File No. 333-_____
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. ____
Post-Effective Amendment No. ____
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. ____
(Check appropriate box or boxes.)
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
Steven S. Soden
BMA Tower, 700 Karnes Blvd., Kansas City, MO 64108-3306
(Name and Address of Agent for Service)
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.
If appropriate, check the following box:
/_/ This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
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
<PAGE>
J&B Funds
Prospectus
October 31, 2000
EQUITY FUNDS
J&B Small-Cap International Fund
J&B Small-Cap Aggressive Growth Fund
J&B Mid-Cap Aggressive Growth Fund
J&B Funds
Jones & Babson, Inc.
Manager and Distributor
A Member of the Generali Group
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.
Equity Funds
J&B Small-Cap
International Fund
J&B Small-Cap
Aggressive Growth Fund
J&B Mid-Cap
Aggressive Growth Fund
Prospectus
October 31, 2000
J&B Funds
Manager and Distributor:
Jones & Babson, Inc.
Kansas City, Missouri
Table of Contents
Information About the Funds
Investment Objectives and Principal Investment Strategies 2
Principal Risk Factors 3
Past Performance 3
Fees and Expenses 3
Management 4
Financial Highlights 5
Information about Investing
How to Purchase Shares 5
How to Redeem Shares 5
Shareholder Services 5
How Share Price is Determined 6
Dividends, Distributions and their Taxation 6
Additional Policies about Transactions 7
Conducting Business with the J&B Funds 8
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
J&B Funds Objective PRINCIPAL RISKS
J&B SMALL-CAP Long term growth of capital Market Risks
INTERNATIONAL FUND Small Company Risks
International Risks
J&B Small-Cap Aggressive Above average capital Market Risks
Growth Fund appreciation Small Company Risks
J&B Mid-Cap Aggressive
Growth Fund
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 will invest primarily in equity
securities (including common stocks, warrants, and convertible preferred
stocks and bonds). The Fund's Adviser will select stocks of smaller, less-
profiled companies - particularly outside the U.S. - with market
capitalizations generally less than two billion U.S. dollars at time of
purchase and which the Adviser believes offer higher return potential than
stocks of large companies. The Fund will attempt to maintain industry or sector
concentrations that approximate those of its current benchmark, the MSCi World,
Ex U.S. Small Cap Index.
Emerging or developing market securities will make up no more than 35% of the
Fund's assets at time of purchase. There will be investments in at least three
foreign countries with no more than 35% of its assets in any one country.
J&B SMALL-CAP AGGRESSIVE GROWTH FUND - This Fund will invest 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 $2 billion) that the Fund's Adviser believes have strong
earnings potential. The Fund will attempt to maintain industry or sector
concentrations that approximate those of its current benchmark, the Russell
2000 Growth Index.
J&B MID-CAP AGGRESSIVE GROWTH FUND - This Fund will invest primarily in equity
securities (including common stocks, warrants, and convertible preferred stocks
and bonds) of U.S. companies with medium market capitalizations (i.e., between
$1 billion and $10 billion) that the Fund's Adviser believes have strong
earnings potential. The Fund will attempt to maintain industry or sector
concentrations that approximate those of its current benchmarks, the Russell
Mid-Cap Index and the Standard & Poor's 400 Midcap Index.
Investment Strategies Common to Each Fund
Each Fund typically looks for companies with:
A strong business franchise that offers growth potential.
Products and services that give the company a competitive advantage.
A stock price the Fund's Adviser believes is reasonable relative to the
assets and/or earning potential of the company.
Attractive fundamental financial characteristics and manageable debt.
In addition, each Fund from time to time will also purchase:
American, European or International Depository Receipts.
Foreign currency or foreign currency forwards (the latter only for hedging
purposes).
Securities not listed on an exchange (which may be more difficult to sell).
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. During such periods, the Funds may not achieve their investment
objectives. 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.
The Small-Cap International Fund will normally invest for the long term (but
may sell a stock at any time the Adviser considers it overvalued or otherwise
unfavorable.)
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
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
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.
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.
PAST PERFORMANCE
The Funds are new as of October 31, 2000, therefore, there is no past
performance information.
Fees & Expenses
This table describes each Fund's 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 1.25% 1.00% 1.00%
Distribution (12b-1) Fees None None None
Other Expenses 0.50% 0.50% 0.50%
Total Annual Fund Operating Expenses 1.95% 1.70% 1.70%
Fee waivers and expense reimbursements* (0.20%) (0.20%) (0.20%)
Net Total Annual Fund Operating Expenses 1.75% 1.50% 1.50%
* The Funds' Manager has contractually agreed to waive fees and to
reimburse expenses 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 section "How to Purchase Shares."
This Example is intended to help you compare the cost of investing in each
Fund with the cost of investing in other mutual funds.
The Example assumes 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
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
FEE Examples
1 Year 3 Years
J&B Small-Cap International Fund $178 $551
J&B Small-Cap Aggressive Growth Fund $153 $474
J&B Mid-Cap Aggressive Growth Fund $153 $474
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 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 1.00% (1.25% for the Small-Cap
International Fund) of the average daily net assets of the Fund. 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 transfer agency, portfolio accounting,
custody fees, and the fees of outside legal and accounting firms.
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:
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 Sub-Advisory Fee Paid
J&B Small-Cap International Fund %
J&B Small-Cap Aggressive Growth Fund %
J&B Mid-Cap Aggressive Growth Fund %
Financial Highlights
The Funds are new as of October 31, 2000, therefore there are no financial
highlights.
HOW TO PURCHASE SHARES
How to Buy Shares (see accompanying chart on page 9 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
$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
1-800-_____________ 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.
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 annually
on or before 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 not accompanied by payment or when 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
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
1-800-
(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 AN ACCOUNT
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
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
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.
HOW TO EXCHANGE SHARES
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.
By Mail
Initial Purchases, Redemptions and all Correspondence:
The J&B Funds
P.O. Box 219757
Kansas City, MO 64121-9779
Subsequent Purchases:
The J&B Funds
P.O. Box 219779
Kansas City, MO 64121-9779
HOW TO OPEN AN ACCOUNT
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
Make your check payable to UMB Bank, n.a. and mail it to us. Always identify
your account number or include the detachable reminder stub (from your
confirmation statement).
HOW TO SELL SHARES
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
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.
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 AN ACCOUNT
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
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
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
Not applicable.
Through Automatic Transaction 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 AN ACCOUNT
Not applicable.
HOW TO ADD TO AN ACCOUNT
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
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
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, writing or e-mailing
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.
J&B Funds
Jones & Babson, Inc.
Manager and Distributor
A Member of the Generali Group
P.O. Box 419757, Kansas City, MO 64141-6757
1-800-000-0000
www.jbfunds.com
<PAGE>
PART B
J&B FUNDS
J&B SMALL-CAP INTERNATIONAL GROWTH FUND
J&B SMALL-CAP AGGRESSIVE GROWTH FUND
J&B MID-CAP AGGRESSIVE GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
October 31, 2000
This Statement of Additional Information is not a Prospectus but should be
read in conjunction with the J&B Funds combined Prospectus dated
October 31, 2000. To obtain the Prospectus or any available Annual or
Semi-Annual Report to Shareholders, please call the J&B Funds toll-free at
1-800-xxx-xxxx (1-800-xxx-xxxx), 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 Growth 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 Stock Ratings 16
Description of Commercial Paper Ratings 16
Financial Statements 17
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 Growth Fund. The
J&B Small-Cap International Growth 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). Small
companies are defined as those with a market
capitalization of $2 billion or less at time of purchase.
The Fund will attempt to maintain industry or sector
concentrations that approximate those of its current
benchmark, the MSCi World, Ex U.S. Small Cap
Index.
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.
In order to meet the liquidity needs of the
International Fund or when the International Fund
believes that investments should be deployed in a
temporary defensive position because of economic or
market conditions, it may invest all or a major
portion of its assets in short-term debt securities
denominated in U.S. dollars, including U.S. Treasury
bills and other securities of the U.S. government and
its agencies, bankers' acceptances, certificates of
deposit, and repurchase agreements maturing in
seven days or less with U.S. banks and broker-
dealers. The International Fund may also hold cash
and time deposits in foreign banks, denominated in
any major foreign currency.
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). The
Small-Cap Fund will purchase smaller, rapidly
growing emerging companies with market
capitalizations under $2 billion, while the Mid-Cap
Fund will purchase midsize companies with market
capitalizations between $1 billion and $10 billion
who have strong earnings prospects projected to grow
faster than the overall market.
Both Funds will be aggressively managed, utilizing
Initial Public Offerings ("IPOs"), short selling and
options. The Small-Cap Fund will utilize the Russell
2000 Growth Index while the Mid-Cap Fund will utilize
either the Russell Mid-Cap Index or the Standard &
Poor's Midcap 400 Index when determining the
industry sector weightings of the Funds.
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.
In order to meet the liquidity needs of the Funds or
when the Funds believe that investments should be
deployed in a temporary defensive position because
of economic or market conditions, the Funds may
invest all or a major portion of its assets in short-term
debt securities denominated in U.S. dollars, including
U.S. Treasury bills and other securities of the U.S.
government and its agencies, bankers' acceptances,
certificates of deposit, and repurchase agreements
maturing in seven days or less with U.S. banks and
broker-dealers.
INVESTMENT POLICIES - ALL FUNDS
Short-Term Debt Obligations. For cash
management purposes including meeting
redemptions and unanticipated expenses, each Fund
may 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.
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 investment 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 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 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.
Each Fund is classified as diversified as defined
under the 1940 Act and the Funds 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) may
not 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,
neither 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, neither
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.
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 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). Signatures 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.
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.
Investment in complex securities. The Funds may
invest in complex securities. These investments may
be subject to numerous special and complex tax rules.
These rules could affect whether gains and losses
recognized by a Fund are treated as ordinary income
or capital gain, accelerate the recognition of income
to a fund and/or defer a Fund's ability to recognize
losses, and, in limited cases, subject a Fund to U.S.
federal income tax on income from certain of its
foreign securities. In turn, these rules may affect the
amount, timing or character of the income distributed
to you by a Fund.
MANAGEMENT AND
INVESTMENT ADVISER
As a part of the Management Agreement, Jones &
Babson, Inc. employs at its own expense [sub-
advisers] as its investment advisers. [discussion of
sub-advisers]. They participate with Jones &
Babson, Inc. in the management of the J&B Funds.
Jones & Babson, Inc. pays [sub-advisers] a fee of
75/100 of one percent (0.75%) for the first $100
million, 65/100 of one percent (0.65%) on the next
$150 million and 50/100 of one percent (0.50%) for
amounts in excess of $250 million with respect to
each 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 Babson Funds, UMB
Scout Funds, Buffalo Funds and the Investors Mark
Series Fund, Inc.; Director, AFBA Five Star 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.
[Francis C. Rood (66), Trustee. Retired, 73-395
Agave Lane, Palm Desert, California 92260-6653.
Formerly Vice President of Finance, Hallmark Cards,
Inc.; Director (or Trustee) of each of the Babson
Funds, Buffalo Funds and the Investors Mark Series
Fund, Inc.]
[William H. Russell (76), Trustee. Financial
Consultant, 645 West 67th Street, Kansas City,
Missouri 64113; previously Vice President, Sprint;
Director (or Trustee) of each of the Babson Funds,
Buffalo Funds and the Investors Mark Series Fund,
Inc.]
[H. David Rybolt (58), Trustee. Consultant, HDR
Associates, P.O. Box 2468, Shawnee Mission,
Kansas 66201; Director (or Trustee) of each of the
Babson Funds, (except Babson-Stewart Ivory
International Fund, Inc.), Buffalo Funds and
Investors Mark Series Fund, Inc.]
P. Bradley Adams (40), Vice President and
Treasurer. Vice President and Treasurer, Jones &
Babson, Inc., and each of the Babson Funds, UMB
Scout Funds and Buffalo Funds; Vice President and
Chief Financial Officer, AFBA Five Star Fund, Inc.;
Principal Financial Officer, 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 Babson Funds, UMB
Scout Funds and Buffalo Funds; Secretary and
Assistant Vice President, AFBA Five Star Fund, Inc.;
Secretary, Investors Mark Series Fund, Inc.;
Constance E. Martin (39), Vice President. Jones &
Babson, Inc.; Vice President, of each of the Babson
Funds, UMB Scout Funds, Buffalo Funds and AFBA
Five Star Fund, Inc.
Guy Cooke (39), Vice President. Chief Compliance
Officer, Jones & Babson, Inc.; Vice President, of
each of the Babson Funds, AFBA Five Star Fund and
Buffalo Funds. He joined Jones & Babson in 1998.
COMPENSATION TABLE
Name of Director Aggregate Pension Estimated Total
Compensation or Reti Annual Compensation
From the rement Benefits From All
Funds BenefitsUpon J&B Funds
Accrued Retirement Paid to
as Part Trustee
of Fund
Expenses
Stephen S. Soden* N/A N/A N/A N/A
[Francis C. Rood] $[___] N/A N/A $[___]
[William H. Russell] $[___] N/A N/A $[___]
[H. David Rybolt] $[___] N/A N/A $[___]
* As an "interested Trustee," Mr. Soden receives
no compensation for his services as a Trustee.
GENERAL INFORMATION AND
HISTORY
J&B Funds (the "Trust") which consists of three
separate series - J&B Small-Cap International
Growth 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 in Delaware 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
Each of the 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 Funds.
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 Trusts 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 Five Star Fund, Inc.
DESCRIPTION OF STOCK RATINGS
Standard & Poor's Earnings and Dividend
Rankings for Common Stocks (S&P) - Growth
and stability of earnings and dividends are deemed
key elements in establishing Standard & Poor's
earnings and dividend rankings for common stocks.
Basic scores are computed for earnings and
dividends, then adjusted by a set of predetermined
modifiers for growth, stability within long-term
trend, and cyclically. Adjusted scores for earnings
and dividends are then combined to yield a final
score. The final score is measured against a
scoring matrix determined by an analysis of the
scores of a large and representative sample of
stocks. The rankings are:
A+ Highest
A High
A- Above Average
B+ Average
B Below Average
B- Lower
C Lowest
D In Reorganization
Value Line Ratings of Financial Strength - The
financial strength of each of the companies
reviewed by Value Line is rated relative to all the
others. The ratings are:
A++ The very highest relative financial
strength.
A+ Excellent financial position relative to
other companies.
A High grade relative financial strength.
B++ Superior financial health on a relative
basis.
B+ Very good relative financial structure.
B Good overall relative financial structure.
C++ Satisfactory finances relative to other
companies.
C+ Below-average relative financial position.
C Poorest financial strength relative to other
major companies.
The ratings are based upon computer analysis of a
number of key variables that determine: (a)
financial leverage, (b) business risk and (c)
company size plus the judgment of their analysts
and senior editors regarding factors that cannot be
quantified across-the-board for all stocks. The
primary variables that are indexed and studied
include equity coverage of debt, equity coverage of
intangibles, "quick ratio" accounting methods,
variability of return, quality of fixed charge
coverage, stock price stability and company size.
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.
FINANCIAL STATEMENTS
[Seed money financials to be provided]
17
<PAGE>
J&B FUNDS
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a)(1) Agreement and Declaration of Trust dated August 4,
2000 is filed herewith as Exhibit No. EX-99(a)(1).
(a)(2) Certificate of Trust as filed with the State of
Delaware on August 4, 2000 is filed herewith as
Exhibit No. EX-99(a)(2).
(b) By-Laws to be filed by amendment.
(c) Specimen copy of securities of the Registrant to be
filed by amendment.
(d)(1) Investment Advisory Agreement to be filed by
amendment.
(d)(2) Investment Sub-Advisory Agreement(s) 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 to be filed by
amendment.
(j) Consent of Auditors to be filed by amendment.
(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) Code of Ethics to be filed by amendment.
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.
To be provided by amendment.
ITEM 27. PRINCIPAL UNDERWRITER.
(a) Jones & Babson, Inc., the only 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 Five 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 only 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 Director
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 None
700 Karnes Blvd.
Kansas City, MO
64108-3306
Vernon W. Voorhees Director None
700 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 Secretary Secretary
700 Karnes Blvd.
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.
Not Applicable.
EXHIBIT INDEX
EXHIBITS EXHIBIT NO.
Agreement and EX-99(a)(1)
Declaration of Trust
Certificate of Trust EX-99(a)(2)
345522 v.01
<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, on the 4th day of August, 2000.
J&B Funds
/s/Stephen S. Soden
Stephen S. Soden
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 Trustee August 4, 2000
Stephen S. Soden
/s/P. Bradley Adams Treasurer and Principal August 4, 2000
P. Bradley Adams Financial & Accounting Officer
