File No. 333-43554
File No. 811-10039
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
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Post-Effective Amendment No. [ ]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1 [X]
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J&B FUNDS
(Exact name of Registrant as Specified in Charter)
BMA Tower, 700 Karnes Blvd., Kansas City, MO 64108-3306
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (816) 751-5900
Stephen S. Soden
BMA Tower, 700 Karnes Blvd., Kansas City, MO 64108-3306
(Name and Address of Agent for Service)
With a copy to:
Michael P. O'Hare, Esq.
Stradley Ronon Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, P 19103
Approximate Date of Proposed Public Offering: As soon as practical after the
effective date of this
registration statement.
It is proposed that this filing become effective (check appropriate box):
/_/ immediately upon filing pursuant to paragraph (b)
/_/ on (date)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.
The Registrant hereby amends this Registration Statement on such dates
as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this
Registration Statement shall become effective on such date as the
Commission, acting pursuant to such Section 8(a), may determine.
Doc. #346470 v.01
Prospectus
December 1, 2000
J&B Funds
Manager And Distributor:
Jones & Babson, Inc.
Kansas City, Missouri
Equity Funds
J&B Small-Cap International Fund
J&B Small-Cap Aggressive Growth Fund
J&B Mid-Cap Aggressive Growth Fund
Shares of the Fund have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the adequacy of this
Prospectus. Any representation to the contrary is a criminal offense.
Table of Contents
Information About the Funds
Investment Objectives and Principal Investment Strategies 2
Principal Risk Factors 4
Past Performance 5
Fees and Expenses 5
Management 6
Financial Highlights 8
Information About Investing
How to Purchase Shares 8
How to Redeem Shares 8
Shareholder Services 9
How Share Price is Determined 9
Dividends, Distributions and Their Taxation 10
Additional Policies About Transactions 10
Conducting Business with the J&B Funds 12
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
J&B FUNDS OBJECTIVE PRINCIPAL RISKS
J&B SMALL-CAP Long term growth Market Risks
INTERNATIONAL FUND of capital Small Company Risks
International Risks
J&B SMALL-CAP Above average Market Risks
AGGRESSIVE GROWTH FUND capital appreciation Small Company Risks
J&B MID-CAP Above average capital Market Risks AGGRESSIVE GROWTH FUND capital
appreciation Small Company Risks
The Principal Risks associated with each Fund are described more fully below in
the section titled Principal Risk Factors.
PRINCIPAL INVESTMENT STRATEGIES
The Funds and their investment advisers (the "Adviser") intend to pursue their
objectives by principally investing as described below:
J&B SMALL-CAP INTERNATIONAL FUND - This Fund's objective is long-term growth of
capital. The Fund invests primarily in a diversified portfolio of equity
securities (including common stocks, warrants, and convertible preferred stocks
and bonds). The Fund may also purchase American, European or International
Depository Receipts. The Fund's Adviser selects stocks of smaller, less-profiled
companies - particularly outside the U.S. - with market capitalizations less
than $1.5 billion at time of purchase and which the Adviser believes offer above
average revenue and earnings growth potential.
To select stocks for the Fund, the Adviser performs intensive fundamental
research and analysis to identify companies and economic sectors with attractive
growth prospects. The Adviser looks for companies with strong management,
innovative products and services that give the company a competitive advantage,
as well as strong fundamental financial characteristics. The Fund generally
invests in companies that are growing faster than the economy in which they
operate, the industry in which they participate and their own historical growth
rate.
The Fund will generally invest in at least three foreign developed countries,
and emerging or developing market securities will make up no more than 35% of
the Fund's assets at time of purchase. For purposes of determining the countries
in which the Fund invests, the Fund considers developed countries to include
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Israel, Italy, Japan, Mexico, the Netherlands, New Zealand,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The Fund considers emerging or developing market countries to be those countries
not listed as developed countries above.
J&B SMALL-CAP AGGRESSIVE GROWTH FUND - This Fund's objective is above average
Capital appreciation. The Fund invests primarily in equity securities (including
common stocks, warrants, and convertible preferred stocks and bonds) of U.S.
companies with small market capitalizations (i.e., generally under $1.5 billion)
that the Fund's Adviser believes are financially sound companies with attractive
long term growth potential. The Fund's Adviser employs an intensive,
research-driven approach in an effort to identify promising stocks and sectors
before they are widely held in other growth portfolios. To reduce risk, the
Adviser diversifies the Fund's portfolio across various growth sectors of the
economy.
J&B MID-CAP AGGRESSIVE GROWTH FUND - This Fund's investment objective is above
average capital appreciation. The Fund seeks to invest in a diversified,
fundamentally sound portfolio of equity securities (including common stocks,
warrants and convertible preferred stocks and bonds) of companies whose earnings
growth rates are accelerating above market expectations. The Fund also seeks to
control the level of risk in its portfolio, by screening potential stocks with
measures of market risk.
The Fund's Adviser uses a disciplined, proprietary investment process based
largely on quantitative analysis. For every company in a universe of
approximately 9,000 U.S. and 12,000 international publicly traded stocks, the
Adviser uses price information and sophisticated statistical techniques to
calculate a weekly measure of excess return over a market index, as well as a
measure of risk based on the volatility of the share price.
The Adviser uses a number of fundamental screening techniques to further narrow
the potential portfolio selections, including tests to ensure that the stock has
a liquid trading market and meets a certain market capitalization range ($1.5
million to $10 billion). The Adviser also performs traditional financial
statement analysis to evaluate a company's cash flow, debt burden and overall
financial soundness. Following the quantitative and qualitative analysis, the
Fund is expected to normally hold between 40 and 70 stocks, diversified by
industry and sector.
TEMPORARY INVESTMENTS
Each Fund may respond to adverse market, economic, political or other conditions
by investing up to 100% of its assets in temporary defensive investments, such
as cash, short-term debt obligations or other high quality investments. Each
Fund may also invest in these types of securities or hold cash while looking for
suitable investment opportunities or to maintain liquidity. In addition, the J&B
Small-Cap International Fund may invest in larger foreign companies or in
U.S.-based companies if, in the adviser's opinion, they represent better
prospects for long-term growth than smaller foreign companies or than foreign
companies generally. During such periods, the Funds may not achieve their
investment objectives.
TRADING AND TURNOVER
Due to their investment strategies, the Small-Cap and the Mid-Cap Aggressive
Growth Funds may buy and sell securities frequently. This may result in higher
transaction costs and additional capital gains tax liabilities. Frequent trading
could also mean higher brokerage commissions and other transaction costs, which
could reduce the Funds' return. The Small-Cap International Fund will normally
invest for the long term (but may sell a stock at any time the Adviser believes
that conditions have changed and the company's prospects are less attractive).
PRINCIPAL RISK FACTORS
As with any mutual fund, there is a risk that you could lose money by investing
in the Funds. Investments are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
MARKET RISKS (ALL FUNDS)
Historically, the equity markets have moved in cycles, and the value of the
Funds' equity securities may fluctuate drastically in price from day to day.
Since the Funds invest primarily in equity securities, the value of the Funds
may go down.
SMALL COMPANY RISKS (ALL FUNDS)
Generally, smaller and less seasoned companies have more potential for rapid
growth. However, they often involve greater risk than larger companies. They may
not have the management experience, financial resources, product diversification
and competitive strengths of larger companies.
Smaller company stocks tend to be bought and sold less often and in smaller
amounts than larger company stocks. Because of this, if a Fund wants to sell a
large quantity of a small company stock it may have to sell at a lower price
than its Adviser might prefer, or it may have to sell in small quantities over a
period of time.
Each of these Funds may invest a portion of its assets in securities of
companies offering shares in IPOs. Because IPO shares frequently are volatile in
price, the Funds may hold IPO shares for a very short period of time. This may
increase the turnover of the Funds' portfolio and may lead to increased expenses
to the Funds, such as commissions and transaction costs. By selling shares, a
Fund may realize taxable gains it will subsequently distribute to shareholders.
In addition, the market for IPO shares can be speculative and/or inactive for
extended periods of time. There is no assurance that a Fund will be able to
obtain allocations of IPO shares. The limited number of shares available for
trading in some IPOs may make it more difficult for the Fund to buy or sell
significant amounts of shares without an unfavorable impact on prevailing
prices. Investors in IPO shares can be affected by substantial dilution in the
value of their shares, by sales of additional shares and by concentration of
control in existing management and principal shareholders.
The Funds' investments in IPO shares may include the securities of unseasoned
companies (companies with less than three years of continuous operations), which
presents risks considerably greater than commons stocks of more established
companies. These companies may have limited operating histories and their
prospects for profitability may be uncertain. These companies may be involved in
new and evolving businesses and may be vulnerable to competition and changes in
technology, markets and economic conditions. They may be more dependent on key
managers and third parties and may have limited product lines.
INTERNATIONAL RISKS
International investing by the Small-Cap International Fund poses additional
risks such as currency fluctuation and political instability. These risks are
inherently passed on to the company's shareholders and in turn, to the Fund's
shareholders.
Investing in developing countries may pose additional risks. Securities issued
by companies in developing countries may not be as liquid as those in more
developed countries. In addition, regulations in developing countries may not be
as strong nor information as readily available.
The Small-Cap International Fund may also purchase foreign currency or foreign
currency forwards in order to hedge the portfolio from the risk that the U.S.
Dollar moves in value in relation to foreign denominated security holdings.
There is no assurance that hedging transactions will eliminate fluctuations in
the prices of the Fund's portfolio securities or in foreign exchange rates or
prevent loss if the prices of these securities should decline. In addition,
because there is a risk of loss to the Fund if the other party does not complete
the transaction, these hedging contracts will be entered into only with approved
parties.
PAST PERFORMANCE
The Funds are new as of December 1, 2000 therefore, there is no past performance
information.
FEES & EXPENSES
There are no sales charges imposed in connection with an investment in any of
the Funds. This table describes each Fund's annual operating fees and expenses
that you may pay if you buy and hold shares of a Fund.
Small-Cap Mid-Cap Small-Cap
Aggressive Aggressive International
Growth Growth Fund
Fund Fund
Management Fees 1.55% 1.35% 1.20%
Distribution (12b-1) Fees None None None
Other Expenses 0.40% 0.40% 0.40%
Total Annual Fund Operating
Expenses 1.95% 1.75% 1.60%
Fee waivers and expense
reimbursements* (0.35%) (0.35%) (0.35%)
Net Total Annual Fund Operating
Expenses 1.60% 1.40% 1.25%
*The Funds' Manager has contractually agreed to waive fees and/or to make
payments in order to keep total operating expenses of the Funds to the level
described above under Net Total Annual Fund Operating Expenses for a period of
one year. For more information regarding these fees and other potential
expenses, see "How to Purchase Shares."
The following examples intend to help you compare the cost of investing in each
Fund with the cost of investing in other mutual funds. The Examples assume that
you invest $10,000 in a Fund for the time periods indicated and then redeem all
your shares at the end of those periods. The Examples also assume 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
J&B Small-Cap International Fund $163 $612
J&B Small-Cap Aggressive Growth Fund $143 $551
J&B Mid-Cap Aggressive Growth Fund $127 $505
MANAGEMENT
The management and affairs of the Funds are supervised by the J&B Funds Board of
Trustees under the laws of the State of Delaware. The Trustees have approved
agreements under which, as described below, certain companies provide essential
management and investment advisory services to the Funds.
INVESTMENT MANAGER
Jones & Babson, Inc. (the "Manager"), 700 Karnes Boulevard, Kansas City,
Missouri 64108, serves as the investment manager of each Fund and, as such,
provides each Fund with professional investment supervision and management. The
Manager is a wholly-owned subsidiary of Business Men's Assurance Company of
America ("BMA"). Assicurazioni Generali S.p.A., an insurance organization
founded in 1831 based in Trieste, Italy, is the ultimate parent of BMA.
The Manager, founded in 1959, has been the Manager for the J&B Funds since their
inception. It presently also serves as the investment manager for the nine
mutual funds in the Babson Funds group and for the five mutual funds in the
Buffalo Funds group.
The Manager oversees each Fund's day-to-day operations and supervises the
purchase and sale of Fund investments. The Manager employs other advisory firms
as sub-advisers to make investment decisions for the Funds.
The Manager serves in its capacity as investment manager under an investment
management agreement entered into with J&B Funds on behalf of each Fund. The
investment management agreement provides for each Fund to pay the Manager a
monthly fee equal on an annual basis to 1.35%, 1.20% and 1.55% of the average
daily net assets of the Small-Cap Aggressive Growth, Mid-Cap Aggressive Growth
and International Small-Cap Funds, respectively. The Manager has contractually
agreed for a one year period to waive all or a portion of such fees and/or to
make payments to limit Fund expenses in order to limit each Fund's annual
operating expenses to certain amounts (see the "Fees & Expenses" chart above).
If a Fund's assets grow and relative expenses come down to a point where fee
waivers or expense payments are no longer necessary to maintain competitive
expense levels, the Manager may seek to recoup amounts waived or expense
payments that it made. The Manager shall only be entitled to recoup such amounts
for a period of three years from the date the amount was waived or paid.
The investment management agreement provides for the Funds to pay for all other
services and expenses not specifically assumed by the Manager. Examples of
expenses paid by the Funds include registration fees, foreign custody and
accounting fees, regulatory reports printing and distribution and the fees of
outside legal and accounting firms.
In addition, operating expenses not required in the normal operation of the
Funds are also payable by the Funds. These expenses include taxes, interest,
governmental charges and fees, including registration of the Fund with the
Securities and Exchange Commission and the fees payable to various States,
brokerage costs, dues, and all extraordinary costs including expenses arising
out of anticipated or actual litigation or administrative proceedings.
SUB-ADVISERS
For all of the Funds, the Manager works with Sub-Advisers, financial service
companies that specialize in certain types of investing. However, the Manager
still retains ultimate responsibility for managing the Funds. Each Sub-
Adviser's role is to make investment decisions for the Funds according to each
Fund's investment objectives, policies and restrictions.
The following organizations act as Sub-Advisers to the Funds: J&B SMALL-CAP
INTERNATIONAL FUND. Sub-Advised by Denver Investment Advisors, LLC, ("DIA"),
Seventeenth Street Plaza, 1225 17th Street, Denver, Colorado 80202. DIA was
founded in 1958 and as of June 30, 2000, has nearly eight billion dollars in
total assets under management. Michael W. Gerding, CFA, manages the Fund. He
joined DIA in 1999, and has over 15 years investment management experience. From
1990 to 1999, Mr. Gerding was a portfolio manager with Founders Asset
Management.
J&B SMALL-CAP AGGRESSIVE GROWTH FUND. Sub-advised by Knappenberger Bayer
("KB"), 601 Carlson Parkway, Suite 950, Minnetonka, MN 55305. KB was founded
in 1998 and as of June 30, 2000 has over $100 million in assets under
management. Gail M. Knappenberger, David G. Bayer and Jill A. Thompson manage
the Fund. Mr. Knappenberger was Executive Vice President at Winslow Capital
Management from 1993 to 1998 and has over 28 years of investment management
experience. Mr. Bayer was with American Express Financial Advisors from 1992
to 1998, where he managed IDS Strategy Aggressive mutual fund. He has over 13
years of investment management experience. Ms. Thompson was Managing Director
at First American Asset Management where she co-managed the firm's small and
mid-cap growth products. She has over 11 years of investment management
experience.
J&B MID-CAP AGGRESSIVE GROWTH FUND. Sub-advised by McKinley Capital
Management, Inc., ("McKinley"), 3301 C. Street, Anchorage, Alaska 99503.
McKinley was founded in 1990 and as of September 30, 2000 has nearly $5
billion in assets under management. Robert B. Gillam and Alexander H. Slivka
manage the Fund. Mr. Gillam is President and Chief Investment Officer of
McKinley, which he founded in 1990. He has over 30 years experience in the
financial services industry. Mr. Slivka is manager of Domestic Portfolio
Operations, joining McKinley in 1997. Prior to that he was President of
National Asset Management from 1994 to 1997, and served as a Board Member of
the Chicago Stock Exchange. He has over 17 years of investment management
experience.
Under the Sub-Advisory Agreements, the Manager has agreed to pay each Sub-
Adviser a fee for its services out of the fees the Manager receives from the
Funds. The Manager shall pay each Sub-Adviser fees based on the following
percentages of each Fund's average daily net assets:
Fund Range of Sub-Advisory Fees By Assets
J&B Small-Cap International Fund 0.775% Between 0 and $250 million
0.700% Over $250 Million
J&B Small-Cap Aggressive Growth Fund 0.650% Between 0 and $150 million
0.600% Over $150 Million
J&B Mid-Cap Aggressive Fund 0.500% Between 0 and $5 million
0.470% Between 5 and $25 million
0.450% Over $25 Million
FINANCIAL HIGHLIGHTS
The Funds are new as of December 1, 2000, therefore there are no financial
highlights.
HOW TO PURCHASE SHARES
HOW TO BUY SHARES (see accompanying chart on page 12 for details) By phone, mail
or wire
Through Automatic Monthly Investments
Through exchanges from a J&B, Babson or Buffalo Fund (non-fiduciary
accounts only)
MINIMUM INITIAL INVESTMENT
$2,500 for most accounts
$250 for IRA and Uniform Transfer (Gift) to Minors accounts $100 with an
Automatic Monthly Investment $1,000 for exchanges from another fund ($100 for
IRAs and Uniform Gifts to Minors accounts)
MINIMUM ADDITIONAL INVESTMENT
$100 by phone
$1,000 By Wire
$50 for Automatic Monthly Investments, mail or ACH (automated clearing house)
$1,000 for exchanges from another fund ($100 for IRAs and Uniform Gifts
to Minors accounts)
MINIMUM ACCOUNT SIZE
You must maintain a minimum account value equal to the current minimum initial
investment ($2,500). If your account falls below this amount due to redemptions
(not market action), we may notify you and ask you to increase the account to
the minimum. We will close the account and send your money if you do not bring
the account up to the minimum within 60 days after we mail you the notice.
HOW TO REDEEM SHARES
You may withdraw from your Fund's account at any time in the following amounts:
any amount for redemptions requested by mail or phone to address of record
$1,000 or more for redemptions wired to your account ($10 fee)
($100 minimum for ACH to bank account)
$50 or more for redemptions by a systematic redemption plan (there may be a
fee)
$1,000 or more for exchanges to another fund ($100 for IRAs and Uniform
Gifts
to Minors accounts)
$100 or more for redemptions by automatic monthly exchange to another fund
SHAREHOLDER SERVICES
The following services are also available to shareholders. Please call 1-866-
409-2550 for more information:
Uniform Transfers (Gifts) to Minors accounts
Accounts for corporations or partnerships
Sub-Accounting Services for tax qualified retirement plans and others
Prototype Retirement Plans for the self-employed, partnerships and
corporations.
Traditional IRA accounts
Roth IRA accounts
Simplified Employee Pensions (SEPs)
HOW SHARE PRICE IS DETERMINED
Shares of the Funds are purchased or redeemed at the net asset value per share
next calculated after your purchase order and payment or redemption order is
received in good order (see "Additional Policies" below). In the case of certain
institutions which have made satisfactory payment or redemption arrangements
with the Funds, orders may be processed at the net asset value per share next
effective after receipt by that institution.
The per share calculation is made by subtracting from the Fund's total assets
any liabilities and then dividing into this amount the total outstanding shares
as of the date of the calculation. The net asset value per share is computed
once daily, Monday through Friday, at 4:00 p.m. (Eastern Time) on days when the
Funds are open for business (generally the same days that the New York Stock
Exchange is open for trading).
Each security owned by the Funds that is listed on an Exchange is valued at its
last sale price on that Exchange on the date as of which assets are valued.
Where the security is listed on more than one Exchange, the Funds will use the
price of that Exchange which they generally consider to be the principal
Exchange on which the stock is traded. Lacking sales, the security is valued at
the mean between the last current closing bid and asked prices. An unlisted
security for which over-the-counter market quotations are readily available is
valued at the mean between the last current bid and asked prices. For securities
that are primarily listed on foreign exchanges that may trade on weekends or
other days that the Funds do not price their shares, the net asset value of the
Funds' shares may change on days when shareholders will not be able to purchase
or redeem shares. When market quotations are not readily available, any security
or other asset is valued at its fair value as determined under procedures
approved by the Board of Trustees.
DIVIDENDS, DISTRIBUTIONS AND THEIR TAXATION
Your distributions will be reinvested automatically in additional shares of the
same Fund unless you have elected on your original application, or by written
instructions filed with the Funds, to have them paid in cash ($10 minimum check
amount). There are no fees or sales charges on reinvestments.
If you buy shares of any Fund shortly before the record date, please keep in
mind that any distribution will lower the value of the Fund's shares by the
amount of the distribution and you will then receive a portion of the price back
in the form of a taxable distribution.
DISTRIBUTIONS - Each Fund pays shareholders distributions from its net
investment income and from any net capital gains that it has realized on the
sale of the securities. Each of these distributions will be declared semi-
annually on or before June 30 and December 31.
TAX CONSIDERATIONS - In general, Fund distributions are taxable to you as either
ordinary income or capital gains. This is true whether you reinvest your
distributions in additional Fund shares or receive them in cash. Any capital
gains a Fund distributes are taxable to you as long-term capital gains no matter
how long you have owned your shares.
By law, a Fund must withhold 31% of your taxable distributions and proceeds if
you do not provide your correct social security or taxpayer identification
number, or if the IRS instructs the Fund to do so.
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
In general, when you sell your shares of a Fund, you may have a capital gain or
loss. For tax purposes, an exchange of your Fund shares for shares of a
different J&B, Buffalo or Babson Fund is the same as a sale. The individual tax
rate on any gain from the sale or exchange of your fund shares depends on your
marginal tax bracket and on how long the shares have been held.
Many states grant tax-free status to dividends paid from interest earned on
direct obligations of the U.S. government, subject to certain restrictions.
Fund distributions and gains from the sale or exchange of your fund shares
generally will be subject to state and local income tax. Any foreign taxes paid
by the Funds on their investments may be passed through to you as a foreign tax
credit. Non-U.S. investors may be subject to U.S. withholding and estate tax.
You should consult your tax advisor about the federal, state, local or foreign
tax consequences of your investment in a Fund.
ADDITIONAL POLICIES ABOUT TRANSACTIONS
We cannot process transaction requests that are not complete and in good order
as described in this section. We may cancel or change our transaction policies
without notice. To avoid delays, please call us if you have any questions about
these policies.
PURCHASES - We may reject orders when we believe it is in the best interest of
the Funds and their shareholders.
REDEMPTIONS - The Funds try to send redemption proceeds to the proper party, as
instructed, as soon as practicable after a redemption request has been received
in "good order" and accepted, but reserves the right under certain circumstances
to delay redemption transactions up to seven days, or as required by applicable
law. The Manager believes that certain investors who try to "time the market" by
purchasing and redeeming shares from the Funds on a regular basis, may disrupt
the investment process and pose additional transactions costs to the Funds. In
those cases the Manager may delay redemption proceeds as described above or take
other actions it deems necessary to discourage such activity.
If you request a redemption within 15 days of purchase, we will delay sending
your proceeds until we are certain that we have collected unconditional payment,
which may take up to 15 days from the date of purchase. For your protection, if
your account address has been changed within the last 30 days, your redemption
request must be in writing and signed by each account owner, with signature
guarantees. The right to redeem shares may be temporarily suspended in emergency
situations only as permitted under Federal law.
We cannot accept requests that contain special conditions or effective dates. We
may request additional documentation to insure that a request is genuine. Under
certain circumstances, we may pay you proceeds in the form of portfolio
securities owned by the Fund being redeemed. If you receive securities instead
of cash, you may incur brokerage costs when converting into cash.
SIGNATURE GUARANTEES - You can get a signature guarantee from most banks,
or credit unions or securities dealers, but not a notary public. For your
protection, we require a guaranteed signature if you request:
A redemption check sent to a different payee, bank or address than we have on
file.
A redemption check mailed to an address that has been changed within the last
30 days.
A redemption for $50,000 or more in writing.
A change in account registration or redemption instructions
(including withdrawal by draft election).
CORPORATIONS, TRUSTS AND OTHER ENTITIES - Additional documentation is normally
required for corporations, fiduciaries and others who hold shares in a
representative or nominee capacity. We cannot process your request until we have
all documents in the form required. Please call us first to avoid delays.
EXCHANGES TO ANOTHER FUND - You must meet the minimum investment requirement of
the Fund you are exchanging into. The names and registrations on the two
accounts must be identical. Your shares must have been held in an open account
for 15 days or more and we must have received good payment before we will
exchange shares.
TELEPHONE SERVICES - During periods of increased market activity, you may have
difficulty reaching us by telephone. If this happens, contact us by mail. We may
refuse a telephone request, including a telephone redemption request. We will
use reasonable procedures to confirm that telephone instructions are genuine. If
such procedures are not followed, the Funds may be liable for losses due to
unauthorized or fraudulent instructions. At our option, we may limit the
frequency or the amount of telephone redemption requests. Neither the Funds nor
Jones & Babson, Inc. assumes responsibility for the authenticity of telephone
redemption requests.
CONDUCTING BUSINESS WITH THE J&B FUNDS BY PHONE
1-866-409-2550
(You must authorize each type of telephone transaction on your account
application or the appropriate form, available from us. All account owners must
sign. When you call, we may request personal identification and tape record the
call.
HOW TO OPEN ACCOUNT BY PHONE
If you already have an account with us and
you have authorized telephone exchanges, you may call to open an account in
another J&B, Babson or Buffalo Fund by exchange ($2,500 minimum). The names and
registrations on the accounts must be identical.
HOW TO ADD TO AN ACCOUNT BY PHONE
You may make investments ($100 minimum) by telephone. After we have received
your telephone call, we will deduct from your checking account the cost of the
shares.
Availability of this service is subject to approval by the Funds and
participating banks.
HOW TO SELL SHARES BY PHONE
You may withdraw any amount ($1,000 minimum if wired) by telephone. We will send
funds only to the address or bank account on file with us. Provide the Fund's
name, your account number, the names of each account owner (exactly as
registered), and the number of shares or dollar amount to be redeemed. For
wires, also provide the bank name and bank account number. Wires will be subject
to a $10 fee.
HOW TO EXCHANGE SHARES BY PHONE
You may exchange shares ($1,000 minimum or the initial minimum fund requirement)
for shares in another J&B, Babson or Buffalo Fund which have been held in open
account for 15 days or more.
All account owners are automatically granted telephone and Fund web site
exchange privileges unless they decline them explicitly in writing, either on
the account application or by writing to the J&B Funds.
CONDUCTING BUSINESS WITH THE J&B FUNDS BY MAIL
Initial Purchases, Redemptions and all Correspondence:
The J&B Funds
P.O. Box 219757
Kansas City, MO 64121-9757
Subsequent Purchases:
The J&B Funds
P.O. Box 219779
Kansas City, MO 64121-9779
HOW TO OPEN ACCOUNT BY MAIL
Complete and sign the application which accompanies this Prospectus. Your
initial investment must meet the minimum amount. Make your check payable to UMB
Bank, n.a. and be sure to indicate the name of the Fund in which you are
investing.
HOW TO ADD TO AN ACCOUNT BY MAIL
Make your check payable to UMB Bank, n.a. and mail it to us. Always identify
your account number or include the detachable investment stub (from your
confirmation statement).
HOW TO SELL SHARES BY MAIL
In a letter, include the genuine signature of each registered owner (exactly as
registered), the name of each account owner, the account number and the number
of shares or the dollar amount to be redeemed. We will send funds only to the
address of record.
HOW TO EXCHANGE SHARES BY MAIL
In a letter, include the genuine signature of each registered owner, the account
number, the number of shares or dollar amount to be exchanged ($1,000 minimum)
and the J&B, Babson or Buffalo Fund into which the amount is being transferred.
CONDUCTING BUSINESS WITH THE J&B FUNDS BY WIRE
UMB Bank, n.a.,
Kansas City, Missouri, ABA #101000695
For Account Number: 9870326213
Please provide:
(Fund Number)/(J&B Account Number)/(Name on Account)
HOW TO OPEN ACCOUNT BY WIRE
Call us first to get an account number. We will require information such as your
Social Security or Taxpayer Identification Number, the amount being wired
($2,500 minimum), and the name and telephone number of the wiring bank. Then
tell your bank to wire the amount. You must send us a completed application as
soon as possible or payment of your redemption proceeds will be delayed.
HOW TO ADD TO AN ACCOUNT BY WIRE
Wire share purchases ($1,000 minimum) should include the names of each account
owner, your account number and the J&B Fund in which you are purchasing shares.
You should notify us by telephone that you have sent a wire purchase order to
UMB Bank, n.a.
HOW TO SELL SHARES BY WIRE
Redemption proceeds ($1,000 minimum) may be wired to your pre-identified bank
account. A $10 fee is deducted. If we receive your request before 4:00 P.M.
(Eastern Time) we will normally wire funds the following business day. If we
receive your request later in the day, we will normally wire funds on the second
business day. Contact your bank about the time of receipt and availability.
HOW TO EXCHANGE SHARES BY WIRE
Not applicable.
CONDUCTING BUSINESS WITH THE J&B FUNDS THROUGH AUTOMATIC TRANSACTIONS PLANS
You must authorize each type of automatic transaction on your account
application or complete an authorization form, available from us upon request.
All registered owners must sign.
HOW TO OPEN ACCOUNT THROUGH AUTOMATIC TRANSACTIONS PLANS
Not applicable.
HOW TO ADD TO AN ACCOUNT THROUGH AUTOMATIC TRANSACTIONS PLANS
Automatic Monthly Investment:
You may authorize automatic monthly investments in a constant dollar amount ($50
minimum) from your checking account. We will draft your checking account on the
same day each month in the amount you authorize.
HOW TO SELL SHARES THROUGH AUTOMATIC TRANSACTIONS PLANS
Systematic Redemption Plan:
You may specify a dollar amount ($50 minimum) to be withdrawn monthly or
quarterly or have your shares redeemed at a rate calculated to exhaust the
account at the end of a specified period. A fee of $1.50 or less may be charged
for each withdrawal. You must own shares in an open account valued at $10,000
when you first authorize the systematic redemption plan. You may cancel or
change your plan or redeem all your shares at any time. We will continue
withdrawals until your shares are gone or until the Fund or you cancel the plan.
HOW TO EXCHANGE SHARES THROUGH AUTOMATIC TRANSACTIONS PLANS
Monthly Exchanges:
You may authorize monthly exchanges from your account ($100 minimum) to another
J&B, Babson or Buffalo Fund. Exchanges will be continued until all shares have
been exchanged or until you terminate the service.
ADDITIONAL INFORMATION
The Statement of Additional Information (SAI) contains additional information
about the J&B Funds and is incorporated by reference into this Prospectus. The
Funds' annual and semi-annual reports to shareholders contain additional
information about each Funds' investments. In the Funds' annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected each Fund's performance during the last fiscal year.
You may obtain a free copy of these documents by calling or writing the J&B
Funds as shown below. You also may call the toll free number given below to
request other information about the J&B Funds and to make shareholder inquiries.
You may review and copy the SAI and other information about the J&B Funds by
visiting the Securities and Exchange Commission's Public Reference Room in
Washington, DC (1-202-942-8090) or by visiting the Commission's Internet site at
http://www.sec.gov. Copies of this information also may be obtained, upon
payment of a duplicating fee, by writing to the Public Reference Section of the
Commission, Washington, DC 20549-6009.
811-10039
J&B FUNDS
JONES & BABSON, INC.
Manager and Distributor
A Member of the Generali Group
P.O. Box 219757, Kansas City, MO 64121-9757
TOLL FREE 1-866-409-2550
<PAGE>
PART B
J&B Funds
J&B Small-Cap International Fund
J&B Small-Cap Aggressive Growth Fund
J&B Mid-Cap Aggressive Growth Fund
Statement Of Additional Information
December 1, 2000
This Statement of Additional Information is not a Prospectus but should be read
in conjunction with the J&B Funds combined Prospectus dated December 1, 2000. To
obtain the Prospectus or any available Annual or Semi-Annual Report to
Shareholders, please call the J&B Funds toll-free at 1-866-409-2550, or in the
Kansas City area 816-751-5900. The Funds are series of J&B Funds, a Delaware
business trust organized on August 4, 2000.
TABLE OF CONTENTS
Page
Investment Objectives, Strategies and Risks 2
J&B Small-Cap International Fund 2
J&B Small-Cap Aggressive Growth Fund 4
J&B Mid-Cap Aggressive Growth Fund 4
Investment Policies - All Funds 4
Risk Factors - All Funds 5
Investment Restrictions - All Funds 6
Portfolio Transactions 7
Performance Measures 8
How the Funds' Shares are Distributed 9
How Share Purchases are Handled 9
Redemption of Shares 10
Signature Guarantees 10
Additional Purchase and Redemption Policies 11
Holidays 11
Dividends, Distributions and their Taxation 12
Management and Investment Adviser 13
Officers and Trustees 13
Compensation Table 14
General Information and History 14
Custodian 15
Transfer Agent 15
Independent Auditors 15
Other Jones & Babson Funds 15
Description of Commercial Paper Ratings 16
Report of Independent Auditors 17
Financial Statements 18
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
J&B Funds (the "Trust") is an open-end, management investment company comprised
of three separate mutual funds (each, a "Fund"). Each Fund maintains a
diversified portfolio of investments. The following information supplements the
Prospectus which describes each Fund's investment objective, and principal
strategies and risks.
J&B Small-Cap International Fund. The J&B Small-Cap International Fund
("International Fund") seeks long term growth of capital by investing at least
65% of its assets in small company equity securities (including common stocks,
warrants and convertible preferred stocks or convertible bonds). Small companies
are defined as those with a market capitalization of $1.5 billion or less at
time of purchase.
The International Fund may also purchase American Depository Receipts ("ADRs")
which represent foreign securities traded on U.S. exchanges or in the
over-the-counter market, European Depository Receipts ("EDRs"), and
International Depository Receipts ("IDRs"), in bearer form, which are designed
for use in European and other securities markets. The International Fund may
also invest in securities that are not listed on an exchange. Generally, the
volume of trading in an unlisted common stock is less than the volume of trading
in a listed stock. This means that the degree of market liquidity of some stocks
in which the International Fund invests may be relatively limited. When the
International Fund disposes of such a stock it may have to offer the shares at a
discount from recent prices or sell the shares in small lots over an extended
period of time.
In order to expedite settlement of portfolio transactions and to minimize
currency value fluctuations, the International Fund may purchase foreign
currencies and/or engage in forward foreign currency transactions. The
International Fund will not engage in forward foreign currency exchange
contracts for speculative purposes. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts may
be bought or sold to protect the International Fund, to some degree, against a
possible loss resulting from an adverse change in the relationship between
foreign currencies and the U.S. dollar. This method of protecting the value of
the International Fund's investment securities against a decline in the value of
a currency does not eliminate fluctuations in the underlying prices of the
securities. It establishes a rate of exchange that one can achieve at some
future point in time. Although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.
The International Fund does not intend to invest more than 35% of its total
assets in any one particular country. The International Fund may also invest up
to 35% of its assets in companies located in developing countries. A developing
or emerging market country is generally considered to be a country that is in
the initial stages of its industrialization cycle with a low per capita gross
national product. Compared to investment in the United States and other
developed countries, investing in the equity and fixed income markets of
developing countries involves exposure to relatively unstable governments,
economic structures that are generally less mature and based on only a few
industries, and securities markets which trade a small number of securities.
Prices on securities exchanges in developing countries tend to be more volatile
than those in developed countries.
Risks of Foreign Investments. Investors should recognize that investing in
foreign companies involves certain special considerations that are not typically
associated with investing in U.S. companies. Since the stocks of foreign
companies are frequently denominated in foreign currencies, and since the
International Fund may temporarily hold uninvested reserves in bank deposits in
foreign currencies, it will be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations, and may incur costs in
connection with conversions between various currencies. The investment policies
of the International Fund permit it to enter into forward foreign currency
exchange contracts in order to hedge the International Fund's holdings and
commitments against changes in the level of future currency rates. Such
contracts involve an obligation to purchase or sell a specific currency at a
future date at a price set at the time of the contract.
As foreign companies are not generally subject to uniform accounting, auditing
and financial reporting standards and practices comparable to those applicable
to domestic companies, there may be less publicly available information about
certain foreign companies than about domestic companies. Securities of some
foreign companies are generally less liquid and more volatile than securities of
comparable domestic companies. There is generally less government supervision
and regulation of stock exchanges, brokers and listed companies than in the U.S.
In addition, with respect to certain foreign countries, there is the possibility
of expropriation or confiscatory taxation, political or social instability, or
diplomatic developments that could affect U.S. investments in those countries.
Although the International Fund will endeavor to achieve most favorable
execution costs in its portfolio transactions, fixed commissions on many foreign
stock exchanges are generally higher than negotiated commissions on U.S.
Exchanges. In addition, it is expected that the expenses of custodian
arrangements of the International Fund's foreign securities will be somewhat
greater than the expenses for the custodian arrangements for handling the
International Fund's domestic securities of equal value.
Certain foreign governments levy withholding taxes against dividend and interest
income. Although in some countries a portion of these taxes are recoverable, the
nonrecovered portion of foreign withholding taxes will reduce the income
received from the companies comprising the International Fund's portfolio.
Risks of Foreign Currency Transactions. The value of the assets of the
International Fund as measured in U. S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange
control regulations, and the International Fund may incur costs in connection
with conversions between various currencies.
The International Fund will conduct its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through the use of forward contracts to purchase or
sell foreign currencies. A forward foreign currency exchange contract will
involve an obligation by the International Fund to purchase or sell a specific
amount of currency at a future date, which may be any fixed number of days, from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are transferable in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirements, and
no commissions are charged at any stage for trades. Neither type of foreign
currency transaction will eliminate fluctuations in the prices of the
International Fund's portfolio securities or prevent loss if the prices of such
securities should decline.
The International Fund may enter into forward foreign currency exchange
contracts only under two circumstances. First, when the International Fund
enters into a contract for the purchase or sale of a security denominated in a
foreign currency, it may desire to "lock in" the U.S. dollar price of the
security. The International Fund will then enter into a forward contract for the
purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying securities transaction; in this manner the
International Fund will be better able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date the securities
are purchased or sold and the date on which payment is made or received.
Second, when the Adviser believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, it may enter
into a forward contract to sell, for a fixed amount of dollars, the amount of
foreign currency approximating the value of some or all of the International
Fund's securities denominated in such foreign currency. The precise matching of
the forward contract amounts and the value of the securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short- term currency market movement is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. The Adviser does not intend to cause the
International Fund to enter into such forward contracts under this second
circumstance on a regular or continuous basis. The International Fund will also
not enter into such forward contracts or maintain a net exposure to such
contracts when the consummation of the contracts would obligate the
International Fund to deliver an amount of foreign currency in excess of the
value of its securities or other assets denominated in that currency. The
Adviser believes that it is important to have flexibility to enter into such
forward contracts when it determines that to do so is in the best interests of
the International Fund. The International Fund's custodian bank segregates cash
or equity or debt securities in an amount not less than the value of the
International Fund's total assets committed to forward foreign currency exchange
contracts entered into under this second type of transaction. If the value of
the securities segregated declines, additional cash or securities is added so
that the segregated amount is not less than the amount of the International
Funds' commitments with respect to such contracts. Under normal circumstances,
the International Fund expects that any appreciation or depreciation on such
forward exchange contracts will be approximately offset by the depreciation or
appreciation in translation of the underlying foreign investment arising from
fluctuations in foreign currency exchange rates.
The International Fund will recognize the unrealized appreciation or
depreciation from the fluctuation in a foreign currency forward contract as an
increase or decrease in its net assets on a daily basis, thereby providing an
appropriate measure of its financial position and changes in financial position.
J&B Small-Cap Aggressive Growth Fund and J&B Mid-Cap Aggressive Growth Fund. The
objectives of the J&B Small-Cap Aggressive Growth Fund ("Small-Cap Fund") and
the J&B Mid-Cap Aggressive Growth Fund ("Mid-Cap Fund") are above average
capital appreciation. They will invest at least 65% of their assets at time of
purchase in U.S. issued equity securities (including common stocks, warrants and
convertible preferred stocks) of small-cap and mid-cap companies, respectively.
The Small-Cap Fund will purchase smaller, rapidly growing emerging companies
with market capitalizations generally under $1.5 billion, while the Mid-Cap Fund
will purchase midsize companies with market capitalizations between $1.5 billion
and $10 billion who have strong earnings prospects projected to grow faster than
the overall market.
Since both the Small-Cap and Mid-Cap Funds focus on smaller companies, the
overall income return on these Funds may be low. Smaller companies frequently
need to retain all or most of their profits to finance their growth and will pay
small dividend yields, or none. If the companies are successful, this plow-back
of earnings and internal financing of growth without the need to issue
additional shares ultimately should enhance the companies' per share earnings
and dividend capability and make their shares more attractive in the
marketplace.
INVESTMENT POLICIES - ALL FUNDS
Short-Term Debt Obligations. Each Fund may, to a limited extent, and not to
deviate from the Fund's normal investment policies, invest a portion of its
assets in cash or high-quality, short-term debt obligations readily changeable
into cash such as:
(1) certificates of deposit, bankers' acceptances and other short- term
obligations issued domestically by United States commercial banks having assets
of at least $1 billion and which are members of the Federal Deposit Insurance
Corporation or holding companies of such banks;
(2) commercial paper of companies rated P-2 or higher by Moody's or A-2 or
higher by S&Pr, or if not rated by either Moody's or S&Pr, a company's
commercial paper may be purchased by the Fund if the company has an outstanding
bond issue rated Aa or higher by Moody's or AA or higher by S⪻
(3) short-term debt securities which are non-convertible and which have one year
or less remaining to maturity at the date of purchase and which are rated Aa or
higher by Moody's or AA or higher by S⪻ and
(4) negotiable certificates of deposit and other short-term debt obligations of
savings and loan associations having assets of at least $1 billion and which are
members of the Federal Home Loan Banks Association and insured by the Federal
Savings and Loan Insurance Corporation.
These investments may be used for cash management purposes to maintain liquidity
to be able to satisfy redemption requests or pay unanticipated expenses, or
while the Fund's Adviser looks for suitable investment opportunities.
There may be times, however, when each Fund attempts to respond to adverse
market, economic, political or other conditions by investing up to 100% of its
assets in these types of investments for temporary, defensive purposes. During
those times, the Funds will not be able to pursue its investment objective and,
instead, will focus on preserving your investment.
Repurchase Agreements. The Funds, for cash management purposes, may invest in
issues of the U.S. Treasury or an U.S. government agency subject to repurchase
agreements. A repurchase agreement involves the sale of securities to the Fund
with the concurrent agreement by the seller to repurchase the securities at the
Funds' cost plus interest at an agreed rate upon demand or within a specified
time, thereby determining the yield during the Funds' period of ownership. The
result is a fixed rate of return insulated from market fluctuations during such
period. Under the 1940 Act, repurchase agreements are considered loans by the
Funds.
The Funds will enter into repurchase agreements only with U.S. banks having
assets in excess of $1 billion which are members of the Federal Deposit
Insurance Corporation, and with certain securities dealers who meet the
qualifications set from time to time by the Manager or sub-adviser. The term to
maturity of a repurchase agreement normally will be no longer than a few days.
Repurchase agreements maturing in more than seven days and other illiquid
securities will not exceed 15% of each Fund's net assets.
Risk Factors Applicable to Repurchase Agreements. The use of repurchase
agreements involves certain risks. For example, if the seller of the agreement
defaults on its obligation to repurchase the underlying securities at a time
when the value of these securities has declined, the Funds may incur a loss upon
disposition of them. If the seller of the agreement becomes insolvent and
subject to liquidation or reorganization under the Bankruptcy Code or other
laws, disposition of the underlying securities may be delayed pending court
proceedings. Finally, it is possible that the Funds may not be able to perfect
their interest in the underlying securities. While the Funds' management
acknowledges these risks, it is expected that they can be controlled through
stringent security selection criteria and careful monitoring procedures.
Borrowing. As a matter of non-fundamental investment policy, no Fund may borrow
money for the purpose of leveraging its investments. In addition, no Fund will
purchase portfolio securities when borrowings exceed 5% of their respective
total assets.
RISK FACTORS - ALL FUNDS
Risk Factors Applicable to Illiquid and Restricted Securities. Illiquid
securities include repurchase agreements and time deposits with
notice/termination dates of more than seven days, certain variable-amount master
demand notes that cannot be called within seven days, certain insurance funding
agreements (see below), certain unlisted over-the-counter options and other
securities that are traded in the U.S. but are subject to trading restrictions
because they are not registered under the Securities Act of 1933, as amended
(the "1933 Act").
Each Fund may invest up to 15% of its net assets in securities that are
illiquid. If otherwise consistent with their investment objectives and policies,
the Funds may purchase commercial paper issued pursuant to Section 4(2) of the
1933 Act and domestically traded securities that are not registered under the
1933 Act but can be sold to "qualified institutional buyers" in accordance with
Rule 144A under the 1933 Act ("Rule 144A Securities"). These securities will not
be considered illiquid so long as the Advisor determines, under guidelines
approved by the Board of Trustees, that an adequate trading market exists.
Because illiquid and restricted securities may be difficult to sell at an
acceptable price, they may be subject to greater volatility and may result in a
loss to a Fund. The practice of investing in Rule 144A Securities could increase
the level of a Fund's illiquidity during any period that qualified institutional
buyers become uninterested in purchasing these securities.
Risk Factors Applicable to a Fund's Investment in Other Investment Companies. To
the extent consistent with its investment objective and policies, the Funds may
invest in securities issued by other investment companies. Investments by a Fund
in other investment companies will be subject to the limitations of the 1940
Act.
As a shareholder of another investment company, the Fund would be subject to the
same risks as any other investor in that company. In addition, it would bear a
proportionate share of any fees and expenses paid by that company. These would
be in addition to the advisory and other fees paid directly by the Fund.
Risk Factors Applicable to Securities Lending. In order to generate additional
income, the Funds may lend securities on a short-term basis to banks,
broker-dealers or other qualified institutions. In exchange, the Funds will
receive collateral equal to at least 102% of the value of the securities loaned.
Securities lending may represent no more than one-third the value of a Fund's
total assets (including the loan collateral). Any cash collateral received by a
Fund in connection with these loans may be invested in U.S. government
securities and other liquid high-grade debt obligations.
The main risk when lending portfolio securities is that the borrower might
become insolvent or refuse to honor its obligation to return the securities. In
this event, a Fund could experience delays in recovering its securities and may
incur a capital loss. In addition, a Fund may incur a loss in reinvesting the
cash collateral it receives.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The Funds have each adopted the following fundamental investment policies and
restrictions that cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Fund. Under the 1940 Act, a "majority of
the outstanding voting securities" of a Fund means the vote of: (i) more than
50% of the outstanding voting securities of the Fund; or (ii) 67% or more of the
voting securities of the Fund present at a meeting, if the holders of more than
50% of the outstanding voting securities are present or represented by proxy,
whichever is less. With respect to the policies concerning concentration,
borrowing money and senior securities, legal or regulatory limitations are
explained within the investment restrictions. Such explanations are not part of
the fundamental investment restriction and may be modified without shareholder
approval to reflect changes in the legal and regulatory requirements. The
language of the restrictions that are fundamental are shown in bold.
Each Fund is classified as diversified as defined under the 1940 Act and a Fund
may not change their classification from diversified to non-diversified without
shareholder approval. Under the 1940 Act, diversified generally means that each
Fund may not, with respect to 75% of its total assets, invest more than 5% of
its total assets in securities of any one issuer (except obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
securities issued by investment companies), or purchase more than 10% of the
voting securities of any one issuer.
The Funds will not make investments that will result in the concentration (as
that term may be defined in the 1940 Act, any rule or order thereunder, or U.S.
Securities and Exchange Commission ("SEC") staff interpretation thereof) of
their investments in the securities of issuers primarily engaged in the same
industry. The SEC staff currently takes the position that a mutual fund
concentrates its investments in a particular industry if 25% or more of its
total assets are invested in issuers within the industry. This restriction does
not limit a Fund from investing in obligations issued or guaranteed by the U.S.
government, or its agencies or instrumentalities. In applying each Fund's
fundamental policy concerning industry concentration, it is a matter of
non-fundamental policy that investments in certain categories of companies will
not be considered to be investments in a particular industry. In particular,
technology companies will be divided according to their products and services,
for example, hardware, software, information services and outsourcing, or
telecommunications will each be a separate industry. Also, for example: (i)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; (ii) asset-backed
securities will be classified according to the underlying assets securing such
securities; and (iii) utility companies will be divided according to their
services, for example, gas, gas transmission, electric and telephone will each
be considered a separate industry.
The Funds will not: (1) borrow money or issue senior securities, except as the
1940 Act, any rule thereunder, or SEC staff interpretation thereof, may permit.
The following sentence is intended to describe the current regulatory limits
relating to senior securities and borrowing activities that apply to mutual
funds and the information in the sentence may be changed without shareholder
approval to reflect legal or regulatory changes. A Fund may borrow up to 5% of
its total assets for temporary purposes and may also borrow from banks, provided
that if borrowings exceed 5%, the Fund must have assets totaling at least 300%
of the borrowing when the amount of the borrowing is added to the Fund's other
assets. The effect of this provision is to allow a Fund to borrow from banks
amounts up to one-third (33 1/3%) of its total assets (including those assets
represented by the borrowing); (2) underwrite the securities of other issuers,
except that a Fund may engage in transactions involving the acquisition,
disposition or resale of its portfolio securities, under circumstances where it
may be considered to be an underwriter under the Securities Act of 1933; (3)
purchase or sell real estate, unless acquired as a result of ownership of
securities or other instruments and provided that this restriction does not
prevent any Fund from investing in issuers which invest, deal or otherwise
engage in transactions in real estate or interests therein, or investing in
securities that are secured by real estate or interests therein; (4) purchase or
sell physical commodities, unless acquired as a result of ownership of
securities or other instruments and provided that this restriction does not
prevent the Funds from engaging in transactions involving futures contracts and
options thereon or investing in securities that are secured by physical
commodities; (5) make loans, provided that this restriction does not prevent the
Funds from purchasing debt obligations, entering into repurchase agreements, and
loaning its assets to broker/dealers or institutional investors.
Non-Fundamental Investment Restrictions
In addition to the fundamental restrictions described above, and the various
general investment policies described in the Prospectus, the Funds will be
subject to the following non-fundamental investment restrictions, which may be
changed by the Board of Trustees without shareholder approval.
(1) each Fund is permitted to invest in other investment companies, including
open-end, closed-end or unregistered investment companies, either within the
percentage limits set forth in the 1940 Act, any rule or order thereunder, or
SEC staff interpretation thereof, or without regard to percentage limits in
connection with a merger, reorganization, consolidation or other similar
transaction. However, no Fund may operate as a fund of funds which invests
primarily in the shares of other investment companies as permitted by Section
12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a fund of funds. Under current legal and regulatory
requirements, each Fund may invest up to 5% of its total assets in the
securities of any one investment company, but may not own more than 3% of any
investment company or invest more than 10% of its total assets in the securities
of other investment companies; (2) each Fund may not invest more than 15% of its
net assets in securities which they can not sell or dispose of in the ordinary
course of business within seven days at approximately the value at which the
Fund has valued the investment; and (3) each Fund will not borrow for the
purpose of leveraging its investments. In this regard, no Fund will purchase
portfolio securities when borrowings exceed 5% of their respective total assets.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Funds are made by each Fund's
sub-adviser.
The Funds, in purchasing and selling portfolio securities, will seek the best
available combination of execution and overall price (which shall include the
cost of the transaction) consistent with the circumstances which exist at the
time. The Funds do not intend to solicit competitive bids on each transaction.
The Funds believe it is in their best interest, and that of their shareholders,
to have a stable and continuous relationship with a diverse group of financially
strong and technically qualified broker-dealers who will provide quality
executions at competitive rates. Broker-dealers meeting these qualifications
also will be selected for their demonstrated loyalty to the Funds, when acting
on their behalf, as well as for any research or other services provided to the
Funds. The Funds normally will not pay a higher commission rate to
broker-dealers providing benefits or services to them than they would pay to
broker-dealers who do not provide such benefits or services. However, the Funds
reserve the right to do so within the principles set out in Section 28(e) of the
Securities Exchange Act of 1934 when it appears that this would be in the best
interests of the shareholders.
No commitment is made to any broker or dealer with regard to placing of orders
for the purchase or sale of Fund portfolio securities, and no specific formula
is used in placing such business. Allocation is reviewed regularly by both the
Board of Trustees of J&B Funds and by the Manager.
Since the Funds do not currently market their shares through intermediary
brokers or dealers, it is not their practice to allocate brokerage or principal
business on the basis of sales of their shares that may be made through such
firms. However, they may place portfolio orders with qualified broker-dealers
who recommend a Fund to other clients, or who act as agent in the purchase of
Fund shares for their clients.
Research services furnished by broker-dealers may be useful to the Manager or a
Fund's sub-adviser in serving other clients, as well as a Fund. Conversely, a
Fund may benefit from research services obtained by the Manager or a Fund's
sub-adviser from the placement of portfolio brokerage of other clients.
When the Manager or a sub-adviser in its fiduciary duty believes it to be in the
best interests of its shareholders, a Fund may join with other clients of the
Manager or sub-adviser in acquiring or disposing of a portfolio holding.
Securities acquired or proceeds obtained will be equitably distributed between
the Fund and other clients participating in the transaction. In some instances,
this investment procedure may affect the price paid or received by the Fund or
the size of the position obtained by the Fund.
PERFORMANCE MEASURES
From time to time, each of the Funds may advertise its performance in various
ways, as summarized below.
Total Return. The Funds may advertise "average annual total return" over various
periods of time. Such total return figures show the average percentage change in
value of an investment in a Fund from the beginning date of the measuring period
to the end of the measuring period. These figures reflect changes in the price
of the Fund's shares and assume that any income dividends and/or capital gains
distributions made by the Funds during the period were reinvested in shares of
the Fund. Figures will be given for recent one-, five- and ten-year periods (if
applicable), and may be given for other periods as well (such as from
commencement of a Fund's operations, or on a year-by-year basis).
The Funds' "average annual total return" figures described and shown below are
computed according to a formula prescribed by the Securities and Exchange
Commission. The formula can be expressed as follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1000 payment
made at the beginning of the 1, 5, or 10 year (or other) periods at the end of
the 1, 5, or 10 year (or other) periods (or fractional portions thereof).
Performance Comparisons. In advertisements or in reports to shareholders, the
Funds may compare their performance to that of other mutual funds with similar
investment objectives and to stock or other relevant indices. Performance
information, rankings, ratings, published editorial comments and listings as
reported in national financial publications such as Kiplinger's Personal Finance
Magazine, Business Week, Morningstar Mutual Funds, Investor's Business Daily,
Smart Money, Money Central Investors, Institutional Investor, The Wall Street
Journal, Mutual Fund Forecaster, No- Load Investor, Money, Forbes, Fortune,
Barron's Financial World, U.S. News & World Report, USA Today, Bloomberg's
Personal Finance, Income & Safety, The Mutual Fund Letter, United Mutual Fund
Selector, No-Load Fund Analyst, No- Load Fund X, Louis Rukeyser's Wall Street
newsletter, Donoghue's Money Letter, CDA Investment Technologies, Inc.,
Wiesenberger Investment Companies Service, Donoghue's Mutual Fund Almanac, Bank
Rate Monitor and Donoghue's Money Fund Report may also be used in comparing
performance of the Funds. Performance comparisons should not be considered as
representative of the future performance of the Funds.
HOW THE FUND'S SHARES ARE DISTRIBUTED
Jones & Babson, Inc., as agent of J&B Funds agrees to supply its best efforts
as distributor of the J&B Funds' shares. Jones & Babson, Inc. is located at
BMA Tower, 700 Karnes Blvd., Kansas City, MO 64108-3306. The following
persons who are affiliated with J&B Funds as Trustees or senior officers are
also affiliated with Jones & Babson, Inc. as Directors or officers: Stephen
S. Soden, P. Bradley Adams, Martin A. Cramer, Constance E. Martin and Guy
Cooke.
Jones & Babson, Inc. does not receive any fee or other compensation under the
distribution agreement which continues in effect until October 31, 2002, and
which will continue automatically for successive annual periods ending each
October 31, if continued at least annually by the Board of Trustees, including a
majority of those Trustees who are not parties to such agreement or interested
persons of any such party. It terminates automatically if assigned by either
party or upon 60 days written notice by either party to the other.
Jones & Babson, Inc. also acts as sole distributor of the shares for UMB
Scout Stock Fund, UMB Scout Stock Select Fund, UMB Scout Technology Fund, UMB
Scout Equity Index Fund, UMB Scout Bond Fund, Inc., UMB Scout Money Market
Fund, Inc., UMB Scout Tax-Free Money Market Fund, Inc., UMB Scout Regional
Fund, Inc., UMB Scout WorldWide Fund, UMB Scout WorldWide Select Fund, UMB
Scout Balanced Fund, Inc., UMB Scout Capital Preservation Fund, Inc., UMB
Scout Kansas Tax-Exempt Bond Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo
Equity Fund, Inc., Buffalo High Yield Fund, Inc., Buffalo USA Global Fund,
Inc., Buffalo Small Cap Fund, Inc., AFBA Five Star Fund, Inc., Babson Growth
Fund, Inc., Babson Enterprise Fund, Inc., Babson Enterprise Fund II, Inc.,
Babson Value Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., Babson Bond Trust, Babson Money Market Fund, Inc.,
and Babson Tax-Free Income Fund, Inc.
HOW SHARE PURCHASES ARE HANDLED
We cannot process transaction requests that are not complete and in good order,
as described in the Prospectus. If you use the services of any other broker to
purchase or redeem shares of the Funds, that broker may charge you a fee. Each
order accepted will be fully invested in whole and fractional shares, unless the
purchase of a certain number of whole shares is specified, at the net asset
value per share next effective after the order is accepted by the Fund.
Each investment is confirmed by a year-to-date statement that provides the
details of the immediate transaction, plus all prior transactions in your
account during the current year. This includes the dollar amount invested, the
number of shares purchased or redeemed, the price per share, and the aggregate
shares owned. A transcript of all activity in your account during the previous
year will be furnished each January. By retaining each annual summary and the
last year-to-date statement, you have a complete detailed history of your
account that provides necessary tax information. A duplicate copy of a past
annual statement is available from Jones & Babson, Inc. at its cost, subject to
a minimum charge of $5 per account, per year requested.
Each statement and transaction confirmation will request that you inform the
Fund in writing of any questions about the information presented. If you do not
notify the Fund in writing of any questions within the specified time period, it
will indicate that you have approved the information.
The shares you purchase are held by the Funds in an open account, thereby
relieving you of the responsibility of providing for the safekeeping of a
negotiable share certificate. Jones & Babson, Inc. does not intend to issue
new certificated shares for any accounts.
If an order to purchase shares must be canceled due to non-payment, the
purchaser will be responsible for any loss incurred by the Funds arising out of
such cancellation. To recover any such loss, the Funds reserve the right to
redeem shares owned by any purchaser whose order is canceled, and such purchaser
may be prohibited or restricted in the manner of placing further orders.
The Funds reserve the right in their sole discretion to withdraw all or any part
of the offering made by the prospectus or to reject purchase orders when, in the
judgment of management, such withdrawal or rejection is in the best interest of
the Funds and its shareholders. The Funds also reserve the right at any time to
waive or increase the minimum requirements applicable to initial or subsequent
investments with respect to any person or class of persons, which includes
shareholders of the Funds' special investment programs.
The Funds reserve the right to refuse to accept orders for Fund shares unless
accompanied by payment, except when a responsible person has indemnified the
Fund against losses resulting from the failure of investors to make payment. In
the event that the Funds sustains a loss as the result of failure by a purchaser
to make payment, the Funds' underwriter, Jones & Babson, Inc., will cover the
loss.
REDEMPTION OF SHARES
The Funds will transmit redemption proceeds to the proper party, as instructed,
as soon as practicable after a redemption request has been received in good
order and accepted, but in no event later than the third business day
thereafter. Transmissions are made by mail unless an expedited method has been
authorized and specified in the redemption request. The Funds will not be
responsible for the consequences of delays including delays in the banking or
Federal Reserve wire systems. In the case of redemption requests made within 15
days of the date of purchase, the Funds may delay transmission of proceeds until
such time as it is certain that unconditional payment in federal funds or check
clearance has been collected for the purchase of shares being redeemed or 15
days from the date of purchase, whichever occurs first.
Due to the high cost of maintaining smaller accounts, the Trustees have
authorized the Funds to close shareholder accounts where their value falls below
the current minimum initial investment requirement at the time of initial
purchase as a result of redemptions and not as the result of market action, and
remains below this level for 60 days after each such shareholder account is
mailed a notice of: (1) the Fund's intention to close the account, (2) the
minimum account size requirement, and (3) the date on which the account will be
closed if the minimum size requirement is not met. Since the minimum investment
amount and the minimum account size are the same, any redemption from an account
containing only the minimum investment amount may result in redemption of that
account.
We will not be responsible for the consequences of delays, including delays in
the banking or Federal Reserve wire systems. We must receive an endorsed share
certificate with a signature guarantee, where a certificate has been issued.
The right of redemption may be suspended, or the date of payment postponed
beyond the normal three-day period by the Board of Trustees under the following
conditions authorized by the 1940 Act: (1) for any period (a) during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closing, or (b) during which trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a result of
which (a) disposal by the Funds of securities owned by it is not reasonably
practicable, or (b) it is not reasonably practicable for the Funds to determine
the fair value of its net assets; or (3) for such other periods as the
Securities and Exchange Commission may by order permit for the protection of the
Funds' shareholders.
J&B Funds has elected to be governed by Rule 18f-1 under the 1940 Act, pursuant
to which the Funds are obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of a Fund's net asset value during any 90-day period
for any one shareholder. Should redemptions by any shareholder exceed such
limitation, a Fund may redeem the excess in kind. If shares are redeemed in
kind, the redeeming shareholder may incur brokerage costs in converting the
assets to cash. The method of valuing securities used to make redemptions in
kind will be the same as the method of valuing portfolio securities described
under "How Share Price is Determined" in the Prospectus, and such valuation will
be made as of the same time the redemption price is determined.
SIGNATURE GUARANTEES
Signature guarantees normally reduce the possibility of forgery and are required
in connection with certain redemptions. Signature guarantees are required in
connection with all redemptions of $50,000 or more by mail, or changes in share
registration, except as hereinafter provided. These requirements may be waived
by the Fund in certain instances where it appears reasonable to do so and will
not unduly affect the interest of other shareholders. Signature(s) must be
guaranteed by an "eligible guarantor institution" as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934. Eligible guarantor institutions
include: (1) national or state banks, savings associations, savings and loan
associations, trust companies, savings banks, industrial loan companies and
credit unions; (2) national securities exchanges, registered securities
associations and clearing agencies; or (3) securities broker/dealers which are
members of a national securities exchange or clearing agency or which have a
minimum net capital of $100,000. A notarized signature is not sufficient for the
request to be in proper form. Signature guarantees will be waived for mail
redemptions of $50,000 or less, but they will be required regardless of the size
of the redemption if the checks are to be payable to someone other than the
registered owner(s), or are to be mailed to an address different from the
registered address of the shareholder(s). Signature guarantees are also required
for a change in account registration or redemption instructions.
Signature guarantees must appear together with the signature(s) of the
registered owner(s) on: (1) a separate instrument of assignment, which should
specify the total number of shares to be redeemed (this "stock power" may be
obtained from the Fund or from most banks or stock brokers); or (2) all stock
certificates tendered for redemption.
ADDITIONAL PURCHASE AND REDEMPTION POLICIES
We reserve the right to:
Waive or increase the minimum investment requirements with respect to any
person or class of persons, which include shareholders of the Funds' special
investment programs.
Cancel or change the telephone investment service, the telephone exchange
service and the automatic monthly investment plan without prior notice to you
where in the best interest of the Funds and their investors.
Cancel or change the telephone redemption service at any time without notice.
Begin charging a fee for the telephone investment service or the automatic
monthly investment plan and to cancel or change these services upon 15 days
written notice to you.
Begin charging a fee for the systematic redemption plan upon 30 days written
notice to you.
Waive signature guarantee requirements in certain instances where it appears
reasonable to do so and will not unduly affect the interests of other
shareholders. We may waive the signature guarantee requirement if you authorize
the telephone redemption methods at the same time you submit the initial
application to purchase shares.
Require signature guarantees if there appears to be a pattern of redemptions
designed to avoid the signature guarantee requirement, or if we have other
reason to believe that this requirement would be in the best interests of the
Funds and their shareholders.
The Funds do not allow market timers. The Funds may refuse to sell shares to
market timers. You will be considered a market timer if you have (i) requested a
redemption of Fund shares within two weeks of an earlier purchase request, (ii)
make investments of large amounts of $1 million or more followed by a redemption
request in close proximity to the purchase or (iii) otherwise seem to follow a
timing pattern. Shares under common ownership or control are combined for these
purposes.
HOLIDAYS
The net asset value per share of each Fund's portfolio is computed once daily,
as described in the prospectus, Monday through Friday, at the specific time
during the day that the Board of Trustees sets at least annually, except on days
on which changes in the value of a Fund's portfolio securities will not
materially affect the net asset value, or days during which no security is
tendered for redemption and no order to purchase or sell such security is
received by the Fund, or the following holidays:
New Year's Day January 1
Martin Luther King, Jr. Third Monday in
Day January
Presidents' Holiday Third Monday in February
Good Friday Friday before Easter
Memorial Day Last Monday in May
Independence Day July 4
Labor Day First Monday in September
Thanksgiving Day Fourth Thursday in November
Christmas Day December 25
DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions of net investment income. In general, the Funds receive income in
the form of dividends or interest on their investments. This income, less
expenses incurred in the operation of a Fund, constitutes a Fund's net
investment income from which dividends may be paid to investors. Any
distributions by a Fund from such income will be taxable to investors as
ordinary income, whether the investors take them in cash or in additional
shares.
Distributions of capital gains. In general, the Funds may derive capital gains
and losses in connection with sales or other dispositions of their portfolio
securities. Distributions from net short-term capital gains will be distributed
and taxed as ordinary income. Distributions from net long-term capital gains
will be taxable as long-term capital gain, regardless of how long the Fund
shares have been held. Any net capital gains realized by a Fund generally will
be distributed once each year, and may be distributed more frequently, if
necessary, in order to reduce or eliminate excise or income taxes on the Fund.
Effect of foreign investments on distributions. Some portion of gains or losses
realized from the sale of foreign debt securities may be due to differences in
the exchange rates between the U.S. dollar and foreign currencies. These
"foreign exchange" gains or losses can affect the International Fund's
distributions. Most foreign exchange gains realized on the sale of debt
securities by the International Fund are treated as ordinary income by the
International Fund. Similarly, foreign exchange losses realized by the
International Fund on the sale of debt securities are generally treated as
ordinary losses by the International Fund. These gains when distributed will be
taxable as ordinary dividends, and any losses will reduce the International
Fund's ordinary income otherwise available for distribution. This treatment
could increase or reduce the International Fund's ordinary income distributions,
and may cause some or all of the International Fund's previously distributed
income to be classified as a return of capital.
The International Fund may be subject to foreign withholding taxes on income
from certain of its foreign securities. This, in turn, could reduce ordinary
income distributions to the shareholders.
Information on the tax character of distributions. The Funds will inform you of
the amount of your ordinary income dividends and capital gains distributions at
the time they are paid, and will advise you of their tax status for federal
income tax purposes shortly after the close of each calendar year. If you have
not held Fund shares for a full year, a Fund may designate and distribute to
you, as ordinary income or capital gain, a percentage of income that is not
equal to the actual amount of such income earned during the period of your
investment in the Fund.
Election to be taxed as a regulated investment company. Each Fund has elected to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue Code and intends to so qualify during the current fiscal year. As
regulated investment companies, the Funds generally pay no federal income tax on
the income and gains they distribute to you. The Board of Trustees reserves the
right not to maintain the qualification of a Fund as a regulated investment
company if it determines such course of action to be beneficial to shareholders.
In such case, the Fund will be subject to federal, and possibly state, corporate
taxes on its taxable income and gains, and distributions to you will be taxed as
ordinary dividend income to the extent of such Fund's earnings and profits.
Excise tax distribution requirements. To avoid federal excise taxes, the
Internal Revenue Code requires each Fund to distribute to you by December 31 of
each year, at a minimum, the following amounts: 98% of its taxable ordinary
income earned during the calendar year; 98% of its capital gain net income
earned during the twelve month period ending October 31; and 100% of any
undistributed amounts from the prior year. Each Fund intends to declare and pay
these amounts in December (or in January that are treated by you as received in
December) to avoid these excise taxes, but can give no assurances that its
distributions will be sufficient to eliminate all taxes.
Redemption of Fund shares. Redemptions (including redemptions in-kind) and
exchanges of Fund shares are taxable transactions for federal and state income
tax purposes. If you redeem your Fund shares, or exchange your Fund shares for
shares of a different J&B Fund, the IRS will require that you report any gain or
loss on your redemption or exchange. If you hold your shares as a capital asset,
any gain or loss that you realize will be capital gain or loss and will be
long-term or short-term, generally depending on how long you hold your shares.
Beginning after the year 2005 (2000 for certain shareholders), gain in a sale or
redemption of Fund shares held for more than five years may be subject to a
reduced rate of tax. Any loss incurred on the redemption or exchange of shares
held for six months or less will be treated as a long-term capital loss to the
extent of any long-term capital gains distributed to you by the Fund on those
shares. All or a portion of any loss that you realize upon the redemption of
your fund shares will be disallowed to the extent that you buy other shares in
such fund (through reinvestment of dividends or otherwise) within 30 days before
or after your share redemption. Any loss disallowed under these rules will be
added to your tax basis in the new shares you buy.
Dividends-received deduction for corporations. If you are a corporate
shareholder, you should note that only a small percentage of the dividends paid
by the Funds for this fiscal year are expected to qualify for the
dividends-received deduction. In some circumstances, you may be allowed to
deduct these qualified dividends, thereby reducing the tax that you would
otherwise be required to pay on these dividends. The dividends-received
deduction will be available only with respect to dividends designated by such
Fund as eligible for such treatment. All dividends (including the deducted
portion) must be included in your alternative minimum taxable income
calculation.
MANAGEMENT AND
INVESTMENT ADVISER
Jones & Babson, Inc. serves as investment manager of each Fund pursuant to a
Management Agreement with the Trust. Jones & Babson, Inc. also employs at
its own expense the following sub-advisers to manage the Funds' assets on a
day-to-day basis:
J&B Small-Cap International Fund. Denver Investment Advisors, LLC, ("DIA"),
Seventeenth Street Plaza, 1225 17th Street, Denver, Colorado, 80202. DIA was
founded in 1958 and as of June 30, 2000 has nearly eight billion dollars in
total assets under management.
J&B Small-Cap Aggressive Growth Fund. Knappenberger Bayer ("KB"), 601 Carlson
Parkway, Suite 950, Minnetonka, Minnesota, 55305. KB was founded in 1998 and as
of June 30, 2000 has over $100 million in total assets under management.
J&B Mid-Cap Aggressive Growth Fund. McKinley Capital Management, Inc.,
("McKinley"), 3301 C Street, Anchorage, Alaska, 99503. McKinley was founded in
1990 and as of June 30, 2000 has nearly five billion dollars in total assets
under management.
Jones & Babson, Inc. pays DIA a fee of 77.5/100 of one percent (0.775%) for the
first $250 million and 70/100 of one percent (0.70%) for amounts in excess of
$250 million with respect to the J&B Small-Cap International Fund's average
daily total net assets.
Jones & Babson, Inc. pays KB a fee of 65/100 of one percent (0.65%) for the
first $150 million and 60/100 of one percent (0.60%) for amounts in excess of
$150 million with respect to the J&B Small-Cap Aggressive Growth Fund's average
daily total net assets.
Jones & Babson, Inc. pays McKinley a fee of 50/100 of one percent (0.50%) for
the first $5 million, 47/100 of one percent (0.47%) for the next 20 million and
45/100 of one percent (0.450%) for amounts in excess of $25 million with respect
to the J&B Mid-Cap Aggressive Growth Fund's average daily total net assets.
Controlling Persons. Certain officers and trustees of J&B Funds are also
officers, directors or trustees or both of Jones & Babson, Inc., or other
funds affiliated with Jones & Babson, Inc.
Jones & Babson, Inc. is a wholly-owned subsidiary of Business Men's Assurance
Company of America which is considered to be a controlling person under the
Investment Company Act of 1940. Assicurazioni Generali S.p.A., an insurance
organization founded in 1831 based in Trieste, Italy, is considered to be a
controlling person and is the ultimate parent of Business Men's Assurance
Company of America. Mediobanca is a 5% owner of Generali.
OFFICERS AND TRUSTEES
The officers of the Trust manage the Trust's day-to-day operations. The Trust's
officers and its manager are subject to the supervision and control of the Board
of Trustees. The Trustees have approved contracts under which certain companies
provide essential management services to the Funds. The Funds pay the fees for
the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust or its manager.
The following table lists the officers and Trustees of the Trust and their ages.
Unless noted otherwise, the address of each officer and Trustee is BMA Tower,
700 Karnes Blvd., Kansas City, Missouri 64108-3306. Except as indicated, each
has been an employee of Jones & Babson, Inc. for more than five years.
* Stephen S. Soden (55), President and Trustee. President and Director (or
Trustee) of Jones & Babson, Inc. and of each of the nine Babson Funds, ten
UMB Scout Funds, five Buffalo Funds and the Investors Mark Series Fund, Inc.
Mr. Soden became President and Director (or Trustee) of Jones & Babson and
the funds described above in 2000 and was previously Senior Vice President at
BMA, the parent of Jones & Babson, Inc.
Eric T. Jager (57), Trustee. Executive Vice President, Bartlett & Company,
4800 Main Street, Suite 600, Kansas City, Missouri, 64112. Director (or
Trustee) of each of the ten UMB Scout Funds.
John A. MacDonald (51), Trustee. President, Chinquapin Trust Co., PO Box
419580 M.D. 323, Kansas City, Missouri, 64141. Previously Director of
Private Investments of Hallmark Cards, Inc.
Steve W. Panknin (49), Trustee. Executive Vice President, Country Club Bank,
414 Nichols Road, Kansas City, Missouri, 64112.
James R. Seward (48), Trustee. Financial Consultant, Seward & Company, LLC, 3520
West 75th Street, Suite 104, Prarie Village, Kansas 66208; Director (or Trustee)
of the Investors Mark Series Fund, Inc.
P. Bradley Adams (40), Trustee. Vice President and Treasurer, Jones &
Babson, Inc., and each of the nine Babson Funds, ten UMB Scout Funds and five
Buffalo Funds; Vice President and Chief Financial Officer, AFBA 5 Star Fund,
Inc.; Principal Financial Officer, Investors Mark Series Fund, Inc.
Robert N. Sawyer (54), Trustee. Senior Vice President and Chief Investment
Officer, Business Men's Assurance Corporation of America; Chairman and
Director, Investors Mark Series Fund, Inc.
Martin A. Cramer (50), Vice President and Secretary. Vice President and
Secretary, Jones & Babson, Inc., and of each of the nine Babson Funds, ten
UMB Scout Funds and five Buffalo Funds; Secretary and Assistant Vice
President, AFBA 5 Star Fund, Inc.; Secretary, Investors Mark Series Fund,
Inc.
Constance E. Martin (39), Vice President. Jones & Babson, Inc.; Vice
President, of each of the nine Babson Funds, ten UMB Scout Funds, five
Buffalo Funds and AFBA 5 Star Fund, Inc.
Guy Cooke (39), Vice President. Chief Compliance Officer, Jones & Babson,
Inc.; Vice President of each of the nine Babson Funds, AFBA 5 Star Fund, Inc.
and five Buffalo Funds. He joined Jones & Babson in 1998.
COMPENSATION TABLE
Name of Aggregate Pension or Estimated Total
Director Compensation Retirement Annual Compensation
From the Benefits Benefits From All J&B
Funds Accrued as Upon Funds Paid to
Part of Retirement Trustees
Fund Expenses
Stephen S.
Soden* NA NA NA NA
P. Bradley
Adams* NA NA NA NA
Robert N.
Sawyer* NA NA NA NA
Eric T. Jager $0 NA NA $0
John A.
MacDonald $0 NA NA $0
Steve W.
Panknin $0 NA NA $0
James R.
Seward $0 NA NA $0
* As "interested" Trustees, Messrs. Soden, Adams and Sawyer receive no
compensation for their services as Trustees.
GENERAL INFORMATION AND HISTORY
J&B Funds (the "Trust") which consists of three separate series - J&B Small- Cap
International Fund series, J&B Small-Cap Aggressive Growth Fund series and J&B
Mid-Cap Aggressive Growth Fund series - was organized as a business trust under
the Delaware Business Trust Act on August 4, 2000. Each series represents
interests in a separate portfolio of investments and is subject to separate
liabilities. Shares of each series are entitled to vote as a series only to the
extent required by the 1940 Act or as permitted by the Trustees. The beneficial
interest of each series is divided into an unlimited number of shares, with no
par value. Each share has equal dividend, voting, liquidation and redemption
rights. There are no conversion or preemptive rights. Shares, when issued, will
be fully paid and nonassessable. Fractional shares have proportional voting
rights. Shares will be maintained in open accounts on the books of the transfer
agent, and certificates for shares will generally not be issued. The Trust does
not intend to hold regular annual shareholder meetings. Upon the Trust's
liquidation, all shareholders of a series would share pro-rata in the net assets
of such series available for distribution to shareholders of the series, but, as
shareholders of such series, would not be entitled to share in the distribution
of assets belonging to any other series.
If they deem it advisable and in the best interests of shareholders, the
Trustees may create additional series of shares and may create multiple classes
of shares of each series, which may differ from each other as to expenses and
dividends.
Code of Ethics. Each Fund, its investment adviser, sub-adviser (if applicable)
and principal underwriter have each adopted a code of ethics, as required by
federal securities laws. Under each code of ethics, persons who are designated
as access persons may engage in personal securities transactions, including
transactions involving securities that may be purchased or sold by any Fund,
subject to certain general restrictions and procedures. Each code of ethics
contains provisions designed to substantially comply with the recommendations
contained in the Investment Company Institute's 1994 Report of the Advisory
Group on Personal Investing. The codes of ethics are on file with the Securities
and Exchange Commission.
Control Persons and Principal Holders of Shares. As of October 30, 2000, which
was prior to the public offering of the Funds' shares, Jones & Babson, Inc. was
the holder of 100% of each Fund's shares and there were no other control persons
or principal holders of shares of the Funds. Control persons are persons deemed
to control a Fund because they own beneficially 25% of the outstanding equity
securities. Principal holders are persons that own beneficially 5% or more of a
Fund's outstanding equity securities.
CUSTODIAN
The J&B Small-Cap Aggressive Growth Fund's and the J&B Mid-Cap Aggressive Growth
Fund's assets are held for safekeeping by an independent custodian, UMB Bank,
n.a., Kansas City, Missouri ("UMB"), and foreign subcustodians as discussed
below. This means UMB, rather than a Fund, has possession of the Fund's cash and
securities. UMB is not responsible for any Fund's investment management or
administration. But, as directed by the Trust's officers, it delivers cash to
those who have sold securities to a Fund in return for such securities, and to
those who have purchased portfolio securities from the Fund, it delivers such
securities in return for their cash purchase price. It also collects income
directly from issuers of securities owned by a Fund and holds this for payment
to shareholders after deduction of the Fund's expenses. The custodian is
compensated for its services by the Manager.
The J&B Small-Cap International Fund's assets are held for safekeeping by an
independent custodian, State Street Bank and Trust Company of Boston,
Massachusetts and foreign subcustodians as discussed below. This means State
Street Bank and Trust Company, rather than the Fund, has possession of the
Fund's cash and securities. State Street Bank and Trust Company is not
responsible for the Fund's investment management or administration. But, as
directed by the Fund's officers, it delivers cash to those who have sold
securities to the Fund in return for such securities, and to those who have
purchased portfolio securities from the Fund, it delivers such securities in
return for their cash purchase price. It also collects income directly from
issuers of securities owned by the Fund and holds this for payment to
shareholders after deduction of the Fund's expenses. The custodian is
compensated for its services by the Fund.
Pursuant to rules adopted under the 1940 Act, the Fund may maintain its foreign
securities and cash in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign custodial institutions is
made by the custodian, subject to the supervision of the Board of Trustees
following a consideration of a number of factors, including (but not limited to)
the eligibility and financial stability of the institution; the ability of the
institution to perform capably custodial services for the fund; the reputation
of the institution in its national market; the political and economic stability
of the country in which the institution is located; and further risks of
potential nationalization or expropriation of Fund assets.
TRANSFER AGENT
Jones & Babson, Inc. also serves as transfer agent to the Funds.
INDEPENDENT AUDITORS
The Trust's financial statements are audited annually by independent auditors
approved by the Trustees each year, and in years in which an annual meeting is
held the Trustees may submit their selection of independent auditors to the
shareholders for ratification. Ernst & Young LLP, One Kansas City Place, 1200
Main Street, Suite 2000, Kansas City, Missouri 64105, serves as the Trust's
present independent auditor.
OTHER JONES & BABSON FUNDS
Jones & Babson, Inc. also sponsors and manages the Buffalo Group of Mutual
Funds. They are: Buffalo Balanced Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo High Yield Fund, Inc., Buffalo USA Global Fund, Inc., and Buffalo
Small Cap Fund, Inc.
Jones and Babson, Inc. also sponsors and manages, in association with its
investment counsel, David L. Babson & Co. Inc., nine no-load funds comprising
the Babson Mutual Fund Group. They are: Babson Growth Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund II, Inc., Babson Value Fund,
Inc. Shadow Stock Fund, Inc., Babson-Stewart Ivory International Fund, Inc.,
Babson Bond Trust, Babson Money Market Fund, Inc. and Babson Tax-Free Income
Fund, Inc.
A prospectus for any of the Funds may be obtained from Jones & Babson, Inc.,
BMA Tower, 700 Karnes Blvd., Kansas City, MO 64108-3306.
Jones & Babson, Inc. also provides services to nine mutual funds that
specifically seek to provide services to customers of affiliate banks of UMB
Financial Corporation. They are: UMB Scout Stock Fund, UMB Scout Stock
Select Fund, UMB Scout Bond Fund, Inc., UMB Scout Money Market Fund, Inc.,
UMB Scout Tax-Free Money Market Fund, Inc., UMB Scout Regional Fund, Inc.,
UMB Scout WorldWide Fund, UMB Scout WorldWide Select Fund, UMB Scout Balanced
Fund, Inc., UMB Scout Capital Preservation Fund, Inc. and UMB Scout Kansas
Tax-Exempt Bond Fund, Inc.
In addition, Jones & Babson, Inc., also provides services to the AFBA 5 Star
Fund, Inc.
DESCRIPTION OF COMMERCIAL
PAPER RATINGS
Moody's - Moody's commercial paper rating is an opinion of the ability of an
issuer to repay punctually promissory obligations not having an original
maturity in excess of nine months. Moody's has one rating - prime. Every such
prime rating means Moody's believes that the commercial paper note will be
redeemed as agreed. Within this single rating category are the following
classifications:
Prime - 1 Highest Quality
Prime - 2 Higher Quality
Prime - 3 High Quality
The criteria used by Moody's for rating a commercial paper issuer under this
graded system include, but are not limited to the following factors:
(1) evaluation of the management of the issuer;
(2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative type risks which may be inherent in certain
areas;
(3) evaluation of the issuer's products in relation to competition and
customer acceptance;
(4) liquidity;
(5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years;
(7) financial strength of a parent company and relationships which exist
with the issuer; and
(8) recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet such
obligations.
S&P - Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely repayment of debt having an original maturity of no more
than 270 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. The four categories are as
follows:
"A" Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree of safety.
"A-1" This designation indicates that the degree of safety regarding timely
payment is very strong.
"A-2" Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming.
"A-3" Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
"B" Issues rated "B" are regarded as having only an adequate capacity for timely
payment. Furthermore, such capacity may be damaged by changing conditions or
short-term adversities.
"C" This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
"D" This rating indicates that the issuer is either in default or is expected to
be in default upon maturity.
REPORT OF INDEPENDENT AUDITORS
The Shareholder and Board of Trustees
J&B Funds
We have audited the accompanying statements of net assets of J&B Funds
(comprised of J&B Small-Cap International Fund, J&B Small-Cap Aggressive Growth
Fund and J&B Mid-Cap Aggressive Growth Fund) (the Trust) as of November 10,
2000. These statements of net assets are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these statements of
net assets based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the statements of net assets are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statements of net assets.
Our procedures included confirmation of cash as of November 10, 2000, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall statement of net assets presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the statements of net assets referred to above presents fairly,
in all material respects, the financial position of each of the respective funds
comprising the Trust at November 10, 2000, in conformity with accounting
principles generally accepted in the United States.
Ernst & Young LLP
Kansas City, Missouri
November 13, 2000
FINANCIAL STATEMENTS
J&B Funds
Statements of Net Assets
November 10, 2000
J&B J&B J&B
Small-Cap Small-Cap Mid-Cap
International Agressive Aggressive
Fund Growth Growth
Fund Fund
Cash $40,000 $40,000 $20,000
Net assets applicable
to outstanding
shares $40,000 $40,000 $20,000
Capital shares,
$1.00 par value
Shares of beneficial
interest authorized Unlimited Unlimited Unlimited
Shares of beneficial
interest outstanding 4,000 4,000 2,000
Net asset value per share $10.00 $10.00 $10.00
See accompanying note.
J&B Funds
Note to Statements of Net Assets
November 10, 2000
Note - Significant Accounting Policies
Organization
J&B Funds (the Trust) was organized as a Delaware business trust on August 4,
2000 and is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. An unlimited number of
shares of beneficial interest in the Trust on August 4, 2000 were issued to the
J&B Small-Cap International Fund, J&B Small-Cap Aggressive Growth Fund and J&B
Mid-Cap Aggressive Growth Fund. Jones & Babson, Inc. serves as the Trust's
manager and distributor (the Manager). The costs of organization will be paid by
the Manager.
MANAGEMENT FEES
The Manager will charge the J&B Small-Cap International Fund, J&B Small-Cap
Aggressive Growth Fund and J&B Mid-Cap Aggressive Growth Fund a fee based on an
annual rate of 1.55%, 1.35% and 1.20%, respectively, of each fund's average
daily net assets from which the Manager will pay the respective fund's
subadvisers, Denver Investment Advisors, LLC, Knappenberger Bayer and McKinley
Capital Management, Inc., fees as described in the table below:
Subadvisory Fee Paid
Fund Rate Net Assets Level
J&B Small-Cap
International Fund 0.775% $0 to $250 Million
0.70% Over $250 million
J&B Small-Cap
Aggressive Growth Fund 0.65% $0 to $150 million
0.60% Over $150 million
J&B Mid-Cap
Aggressive Growth Fund 0.50% $0 to $5 million
0.47% $5 to $25 million
0.45% Over $25 million
J&B Funds
Note to Statements of Net Assets (continued)
Note - Significant Accounting Policies (continued)
The Manager has agreed to waive fees and reimburse expenses in order to limit
operating expenses of J&B Small-Cap International Fund, J&B Small-Cap Aggressive
Growth Fund and J&B Mid-Cap Aggressive Growth Fund to 1.60%, 1.40% and 1.25%,
respectively, of the average daily net assets of each fund. The funds comprising
the Trust will pay for all other services and expenses not specifically assumed
by the Manager such as registration fees, foreign custody fees, printing and
distribution of regulatory reports, and the fees of outside legal and accounting
firms. Certain officers and trustees of the Trust are also officers or trustees
of the Manager.
FEDERAL AND STATE TAXES
The Trust intends to qualify as a "regulated investment company" under the
Internal Revenue Code and intends to distribute each year substantially all of
its net investment income and realized capital gains to its shareholders.
12
2
JB300B
<PAGE>
J&B FUNDS
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a)(1) Agreement and Declaration of Trust dated August 4,
2000 is incorporated herein by reference to Exhibit
No. EX99(a)(1) of Registrant's Registration
Statement on Form N-1A as filed with the Securities
and Exchange Commission (the "SEC") via EDGAR on
August 11, 2000 (File No. 811-10039).
(a)(2) Certificate of Trust as filed with the State of
Delaware on August 4, 2000 is incorporated herein by
reference to Exhibit No. EX99(a)(2) of the
Registrant's Registration Statement on Form N-1A as
filed with the SEC via EDGAR on August 11, 2000
(File No. 811-10039).
(a)(3) Officer's Certificate designating the three initial
series of the Registrant dated November 28, 2000 is
filed herewith as Exhibit No. EX99(a)(3).
(b) By-Laws are filed herewith as Exhibit No. EX99(b).
(c) Instruments Defining Rights of Security Holders.
See Article III, "Shares" and Article V
"Shareholders' Voting Powers and Meetings" of the
Registrant's Agreement and Declaration of Trust.
See also, Article II, "Meetings of Shareholders" of
the Registrant's By-Laws.
(d)(1) Form of Management Agreement between the Registrant
and Jones & Babson, Inc. is filed herewith as
Exhibit No. EX99(d)(1).
(d)(2) Investment Sub-Advisory Agreements to be filed by
amendment.
(e) Underwriting Agreement to be filed by amendment.
(f) Bonus or Profit Sharing Contracts.
Not Applicable.
(g) Custodian Agreement to be filed by amendment.
(h)(1) Transfer Agency Agreement to be filed by amendment.
(h)(2) Fund Accounting Agreement to be filed by amendment.
(h)(3) Fund Administration Agreement to be filed by
amendment.
(i) Opinion and Consent of Counsel dated November 28,
2000 is filed herewith as Exhibit No. EX99(i).
(j)(1) Consent of Auditors dated November 21, 2000 is filed
herewith as Exhibit No. EX99(j)(1).
(j)(2) Power of Attorney is filed herewith as Exhibit No.
EX99(j)(2).
(k) Omitted Financial Statements.
Not Applicable.
(l) Initial Capital Agreements.
Not Applicable.
(m) Rule 12b-1 Plan.
Not Applicable.
(n) Rule 18f-3 Plan.
Not Applicable.
(p)(1) Code of Ethics of the Registrant and its Manager is
filed herewith as Exhibit No. EX99(p)(1).
(p)(2) Code of Ethics of Denver Investment Advisors, Inc.
is filed herewith as Exhibit No. EX99(p)(2).
(p)(3) Code of Ethics of McKinley Capital Management, Inc.
is filed herewith as Exhibit No. EX99(p)(3).
(p)(4) Code of Ethics of Knappenberger Bayer, Inc. is filed
herewith as Exhibit No. EX99(p)(4).
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Article VII, Section 2(a) of the Agreement and Declaration
of Trust provides that to the fullest extent that limitations on
the liability of Trustees and officers are permitted by the
Delaware Business Trust Act, the officers and Trustees shall not
be responsible or liable in any event for any act or omission of:
any agent or employee of the Trust; any Investment Adviser or
Principal Underwriter of the Trust; or with respect to each
Trustee and officer, the act or omission of any other Trustee or
officer, respectively. The Trust, out of the Trust Property,
shall indemnify and hold harmless each and every officer and
Trustee from and against any and all claims and demands
whatsoever arising out of or related to such officer's or
Trustee's performance of his or her duties as an officer or
Trustee of the Trust. This limitation on liability applies to
events occurring at the time a Person serves as a Trustee or
officer of the Trust whether or not such Person is a Trustee or
officer at the time of any proceeding in which liability is
asserted. Nothing herein contained shall indemnify, hold
harmless or protect any officer or Trustee from or against any
liability to the Trust or any Shareholder to which such Person
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Person's office.
Article VII, Section 2(b) provides that every note, bond,
contract, instrument, certificate or undertaking and every other
act or document whatsoever issued, executed or done by or on
behalf of the Trust, the officers or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have
been issued, executed or done only in such Person's capacity as
Trustee and/or as officer, and such Trustee or officer, as
applicable, shall not be personally liable therefore, except as
described in the last sentence of the first paragraph of Section
2 of Article VII.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT
ADVISER.
The principal business of Jones & Babson, Inc. is the
management of the J&B Funds and Babson Funds families of mutual
funds. It also provides fund accounting, fund administration and
fund transfer agency services for non-affiliated mutual funds,
and has expertise in the tax and pension plan field. It
supervises a number of prototype and profit-sharing plan programs
sponsored by various organizations eligible to be prototype plan
sponsors. The principal business of each sub-adviser is to
provide investment counsel and advice to a wide variety of
clients.
ITEM 27. PRINCIPAL UNDERWRITER.
(a) Jones & Babson, Inc., the principal underwriter of the
Registrant, also acts as principal underwriter for the
following:
UMB Scout Stock Fund, Inc.
-UMB Scout Stock Fund
-UMB Scout Stock Select Fund
UMB Scout WorldWide Fund, Inc.
-UMB Scout WorldWide Fund
-UMB Scout WorldWide Select Fund
UMB Scout Regional Fund, Inc.
UMB Scout Balanced Fund, Inc.
UMB Scout Bond Fund, Inc.
UMB Scout Capital Preservation Fund, Inc.
UMB Scout Kansas Tax-Exempt Bond Fund, Inc.
UMB Scout Money Market Fund, Inc.
UMB Scout Tax-Free Money Market Fund, Inc.
UMB Scout Funds
-UMB Scout Technology Fund
-UMB Scout Equity Index Fund
David L. Babson Growth Fund, Inc.
Babson Enterprise Fund, Inc.
Babson Enterprise Fund II, Inc.
D.L. Babson Money Market Fund, Inc.
-Prime Portfolio
-Federal Portfolio
D.L. Babson Tax-Free Income Fund, Inc.
-Portfolio S
-Portfolio L
-Portfolio MM
D.L. Babson Bond Trust
-Portfolio L
-Portfolio S
Babson Value Fund, Inc.
Shadow Stock Fund, Inc.
Babson-Stewart Ivory International Fund, Inc.
AFBA 5 Star Fund, Inc.
Buffalo Balanced Fund, Inc.
Buffalo Equity Fund, Inc.
Buffalo High Yield Fund, Inc.
Buffalo Small Cap Fund, Inc.
Buffalo USA Global Fund, Inc.
Investors Mark Series Fund, Inc.
(b) Herewith is the information required by the following
table with respect to each director, officer or partner
of the underwriter named in answer to Item 20 of Part
B:
Name and Principal Position & Offices Positions & Offices
Business Address with Underwriter with Registrant
Stephen S. Soden Chairman and Chairman and Trustee
700 Karnes Blvd. Director
Kansas City, MO
64108-3306
Giorgio Balzer Director None
700 Karnes Blvd.
Kansas City, MO
64108-3306
Robert T. Rakich Director None
700 Karnes Blvd.
Kansas City, MO
64108-3306
Edward S. Ritter Director None
700 Karnes Blvd.
Kansas City, MO
64108-3306
Robert N. Sawyer Director Trustee
700 Karnes Blvd.
Kansas City, MO
64108-3306
P. Bradley Adams Vice President and Vice President and
700 Karnes Blvd. Treasurer Treasurer
Kansas City, MO
64108-3306
Martin A. Cramer Vice President and Vice President and
700 Karnes Blvd. Secretary Secretary
Kansas City, MO
64108-3306
(c) The principal underwriter does not receive any
remuneration or compensation for the duties or services
rendered to the Registrant pursuant to the principal
underwriting agreement.
ITEM 28. LOCATION OF ACOUNTS AND RECORDS.
Each account, book or other document required to be
maintained by Section 31(a) of the Investment Company Act of
1940, as amended and Rules (17 CFR 270-31a-1 to 31a-3)
promulgated thereunder, is in the physical possession of Jones &
Babson, Inc., at BMA Tower, 700 Karnes Blvd., Kansas City,
Missouri 64108-3306.
ITEM 29. MANAGEMENT SERVICES.
There are no management related service contracts not
discussed in Part A or Part B.
ITEM 30. UNDERTAKINGS.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the provisions
described in response to item 25, or otherwise, the Registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a Trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended (the "1933 Act") and the Investment Company Act of
1940, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Kansas City, and the
State of Missouri on the 28th day of November, 2000.
J&B Funds
/s/ Stephen S. Soden
Stephen S. Soden
Chairman and Trustee
Pursuant to the requirements of the 1933 Act, this
Registration Statement has been signed below by the following
persons in the capacities and the date(s) indicated.
Signature Title Date
/s/ Stephen S. Soden Chairman and Trustee November 28, 2000
Stephen S. Soden
/s/ P. Bradley Adams Trustee, Treasurer and Principal November 28, 2000
P. Bradley Adams Financial & Accounting Officer
/s/ Eric T. Jager* Trustee November 28, 2000
Eric T. Jager
/s/ John A. MacDonald* Trustee November 28, 2000
John A. MacDonald
/s/ Steve W. Panknin* Trustee November 28, 2000
Steve W. Panknin
/s/ James R. Seward* Trustee November 28, 2000
James R. Seward
/s/ Robert N. Sawyer* Trustee November 28, 2000
Robert N. Sawyer
* Pursuant to Power of Attorney filed herewith as Exhibit
EX99(j)(2).
<PAGE>
EXHIBIT INDEX
EXHIBITS EXHIBIT NO.
Officer's Certificate EX99(a)(3)
By-Laws EX99(b)
Management Agreement EX99(d)(1)
Opinion and Consent of EX99(i)
Counsel
Consent of Independent EX99(j)(1)
Public Auditor
Power of Attorney EX99(j)(2)
Code of Ethics of EX99(p)(1)
Registrant and Manager
Code of Ethics of Denver EX99(p)(2)
Investment Advisors,
Inc.
Code of Ethics of EX99(p)(3)
McKinley Capital
Management, Inc.
Code of Ethics of EX99(p)(4)
Knappenberger Bayer,
Inc.
Doc. #381195 v.01
