in the securities of any issuer if, immediately after such investment, less than 75% of the total assets of the Fund will be invested in cash and cash items (including receivables), government securities, securities of other investment companies or other securities for the purposes of this calculation limited in respect of any one issuer to an amount (determined immediately after the latest acquisition of securities of the issuer) not greater in value than 5% of the total assets of the Fund and to not more than 10% of the outstanding voting securities of such issuer;

3.

borrow money or issue senior securities (as defined in the 1940 Act or interpreted by the SEC or its staff) except that the Fund may borrow (i) from a bank or other person for temporary purposes in amounts not exceeding 5% of its total assets and (ii) from a bank, in amounts (when aggregated with amounts borrowed under clause (i)) not exceeding 33 1/3% of its total assets;

4.

make loans to other persons, except (i) by loaning portfolio securities, (ii) by engaging in repurchase agreements, or (iii) by purchasing nonpublicly offered debt securities.  For purposes of this limitation, the term “loans” shall not include the purchase of a portion of an issue of publicly distributed bonds, debentures or other securities;

5.

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;

6.

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); or

7.

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 Montecito Fund, which may be changed by the Board of Directors, provide that the Fund may not:

1.

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 make investments for the purpose of exercising control or management;

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; or

3.

mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any assets of the Fund except as may be necessary in connection with borrowings described in fundamental limitation (1) above.  Margin deposits, security interests, liens and collateral arrangements with respect to transactions involving options, futures contracts, short sales and other permitted investments and techniques are not deemed to be a mortgage, pledge or hypothecation of assets for purposes of this limitation.

 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 a violation.

DISCLOSURE OF PORTFOLIO HOLDINGS

No sooner than 60 days after the end of each fiscal quarter, the Funds will make available to each shareholder upon request a complete schedule of their portfolio holdings, as of the end of the previous fiscal quarter. The Funds have an ongoing arrangement to provide portfolio holdings information to rating agencies such as Lipper and Morningstar, with the understanding that such holdings will be posted or disseminated to the public by the rating agency at any time.  Portfolio holdings information will be provided to rating agencies at the same time that it is provided to shareholders, that is, at least 60 days after the end of each fiscal quarter.  

The Funds also have ongoing relationships with their service providers to release portfolio holdings information on a daily basis in order for those parties to perform duties on behalf of the Fund.  These third party servicing agents are the Fund Manager, Transfer Agent, Distributor and Custodian as these terms are defined in this SAI.  The Funds also may disclose portfolio holdings, as needed, to auditors, legal counsel, proxy voting services (if applicable), pricing services, printers, parties to merger and reorganization agreements and their agents, and prospective or newly hired investment advisers or sub-advisors.  The lag between the date of the information and the date on which the information is disclosed will vary based on the identity of the party to whom the information is disclosed.  For instance, the information may be provided to auditors within days of the end of an annual period, while the information may be given to lega l counsel at any time.  The Funds will provide portfolio information to service providers only when there is a legitimate business reason for the disclosure and the information is disclosed under conditions of confidentiality.  “Conditions of confidentiality” include (i) confidentiality clauses in written agreements, (ii) confidentiality implied by the nature of the relationship (e.g., attorney-client relationship), (iii) confidentiality required by fiduciary or regulatory principles (e.g., custody relationships) or (iv) understandings or expectations between the parties that the information will be kept confidential.  The Funds believe, based upon their size and operations, that these are reasonable procedures to protect the confidentiality of the Funds’ portfolio holdings and will provide sufficient protection against personal trading based on the information.  Neither the Funds nor their service providers (other than the Fund Manager as specified below) may provide mater ial information regarding the Funds’ portfolio holdings to third parties not mentioned above.

The Fund Manager may disclose information to broker-dealers as desirable for purposes of analyzing the impact of existing and future market changes on the prices, availability, demand and liquidity of securities.  In addition, the information may be disclosed to broker-dealers so that they may assist the portfolio managers with trading such securities.

The Funds are prohibited from entering into any arrangements with any person to disclose information about the Funds’ portfolio holdings without the specific approval of the Co-Presidents of the Company.  Such disclosure may be made only when the Company has a legitimate business purpose for doing so and the recipients are subject to a confidentiality agreement.  For example, disclosure may be made to a newly hired sub-adviser prior to commencement of its duties.  The Fund Manager must submit any proposed arrangement pursuant to which the Fund Manager intends to disclose a Fund’s portfolio holdings to the Board, which will review such arrangement to determine (i) whether it is in the best interests of Fund shareholders, (ii) whether the information will be kept confidential and (iii) whether the disclosure presents a conflict of interest between the interests of Fund shareholders and those of the Fund Manager, or any affiliated pers on of the Fund, or the Fund Manager. Additionally, the Funds, the Fund Manager, and any affiliated persons of the Fund Manager, are prohibited from receiving compensation or other consideration, for themselves or on behalf of a Fund, as a result of disclosing the Fund’s portfolio holdings.

FUND MANAGER

Hillcrest Wells Advisors, LLC (the “Fund Manager”) is organized under the laws of the State of California as a limited liability company, and is registered as an investment adviser with the Securities and Exchange Commission.  The Fund Manager manages the general business affairs and the investment operations of the Funds pursuant to an investment advisor agreement with the Company dated January 19, 2010 (the “Advisor Agreement”).  Richard J. Capalbo and Rodney D. Hagenbuch are officers and members of the Fund Manager.  Accordingly, each of those persons is considered an “affiliated person” of the Company, as that term is defined in the 1940 Act.  Mr. Capalbo is a controlling member of the Fund Manager as well as a Director of the Company.  

The Advisor Agreements

Under the Advisor Agreement, the Fund Manager is paid a monthly fee at an average annual rate of 0.50% of the PFW Water Fund’s net assets.  The Fund Manager has only recently been engaged to manage the PFW Water Fund and has not been paid any advisory fees as of the date of this Statement of Additional Information.

Under the Advisor Agreement, the Fund Manager is paid a monthly fee at an annual rate of 0.30% of the first $100 million of the Montecito Fund’s average daily net assets, and 0.25% on average daily net assets in excess of $100 million.  For the fiscal year ending March 31, 2010, the PFW Water Fund paid $92,270in advisory fees to the Fund Manager.  For the fiscal year ending March 31, 2010, the Montecito Fund paid $30,705in advisory fees to the Fund Manager.

Prior to January 19, 2010, SBG Capital Management, Inc. (the “Prior Fund Manager”) managed the general business affairs and the investment operations of the Funds pursuant to investment advisor agreements with the Company dated September 30, 1998 for the PFW Water Fund, and dated April 1, 2002 for the Montecito Fund (the “Prior Advisor Agreements”).  For the fiscal years ending March 31, 2008 and 2009, the PFW Water Fund paid $69,662 and $78,352, respectively, in advisory fees to the Prior Fund Manager. For the fiscal years ending March 31, 2008 and 2009, the Montecito Fund paid $38,731 and $31,669 in advisory fees to the Prior Fund Manager.

Under the terms of the Advisor Agreement, the Fund Manager will provide or arrange to be provided to each Fund such investment advice as the Fund Manager deems advisable and will furnish or arrange to be furnished a continuous investment program for each Fund consistent with the Fund’s investment objective and policies.  The responsibility for making decisions to buy, sell or hold a particular security for a Fund rests with the Fund Manager, subject to review by the Board of Directors. Ben Murillo, Jr.  is the portfolio manager responsible for the day-to-day management of the PFW Water Fund.  Blake T. Todd is the portfolio manager responsible for the day-to-day management of the Montecito Fund.  

The Advisor Agreement provides that the Fund Manager will not be liable for any damages, expenses or losses incurred by the Company in connection with, any error of judgment, mistake of law, any act or omission connected with or arising out of any services rendered under, or payments made pursuant to, the Agreement or any other matter to which the Agreement relates, except by reason of willful misfeasance, bad faith or gross negligence on the part of any such persons in the performance of the Fund Manager’s duties under the Agreement, or by reason of reckless disregard by any of such persons of the Fund Manager’s obligations and duties under the Agreement.

The Advisor Agreement provides that it will remain in force for an initial term of two years, and from year to year thereafter, subject to annual approval by (a) the Board of Directors or (b) a vote of a majority (as defined in the 1940 Act) of the outstanding shares of a Fund; provided that in either event continuance is also approved by a majority of the Independent Directors, by a vote cast in person at a meeting called for the purpose of voting on such approval.  The Advisor Agreement may be terminated at any time, on sixty days written notice, without the payment of any penalty, (i) the Board of Directors, (ii) a vote of the majority of the outstanding voting securities of the applicable Fund, or (iii) the Fund Manager.  

The Advisor Agreement will terminate automatically in the event of its assignment (as defined in the 1940 Act).

The Advisor Agreement provides that the Fund Manager may delegate responsibility for the management of a Fund to a sub-advisor.  

The PFW Water Fund

Prior to June 1, 2007, the PFW Water Fund was known as the Bender Growth Fund and was sub-advised by Robert Bender & Associates, Inc. ("Bender & Associates").  Pursuant to an Investment Sub-Adviser Agreement dated September 30, 1998, Bender & Associates was entitled to receive a monthly fee at an annual rate of 0.40% of the Fund’s average daily net assets from the Fund Manager.  Pursuant to an Expense Reduction Agreement dated May 20, 2005, Bender & Associates had agreed that no monthly fees would be paid to Bender & Associates for the first $10 million in average daily net assets and that, effective August 1, 2005, Bender & Associates would receive a monthly fee at an annual rate of 0.30% of the Fund's aggregate daily net assets greater than $10,000,000.  For the fiscal year ended March 31, 2008, Bender & Associates received $2,079 from the Fund Manager. The sub-advisory agreement between the Fund M anager and Bender & Associates was not renewed and the Fund Manager began managing the Fund without a sub-advisor on June 1, 2007.

OPERATING SERVICES AGREEMENT

The Company has also entered into an Operating Services Agreement with the Fund Manager (“Services Agreement”) dated January 19, 2010.  Under the terms of the Services Agreement, the Fund Manager, provides, or arranges to provide, day-to-day operational services to the Funds including, but not limited to:

1.	accounting	6.	custodial
2.	administrative	7.	fund share distribution
3.	legal	8.	shareholder reporting
4.	dividend disbursing and transfer agent	9.	sub-accounting, and
5.	registrar	10.	record keeping services

Under the Services Agreement, the Fund Manager may, with the Company’s permission, employ third parties to assist it in performing the various services required of the Funds.  The Fund Manager is responsible for compensating such parties. Under the Services Agreement, for administrative services rendered to the PFW Water Fund by the Fund Manager, the PFW Water Fund pays the Fund Manager 0.75% annually on net assets.  Prior to August 1, 2007, the PFW Water Fund paid the Fund Manager the following fees: 1.10% annually on Class A net assets; 2.00% annually on Class Y net assets up to $2.5 million, then 1.10% annually on net assets above $2.5 million; and 2.00% annually on Class C net assets up to $7.5 million, then 1.10% annually on net assets above $7.5 million.  Under the Services Agreement, for administrative services rendered to the Montecito Fund by the Fund Manager, the Montecito Fund pays the Fund Manager 0.64% annually on net assets .  The Fund Manager has only recently been engaged by the Funds and has not been paid any service fees as of the date of this Statement of Additional Information.

Prior to January 19, 2010, the Company had an Operating Services Agreement with the Prior Fund Manager (the “Prior Services Agreement”) dated September 30, 1998, as amended August 1, 2007.  For its fiscal years ended March 31, 2008, 2009 and 2010, the PFW Water Fund paid the Prior Fund Manager service fees of, $137,757 and $117,530, and $105,428, respectively.  For the fiscal years ended March 31, 2008, 2009 and 2010, the Montecito Fund paid the Prior Fund Manager a service fee of, $82,627, $67,559, and $50,907, respectively.

DIRECTORS AND OFFICERS

The Board of Directors has overall responsibility for conduct of the Company's affairs.  The day-to-day operations of the Funds are managed by the Fund Manager, subject to the bylaws of the Company and review by the Board of Directors.  

Board Leadership Structure.  The Company is led by Mr. Richard J. Capalbo, who has served as the Chairman of the Board, President (principal executive officer), Treasurer (principal financial officer), Secretary and Chief Compliance Officer since January 2010.  Mr. Capalbo is an interested person by virtue of his controlling interest in the Company's investment adviser.  The Board of Directors is comprised of Mr. Capalbo and three Independent Directors (i.e. those who are not "interested persons" of the Company, as defined under the 1940 Act).  Mr. Robert Murray serves as the Lead Independent Director, and governance guidelines provide that the Independent Directors will meet in executive session at each Board meeting and no less than quarterly.  The Company has an Audit Committee with a separate chair.  The Company does not have a Nominating Committee, but the Audit Committee performs the dut ies of a nominating committee when and if necessary.  Under the Company Articles of Incorporation, By-Laws and governance guidelines, the Chairman of the Board is generally responsible for (a) chairing board meetings, (b) setting the agendas for these meetings and (c) providing information to board members in advance of each board meeting and between board meetings.  Generally, the Company believes it best to have a single leader who is seen by shareholders, business partners and other stakeholders as providing strong leadership.  The Company believes that its Chairman, together with the Audit Committee and the full Board of Directors, provide effective leadership that is in the best interests of the Company, its Funds and each shareholder.

Board Risk Oversight.  The Board of Directors is comprised of Mr. Capalbo and three (3) Independent Directors with an Audit Committee with a separate chair.  The Board is responsible for overseeing risk management, and the full Board regularly engages in discussions of risk management and receives compliance reports that inform its oversight of risk management from Mr. Capalbo in his role as Chief Compliance Officer at quarterly meetings and on an ad hoc basis, when and if necessary.  The Audit Committee considers financial and reporting the risk within its area of responsibilities.  Generally, the Board believes that its oversight of material risks is adequately maintained through the compliance-reporting chain where the Chief Compliance Officer is the primary recipient and communicator of such risk-related information.

Director Qualifications.  Generally, the Company believes that each Director is competent to serve because of their individual overall merits including: (i) experience, (ii) qualifications, (iii) attributes and (iv) skills.  Mr. Capalbo has over 20 years of business experience in the investment management and brokerage business, holds a Bachelor's degree from Fordham University and a Master's degree from the Wharton School of Finance and Commerce of the University of Pennsylvania, is highly skilled in portfolio and risk management functions as well as possessing a refined understanding of the regulatory framework under which investment companies must operate.  He has served on the Board of Directors of Kemper Financial and served as Chairman, President and Chief Executive Officer of broker-dealer Bateman, Eichler, Hill, Richards Inc.  Ms. Martha Harris Thompson has over 20 years of business experience in the inve stment management, financial advisory and brokerage business, holds a Bachelor's degree from Duke University, is highly skilled in portfolio and risk management functions as well as possessing a refined understanding of the regulatory framework under which investment companies must operate.  Mr. Robert K. Murray has over 20 years of business experience in the investment management, financial advisory and brokerage business, holds a Bachelor's degree in Accounting from Iona College, and is highly skilled in portfolio and risk management functions as well as possessing a refined understanding of the regulatory framework under which investment companies must operate based upon his years of experience working with clients that were subject to the Investment Company Act.  He also possesses many years of hands-on business experience in the computer services industry, serving in sales and marketing positions for the IBM Corporation as well as founding Information Products of North Jersey, an authorized IB M distributor.  Dr. Louis F. Moret, D.P.A., has decades of experience in administration and finance fields, including service to public pensions, non-profit organizations and for-profit businesses including a bank and an investment adviser.  He also presently serves on California Public Employees' Retirement System's Board of Administration.  Additionally, he completed the Directors Education and Certification Program at U.C.L.A. and serves as an Adjunct Professor at the Graduate School of Public Policy at Pepperdine University.  He earned his Doctor of Public Administration (D.P.A.) from the University of La Verne, his Masters in Public Administration from the University of Southern California, and his Bachelor of Arts in Sociology from Whittier College.  Based upon his years of experience in the financial services industry and his education, he possesses a refined understanding of the regulatory framework under which investment companies must operate.  The Company does not bel ieve any one factor is determinative in assessing a Director's qualifications, but that collective experience of each Director makes them highly qualified.

The Directors of the Company, including those Directors who are also officers, are listed below

Independent Directors:

Name, Address and Age	Position(s) Held with the Company	Term of Office and Length of Time Served	Principal Occupation(s) During the Past 5 Years	Number of Funds in the Company Overseen by Director	Other Directorships Held by Director During Past 5 Years
Martha Harris Thompson 843 S Orange Grove Blvd., Pasadena CA 91105-1738 Age: 73	Director	Indefinite/ Since January 2010	Stockbroker, Western International Securities (1996-2008); Stockbroker, Associated Securities (2008-July 2009)	2	None
Louis F. Moret 5439 Dahlia Drive Los Angeles, CA 90041 Age: 64	Director	Indefinite/ Since January 2010	Retired	2	Member, Board of Administr-ation, CalPERS (2008-present); Member, Advisory Board, Lasair Capital LLC (investment adviser), (2007-present), Member, Los Angeles Fire and Pension Board (1997-2008).
Robert K. Murray 8950 Abbotsford Terrace Fort Myers, FL 33912 Age: 68	Director	Indefinite/ Since January 2010	Registered Representative, Cazenave, Inc. (broker-dealer) (1991-present)	2	None

Interested Director:

Name, Address and Age	Position(s) Held with the Company	Term of Office and Length of Time Served	Principal Occupation(s) During the Past 5 Years	Number of Funds in the Company Overseen by  Director	Other Directorships Held by Director During Past 5 Years
Richard Capalbo1 1270 Hillcrest Avenue Pasadena, CA 91106 Age: 63	Director; President, Chief Financial Officer and Treasurer,	Indefinite/ Since January 2010	President and Chief Executive Officer, (2009 – present), Hillcrest Wells Advisors, LLC (registered investment advisor), Richard Capalbo Enterprise Consulting (practice management consulting firm) (2006-present); The Quantum Group (practice management consulting firm) (1998-2006).	2	None

 ¹Richard J. Capalbo is an “interested person” as defined in Section 2(a)(19) of the 1940 Act, by virtue of his affiliation with Hillcrest Wells Advisors, LLC.  

Principal Officers Who Are Not Directors:

Name, Address and Age	Position(s) Held with the Company	Term of Office and Length of Time Served	Principal Occupation(s) During the Past 5 Years	Number of Funds in the Company Overseen by  Director	Other Directorships Held by Director During Past 5 Years
Michael J. Wagner Northern Lights Compliance Services, LLC 450 Wireless Blvd. Hauppauge, NY 11788 Age:  58	Chief Compliance Officer	Since August 2006	Northern Lights Compliance Services, LLC (2006 – present); Senior Vice President of Fund Compliance Services, LLC (2004 – 2006); Vice President of GemCom, LLC (2004 – present); President of Gemini Fund Services, LLC (2003 – 2006); Chief Operations Officer of Gemini Fund Services, LLC (2003 – 2006); Senior Vice President, Fund Accounting, of Orbitex Fund Services (2001-2002); Director, Constellation Trust Company (2005- 2008).	N/A	N/A
James Colantino 450 Wireless Blvd. Hauppauge, NY  11788 Age: 40	Assistant Treasurer	Since March 1, 2010	Vice President (2004- present); Senior Fund Administrator (1999-2004), Gemini Fund Services, LLC.	N/A	N/A
Rodney D. Hagenbuch 1270 Hillcrest Avenue Pasadena, CA 91106 Age: 73	Assistant Compliance Officer and AML Officer	Since March 1, 2010	Chief Compliance Officer, ( 2009 – present) Hillcrest Wells Advisors, LLC (registered investment advisor), Registered Principal,(January 2010-present), Benefit Funding Services, LLC,  Registered Principal,(January 2010-present), Second Street Securities LLC, Registered Rep, (January 2008 – November 2009), Stonnington Group, LLC, Managing Member, (May 2002-December 2007), ARQUE (formerly known as Quantum Leap Securities, LLC),Principal (1999-2007), Quantum Leap Institute, LLC, Principal (March 2005-December 2005), Stonnington Group, LLC	N/A	N/A

COMPENSATION OF DIRECTORS

Each Independent Director currently receives a fee of $1,000 for each Board meeting attended.  Officers of the Fund and Directors who are interested persons of the Fund do not receive any compensation from the Funds.  None of the Directors received a fee for the fiscal year ended March 31, 2009 because they only recently joined the Board; however, the following table sets forth information regarding the estimated compensation of Directors to be paid by the Company for the fiscal year ended March 31, 2010:

Name of Director	Compensation from Fund Complex	Pension Benefits	Annual Benefits	Total Compensation Paid to Director
Robert K. Murray	$1,000	$0	$0	$1,000
Louis F. Moret	$1,000	$0	$0	$1,000
Martha Harris Thompson	$1,000	$0	$0	$1,000

The Company's audit committee consists of Robert K. Murray, Louis F. Moret and Martha Harris Thompson.  The audit committee is responsible for overseeing each Fund’s accounting and financial reporting policies and practices, its internal controls and, as appropriate, the internal controls of certain service providers; overseeing the quality and objectivity of each Fund's financial statements and the independent audit of the financial statements; selecting the independent auditors, and acting as a liaison between the Fund's independent auditors and the full Board of Directors.  The audit committee held two meetings during the fiscal year ended March 31, 2010.

The following table provides information regarding shares of the Funds owned by each Director as of December 31, 2009:

Name	Dollar Range of Shares in the PFW Water Fund	Dollar Range of Shares in the Montecito Fund	Aggregate Dollar Range of Shares in the Complex
Richard J. Capalbo	$0	$0	$0
Robert K. Murray	$0	$0	$0
Louis F. Moret	$0	$0	$0
Martha Harris Thompson	$0	$0	$0

CONTROL PERSONS AND PRINCIPAL HOLDERS OF THE FUND

The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates presumption of control of the Fund, under Section 2(a)(9) of the Act.   

As of July 1, 2010 the Directors and Officers, as a group,  own less than 1% of the shares of the PFW Water Fund and do not own any shares of the  Montecito Fund. As of July 1, 2010, the following persons owned, beneficially or of record, 5% or more of a class of shares of a Fund.

Name of Shareholder	Share Class Owned	% Of Share Class Owned	% Of Total Fund Shares Owned
Schwab-Bender 101 Montgomery Street San Francisco, CA 94104	PFW Water Fund –Class A	7.24%	5.89%
Rodney Hagenbuch 16826 Monte Hermoso Dr Pacific Palisades, CA 90272	PFW Water  Fund – Class I	100.00%	0.024%
Crowell, Weedon & co 624 S. Grand Avenue, Suite 2510 Los Angeles, CA 90017	Montecito Fund – Class A	10.01%	10.01%
John F. Wilson One Wilshire Building 624 S. Grand Avenue Los Angeles, CA 90017	Montecito Fund – Class A	5.77%	5.77%

The Company will call a meeting of shareholders for the purpose of voting upon the question of removal of a Director or Directors when requested in writing to do so by record holders of at least 10% of the Fund’s outstanding common shares.  The Company’s bylaws contain procedures for the removal of directors by its shareholders.  At any meeting of shareholders, duly called and at which a quorum is present, the shareholders may by the affirmative vote of the holders of a majority of the votes entitled to be cast thereon, remove any director or directors from office and may elect a successor or successors to fill any resulting vacancies for the unexpired terms of the removed directors.

PROXY VOTING POLICIES AND PROCEDURES

The Board of Directors of the Company has delegated responsibilities for decisions regarding proxy voting for securities held by each Fund to the Fund Manager.  The Fund Manager will vote such proxies in accordance with its proxy policies and procedures. In some instances, the Fund Manager may be asked to cast a proxy vote that presents a conflict between the interests of the Fund’s shareholders, and those of the Fund Manager or an affiliated person of the Fund Manager.  In such a case, the Company’s policy requires that the Fund Manager abstain from making a voting decision and to forward all necessary proxy voting materials to the Company to enable the Board of Directors to make a voting decision.  When the Board of Directors is required to make a proxy voting decision, only the Directors without a conflict of interest with regard to the security in question or the matter to be voted upon will be permit ted to participate in the decision of how the Fund’s vote will be cast.

The Fund Manager's proxy voting policies and procedures are attached as Appendix A to this Statement of Additional Information.

More information. The actual voting records relating to portfolio securities during the most recent 12-month period ended June 30 are available without charge, upon request by calling toll-free, 1-800-723-8637 or by accessing the SEC’s website at www.sec.gov.  In addition, a copy of the Funds’ proxy voting policies and procedures are also available by calling 1-800-723-8637 and will be sent within three business days of receipt of a request.

PURCHASING AND REDEEMING SHARES

Information concerning purchasing and redeeming shares of the Funds is contained in the Prospectus.  Upon request, the initial sales load is waived for the officers and Directors (and immediate family members of the officers and Directors) of the Company, and for employees (and immediate family members of employees) of the advisers, distributor, transfer agent, fund accountant, administrator, and their respective affiliates. In addition, please note that dealers may charge their customers a processing or service fee in connection with the purchase or redemption of Fund shares.  The amount and applicability of such a fee is determined and disclosed to its customers by each individual dealer.  Processing or service fees typically are fixed, nominal dollar amounts and are in addition to the sales and other charges described in the prospectus and this statement of additional information.  Your dealer will provide you with specific informatio n about any processing or service fees you will be charged.

Neither Fund will issue stock certificates evidencing shares.  Instead, your account will be credited with the number of shares purchased, relieving you of responsibility for safekeeping of certificates and the need to deliver them upon redemption.  Written confirmations are issued for all purchases of shares.

Redemptions will be made at net asset value ("NAV").  Each Fund’s NAV is determined on days on which the New York Stock Exchange is open for trading.  For purposes of computing the NAV of a share of each of the Funds, securities traded on national security exchanges or on the NASDAQ National Market System, for which market quotations are available are valued by an independent pricing service as of the close of business on the date of valuation.  The pricing service generally uses the last reported sale price for exchange traded securities, and the NASDAQ official closing price (NOCP) for NASDAQ traded securities or, lacking any reported sales on that day, at the most recent bid quotations.  Securities for which current market quotations are not readily available are valued at estimated fair market value as determined in good faith by the Fund Manager, subject to the review and supervision of the Board of Directors.  S hort-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.  The price per share for a purchase order or redemption request is the net asset value next determined after receipt of the order.

Each Fund is open for business on each day that the New York Stock Exchange (“NYSE”) is open.  The Fund’s share prices or NAV is normally determined as of 4:00 p.m., Eastern time.  Each Fund’s share price is calculated by subtracting its liabilities from the closing fair market value of its total assets and dividing the result by the total number of shares outstanding on that day.  Fund liabilities include accrued expenses and dividends payable, and its total assets include the market value of the portfolio securities as well as income accrued but not yet received.

TAX INFORMATION

The Funds have qualified, and intend to continue to qualify, as regulated investment companies under Subchapter M of the Internal Revenue Code so as to be relieved of federal income tax on their capital gains and net investment income currently distributed to their shareholders.  To qualify as a regulated investment company, a Fund must, among other things, derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities, or other income derived with respect to its business of investing in such stock or securities.

If a Fund qualifies as a regulated investment company and distributes at least 90% of its net investment income that Fund will not be subject to federal income tax on the income so distributed.  However, that Fund would be subject to corporate income tax on any undistributed income other than tax-exempt income from municipal securities.

Each Fund intends to distribute to shareholders, at least annually, substantially all net investment income and any net capital gains realized from sales of the Fund’s portfolio securities.  Dividends from net investment income and distributions from any net realized capital gains are reinvested in additional shares of the Fund unless the shareholder has requested in writing to have them paid by check.

Dividends from investment income and net short-term capital gains are generally taxable to the shareholder as ordinary income.  Distributions of long-term capital gains are taxable as long-term capital gains regardless of the length of time shares in the Fund have been held.  Distributions are taxable, whether received in cash or reinvested in shares of the Fund.

Each shareholder is advised annually of the source of distributions for federal income tax purposes.  A shareholder who is not subject to federal income tax will not be required to pay tax on distributions received.

If shares are purchased shortly before a record date for a distribution, the shareholder will, in effect, receive a return of a portion of his investment, but the distribution will be taxable to him even if the net asset value of the shares is reduced below the shareholder's cost.  However, for federal income tax purposes the original cost would continue as the tax basis.

If a shareholder fails to furnish his social security or other tax identification number or to certify properly that it is correct, the Fund may be required to withhold federal income tax at the rate of 28% (backup withholding) from dividend, capital gain and redemption payments to him.  Dividend and capital gain payments may also be subject to backup withholding if the shareholder fails to certify properly that he is not subject to backup withholding due to the under-reporting of certain income.

Taxation of the Shareholder.  Taxable distributions generally are included in a shareholder’s gross income for the taxable year in which they are received.  However, dividends declared in October, November and December and made payable to shareholders of record in such month will be deemed to have been received on December 31st if paid by either Fund during the following January.

Distributions by a Fund will result in a reduction in the fair market value of that Fund’s shares.  Should a distribution reduce the fair market value below a shareholder’s cost basis, such distribution would be taxable to the shareholder as ordinary income or as a long-term capital gain, even though, from an investment standpoint, it may constitute a partial return of capital.  In particular, investors should be careful to consider the tax implications of buying shares of a Fund just prior to a distribution.  The price of such shares includes the amount of any forthcoming distribution so that those investors may receive a return of investment upon distribution which will, nevertheless, be taxable to them.

A redemption of shares is a taxable event and, accordingly, a capital gain or loss may be recognized.  Each investor should consult a tax adviser regarding the effect of federal, state, local, and foreign taxes on an investment in either of the Funds.

Dividends.  A portion of each Fund’s income may qualify for the dividends-received deduction available to corporate shareholders to the extent that the particular Fund’s income is derived from qualifying dividends.  Because the Fund may earn other types of income, such as interest, income from securities loans, non-qualifying dividends, and short-term capital gains, the percentage of dividends from the Fund that qualifies for the deduction generally will be less than 100%.  Each Fund will notify corporate shareholders annually of the percentage of Fund dividends that qualifies for the dividend received deductions.

A portion of each Fund’s dividends derived from certain U.S. government obligations may be exempt from state and local taxation.  Short-term capital gains are distributed as dividend income.  The Funds will send each shareholder a notice in January describing the tax status of dividends and capital gain distributions for the prior year.

Capital Gain Distribution.  Long-term capital gains earned by each Fund from the sale of securities and distributed to shareholders are federally taxable as long-term capital gains, regardless of the length of time shareholders have held their shares.  If a shareholder receives a long-term capital gain distribution on shares of either Fund, and such shares are held six months or less and are sold at a loss, the portion of the loss equal to the amount of the long-term capital gain distribution will be considered a long-term loss for tax purposes.  Short-term capital gains distributed by the Funds are taxable to shareholders as dividends, not as capital gains.

Capital Loss Carryforwards.  As of March 31, 2010, the PFW Water Fund and the Montecito Fund had, for federal income tax purposes, capital losses which may be carried over to offset future capital gains.  The capital loss carryforwards expire on March 31 of the years indicated below:

	2011	2012	2013	2017	2018	Total
PFW Water Fund	$1,784,760	$3,197,676	$3,160,562	-	-	$8,142,998
The Montecito Fund	-	-	-	$595,747	$1,813,884	$2,409,631

CUSTODIAN

The Bank of New York Mellon, (“BNY”), One Wall Street, New York, NY 10286, acts as custodian for the Funds.  As such, BNY holds all securities and cash of the Funds, delivers and receives payment for securities sold, receives and pays for securities purchased, collects income from investments and performs other duties, all as directed by officers of the Company.  BNY does not exercise any supervisory function over management of the Funds, the purchase and sale of securities or the payment of distributions to shareholders.

CUSTODY ADMINISTRATOR

Under the Custody Agreement with BNY, Gemini Fund Services, LLC ("GFS" or the “Administrator”), serves as custody administrator on behalf of the Funds, and performs certain tasks on behalf of BNY, for which it receives a share of the custody fees paid to the Custodian, including a share of the asset-based fee and certain transaction fees.

TRANSFER AGENT

GFS, 4020 South 147^th Street, Suite 2, Omaha, NE  68137, acts as transfer, dividend disbursing, and shareholder servicing agent for the Funds pursuant to a written agreement with the Company. Under the agreement, GFS is responsible for administering and performing transfer agent functions, dividend distribution, shareholder administration, and maintaining necessary records in accordance with applicable rules and regulations.  Under the Services Agreement, the Fund Manager is responsible for paying the fees to GFS.

ADMINISTRATION

GFS also acts as Administrator to the Funds pursuant to a written agreement with the Company.  GFS supervises all administrative aspects of the operations of the Funds except those performed by the Fund Manager.  As Administrator, GFS is responsible for:

(1)

calculating each Fund’s NAV;

(2)

preparing and maintaining the books and accounts specified in Rule 31a-1 and 31a-2 of the 1940 Act;

(3)

preparing financial statements contained in reports to stockholders of the Funds;

(4)

preparing the Funds' federal and state tax returns;

(5)

preparing reports and filings with the Securities and Exchange Commission;

(6)

preparing filings with state Blue Sky authorities; and

(7)

maintaining each Fund’s financial accounts and records.

For the services to be rendered as administrator, GFS receives an annual fee, paid monthly, based on 0.15% of the average net assets of each Fund up to $75 million (subject to various monthly minimums), as determined by valuations made as of the close of each business day of the month.  For its fiscal years ended March 31, 2008, 2009 and 2010, the Fund Manager paid GFS $138,556, $52,786 and $203,911, respectively. Under the Services Agreement, the Fund Manager is responsible for paying the fees to GFS.

COMPLIANCE SERVICES

Pursuant to a Compliance Service Agreement with the Company, Northern Lights Compliance Services, LLC, ("NLCS”) an affiliate of GFS, provides a Chief Compliance Officer to the Company.  Under the terms of the Agreement, NLCS is paid an annual fee by the Fund Manager, and is reimbursed for out-of-pocket expenses.  

PORTFOLIO MANAGERS

Ben Murillo, Jr.  is the portfolio manager of the PFW Water Fund and has been responsible for the day-to-day management of the Fund since July 1, 2010. As of July 1, 2010, Mr. Murillo was responsible for the management of the following types of accounts in addition to the PFW Water Fund:

Account Type	Number of Accounts by Account Type	Total Assets By Account Type	Number of Accounts by Type  Subject to a Performance Fee	Total Assets By Account Type Subject to a Performance Fee
Ben Murillo, Jr.
Registered Investment Companies	None	N/A	N/A	N/A
Other Pooled Investment Vehicles	None	N/A	N/A	N/A
Other Accounts	None	N/A	N/A	N/A

Blake T. Todd is the portfolio manager of the Montecito Fund and has been responsible for the day-to-day management of the Fund since November 1, 2005. As of March 31, 2010, Mr. Todd was responsible for the management of the following types of accounts in addition to the Montecito Fund:

Account Type	Number of Accounts by Account Type	Total Assets By Account Type	Number of Accounts by Type  Subject to a Performance Fee	Total Assets By Account Type Subject to a Performance Fee
Blake T. Todd
Registered Investment Companies	None	N/A	N/A	N/A
Other Pooled Investment Vehicles	None	N/A	N/A	N/A
Other Accounts	38	$21,000,000	N/A	N/A

Conflicts of Interest

As indicated in the tables above, a portfolio manager employed by the Fund Manager may manage numerous accounts for multiple clients for which the Fund Manager also serves as the investment manager. These accounts consist of separate accounts (i.e., accounts managed on behalf of individuals or public or private institutions). Portfolio Managers employed by the Fund Manager make investment decisions for each account based on the investment objectives and policies and other relevant investment considerations applicable to that specific account.

In the event that a portfolio manager has responsibility for managing more than one account, potential conflicts of interest may arise. The only material conflict of interest identified by the Fund Manager involves the execution of portfolio trades for clients.  The Fund Manager uses systems for executing trades that are reasonably designed to provide fair treatment for each of its accounts.   

In addition, each portfolio manager is also a registered representative of the brokerage firm Crowell Weedon & Co. and makes investment recommendations to his brokerage clients, including recommendations for the purchase and sale of mutual funds.  This may create potential conflicts of interests that may cause the portfolio manager to recommend to his brokerage clients purchases of shares of his managed Fund since each portfolio manager is compensated by the Fund Manager based on a percentage of his managed Fund's assets.  This may also create potential conflict of interests if the portfolio manager selects a security for purchase by his managed Fund and simultaneously recommends that the same security be sold by his brokerage client, due to different investment goals between the managed Fund and the brokerage client.   If any potential conflicts of interest arise between the managed Fund and the managed brokerage accounts, the portf olio managers will proceed in a manner that ensures that their managed Fund will not be materially treated less favorably.  

Compensation

As of July 1, 2010, Mr. Murillo’s and Mr. Todd’s compensation is based on a percentage of the applicable Fund’s assets over $10 million ..  The following table shows the dollar range of equity securities beneficially owned by the portfolio manager of the PFW Water Fund as of July 1, 2010:

Name of Portfolio Manager	Dollar Range of Equity Securities in Managed Fund
Ben Murillo, Jr.	$0

The following table shows the dollar range of equity securities beneficially owned by the portfolio manager of the Montecito Fund as of March 31, 2010:

Name of Portfolio Manager	Dollar Range of Equity Securities in Managed Fund
Blake T. Todd	Over $100,000

BROKERAGE ALLOCATION AND PORTFOLIO TRANSACTIONS

Subject to policies established by the Board of Directors, the Fund Manager is responsible for investment decisions and for the execution of each Fund’s portfolio transactions.  The Funds have no obligation to deal with any particular broker or dealer in the execution of transactions in portfolio securities.  In executing such transactions, the Fund Manger seeks to obtain the best price and execution for its transactions.  While the Fund Manager generally seeks reasonably competitive commission rates, the Funds do not necessarily pay the lowest commission.

Where best price and execution may be obtained from more than one broker or dealer, the Fund Manager may, in its discretion, purchase and sell securities through dealers who provide research, statistical and other information to the Fund Manager.  Information so received will be in addition to and not in lieu of the services required to be performed by the Fund Manager under its Advisor Agreement and the expenses of the Fund Manager 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 a Fund and the Fund Manager, the Fund Manager has advised that such information is, in its opinion, only supplementary to the Fund Manager’s own research activities and the information must still be analyzed, weighed and reviewed by the Fund Manager.  During the fiscal years ended March 31, 2008, 2009 and 2010, the PFW Water Fund paid brokerage commissions of $28,345, $14,522, and $14,098, respectively.  During the fiscal years ended March 31, 2008, 2009, and 2010 the Montecito Fund paid brokerage commissions of $21,504, $7,267, and $8,648, respectively.

The Funds will not purchase securities from, or sell securities to, the Fund Manager or its affiliates.  The Fund Manager may not take into account the sale of Fund shares by a broker in allocating brokerage transactions. However, the Fund Manager may place portfolio transactions with brokers or dealers that promote or sell the applicable Fund's shares so long as such placements are made pursuant to policies approved by the Board of Directors that are designed to ensure that the selection is based on the quality of the broker’s execution and not on its sales efforts.

It is anticipated that the PFW Water Fund’s annual portfolio turnover rates will not exceed 100%.  However, the PFW Water Fund's portfolio turnover may be higher during the current fiscal year due to the new portfolio manager, new investment strategies and expectations of significant inflows to the Fund from net purchases of Fund shares.  The Montecito Fund’s annual portfolio turnover rate may exceed 100%.  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 Funds.  

DISTRIBUTOR

Capital Research Brokerage Services, LLC (the “Distributor") located at 15 S. Raymond Avenue, Suite 200, Pasadena, CA 91105, acts as principal underwriter for the Funds.  The Distributor facilitates the registration of each Fund’s shares under state securities laws and assists in the sale of shares.  The Distributor is compensated by the Fund Manager for its services to the Funds under a written agreement for such services.  For the fiscal years ended March 31, 2008, 2009 and 2010, the Distributor received, $8,400 and $9,100, and $8,400, respectively from the Fund Manager for underwriting services provided to the Funds.  

The following table represents all commissions and other compensation received by the Distributor, who is an affiliated person of the Funds, during the fiscal year ended March 31, 2010:

Name of Principal Underwriter	Net Underwriting Discounts And Commissions	Compensation On Redemption And Repurchases	Brokerage Commissions	Other Compensations(1)
Capital Research Brokerage Services, LLC	$26,948	$0	$0	$0

⁽¹⁾  This amount includes a monthly minimum fee of $700, which Capital Research Brokerage Services, LLC, receives from the Fund Manager for acting as distributor to the Funds.  

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Cohen Fund Audit Services, Ltd.serves as the Company's independent registered public accounting firm and audited the Funds’ financial statements for their fiscal year ended on March 31, 2010.

DISTRIBUTION PLANS

As noted in the Funds’ Prospectus, each Fund has adopted a plan pursuant to Rule 12b-1 under the 1940 Act (each a “Plan” and collectively, the “Plans”) whereby each Fund pays 0.25% per annum of that Fund’s average daily net assets for each of its share classes for shareholder servicing activities. Under its Plan, the PFW Water Fund pays an additional 0.75% per annum of that Fund’s average daily net assets for its Class C shares.   Under the Plan adopted by the PFW Water Fund, the fee is paid to the Distributor.  Under the Plan adopted by the Montecito Fund, the fee is paid to the Fund Manager.  The fees are used by the Fund Manager and Distributor to compensate dealers and others for providing services relating to the distribution of that Fund’s shares.  The fees are paid on a quarterly basis, based on each Fund’s average daily net assets attributable to the applicable class of shares.

Pursuant to the respective Plan, the Fund Manager or Distributor is entitled to a fee each month for expenses incurred in the distribution and promotion of the applicable Fund’s shares, including but not limited to, printing of prospectuses and reports used for sales purposes, preparation and printing of sales literature and related expenses, advertisements, and other distribution-related expenses as well as any distribution or service fees paid to securities dealers or others who have executed a dealer agreement with the underwriter.  Any expense of distribution in excess of authorized Plan fees will be borne by the Fund Manager or Distributor without any additional payments by the Funds.  You should be aware that it is possible that Plan accruals will exceed the actual expenditures by the Fund Manager or Distributor for eligible services.  Accordingly, such fees are not strictly tied to the provision of such services.

To the extent that each Fund, the Fund Manager, other parties on behalf of either of the Funds, or the Distributor make payments that are deemed to be payments for the financing of any activity primarily intended to result in the sale of shares issued by each Fund within the context of Rule 12b-1, such payments will be deemed to be made pursuant to the Plans.  In no event shall the payments made under the Plans, plus any other payments deemed to be made pursuant to the Plans, exceed the amount permitted to be paid pursuant to the Conduct Rules of the National Association of Securities Dealers, Inc., Article III, Section 26(d)(4).

The Plans have been approved by the Board of Directors, including all of the Directors who are non-interested persons as defined in the 1940 Act.  The Plans must be renewed annually by the Board of Directors, including a majority of the Directors who are non-interested persons of the Fund and who have no direct or indirect financial interest in the operation of the Plans.  The votes must be cast in person at a meeting called for that purpose.  It is also required that the selection and nomination of such Directors be done by the non-interested Directors.  The Plans may be terminated at any time, without any penalty: (i) by vote of a majority of the non-interested Directors who have no direct or indirect financial interest in the operation of the Plan; or (ii) by vote of a majority of the outstanding shares of each Fund, or any class of a Fund with respect to the provisions of the Plan affecting that class. The Distributor or any dealer o r other firm may also terminate their respective agreements at any time upon written notice.

The Plans and any related agreement may not be amended to increase materially the amounts to be spent for distribution expenses without approval by a majority of the Fund’s outstanding shares, and all material amendments to the Plans or any related agreements shall be approved by a vote of the non-interested Directors, cast in person at a meeting called for the purpose of voting on any such amendment.

The Fund Manager and the Distributor are required to report in writing to the Board of Directors of each Fund, at least quarterly, on the amounts and purpose of any payment made under the Plans, as well as to furnish the Board with such other information as may reasonably be requested in order to enable the Board to make an informed determination of whether the Plans should be continued.

During the fiscal years ended March 31, each Fund paid the following 12b-1 fees pursuant to each Plan:

FUND	March 31, 2010	March 31, 2009	March 31, 2008
PFW Water Fund Class A	$38,087	$30,800	$15,889
PFW Water Fund Class Y	-	$641(1)	$8,662(1)
PFW Water Fund Class C	$32,193	$30,940	$40,951
Montecito Fund	$25,588	$26,390	$32,276
TOTAL	$95,868	$88,771	$97,778

Estimated amounts paid under the Plan (as a percentage of TOTAL 12b-1 fees paid by the Funds):	March 31, 2010	March 31, 2009	March 31, 2008
Compensation  to Fund Manager and Distributor	21%	11%	11%
Compensation to Broker-Dealers	79%	89%	89%

                                                            ⁽¹⁾  The sale of Class Y shares of the PFW Water Fund was suspended on April 30, 2008.

FINANCIAL STATEMENTS

The financial statements of the Funds for the year ended March 31, 2010 and the independent registered public accountant’s report dated May 28, 2010 are incorporated herein by reference.  These financial statements include the schedules of investments, statements of assets and liabilities, statements of operations, statements of changes in net assets, financial highlights and notes. The Company will provide the Annual Report without charge upon request in writing or by telephone.

APPENDIX A

HILLCREST WELLS ADVISORS, LLC

PROXY VOTING POLICIES AND PROCEDURES

(Adopted January 19, 2010)

Pursuant to the recent adoption by the Securities and Exchange Commission (the “Commission”) of Rule 206(4)-6 (17 CFR 275.206(4)-6) and amendments to Rule 204-2 (17 CFR 275.204-2) under the Investment Advisers Act of 1940 (the “Act”), it is a fraudulent, deceptive, or manipulative act, practice or course of business, within the meaning of Section 206(4) of the Act, for an investment adviser to exercise voting authority with respect to client securities, unless (i) the adviser has adopted and implemented written policies and procedures that are reasonably designed to ensure that the adviser votes proxies in the best interests of its clients, (ii) the adviser describes its proxy voting procedures to its clients and provides copies on request, and (iii) the adviser discloses to clients how they may obtain information on how the adviser voted their proxies.

In order to fulfill its responsibilities under the Act, Hillcrest Wells Advisors, LLC (hereinafter “we” or “our”) has adopted the following policies and procedures for proxy voting with regard to companies in investment portfolios of our clients.  

KEY OBJECTIVES

The key objectives of these policies and procedures recognize that a company’s management is entrusted with the day-to-day operations and longer term strategic planning of the company, subject to the oversight of the company’s board of directors.  While “ordinary business matters” are primarily the responsibility of management and should be approved solely by the corporation’s board of directors, these objectives also recognize that the company’s shareholders must have final say over how management and directors are performing, and how shareholders’ rights and ownership interests are handled, especially when matters could have substantial economic implications to the shareholders.  

Therefore, we will pay particular attention to the following matters in exercising our proxy voting responsibilities as a fiduciary for our clients:

Accountability.  Each company should have effective means in place to hold those entrusted with running a company’s business accountable for their actions.  Management of a company should be accountable to its board of directors and the board should be accountable to shareholders.  

Alignment of Management and Shareholder Interests.  Each company should endeavor to align the interests of management and the board of directors with the interests of the company’s shareholders. For example, we generally believe that compensation should be designed to reward management for doing a good job of creating value for the shareholders of the company.

Transparency.  Promotion of timely disclosure of important information about a company’s business operations and financial performance enables investors to evaluate the performance of a company and to make informed decisions about the purchase and sale of a company’s securities.

DECISION METHODS

We generally believe that the individual portfolio managers that invest in and track particular companies are the most knowledgeable and best suited to make decisions with regard to proxy votes.  Therefore, we rely on those individuals to make the final decisions on how to cast proxy votes.

No set of proxy voting guidelines can anticipate all situations that may arise. In special cases, we may seek insight from our managers and analysts on how a particular proxy proposal will impact the financial prospects of a company, and vote accordingly.

In some instances, a proxy vote may present a conflict between the interests of a client, on the one hand, and our interests or the interests of a person affiliated with us, on the other.  In such a case, we will abstain from making a voting decision and will forward all of the necessary proxy voting materials to the client to enable the client to cast the votes.  

SUMMARY OF PROXY VOTING GUIDELINES

Election of the Board of Directors

We believe that good corporate governance generally starts with a board composed primarily of independent directors, unfettered by significant ties to management, all of whose members are elected annually.  In addition, key board committees should be entirely independent.   

The election of a company’s board of directors is one of the most fundamental rights held by shareholders.  Because a classified board structure prevents shareholders from electing a full slate of directors annually, we will generally support efforts to declassify boards or other measures that permit shareholders to remove a majority of directors at any time, and will generally oppose efforts to adopt classified board structures.

Approval of Independent Auditors

We believe that the relationship between a company and its auditors should be limited primarily to the audit engagement, although it may include certain closely related activities that do not raise an appearance of impaired independence.

We will evaluate on a case-by-case basis instances in which the audit firm has a substantial non-audit relationship with a company to determine whether we believe independence has been, or could be, compromised.

Equity-based compensation plans

We believe that appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of shareholders and the interests of directors, management, and employees by providing incentives to increase shareholder value.  Conversely, we are opposed to plans that substantially dilute ownership interests in the company, provide participants with excessive awards, or have inherently objectionable structural features.

We will generally support measures intended to increase stock ownership by executives and the use of employee stock purchase plans to increase company stock ownership by employees.  These may include:

1.

Requiring senior executives to hold stock in a company.

2.

Requiring stock acquired through option exercise to be held for a certain period of time.

3.

Using restricted stock grants instead of options.

4.

Awards based on non-discretionary grants specified by the plan’s terms rather than subject to management’s discretion.

While we evaluate plans on a case-by-case basis, we will generally oppose plans that have the following features:

1.

Annual option grants that would exceed 2% of outstanding shares.

2.

Ability to issue options with an exercise price below the stock’s current market price.

3.

Automatic share replenishment (“evergreen”) feature.

4.

Authorization to permit the board of directors to materially amend a plan without shareholder approval.

5.

Authorizes the re-pricing of stock options or the cancellation and exchange of options without shareholder approval.

These are guidelines, and we consider other factors, such as the nature of the industry and size of the company, when assessing a plan’s impact on ownership interests.

Corporate Structure

We view the exercise of shareholders’ rights, including the rights to act by written consent, to call special meetings and to remove directors, to be fundamental to good corporate governance.  

Because classes of common stock with unequal voting rights limit the rights of certain shareholders, we generally believe that shareholders should have voting power equal to their equity interest in the company and should be able to approve or reject changes to a company’s by-laws by a simple majority vote.  

Because the requirement of a supermajority vote can limit the ability of shareholders to effect change, we will support proposals to remove super-majority (typically from 66.7% to 80%) voting requirements for certain types of proposals and oppose proposals to impose super-majority requirements.

We will generally support the ability of shareholders to cumulate their votes for the election of directors.  

Shareholder Rights Plans

While we recognize that there are arguments both in favor of and against shareholder rights plans, also known as poison pills, such measures may tend to entrench current management, which we generally consider to have a negative impact on shareholder value.

We believe the best approach is for a company to seek shareholder approval of rights plans and we generally support shareholder resolutions requesting that shareholders be given the opportunity to vote on the adoption of rights plans.

We will generally be more inclined to support a shareholder rights plan if the plan (i) has short-term “sunset” provisions, (ii) is linked to a business strategy that will likely result in greater value for shareholders, (iii) requires shareholder approval to reinstate the expired plan or adopt a new plan at the end of its term, and (iv) is subject to mandatory review by a committee of independent directors.

CLIENT INFORMATION

A copy of these Proxy Voting Policies and Procedures is available to our clients, without charge, upon request, by calling 1-800-723-8637.  We will send a copy of these Proxy Voting Policies and Procedures within three business days of receipt of a request, by first-class mail or other means designed to ensure equally prompt delivery.

In addition, we will provide each client, without charge, upon request, information regarding the proxy votes cast by us with regard to the client’s securities.  

PART C

OTHER INFORMATION

Item 28  Exhibits

(a)  Articles of Incorporation

(a)(1) Articles of Incorporation are incorporated by reference to Initial Registration Statement, filed on   December 30, 1992.

(a)(2) Form of Articles Supplementary in respect to the Montecito Fund is incorporated by reference   to Post-  Effective Amendment No. 12, filed on May 31, 2002.

(a)(2) Form of Articles Supplementary in respect to the name change of The Bender Growth Fund to   SBG Growth Fund is incorporated by reference to Post-Effective Amendment No. 19 filed on July   30, 2007.

(a)(2) Form of Articles Supplementary in respect to the name change of the SBG Growth Fund to the   PFW Water Fund is incorporated by reference to Post-Effective Amendment No. 20 filed on July 28,   2008.

(b) Bylaws of Registrant

      Amended Bylaws are incorporated by reference to Post-Effective Amendment No. 15, filed on June 2, 2005.

(c) Instruments Defining Rights of Shareholders

None  

(d) Investment Advisory Agreement

Management Agreement for the PFW Water Fund and the Montecito Fund is incorporated by reference to Post Effective Amendment No. 22 filed on March 19, 2010.

 (e) Underwriting Contracts     

(e)(1)Distribution Agreement made as of August 30, 2000, as amended November 15, 2006, is incorporated by reference to Post-Effective Amendment No.21, filed on June 29, 2009.

.

      (e)(2)Assignment of Distribution Agreement dated January 19, 2010  is filed herewith.

(f) Bonus or Profit-Sharing Contracts

None

(g) Custodian Agreement

Custody Agreement between the Bank of New York and the Registrant is incorporated by reference to Post-Effective Amendment No. 14 filed on June 3, 2004.

(h) Other Material Contracts

(h)(1) Operating Services Agreement, as amended on August 1, 2007 is incorporated by reference to   Post-Effective Amendment No. 19 filed on July 30, 2007.  Operating Services Agreement, dated   January 19, 2010 is incorporated by reference to Post Effective Amendment No. 22 filed on March 19, 2010.

(h)(2) Administration and Accounting Service Agreement made as of May 17, 2000 as amended on November 15, 2006 between the Registrant and Gemini Fund Services, LLC is incorporated by reference to Post-Effective Amendment No. 19 filed on July 30, 2007.  

(h)(3) Transfer Agency and Service Agreement made as of May 17, 2000 as amended on May 20, 2005   between the Registrant and Gemini Fund Services, LLC is incorporated by reference to Post-Effective   Amendment No. 16, filed on September 28, 2005.

(h)(3) Service Agreement made as of May 27, 2010 between the Registrant and Gemini Fund Services, LLC is filed herewith.

(h)(4) Consulting Agreement between the Registrant and Northern Lights Compliance Services, LLC is filed herewith.     

(i)  Opinion of Counsel    

(i)(1) Opinion of Counsel is incorporated by reference to Post-Effective Amendment No. 14 filed on June 3, 2004.

(i)(2)  Consent of Counsel is filed herewith.

(j) Other Opinions

 (j)(1) Consent of Independent Registered Public Accounting firm is filed herewith.

(j)(2) Powers of Attorney are incorporated by reference to Post Effective Amendment No. 22 filed on March 19, 2010.

(k) Omitted Financial Statements

None

(l) Initial Capital Agreements

 Incorporated by reference to Pre-Effective Amendment No. 4, filed on October 4, 1996.

(m) Rule 12b-1 Plans

(m)(1) Amended Service and Plan of Distribution Pursuant to Rule 12b-1 Plan is incorporated by reference to Post Effective Amendment No. 23 filed on June 1, 2010.

(m)(2) Montecito Fund Plan is incorporated by reference to Post-Effective Amendment No. 11, filed on April 5, 2002.

(n) Rule 18f-3 Plan

Registrant’s Multi-Class Plan pursuant to Rule 18f-3, as amended May 16, 2008, is incorporated by reference to Post-Effective Amendment No. 20 filed on July 28, 2008. Amended Rule 18f-3 Plan is incorporated by reference Post Effective Amendment No. 22 filed on March 19, 2010.

(o) Reserved

(p) Code of Ethics

(p)(1) Amended Code of Ethics of Santa Barbara Group of Mutual Funds, as amended November 15, 2006 is incorporated by reference to Post-Effective Amendment No. 18 filed on June 4, 2007.

(p)(2) Code of Ethics of the Adviser is filed  herewith.

Item 29 Persons Controlled by or under Common Control with Registrant.

None.

Item 30 Indemnification.

Section 2-418 of the General Corporation Law of Maryland authorizes the registrant to indemnify its directors and officers under specified circumstances.  Section 7 of Article VII of the bylaws of the registrant (exhibit 2 to the registration statement, which is incorporated herein by reference) provides in effect that the registrant shall provide certain indemnification to its directors and officers. In accordance with section 17(h) of the Investment Company Act, this provision of the bylaws shall not protect any person against any liability to the registrant or its shareholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.

Item 31 Business and Other Connections of Investment Adviser.

The Adviser has no other business or other connections, other than as described in the Statement of Additional Information.

Item 32 Principal Underwriters.

(a)

Capital Research Brokerage Services, LLC ("CRBS") located at 15 S. Raymond Avenue, Suite 200, Pasadena, CA 91105, serves as principal underwriter to no other investment company.

(b)  Information with respect to each member and officer of CRBS is incorporated by reference to Schedule A of Form BD filed by it under the Securities and Exchange Act of 1934 (File No. 8-40823).

Item 33 Location of Accounts and Records.

Capital Research Brokerage Services, LLC, 15 S. Raymond Avenue, Suite 200, Pasadena, CA 91105

Gemini Fund Services, LLC, 4020 South 147^th Street, Suite #2, Omaha, NE 38137.

Gemini Fund Services, LLC, 450 Wireless Blvd., Hauppauge, NY 11788.

Hillcrest Wells Advisors, LLC, 1270 Hillcrest Avenue, Pasadena, CA 91106.  

The Bank of New York Mellon, One Wall Street, 25^th Floor, New York, New York 10286.

Item 34 Management Services.

None

Item 35 Undertakings.

None.

 SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it certifies that it meets all of the requirement for effectiveness of this registration statement under rule 485(b) under the Securities Act and has duly caused this Registration to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Dayton and State of Ohio on the 29 ^th day of July, 2010.

FOR THE SANTA BARBARA GROUP OF MUTUAL FUNDS, INC.

(REGISTRANT)

/s/ JOANN M. STRASSER

JOANN M. STRASSER*

ATTORNEY IN FACT

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in their capacities on July 29, 2010

Name

Title

Richard J. Capalbo*

President, Principal Executive Officer,

Treasurer, Principal Financial Officer, and Director

Martha Harris Thompson*

Director

Robert K. Murray*

Director

Louis F. Moret*

Director

/s/ JOANN M. STRASSER____________________

JOANN M. STRASSER *

ATTORNEY IN FACT

* Pursuant to Powers of Attorney

EXHIBIT INDEX

EXHIBITS	EXHIBIT NO.
Assignment of Distribution Agreement	Ex 28(e)(2)
Service Agreement	Ex 28(h)(3)
Consulting Agreement	Ex 28(h)(4)
Consent of Counsel	Ex 28(i)(1)
Consent of Independent Registered Public Accountant	Ex 28(j)(1)
Code of Ethics of the Adviser	Ex 28(m)(1)

EX-99.E UNDR CONTR

ASSIGNMENT OF DISTRIBUTION AGREEMENT

Effective as of January 19, 2010

WHEREAS, The Santa Barbara Group of Mutual Funds, Inc. (the "Company"), SBG Capital Management Company ("SBG"), and Capital Research Brokerage Services, LLC, (collectively, the "Parties"), entered into a Distribution Agreement dated August 30, 2000 (the “Agreement”).

WHEREAS, the Company entered into an Investment Advisor Agreement with SBG dated September 30, 1998 and an Investment Advisor Agreement with SBG dated April 1, 2002, pursuant to which SBG serves as the investment adviser for each series of shares issued by the Company.

WHEREAS, Hillcrest Wells Advisors, LLC (“Hillcrest”) acquired SBG in 2010, and the Company entered into a Management Agreement with Hillcrest dated January 19, 2010, to replace SBG with Hillcrest as the investment adviser for each series of shares issued by the Company.

WHEREAS, the Parties desire to (i) amend the Agreement to enable SBG to assign its rights and obligations under the Agreement to Hillcrest and (ii) as applicable, assign or acknowledge the assignment of SBG’s rights and obligations under the Agreement to Hillcrest.

In furtherance of the foregoing recitals, the Parties hereby agree as follows:

1.

Amendment.

The Agreement is hereby amended to permit the assignment by SBG of all of its rights, title, benefits, privileges, and interests in and to, and all of its burdens, obligations, and liabilities in connection with, the Agreement to Hillcrest, provided the assignment is approved by the remaining Parties.

2.

Assignment.

SBG hereby assigns all of its rights, title, benefits, privileges, and interests in and to, and all of its burdens, obligations, and liabilities in connection with, the Agreement to Hillcrest, as of the date first written above.

3.

Assumption.

Hillcrest hereby accepts the assignment and assumes and agrees to observe and perform all of the duties, obligations, terms, provisions, and covenants in connection with the Agreement.  Hillcrest acknowledges and agrees that the representations, warranties, covenants and agreements contained in the Agreement remain in full force and effect to the full extent provided therein.

4.

Further Actions.  Each of the Parties covenants and agrees, at its own expense, to execute and deliver, at the request of the other Parties, such further instruments of transfer and assignment and to take such other action as such other party may reasonably request to more effectively consummate the assignments and assumptions contemplated by this agreement.

5.

Counterparts.  This agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

Agreed to and Accepted:

THE SANTA BARBARA GROUP OF MUTUAL FUNDS, INC.

/s/ Richard Capalbo

Name:

Richard Capalbo

Title:

President

SBG CAPITAL MANAGEMENT COMPANY

/s/ John Odell

Name:

John Odell

Title:

President

CAPITAL RESEARCH BROKERAGE SERVICES, LLC

/s/ John Odell

Name:

John Odell

Title:

President

HILLCREST WELLS ADVISORS, LLC

/s/ Richard Capalbo

Name:

Richard Capalbo

Title:

President

EX-99.H OTH MAT CONT

FUND SERVICES AGREEMENT

between

SANTA BARBARA GROUP OF MUTUAL FUNDS, INC.

 and

INDEX

SANTA BARBARA GROUP OF MUTUAL FUNDS, INC.

FUND SERVICES AGREEMENT

THIS FUND SERVICES AGREEMENT (the “Agreement”) effective as of the 1^st day of June, 2010, by and between SANTA BARBARA GROUP OF MUTUAL FUNDS, INC., a Maryland corporation having its principal office and place of business at 1270 Hillcrest Avenue, Pasadena, CA 91106 (the "Corporation") and GEMINI FUND SERVICES, LLC, a Nebraska limited liability company having its principal office and place of business at 4020 South 147^th Street, Omaha, Nebraska 68137 (“GFS”).  This Agreement replaces and supersedes all prior understandings and agreements between the parties hereto for the services described below.

WHEREAS, the Corporation is an open-end management investment company registered with the United States Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940, as amended (“1940 Act”); and

WHEREAS, the Corporation is authorized to issue shares (“Shares”) in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and

WHEREAS, the Corporation offers shares in the series as set forth on Appendix IV attached hereto (each such series, together with all other series subsequently established by the Corporation and made subject to this Agreement in accordance with Section 10, being herein referred to as a “Fund,” and collectively as the “Funds”); and

WHEREAS, the Corporation desires that GFS perform the services selected on Appendix IV (collectively the “Services”) for the Funds and GFS is willing to provide those services on the terms and conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the promises and mutual covenants contained herein, the Corporation and GFS hereby agree as follows:

1.

APPOINTMENT AND DELIVERY OF DOCUMENTS

(a)

The Corporation, on behalf of each Fund listed in Appendix IV attached hereto, hereby appoints GFS to provide the Services to the Corporation as selected in Appendix IV attached hereto, for the period and on the terms set forth in this Agreement.  GFS accepts such appointment and agrees to furnish the services herein set forth in return for the compensation as provided in Section 3 and Appendix IV of this Agreement.  A description of all the services offered by GFS is set forth on Appendices I – III.  

(b)

In connection therewith the Corporation has delivered to GFS copies of:

(i)

the Corporation’s Articles of Incorporation and Bylaws (collectively, the "Organizational Documents");

(ii)

the Corporation’s Registration Statement on Form N-1A and all amendments thereto filed with the SEC pursuant to the Securities Act of 1933, as amended  (the "Securities Act"), and the 1940 Act (the "Registration Statement");

(iii)

the Corporation’s notification of registration under the 1940 Act on Form N-8A as filed with the SEC;

(iv)

the Corporation’s current Prospectus and Statement of Additional Information for each Fund (collectively, as currently in effect and as amended or supplemented, the "Prospectus");

(v)

each Fund’s current plan of distribution adopted by the Corporation under Rule 12b-1 under the 1940 Act (the "Plan");

(vi)

each Fund’s investment advisory agreement;

(vii)

each Fund’s underwriting agreement;

(viii)

contact information for each Fund’s service providers, including but not limited to, the Fund’s administrator, custodian, transfer agent, independent auditors, legal counsel, underwriter and chief compliance officer; and

(ix)

procedures adopted by the Corporation in accordance with Rule 17a-7 under the 1940 Act with respect to affiliated transactions.

(c)

The Corporation shall promptly furnish GFS with all amendments of or supplements to the items listed in Section 1(b) above, and shall deliver to GFS a copy of the resolution of the Board of Directors of the Corporation (the "Board") appointing GFS and authorizing the execution and delivery of this Agreement.  

2.

DUTIES OF GFS

GFS’s duties with respect to Fund Accounting, Fund Administration and Transfer Agency services are detailed in Appendices I, II and III to this Agreement.   

(a)

In order for GFS to perform the Services, the Corporation (i) shall cause all service providers to the Funds of the Corporation to furnish any and all information to GFS, and assist GFS as may be required and (ii) shall ensure that GFS has access to all records and documents maintained by the Corporation or any service provider to the Corporation or a Fund of the Corporation.

(b)

GFS shall, for all purposes herein, be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Corporation in any way or otherwise be deemed an agent of the Corporation.

(c)

Whenever, in the course of performing its duties under this Agreement, GFS determines, on the basis of information supplied to GFS by the Corporation, that a violation of applicable law has occurred, or that, to its knowledge, a possible violation of applicable law may have occurred, or with the passage of time could occur, GFS shall promptly notify the Corporation and its legal counsel of such violation.

3.

FEES AND EXPENSES

(a)

Fees.  As compensation for the Services provided by GFS to the Corporation pursuant to this Agreement, the Corporation, on behalf of each Fund, agrees to pay GFS the fees set forth in Appendix IV attached hereto.  Fees will begin to accrue for each Fund on the latter of the date of this Agreement or the date GFS begins providing services to a Fund.  For the purpose of determining fees calculated as a function of a Fund’s assets, the value of the Fund’s assets and net assets shall be computed as required by its currently effective Prospectus, generally accepted accounting principles, and resolutions of the Board.  GFS will render, after the close of each month in which services have been furnished, a statement reflecting all of the charges for such month.  Services provided for partial months shall be subject to pro ration.

(b)

Expenses.  GFS will bear its own expenses, in connection with the performance of the Services under this Agreement, except as provided herein or as agreed to by the parties.  In addition to the fees paid under Section 3(a), the Corporation agrees to reimburse GFS for all reasonable out-of-pocket expenses or advances incurred by GFS to perform the Services or otherwise incurred by GFS at the request or with the consent of the Corporation.  For reports, analyses and services requested in writing by the Corporation and provided by GFS, not in the ordinary course, GFS shall charge hourly fees specified in Appendix IV attached hereto.

(c)

Fee Changes.  On each anniversary date of this Agreement (determined from the “Effective Date” for each Fund as set forth on Appendix IV), the base and/or minimum fees enumerated in Appendix IV attached hereto, may be increased by the change in the Consumer Price Index for the Northeast region (the “CPI”) for the twelve-month period ending with the month preceding such annual anniversary date.  Any CPI increases not charged in any given year may be included in prospective CPI fee increases in future years.  GFS Agrees to provide the Board prior written notice of any CPI increase.

(d)

Due Date.  All fees contemplated under Section 3(a) above and reimbursement for all expenses contemplated under Section 3(b) above are due and payable within ten (10) days of receipt of an invoice provided by GFS.  Any fees or reimbursements due hereunder not received by its due date may be assessed interest at the maximum amount permitted by law.

(e)

Books and Records.  The accounts, books, records and other documents (the “Records”) maintained by GFS shall be the property of the Funds, and shall be surrendered to the Funds, at the expense of the Funds, promptly upon request by the Funds in the form in which such Records have been maintained or preserved, provided that all service fees and expenses charged by GFS in the performance of its duties hereunder have been fully paid to the satisfaction of GFS.  GFS agrees to maintain a back up set of Records of the Funds (which back-up set shall be updated on at least a weekly basis) at a location other than that where the original Records are stored.  GFS shall assist the Funds’ independent auditors, or, upon approval of the Funds, any regulatory body, in any requested review of the Funds’ Records.  GFS shall preserve the Records, as they are required to be maintained and pres erved by Rule 31a-1 under the 1940 Act ..

(f)

De-Conversion Fees.  Upon termination of this Agreement, GFS will charge a “De-Conversion” fee to compensate GFS for providing to the Fund’s new service providers, all material records, history and data maintained by GFS under this Agreement.  The amount of the De-Conversion fees are specified in Appendix IV attached hereto.  In addition, GFS reserves the right to charge for out-of-pocket expenses associated with the De-Conversion, as specified in Section 12(d) of this Agreement.

(g)

Post-Engagement Audit Support Fees.  After a De-Conversion, GFS is often called upon to provide support to a Fund’s service provider and assist with a Fund’s annual audit. Services provided by GFS to accommodate a Fund’s request following termination of this Agreement shall be subject to GFS’s standard hourly rates existing at the time of the request.  The Fund agrees to compensate GFS, at GFS’s standard hourly rates, for accommodating a Fund’s request following termination of this Agreement.  

4.

STANDARD OF CARE, INDEMNIFICATION AND RELIANCE

(a)

Indemnification of GFS.  The Corporation shall, on behalf of each applicable Fund, indemnify and hold GFS harmless from and against any and all losses, damages, costs, charges, reasonable attorney or consultant fees, payments, expenses and liability arising out of or attributable to the Corporation’s refusal or failure to comply with the terms of this Agreement, breach of any representation or warranty made by the Corporation contained in this Agreement, or which arise out of the Corporation’s lack of good faith, gross negligence or willful misconduct with respect to the Corporation’s performance under or in connection with this Agreement.  The Corporation shall hold GFS harmless and GFS shall not be liable for and shall be entitled to rely upon and may act upon information, advice, records, reports and requests generated by the Funds, the Fund ’ s legal counsel and the Fund ’ s independent accountants.  GFS shall be without liability for any action reasonably taken or omitted pursuant to this Agreement.  

(b)

Indemnification of the Corporation. GFS shall indemnify and hold the Corporation and each applicable Fund harmless from and against any and all losses, damages, costs, charges, reasonable attorney or consultant fees, payments, expenses and liability arising out of or attributable to GFS’s refusal or failure to comply with the terms of this Agreement, breach of any representation or warranty made by GFS contained in this Agreement or which arise out of GFS’s lack of good faith, gross negligence, willful misconduct or reckless disregard of its duties with respect to GFS’s performance under or in connection with this Agreement.

(c)

Reliance.  Except to the extent that GFS may be liable pursuant to Sections 4(a) and 4(b) above, GFS shall not be liable for any action taken or failure to act in good faith in reliance upon:

(i)

advice of the Corporation , its officers, independent auditors or counsel to the Corporation ;

(ii)

any oral instruction which it receives and which it reasonably believes in good faith was transmitted by the person or persons authorized by the Board to give such oral instruction pursuant to the parties standard operating practices;

(iii)

any written instruction or certified copy of any resolution of the Board, and GFS may rely upon the genuineness of any such document, copy or facsimile thereof reasonably believed in good faith by GFS to have been validly executed;

(iv)

any signature, instruction, request, letter of transmittal, certificate, opinion of counsel, statement, instrument, report, notice, consent, order, or other document reasonably believed in good faith by GFS to be genuine and to have been signed or presented by the Corporation or other proper party or parties;

(v)

any instruction, information, data, records or documents provided to GFS or its agents or subcontractors furnished (pursuant to procedures mutually agreed to by GFS and the Corporation’s service providers) by machine readable input, data entry, email, facsimile or other similar means authorized by the Corporation;

(vi)

any authorization, instruction, approval, item or set of data, or information of any kind transmitted to GFS in person or by telephone, email, facsimile or other electronic means, furnished and reasonably believed by GFS to be genuine and to have been given by the proper person or persons.  GFS shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Corporation.

GFS shall not be under any duty or obligation to inquire into the validity or invalidity or authority or lack of authority of any statement, oral or written instruction, resolution, signature, request, letter of transmittal, certificate, opinion of counsel, instrument, report, notice, consent, order, or any other document or instrument which GFS reasonably believes in good faith to be genuine.

At any time, GFS may apply to any officer of the Corporation for instructions, and may consult with legal counsel to the Corporation with respect to any matter arising in connection with the routine services to be performed by GFS under this Agreement, and GFS and its agents or subcontractors shall not be liable and shall be indemnified by the Corporation on behalf of the applicable Fund for any action taken or omitted by it in reasonable reliance upon such instructions or upon the advice of such counsel.  GFS agrees to consult first with a Fund’s adviser before engaging in any non-routine legal consultation that may result in additional legal costs to the Fund.  

(d)

Errors of Others ..  GFS shall not be liable for the errors of other service providers to the Corporation , including the errors of pricing services (other than to pursue all reasonable claims against the pricing service based on the pricing services' standard contracts entered into by GFS) and errors in information provided by an investment adviser (including prices and pricing formulas and the untimely transmission of trade information) or custodian to the Corporation ; except or unless any GFS action or inaction is a direct cause of the error.

(e)

Reliance on Electronic Instructions. If the Corporation has the ability to originate electronic instructions to GFS in order to (i) effect the transfer or movement of cash or Shares or (ii) transmit Shareholder information or other information, then in such event GFS shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established and agreed upon by GFS and the Fund’s investment adviser.

(f)

Notification of Claims. In order that the indemnification provisions contained in this Section shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim or to defend against said claim in its own name or in the name of the other party. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party’s prior written consent.

(g)

Notwithstanding any other provision of this Agreement, GFS’s maximum liability to a Fund arising out of the transactions contemplated hereby, whether arising in contract, tort (including, without limitation, negligence) or otherwise, shall not exceed the direct loss to such Fund.  IN NO EVENT SHALL GFS BE LIABLE FOR TRADING LOSSES, LOST REVENUES, SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL OR EXEMPLARY DAMAGES OR LOST PROFITS, WHETHER OR NOT SUCH DAMAGES WERE FORESEEABLE OR GFS WAS ADVISED OF THE POSSIBILITY THEREOF. THE PARTIES ACKNOWL­EDGE THAT THE OTHER PARTS OF THIS AGREEMENT ARE PREMISED UPON THE LIMITATION STATED IN THIS SECTION.

5.

LIMITATION OF SHAREHOLDER AND CORPORATION LIABILITY

The Board and the shareholders of each Fund shall not be liable for any obligations of the Corporation or of the Funds under this Agreement, and GFS agrees that, in asserting any rights or claims under this Agreement, it shall look only to the assets and property of the Fund (or Funds) to which GFS’s rights or claims relate in settlement of such rights or claims, and not to the Board or the shareholders of the Funds.  It is expressly agreed that the obligations of the Corporation hereunder shall not be binding upon any of the directors, shareholders, nominees, officers, agents or employees of the Corporation personally, but bind only the corporate property of the Corporation, as provided in the Articles of Incorporation of the Corporation.  The execution and delivery of this Agreement have been authorized by the Board of the Corporation and signed by the officers of the Corporation, acting as such, and neither such authorization by the Boar d and shareholders nor such execution and delivery by such officers shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the property of the Corporation as provided in its Articles of Incorporation.  A copy of the Agreement and Articles of Incorporation are on file with the Secretary of State of Maryland.

6.

EXPENSES ASSUMED BY THE CORPORATION

Except as otherwise specifically stated in this Agreement, GFS shall pay all expenses incurred by it in performing the Services under this Agreement.  Each Fund of the Corporation will bear out-of-pocket expenses incurred by GFS under this Agreement and all other expenses incurred in the operation of the Fund (other than those borne by the investment adviser to the Fund) including, but not limited to:

(a)

taxes;

(b)

interest;

(c)

brokerage fees and commissions, if any;

(d)

fees for Directors who are not officers, directors, partners, employees or holders of five percent (5%) or more of the outstanding voting securities of the investment adviser or GFS;

(e)

Securities and Exchange Commission fees (including EDGAR filing fees);

(f)

state blue sky registration or qualification fees;

(g)

advisory fees;

(h)

charges of custodians;

(i)

transfer and dividend disbursing agents' fees;

(j)

insurance premiums;

(k)

outside auditing and legal expenses;

(l)

costs of maintaining corporate existence;

(m)

costs attributable to shareholder services, including without limitation telephone and personnel expenses;

(n)

costs of preparing and printing prospectuses for regulatory purposes;

(o)

costs of shareholders' reports, Corporate meetings and related expenses;

(p)

Corporation legal fees; and

(q)

any extraordinary expenses.

7.

REPRESENTATIONS AND WARRANTIES

(a)

Representations of GFS.  GFS represents and warrants to the Corporation that:

(i)

it is a limited liability company duly organized and existing and in good standing under the laws of the State of Nebraska;

(ii)

it is empowered under applicable laws and by its organizational documents to enter into this Agreement and perform its duties under this Agreement;

(iii)

it has access to the necessary facilities, equipment, and personnel to perform its duties and obligations under this Agreement; and

(iv)

it is registered as a transfer agent under Section 17A of the Securities Exchange Act of 1934 and shall continue to be registered throughout the remainder of this Agreement.

(b)

Representations of the Corporation.  The Fund represents and warrants to GFS that:

(i)

it is a Corporation duly organized and existing and in good standing under the laws of the State of Maryland;

(ii)

it is empowered under applicable laws and by its Organizational Documents to enter into and perform this Agreement;

(iii)

all proceedings required by said Organizational Documents have been taken to authorize it to enter into and perform this Agreement;

(iv)

it is an open-end management investment company registered under the 1940 Act and will operate in conformance with the 1940 Act and all rules and regulations promulgated thereunder during the term of this Agreement;

(v)

a registration statement under the Securities Act of 1933 is currently  effective and will remain effective, and appropriate state securities law filings as required, have been or will be made and will continue to be made, with respect to all Shares of the Fund being offered for sale; and

(vi)

Each Fund’s Organizational Documents, Registration Statement and Prospectus are true and accurate and will remain true and accurate at all times during the term of this Agreement in conformance with applicable federal and state securities laws.

8.

CONFIDENTIALITY

GFS and the Corporation agree that all books, records, information, and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except that GFS may:

(a)

prepare or assist in the preparation of periodic reports to shareholders and regulatory bodies such as the SEC;

(b)

provide information typically supplied in the investment company industry to companies that track or report price, performance or other information regarding investment companies; and

(c)

release such information as permitted or required by law or approved in writing by the Corporation, which approval shall not be unreasonably withheld and may not be withheld where GFS may be exposed to civil or criminal liability or proceedings for failure to release the information, when requested to divulge such information by duly constituted authorities or when so requested by the Corporation and the Advisers.

Except as provided above, in accordance with Title 17, Chapter II, part 248 of the Code of Federal Regulations (17 CFR 248.1 – 248.30) (“Reg S-P”), GFS will not directly, or indirectly through an affiliate, disclose any non-public personal information as defined in Reg S-P, received from a Fund to any person that is not affiliated with the Fund or with GFS and provided that any such information disclosed to an affiliate of GFS shall be under the same limitations on non-disclosure.

Both parties agree to communicate sensitive information via secured communication channels (i.e. encrypted format).  

9.

PROPRIETARY INFORMATION

(a)

Proprietary Information of GFS. The Corporation acknowledges that the databases, computer programs, screen formats, report formats, interactive design techniques, and documentation manuals maintained by GFS on databases under the control and ownership of GFS or a third party constitute copyrighted, trade secret, or other proprietary information (collectively, “GFS Proprietary Information”) of substantial value to GFS or the third party. The Corporation agrees to treat all GFS Proprietary Information as proprietary to GFS and further agrees that it shall not divulge any GFS Proprietary Information to any person or organization except as may be provided under this Agreement.

(b)

Proprietary Information of the Corporation. GFS acknowledges that the Shareholder list and all information related to shareholders furnished to GFS by the Corporation or by a shareholder in connection with this Agreement (collectively, “Customer Data”) all information regarding the Corporation portfolios, arrangements with brokerage firms, compensation paid to or by the Corporation, trading strategies and all such related information (collectively, “Corporation Proprietary Information”) constitute proprietary information of substantial value to the Corporation. In no event shall GFS Proprietary Information be deemed Corporation Proprietary Information or Customer Data. GFS agrees to treat all Corporation Proprietary Information and Customer Data as proprietary to the Corporation and further agrees that it shall not divulge any Corporation Proprietary Information or Customer Data to any person or organizati on except as may be provided under this Agreement or as may be directed by the Corporation or as may be duly requested by regulatory authorities.

(c)

Each party shall take reasonable efforts to advise its employees of their obligations pursuant to this Section 9.  The obligations of this section shall survive any earlier termination of this Agreement.

10.

ADDITIONAL FUNDS AND CLASSES

In the event that the Corporation establishes one or more series of Shares or one or more classes of Shares after the effectiveness of this Agreement, such series of Shares or classes of Shares, as the case may be, shall become Funds and classes under this Agreement with necessary changes made to Appendix IV; however, either GFS or the Corporation may elect not to make any such series or classes subject to this Agreement.

11.

ASSIGNMENT AND SUBCONTRACTING

This Agreement shall extend to and shall be binding upon the parties hereto and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Corporation without the prior written consent of GFS. GFS may subcontract any or all of its responsibilities pursuant to this Agreement to one or more companies, trusts, firms, individuals or associations, which may or may not be affiliated persons of GFS and which agree to comply with the terms of this Agreement; provided, however, that any such subcontracting shall not relieve GFS of its responsibilities hereunder.  GFS may pay such persons for their services, but no such payment will increase fees due from the Corporation hereunder.

12.

EFFECTIVE DATE, TERM AND TERMINATION

(a)

    Effective Date.  This Agreement shall become effective on the date first above written and the effective date with respect to each Fund is set forth on the applicable Appendix IV attached hereto.

(b)

    Term.  This Agreement shall remain in effect for a period of one (1) year from the applicable Fund(s) effective date and shall continue in effect for successive twelve-month periods provided that such continuance is specifically approved at least annually by a majority of the Board.  

(c)

    Termination.  This Agreement can be terminated upon ninety (90) days’ prior written notice by either party.  Upon termination of this Agreement, GFS shall have no further obligation to provide Services to the terminating Fund(s) and all outstanding payments due from such Fund(s) under this Agreement shall become immediately due and payable to GFS, including any unpaid fees earned through the date of termination and the balance of all future minimum fees due under the remaining term of this Agreement.  In the event of termination, GFS agrees that it will cooperate to facilitate the smooth transition of services and to minimize disruption to a Fund and its shareholders.  Notwithstanding the foregoing, either party may terminate this agreement upon thirty (30) days’ written notice in the event of a breach.  The parties have a right to attempt to cure a breach within the thirty-day notice period.  If the breach is not cured within said period, then the parties hereto will submit to arbitration, in accordance with Section 14(g), below. In any event, this Agreement can be terminated at any time upon thirty (30) days’ prior written notice if the Board makes a determination to liquidate the Fund.  

(d)

    Reimbursement of GFS’s Expenses.  If this Agreement is terminated with respect to a Fund or Funds, GFS shall be entitled to collect from the Fund or Funds, the compensation described under Section 3 of this Agreement, which will include  GFS’s reasonable labor charges and cash disbursements for services in connection with GFS’s activities in effecting such termination, including without limitation, the labor costs and expenses associated with the de-conversion of the Corporation’s records of each Fund from its computer systems, and the delivery to the Corporation and/or its designees of the Corporation’s  property, records, instruments and documents, or any copies thereof.  Subsequent to such termination, for a reasonable fee, GFS will provide the Corporation with reasonable access to all Corporation documents or records, if any, remaining in its poss ession.  

(e)

    Survival of Certain Obligations.  The obligations of Sections 3, 4, 8, 9, 12 and 13 shall survive any termination of this Agreement.

13.

LIAISON WITH ACCOUNTANTS/ATTORNEYS

(a)      GFS shall act as liaison with each Fund’s independent public accountants and shall provide account analyses, fiscal year summaries, and other audit-related schedules with respect to each Fund.  GFS shall take reasonable actions in the performance of its duties under this Agreement to ensure that the necessary information is made available to such accountants for the expression of their opinion, as required by the Fund.

(b)

GFS shall act as liaison with each Fund’s legal counsel and shall take reasonable actions to ensure that necessary Fund information is made available to the Fund’s legal counsel.  

14.

MISCELLANEOUS

(a)

Amendments.  This Agreement may not be amended, or any provision hereof waived, except in writing signed by the party against which the enforcement of such amendment or waiver is sought.

(b)

Governing Law.  This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of New York.

(c)

Entire Agreement.  This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written.

(d)

Counterparts.  The parties may execute this Agreement on any number of counterparts, and all of the counterparts taken together shall be deemed to constitute one and the same instrument.

(e)

Severability.  If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected by such determination, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid.

(f)

Force Majeure.  Neither party shall be liable for failure to perform if the failure results from a cause beyond its control, including, without limitation, fire, electrical, mechanical, or equipment breakdowns, delays by third party vendors and/or communications carriers, civil disturbances or disorders, terrorist acts, strikes, acts of governmental authority or new governmental restrictions, or acts of God.

(g)

Arbitration .   The parties understand and agree that, to the extent permitted by law, all claims arising out of this Agreement will be resolved through final and binding arbitration pursuant to the terms hereof.  In this regard, the parties acknowledge and agree that: (i) such arbitration will be final and binding on the parties; (ii) the parties are hereby waiving their rights to seek remedies in court, including the right to a jury trial; (iii) pre-arbitration discovery is generally more limited than and different from discovery conducted in connection with litigation; (iv) the arbitrator's award is not required to include factual findings or legal reasoning; and (v) a party's right to appeal or seek modification of rulings by the arbitrator will be strictly limited.

Such arbitration will be conducted in New York according to the securities arbitration rules then in effect of the American Arbitration Association.  Both parties understand that the other party may initiate arbitration by serving or mailing a written notice to the other party hereto by certified mail, return receipt requested.  Any award the arbitration panel makes will be final, and judgment on it may be entered in any court having jurisdiction.

This arbitration provision shall be enforced and interpreted exclusively in accordance with applicable Federal law, including the Federal Arbitration Act. Any costs, fees, or taxes involved in enforcing the award shall be fully assessed against and paid by the party resisting enforcement of said award.  The prevailing party shall also be entitled to an award of reasonable attorney fees and costs incurred in connection with the enforcement of this Agreement.  No person shall bring a putative or certified class action to arbitration, nor seek to enforce any pre-dispute arbitration agreement against any person who has initiated in court a putative class action who is a member of a putative class action until:

·

The class certification is denied;

·

The class is decertified; or

·

The person is excluded from the class by the court.

Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any rights under this Agreement except to the extent stated herein.

(h)

Headings.  Section and paragraph headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement.

(i)

Notices.  All notices, requests, demands and other communications hereunder shall be in writing and shall be delivered by hand or by overnight, registered or certified mail, postage prepaid, or by facsimile to each party at the address set forth below or at such new address designated by such party by notice given pursuant to this Section.

To the Corporation:	To GFS:
Richard Capalbo	Andrew Rogers
President	President
Hillcrest Wells Advisors, LLC	Gemini Fund Services, LLC
1270 Hillcrest Avenue	450 Wireless Boulevard
Pasadena, CA 91106	Hauppauge, NY 11788
Telephone: (626) 484-5144	Telephone: (631) 470-2669
Richardcapalbo1@gmail.com	AndrewR@geminifund.com

With a copy to:

JoAnn Strasser, Esq.

Thompson Hine LLP

312 Walnut Street, 14th Floor

Cincinnati, Ohio  45202-4089

Telephone: (513) 352-6725

Joann. strasser@thompsonhine.com

(j)

Safekeeping. GFS shall establish and maintain facilities and procedures reasonably acceptable to the Corporation for the safekeeping and control of records maintained by GFS under this Agreement including the preparation and use of check forms, facsimile, email or other electronic signature imprinting devices.

(k)

Distinction of Funds.  Notwithstanding any other provision of this Agreement, the parties agree that the assets and liabilities of each Fund of the Corporation are separate and distinct from the assets and liabilities of each other Fund and that no Fund shall be liable or shall be charged for any debt, obligation or liability of any other Fund, whether arising under this Agreement or otherwise.

(l)

Representation of Signatories.  Each of the undersigned expressly warrants and represents that they have full power and authority to sign this Agreement on behalf of the party indicated and that their signature will bind the party indicated to the terms hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized persons, effective as of the day and year first above written.

SANTA BARBARA GROUP OF MUTUAL FUNDS, INC.

GEMINI FUND SERVICES, LLC

By:  

/s/ Richard Capalbo

                                    By:  /s/ Andrew Rogers

Richard Capalbo

       Andrew Rogers

President

       President

Attest:

By:  

/s/ Rod Hagenbuch

                                    By:  /s/ Emile Molineaux

Rod Hagenbuch

       Emile Molineaux

Chief Compliance Officer

       Secretary

            Hillcrest Wells Advisors, LLC

APPENDIX I

Fund Accounting Services

With respect to each Fund electing Fund Accounting Services, GFS shall provide the following services subject to, and in compliance with, the objectives, policies and limitations set forth in the Corporation’s Registration Statement, the Articles of Incorporation, Bylaws, applicable laws and regulations, and resolutions and policies established by the Corporation’s Board:

1)

Timely calculate the net asset value per share with the frequency prescribed in each Fund's then-current Prospectus, transmit the Fund's net asset value to NASDAQ, and communicate such net asset value to the Corporation and its transfer agent;

2)

Calculate each item of income, expense, deduction, credit, gain and loss, if any, as required by the Corporation and in conformance with generally accepted accounting principles ("GAAP"), SEC Regulation S-X (or any successor regulation) and the Internal Revenue Code of 1986, as amended (or any successor laws)(the "Code");

3)

Prepare and maintain on behalf of the Corporation, books and records of each Fund, as required by Rule 31a-1 under the 1940 Act, and as such rule or any successor rule, may be amended from time to time, that are applicable to the fulfillment of GFS’s Fund Accounting Services, as well as any other documents necessary or advisable for compliance with applicable regulations as may be mutually agreed to between the Corporation and GFS.  Without limiting the generality of the foregoing, GFS will prepare and maintain the following records upon receipt of information in proper form from the Fund or its authorized agents:

a.

Cash receipts journal

b.

Cash disbursements journal

c.

Dividend record

d.

Purchase and sales - portfolio securities journals

e.

Subscription and redemption journals

f.

Security ledgers

g.

Broker ledger

h.

General ledger

i.

Daily expense accruals

j.

Daily income accruals

k.

Securities and monies borrowed or loaned and collateral therefore

l.

Foreign currency journals

m.

Trial balances

4)

Make such adjustments over such periods as the Corporation’s administrator deems necessary, and communicates to GFS in writing, to reflect over-accruals or under-accruals of estimated expenses or income;

5)

Provide the Corporation and, each investment adviser serving as an investment adviser for a Fund with daily portfolio valuation, net asset value calculation and other standard operational reports as requested from time to time;

6)

Provide all raw data available from its mutual fund accounting system for the Fund’s investment adviser or the administrator to assist in preparation of the following:

a.

Semi-annual financial statements;

b.

Semi-annual form N-SAR and annual tax returns;

c.

Financial data necessary to update form N-1A; and

d.

Annual proxy statement.

7)

Provide facilities to accommodate an annual audit by each Fund’s independent accountants and, upon approval of the Corporation, any audits or examinations conducted by the SEC or any other governmental or quasi-governmental entities with jurisdiction;

8)

Transmit to and receive from each Fund's transfer agent appropriate data on a daily basis and daily reconcile Shares outstanding and other data with the transfer agent;

9)

Periodically reconcile all appropriate data with each Fund's custodian; and

10)

Perform such other record keeping, reporting and other tasks as may be specified from time to time in the procedures adopted by the Board pursuant to mutually acceptable timelines and compensation agreements.

Fund Accounting Records.

Maintenance of and Access to Records.  GFS shall maintain records relating to its services, such as journals, ledger accounts and other records, as are required to be maintained under the 1940 Act and, specifically, Rule 31a-1 thereunder.  The books and records pertaining to the Corporation that are in possession of GFS shall be the property of the Corporation.  The Corporation, or the Corporation’s authorized representatives, shall have access to such books and records at all times during GFS’s normal business hours. Upon the reasonable request of the Corporation, copies of any such books and records shall be provided promptly by GFS to the Corporation or the Corporation authorized representatives.  In the event the Corporation designates a successor that assumes any of GFS’s obligations hereunder, GFS shall, at the expense and direction of the Corporation, transfer to such successor all relevant books, records and other da ta established or maintained by GFS under this Agreement.

Inspection of Records.  In case of any requests or demands for the inspection of the records of the Corporation maintained by GFS, GFS will endeavor to notify the Corporation and to secure instructions from an authorized officer of the Corporation as to such inspection. GFS shall abide by the Corporation's instructions for granting or denying the inspection; provided, however, that GFS may grant the inspection without instructions from the Corporation if GFS is advised to disclose by its legal counsel.

All out-of-pocket expenses will be billed as set forth on Appendix IV.  GFS may from time to time adopt new procedures, or modify existing procedures, in order to carry out its Fund Accounting Services.  Any modification of the Fund Accounting Services provided by GFS as set forth in this Appendix I shall be delivered to the Corporation in writing.  

APPENDIX II

Fund Administrative Services

With respect to each Fund electing Fund Administrative Services, GFS shall provide the following services subject to, and in compliance with the objectives, policies and limitations set forth in the Corporation’s Registration Statement, the Corporation’s Articles of Incorporation and Bylaws, applicable laws and regulations, and resolutions and policies established by the Corporation’s Board:

1)

    Monitor the performance of administrative and professional services rendered to the Corporation by others, including its custodian, transfer agent, fund accountant and dividend disbursing agent as well as legal, auditing, shareholder servicing and other services performed for the Corporation;

2)

    Monitor Fund holdings and operations for post-trade compliance with the Prospectus and Statement of Additional Information, SEC statutes, rules, regulations and policies and pursuant to advice from the Fund’s independent public accountants and Corporation counsel, monitor Fund holdings for compliance with IRS taxation limitations and restrictions and applicable Federal Accounting Standards Board rules, statements and interpretations; provide periodic compliance reports to each investment adviser or sub-adviser to the Corporation, and assist the Corporation, the Adviser and each sub-adviser to the Corporation (collectively referred to as “Advisers”) in preparation of periodic compliance reports to the Corporation, as applicable;

3)

   Prepare and coordinate the printing of semi-annual and annual financial statements;

4)

    Prepare selected management reports for performance and compliance analyses agreed upon by the Corporation and GFS from time to time;

5)

    In consultation with legal counsel to the Corporation, the investment adviser, officers of the Corporation and other relevant parties, prepare and disseminate materials for meetings of the Board, including agendas and selected financial information as agreed upon by the Corporation and GFS from time to time; attend and participate in Board meetings to the extent requested by the Board; and prepare or cause to be prepared minutes of the meetings of the Board;

6)

    Determine income and capital gains available for distribution and calculate distributions required to meet regulatory, income, and excise tax requirements, to be reviewed by the Corporation's independent public accountants;

7)

    Review the Corporation's federal, state, and local tax returns as prepared and signed by the Corporation's independent public accountants;

8)

    Prepare and maintain the Corporation's operating expense budget to determine proper expense accruals to be charged to each Fund in order to calculate its daily net asset value;

9)

    In consultation with legal counsel for the Corporation, assist in and monitor the preparation, filing, printing and where applicable, dissemination to shareholders of the following:

a.

amendments to the Corporation’s Registration Statement on Form N-1A;

b.

periodic reports to the Directors, shareholders and the SEC, including but not limited to annual reports and semi-annual reports;

c.

notices pursuant to Rule 24f-2;

d.

proxy materials; and

e.

reports to the SEC on Forms N-SAR, N-CSR, N-Q and N-PX.

10)

Coordinate the Corporation's audits and examinations by:

a.

assisting each Fund’s independent public accountants, or, upon approval of the Corporation, any regulatory body, in any requested review of a Fund’s accounts and records;

b.

providing appropriate financial schedules (as requested by a Fund’s independent public accountants or SEC examiners); and

c.

providing office facilities as may be required.

11)

Determine, after consultation with legal counsel for the Corporation and the Fund’s investment adviser, the jurisdictions in which Shares of the Corporation shall be registered or qualified for sale; facilitate, register, or prepare applicable notice or other filings with respect to, the Shares with the various state and territories of the United States and other securities commissions, provided that all fees for the registration of Shares or for qualifying or continuing the qualification of the Corporation shall be paid by the Corporation;

12)

Monitor sales of Shares and ensure that the Shares are properly and duly registered with the SEC;

13)

Monitor the calculation of performance data for dissemination to information  services covering the investment company industry, for sales literature of the Corporation and other appropriate purposes;

14)

Prepare, or cause to be prepared, expense and financial reports, including Fund budgets, expense reports, pro-forma financial statements, expense and profit/loss projections and fee waiver/expense reimbursement projections on a periodic basis;

15)

Prepare authorization for the payment of Corporation expenses and pay, from Corporation assets, all bills of the Corporation;

16)

Provide information typically supplied in the investment company industry to companies that track or report price, performance or other information with respect to investment companies;

17)

Upon request, assist each Fund in the evaluation and selection of other service providers, such as independent public accountants, printers, EDGAR providers and proxy solicitors (such parties may be affiliates of GFS);

18)

Perform other services, recordkeeping and assistance relating to the affairs of the Corporation as the Corporation may, from time to time, reasonably request pursuant to mutually acceptable timelines and compensation agreements.

All out-of-pocket expenses will be billed as set forth on Appendix IV.  GFS may from time to time adopt new procedures, or modify existing procedures, in order to carry out its Fund Administrative Services.  Any modification of the Fund Administrative Services provided by GFS as set forth in this Appendix II shall be delivered to the Corporation in writing.  

APPENDIX III

Transfer Agency Services

With respect to each Fund electing Transfer Agency Services, GFS shall provide the following services subject to, and in compliance with the objectives, policies and limitations set forth in the Corporation’s Registration Statement, the Corporation’s Articles of Incorporation and Bylaws, applicable laws and regulations, and resolutions and policies established by the Corporation’s Board:

1)

Provide the services of a transfer agent, dividend disbursing agent and, as relevant, agent in connection with accumulation, open-account or similar plans (including without limitation any periodic investment plan or periodic withdrawal program) that are customary for open-end management investment companies including:

a.

maintaining all Shareholder accounts;

b.

preparing Shareholder meeting lists;

c.

preparing and certifying direct Shareholder lists in conjunction with proxy solicitations;

d.

preparing periodic mailing of year-end tax and statement information;

e.

mailing Shareholder reports and prospectuses to current Shareholders;

f.

withholding taxes on U.S. resident and non-resident alien accounts;

g.

preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required by federal authorities with respect to distributions for Shareholders;

h.

preparing and mailing confirmation forms and statements of account to Shareholders for all purchases and redemptions of Shares and other confirmable transactions in Shareholder accounts; and

i.

providing account information in response to inquiries from Shareholders.

2)

    Receiving for acceptance, orders for the purchase of Shares, and promptly delivering payment and appropriate documentation therefore to the Custodian of the Fund authorized by the Board (the “Custodian”); or, in the case of a Fund operating in a master-feeder or fund of funds structure, to the transfer agent or interest-holder record keeper for the master portfolios in which the Fund invests;

3)

Pursuant to purchase orders, issue the appropriate number of Shares and hold such Shares in the appropriate Shareholder account;

4)

 Receiving for acceptance, redemption requests and redemption directions and delivering the appropriate documentation therefore to the Custodian or, in the case of Fund operating in a master-feeder or fund of funds structure, to the transfer agent or interest-holder record keeper for the master portfolios in which the Fund invests;

5)

 As and when the Fund receives monies paid to it by the Custodian with respect to any redemption, paying over or cause to be paid over the redemption proceeds as required by the Prospectus pursuant to which the redeemed Shares were offered and as instructed by the redeeming Shareholders;

6)

Effecting transfers of Shares upon receipt of appropriate instructions from Shareholders;

7)

Monitoring and making appropriate filings with respect to the escheatment laws of the various states and territories of the United States;

8)

Preparing and transmitting to Shareholders (or crediting the appropriate Shareholder accounts) payments for all distributions and dividends declared by the Corporation with respect to Shares of each Fund;

9)

Receiving from Shareholders and/or debiting Shareholder accounts for sales commissions, including contingent deferred, deferred and other sales charges, and service fees (i.e., wire redemption charges) and prepare and transmit payments to underwriters, selected dealers and others for commissions and service fees received and provide necessary tracking reports to the Fund’s and/or the Fund’s principal underwriter;

10)

Recording the issuance of shares of a Fund and maintaining pursuant to SEC Rule 17Ad-10(e) a record of the total number of shares of the Fund which are authorized, based upon data provided to it by the Fund, issued and outstanding; and  

11)

Providing the Corporation on a regular basis with each Fund’s total number of shares that are authorized and issued and outstanding.

Issuance of Shares.

GFS, in its capacity as transfer agent, shall make original issues of Shares of each Fund in accordance with the Fund’s Prospectus, only upon receipt of:

a.

instructions requesting the issuance,

b.

a copy of a resolution of the Board authorizing the issuance,

c.

necessary funds for the payment of any original issue tax applicable to such Shares, and

d.

an opinion of the Corporation’s legal counsel as to the legality and validity of the issuance, which opinion may provide that it is contingent upon the filing by the Corporation of an appropriate notice with the SEC, as required by Section 24 of the 1940 Act or the rules thereunder. If such opinion is contingent upon a filing under Section 24 of the 1940 Act, the Corporation shall indemnify GFS for any liability arising from the failure of the Corporation to comply with such section or the rules thereunder.

The responsibility of GFS for each Fund’s state registration status is solely limited to the reporting of transactions to the Corporation, and GFS shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which functions shall be the sole responsibility of the Fund, its distributor or other agent.

Transfer of Shares.

Transfers of Shares of each Fund shall be registered on the Shareholder records maintained by GFS. In registering transfers of Shares, GFS may rely upon the Uniform Commercial Code as in effect in the State of Nebraska or any other statutes that, in the opinion of GFS’s legal counsel, protect GFS and the Corporation from liability arising from:

a.

not requiring complete documentation;

b.

registering a transfer without an adverse claim inquiry;

c.

delaying registration for purposes of such inquiry; or

d.

refusing registration whenever an adverse claim requires such refusal.

As transfer agent, GFS will be responsible for delivery to the transferor and transferee of such documentation as is required by the Uniform Commercial Code.

Purchase Orders.

Shares shall be issued in accordance with the terms of the Prospectus after GFS or its agent receives either:

a.

an instruction directing investment in a Fund, a check (other than a third party check) or a wire or other electronic payment in the amount designated in the instruction and in the case of an initial purchase, a completed account application; or

b.

the information required for purchases pursuant to a selected dealer agreement, processing organization agreement, or a similar contract with a financial intermediary.

Distribution Eligibility.   

Shares issued in a Fund after receipt of a completed purchase order shall be eligible to receive distributions of the Fund at the time specified in the prospectus pursuant to which the Shares are offered.

Determination of Federal Funds.

Shareholder payments shall be considered “Federal Funds” no later than on the day indicated below unless other times are noted in the Prospectus:

a.

for a wire received, at the time of the receipt of the wire;

b.

for a check drawn on a member bank of the Federal Reserve System, on the second Fund Business Day following receipt of the check; and

c.

for a check drawn on an institution that is not a member of the Federal Reserve System, at such time as GFS is credited with Federal Funds with respect to that check.

Lost Shareholders.  

GFS shall perform such services as are required in order to comply with Rules 17a-24 and 17Ad-17 (the “Lost Shareholder Rules”) of the Securities Exchange Act of 1934, including, but not limited to, those set forth below.  GFS may, in its sole discretion, use the services of a third party to perform some of or all such services.

a.

documentation of search policies and procedures;

b.

execution of required searches;

c.

tracking results and maintaining data sufficient to comply with the Lost Shareholder Rules; and

d.

preparation and submission of data required under the Lost Shareholder Rules.

Anti-Money Laundering (“AML”) Delegation.

If the Corporation elects to delegate to GFS certain AML duties under this Agreement, the parties will agree to such duties and terms which may be amended from time to time subject to mutual written agreement between the parties.  In consideration of the performance of the duties by GFS pursuant to this Section, the Corporation agrees to pay GFS for the reasonable administrative expense that may be associated with such additional duties in the amount as the parties may from time to time agree in writing.

Anti-Identity Theft Delegation.

To the extent that a Fund has covered accounts that allow redemption proceeds to go to third parties, GFS will assume Anti-Identity Theft monitoring duties for the Fund under this Agreement, pursuant to legal requirements, beginning August 1, 2009. Any out of pocket expenses occurred in this regard are due and payable by the Fund.

Rule 22c-2 Compliance.

Rule 22c-2 under the 1940 Act requires that a fund’s principal underwriter or transfer agent enter into a shareholder information agreement with any financial intermediary or its agent where, through itself or its agent, purchases or redeems shares directly from a fund, its principal underwriter or transfer agent, or through a registered clearing agency.  Each Fund shall ensure that its principal underwriter enters into such agreements, which permits GFS as transfer agent to request information from such financial intermediaries to insure that the Corporation’s procedures are being followed with respect to market timing and, where applicable, early redemption fees.  The Corporation’s procedures in this regard would trigger the information requests, under certain conditions, with respect to said financial intermediaries’ omnibus accounts in the respective Fund.  

Processing through the National Securities Clearing Corporation (the “NSCC”).

GFS will: (i) process accounts through Networking and the purchase, redemption, transfer and exchange of shares in such accounts through Fund/SERV (Networking and Fund/SERV being programs operated by the NSCC on behalf of NSCC’s participants, including the Corporation), in accordance with, instructions transmitted to and received by GFS by transmission from NSCC on behalf of broker-dealers and banks which have been established by, or in accordance with the instructions of authorized persons, as hereinafter defined on the dealer file maintained by GFS; (ii) issue instructions to each Fund’s Custodian for the settlement of transactions between the Fund and NSCC (acting on behalf of its broker-dealer and bank participants); (iii) provide account and transaction information from the affected Corporation’s records on an appropriate computer system in accordance with NSCC’s Networking and Fund/SERV rules for those broker-dealers; and ( iv) maintain Shareholder accounts through Networking.

Transfer Agency Records.

GFS shall maintain the following shareholder account information:

·

name, address and United States Tax Identification or Social Security number;

·

number of Shares held and number of Shares for which certificates, if any, have been issued, including certificate numbers and denominations;

·

historical information regarding the account of each Shareholder, including dividends and distributions paid and the date and price for all transactions on a Shareholder’s account;

·

any stop or restraining order placed against a Shareholder’s account;

·

any correspondence relating to the current maintenance of a Shareholder’s account;

·

information with respect to withholdings; and

·

any information required in order for GFS to perform any calculations by this Agreement.

All out-of-pocket expenses will be billed as set forth on Appendix IV.  GFS may from time to time adopt new procedures, or modify existing procedures, in order to carry out its Transfer Agency Services.  Any modification of the Transfer Agency Services provided by GFS as set forth in this Appendix III shall be delivered to the Corporation in writing.

APPENDIX IV

LIST OF FUNDS

SERVICES & FEES

This Appendix IV is part of the Fund Services Agreement between Santa Barbara Group of Mutual Funds, Inc. and Gemini Fund Services, LLC.  Set forth below are the Services elected by the Fund(s) identified on this Appendix IV along with the associated Fees.  

EFFECTIVE DATE

The Effective Date for the Funds set forth on this Appendix IV shall be the later of the date of this Agreement or upon commencement of operations.

COVERED FUNDS

The Funds to be covered under this Agreement include:

Fund Name

PFW Water Fund

     Class A

     Class C

     Class I

Montecito Fund

     Class A

SELECTED SERVICES and FEES

The Fund(s) shall pay to GFS the following fees:  (all basis point fees will be calculated based upon the average net assets of the Fund for the previous month)  

Administration and Fund Accounting Fees

1.  BASE FEE

CALCULATED FEE WILL BE BASED UPON PRIOR MONTHS AVERAGE NET ASSETS:

(No prorating partial months)

NOTE:  The following administrative service fees are per portfolio serviced plus out-of-pocket expenses.

MINIMUM FEE PER FUND:

Under $5 million	$3,000
From $5 million to $10 million	$3,500
From $10 million to $20 million	$4,000
From $20 million on	$4,500

OR,

NET ASSET CHARGE:

·

First $75 Million of average monthly net assets of Fund - 1/12^th of 0.15% (15 basis points), plus

·

Next $75 Million of average monthly net assets of Fund - 1/12^th of 0.10% (10 basis points), plus

·

Over $150 Million of average monthly net assets of Fund - 1/12^th of 0.07% (7 basis points).

2.   EXPENSES

(i)

Price Quotes.  The charge for equity and bond price quotes per security, per day will be as follows:

$.10 Domestic and Canadian Equities

$.15 Options

$.58 Corp/Gov/Agency Bonds

$.50 International Equities and Bonds

$.80 Municipal Bonds

$1.00 CMO’s

The following expenses will be charged to the Funds as incurred by GFS in connection with the performance of its duties to include

a.

Out-of-pocket expenses.  The Fund(s) shall reimburse GFS for all out-of-pocket expenses incurred by GFS to provide the Services to the Fund(s).

b.

Manual processing fee.  The Fund(s) shall pay an additional charge of $500.00 per month for portfolios that transmit daily trades via facsimile as opposed to utilizing an electronic format.

c.

SAS 70 expense.  Each Fund shall pay its allocated portion of the GFS annual SAS 70 review.

d.

Fund Accounting Data De-Conversion fee.  Each Fund shall pay a Fund Accounting record data de-conversion fee in the amount of $2,500.00 upon a cancellation or termination of this Agreement for any reason other than liquidation of the Fund.  

(ii)

State Registration (Blue Sky) Fees:

Each Fund shall pay its allocated federal and state regulatory filing fees.  In addition, each Fund shall pay GFS the following fees per state registration:

Initial registration	$  295.00
Registration renewal	$  150.00
Sales reports (if required)	$    25.00

3.

SPECIAL REPORTS

All reports and/or analyses requested by the Funds, their auditors, legal counsel, portfolio manager, or any regulatory agency having jurisdiction over the Funds, that are not in the normal course of fund administrative activities as specified in Section 2 of this Agreement shall be subject to an additional charge, agreed upon in advance, based upon the following rates:

Labor:

General Counsel - $300.00/hr.

Senior staff - $150.00/hr.

Junior staff - $75.00/hr.

Computer time - $45.00/hr.

Fee Increases

On each annual anniversary date of this Agreement, the fees enumerated above will be increased by the change in the Consumer Price Index for the Northeast region (CPI) for the twelve-month period ending with the month preceding such annual anniversary date.

Transfer Agency Fees

1.

ACCOUNT MAINTENANCE CHARGE:

The Greater of (No prorating for partial months) (1) a minimum maintenance charge per Fund/Class $1,000.00/month; or, (2) charges based upon the total of all open/close accounts⁽¹⁾ per fund/class upon the following annual rates:

Type of Fund

Charge Per Account

Dividend calculated and

paid annually, semi-annually, quarterly

$9.00

Dividend calculated and paid monthly

$12.00

Dividend accrued daily and paid monthly

$16.00

Closed Accounts

$2.00⁽²⁾

PLUS,

2. TRANSACTION FEES:

Trade Entry (purchase/liquidation) and maintenance transactions	$ 1.50 each
New account set-up	$ 3.00 each
Customer service calls	$ 1.50 each
Correspondence/information requests	$ 1.75 each
Check preparation	$   .50 each
Liquidation paid by wire transfer	$ 3.00 each
ACH charge	$   .45 each
SWP	$ 1.00 each

3. 24 HOUR AUTOMATED VOICE RESPONSE:

⁽¹⁾ All accounts closed during a month will be considered as open accounts for billing purposes in the month the account is closed.

⁽²⁾ Closed accounts remain on the shareholder files until all 1099’s and 5498’s have been distributed to the shareholders and send via mag-media to the IRS.

Initial set-up (one-time) charge per Fund - $750.00

Monthly maintenance charge per Fund - $50.00

All calls processed through automated voice response will be billed as a customer service call listed above.

4. Fund/SERV

All Funds processed through Fund/SERV will be subject to an additional monthly charge of $250.00.

All transactions processed through Fund/SERV will be billed at the transaction fee rates listed above.

5. INTERNET ACCESS:

Each shareholder/adviser/broker hit billed at $0.25 per hit.

6. ISSUANCE OF SHARE CERTIFICATES:

For each share certificate issued by GFS, a $15.00 charge will be assessed to the Fund for which the certificate was issued.

7.  RULE 22c-2 COMPLIANCE:

$100 per month service fee for the Corporation, plus $25 per month maintenance fee per Fund.

8.  IRA PLAN FEES:

The following fees will be charged directly to the shareholder account:

Annual maintenance fee	$15.00/account *
Incoming transfer from prior custodian	$12.00
Distribution to a participant	$15.00
Refund of excess contribution	$15.00
Transfer to successor custodian	$15.00
Automatic periodic distributions	$15.00/year per account

$15.00/year per account

*Includes $8.00 Bank Custody Fee.

9.    EXPENSES:

Special Reports/Programming Fees

All special reports analyses and/or programming requested by a Fund or the Corporation under this Agreement shall be subject to an additional programming charge, agreed upon in advance, based upon the following rates:

GFS Senior & MIS Staff	$200.00 per hour
GFS Junior Staff	$100.00 per hour

Out -of-pocket Expenses

The Corporation shall reimburse GFS for all out-of-pocket expenses incurred by GFS when performing Services under this Agreement, including but not limited to the following:

oAnti-ID Theft Monitoring	oPro rata portion of annual SAS 70 review
oBank Account and other Bank Fees	oProxy Services
oCustomer Identification/AML Program Costs	oRecord Storage
oFund Stationery and Supplies	oRegulatory fees and assessments
oLocating Lost Shareholders/Escheatment Costs	oState and Federal filing fees and assessments
oNSCC Charges	oTax Reporting
oPostage	oTelephone and Toll Free Lines
oPre and Post Sale Fulfillment	oTravel Requested by the Corporation
oPrinting Fund Documents

Fee Increases

On each annual anniversary date of this Agreement, the fees enumerated above will be increased by the change in the Consumer Price Index for the Northeast region (CPI) for the twelve-month period ending with the month preceding such annual anniversary date.

Additional Charges:

a.

Transfer Agency De-Conversion fee.  Each Fund shall pay a Transfer Agency record data de-conversion fee in the amount of $15,000.00 upon a cancellation or termination of this Agreement for any reason other than liquidation of the Fund.  

b.

Rule 22c-2 compliance fee.  The Funds shall pay a $100.00 monthly administration fee for Rule 22c-2 compliance per fund family, plus an additional monthly fee of $25.00 per Fund.  

Optional Web Services

Check this box to elect 24 Hour Automated Voice Response

24 Hour Automated Voice Response Charges:
Initial set-up (one-time) charge	$1,500.00 per fund family
Monthly charge	$50.00 per fund family

Web Package Fees:

Check this box for Shareholder Desktop Web Package (described below)

$7,500.00 initial installation charge

$2,500.00 annual maintenance (invoiced annually in advance)

Check this box for Shareholder Desktop Online New Accounts (described below)

$2,500.00 initial installation charge

$2.50 per new account fee

Check this box for Fund Data Web Package (described below)

$5,000.00 initial installation charge

$1,500.00 annual maintenance (invoiced annually in advance)

SHAREHOLDER DESKTOP WEB PACKAGE

Proprietary Secure Web-Based Direct Interface With Transfer Agent Data

Supports Five Levels of Access

·

Fund Administrator

·

Broker/Dealer

·

Broker/Dealer Branch

·

Registered Representative

·

Shareholder

Customizable Look And Feel (Logo And Color Scheme)

Account Inquiry

·

Portfolio Summary

·

Account Position

·

Transaction History

·

General Account Information

Online Transactions (Must have this reflected in the prospectus to offer this functionality)

·

Exchanges

·

Purchases

·

Redemptions

·

Prospectus and SAI Access

Account Maintenance

·

Change of Shareholder Information

o

Address

o

Phone Number

o

Email Address

Online Statement Access

·

Quarterly Statements and Confirms

·

Electronic Delivery (Should have this reflected in the prospectus and application to offer this functionality)

o

Statements

o

Confirms

o

Regulatory Mailings

SHAREHOLDER DESKTOP ONLINE NEW ACCOUNTS

·

Allows clients the ability to set up a new account online if they provide valid ACH information and agree to all disclaimers and agreements on site.

·

E-Signature capability

FUND DATA WEB PACKAGE

Performance Web Page

·

Comprehensive performance report hosted by GFS

o

Fund performance updated nightly

o

Up to 20 indexes available

o

Data provided in simple format to be encapsulated into Fund’s own website to provide a custom look and feel

o

Growth of $10,000 graph available

Holdings web page

·

Fund holding updated periodically to meet fund disclosure rules hosted by GFS

o

Fund holding updated periodically to meet fund disclosure rules

o

Top ten report available

o

Data provided in simple format to be encapsulated into Fund’s own website to provide a custom look and feel

Historical NAV web page

·

Provides historical NAV information for a specified period of time and for a specified fund

o

Data provided in simple format to be encapsulated into Fund’s own website to provide a custom look and feel

Fulfillment web page

·

Provides an online request form for shareholders who wish to request a hard copy of the fulfillment material mailed to them

o

Request is automatically routed online to the Shareholder Services Team at GFS for processing

o

Reporting of Fulfillment requests made online or via phone available via GFS Reporting Services Tool.

GFS reporting utilizes the next generation secure web-based report delivery vehicle which allows for direct request or subscription based delivery reports available in multiple formats (PDF, Excel, XML, CSV)

5

EX-99.H OTH MAT CONT

CONSULTING AGREEMENT

This Consulting Agreement (the “Agreement”) is effective June 1, 2010 between NORTHERN LIGHTS COMPLIANCE SERVICES, LLC, a Nebraska limited liability company located at 450 Wireless Boulevard, Hauppauge, NY 11788 (“NLCS”), and THE SANTA BARBARA GROUP OF MUTUAL FUNDS, INC., a registered investment company organized as a corporation under the laws of the state of Maryland, located at 1270 Hillcrest Avenue, Pasadena, California 91106 (the "Company"), on behalf of each portfolio series listed on the attached Appendix A (each a “Fund” and collectively “Funds”).  This Agreement supersedes and replaces the existing consulting agreement between the parties.

I.   SCOPE OF SERVICES

NLCS will provide compliance services to the Company as set forth herein and assist  the Company in complying with the Federal Securities Laws (defined by Rule 38a-1) and meeting its responsibilities as outlined by Rule 38a-1 under the Investment Company Act of 1940, as amended (the “1940 Act”).

Phase I - Risk Management and Policies and Procedures Review

As part of the risk management and policies and procedures review, NLCS will perform the services listed below.

a.

Evaluation of Internal Control Structure

1.

Conduct interviews with certain employees throughout the business lines of the Company that are responsible for the day-to-day operations of the Company in relation to compliance with the Federal Securities Laws by the Company and each investment adviser, principal underwriter, administrator, and transfer agent of the Company (collectively the “Service Providers”).

2.

Assess from the interviews the operational risks and compliance with stated policies and procedures of the Company and its Service Providers.

3.

Review internal audit and other reports maintained by the Company and, to the extent practicable, its Service Providers, related to compliance with the Federal Securities Laws.

4.

Review any written policies and procedures provided pursuant to Item b below to assess the appropriateness of such documents with respect to compliance with the Federal Securities Laws by the Company and its Service Providers.

b.

Policies and Procedures

Conduct a detailed review and assessment of the Company's policies and procedures pertaining to compliance with the Federal Securities Laws.  This review will cover among other things, policies and procedures relating to:

1.

Pricing of portfolio securities and Fund shares, with a focus on the following items within the pricing policies and procedures:

a)

Monitoring for circumstances that may necessitate the use of fair value prices;

b)

Establishing criteria for determining when market quotations are no longer reliable for a particular portfolio security;

c)

Providing a methodology or methodologies by which the Funds determine the current fair value of the portfolio securities; and

d)

Reviewing the appropriateness and accuracy of the methodology used in valuing securities, including making any necessary adjustments.

2.

Processing of Fund shares, with a focus on the following items:

a)

Segregation of investor orders received before the Funds price their shares from those that were received after the Funds price their shares; and

b)

Methodology used by the Funds to protect themselves and their shareholders against late trading.

3.

Identification of affiliated persons to ensure that any transactions with affiliated persons are executed in compliance with the 1940 Act.

4.

Protection of nonpublic information, including:

a)

Prohibitions against trading portfolio securities on the basis of information acquired by analysts or portfolio managers employed by the Company or its Service Providers;

b)

Disclosure to third parties of material information about the Funds' portfolios, trading strategies, or pending transactions; and

c)

Purchase or sale of Fund shares by the Company or its Service Provider's personnel based on material, nonpublic information about the Funds' portfolios.

5.

Compliance with fund governance requirements, including the procedures to guard against:

a)

Improperly constituted board;

b)

Failure of the board to properly consider matters entrusted to it; and

a)

Failure of the board to request and consider information required by the 1940 Act from the Company and its Service Providers.

6.

The excessive short-term trading of mutual fund shares that may be harmful to the Funds, including a focus on the following areas:

a)

Consistency of policies and procedures with the Funds' disclosed policies regarding market timing;

b)

Monitoring of shareholder trades or flows of money in and out of the funds in order to detect market timing activity;  

c)

Enforcement of the Funds' policies regarding market timing;

d)

Prevention of short-term trading waivers that would harm the Funds or their shareholders or subordinate the interests of the Funds or their shareholders to those of the Company or any other affiliated person or associated person of the Company; and

e)

Reporting to the Funds' board regarding all waivers granted, so that the board can determine whether the waivers were proper.

7.

Document retention and business continuity.  

In addition, NLCS shall conduct a review of the policies and procedures of the Company’s Service Providers, as they relate to the Company’s compliance with the Federal Securities Laws.

Investment Adviser Review

The review of the policies and procedures of each Fund’s investment adviser shall cover, among other things, to the extent applicable to the Company:

a)

Portfolio management processes, including allocation of investment opportunities among clients and consistency of portfolios with clients' investment objectives, disclosures by the Company, and applicable regulatory restrictions;

b)

Trading practices, including procedures by which the Company satisfies its best execution obligation, uses client brokerage to obtain research and other services ("soft dollar arrangements"), and allocates aggregated trades among clients;

c)

Proprietary trading of the Company and personal trading activities of supervised persons;

d)

The accuracy of disclosures made to investors, clients, and regulators, including account statements and advertisements;

e)

Safeguarding of client assets from conversion or inappropriate use by advisory personnel;

f)

The accurate creation of required records and their maintenance in a manner that secures them from unauthorized alteration or use and protects them from untimely destruction;

g)

Marketing of advisory services, including the use of solicitors;

h)

Processes to value client holdings and assess fees based on those valuations;

i)

Safeguards for the privacy protection of client records and information; and

j)

Business continuity plans.

It is understood that the Chief Compliance Officer of each Fund’s investment adviser is primarily responsible for compliance by such organization with Rule 206(4)-7 under The Investment Advisers Act of 1940, as amended, and for overseeing, with respect to the portfolios they advise, each of the foregoing items.

Underwriter Review

The review of the policies and procedures of each Fund’s underwriter shall cover, among other things, to the extent applicable to the Company:

a)

The accuracy of disclosures made to investors, clients, and regulators, including account statements and advertisements;

b)

The accurate creation of required records and their maintenance in a manner that secures them from unauthorized alteration or use and protects them from untimely destruction;

c)

Proprietary trading of the Company and personal trading activities of supervised persons;

d)

The Fund’s selling agreement process;

e)

Payments of 12b-1 fees to selling brokers;

f)

Anti-money laundering policies and procedures;

g)

Advertising review process, submission of materials to FINRA and the maintenance of advertising review records; and

h)

Business continuity plans.

Fund Administrator, Fund Accounting and Fund Transfer Agent Review

The review of the policies and procedures of each Fund’s administrator, fund accountant and transfer agent shall cover, among other things, to the extent applicable to the Company:

a)

The accuracy of disclosures made to investors, clients, and regulators, including account statements and advertisements;

b)

Maintenance of fund records including board materials and correspondence with regulators;

c)

Proprietary trading of the Company and personal trading activities of supervised persons;

d)

Maintenance of Fund records;

e)

Processes to ensure timely filing of Fund reports;

f)

Auditors comments noted in SAS 70 reports;

g)

Anti-money laundering policies and procedures; and

h)

Business continuity plans.

As part of its review, NLCS may rely on summaries, reviews or statements prepared by the chief compliance officers of a Service Provider or a third party.  

Each Service Provider is responsible for proper developments and implementation of its policies and procedures.  Although NLCS performs a review of each Service Providers policies, procedures and standard business practices, NLCS is not responsible and cannot ensure that all necessary policies are adopted and implemented by such Service Provider.  

Phase II - Amending and Drafting of Policies and Procedures

Based on the analysis performed under Phase I of the engagement, NLCS will conduct any additional research that is necessary in order to ensure that the current practices of the Company are in compliance with the Federal Securities Laws and relevant rules promulgated thereunder. Additionally, NLCS will recommend amendments and draft policies and procedures for the areas identified in Phase I, including amending the policies and procedures as they pertain to:

a.

Consistency with regulatory expectations of risk based policies and procedures;

b.

Maintaining compliance with SEC regulations, under Rule 38a-1 under the 1940 Act; and

c.

Consistency within the structure, organization, and format of the policies and procedures.

Any amendments to the policies and procedures drafted by NLCS will be based on industry best practices and regulatory pronouncements. Upon completion of Phase II, the Company will have customized policies and procedures that are designed to assist the Company in complying with Rule 38a-1 under the 1940 Act.  These procedures will be compiled in a manual that also will describe the overall implementation of the Company’s Compliance Program (the “Compliance Program Manual”).  This Compliance Program Manual will serve as the Company’s primary policy and procedures manual and will include summaries of the compliance policies and procedures of each of the Fund’s Service Providers.

Phase III – Ongoing Monitoring and Board Reporting

Once the Company’s Compliance Program Manual is complete, the Company’s Chief Compliance Officer will present it to the Board of Directors of the Company (the “Board”) for Approval.  

Thereafter, the Company’s Chief Compliance Officer will create any appropriate records and monitor the Company’s Compliance Program for effectiveness, including ongoing dialogue with key compliance personnel at the Company’s Service Providers.   

The Company’s Chief Compliance Officer will conduct an annual review to assess compliance with the Company’s Compliance Program and its overall effectiveness, and will prepare a written report to the Company’s Board annually, within sixty calendar days of the completion of the annual review, that addresses the operation of the policies and procedures of the Fund and its Service Providers, any material changes made to those policies and procedures since the date of the last report, and any material changes to the policies and procedures recommended as a result of the annual review, and each “Material Compliance Matter” as defined in Rule 38a-1 of the 1940 Act.

II. STAFFING AND TIMING

Under the terms of this Agreement, NLCS will provide the services of Mike Wagner, who shall be appointed by the Board as the Chief Compliance Officer for the Company and each Fund of the Company.  In addition, NLCS will provide support staff to Mr. Wagner to assist him in all aspects of his duties under this Agreement.  Mr. Wagner will lead the engagement and will have overall supervisory responsibility for the ongoing obligations hereunder. A brief biography for Mr. Wagner is included in Appendix C to this Agreement.

The timeline for this engagement, although subject to change, will be as follows:

ON-SITE

The on-site portion will consist primarily of reviewing the policies and procedures identified in Phase I above as well as interviews of the relevant personnel throughout the different business lines of the Company.

Visits to Service Providers of the Company will include:

1)

On-site visit to each Fund’s administrator, fund accountant and transfer agent.

2)

On-site visit to each Fund’s principal underwriter.

3)

On-site visits to each Fund’s investment adviser.

4)

Visits to each of the foregoing Service Providers will include consultation with the Chief Compliance Officer of the respective Service Provider.

OFF-SITE

The off-site portion of this engagement will consist of NLCS devoting significant time reviewing notes from its visits with the Service Providers, continuing follow-up and communication with necessary Service Provider personnel, Company officers, legal advisors, etc. and preparing any amendments and drafting new policies and procedures as may be required under Phase II.

III. PAYMENT

In consideration of the timely and satisfactory performance of the services indicated above, NLCS shall be compensated as indicated in the attached Appendix B. The payment of all fees and the reimbursement of all Out of Pocket Expenses shall be due and payable within fifteen (15) days of receipt of an invoice from NLCS (the “Due Date”).  Interest may accrue, at the maximum amount permitted by law, on any invoice balance that remains unpaid after its Due Date.

IV. INDEPENDENT CONTRACTOR

NLCS shall act as an independent contractor and not as an agent of the Company and NLCS shall make no representation as an agent of the Company, except that the Chief Compliance Officer shall act as an appointed officer of the Company and shall be empowered with full responsibility and authority to develop and enforce appropriate policies and procedures for the Company.  

NLCS does not offer legal or accounting services and does not purport to replace the services provided by legal counsel or that of a certified public accountant. If contracts are provided, they will be forms only and the provision of such contracts does not constitute and should not be deemed to be legal advice. The representatives of NLCS are experts, and as such will make every reasonable effort to provide the services described in this Agreement. However, there is no guarantee that work performed by NLCS will be favorably received by any regulatory agency.

Though NLCS's work may involve analysis of accounting and financial records, at no time will work performed by NLCS be deemed to be an audit of the Company in accordance with generally accepted auditing standards or otherwise, nor will any work performed by NLCS consist of a review of the internal controls of the Company in accordance with AICPA Statement on Auditing Standards No. 70, or any other authoritative literature.

V. PROPRIETARY INFORMATION

NLCS recognizes that the Company may be subject to the provisions of the U.S. Securities and Exchange Commission's Regulation S-P, or other privacy rules promulgated under the Gramm -Leach-Bliley Act (the "GLBA").  In carrying out its consulting duties, NLCS will acquire information of a confidential nature relating to the Company's business activities and its clients.   NLCS hereby agrees to maintain the confidentiality of the Company’s information in accordance with GLBA and shall not use, publish, or otherwise disclose any information pertaining to the Company, a Fund or its Service Providers.   

VI. STANDARD OF CARE, INDEMNIFICATION AND RELIANCE

a.

Indemnification of NLCS.  The Company shall on behalf of each Fund, indemnify and hold NLCS harmless from and against any and all losses, damages, costs, charges, reasonable counsel fees, payments, expenses and liability arising out of or attributable to: (i) the Company’s refusal or failure to comply with the terms of this Agreement, (ii) the Company’s lack of good faith, gross negligence or willful misconduct with respect to the Company’s performance under or in connection with this Agreement, or (iii) all actions taken by NLCS hereunder in good faith without gross negligence, willful misconduct or reckless disregard of its duties .. NLCS shall not be liable for, and shall be entitled to rely upon, and may act upon information, records and reports generated by the Company, advice of the Company, or of counsel for the Company and upon statements of the Company’s independent accountants, and shall be without liability for any action reasonably taken or omitted pursuant to such records and reports or advice, provided that such action is not, to the knowledge of NLCS, in violation of applicable federal or state laws or regulations, and provided further that such action is taken without gross negligence, bad faith, willful misconduct or reckless disregard of its duties. The Company shall hold NLCS harmless in regard to any liability incurred by reason of the inaccuracy of such information provided by the Company or its other Service Providers or for any action reasonably taken or omitted in good faith reliance on such information.

b.

Indemnification of the Company. NLCS shall indemnify and hold the Company and each Fund harmless from and against any and all losses, damages, costs, charges, reasonable counsel fees, payments, expenses and liability arising out of or attributable to NLCS’s refusal or failure to comply with the terms of this Agreement, or which arise out of NLCS’s lack of good faith, gross negligence or willful misconduct with respect to NLCS’ performance under or in connection with this Agreement.

c.

Reliance.  Except to the extent that NLCS may be liable pursuant to this Section VI, NLCS shall not be liable for any action taken or failure to act in good faith in reliance upon:

i.

advice of the Company or of counsel to the Company;

ii.

any written instruction or certified copy of any resolution of the Board, and NLCS may rely upon the genuineness of any such document, copy or facsimile thereof reasonably believed in good faith by NLCS to have been validly executed;

iii.

any signature, instruction, request, letter of transmittal, certificate, opinion of counsel, statement, instrument, report, notice, consent, order, or other document reasonably believed in good faith by NLCS to be genuine and to have been signed or presented by the Company or other proper party or parties; or

iv.

reasonable actions taken by NLCS based on information provided by other Service Providers to the Company.

NLCS shall not be under any duty or obligation to inquire into the validity or invalidity or authority or lack of authority of any statement, oral or written instruction, resolution, signature, request, letter of transmittal, certificate, opinion of counsel, instrument, report, notice, consent, order, or any other document or instrument which NLCS reasonably believes in good faith to be genuine.

d.

Errors of Others ..  NLCS shall not be liable for the errors of other Service Providers to the Company, and errors in information provided by an investment adviser or custodian to the Company.

e.

Limitation of Shareholder and Board Liability.  The Board of the Company and the shareholders of Funds shall not be liable for any obligations of the Company or of the Funds under this Agreement, and NLCS agrees that, in asserting any rights or claims under this Agreement, it shall look only to the assets and property of the Funds to which NLCS’s rights or claims relate in settlement of such rights or claims, and not to the Board of the Company or the shareholders of the Funds.  It is expressly agreed that the obligations of the Company hereunder shall not be binding upon any of the  Board, shareholders, nominees, officers, agents or employees of the Company personally, but bind only the Company property of the Company, as provided in the Declaration of Company.  The execution and delivery of this Agreement has been authorized by the  Board of the Company and signed by the officers of the Company, acting as such, and neither such authorization by such  Board and shareholders nor such execution and delivery by such officers shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the property of the Company as provided in its Declaration of Company.  A copy of the Agreement and Articles of Incorporation of the Company is on file with the Secretary of State of Maryland.

f.

In the event that NLCS is requested, pursuant to subpoena or other legal process, to provide testimony or produce its documents relating to its engagement under this Agreement, in judicial or administrative proceedings to which NLCS is not a party, NLCS shall promptly notify the Company and shall be reimbursed by the Company at the then current standard billing rates for NLCS's professional time and expenses, including reasonable attorneys fees incurred responding to such request.

Notwithstanding the indemnification provisions above, to the extent that the Chief Compliance Officer incurs any liability in connection with the performance of his duties under this Agreement, he shall be covered under the Directors and Officers Errors and Omissions insurance policy of the Company, in accordance with the terms therein and the deductible shall be covered by the Company.  

VII. CONDITIONS PRECEDENT

The following conditions must be met within a reasonable amount of time following the execution of this Agreement:

a.

The investment adviser for each Fund of the Company will officially appoint a Chief Compliance Officer pursuant to Rule 206(4)-7 under the Investment Advisers Act of 1940 ("Advisers Act"), to fulfill all required duties thereunder.

b.

The Company’s Chief Compliance Officer shall be covered under the Company’s Directors and Officers/ Errors and Omissions Insurance as an officer of the Company.

c.

NLCS shall obtain Errors and Omissions Insurance coverage with respect to its employees.

VIII. WARRANTY

NLCS warrants that it is under no obligation to any other entity that in any way is in conflict with this Agreement and that it is free to enter into this Agreement.

IX. EFFECTIVE DATE, TERM AND TERMINATION

a.

Effective Date and Term.  This Agreement shall become effective on the date first above written and shall continue for a period of one (1) year (the “Initial Term”).  This Agreement shall automatically continue for successive one year periods (a “Renewal Term”) subject to approval of the Board of the Company, including approval by a majority of the Independent Directors.

b.

Termination.  This Agreement may be terminated at the end of the Initial Term (or Renewal Term) by either party by providing at least ninety (90) days written notice prior to the commencement of a Renewal Term.  Unless terminated by providing a party at least ninety (90) days written notice prior to the commencement of a Renewal Term, this Agreement may not be terminated by either party absent a material breach.  Upon written notice of a material breach, a party shall have 30 days to remedy a material breach. Compensation due NLCS and unpaid by the Company upon such termination shall be due on the date of termination or after the date that the provision of services ceases, whichever is later.  In the event of termination, NLCS agrees that it will cooperate in the smooth transition of services and to minimize disruption to the Company and its shareholders.

c.

Reimbursement of NLCS’s Expenses.  If this Agreement is terminated with respect to a Fund or Funds, NLCS shall be entitled to collect from the Company the amount of all of NLCS’s reasonable labor charges and cash disbursements for services in connection with NLCS’s activities in effecting such termination, including without limitation, the labor costs and expenses associated with delivery of any compliance records of each such Fund from its computer systems, and the delivery to the Company and/or its designees of related records, instruments and documents, or any copies thereof.  In the event of termination, NLCS agrees that it will cooperate in the smooth transition of services and to minimize disruption to the Company.

X. EXCEPTIONS RESULTING FROM BOARD ACTION UNDER RULE 38a-1

a.

Termination.  If the Board dismisses the Company’s Chief Compliance Officer, this Agreement will either end immediately or, at the discretion of both parties, NLCS may present an alternative Chief Compliance Officer for Board consideration and approval to continue the Chief Compliance Officer duties set forth under this Agreement.  

b.

Prevention of Termination.  If NLCS wishes to dismiss the Chief Compliance Officer under the terms of NLCS’s arrangement with the Chief Compliance Officer, NLCS will present its plan of action to the Board prior to taking such action.  Under such circumstances NLCS may, at its own discretion, offer to present another Chief Compliance Officer candidate to the Board that would work through NLCS.  If the Board approves the new Chief Compliance Officer, the contract would continue as amended to reflect the new Chief Compliance Officer.  If, the Board chooses to engage its own Chief Compliance Officer as a result of NLCS dismissing the Chief Compliance Officer under this Agreement, the contract with NLCS would end, and the Company would pay NLCS only for fees and Out of Pocket Expenses accrued up to the point in time when the Board’s new Chief Compliance Officer officially assumes responsibility. &n bsp;

c.

Change in Compensation.  If the Board decides to increase the Chief Compliance Officer’s compensation or provide a bonus to the Chief Compliance Officer, then the fees paid to NLCS by the Company will increase proportionately for any amounts it deems due to the Chief Compliance Officer above the amounts due to NLCS under this Agreement.  Any attempt by the Board to reduce the salary of the Chief Compliance Officer would be contrary to the terms of this Agreement.

d.

Resignation by Chief Compliance Officer.  If the Chief Compliance Officer voluntarily resigns, at the discretion of both parties, NLCS may present an alternative Chief Compliance Officer for Board consideration and approval to continue Chief Compliance Officer duties under this Agreement.  If the Board chooses to end its relationship with NLCS as a result of such voluntary resignation by the Chief Compliance Officer, the contract with NLCS would end, and the Company would pay NLCS only for fees and Out of Pocket Expenses accrued up to the point in time when the Board’s new Chief Compliance Officer officially assumes responsibility.  NLCS will make every effort to assist the Board in a smooth transition during this period.

XI. MISCELLANEOUS

a.

Amendments.  No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties hereto.

b.

Governing Law.  This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of New York.

c.

Entire Agreement.  This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written.

d.

Counterparts.  The parties may execute this Agreement on any number of counterparts, and all of the counterparts taken together shall be deemed to constitute one and the same instrument.

e.

Severability.  If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected by such determination, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid.

f.

Force Majeure.  Neither party shall be liable to the other for failure to perform if the failure results from a cause beyond its control, including, without limitation, fire, electrical, mechanical, or equipment breakdowns, delays by third party vendors and/or communications carriers, civil disturbances or disorders, terrorist acts, strikes, acts of governmental authority or new governmental restrictions, or acts of God.

g.

Headings.  Section and paragraph headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement.

h.

Notices.  All notices, requests, demands and other communications hereunder shall be in writing and shall be delivered by hand or by overnight, registered or certified mail, postage prepaid, to each party at the address set forth below or at such new address designated by such party by notice given.  

To the Company:	To NLCS:
Richard J. Capalbo	Michael J. Wagner
President	President
The Santa Barbara Group of Mutual Funds, Inc.	Northern Lights Compliance Services, LLC
1270 Hillcrest Avenue	450 Wireless Boulevard
Pasadena, CA 91106	Hauppauge, NY 11788
(626) 484-5744	(631) 470-2604
	Michael.Wagner@NLCompliance.com

                                                           With a copy to:

JoAnn Strasser, Esq.

Thompson Hine LLP

312 Walnut Street, 14th Floor

Cincinnati, Ohio  45202-4089

Tel.: 513-352-6725

Joann.strasser@thompsonhine.com

i.

Distinction of Funds.  Notwithstanding any other provision of this Agreement, the parties agree that the assets and liabilities of each Fund of the Company are separate and distinct from the assets and liabilities of each other Fund and that no Fund shall be liable or shall be charged for any debt, obligation or liability of any other Fund, whether arising under this Agreement or otherwise.

j.

Representation of Signatories.  Each of the undersigned expressly warrants and represents that they have full power and authority to sign this Agreement on behalf of the party indicated and that their signature will bind the party indicated to the terms hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized persons, as of the day and year first above written.

THE SANTA BARBARA GROUP OF MUTUAL FUNDS

 /s/ Richard J. Capalbo By:   Richard J. Capalbo President
NORTHERN LIGHTS COMPLIANCE SERVICES, LLC  
/s/ Michael J. Wagner By:   Michael J. Wagner President

The undersigned investment adviser hereby acknowledges and agrees to the terms of this Consulting Agreement.

HILLCREST WELLS ADVISORS, LLC

1270 Hillcrest Avenue

Pasadena, California 91106

By:

____________________________

Richard Capalbo

President

1

APPENDIX A

List of Funds

PFW Water Fund

Montecito Fund

APPENDIX B –FEES

1) Development of Procedures. A one-time fee of $0 per Fund will be billed for developing/updating the Compliance Program Manual for the Company.  

plus

2) Base Fee – Company Chief Compliance Officer Services.

Base Annual Fee

$12,600.00 for the first Fund, plus

$6,300.00 for each additional Fund

The Annual Fee under this Agreement will be billed to each Fund set forth on Appendix A on a calendar quarterly basis, in advance. The invoices shall be due and payable by the Fund within fifteen (15) days of receipt of an invoice from NLCS.  Each invoice shall provide by NLCS shall include the amount due and a brief description of the services rendered.

An additional fee of $5,000 per year will be charged to each Fund involving complex securities or other higher risk compliance issues, as determined by NLCS in its sole discretion.

On the annual anniversary date of each Fund being added to this Agreement, such Fund’s fees enumerated above may be increased by the change in the Consumer Price Index for the Northeast region (“CPI”) for the twelve-month period ending with the month preceding such annual anniversary date.  Any CPI increases not charged in any given year may be included in prospective CPI fee increases in future years.

 plus

3) Out of Pocket Expenses.

Reasonable expenses incurred in connection with Company business, including, but not limited to, travel and meals, visits to Company Service Providers, telephone calls, photocopying, binding and shipping of compliance materials, will be billed to the Company on a monthly basis. The Company agrees to reimburse NLCS for all Out of Pocket Expenses incurred by NLCS in connection with the services provided to the Company pursuant to this Agreement. Where the Company’s Chief Compliance Officer makes a single visit to Service Providers for purposes not only of the Company, but also for other NLCS clients that employ the same Service Providers, the travel costs will be divided among the Company and such clients equally.  An invoice detailing these Out of Pocket Expenses, including any Fund specific expenses, will be submitted to the Company at the end of each month, and will be payable by the Company within fifteen (15) days of receipt of an invoice f rom NLCS.  Fund specific Out of Pocket Expenses, such as those incurred from visits to investment advisers for specific Funds, will be allocated by the Company to the respective Fund.

APPENDIX C

RESUME OF

Michael J. Wagner

450 Wireless Blvd.

Hauppauge, NY 11788

631-470-2604 or mikew@NLcompliance.net

Northern Lights Compliance Services, LLC – Hauppauge, NY

President

April 2006- current

            Senior Vice President

              August 2004-March 2006

·     Created to assist fund companies meet rule 38a-1 requirements

·     Review and prepare compliance manuals for multiple fund families

·     Attend Board meetings and present materials

·     Coordinate the services of multiple CCOs

NorthStar Financial Services Group, LLC

Gemini Fund Services, LLC – Hauppauge, NY

President

April 2004- March 2006

            Chief Operations Officer

              January 2003- March 2006

·     President, Treasurer and other officer of multiple fund families

·     Attend Board meetings and present materials

·

Created subsidiary company, Gemcom, LLC, to provide printing and edgarization services

·     Created subsidiary company, Fund Compliance Services, LLC, to provide CCO and

       compliance services

·

Responsible for all operating departments including fund accounting, financial and legal administration and transfer agency, supervising approximately 60 professionals

·     Automate portfolio compliance for mutual funds

·     Oversee fund compliance with domestic and international regulatory requirements

·     Implement FundStation.net performance system

·     Coordinate annual audits with independent accountants

·     Supervise launch of multiple fund families

·

Project manager responsible for implementing and overseeing all aspects of fund mergers, acquisitions and consolidations

·     Prepare and review financial statements and board books

·     Member of Securities Valuation Committee for multiple fund families

·     Prepare and present client presentations

Gemcom, LLC – Hauppauge, NY

Manager/Chief Operations Officer

July 2004 – March 2006

·     Provide Edgar services for regulatory filings

·     Prepare and print financial statements and marketing documents

Orbitex Fund Services, Inc. (predecessor to Gemini Fund Services, LLC)

             Director of Operations

             September 1999- June 2001

             Senior Vice President- Fund Accounting

             July 2001-December 2002

·     Direct implementation of new fund accounting system

·     Coordinate relocation of transfer agency function to Omaha

·     Responsible for client relationship management  

·     Manage staff of 20+ plus

·     Orchestrate conversion of mutual funds to Invest One accounting system

·     Y2K project leader for accounting department and design disaster recovery plan

·     Coordinate annual audits with independent accountants

·     Develop and present training seminars for mutual funds

American Data Services, Inc. (predecessor to Orbitex Fund Services, Inc.)

Director of Operations

November 1987 – August 1999

·     Prepare financial statements and quarterly board reports

·     Coordinate development of proprietary fund accounting and transfer agency systems

·     Responsible for fund accounting, administration and transfer agency operations

·     Prepared or reviewed all dividend calculations

·     Prepared or reviewed all income and excise tax returns

·     Resolved issues relating to foreign tax reclaims and class action proceeds

·     Responsible for client relationships

Ernst & Young - New York, NY

            Senior Audit Manager

            Audit Manager

            Audit Supervisor

            Audit Senior Accountant

            Audit Staff Accountant

October 1972- October 1987

·     Responsible for the audits of many mutual funds, including The Dreyfus Funds

·     Preparation of financial statements and tax returns for mutual fund clients

·     Responsible for audits of other investment vehicles such as closed end funds and UITs

·     Supervised audits and special projects with staffs as large 250

·

Responsible for numerous “high profile” client audits and special projects, including reviews of systems of internal control

Computer Knowledge

Microsoft Word, PowerPoint  & Excel, PAM, Envision, PAIRS

Education

St. John’s University

Bachelor of Science Degree - May 1972

Graduated Cum Laude

Major:   Accounting

Achievements

Certified Public Accountant in State of New York 1975

Other

           Officer in the United States Army 1972-1978

Member of the American Institute of Certified Public Accountant

Member of the New York State Society of Public Accountants (through 2003)

4

EX-99.I LEGAL OPININ

THOMPSON	ATLANTA              CINCINNATI                   COLUMBUS             NEW YORK
HINE	BRUSSELS             CLEVELAND                DAYTON                  WASHINGTON, D.C.

                                                                                                                                            July 30, 2010

The Santa Barbara Group of Mutual Funds, Inc.

1270 Hillcrest Avenue

Pasadena, CA 91106

RE:

Santa Barbara Group of Mutual Funds, Inc.

File Nos. 33-56546 and 811-07414

Gentlemen:

A legal opinion that we prepared was filed with Post-Effective Amendment No. 14 to The Santa Barbara Group of Mutual Funds, Inc.’s Registration Statement (the “Legal Opinion”).  We hereby give you our consent to incorporate by reference the Legal Opinion into Post-Effective Amendment No. 24 under the Securities Act of 1933, Post-Effective Amendment No. 29 under the Investment Company Act of 1940 (the “Amendment”), and consent to all references to us in the Amendment.

Very truly yours,

/s/ THOMPSON HINE LLP

THOMPSON HINE LLP

EX-99.J OTHER OPININ

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

As independent registered public accountants, we hereby consent to the use of our report incorporated by reference herein dated May 28, 2010 on the financial statements of The Santa Barbara Group of Mutual Funds, Inc. (the “Funds”), comprising the PFW Water Fund and The Montecito Fund, as of March 31, 2010 and for the periods indicated therein and to the references to our firm in the prospectus and the Statement of Additional Information in this Post-Effective Amendment to The Santa Barbara Group of Mutual Funds, Inc.’s Registration Statement on Form N-1A.

/s/ Cohen Fund Audit Services, Ltd

Cohen Fund Audit Services, Ltd.

Westlake, Ohio

July 30, 2010

EX-99.P CODE ETH

Hillcrest Wells Advisors, LLC

Investment Adviser

Code of Ethics

© Copyright 2008, National Regulatory Services. All rights reserved.

                                                                                                                                                                 &nb sp;                                                           

Hillcrest Wells Advisors, LLC

Code of Ethics

to Current

                                                                                                                                                                 &nb sp;                                                           

Table of Contents

1 - Statement of General Policy

2 - Definitions

3 - Standards of Business Conduct

4 - Prohibition Against Insider Trading

5 - Personal Securities Transactions

6 - Protecting the Confidentiality of Client Information

7 - Compliance Procedures

8 - Certification

9 - Records

10 - Reporting Violations and Sanctions

Statement of General Policy

This Code of Ethics (“Code”) has been adopted by Hillcrest Wells Advisors, LLC and is designed to comply with Rule 204A-1 under the Investment Advisers Act of 1940 (“Advisers Act”).

This Code establishes rules of conduct for all employees of Hillcrest Wells Advisors, LLC and is designed to, among other things, govern personal securities trading activities in the accounts of employees. The Code is based upon the principle that Hillcrest Wells Advisors, LLC and its employees owe a fiduciary duty to Hillcrest Wells Advisors, LLC's clients to conduct their affairs, including their personal securities transactions, in such a manner as to avoid (i) serving their own personal interests ahead of clients, (ii) taking inappropriate advantage of their position with the firm and (iii) any actual or potential conflicts of interest or any abuse of their position of trust and responsibility.

The Code is designed to ensure that the high ethical standards long maintained by Hillcrest Wells Advisors, LLC continue to be applied. The purpose of the Code is to preclude activities which may lead to or give the appearance of conflicts of interest, insider trading and other forms of prohibited or unethical business conduct. The excellent name and reputation of our firm continues to be a direct reflection of the conduct of each employee.

Pursuant to Section 206 of the Advisers Act, both Hillcrest Wells Advisors, LLC and its employees are prohibited from engaging in fraudulent, deceptive or manipulative conduct. Compliance with this section involves more than acting with honesty and good faith alone. It means that the Hillcrest Wells Advisors, LLC has an affirmative duty of utmost good faith to act solely in the best interest of its clients.

Hillcrest Wells Advisors, LLC and its employees are subject to the following specific fiduciary obligations when dealing with clients:

•

The duty to have a reasonable, independent basis for the investment advice provided;

•

The duty to obtain best execution for a client’s transactions where the Firm is in a position to direct brokerage transactions for the client;

•

The duty to ensure that investment advice is suitable to meeting the client’s individual objectives, needs and circumstances; and

•

A duty to be loyal to clients.

In meeting its fiduciary responsibilities to its clients, Hillcrest Wells Advisors, LLC expects every employee to demonstrate the highest standards of ethical conduct for continued employment with Hillcrest Wells Advisors, LLC Strict compliance with the provisions of the Code shall be considered a basic condition of employment with Hillcrest Wells Advisors, LLC Hillcrest Wells Advisors, LLC's reputation for fair and honest dealing with its clients has taken considerable time to build. This standing could be seriously damaged as the result of even a single securities transaction being considered questionable in light of the fiduciary duty owed to our clients. Employees are urged to seek the advice of Michael J. Wagner, the Chief Compliance Officer, for any questions about the Code or the application of the Code to their individual circumstances. Employees should also understand that a material breach of the provisions of t he Code may constitute grounds for disciplinary action, including termination of employment with Hillcrest Wells Advisors, LLC

The provisions of the Code are not all-inclusive. Rather, they are intended as a guide for employees of Hillcrest Wells Advisors, LLC in their conduct. In those situations where an employee may be uncertain as to the intent or purpose of the Code, he/she is advised to consult with Michael J. Wagner.  Michael J. Wagner may grant exceptions to certain provisions contained in the Code only in those situations when it is clear beyond dispute that the interests of our clients will not be adversely affected or compromised. All questions arising in connection with personal securities trading should be resolved in favor of the client even at the expense of the interests of employees.

Michael J. Wagner will periodically report to the board of directors of Hillcrest Wells Advisors, LLC to document compliance with this Code

Definitions

For the purposes of this Code, the following definitions shall apply:

•

“Access person” means any supervised person who: has access to nonpublic information regarding any clients’ purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any fund RIA or its control affiliates manage; or is involved in making securities recommendations to clients that are nonpublic.

•

 “Account” means accounts of any employee and includes accounts of the employee’s immediate family members (any relative by blood or marriage living in the employee’s household), and any account in which he or she has a direct or indirect beneficial interest, such as trusts and custodial accounts or other accounts in which the employee has a beneficial interest or exercises investment discretion.

•

“Beneficial ownership” shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in determining whether a person is the beneficial owner of a security for purposes of Section 16 of such Act and the rules and regulations thereunder.

•

“Reportable security” means any security as defined in Section 202(a)(18) of the Advisers Act, except that it does not include: (i) Transactions and holdings in direct obligations of the Government of the United States; (ii) Bankers’ acceptances, bank certificates of deposit, commercial paper and other high quality short-term debt instruments, including repurchase agreements; (iii) Shares issued by money market funds; (iv) Transactions and holdings in shares of other types of open-end registered mutual funds, unless Hillcrest Wells Advisors, LLC or a control affiliate acts as the investment adviser or principal underwriter for the fund; and (v) Transactions in units of a unit investment trust if the unit investment trust is invested exclusively in mutual funds, unless Hillcrest Wells Advisors, LLC or a control affiliate acts as the investment adviser or principal underwriter for the fund.

•

“Supervised person” means directors, officers, partners, consultants, independent contractors and temporary employees or other persons designated by the Chief Compliance Officer of Hillcrest Wells Advisors, LLC (or other persons occupying a similar status or performing similar functions); employees of Hillcrest Wells Advisors, LLC; and any other person who provides advice on behalf of Hillcrest Wells Advisors, LLC and is subject to Hillcrest Wells Advisors, LLC's supervision and control.

Standards of Business Conduct

Hillcrest Wells Advisors, LLC places the highest priority on maintaining its reputation for integrity and professionalism. That reputation is a vital business asset. The confidence and trust placed in our firm and it's employees by our clients is something we value and endeavor to protect. The following Standards of Business Conduct sets forth policies and procedures to achieve these goals. This Code is intended to comply with the various provisions of the Advisers Act and also requires that all supervised persons comply with the various applicable provisions of the Investment Company Act of 1940, as amended, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and applicable rules and regulations adopted by the Securities and Exchange Commission (“SEC”).

Section 204A of the Advisers Act requires the establishment and enforcement of policies and procedures reasonably designed to prevent the misuse of material, nonpublic information by investment advisers. Such policies and procedures are contained in this Code. The Code also contains policies and procedures with respect to personal securities transactions of all Hillcrest Wells Advisors, LLC's access persons as defined herein. These procedures cover transactions in a reportable security in which an access person has a beneficial interest in or accounts over which the access person exercises control as well as transactions by members of the access person’s immediate family.

Section 206 of the Advisers Act makes it unlawful for Hillcrest Wells Advisors, LLC or its agents or employees to employ any device, scheme or artifice to defraud any client or prospective client, or to engage in fraudulent, deceptive or manipulative practices. This Code contains provisions that prohibit these and other enumerated activities and that are reasonably designed to detect and prevent violations of the Code, the Advisers Act and rules thereunder.  

Prohibition Against Insider Trading

Introduction

Trading securities while in possession of material, nonpublic information, or improperly communicating that information to others may expose supervised persons and Hillcrest Wells Advisors, LLC to stringent penalties. Criminal sanctions may include a fine of up to $1,000,000 and/or ten years imprisonment. The SEC can recover the profits gained or losses avoided through the illegal trading, impose a penalty of up to three times the illicit windfall, and/or issue an order permanently barring you from the securities industry. Finally, supervised persons and Hillcrest Wells Advisors, LLC may be sued by investors seeking to recover damages for insider trading violations.

The rules contained in this Code apply to securities trading and information handling by supervised persons of Hillcrest Wells Advisors, LLC and their immediate family members.

The law of insider trading is unsettled and continuously developing. An individual legitimately may be uncertain about the application of the rules contained in this Code in a particular circumstance. Often, a single question can avoid disciplinary action or complex legal problems. You must notify Michael J. Wagner immediately if you have any reason to believe that a violation of this Code has occurred or is about to occur.

General Policy

No supervised person may trade, either personally or on behalf of others (such as investment funds and private accounts managed by Hillcrest Wells Advisors, LLC), while in the possession of material, nonpublic information, nor may any personnel of Hillcrest Wells Advisors, LLC communicate material, nonpublic information to others in violation of the law.

1.

What is Material Information?

Information is material where there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions. Generally, this includes any information the disclosure of which will have a substantial effect on the price of a company’s securities. No simple test exists to determine when information is material; assessments of materiality involve a highly fact-specific inquiry. For this reason, you should direct any questions about whether information is material to Michael J. Wagner.

Material information often relates to a company’s results and operations, including, for example, dividend changes, earnings results, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments.

Material information also may relate to the market for a company’s securities. Information about a significant order to purchase or sell securities may, in some contexts, be material. Prepublication information regarding reports in the financial press also may be material. For example, the United States Supreme Court upheld the criminal convictions of insider trading defendants who capitalized on prepublication information about The Wall Street Journal’s “Heard on the Street” column.

You should also be aware of the SEC’s position that the term “material nonpublic information” relates not only to issuers but also to Hillcrest Wells Advisors, LLC's securities recommendations and client securities holdings and transactions.

2.

What is Nonpublic Information?

Information is “public” when it has been disseminated broadly to investors in the marketplace. For example, information is public after it has become available to the general public through a public filing with the SEC or some other government agency, the Dow Jones “tape” or The Wall Street Journal or some other publication of general circulation, and after sufficient time has passed so that the information has been disseminated widely.

3.

Identifying Inside Information

Before executing any trade for yourself or others, including investment funds or private accounts managed by Hillcrest Wells Advisors, LLC (“Client Accounts”), you must determine whether you have access to material, nonpublic information. If you think that you might have access to material, nonpublic information, you should take the following steps:

•

Report the information and proposed trade immediately to Michael J. Wagner.

•

Do not purchase or sell the securities on behalf of yourself or others, including investment funds or private accounts managed by the firm.

•

Do not communicate the information inside or outside the firm, other than to Michael J. Wagner.

•

After Michael J. Wagner has reviewed the issue, the firm will determine whether the information is material and nonpublic and, if so, what action the firm will take.

You should consult with Michael J. Wagner before taking any action. This degree of caution will protect you, our clients, and the firm.

4.

Contacts with Public Companies

Contacts with public companies may represent an important part of our research efforts. The firm may make investment decisions on the basis of conclusions formed through such contacts and analysis of publicly available information. Difficult legal issues arise, however, when, in the course of these contacts, a supervised person of Hillcrest Wells Advisors, LLC or other person subject to this Code becomes aware of material, nonpublic information. This could happen, for example, if a company’s Chief Financial Officer prematurely discloses quarterly results to an analyst, or an investor relations representative makes selective disclosure of adverse news to a handful of investors. In such situations, Hillcrest Wells Advisors, LLC must make a judgment as to its further conduct. To protect yourself, your clients and the firm, you should contact Michael J. Wagner immediately if you believe that you may ha ve received material, nonpublic information.

5.

Tender Offers

Tender offers represent a particular concern in the law of insider trading for two reasons: First, tender offer activity often produces extraordinary gyrations in the price of the target company’s securities. Trading during this time period is more likely to attract regulatory attention (and produces a disproportionate percentage of insider trading cases). Second, the SEC has adopted a rule which expressly forbids trading and “tipping” while in the possession of material, nonpublic information regarding a tender offer received from the tender offeror, the target company or anyone acting on behalf of either. Supervised persons of Hillcrest Wells Advisors, LLC and others subject to this Code should exercise extreme caution any time they become aware of nonpublic information relating to a tender offer.

6.

Restricted/Watch Lists

Although Hillcrest Wells Advisors, LLC does not typically receive confidential information from portfolio companies, it may, if it receives such information take appropriate procedures to establish restricted or watch lists in certain securities.

Michael J. Wagner may place certain securities on a “restricted list.” Access persons are prohibited from personally, or on behalf of an advisory account, purchasing or selling securities during any period they are listed. Securities issued by companies about which a number of supervised persons are expected to regularly have material, nonpublic information should generally be placed on the restricted list. Michael J. Wagner shall take steps to immediately inform all supervised persons of the securities listed on the restricted list.

Michael J. Wagner may place certain securities on a “watch list.” Securities issued by companies about which a limited number of supervised persons possess material, nonpublic information should generally be placed on the watch list. The list will be disclosed only to Michael J. Wagner and a limited number of other persons who are deemed necessary recipients of the list because of their roles in compliance.

(Attached is a copy of the Insider Trading Policy for Hillcrest Wells Advisors, LLC)

Personal Securities Transactions

General Policy

Hillcrest Wells Advisors, LLC has adopted the following principles governing personal investment activities by Hillcrest Wells Advisors, LLC's supervised persons:

•

The interests of client accounts will at all times be placed first;

•

All personal securities transactions will be conducted in such manner as to avoid any actual or potential conflict of interest or any abuse of an individual’s position of trust and responsibility; and

•

Access persons must not take inappropriate advantage of their positions.

Pre-Clearance Required for Participation in IPOs

No access person shall acquire any beneficial ownership in any securities in an Initial Public Offering for his or her account, as defined herein without the prior written approval of Michael J. Wagner who has been provided with full details of the proposed transaction (including written certification that the investment opportunity did not arise by virtue of the access person’s activities on behalf of a client) and, if approved, will be subject to continuous monitoring for possible future conflicts.

Pre-Clearance Required for Private or Limited Offerings

No access person shall acquire beneficial ownership of any securities in a limited offering or private placement without the prior written approval of the Michael J. Wagner who has been provided with full details of the proposed transaction (including written certification that the investment opportunity did not arise by virtue of the access person’s activities on behalf of a client) and, if approved, will be subject to continuous monitoring for possible future conflicts.

Interested Transactions

No access person shall recommend any securities transactions for a client without having disclosed his or her interest, if any, in such securities or the issuer thereof, including without limitation:

•

any direct or indirect beneficial ownership of any securities of such issuer;

•

any contemplated transaction by such person in such securities;

•

any position with such issuer or its affiliates; and

•

any present or proposed business relationship between such issuer or its affiliates and such person or any party in which such person has a significant interest.

Protecting the Confidentiality of Client Information

Confidential Client Information

In the course of investment advisory activities of Hillcrest Wells Advisors, LLC, the firm gains access to nonpublic information about its clients. Such information may include a person's status as a client, personal financial and account information, the allocation of assets in a client portfolio, the composition of investments in any client portfolio, information relating to services performed for or transactions entered into on behalf of clients, advice provided by Hillcrest Wells Advisors, LLC to clients, and data or analyses derived from such non-public personal information (collectively referred to as "Confidential Client Information"). All Confidential Client Information, whether relating to Hillcrest Wells Advisors, LLC's current or former clients, is subject to the Code's policies and procedures. Any doubts about the confidentiality of information must be resolved in favor of confidentiality.

Non-Disclosure Of Confidential Client Information

All information regarding Hillcrest Wells Advisors, LLC's clients is confidential. Information may only be disclosed when the disclosure is consistent with the firm's policy and the client's direction. Hillcrest Wells Advisors, LLC does not share Confidential Client Information with any third parties, except in the following circumstances:

•

As necessary to provide service that the client requested or authorized, or to maintain and service the client's account. Hillcrest Wells Advisors, LLC will require that any financial intermediary, agent or other service provider utilized by Hillcrest Wells Advisors, LLC (such as broker-dealers or sub-advisers) comply with substantially similar standards for non-disclosure and protection of Confidential Client Information and use the information provided by Hillcrest Wells Advisors, LLC only for the performance of the specific service requested by Hillcrest Wells Advisors, LLC;

•

As required by regulatory authorities or law enforcement officials who have jurisdiction over Hillcrest Wells Advisors, LLC, or as otherwise required by any applicable law. In the event Hillcrest Wells Advisors, LLC is compelled to disclose Confidential Client Information, the firm shall provide prompt notice to the clients affected, so that the clients may seek a protective order or other appropriate remedy. If no protective order or other appropriate remedy is obtained, Hillcrest Wells Advisors, LLC shall disclose only such information, and only in such detail, as is legally required;

•

To the extent reasonably necessary to prevent fraud, unauthorized transactions or liability.

Employee Responsibilities

All access persons are prohibited, either during or after the termination of their employment with Hillcrest Wells Advisors, LLC, from disclosing Confidential Client Information to any person or entity outside the firm, including family members, except under the circumstances described above. An access person is permitted to disclose Confidential Client Information only to such other access persons who need to have access to such information to deliver the Hillcrest Wells Advisors, LLC's services to the client.

Access persons are also prohibited from making unauthorized copies of any documents or files containing Confidential Client Information and, upon termination of their employment with Hillcrest Wells Advisors, LLC, must return all such documents to Hillcrest Wells Advisors, LLC

Any supervised person who violates the non-disclosure policy described above will be subject to disciplinary action, including possible termination, whether or not he or she benefited from the disclosed information.

Security Of Confidential Personal Information

Hillcrest Wells Advisors, LLC enforces the following policies and procedures to protect the security of Confidential Client Information:

•

The firm restricts access to Confidential Client Information to those access persons who need to know such information to provide Hillcrest Wells Advisors, LLC's services to clients;

•

Any access person who is authorized to have access to Confidential Client Information in connection with the performance of such person's duties and responsibilities is required to keep such information in a secure compartment, file or receptacle on a daily basis as of the close of each business day;

•

All electronic or computer files containing any Confidential Client Information shall be password secured and firewall protected from access by unauthorized persons;

•

Any conversations involving Confidential Client Information, if appropriate at all, must be conducted by access persons in private, and care must be taken to avoid any unauthorized persons overhearing or intercepting such conversations.

Privacy Policy

As a registered investment adviser, Hillcrest Wells Advisors, LLC and all supervised persons, must comply with SEC Regulation S-P, which requires investment advisers to adopt policies and procedures to protect the "nonpublic personal information" of natural person clients. "Nonpublic information," under Regulation S-P, includes personally identifiable financial information and any list, description, or grouping that is derived from personally identifiable financial information. Personally identifiable financial information is defined to include information supplied by individual clients, information resulting from transactions, any information obtained in providing products or services. Pursuant to Regulation S-P Hillcrest Wells Advisors, LLC has adopted policies and procedures to safeguard the information of natural person clients.

Enforcement and Review of Confidentiality and Privacy Policies

Michael J. Wagner is responsible for reviewing, maintaining and enforcing Hillcrest Wells Advisors, LLC's confidentiality and privacy policies and is also responsible for conducting appropriate employee training to ensure adherence to these policies. Any exceptions to this policy requires the written approval of Michael J. Wagner.

Compliance Procedures

Reporting Requirements

Every access person shall provide initial and annual holdings reports and quarterly transaction reports to Michael J. Wagner which must contain the information described below.

1.

Initial Holdings Report

Every access person shall, no later than ten (10) days after the person becomes an access person, file an initial holdings report containing the following information:

•

The title and exchange ticker symbol or CUSIP number, type of security, number of shares and principal amount (if applicable) of each reportable security in which the access person had any direct or indirect beneficial interest ownership when the person becomes an access person;

•

The name of any broker, dealer or bank, account name, number and location with whom the access person maintained an account in which any securities were held for the direct or indirect benefit of the access person; and

•

The date that the report is submitted by the access person.

The information submitted must be current as of a date no more than forty-five (45) days before the person became an access person.

2.

Annual Holdings Report

Every access person shall, no later than April 30 each year, file an annual holdings report containing the same information required in the initial holdings report as described above. The information submitted must be current as of a date no more than forty-five (45) days before the annual report is submitted.

3.

Quarterly Transaction Reports

Every access person must, no later than thirty (30) days after the end of each calendar quarter, file a quarterly transaction report containing the following information:

With respect to any transaction during the quarter in a reportable security in which the access persons had any direct or indirect beneficial ownership:

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The date of the transaction, the title and exchange ticker symbol or CUSIP number, the interest rate and maturity date (if applicable), the number of shares and the principal amount (if applicable) of each covered security;

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The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);

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The price of the reportable security at which the transaction was effected;

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The name of the broker, dealer or bank with or through whom the transaction was effected; and

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The date the report is submitted by the access person.

4.

Exempt Transactions

An access person need not submit a report with respect to:

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Transactions effected for, securities held in, any account over which the person has no direct or indirect influence or control;

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Transactions effected pursuant to an automatic investment plan;

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A quarterly transaction report if the report would duplicate information contained in securities transaction confirmations or brokerage account statements that Hillcrest Wells Advisors, LLC holds in its records so long as the firm receives the confirmations or statements no later than 30 days after the end of the applicable calendar quarter;

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Any transaction or holding report if Hillcrest Wells Advisors, LLC has only one access person, so long as the firm maintains records of the information otherwise required to be reported

5.

Monitoring and Review of Personal Securities Transactions

Michael J. Wagner will monitor and review all reports required under the Code for compliance with Hillcrest Wells Advisors, LLC's policies regarding personal securities transactions and applicable SEC rules and regulations.

Richard Capalbo is required to initial all reviewed reports. Michael J. Wagner may also initiate inquiries of access persons regarding personal securities trading. Access persons are required to cooperate with such inquiries and any monitoring or review procedures employed Hillcrest Wells Advisors, LLC Any transactions for any accounts of Michael J. Wagner will be reviewed by Emile Molineaux. After completion of the review, Emile Molineaux will initial the report. Michael J. Wagner shall at least annually identify all access persons who are required to file reports pursuant to the Code and will inform such access persons of their reporting obligations.

Certification

Initial Certification

All supervised persons will be provided with a copy of the Code and must initially certify in writing to Michael J. Wagner that they have: (i) received a copy of the Code; (ii) read and understand all provisions of the Code; (iii) agreed to abide by the Code; and (iv) reported all account holdings as required by the Code.

Acknowledgement of Amendments

All supervised persons shall receive any amendments to the Code and must certify to Michael J. Wagner in writing that they have: (i) received a copy of the amendment; (ii) read and understood the amendment; (iii) and agreed to abide by the Code as amended.

Annual Certification

All supervised persons must annually certify in writing to Michael J. Wagner that they have: (i) read and understood all provisions of the Code; (ii) complied with all requirements of the Code; and (iii) submitted all holdings and transaction reports as required by the Code.

Further Information

Supervised persons should contact Michael J. Wagner regarding any inquiries pertaining to the Code or the policies established herein.

Records

Michael J. Wagner shall maintain and cause to be maintained in a readily accessible place the following records:

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A copy of any code of ethics adopted by the firm pursuant to Advisers Act Rule 204A-1 which is or has been in effect during the past five years;

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A record of any violation of Hillcrest Wells Advisors, LLC's Code and any action that was taken as a result of such violation for a period of five years from the end of the fiscal year in which the violation occurred;

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A record of all written acknowledgements of receipt of the Code and amendments thereto for each person who is currently, or within the past five years was, an access person which shall be retained for five years after the individual ceases to be an access person of Hillcrest Wells Advisors, LLC;

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A copy of each report made pursuant to Advisers Act Rule 204A-1, including any brokerage confirmations and account statements made in lieu of these reports;

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A list of all persons who are, or within the preceding five years have been, access persons;

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A record of any decision and reasons supporting such decision to approve an access persons' acquisition of securities in IPOs and limited offerings within the past five years after the end of the fiscal year in which such approval is granted.

Reporting Violations and Sanctions

All supervised persons shall promptly report to Michael J. Wagner or an alternate designee all apparent violations of the Code. Any retaliation for the reporting of a violation under this Code will constitute a violation of the Code. Michael J. Wagner shall promptly report to senior management all apparent material violations of the Code. When Michael J. Wagner finds that a violation otherwise reportable to senior management could not be reasonably found to have resulted in a fraud, deceit, or a manipulative practice in violation of Section 206 of the Advisers Act, he or she may, in his or her discretion, submit a written memorandum of such finding and the reasons therefore to a reporting file created for this purpose in lieu of reporting the matter to senior management.

Senior management shall consider reports made to it hereunder and shall determine whether or not the Code has been violated and what sanctions, if any, should be imposed. Possible sanctions may include reprimands, monetary fine or assessment, or suspension or termination of the employee’s employment with the firm.