File No. 33-82366
File No. 811-08690
As filed with the Securities and Exchange Commission
on March 18, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 2 /X/
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 4 /X/
THE DLB FUND GROUP
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(Exact Name of Registrant as Specified in Charter)
One Memorial Drive, Cambridge, Massachusetts 02142
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(Address of Principal Executive Office)
(617)225-3800
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(Registrant's Telephone Number, Including Area Code)
Ronald E. Gwozdz with a copy to:
David L. Babson & Co., Inc. Gregory D. Sheehan, Esq.
One Memorial Drive Ropes & Gray
Cambridge, Massachusetts 02142 One International Place
- ------------------------------- Boston, Massachusetts 02110
(Name and Address of Agent for Service)
It is proposed that this filing become effective (check appropriate box):
|_| Immediately upon filing |X| on April 2, 1996 pursuant to
pursuant to paragraph (b) paragraph (b)
|_| 60 days after filing pursuant |_| on (date) pursuant to
to paragraph (a)(1) paragraph (a)(1)
|_| 75 days after filing pursuant |_| on (date) pursuant to
to paragraph (a)(2) paragraph (a)(2) of rule 485.
If appropriate, check the following box:
|X| This post-effective amendment designates a new effective date for a
previously-filed, post-effective amendment.
Pursuant to Rule 24f-2(a) under the Investment Company Act of 1940, the
Registrant has previously declared the registration under the Securities Act of
1933 of an indefinite number of its shares of beneficial interest. Registrant
filed a Rule 24f-2 Notice with respect to Registrant's fiscal year ended
December 31, 1995 on February 29, 1996.
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THE DLB FUND GROUP
CROSS REFERENCE SHEET
FORM N-1A
Part A: Information Required in Prospectus
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<TABLE>
<CAPTION>
Location in the
N-1A Registration Statement
Item No Item by Prospectus Heading
- ------- ---- ---------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis "Shareholder Transaction and Fund Expenses"
3. Condensed Financial Information "Financial Highlights"
4. General Description of the "Organization and Capitalization of the Trust,"
Registrant "Investment Objectives and Policies and Associated
Risks" and Cover Page
5. Management of the Fund "Management of the Trust"
5A. Management's Discussion of Fund Not Applicable
Performance
6. Capital Stock and Other Securities "Distributions," "Taxes" and "Shareholder
Inquiries"
7. Purchase of Securities Being "Purchase of Shares" and "Determination of Net
Offered Asset Value"
8. Redemption or Repurchase "Redemption of Shares" and "Determination of Net
Asset Value"
9. Pending Legal Proceedings Not Applicable
</TABLE>
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Part B: Information Required in
Statement of Additional Information ("SAI")
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<TABLE>
<CAPTION>
Location in the
N-lA Registration Statement
Item No. Item by SAI Heading
- -------- ---- --------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents "Table of Contents"
12. General Information and History Not Applicable
13. Investment Objective and Policies "Investment Objectives and Policies and Associated
Risks," "Investment Restrictions," and "Additional
Investment Practices of the Fixed Income Fund"
14. Management of the Registrant "Management of the Trust"
15. Control Persons and Principal "Description of the Trust
Holders of Securities and Ownership of Shares"
16. Investment Advisory and Other "Investment Advisory and
Services Other Services"
17. Brokerage Allocation "Portfolio Transactions"
18. Capital Stock and Other Securities "Description of the Trust" and "Ownership of
Shares"
19. Purchase, Redemption and Pricing "Purchase of Shares"
of Securities Being Offered and "Redemption of Shares"
in Prospectus and "Determination of Net Asset
Value"
20. Tax Status "Income Dividends, Distributions and Tax Status"
21. Underwriters Not Applicable
22. Calculation of Performance Data "Performance Information"
23. Financial Statements "Report of Independent Auditors and Financial
Statements"
</TABLE>
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PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
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PROSPECTUS
THE DLB FUND GROUP
One Memorial Drive
Cambridge, Massachusetts 02142
(617) 225-3800
April 1, 1996
The DLB Fund Group (the "Trust") is an open-end management investment
company offering four non-diversified portfolios with different investment
objectives and strategies. (Such portfolios are each referred to as a "Fund,"
and, collectively, as the "Funds.") The Funds are intended primarily to serve as
investment vehicles for institutional investors. Each Fund's investment manager
is David L. Babson & Co., Inc. (the "Manager").
The DLB FIXED INCOME FUND (the "Fixed Income Fund") seeks to achieve a
high level of current income consistent with preservation of capital through
investment in a portfolio of fixed income securities.
The DLB GLOBAL SMALL CAPITALIZATION FUND (the "Global Small Cap Fund")
seeks long-term capital appreciation through investment primarily in common
stocks of smaller foreign and domestic companies.
The DLB VALUE FUND (the "Value Fund") seeks long-term capital
appreciation primarily through investment in a portfolio of common stocks of
established companies.
The DLB MID CAPITALIZATION FUND (the "Mid Cap Fund") seeks long-term
capital appreciation primarily through investment in a portfolio of common
stocks of small to medium-size companies.
Shares of each Fund are sold to investors by the Trust. The minimum
initial investment in a Fund is $100,000, and the minimum for each subsequent
investment is $10,000.
This Prospectus concisely describes the information which investors
ought to know before investing in any of the Funds. Please read this Prospectus
carefully and keep it for further reference.
A Statement of Additional Information dated April 1, 1996 is available
at no charge by writing to the Trust, c/o David L. Babson & Co., Inc., Marketing
Department, Attention: Maureen A. Madden, One Memorial Drive, Cambridge,
Massachusetts, 02142 or by telephoning (617) 225-3800. The Statement, which
contains more detailed information about all of the Funds, has been filed with
the Securities and Exchange Commission and is incorporated by reference in this
Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
PAGE
SHAREHOLDER TRANSACTION AND FUND EXPENSES.................................. 3
FINANCIAL HIGHLIGHTS....................................................... 8
INVESTMENT OBJECTIVES AND POLICIES AND ASSOCIATED RISKS.................... 12
PURCHASE OF SHARES......................................................... 18
REDEMPTION OF SHARES....................................................... 20
DETERMINATION OF NET ASSET VALUE........................................... 21
DISTRIBUTIONS.............................................................. 22
TAXES...................................................................... 22
MANAGEMENT OF THE TRUST.................................................... 23
PERFORMANCE INFORMATION.................................................... 24
ORGANIZATION AND CAPITALIZATION OF THE TRUST............................... 25
SHAREHOLDER INQUIRIES...................................................... 25
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SHAREHOLDER TRANSACTION AND FUND EXPENSES
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1. FIXED INCOME FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after fee waiver) (a).................... .20%
12b-1 Fees(b)............................................. 0
Other Expenses(c)......................................... .35%
----
Total Fund Operating Expenses (after fee waiver) (a)...... .55%
EXAMPLE:
You would pay the following Years
expenses on a $1,000 investment, -----
assuming a 5% annual return 1 3
with or without redemption at - -
the end of each period: $6.00 $18.00
- ---------------
(a) The Manager has agreed with the Fund to reduce its management fee and
to bear certain expenses for the current fiscal year to the extent that
the Fund's total annual expenses, other than brokerage commissions and
transfer taxes, would otherwise exceed .55% of the Fund's average daily
net assets. Therefore, so long as the Manager agrees to reduce its fee
and to bear certain expenses, total annual expenses of the Fund, other
than brokerage commissions and transfer taxes, will not exceed .55%.
Absent such agreement by the Manager to waive its fee and bear certain
expenses, management fees would be .40% and total Fund operating
expenses would be 2.50%.
(b) The Fund has adopted a distribution and services plan pursuant to Rule
12b-1 that permits payments by the Fund at an annual rate of up to .50%
of the Fund's average net assets, but the Trustees do not currently
intend to implement such plan during the Fund's current fiscal year.
See "Purchase of Shares -- 12b-1 Plans."
(c) "Other Expenses" are based on estimated amounts for the Fund's current
fiscal year.
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2. GLOBAL SMALL CAP FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after fee waiver)(a).......................... .80%
12b-1 Fees(b).................................................. 0
Other Expenses(c).............................................. .70%
----
Total Fund Operating Expenses (after fee waiver) (a)........... 1.50%
EXAMPLE:
You would pay the following Years
expenses on a $1,000 investment, -----
assuming a 5% annual return 1 3
with or without redemption at - -
the end of each period: $15.00 $47.00
- ---------------
(a) The Manager has agreed with the Fund to reduce its management fee and
to bear certain expenses for the current fiscal year to the extent that
the Fund's total annual expenses, other than brokerage commissions and
transfer taxes, would otherwise exceed 1.50% of the Fund's average
daily net assets. Therefore, so long as the Manager agrees to reduce
its fee and to bear certain expenses, total annual expenses of the
Fund, other than brokerage commissions and transfer taxes, will not
exceed 1.50%. Absent such agreement by the Manager to waive its fee and
bear certain expenses, management fees would be 1.00% and total Fund
operating expenses would be 2.50%. The management fees paid by the Fund
are higher than the management fees paid by most other investment
companies, although not necessarily higher than other investment
companies investing in a global portfolio of small capitalization
stocks.
(b) The Fund has adopted a distribution and services plan pursuant to Rule
12b-1 that permits payments by the Fund at an annual rate of up to .50%
of the Fund's average net assets, but the Trustees do not currently
intend to implement such plan during the Fund's current fiscal year.
See "Purchase of Shares -- 12b-1 Plans."
(c) "Other Expenses" are based on estimated amounts for the Fund's current
fiscal year.
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3. VALUE FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after fee waiver)(a)..................... . 35%
12b-1 Fees(b)............................................. 0
Other Expenses(c)......................................... .45%
----
Total Fund Operating Expenses (after fee waiver) (a)...... .80%
EXAMPLE:
You would pay the following Years
expenses on a $1,000 investment, -----
assuming a 5% annual return 1 3
with or without redemption at - -
the end of each period: $8.00 $26.00
- ---------------
(a) The Manager has agreed with the Fund to reduce its management fee and
to bear certain expenses for the current fiscal year to the extent that
the Fund's total annual expenses, other than brokerage commissions and
transfer taxes, would otherwise exceed .80% of the Fund's average daily
net assets. Therefore, so long as the Manager agrees to reduce its fee
and to bear certain expenses, total annual expenses of the Fund, other
than brokerage commissions and transfer taxes, will not exceed .80%.
Absent such agreement by the Manager to waive its fee and bear certain
expenses, management fees would be .55% and total Fund operating
expenses would be 2.43%.
(b) The Fund has adopted a distribution and services plan pursuant to Rule
12b-1 that permits payments by the Fund at an annual rate of up to .50%
of the Fund's average net assets, but the Trustees do not currently
intend to implement such plan during the Fund's current fiscal year.
See "Purchase of Shares -- 12b-1 Plans."
(c) "Other Expenses" are based on estimated amounts for the Fund's current
fiscal year.
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4. MID CAP FUND
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after fee waiver)(a)........................ .30%
12b-1 Fees(b)................................................ 0
Other Expenses(c)............................................ .60%
----
Total Fund Operating Expenses (after fee waiver) (a)......... .90%
EXAMPLE:
You would pay the following Years
expenses on a $1,000 investment, -----
assuming a 5% annual return 1 3
with or without redemption at - -
the end of each period: $9.00 $29.00
- ---------------
(a) The Manager has agreed with the Fund to reduce its management fee and
to bear certain expenses for the current fiscal year to the extent that
the Fund's total annual expenses, other than brokerage commissions and
transfer taxes, would otherwise exceed .90% of the Fund's average daily
net assets. Therefore, so long as the Manager agrees to reduce its fee
and to bear certain expenses, total annual expenses of the Fund, other
than brokerage commissions and transfer taxes, will not exceed .90%.
Absent such agreement by the Manager to waive its fee and bear certain
expenses, management fees would be .60% and total Fund operating
expenses would be 2.50%.
(b) The Fund has adopted a distribution and services plan pursuant to Rule
12b-1 that permits payments by the Fund at an annual rate of up to .50%
of the Fund's average net assets, but the Trustees do not currently
intend to implement such plan during the Fund's current fiscal year.
See "Purchase of Shares -- 12b-1 Plans."
(c) "Other Expenses" are based on estimated amounts for the Fund's current
fiscal year.
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The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses of each of the Funds that are borne
by holders of Fund shares. THE FIVE PERCENT ANNUAL RETURN AND ESTIMATED EXPENSES
USED IN CALCULATING THE EXAMPLES ARE NOT REPRESENTATIONS OF PAST OR FUTURE
PERFORMANCE OR EXPENSES; ACTUAL PERFORMANCE AND/OR EXPENSES MAY BE MORE OR LESS
THAN SHOWN.
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FINANCIAL HIGHLIGHTS
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The following tables, which present per share financial information for
each of the Funds, have been audited by Deloitte & Touche LLP,
independent accountants. These tables should be read in conjunction
with the Funds' other audited financial statements and related notes
which are included in the Statement of Additional Information.
1. FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $10.00
------
Income from investment operations:
Net investment income 0.28
Net realized and unrealized gain on investments 0.37
----
Total from investment operations 0.65
----
Less distributions declared to shareholders:
From net investment income (0.28)
From net realized gain on investments (0.11)
-----
Total distributions declared to shareholders (0.39)
-----
Net asset value - end of period $10.26
======
Total return 14.75%*
Ratios and Supplemental Data:
Ratio of expenses to average net assets 0.55%*
Ratio of net investment income to average net assets 6.24%*
Portfolio turnover 42%
Net assets at end of period (000 omitted) $5,325
The Manager has agreed with the Fund to reduce its
management fee and bear certain expenses, such that
expenses do not exceed 0.55% of average daily net assets
on an annualized basis. If the fee and expenses had been
incurred by the Fund and had expenses been limited to
that required by state securities law, the net
investment income per share and ratios would have been:
Net investment income $0.19
Ratios (to average net assets):
Expenses 2.50%*
Net investment income 4.33%*
- --------------
*Annualized
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2. GLOBAL SMALL CAP FUND
FINANCIAL HIGHLIGHTS
PERIOD FROM JULY 19, 1995
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $10.00
Income from investment operations: ------
Net investment income 0.07
Net realized and unrealized gain on investments 0.33
-----
Total from investment operations 0.40
-----
Less distributions declared to shareholders from net
investment income (0.07)
-----
Net asset value - end of period $10.33
======
Total return 8.96%*
Ratios and Supplemental Data:
Ratio of expenses to average net assets 1.46%*
Ratio of net investment income to average net assets 1.46%*
Portfolio turnover 5%
Net assets at end of period (000 omitted) $10,509
The Manager has agreed with the Fund to reduce its investment
management fee and bear certain expenses, such that expenses do not
exceed 1.50% of average daily net assets on an annualized basis. If
the fee and expenses had been incurred by the Fund and had expenses
been limited to that required by state securities law, net investment
income per share would have been:
Net investment income $0.02
Ratios (to average net assets):
Expenses 2.50%*
Net investment income 0.42%*
- --------------
*Annualized
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3. VALUE FUND
FINANCIAL HIGHLIGHTS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $10.00
Income from investment operations: ------
Net investment income 0.09
Net realized and unrealized gain on investments 0.73
----
Total from investment operations 0.82
----
Less distributions declared to shareholders:
From net investment income (0.09)
From net realized gain on investments (0.15)
----
Total distributions declared to shareholders (0.24)
----
Net asset value - end of period $10.58
======
Total return 18.64%*
Ratios and Supplemental Data:
Ratio of expenses to average net assets 0.80%*
Ratio of net investment income to average net assets 2.02%*
Portfolio turnover 7%
Net assets at end of period (000 omitted) $10,818
The Manager has agreed with the Fund to reduce its management fee and
bear certain expenses, such that expenses do not exceed 0.80% of
average daily net assets on an annualized basis. If the fee and
expenses had been incurred by the Fund, the net investment income per
share and ratios would have been:
Net investment income $0.02
Ratios (to average net assets):
Expenses 2.43%*
Net investment income 0.40%*
- --------------
*Annualized
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4. MID CAP FUND
FINANCIAL HIGHLIGHTS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $10.00
Income from investment operations: ------
Net investment income 0.08
Net realized and unrealized gain on investments 0.84
----
Total from investment operations 0.92
----
Less distributions declared to shareholders:
From net investment income (0.08)
From net realized gain on investments (0.09)
----
Total distributions declared to shareholders (0.17)
----
Net asset value - end of period $10.75
======
Total return 21.17%*
Ratios and Supplemental Data:
Ratio of expenses to average net assets 0.90%*
Ratio of net investment income to average net assets 1.90%*
Portfolio turnover 6%
Net assets at end of period (000 omitted) $10,929
The Manager has agreed with the Fund to reduce its management fee and
bear certain expenses, such that expenses do not exceed 0.90% of
average daily net assets on an annualized basis. If the fee and
expenses had been incurred by the Fund and had expenses been limited
to that required by state securities law, the net investment income
per share and ratios would have been:
Net investment income 0.01
Ratios (to average net assets):
Expenses 2.50%*
Net investment income 0.32%*
- --------------
*Annualized
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INVESTMENT OBJECTIVES AND POLICIES AND ASSOCIATED RISKS
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FIXED INCOME FUND
The Fixed Income Fund's investment objective is to achieve a high level of
current income consistent with preservation of capital through investment in a
portfolio of fixed income securities.
The Manager will pursue the Fixed Income Fund's objective by investing the
Fund's assets primarily in publicly traded domestic fixed income securities,
including U.S. Treasury and agency obligations, mortgage-backed and asset-backed
securities and corporate debt securities. The Fund will also invest in other
fixed income markets, such as corporate private placements, directly-placed
mortgage obligations and foreign currency denominated bonds. Substantially all
(but no less than 65%) of the Fund's total assets will at all times be invested
in fixed income securities. Pending investment and reinvestment in fixed income
securities, the Manager may invest the Fund's assets in money market
instruments. Allocations are made among a wide array of market sectors, such as
U.S. Treasury and agency obligations, corporate securities, mortgages and
mortgage-backed securities, private placement securities and non-U.S. dollar
denominated securities, based on the relative attractiveness of such sectors.
Following these sector allocations, the Manager will purchase those securities
deemed attractively valued in the desired sectors. The Fund may invest in any
fixed income security, including preferred stocks. The Fund may also hold a
portion of its assets in cash or money market instruments.
PORTFOLIO DURATION AND MATURITY. The Fund's portfolio will generally have
an average dollar weighted portfolio maturity of five to twelve years and a
duration of no less than three years and no more than ten years (excluding
short-term investments). The duration of a fixed income security is the weighted
average maturity, expressed in years, of the present value of all future cash
flows, including coupon payments and principal repayments. The Fund's portfolio
may include securities with maturities and durations outside of these ranges.
PORTFOLIO QUALITY. The Fund may invest in any security that is rated
investment grade at the time of purchase (i.e., at least Baa as determined by
Moody's Investors Service, Inc. ("Moody's") or BBB as determined by Standard &
Poor's ("S&P")), or in any unrated security that the Manager determines to be of
comparable quality. Securities rated Baa by Moody's or BBB by S&P and comparable
unrated securities have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments on such obligations than in the case of
higher-rated securities. In the event that any security held by the Fund ceases
to be of investment grade quality, the Fund will not be obligated to dispose of
such security and may continue to hold the obligation if, in the opinion of the
Manager, such investment is considered appropriate under the circumstances.
However, if more than 5% of the Fund's net assets are below investment grade
quality, the Manager will dispose of such securities as are necessary to reduce
such holdings to 5% or less.
INTEREST RATE RISK. The values of fixed income securities generally vary
inversely to changes in prevailing interest rates. Investments in lower quality
fixed income securities generally provide greater income than investments in
higher-rated securities but are subject to greater market fluctuations and risks
of loss of income and principal than are higher-rated securities. Fluctuations
in the value of portfolio
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securities will not affect interest income on existing portfolio securities but
will be reflected in the Fund's net asset value.
MORTGAGE-BACKED AND OTHER ASSET-BACKED SECURITIES. The Fund may invest in
mortgage-backed and other asset-backed securities issued by the U.S. Government
and its agencies and instrumentalities and by non-governmental issuers. Interest
and principal payments (including prepayments) on the mortgages underlying
mortgage-backed securities are passed through to the holders of the
mortgage-backed security. Prepayments occur when the mortgagor on an individual
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. As a result of the pass-through of prepayments of principal on
the underlying securities, mortgage-backed securities are often subject to more
rapid prepayment of principal than their stated maturity would indicate. Because
the prepayment characteristics of the underlying mortgages vary, there can be no
certainty as to the predicted yield or average life of a particular issue of
pass-through certificates. Prepayments are important because of their effect on
the yield and price of the securities. During periods of declining interest
rates, such prepayments can be expected to accelerate and the Fund would be
required to reinvest the proceeds at the lower interest rates then available. In
addition, prepayments of mortgages which underlie securities purchased at a
premium could result in capital losses because the premium may not have been
fully amortized at the time the obligation was prepaid. As a result of these
principal payment features, the values of mortgage-backed securities generally
fall when interest rates rise, but their potential for capital appreciation in
periods of falling interest rates is limited because of the prepayment feature.
The mortgage-backed securities purchased by the Fund may include adjustable rate
instruments. See "Adjustable Rate Securities" below.
The Fund may also invest in asset-backed securities such as securities
backed by pools of automobile loans, educational loans and credit card
receivables, both secured and unsecured. These assets are generally held by a
trust and payments of principal and interest or interest only are passed through
to certificate holders. The underlying assets are subject to prepayment, which
may reduce the overall return to certificate holders. Nevertheless, principal
repayment rates tend not to vary much with interest rates and the short-term
nature of the assets tends to dampen the impact of any change in the prepayment
level. Certificate holders may also experience delays in payment on the
certificates if the full amounts due on the underlying assets are not realized
by the trust because of unanticipated legal or administrative costs of enforcing
the contracts or because of depreciation or damage to the collateral (usually
automobiles) securing certain contracts, or other factors.
In addition to the risks described above, mortgage-backed and asset-backed
securities without a U.S. Government guarantee involve risk of loss of principal
if the obligors of the underlying obligations default in payment of the
obligations.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). The Fund may invest in CMOs.
A CMO is a security backed by a portfolio of mortgages or mortgage-backed
securities held under an indenture. The issuer's obligation to make interest and
principal payments is secured by the underlying portfolio of mortgages or
mortgage-backed securities. CMOs are issued in multiple classes or series which
have different maturities representing interests in some or all of the interest
or principal on the underlying collateral or a combination thereof. CMOs of
different classes are generally retired in sequence as the underlying mortgage
loans in the mortgage pool are repaid. In the event of sufficient early
prepayments on such mortgages, the class or series of CMO first to mature
generally will be retired prior to its stated maturity. Thus, the early
retirement of a particular class or series of CMO held by the Fund would have
the same effect as the prepayment of mortgages underlying a mortgage-backed
pass-through security.
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CMOs also include securities ("Residuals") representing the interest in any
excess cash flow and/or the value of any collateral remaining after the issuer
has applied cash flow from the underlying mortgages or mortgage-backed
securities to the payment of principal of, and interest on, all other CMOs and
the administrative expenses of the issuer. Due to uncertainty as whether any
excess cash flow or the underlying collateral will be available, there can be no
assurances that Residuals will ultimately have value. See the Statement of
Additional Information.
ADJUSTABLE RATE SECURITIES. The Fund may invest in adjustable rate
securities which are securities that have interest rates that are reset at
periodic intervals, usually by reference to some interest rate index or market
interest rate. They may be U.S. Government securities or securities of other
issuers. Some adjustable rate securities are backed by pools of mortgage loans.
Although the rate adjustment feature may act as a buffer to reduce sharp changes
in the value of adjustable rate securities, these securities are still subject
to changes in value based on changes in market interest rates or changes in the
issuer's creditworthiness. Because the interest rate is reset only periodically,
changes in the interest rates on adjustable rate securities may lag changes in
prevailing market interest rates. Also, some adjustable rate securities (or the
underlying mortgages) are subject to caps or floors that limit the maximum
change in interest rate during a specified period or over the life of the
security. Because of the resetting of interest rates, adjustable rate securities
are less likely than non-adjustable rate securities of comparable quality and
maturity to increase significantly in value when market interest rates fall. The
Fund's investments in adjustable rate securities will not be included for
purposes of determining compliance with the Fund's policy of investing at least
65% of its total assets in fixed income securities discussed above.
OTHER INVESTMENT POLICIES. The Fund may also invest a limited portion of
its assets (in all cases less than 5%) in IO/PO strips, zero coupon securities,
indexed securities, loans and other direct debt instruments, reverse repurchase
agreements and dollar roll agreements. See the Statement of Additional
Information for a description of each of these investment practices and the
related risks.
See "Investment Objectives And Policies and Associated Risks--General" for
additional information.
GLOBAL SMALL CAP FUND
The investment objective of the Global Small Cap Fund is to seek long-term
capital appreciation through investment primarily in common stocks of foreign
and domestic companies with market capitalizations at the time of investment by
the Fund of up to $1.5 billion. Such companies are referred to herein as "small
capitalization companies." Current income is only an incidental consideration in
selecting investments for the Fund. The Fund is designed for investors seeking
above-average capital growth potential through a global portfolio of common
stocks.
Under normal circumstances, substantially all (but no less than 65%) of the
Fund's total assets will at all times be invested in common stocks of small
capitalization companies. Such companies may present greater opportunities for
capital appreciation because of high potential earnings growth, but may also
involve greater risk. Small capitalization companies tend to be smaller than
other companies and may be dependent upon a single proprietary product or market
niche. They may have limited product lines, markets or financial resources or
may depend on a limited management group. Typically, small capitalization
companies have fewer securities outstanding, which may be less liquid than
securities of larger companies. Their common stock and other securities may
trade less frequently and in limited
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volume. The securities of small capitalization companies are generally more
sensitive to purchase and sale transactions; therefore, the prices of such
securities tend to be more volatile than the securities of larger companies. As
a result, the securities of small capitalization companies may change in value
more than those of larger, more established companies.
In seeking capital appreciation, the Fund follows a global investment
strategy of investing primarily in common stocks traded in securities markets
located in a number of foreign countries and in the United States. The Fund
normally expects to invest approximately 40% to 60% of its assets outside the
United States and the remaining 60% to 40% of its assets inside the United
States. The weighting of the Fund's portfolio between foreign and domestic
investments will depend upon prevailing conditions in foreign and domestic
markets. Under certain market conditions, the Fund may invest more than 60% of
its assets either outside or inside the United States. In addition, the Fund
will always invest at least 65% of its total assets in at least three different
countries, one of which will be the United States. The Fund may hold a portion
of its assets in cash or money market instruments.
Consistent with the above policies, the Fund may at times invest more than
25% of its assets in the securities of issuers located in a single country. At
such times, the Fund's performance will be directly affected by political,
economic, market and exchange rate conditions in such country. When the Fund
invests a substantial portion of its assets in a single country it is subject to
greater risk of adverse changes in any of these factors with respect to such
country than a Fund which does not invest as heavily in the country.
The Fund may invest up to 15% of its assets in stocks traded in the
securities markets of newly industrializing countries in Asia, Latin America,
the Middle East, Southern Europe, Eastern Europe (including the former Soviet
Union) and Africa. Investment in such countries involves a greater degree of
risk than investment in industrialized countries, as discussed below. In order
to gain exposure to certain foreign countries which prohibit or impose
restrictions on direct investment, the Fund may (subject to any applicable
regulatory requirements) invest in foreign and domestic investment companies and
other pooled investment vehicles that invest primarily or exclusively in such
countries. The Fund's investment through such vehicles will generally involve
the payment of indirect expenses (including advisory fees) which the Fund does
not incur when investing directly.
The Manager believes that the securities markets of many nations move
relatively independently of one another because business cycles and other
economic or political events that influence one country's securities markets may
have little effect on securities markets in other countries. By investing in a
global portfolio, the Fund attempts to reduce the risks associated with
investing in the economy of only one country. The countries that the Manager or
Babson-Stewart Ivory International, the Fund's sub-adviser (the "Sub-Adviser"),
believes offer attractive opportunities for investment may change from time to
time. The Fund will invest only in exchange-traded securities and securities
traded through established over-the-counter trading systems which the Manager or
the Sub-Adviser believes provide comparable liquidity to exchange-traded
securities.
Foreign investments can involve risks, however, that may not be present in
domestic securities. Because foreign securities are normally denominated and
traded in foreign currencies, the value of the assets of the Fund may be
affected favorably or unfavorably by changes in currency rates and exchange
control regulations. There may be less information publicly available about a
foreign company than about a U.S. company, and foreign companies are not
generally subject to accounting, auditing and financial
-15-
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reporting standards and practices comparable to those in the United States. The
securities of some foreign companies are less liquid and at times more volatile
than securities of comparable U.S. companies. Foreign brokerage commissions and
other fees are also generally higher than in the United States. Foreign
settlement procedures and trade regulations may involve certain risks (such as
delay in payment or deliveryof securities or in the recovery of the Fund's
assets held abroad) and expenses not present in the settlement of domestic
investments.
In addition, with respect to certain foreign countries, there is a
possibility of expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial instability and
diplomatic developments which could affect the value of investments in those
countries. In certain countries, legal remedies available to investors may be
more limited than those available with respect to investments in the United
States or other countries. The laws of some foreign countries may limit the
Fund's ability to invest in securities of certain issuers located in those
countries. Finally, special tax considerations apply to foreign securities.
See "Investment Objectives and Policies and Associated Risks--General" for
additional information.
VALUE FUND
The Value Fund's investment objective is to seek long-term capital
appreciation primarily through investment in a portfolio of common stocks of
established companies. Strong consideration is given to common stocks whose
current prices do not adequately reflect, in the opinion of the Manager, the
true value of the underlying company in relation to earnings, dividends and/or
assets.
The Fund will ordinarily invest in the securities of companies which are
listed on national securities exchanges or on the National Association of
Securities Dealers Automated Quotation System. The Manager will select which
issues to invest in based on its assessment of whether the issue is likely to
provide favorable capital appreciation over the long-term.
The Fund's investments may be made in companies which are currently of
below average quality but which, in the opinion of the Manager, are undervalued
by the market and offer attractive opportunities for long-term capital
appreciation. Such companies involve a greater degree of investment risk than
companies of average or above average quality, including the risk of a total
loss in the event of insolvency or bankruptcy. Investment quality is evaluated
using fundamental analysis emphasizing an issuer's historic financial
performance, balance sheet strength, management capability and competitive
position. Various valuation parameters are examined to determine the
attractiveness of individual securities. The Fund may also hold a portion of its
assets in cash or money market instruments.
See "Investment Objectives And Policies and Associated Risks--General" for
additional information.
MID CAP FUND
The investment objective of the Mid Cap Fund is to seek long-term capital
appreciation primarily through investment in small to medium-size companies.
Such companies are referred to herein as "mid capitalization companies," which
for these purposes means companies with a market capitalization at the
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time of investment by the Fund of between $400 million and $2 billion. Current
income is only an incidental consideration. Strong consideration is given to
common stocks of mid capitalization companies whose current prices do not
adequately reflect, in the opinion of the Manager, the ongoing business value of
the underlying company.
The Mid Cap Fund invests primarily in common stocks. Under normal
circumstances, substantially all (but no less than 65%) of its total assets will
be invested in the common stock of mid capitalization companies. Such companies
may present greater opportunities for capital appreciation because of high
potential earnings growth, but may also involve greater risk. Mid capitalization
companies, when compared to larger capitalization issuers, may be more dependent
upon a single proprietary product or market niche, may have limited product
lines, markets or financial resources, or may depend on a limited management
group. Typically, mid capitalization companies have fewer securities outstanding
and are less liquid than securities of larger companies. Their common stock and
other securities may trade less frequently and in limited volume. The securities
of mid capitalization companies are generally more sensitive to purchase and
sale transactions; therefore, the prices of such securities tend to be more
volatile than the securities of larger companies. As a result, the securities of
mid capitalization companies may change in value more than those of larger, more
established companies. The Fund generally intends to stay fully invested in
equity securities, although the Fund may hold a portion of its assets in cash or
money market instruments.
See "Investment Objectives and Policies and Associated Risks--General" for
additional information.
GENERAL
ILLIQUID SECURITIES. Each of the Funds may purchase "illiquid securities,"
which are securities that are not readily marketable, including securities whose
disposition is restricted by contract or under Federal securities laws, so long
as no more than 15% of a Fund's net assets would be invested in such illiquid
securities. A Fund may not be able to dispose of such securities in a timely
fashion and for a fair price, which could result in losses to the Fund. In
addition, illiquid securities are generally more difficult to value.
PORTFOLIO TURNOVER. Although portfolio turnover is not a limiting factor
with respect to investment decisions for the Funds, the Funds expect to
experience relatively low portfolio turnover rates. It is not anticipated that
under normal circumstances the annual portfolio turnover rate of any Fund will
exceed 100%. However, in any particular year, market conditions may result in
greater rates than are currently anticipated. Portfolio turnover involves
brokerage commissions and other transaction costs, which will be borne directly
by the relevant Fund, and could involve realization of capital gains that would
be taxable when distributed to shareholders. The tax consequences of portfolio
transactions may be a secondary consideration for tax-exempt investors.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements with
banks and broker-dealers. Under repurchase agreements a Fund acquires a security
(usually an obligation of a Government under which the transaction is initiated
or in whose currency the agreement is denominated) for cash and obtains a
simultaneous commitment from the seller to repurchase the security at an
agreed-upon price and date. The resale price exceeds the acquisition price and
reflects an agreed-upon market rate unrelated to the coupon rate on the
purchased security. Such transactions afford an opportunity for a Fund to earn
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a return on temporarily available cash at no market risk, although there is a
risk that the seller may default on its obligation to pay the agreed-upon sum on
the redelivery date. Such a default may subject a Fund to expenses, delays and
risks of loss. Repurchase agreements entered into with foreign brokers, dealers
and banks involve additional risks similar to those of investing in foreign
securities. For a discussion of these risks, see "Global Small Cap Fund," above.
FIRM COMMITMENTS. Each Fund may enter into firm commitment agreements with
banks or broker-dealers for the purchase of securities at an agreed-upon price
on a specified future date. A Fund will only enter into firm commitment
arrangements with banks and broker-dealers which the Manager or Sub- Adviser
determines present minimal credit risks. A Fund will maintain, in a segregated
account with its custodian, cash, U.S. Government Securities or other liquid
high grade debt obligations in an amount equal to the Fund's obligations under
firm commitment agreements.
LOANS OF PORTFOLIO SECURITIES. To the extent permitted by applicable law,
each Fund may make secured loans of portfolio securities on up to 100% of the
Fund's total assets. The risks in lending portfolio securities, as with other
extensions of credit, consist of possible delay in recovery of the securities or
possible loss of rights in the collateral should the borrower fail financially.
However, such loans will be made only to broker-dealers that are believed by the
Manager or the Sub-Adviser to be of relatively high credit standing. Securities
loans are made to broker-dealers pursuant to agreements requiring that loans be
continuously secured by collateral in cash or U.S. Government securities at
least equal at all times to the market value of the securities lent. The
borrower pays to the lending Fund an amount equal to any dividends or interest
received on the securities lent. The Fund may invest the cash collateral
received or may receive a fee from the borrower. Although voting rights or
rights to consent with respect to the loaned securities pass to the borrower,
the Fund retains the right to call the loans at any time on reasonable notice.
The Fund may also call such loans in order to sell the securities involved. The
Fund pays various fees in connection with such loans including shipping fees and
reasonable custodian and placement fees.
RISKS OF NON-DIVERSIFICATION. The Funds are "non-diversified" funds and as
such are not required to meet any diversification requirements under the
Investment Company Act of 1940. As a non-diversified fund, each Fund may invest
a relatively high percentage of its assets in the securities of relatively few
issuers, rather than invest in the securities of a large number of issuers
merely to satisfy diversification requirements. Investment in the securities of
a limited number of issuers may increase the risk of loss to a Fund should there
be a decline in the market value of any one portfolio security. Investment in a
non-diversified fund therefore entails greater risks than investment in a
"diversified" fund.
CHANGES TO INVESTMENT OBJECTIVES. The investment objective and policies of
each Fund may be changed by the Trustees without shareholder approval. Any such
change may result in a Fund having an investment objective and policies
different from the objective and policies which a shareholder considered
appropriate at the time of such shareholder's investment in the Fund.
Shareholders of the relevant Fund will be notified of any changes in a Fund's
investment objective or policies through a revised prospectus or other written
communication.
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PURCHASE OF SHARES
================================================================================
Shares of each Fund may be purchased directly from the Trust on any day
when the New York Stock Exchange is open for business (a "business day"). The
minimum for an initial investment in a Fund is
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$100,000, and the minimum for each subsequent investment is $10,000. The
purchase price of a share of each Fund is the net asset value next determined
after a purchase order is received in good order.
Shares of each Fund may be purchased either (i) in exchange for common
stocks on deposit at The Depository Trust Company ("DTC") or appropriate fixed
income securities, subject to the determination by the Manager that the
securities to be exchanged are acceptable, (ii) in cash (i.e., by wire transfer)
or(iii) by a combination of such securities and cash. In all cases, the Manager
reserves the right to reject any particular investment. Securities accepted by
the Manager in exchange for Fund shares will be valued as set forth under
"Determination of Net Asset Value" (generally the last quoted sale price) as of
the time of the next determination of net asset value after such acceptance. All
dividends, interest, subscription or other rights which are reflected in the
market price of accepted securities at the time of valuation become the property
of the relevant Fund and must be delivered to the Trust upon receipt by the
investor from the issuer. A gain or loss for federal income tax purposes may be
realized by investors subject to Federal income taxation upon the exchange,
depending upon the investor's basis in the securities tendered.
The Manager will not approve the acceptance of securities in exchange for
Fund shares unless (1) the Manager, in its sole discretion, believes the
securities are appropriate investments for the Fund; (2) the investor represents
and agrees that all securities offered to the Fund are not subject to any
restrictions upon their sale by the Fund under the Securities Act of 1933, or
otherwise; and (3) the securities may be acquired under the investment
restrictions applicable to the relevant Fund. Investors interested in purchases
through exchange should telephone the Manager at (617) 225-3800, Attn: Maureen
A. Madden.
Investors should call the offices of the Trust before attempting to place
an order for Trust shares. The Trust reserves the right at any time to reject an
order.
For purposes of calculating the purchase price of Trust shares, a purchase
order is received by the Trust on the day that it is "in good order" unless it
is rejected by the Trust. An order is "in good order" if the Trust has received
the consideration for Trust shares (cash or, in the case of in-kind investments,
securities). In the case of a cash investment, the deadline for wiring federal
funds to the Trust is 2:00 p.m.; in the case of an investment in-kind, the
investor's securities must be placed on deposit at DTC, and 4:00 p.m. is the
deadline for transferring those securities to the account designated by
Investors Bank & Trust Company. If the consideration is not received by the
Trust before the relevant deadline, the purchase order is not considered to be
in good order and the purchase order and consideration are required to be
resubmitted on the following business day, unless Investors Bank & Trust Company
can credit the consideration to the account for a specific Fund.
All federal funds must be transmitted to Investors Bank & Trust Company to
Account No. 777777722 for the account of the specific Fund.
"Federal funds" are monies credited to Investors Bank & Trust Company's
account with the Federal Reserve Bank of Boston.
Purchases will be made in full and fractional shares of each Fund
calculated to three decimal places. The Trust will send to shareholders written
confirmation (including a statement of shares owned) at the time of each
transaction.
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12B-1 PLANS. The Trust has adopted a distribution and services plan (each a
"Plan") for each Fund under Rule 12b-1 of the Investment Company Act of 1940,
but the Trustees do not intend to implement such Plans during the Trust's
current fiscal year. The purposes of each Plan if implemented would be to
compensate and/or reimburse investment dealers and other persons for services
provided and expenses incurred in promoting sales of shares, reducing
redemptions or improving services provided to shareholders by such dealers and
other persons. Each Plan would permit payments by a Fund for such purposes at an
annual rate of up to .50% of the Fund's average net assets, subject to the
authority of the Trustees to reduce the amount of payments or to suspend the
Plan for such periods as they may determine. Subject to these limitations, the
amount of payments under each Plan and the specific purposes for which they are
made would be determined by the Trustees. At present, the Trustees have no
intention of implementing any Plan.
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REDEMPTION OF SHARES
================================================================================
Shares of each Fund may be redeemed on any business day in cash or in kind.
The redemption price is the net asset value per share next determined after
receipt of the redemption request in good order. There is no redemption fee for
any of the Funds. Cash payments generally will be made by transfer of Federal
funds for payment into the investor's account the next business day following
the redemption request. Redemption requests should be sent to Investors Bank &
Trust Company. In order to help facilitate the timely payment of redemption
proceeds, it is recommended that investors telephone the Manager at (617)
225-38700, Attn: Maureen A. Madden, at least two days prior to submitting a
request.
Payment on redemption will be made as promptly as possible and in any event
within seven days after the request for redemption is received by the Trust in
good order. A redemption request is in good order if it includes the correct
name in which shares are registered, the investor's account number and the
number of shares or the dollar amount of shares to be redeemed and if it is
signed correctly in accordance with the form of registration. Persons acting in
a fiduciary capacity, or on behalf of a corporation, partnership or trust must
specify, in full, the capacity in which they are acting. In-kind redemptions, as
described below, will be transferred and delivered as directed by the investor.
If the Manager determines, in its sole discretion, that it would be
detrimental to the best interests of the remaining shareholders of a Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price in
whole or in part by a distribution in kind of securities held by the Fund in
lieu of cash. Securities used to redeem Fund shares in kind will be valued in
accordance with the relevant Fund's procedures for valuation described under
"Determination of Net Asset Value." Investors generally will incur brokerage
charges on the sale of any such securities so received in payment of
redemptions.
When opening an account with the Trust, shareholders will be required to
designate the account(s) to which funds or securities may be transferred upon
redemption. Designation of additional accounts and any change in the accounts
originally designated must be made in writing with the signature guaranteed by a
commercial bank, a member firm of a domestic securities exchange or one of
certain other financial institutions.
Each Fund may suspend the right of redemption and may postpone payment for
more than seven days when the New York Stock Exchange is closed for other than
weekends or holidays, or if permitted by the rules of the Securities and
Exchange Commission during periods when trading on the Exchange is restricted
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or during an emergency which makes it reasonably impracticable for the Fund to
dispose of its securities or fairly to determine the value of the net assets of
the Fund, or during any other period permitted by the Securities and Exchange
Commission for the protection of investors.
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DETERMINATION OF NET ASSET VALUE
================================================================================
The net asset value of a share of each Fund is determined at 4:15 p.m.,
Eastern time, on each day on which the New York Stock Exchange is open, other
than a day on which no shares of the Fund were tendered for redemption and no
order to purchase shares was received by the Fund. If no shares of the Fund are
tendered for redemption during a month and no order to purchase shares is
received by the Fund during such month, the net asset value of a share of such
Fund will be determined on the last business day of such month. The net asset
value per share for a Fund is determined by dividing the total value of the
Fund's portfolio investments and other assets, less any liabilities, by the
total outstanding shares of the Fund. Portfolio securities for which market
quotations are available are valued at the last quoted sale price, or, if there
is no such reported sale, at the closing bid price. Securities traded in the
over-the-counter market are valued at the most recent bid price as obtained from
one or more dealers that make markets in the securities. Portfolio securities
that are traded both in the over-the-counter market and on one or more stock
exchanges are valued according to the broadest and most representative market.
Unlisted securities for which market quotations are not readily available are
valued at the most recent quoted bid price. Other assets for which no quotations
are readily available are valued at fair value as determined in good faith in
accordance with procedures adopted by the Trustees of the Trust. Determination
of fair value will be based upon such factors as are deemed relevant under the
circumstances, including the financial condition and operating results of the
issuer, recent third party transactions (actual or proposed) relating to such
securities and, in extreme cases, the liquidation value of the issuer.
Because of time zone differences, foreign exchanges and securities markets
will usually be closed prior to the time of the closing of the New York Stock
Exchange and the value of foreign securities will be determined as of the
closing of such exchanges and securities markets. Events affecting the values of
such foreign securities, however, may occasionally occur between the closings of
such exchanges and securities markets and the time the Fund determines its net
asset value, which will not be reflected in the computation of such net asset
value. If an event materially affecting the value of such foreign securities
occurs during such period, then such securities will be valued at fair value as
determined in good faith in accordance with procedures adopted by the Trustees.
Because foreign securities are quoted in foreign currencies, fluctuations
in the value of such securities in relation to the U.S. dollar will affect the
net asset value of shares of the Fund even though there has not been any change
in the values of such securities measured in terms of the foreign currencies in
which they are denominated. The value of foreign securities is converted into
U.S. dollars at the rate of exchange prevailing at the time of determination of
net asset value.
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DISTRIBUTIONS
================================================================================
Each Fund intends to pay out as dividends substantially all of its net
investment income (which comes from dividends and any interest it receives from
its investments and net short-term capital gains). Each Fund also intends to
distribute substantially all of its net long-term capital gains, if any, after
giving effect to any available capital loss carryover. Each Fund's present
policy is to declare and pay distributions of its dividends and interest at
least annually. Each Fund also intends to distribute net short-term capital
gains and net long-term capital gains at least annually. All dividends and/or
distributions will be paid in shares of the relevant Fund, at net asset value,
unless the shareholder elects to receive cash. Shareholders may make this
election by marking the appropriate box on the application form or by writing to
Investors Bank & Trust Company.
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TAXES
================================================================================
Each Fund is treated as a separate taxable entity for federal income tax
purposes. Each Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended. By
so qualifying, a Fund itself will not pay federal income tax on the income and
gain distributed annually to its shareholders. Distributions of ordinary income
and short-term capital gains, whether received in cash or reinvested shares,
will be taxable as ordinary income to shareholders subject to federal income
tax. Designated distributions of any long-term capital gains are taxable as
such, regardless of how long a shareholder may have owned shares in the Fund or
whether received in cash or reinvested shares. Any loss recognized on the sale
or disposition of shares held for six months or less will be treated as
long-term capital loss to the extent of any long-term capital gain distributions
received by a shareholder with respect to those shares. A distribution paid to
shareholders in January generally is deemed to have been received by
shareholders on December 31 of the preceding year, if the distribution was
declared and payable to shareholders of record on a date in October, November or
December of that preceding year. The Trust will provide federal tax information
annually, including information about dividends and distributions paid during
the preceding year.
BACK-UP WITHHOLDING. The back-up withholding rules set forth below do not
apply to tax exempt entities that furnish the Trust with an appropriate
certification. For other shareholders, however, the Trust is generally required
to withhold and remit to the U.S. Treasury 31% of all distributions, whether
distributed in cash or reinvested in shares, and 31% of the proceeds of any
redemption paid or credited to the shareholder's account if an incorrect or no
taxpayer identification number has been provided, where appropriate
certification has not been provided for a foreign shareholder, or where the
Trust is notified that the shareholder has underreported income in the past (or
the shareholder fails to certify that he is not subject to such withholding).
Special withholding rules, described below, may apply to foreign shareholders.
The foregoing is a general summary of the federal income tax consequences
for shareholders who are U.S. citizens or residents or domestic corporations.
Shareholders should consult their own tax advisors about the tax consequences of
investments in a Fund in light of their particular tax situations. Shareholders
should also consult their own tax advisors about consequences under foreign,
state, local or other applicable tax laws.
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WITHHOLDING ON DISTRIBUTIONS TO FOREIGN INVESTORS. Dividend distributions
(including in general distributions derived from short-term capital gains,
dividends and interest) are in general subject to a U.S. withholding tax of 30%
when paid to a non-resident alien individual, foreign estate or trust, a foreign
corporation, or a foreign partnership ("foreign shareholder"). Persons who are
residents in a country, such as the United Kingdom, that has an income tax
treaty with the United States may be eligible for a reduced withholding rate
(upon filing of appropriate forms), and are urged to consult their tax advisors
regarding the applicability and effect of such a treaty. Distributions of net
long-term capital gains to a foreign shareholder and any gain realized upon the
sale of Fund shares by such a shareholder will ordinarily not be subject to U.S.
taxation, unless the recipient or seller is a nonresident alien individual who
is present in the United States for more than 182 days during the taxable year.
Foreign shareholders with respect to whom income from a Fund is "effectively
connected" with a U.S. trade or business carried on by such shareholder,
however, will in general be subject to U.S. federal income tax on the income
derived from the Fund at the graduated rates applicable to U.S. citizens,
residents or domestic corporations, whether such income is received in cash or
reinvested in shares, and may also be subject to a branch profits tax. Again,
foreign shareholders who are residents in a country with an income tax treaty
with the United States may obtain different tax results and are urged to consult
their tax advisors.
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MANAGEMENT OF THE TRUST
================================================================================
Each Fund is advised and managed by David L. Babson & Co., Inc., One
Memorial Drive, Cambridge, Massachusetts 02142, which provides investment
advisory services to a substantial number of institutional and other investors,
including other registered investment companies. David L. Babson & Co., Inc. is
a wholly owned subsidiary of DLB Acquisition Corp., a holding company, which is
controlled by Mass Mutual Holding Company, a holding company and wholly owned
subsidiary of Massachusetts Mutual Life Insurance Company, a mutual life
insurance company.
Under separate Management Contracts relating to each Fund, the Manager
selects and reviews each Fund's investments and provides executive and other
personnel for the management of the Trust. Pursuant to the Trust's Agreement and
Declaration of Trust, the Board of Trustees supervises the affairs of the Trust
as conducted by the Manager. In the event that the Manager ceases to be the
manager of any Fund, the right of the Fund or of the Trust to use the
identifying name "DLB" may be withdrawn.
The Manager has entered into a Sub-Advisory Agreement (the "Sub-Advisory
Agreement") with Babson-Stewart Ivory International (the "Sub-Adviser"), One
Memorial Drive, Cambridge, Massachusetts 02142, with respect to the management
of the international component of the Global Small Cap Fund's portfolio. The
Sub-Adviser also provides investment advisory services to a substantial number
of institutional and other investors, including other registered investment
companies. The Sub-Adviser is a general partnership owned 50% by the Manager and
50% by Stewart-Ivory & Company (International) Limited, an indirect wholly owned
subsidiary of Stewart Ivory (Holdings) Ltd., which is controlled by James G.D.
Ferguson and John G.L. Wright.
Each of the Funds pays the Manager a monthly fee at the annual rate of the
relevant Fund's average daily net assets set forth below. In addition, the
Manager has agreed to waive its fee and to bear certain expenses for the current
fiscal year to the extent each of the Fund's annual expenses (including the
management fee but excluding brokerage commissions and transfer taxes) would
exceed the percentage of the Fund's average daily net assets set forth below.
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Management Fee Expense Limitation
(as a % of Average (as a % of Average
Daily Net Assets) Daily Net Assets)
----------------- -----------------
Name of Fund
- ------------
Fixed Income Fund .40% .55%
Global Small Cap Fund 1.00* 1.50
Value Fund .55 .80
Mid Cap Fund .60 .90
* Under the Sub-Advisory Agreement, the Manager pays the Sub-Adviser a
monthly fee at the annual rate of .50% of the Global Small Cap Fund's
average daily net assets, although the Sub- Adviser has currently
agreed to waive a portion of its fee. Payments made to the Sub-Adviser
by the Manager will not affect the amounts payable by the Fund to the
Manager or the Fund's expense ratio. The management fees paid by the
Fund are higher than the management fees paid by most other investment
companies, although not necessarily higher than other investment
companies investing in a global portfolio of small capitalization
stocks.
Edward L. Martin is primarily responsible for the day-to-day management of
the portfolio of the Fixed Income Fund. Peter C. Schliemann, James W. Burns and
John Wright are primarily responsible for the day-to-day management of the
portfolio of the Global Small Cap Fund. Roland W. Whitridge is primarily
responsible for the day-to-day management of the Value Fund. Eugene Gardner is
primarily responsible for the day-to-day management of the Mid Cap Fund. Mr.
Martin, Mr. Schliemann, Mr. Whitridge and Mr. Gardner have each been employed by
the Manager in portfolio management for the past five years. Mr. Burns and Mr.
Wright have each been employed by the Sub-Adviser in portfolio management for
the past five years.
================================================================================
PERFORMANCE INFORMATION
================================================================================
Yield (in the case of the Fixed Income Fund) and total return data (for
all Funds) may from time to time be included in advertisements about each Fund.
"Yield" for the Fixed Income Fund is calculated by dividing the Fund's
annualized net investment income per share during a recent 30-day period by the
maximum public offering price per share on the last day of that period. "Total
return" for the life of a Fund through the most recent calendar quarter
represents the average annual compounded rate of return on an investment of
$1,000 in the Fund at net asset value. Quotations of yield or total return for
any period when an expense limitation was in effect will be greater than if the
limitation had not been in effect.
All data is based on a Fund's past investment results and does not
predict future performance. Investment performance, which will vary, is based on
many factors, including market conditions, the composition of a Fund's
portfolio, and a Fund's operating expenses. Investment performance also often
reflects the risks associated with a Fund's investment objective and policies.
These factors should be considered when comparing a Fund's investment results to
those of other mutual funds and other investment vehicles.
-24-
<PAGE>
================================================================================
================================================================================
ORGANIZATION AND CAPITALIZATION OF THE TRUST
================================================================================
The Trust was established on August 1, 1994 as a business trust under
Massachusetts law. The Trust has an unlimited number of authorized shares of
beneficial interest which may, without shareholder approval, be divided into an
unlimited number of series of such shares and which are presently divided into
four series of shares, one for each Fund. These shares are entitled to vote at
any meeting of shareholders. The Trust does not generally hold annual meetings
of shareholders and will do so only when required by law. Matters submitted to
shareholder vote must be approved by each Fund separately except (i) when
required by the Investment Company Act of 1940, shares shall be voted together
as a single class, and (ii) when the Trustees have determined that the matter
affects one or more Funds, then only shareholders of such Fund or Funds shall be
entitled to vote on the matter. Shares are freely transferable, are entitled to
dividends as declared by the Trustees, and, in liquidation of the Trust, are
entitled to receive the net assets of their Fund, but not of any other Fund.
Shareholders holding a majority of the outstanding shares of the Trust may
remove Trustees from office by votes cast in person or by proxy at a meeting of
shareholders or by written consent. Massachusetts Mutual Life Insurance Company
currently owns more than 25% of the outstanding shares of each Fund and
therefore is deemed to "control" each Fund within the meaning of the Investment
Company Act of 1940.
Shareholders could, under certain circumstances, be held personally
liable for the obligations of the Trust. The risk of a shareholder incurring
financial loss on account of that liability, however, is considered remote
because liability may arise only in very limited circumstances and shareholders
are entitled to indemnification out of the assets of the relevant Fund for any
such liability.
================================================================================
SHAREHOLDER INQUIRIES
================================================================================
Shareholders may direct inquiries to the Trust c/o David L. Babson & Co.,
Inc., Marketing Department, Attn: Maureen A. Madden, One Memorial Drive,
Cambridge, Massachusetts 02142 (1-617- 225-3800).
When required by the Investment Company Act of 1940, the Manager's
discussion of the performance of each Fund in its most recent fiscal year as
well as a comparison of each Fund's performance over the life of the Fund with
that of a benchmark securities index selected by the Manager will be included in
the Trust's Annual Report for that fiscal year. Copies of the Annual Report will
be available upon request without charge.
-25-
<PAGE>
================================================================================
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
CUSTODIAN
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205
TRANSFER AGENT
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205
-26-
<PAGE>
THE DLB FUND GROUP
STATEMENT OF ADDITIONAL INFORMATION
April 1, 1996
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus dated April 1, 1996, as amended
from time to time, and should be read in conjunction therewith. A copy of the
Prospectus may be obtained free of charge by writing The DLB Fund Group, c/o
David L. Babson & Co., Inc., Marketing Department, Attention: Maureen A. Madden,
One Memorial Drive, Cambridge, Massachusetts 02142, or by telephoning (617)
225-3800.
<PAGE>
Table of Contents
Caption Page
INVESTMENT OBJECTIVES AND POLICIES AND ASSOCIATED RISKS..................... 1
INVESTMENT RESTRICTIONS..................................................... 1
INCOME DIVIDENDS, DISTRIBUTIONS AND TAX STATUS.............................. 4
MANAGEMENT OF THE TRUST..................................................... 6
INVESTMENT ADVISORY AND OTHER SERVICES...................................... 8
ADDITIONAL INVESTMENT PRACTICES OF THE FIXED INCOME FUND.................... 10
PORTFOLIO TRANSACTIONS...................................................... 13
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES............................ 17
INVESTMENT PERFORMANCE...................................................... 20
DETERMINATION OF NET ASSET VALUE............................................ 21
EXPERTS..................................................................... 22
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS..................... 22
-2-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES AND ASSOCIATED RISKS
The investment objective and policies of each of the DLB Fixed Income
Fund (the "Fixed Income Fund"), the DLB Global Small Capitalization Fund (the
"Global Small Cap Fund"), the DLB Value Fund (the "Value Fund") and the DLB Mid
Capitalization Fund (the "Mid Cap Fund") (each a "Fund," and collectively the
"Funds") of The DLB Fund Group (the "Trust") are set forth in the Trust's
Prospectus.
INVESTMENT RESTRICTIONS
Without a vote of the majority of the outstanding voting securities of
the relevant Fund, the Trust will not take any of the following actions with
respect to any Fund:
(1) Borrow money in excess of 10% of the value (taken at the
lower of cost or current value) of the Fund's total assets (not
including the amount borrowed) at the time the borrowing is made, and
then only from banks for temporary, extraordinary or emergency
purposes, except that the Fund may borrow through reverse repurchase
agreements or dollar rolls up to 331/3% of the value of the Fund's
total assets. Such borrowings (other than borrowings relating to
reverse repurchase agreements and dollar rolls) will be repaid before
any investments are purchased.
(2) Underwrite securities issued by other persons except to
the extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter under federal
securities laws.
(3) Purchase or sell real estate (including real estate
limited partnerships), although it may purchase securities of issuers
which deal in real estate, including securities of real estate
investment trusts, securities which represent interests in real estate
and securities which are secured by interests in real estate, and the
Fund may acquire and dispose of real estate or interests in real estate
acquired through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein or for use as
office space for the Fund.
(4) Make loans, except by purchase of debt obligations
(including nonpublicly traded debt obligations), by entering into
repurchase agreements or through the lending of the Fund's portfolio
securities. Loans of portfolio securities may be made with respect to
up to 100% of the Fund's assets in the case of each Fund.
-1-
<PAGE>
(5) Issue any senior security (as that term is defined in the
Investment Company Act of 1940 (the "1940 Act")), if such issuance is
specifically prohibited by the 1940 Act or the rules and regulations
promulgated thereunder. (The Funds have no intention of issuing senior
securities except as set forth in Restriction 1 above.)
(6) Invest 25% or more of the value of its total assets in
securities of issuers in any one industry. (Securities issued or
guaranteed as to principal or interest by the U.S. Government or its
agencies or instrumentalities are not considered to represent
industries.)
(7) Purchase or sell commodities or commodity contracts,
including futures contracts.
Notwithstanding the latitude permitted by Restrictions 1 and 3 above,
no Fund has any current intention in the coming year of (a) borrowing money from
banks or (b) investing in real estate investment trusts.
It is contrary to the present policy of all the Funds, which may be
changed by the Trustees without shareholder approval, to:
(a) Purchase securities on margin, except such short-term
credits as may be necessary for the clearance of purchases and sales of
securities.
(b) Make short sales of securities or maintain a short
position for the Fund's account unless at all times when a short
position is open the Fund owns an equal amount of such securities or
owns securities which, without payment of any further consideration,
are convertible into or exchangeable for securities of the same issue
as, and equal in amount to, the securities sold short. The Funds have
no current intention in the coming year of engaging in short sales or
maintaining a short position.
(c) Invest in securities of any issuer if officers and
Trustees of the Trust and officers and partners of the Manager who
beneficially own more than 1/2 of 1% of the securities of that issuer
together beneficially own more than 5%.
(d) Invest in securities of other investment companies, except
by purchase in the open market involving only customary brokers'
commissions, or in connection with mergers, consolidations or
reorganizations. For purposes of this restriction, foreign banks or
their agents or subsidiaries are not considered investment companies.
(Under the 1940 Act, no registered investment company may (a) invest
more than 10% of its total assets (taken at current value) in
securities of other investment companies, (b) own securities of any one
-2-
<PAGE>
investment company having a value in excess of 5% of its total assets
(taken at current value), or (c) own more than 3% of the outstanding
voting stock of any one investment company.)
(e) Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities the disposition
of which is restricted under federal securities laws, excluding
restricted securities that have been determined by the Trustees of the
Fund (or the person designated by them to make such determination) to
be readily marketable, and (c) repurchase agreements maturing in more
than seven days if, as a result, more than 15% of the Fund's net assets
(taken at current value) would then be invested in securities described
in (a), (b) and (c) above.
(f) Acquire more than 10% of the voting securities of any
issuer.
(g) Invest in warrants or rights (other than warrants or
rights acquired by the Fund as a part of a unit or attached to
securities at the time of purchase), except that the Fund may invest in
such warrants or rights so long as the aggregate value thereof (taken
at the lower of cost or market) does not exceed 5% of the value of the
Fund's total assets and so long as no more than 2% of its total assets
are invested in warrants that are not listed on the New York Stock
Exchange or the American Stock Exchange.
(h) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts.
(i) Make investments for the purpose of gaining control of a
company's management.
Except as indicated above in Restriction No. 1, all percentage
limitations on investments set forth herein and in the Prospectus will apply at
the time of the making of an investment and shall not be considered violated
unless an excess or deficiency occurs or exists immediately after and as a
result of such investment.
The phrase "shareholder approval," as used in the Prospectus, and the
phrase "vote of a majority of the outstanding voting securities," as used herein
with respect to a Fund, means the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares of that Fund, or (2) 67% or more of the
shares of that Fund present at a meeting if more than 50% of the outstanding
shares are represented at the meeting in person or by proxy.
-3-
<PAGE>
INCOME DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Each Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). In order to so qualify, the Fund must, among other things, (a) derive
at least 90% of its gross income from dividends, interest, payments with respect
to certain securities loans, and gains from the sale of stock, securities and
foreign currencies, or other income (including but not limited to gains from
options, futures or firm commitments) derived with respect to its business of
investing in such stock, securities or currencies; (b) derive less than 30% of
its gross income from gains from the sale or other disposition of securities and
certain other assets (including certain foreign currency contracts) held for
less than three months; (c) distribute at least 90% of its dividend, interest
and certain other income (including, in general, short-term capital gains) each
year; and (d) diversify its holdings so that at the end of each fiscal quarter
(i) at least 50% of the market value of the Fund's assets is represented by cash
items, U.S. Government securities, securities of other regulated investment
companies, and other securities, limited in respect of any one issuer to a value
not greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities (other than those of the U.S.
Government or other regulated investment companies) of any one issuer or of two
or more issuers which the Fund controls and which are engaged in the same,
similar or related trades or businesses. So long as a Fund qualifies for
treatment as a regulated investment company, the Fund will not be subject to
federal income tax on income paid to its shareholders in the form of dividends
or capital gain distributions.
The tax status of each Fund and the distributions which it may make are
summarized in the Prospectus under the heading "Taxes." Each Fund intends to pay
out substantially all of its ordinary income and net short-term capital gains,
and to distribute substantially all of its net capital gain, if any, after
giving effect to any available capital loss carry-over. Net capital gain is the
excess of net long-term capital gain over net short-term capital loss. It is the
policy of each Fund to make distributions sufficient to avoid the imposition of
a 4% excise tax on certain undistributed amounts. A shareholder may be limited
in its ability to recognize losses on the sale of Fund shares if the shareholder
subsequently invests in that Fund or another Fund.
Certain transactions entered into by a Fund, such as firm commitments
and hedging transactions, may accelerate income, defer losses, cause adjustments
in the holding periods of the Fund's securities and convert short-term capital
gains or losses into long-term capital gains or losses. Such transactions may
therefore affect the amount, timing and character of distributions to
shareholders. Qualification requirements noted above may restrict the Fund's
ability to engage in such transactions.
Investment by the Global Small Cap Fund in certain "passive foreign
investment companies" could subject the Fund to a U.S. federal income tax or
other charge on
-4-
<PAGE>
distributions received from or the sale of its investment in such a company,
which tax could not be eliminated by making distributions to Fund shareholders.
To avoid this treatment, the Fund may elect to mark to market annually all of
its stock in a passive foreign investment company. Alternatively, if the Fund
elects to treat a passive foreign investment company as a "qualified electing
fund," different rules would apply, although the Fund does not currently expect
to be in the position to make such elections.
In general, all dividends derived from ordinary income and short-term
capital gain are taxable to investors as ordinary income (subject to special
rules concerning the availability of the dividends-received deduction for
corporations) and long-term capital gain distributions are taxable to investors
as long-term capital gains, whether such dividends or distributions are received
in shares or cash. Tax exempt organizations or entities will generally not be
subject to federal income tax on dividends or distributions from a Fund, except
certain organizations or entities, including private foundations, social clubs,
and others, which may be subject to tax on dividends or capital gains. Each
organization or entity should review its own circumstances and the federal tax
treatment of its income.
The dividends-received deduction for corporations will generally apply
to a Fund's dividends paid from investment income to the extent derived from
dividends received by the Fund from domestic corporations that would be entitled
to such deduction in the hands of the Fund if it were a regular corporation.
Certain of the Funds which invest in foreign securities may be subject
to foreign withholding taxes on income and gains derived from foreign
investments. Such taxes would reduce the yield on the Fund's investments, but,
as discussed below, may be taken as either a deduction or a credit by U.S.
investors if the Fund makes the election described below.
If, at the end of the fiscal year, more than 50% of the total assets of
any Fund are comprised of securities of foreign corporations, the Trust intends
to make an election with respect to the relevant Fund which allows shareholders
whose income from the Fund is subject to U.S. taxation at the graduated rates
applicable to U.S. citizens, residents or domestic corporations to claim a
foreign tax credit or deduction (but not both) on their U.S. income tax return.
In such case, the amount of foreign income taxes paid by the Fund would be
treated as additional income to Fund shareholders from non-U.S. sources and as
foreign taxes paid by Fund shareholders. Investors should consult their tax
advisors for further information relating to the foreign tax credit and
deduction, which are subject to certain restrictions and limitations.
Shareholders of any of the Funds whose income from the Fund is not subject to
U.S. taxation at the graduated rates applicable to U.S. citizens, residents or
domestic corporations may receive substantially different tax treatment of
distributions by the relevant Fund, and may be disadvantaged as a result of the
election described in this paragraph. Organizations that are exempt from U.S.
taxation will not be affected by the election described above.
-5-
<PAGE>
MANAGEMENT OF THE TRUST
The Trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
Trustees
*Ronald E. Gwozdz, age 57, has been the Senior Vice President of the
Manager since July 1991 and Managing Director of the Sub-Adviser since 1994,
prior to which he was Senior Vice President of Auburndale Management since
January 1990, and before that, President of Plymouth Funds for Fidelity
Investments.
*Peter C. Thompson, age 63, Chairman of the Trustees, is the President,
Chief Executive Officer and a Director of the Manager and a Managing Director of
Babson-Stewart Ivory International.
Charles E. Hugel, age 67, serves as a Director of Eaton Corporation, a
manufacturer of auto parts, and Pitney Bowes, Inc., a manufacturer of business
and office equipment. He is also Chairman of the Board of Trustees of Lafayette
College. Mr. Hugel is the former Chairman of Asee Brown Boveri Inc., which
principally engages in the manufacture of electrical equipment and the
generation, transmission, distribution and transportation of power, the former
Chairman, President and Chief Executive Officer of Combustion Engineering, Inc.
and a former Executive Vice President of American Telephone and Telegraph
Company.
Richard A. Nenneman, age 66, is the former Editor-in-Chief of The Christian
Science Monitor and a former Senior Vice President of Girard Bank. He currently
serves as a member of the boards of various civic associations.
Richard J. Phelps, age 67, is the Chief Executive Officer of Phelps
Industries, Inc., a manufacturer of rawhide dog treats. He currently serves as a
director of Superior Pet, U.K. and Superior Pet Australia, both manufacturers of
rawhide dog treats; Bio-Comp, USA, a manufacturer of fertilizer; MRI Corp., USA;
Stockton Baseball Co., USA; and Babson- Stewart Ivory International Fund, Inc.
*Peter C. Schliemann, age 50, is the Executive Vice President and a
Director of the Manager. Mr. Schliemann is the portfolio manager for the Global
Small Cap Fund.
*Deemed to be an "interested person" of the Trust and the Manager, as defined by
the 1940 Act
-6-
<PAGE>
Officers
Ronald E. Gwozdz, President.
Edson B. Olds IV, age 57, Treasurer and Clerk, is the Senior Vice
President, Treasurer, Clerk and a Director of the Manager.
The mailing address of each of the officers and Trustees is c/o David
L. Babson & Co., Inc., One Memorial Drive, Cambridge, Massachusetts 02142.
Except as stated above, the principal occupations of the officers and
Trustees for the last five years have been with the employers as shown above,
although in some cases they may have held different positions with such
employers.
Trustee Compensation Table
The Trust pays each Trustee a fee for his services. The Trustees
periodically review their fees to assure that such fees continue to be
appropriate in light of their responsibilities as well as in relation to fees
paid to Trustees of other mutual fund complexes. The estimated fees to be paid
to each Trustee by the Trust for the Trust's first full fiscal year are shown
below:
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual from Registrant
Compensation Accrued as part Benefits upon and Fund Complex
Name of Trustee from Registrant* of Fund Expenses Retirement Paid to Trustees
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ronald E. Gwozdz $0 $0 $0 0
Charles E. Hugel 11,000 0 0 11,000
Richard A. Nenneman 11,000 0 0 11,000
Richard J. Phelps 11,000 0 0 11,000
Peter C. Schliemann 0 0 0 0
Peter C. Thompson 0 0 0 0
</TABLE>
- ---------------
*Reflects estimated amounts to be paid by the Trust for its first full fiscal
year. Includes an annual retainer and an attendance fee for each meeting
attended.
-7-
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
Management Contracts
The Trust's investment manager, David L. Babson & Co., Inc. (the
"Manager"), One Memorial Drive, Cambridge, Massachusetts 02142, is a wholly
owned subsidiary of DLB Acquisition Corp., a holding company, which is owned by
Mass Mutual Holding Company, a holding company and a wholly owned subsidiary of
Massachusetts Mutual Life Insurance Company, a mutual life insurance company. As
disclosed in the Prospectus under the heading "Management of the Trust," under
separate Management Contracts (each a "Management Contract") between the Trust
and the Manager, subject to such policies as the Trustees of the Trust may
determine, the Manager will furnish continuously an investment program for each
Fund and will make investment decisions on behalf of the Fund and place all
orders for the purchase and sale of portfolio securities. The Manager has
entered into a Sub-Advisory Agreement with Babson-Stewart Ivory International
(the "Sub-Adviser") with respect to the management of the international
component of the Global Small Cap Fund's portfolio. Subject to the control of
the Trustees, the Manager also manages, supervises and conducts the other
affairs and business of the Trust, furnishes office space and equipment,
provides bookkeeping and certain clerical services and pays all salaries, fees
and expenses of officers and Trustees of the Trust who are affiliated with the
Manager. As indicated under "Portfolio Transactions," the Trust's portfolio
transactions may be placed with broker-dealers which furnish the Manager, at no
cost, certain research, statistical and quotation services of value to the
Manager in advising the Trust or its other clients.
As disclosed in the Prospectus, each of the Funds pays the Manager a
monthly fee at the annual rate of the relevant Fund's average daily net assets
set forth therein. In addition, the Manager has agreed to waive its fee and to
bear certain expenses until further notice to the extent each of the Fund's
annual expenses (including the management fee, but excluding brokerage
commissions and transfer taxes) would exceed the percentage of the Fund's
average daily net assets set forth in the Prospectus. The Sub-Adviser has also
agreed to waive a portion of its fee. In addition, the Manager's compensation
under the Management Contract is subject to reduction to the extent that in any
year the expenses of the relevant Fund exceed the limits on investment company
expenses imposed by any statute or regulatory authority of any jurisdiction in
which shares of such Fund are qualified for offer and sale. The term "expenses"
is defined in the statutes or regulations of such jurisdictions, and, generally
speaking, excludes brokerage commissions, taxes, interest and extraordinary
expenses. No Fund is currently subject to any state imposed limit on expenses.
-8-
<PAGE>
The Funds paid the following fees during the periods indicated:
<TABLE>
<CAPTION>
1. FIXED INCOME FUND
Management
Fiscal Year Management Fee Paid Fee Waived
<S> <C> <C> <C>
1995 $0 $8,911
2. GLOBAL SMALL CAP FUND
Management
Fiscal Year Management Fee Paid Fee Waived
1995 $0* $45,284
3. VALUE FUND
Management
Fiscal Year Management Fee Paid Fee Waived
1995 $0 $24,862
4. MID CAP FUND
Management
Fiscal Year Management Fee Paid Fee Waived
1995 $0 $26,445
</TABLE>
Each Management Contract provides that the Manager shall not be subject
to any liability in connection with the performance of its services thereunder
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
Each Management Contract was approved by the Trustees of the Trust
(including the Trustees who are not "interested persons" of the Manager) and by
the relevant Fund's sole shareholder in connection with the organization of the
Trust and the establishment of the Funds. Each Management Contract has an
initial two-year term and will continue in effect thereafter indefinitely so
long as its continuance is approved at least annually by (i) vote, cast in
person at a meeting called for that purpose, of a majority (or one, if there is
only one) of those Trustees who are not "interested persons" of the Manager or
the Trust, and by (ii) the majority vote of either the full Board of Trustees or
the vote of a majority of the outstanding shares of the relevant Fund. Each
Management Contract automatically terminates on
- ---------------
* Under the Sub-Advisory Agreement, the Manager paid the Sub-Adviser a
fee of $17,572. The Sub-Adviser waived a portion of its fees in an amount equal
to $4,393.
-9-
<PAGE>
assignment and is terminable on not more than 60 days' notice by the Trust to
the Manager. In addition, each Management Contract may be terminated on not more
than 60 days' written notice by the Manager to the Trust.
The Sub-Advisory Agreement contains provisions similar to those
contained in the Management Contracts.
Custodial Arrangements. Investors Bank & Trust Company ("IBT") serves
as the Trust's custodian on behalf of the Funds. As such, IBT holds in
safekeeping certificated securities and cash belonging to a Fund and, in such
capacity, is the registered owner of securities in book-entry form belonging to
a Fund. Upon instruction, IBT receives and delivers cash and securities of a
Fund in connection with Fund transactions and collects all dividends and other
distributions made with respect to Fund portfolio securities. IBT also maintains
certain accounts and records of the Trust and calculates the total net asset
value, total net income and net asset value per share of each Fund on a daily
basis.
ADDITIONAL INVESTMENT PRACTICES OF THE FIXED INCOME FUND
In addition to the investment practices described in detail in the
Prospectus under the heading "Investment Objectives and Policies and Associated
Risks - Fixed Income Fund," the Fixed Income Fund may also engage, to a limited
extent, in the following investment practices, which are identified in the
Prospectus and more fully described below. The Fund currently intends to invest
less than 5% of its net assets in each of these instruments in the coming year.
Strips and Residuals. The Fund may invest in stripped mortgage-backed
securities which are usually structured with two classes that receive different
portions of the interest and principal distributions on a pool of mortgage
loans. The Fund may invest in both the interest-only or "IO" class and the
principal-only or "PO" class. Prepayments could result in losses on such
stripped mortgage-backed securities. The yield to maturity on an IO class of
stripped mortgage-backed securities is extremely sensitive not only to changes
in prevailing interest rates but also to the rate of principal payments
(including prepayments) on the underlying assets. A rapid rate of principal
prepayments may have a measurably adverse effect on the Fund's yield to maturity
to the extent it invests in IOs. If the assets underlying the IO experience
greater than anticipated prepayments of principal, the Fund may fail to fully
recoup its initial investment in these securities. Conversely, POs tend to
increase in value if prepayments are greater than anticipated and decline if
prepayments are slower than anticipated. Stripped mortgage-backed securities may
have limited liquidity. The Fund may also invest in IO or PO strips relating to
other types of fixed income securities, such as asset- backed securities. Such
investments would be subject similar to risks similar to those described above.
-10-
<PAGE>
Residuals also involve the additional risk of loss of the entire value
of the investment if the underlying securities are prepaid. In addition, if a
CMO (as defined in the Prospectus) bears interest at an adjustable rate, the
cash flows on the related Residual will also be extremely sensitive to the level
of the index upon which the rate adjustments are based.
Zero Coupon Securities. The Fund may invest in "zero coupon" fixed
income securities. The Fund is required to accrue interest income on these
securities at a fixed rate based on the initial purchase price and the length to
maturity, but these securities do not pay interest in cash on a current basis.
The Fund is required to distribute the income on these securities to its
shareholders as the income accrues, even though the Fund is not receiving the
income in cash on a current basis. Thus, the Fund may have to sell other
investments to obtain cash to make income distributions. The market value of
zero coupon securities is often more volatile than that of non-zero coupon fixed
income securities of comparable quality and maturity.
Indexed Securities. The Fund may purchase securities the redemption
values and/or the coupons of which are indexed to the prices of other
securities, securities indices, precious metals or other commodities, or other
financial indicators. Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or coupon rate is determined by
reference to a specific instrument or statistic. Gold-indexed securities, for
example, typically provide for a maturity value that depends on the price of
gold, resulting in a security whose price tends to rise and fall together with
gold prices.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the U.S. and
abroad. At the same time, indexed securities are subject to the credit risks
associated with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates.
Indexed securities in which the Fund may invest include so-called
"inverse floating obligations" or "residual interest bonds" on which the
interest rates typically decline as short-term market interest rates increase
and increase as short-term market rates decline. Such securities have the effect
of providing a degree of investment leverage because they will generally
increase or decrease in value in response to changes in market interest rates at
a rate which is a multiple of the rate at which fixed-rate long-term securities
increase or decrease in response to such changes. As a result, the market values
of such securities will generally be more volatile than the market values of
fixed rate securities.
Loans and Other Direct Debt Instruments. The Fund may invest in direct
debt instruments which are interests in amounts owed by a corporate,
governmental, or other borrower to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or other
receivables), or to other parties. Direct debt instruments are subject to the
Fund's policies regarding the quality of debt securities.
-11-
<PAGE>
Purchasers of loans and other forms of direct indebtedness depend
primarily upon the creditworthiness of the borrower for payment of principal and
interest. Direct debt instruments may not be rated by any nationally recognized
rating agency. Loans that are fully secured offer the Fund more protections than
an unsecured loan in the event of non-payment of scheduled interest of
principal. However, there is no assurance that the liquidation of collateral
from a secured loan would satisfy the borrower's obligation, or that the
collateral can be liquidated. Indebtedness of borrowers whose creditworthiness
is poor involves substantially greater risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of emerging countries will also involve a risk that the
governmental entities responsible for the repayment of the debt may be unable,
or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial
institution's interest with respect to a loan may involve additional risks to
the Fund. For example, if a loan is foreclosed, the Fund could become part owner
of any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, the Fund could be held liable
as a co- lender. Direct debt instruments may also involve a risk of insolvency
of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution
that acts as agent for all holders. The agent administers the terms of the loan,
as specified in the loan agreement. The Fund may have to rely on the agent to
collect and pass on to the Fund any payments received from the borrower and to
apply appropriate credit remedies against a borrower. When the Fund is required
to rely upon a financial institution to pass on to the Fund principal and
interest, the Fund will evaluate the creditworthiness of such financial
institution as well as the creditworthiness of the borrower.
Direct indebtedness purchased by the Fund may include letters of
credit, revolving credit facilities, or other standby financing commitments
obligating the Fund to pay additional cash on demand. These commitments may have
the effect of requiring the Fund to increase its investment in a borrower at a
time when it would not otherwise have done so. The Fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
potential obligations under standby financing commitments.
Reverse Repurchase Agreements and Dollar Roll Agreements. The Fund may
enter into reverse repurchase agreements and dollar roll agreements with banks
and brokers to enhance return.
Reverse repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same assets
at a later date at a fixed price. During the reverse repurchase agreement
period, the Fund continues to receive
-12-
<PAGE>
principal and interest payments on these securities and also has the opportunity
to earn a return on the collateral furnished by the counterparties to secure
their obligation to redeliver the securities.
Dollar rolls are transactions in which the Fund sells securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type and coupon) securities on a specified future
date. During the roll period, the Fund forgoes principal and interest paid on
the securities. The Fund is compensated by the difference between the current
sales price and the forward price for the future purchase (often referred to as
the "drop") as well as by the interest earned on the cash proceeds of the
initial sale.
The Fund will establish segregated accounts with its custodian in which
it will maintain cash, U.S. Government securities or other liquid high grade
debt obligations equal in value to its obligations in respect of reverse
repurchase agreements and dollar rolls. Reverse repurchase agreements involve
the risk that the market value of the securities retained by the Fund may
decline below the price of the securities the Fund has sold but is obligated to
repurchase under the agreement. In the event the buyer of securities under a
reverse repurchase agreement or dollar roll files for bankruptcy or becomes
insolvent, the Fund's use of the proceeds of the agreement may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities. Reverse
repurchase agreements and dollar rolls are considered borrowings by the Fund for
purposes of the Fund's fundamental investment restriction with respect to
borrowings.
PORTFOLIO TRANSACTIONS
Investment Decisions
Investment decisions for the Funds and for the other investment
advisory clients of the Manager and the Sub-Adviser and their affiliates are
made with a view to achieving their respective investment objectives. Investment
decisions are the product of many factors in addition to basic suitability for
the particular client involved. Thus, a particular security may be bought or
sold for certain clients even though it could have been bought or sold for other
clients at the same time. Likewise, a particular security may be bought for one
or more clients when one or more other clients are selling the security. In some
instances, one client may sell a particular security to another client. It also
sometimes happens that two or more clients simultaneously purchase or sell the
same security, in which event each day's transactions in such security are,
insofar as possible, averaged as to price and allocated between such clients in
a manner which in the Manager's or the Sub-Adviser's opinion is equitable to
each and in accordance with the amount being purchased or sold by each. There
may be circumstances when purchases or sales of portfolio securities for one or
more clients will have an adverse effect on other clients.
-13-
<PAGE>
Brokerage and Research Services
Transactions on U.S. stock exchanges, commodities markets and futures
markets and other agency transactions involve the payment by a Fund of
negotiated brokerage commissions. Such commissions vary among different brokers.
A particular broker may charge different commissions according to such factors
as the difficulty and size of the transaction. Transactions in foreign
investments often involve the payment of fixed brokerage commissions, which may
be higher than those in the United States. There is generally no stated
commission in the case of securities traded in the over-the-counter markets, but
the price paid by a Fund usually includes an undisclosed dealer commission or
mark-up. In underwritten offerings, the price paid by a Fund includes a
disclosed, fixed commission or discount retained by the underwriter or dealer.
It is anticipated that most purchases and sales of securities by the Fixed
Income Fund will be with the issuer or with underwriters of or dealers in those
securities, acting as principal. Accordingly, the Fund would not ordinarily pay
significant brokerage commissions with respect to securities transactions.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive brokerage and research services (as defined in the Securities
Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, the Manager and the Sub-Adviser may receive brokerage and research
services and other similar services from many broker-dealers with which the
Manager and the Sub-Adviser place the Funds' portfolio transactions and from
third parties with which these broker-dealers have arrangements. These services
may include such matters as general economic and market reviews, industry and
company reviews, evaluations of investments, recommendations as to the purchase
and sale of investments, newspapers, magazines, pricing services, quotation
services, news services and personal computers utilized by the Manager's or
Sub-Adviser's investment professionals. Where the services referred to above are
not used exclusively by the Manager or the Sub-Adviser for research purposes,
the Manager or Sub-Adviser, based upon their own allocations of expected use,
would bear that portion of the cost of these services which directly relates to
their non-research use. Some of these services may be of value to the Manager,
the Sub-Adviser or their affiliates in advising various of their clients
(including the Funds), although not all of these services would necessarily be
useful and of value in managing the Funds. The management fee paid by each Fund
is not reduced because the Manager, the Sub-Adviser or their affiliates may
receive these services even though the Manager or the Sub-Adviser might
otherwise be required to purchase some of these services for cash.
The Manager and Sub-Adviser each place orders for the purchase and sale
of portfolio investments for the Funds and buy and sell investments for the
Funds through a
-14-
<PAGE>
substantial number of brokers and dealers. In so doing, the Manager and the
Sub-Adviser each uses its best efforts to obtain for the Funds the most
favorable price and execution available, except to the extent they may be
permitted to pay higher brokerage commissions as described below. In seeking the
most favorable price and execution, the Manager or the Sub-Adviser, having in
mind each Fund's best interests, considers all factors it deems relevant,
including, by way of illustration, prices, the size of the transaction, the
nature of the market for the security or other investment, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker-dealer
involved and the quality of service rendered by the broker-dealer in other
transactions.
As permitted by Section 28(e) of the 1934 Act, and by each Management
Contract or, as applicable, the Sub-Advisory Agreement, the Manager or the
Sub-Adviser may cause each Fund to pay a broker-dealer which provides "brokerage
and research services" (as defined in the 1934 Act) to the Manager or
Sub-Adviser an amount of disclosed commission for effecting securities
transactions on stock exchanges and other transactions for such Fund on an
agency basis in excess of the commission which another broker-dealer would have
charged for effecting that transaction. The Manager's or the Sub-Adviser's
authority to cause the Funds to pay any such greater commissions is also subject
to such policies as the Trustees may adopt from time to time. It is the position
of the staff of the Securities and Exchange Commission that Section 28(e) does
not apply to the payment of such greater commissions in "principal"
transactions. Accordingly the Manager or the Sub-Adviser will use its best
effort to obtain the most favorable price and execution available with respect
to such transactions, as described above.
The following tables show brokerage commissions on portfolio
transactions paid by each Fund during the fiscal periods indicated.
1. FIXED INCOME FUND
Fiscal Year Brokerage Commissions
1995 $0
2. GLOBAL SMALL CAP FUND
Fiscal Year Brokerage Commissions
1995 $38,917
-15-
<PAGE>
3. VALUE FUND
Fiscal Year Brokerage Commissions
1995 $16,731
4. MID CAP FUND
Fiscal Year Brokerage Commissions
1995 $18,964
The following tables show transactions placed by each Fund with brokers and
dealers during the most recent fiscal year to recognize research, statistical
and quotation services that the Manager (and Sub-Adviser, in the case of the
Global Small Cap Fund) considered to be particularly useful to it and its
affiliates.
<TABLE>
<CAPTION>
1. FIXED INCOME FUND
<S> <C> <C> <C>
Dollar Value of Percent of Amount of
Those Transactions Total Transactions Commissions
$0 0% $ 0
2. GLOBAL SMALL CAP FUND
Dollar Value of Percent of Amount of
Those Transactions Total Transactions Commissions
$148,540 .004% $450
3. VALUE FUND
Dollar Value of Percent of Amount of
Those Transactions Total Transactions Commissions
$290,168 .004% $468
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
4. MID CAP FUND
<S> <C> <C> <C>
Dollar Value of Percent of Amount of
Those Transactions Total Transactions Commissions
$386,766 .01% $1,140
</TABLE>
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES
The Trust is organized as a Massachusetts business trust under the laws
of Massachusetts by an Agreement and Declaration of Trust ("Declaration of
Trust") dated August 1, 1994. A copy of the Declaration of Trust is on file with
the Secretary of The Commonwealth of Massachusetts. The fiscal year for each
Fund ends on December 31.
Pursuant to the Declaration of Trust, the Trustees have currently
authorized the issuance of an unlimited number of full and fractional shares of
four series: the DLB Fixed Income Fund, the DLB Global Small Capitalization
Fund, the DLB Value Fund and the DLB Mid Capitalization Fund. Each share of each
Fund represents an equal proportionate interest in such Fund. Shares of the
Trust do not have any preemptive rights. Upon liquidation of a Fund,
shareholders of such Fund are entitled to share pro rata in the net assets of
the Fund available for distribution to shareholders.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to subdivide any series of shares into various sub-series of shares
with such dividend preferences and other rights as the Trustees may designate.
While the Trustees have no current intention to exercise this power, it is
intended to allow them to provide for an equitable allocation of the impact of
any future regulatory requirements which might affect various classes of
shareholders differently. The Trustees may also, without shareholder approval,
establish one or more additional separate portfolios for investments in the
Trust or merge two or more existing portfolios. Shareholders' investments in
such a portfolio would be evidenced by a separate series of shares.
The Declaration of Trust provides for the perpetual existence of the
Trust. The Trust, however, may be terminated at any time by vote of at least
two-thirds of the outstanding shares of the Trust. The Declaration of Trust
further provides that the Trustees may also terminate the Trust upon written
notice to the shareholders.
Voting Rights
As summarized in the Prospectus, shareholders are entitled to one vote
for each full share held (with fractional votes for fractional shares held) and
will vote (to the extent provided herein) in the election of Trustees and the
termination of the Trust and on other matters submitted to the vote of
shareholders. Shareholders vote by individual Fund on all
-17-
<PAGE>
matters except (i) when required by the 1940 Act, shares shall be voted in the
aggregate and not by individual Fund, and (ii) when the Trustees have determined
that the matter affects only the interests of one or more Funds, then only
shareholders of such Funds shall be entitled to vote thereon. Shareholders of
one Fund shall not be entitled to vote on matters exclusively affecting another
Fund, such matters including, without limitation, the adoption of or change in
the investment objective, policies or restrictions of the other Fund and the
approval of the investment advisory contract of the other Fund.
There will normally be no meetings of shareholders for the purpose of
electing Trustees except that in accordance with the 1940 Act (i) the Trust will
hold a shareholders' meeting for the election of Trustees at such time as less
than a majority of the Trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy in the Board of Trustees,
less than two-thirds of the Trustees holding office have been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders.
Upon written request by the holders of at least 10% of the outstanding shares
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a Trustee, the Trust has undertaken to provide a list of
shareholders or to disseminate appropriate materials (at the expense of the
requesting shareholders). In addition, shareholders of the Trust holding at
least 10% of the outstanding shares entitled to vote have the right to call a
meeting to elect or remove Trustees or to take other actions as provided in the
Declaration of Trust. Except as set forth above, the Trustees shall continue to
hold office and may appoint successor Trustees. Voting rights are not
cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust except (i)
to change the Trust's name or to cure technical problems in the Declaration of
Trust and (ii) to establish, designate or modify new and existing series or
sub-series of Trust shares or other provisions relating to Trust shares in
response to applicable laws or regulations.
Shareholder and Trustee Liability
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by the Trust
or the Trustees. The Declaration of Trust provides for indemnification out of
all the property of the relevant Fund for all loss and expense of any
shareholder of that Fund held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered remote because it is limited to
circumstances in which the disclaimer is inoperative and the Fund of which he is
or was a shareholder would be unable to meet its obligations.
-18-
<PAGE>
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office. The By-laws of the Trust provide for indemnification by the Trust of
the Trustees and the officers of the Trust except with respect to any matter as
to which any such person did not act in good faith in the reasonable belief that
his action was in or not opposed to the best interests of the Trust. Such person
may not be indemnified against any liability to the Trust or the Trust's
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
At December 31, 1995 the officers and trustees of the Trust did not own any
shares of any Fund, and, except as noted below, to the knowledge of the Trust no
person owned of record or beneficially 5% or more of the shares of any Fund.
1. FIXED INCOME FUND
Shareholder Name Percentage
and Address Owned
Massachusetts Mutual Life 100%
Insurance Company
1295 State Street
Springfield, MA 01111
2. GLOBAL SMALL CAP FUND
Shareholder Name Percentage
and Address Owned
Massachusetts Mutual Life 99%
Insurance Company
1295 State Street
Springfield, MA 01111
David L. Babson & Co., Inc. 1%
One Memorial Drive
Cambridge, MA 02142
-19-
<PAGE>
3. VALUE FUND
Shareholder Name Percentage
and Address Owned
Massachusetts Mutual Life 100%
Insurance Company
1295 State Street
Springfield, MA 01111
4. MID CAP FUND
Shareholder Name Percentage
and Address Owned
Massachusetts Mutual Life 100%
Insurance Company
1295 State Street
Springfield, MA 01111
INVESTMENT PERFORMANCE
Standard performance measure
(for periods commencing July 25, 1995, or in the case of the Global Small Cap
Fund, July 19, 1995, and ending December 31, 1995)
1. FIXED INCOME FUND
Total Return Yield
6.46% 5.98%
2. GLOBAL SMALL CAP FUND
Total Return
4.02%
3. VALUE FUND
Total Return
8.19%
-20-
<PAGE>
4. MID CAP FUND
Total Return
9.68%
Total return for the period that the Funds have been in operation is
determined by calculating the actual dollar amount of investment return on a
$1,000 investment in a Fund made at the beginning of the period, at net asset
value, and then calculating the annual compounded rate of return which would
produce that amount. Total return calculations assume reinvestment of all Fund
distributions at net asset value on their respective reinvestment dates.
The Fixed Income Fund's yield is presented for a specified thirty-day
period (the "base period"). Yield is based on the amount determined by (i)
calculating the aggregate amount of dividends and interest earned by the Fund
during the based period less expenses for that period, and (ii) dividing that
amount by the product of (A) the average daily number of shares of the Fund
outstanding during the base period and entitled to receive dividends and (B) the
net asset value on the last day of the base period. The result is annualized on
a compounding basis to determine the yield. For this calculation, interest
earned on debt obligations held by the Fund is generally calculated using the
yield to maturity (or first expected call date) on such obligations based on
their market values (or, in the case of receivables-backed securities such
securities issued by the Government National Mortgage Association, based on
cost). Dividends on equity securities are accrued daily at their stated dividend
rates.
DETERMINATION OF NET ASSET VALUE
As indicated in the Prospectus, except on days during which no security
is tendered for redemption and no order to purchase or sell such security is
received by the relevant Fund, the net asset value of each Fund share is
determined at 4:15 p.m., Eastern time, on each day on which the New York Stock
Exchange is open for trading. The Trust expects that the days, other than
weekend days, that the New York Stock Exchange will not be open are Independence
Day, Labor Day, Election Day, Thanksgiving Day, Christmas Day, New Year's Day,
Presidents' Day, Good Friday and Memorial Day.
-21-
<PAGE>
EXPERTS
The financial statements of the Fixed Income Fund, the Global Small Cap
Fund, the Value Fund and the Mid Cap Fund as of December 31, 1995 appearing in
this Statement of Additional Information have been audited by Deloitte & Touche
LLP, 125 Summer Street, Boston, Massachusetts 02110, the Trust's independent
auditors, as set forth in each of their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
-22-
<PAGE>
DELOITTE &
TOUCHE LLP
125 Summer Street Telephone: (617) 261-8000
Boston, Massachusetts 02110-1617 Facsimile: (617) 261-8111
INDEPENDENT AUDITORS' REPORT
To the Trustees of The DLB Fund Group and
Shareholders of DLB Fixed Income Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of DLB Fixed Income Fund (a separate series of The
DLB Fund Group) as of December 31, 1995, and the related statements of
operations and changes in net assets, and the financial highlights for the
period from July 25, 1995 (commencement of operations) to December 31, 1995.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at December 31, 1995 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of DLB Fixed Income
Fund at December 31, 1995, the results of its operations, the changes in its net
assets, and its financial highlights for the period from July 25, 1995
(commencement of operations) to December 31, 1995 in conformity with generally
accepted accounting principles.
/s/Deloitte & Touche LLP
February 1, 1996
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
<PAGE>
DLB FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BONDS - 93.3%
S&P/MOODY'S
BOND RATING PRINCIPAL
(UNAUDITED) ISSUER AMOUNT VALUE
<S> <C> <C> <C>
U.S. GOVERNMENT BONDS - 27.3%
AAA U.S. Treasury, 7.25s, 1996 $150,000 $152,531
AAA U.S. Treasury, 8.50s, 1997 400,000 417,124
AAA U.S. Treasury, 6.25s, 2000 100,000 103,453
AAA U.S. Treasury, 7.50s, 1999 75,000 80,519
AAA U.S. Treasury, 6.375s, 2000 100,000 103,109
AAA U.S. Treasury, 10.375s, 2012 250,000 345,625
AAA U.S. Treasury, 8.125s, 2021 200,000 253,125
1,455,486
U.S. Federal Agency Bonds - 1.9%
Federal Home Loan Banks, 7.26s, 1999 100,000 102,984
MORTGAGES - 24.7%
BAA3 Green Tree Financial, 6.9s, 2004 33,499 33,467
AAA Green Tree Financial, 7.25s, 2005 81,024 81,985
AAA FHLMC Gold G00143 72,507 74,440
AAA GNMA, 7.5s, 2023 480,709 494,938
AAA GNMA, 7.5s, 2025 509,175 523,496
AAA Green Tree, 7.05s, 2025 100,000 104,000
1,312,326
INTERNATIONAL BONDS - 13.1%
BAA2 Canadian National Railroad, 7s, 2004 100,000 103,611
AA3 Province of Ontario, 7s, 2005 125,000 133,008
AA2 British Columbia Hydro & Pwr, 15.5s, 2011 200,000 229,398
AA3 Province of Ontario, 15.75s, 2012 100,000 116,822
AAA Hydro Quebec, 8.4s, 2022 100,000 115,621
698,460
FINANCIAL - 11.2%
BAA2 Comdisco, 9.75s, 1997 250,000 259,863
A3 GMAC, 8.4s, 1999 200,000 217,220
A1 Ford Capital BV, 10.125s, 2000 100,000 117,282
594,365
</TABLE>
-2-
<PAGE>
DLB FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BONDS - 93.3%
S&P/MOODY'S
BOND RATING PRINCIPAL
(UNAUDITED) ISSUER AMOUNT VALUE
<S> <C> <C> <C>
INDUSTRIAL - 10.7%
A3 Ryder Mtn, 8.45s, 1999 100,000 108,954
A2 Sears Roebuck, 6.5s, 2000 100,000 102,303
A3 Cardinal Health Inc., 6.5s, 2004 100,000 101,345
A1 Raytheon, 6.5s, 2005 100,000 103,408
BAA3 Telecommunication Inc., 7.25s, 2005 100,000 101,337
BAA3 Time Warner Ent., 8.375s, 2023 50,000 53,826
571,173
TRANSPORTATION - 4.4%
A3 CSX Corp., 9.50s, 2000 100,000 113,897
A3 CSX Corp. Deb, 9s, 2006 100,000 119,160
233,057
Total Bonds (Identified cost, $4,834,859) 4,967,851
REPURCHASE AGREEMENT, 5.2%,
Bank of New York, dated 12/29/95, due
1/2/96 (Secured by $281,000 U.S. Treasury
Notes, due 9/30/97, Market Value, $287,365) 277,440
Total Investments
(Identified cost, $5,112,299) 5,245,291
Other Assets, Less Liabilities - 1.5% 79,848
NET ASSETS - 100% $ 5,325,139
</TABLE>
See notes to financial statements.
-3-
<PAGE>
DLB FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (identified cost, $5,112,299) $5,245,291
Interest receivable 80,415
Total assets 5,325,706
LIABILITIES - Accrued expenses and other liabilities 567
NET ASSETS $5,325,139
NET ASSETS CONSIST OF:
Paid-in capital $5,192,147
Unrealized appreciation on investments 132,992
Total $5,325,139
SHARES OF BENEFICIAL INTEREST OUTSTANDING 518,789
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER
SHARE (NET ASSETS / SHARES OF BENEFICIAL INTEREST
OUTSTANDING) $ 10.26
</TABLE>
See notes to financial statements.
-4-
<PAGE>
DLB FIXED INCOME FUND
STATEMENT OF OPERATIONS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INTEREST INCOME $ 152,090
EXPENSES:
Management fee 8,911
Custodian fee 23,894
Legal fees 23,846
Accounting and audit fees 19,791
Trustees' fees 5,438
Other 6
Total expenses 81,886
Reduction of expenses by investment manager (68,707)
Net expenses 13,179
Net investment income 138,911
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain on investment transactions (identified cost basis) 53,226
Change in unrealized appreciation 132,992
Net realized and unrealized gain on investments 186,218
Increase in net assets from operations $ 325,129
</TABLE>
See notes to financial statements.
-5-
<PAGE>
DLB FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 138,911
Net realized gain on investments 53,226
Net unrealized gain on investments 132,992
Increase in net assets from operations 325,129
Distributions declared to shareholders:
From net investment income (139,227)
From net realized gain on investments (53,159)
Total distributions declared to shareholders (192,386)
Fund share (principal) transactions:
Net proceeds from sale of shares 5,000,000
Net asset value of shares issued to shareholders in reinvestment of distributions 192,386
Increase in net assets from Fund share transactions 5,192,386
Total increase in net assets 5,325,129
NET ASSETS:
At beginning of period 10
At end of period $ 5,325,139
</TABLE>
See notes to financial statements.
-6-
<PAGE>
DLB FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $ 10.00
Income from investment operations:
Net investment income 0.28
Net realized and unrealized gain on investments 0.37
Total income from investment operations 0.65
Less distributions declared to shareholders:
From net investment income (0.28)
From net realized gain on investments (0.11)
Total distributions declared to shareholders (0.39)
Net asset value - end of period $ 10.26
Total return 14.75%*
Ratios and Supplemental Data:
Ratio of expenses to average net assets 0.55%*
Ratio of net investment income to average net assets 6.24%*
Portfolio turnover 42%
Net assets at end of period (000 omitted) $ 5,325
The manager has agreed with the Fund to reduce its management fee and bear
certain expenses, such that expenses do not exceed 0.55% of average daily net
assets on an annualized basis. If the fee and expenses had been incurred by the
Fund, and had expenses been limited to that permitted by state securities law,
the net investment income per share and ratios would have been:
Net investment income $ 0.19
Ratios (to average net assets):
Expenses 2.50%*
Net investment income 4.33%*
* Annualized.
</TABLE>
See notes to financial statements.
-7-
<PAGE>
DLB FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Fixed Income Fund (the "Fund") is a non-diversified series of The DLB
Fund Group (the "Trust").
The Trust is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATIONS - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, are valued on
the basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance
upon exchange or over-the-counter prices. Short-term obligations, which
mature in 60 days or less, are valued at amortized cost, which approximates
market value. Securities for which there are no such valuations are valued
at fair value as determined in good faith by or at the direction of the
Trustees.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded
on the trade date. Interest income is recorded on the accrual basis. All
premium and original issue discount are amortized or accreted for financial
statement and tax reporting purposes as required by federal income tax
regulations.
TAX MATTERS AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code ("Code") applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a
tax return annually using tax accounting methods required under provisions
of the Code which may differ from generally accepted accounting principles,
the basis on which these financial statements are prepared. Accordingly,
the amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on the Fund's tax
return, and consequently, the character of distributions to shareholders
reported in the financial highlights may differ from that reported to
shareholders on Form 1099-DIV. Distributions to shareholders are recorded
on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a return
of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits which result
in temporary over-distributions for financial statement purposes, are
classified as distributions in excess of net investment income or
accumulated undistributed net realized gains. During the period ended
December 31, 1995, $67 and $249 were reclassified from accumulated
undistributed net realized gain on investments` and paid-in capital,
respectively, to accumulated undistributed net investment income, due to
differences between book and tax accounting for mortgage-backed securities
and foreign currency transactions. This change had no effect on the net
assets or net asset value per share.
-8-
<PAGE>
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT MANAGER - The Fund has a management contract with David L.
Babson & Co. Inc. ("DLB") to provide overall investment advisory and
administrative services, and general office facilities. The management fee
is computed daily and paid monthly at an effective annual rate of 0.40% of
average daily net assets.
For the period ended December 31, 1995, the management fee amounted to
$8,911, all of which was waived by DLB and, additionally, $59,796 of Fund
expenses were borne by DLB.
The Fund pays no compensation directly to its Trustees who are officers of
the investment manager, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from DLB.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations, were
as follows:
PURCHASES SALES
U.S. Government securities $4,526,414 $2,061,524
Investments (non-U.S. government securities) $2,503,365 $ 177,303
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate Cost $5,112,299
Gross unrealized appreciation $ 137,028
Gross unrealized depreciation (4,036)
Net unrealized appreciation $ 132,992
5. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares during the period were as follows:
SHARES AMOUNT
Shares sold 500,000 $5,000,000
Shares issued to shareholders in reinvestment of 18,788 192,386
distributions
Net increase 518,788 $5,192,386
* * * * * *
-9-
<PAGE>
DELOITTE &
TOUCHE LLP
125 Summer Street Telephone: (617) 261-8000
Boston, Massachusetts 02110-1617 Facsimile: (617) 261-8111
INDEPENDENT AUDITORS' REPORT
To the Trustees of the DLB Fund Group and Shareholders of
DLB Global Small Capitalization Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of DLB Global Small Capitalization Fund (a
separate series of The DLB Fund Group) as of December 31, 1995, and the related
statements of operations, changes in net assets, and the financial highlights
for the period from July 19, 1995 (commencement of operations) to December 31,
1995. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at December 31, 1995 by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of DLB Global Small
Capitalization Fund at December 31, 1995, the results of its operations, the
changes in its net assets, and its financial highlights for the period from July
19, 1995 (commencement of operations) to December 31, 1995 in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
February 1, 1996
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON AND PREFERRED STOCKS - 98.1%
ISSUER SHARES VALUE
<S> <C> <C>
CHEMICALS SPECIALTY - 1.9%
Calgon Carbon 9,200 $110,400
M.A. Hanna Co. 3,200 89,600
200,000
METALS AND MINING - 0.9%
Martin Marietta Materials 4,500 92,813
PAPER/FOREST PRODUCTS - 0.7%
Albany International Corp. Class A 4,100 74,313
AEROSPACE - 1.3%
E G & G 5,600 135,800
CONSTRUCTION - 1.0%
Southdown Inc. (*) 5,300 103,350
ENVIRONMENTAL - 1.0%
Safety-Kleen 6,900 107,812
MACHINERY/EQUIPMENT - 2.7%
BW/IP Inc. Class A 5,800 95,700
Harsco Corp. 2,000 116,250
Trinity Industries 2,400 75,600
287,550
APPAREL - TEXTILE - 1.8%
National Service Industries 3,700 119,788
Stride Rite 9,300 69,750
189,538
AUTO PARTS MANUFACTURERS - 3.2%
Armor All Products 6,800 123,250
Arvin Industries 3,400 56,100
Bandag Inc. Class A 1,100 58,300
Standard Products 5,800 102,225
339,875
FURNITURE AND APPLIANCES - 2.2%
Herman Miller 4,500 135,000
LA-Z-BOY Chair 3,200 98,800
233,800
RECREATION - 0.8%
King World Productions (*) 2,100 81,638
</TABLE>
-2-
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON AND PREFERRED STOCKS (CONTINUED)
ISSUER SHARES VALUE
<S> <C> <C>
PRINTING AND PUBLISHING - 4.6%
CCH Inc., Class B 5,100 281,138
Central Newspapers A 3,300 103,538
Lee Enterprises 4,200 96,600
481,276
RETAIL - SPECIALITY - 0.8%
Fingerhut Companies 5,700 79,088
WHOLESALERS - 1.0%
Waban Inc. (*) 5,600 105,000
FOOD PRODUCERS - 0.9%
Dean Foods Co. 3,600 99,000
FOOD RETAILERS - 1.1%
Vons Companies (*) 4,200 118,650
COSMETIC/TOILETRY - 0.8%
Alberto Culver Class A 2,600 79,300
TOBACCO - 1.7%
Dimon Inc. 5,600 98,700
Quilmes Industries 4,800 74,880
173,580
COAL GAS AND PIPE - 2.3%
Cabot Oil & Gas Corp. 6,600 96,525
Nabors Industries (*) 13,000 144,625
241,150
OIL - DOMESTIC - 0.8%
Quaker State Corp. 7,000 88,375
BANKS - 2.8%
First Commercial Corp. 3,317 109,461
First Security Corp. 2,900 111,650
Firstier Financial 1,700 74,800
295,911
INSURANCE COMPANIES - 1.8%
Gallagher, AJ & Co. 2,300 85,675
Hartford Steam Boiler Ins. 2,100 105,000
190,675
</TABLE>
-3-
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON AND PREFERRED STOCKS (CONTINUED)
ISSUER SHARES VALUE
<S> <C> <C>
ELECTRONIC/INSTRUMENT - 1.3%
Intergraph Corp. (*) 4,100 64,575
Scitex 5,300 72,213
136,788
TELECOMMUNICATIONS - 0.7%
Octel Communications(*) 2,400 77,400
TRUCKING AND SHIPPING - 2.1%
Alexander & Baldwin 3,400 78,200
Hunt JB Transport 4,500 75,375
Overseas Shipholding 3,700 70,300
223,875
NATURAL GAS - 0.9%
Equitable Resources 3,100 96,875
FOREIGN - 57%
UNITED KINGDOM
Alllied Colloids Group - Chemicals 44,900 92,711
Peter Black Holdings - Household Goods 19,000 79,643
N Brown Group - Retailers - General 20,000 83,214
Court Cavendish Group - Health Care 21,400 90,036
Devro International - Food Producers 26,000 102,527
Fairey Group - Electronic and Electrical Equipment 11,300 94,383
McBride - Household Goods (*) 28,100 84,196
Seton Healthcare Group - Health Care 13,000 79,721
Spirax-Sarco Engineering - Engineering 15,000 138,211
UniChem - Health Care 21,300 80,025
924,667
BELGIUM
Colruyt - Retailers - Food 126,428 123,616
FRANCE
Bioblock Scientific - Distributors 2,000 102,139
Brioch Pasquier - Food Producers 1,000 121,789
Guilbert - Distributors 1,200 141,234
SocieteManutan - Distributors 1,000 116,591
Spir Communication - Media 1,400 128,666
Virbac - Pharmaceuticals 1,000 122,812
733,231
</TABLE>
-4-
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON AND PREFERRED STOCKS (CONTINUED)
ISSUER SHARES VALUE
<S> <C> <C>
FOREIGN (CONTINUED)
GERMANY
Douglas Holdings - Retailers - General 3,250 114,960
Rhoen Klinikum - Health Care 1,200 119,958
Sto AG - Building Materials and Merchants (**) 100 50,332
285,250
ITALY
Gewiss - Electronic and Electrical Equipment 13,700 172,684
Industrie Natuzzi ADR - Household Goods 3,700 167,888
340,572
NETHERLANDS
Grolsch - Breweries 3,350 116,590
Nutricia Verenidge Bedrijuen - Food Producers 1,850 149,772
Wegener - Media 1,550 149,847
416,209
SWITZERLAND
Fotolabo - Other Services and Businesses 400 160,000
Phoenix Mecano - Engineering 300 150,782
310,782
NEW ZEALAND
Guinness Peat Group - Other Financial 155,000 81,021
JAPAN
Aim Services - Other Svcs. and Business 5,000 91,535
Amada Metrecs - Japan 9,000 143,840
Canon Aptex - Engineering 5,500 89,597
Daiwa Industries - Engineering 12,000 116,234
Disco - Electronic and Electrical Equipment 4,000 149,168
Fukuda Denshi - Health Care 5,000 134,153
Harada Industry - Electronic and Electrical Equip. 5,000 85,722
Maruko - Retailers - General (*) 1,500 101,850
Mitsui High Tech - Electronic and Electrical Equip. 5,000 130,763
Nihon Jumbo - Other Services and Businesses 4,300 150,358
Nissen - Retailers - General 5,730 134,314
Royal Ltd. - Retailers - General 4,000 133,670
SxL Corp. - Building and Construction 12,000 124,370
Xebio Co. - Retialers - General 4,000 141,418
1,726,992
</TABLE>
-5-
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON AND PREFERRED STOCKS (CONTINUED)
ISSUER SHARES VALUE
<S> <C> <C>
FOREIGN (CONTINUED)
HONG KONG
CDL Hotels - Leisure and Hotels 260,000 131,126
Chen Hsong Holdings - Engineering 90,000 47,135
Gold Peak - Electronic and Electrical Equipment 150,000 74,195
South China Morning Post - Media 200,000 122,204
374,660
INDONESIA
Multi Bintang D/R - Breweries 5,500 63,806
MALAYSIA
Perlis Plantations - Diversified Industrial 40,000 125,188
SINGAPORE
Tiger Medicals - Pharmaceuticals 50,000 83,038
Tibs Holdings - Transport 40,000 97,809
United Industrial Corp. - Property 71,000 69,745
250,592
THAILAND
Matichon (THB) F/R - Media 13,000 76,865
Saha Pathana Interholding L/R - Div. Industrial * 35,000 66,667
Thai Pineapple (TIPCO) L/R - Food Producers * 52,000 76,431
219,963
Total Common and Preferred Stocks 10,309,981
(Identified Cost $9,938,233)
REPURCHASE AGREEMENT - 1.9%
Bank of New York, dated 12/29/95, due 1/2/96 (Secured by $208,000 U.S.
Treasury Notes, due 9/30/97, Market Value $212,712) 204,300
Total Investments
(Identified cost $10,142,533) 10,514,281
Other Assets, Less Liabilities - 0% (5,003)
NET ASSETS - 100% $ 10,509,278
(*) Non-income producing securities
(**) Preferred Stock
</TABLE>
See notes to financial statements.
-6-
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (identified cost, $10,142,533) $ 10,514,281
Receivable for investments sold 81,885
Dividends and interest receivable 53,890
Total assets 10,650,056
LIABILITIES:
Payable for investments purchased 104,880
Accrued expenses and other liabilities 35,898
Total liabilities 140,778
NET ASSETS $ 10,509,278
NET ASSETS CONSIST OF:
Paid-in capital $ 10,172,224
Unrealized appreciation on investments and translation of assets and liabilities
in foreign currency 371,931
Accumulated net realized loss on investments and foreign currency transactions (35,270)
Accumulated undistributed net investment income 393
Total $ 10,509,278
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,017,012
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE (NET ASSETS / SHARES OF BENEFICIAL INTEREST
OUTSTANDING) $ 10.33
</TABLE>
See notes to financial statements.
-7-
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
STATEMENT OF OPERATIONS
PERIOD FROM JULY 19, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $10,439) $ 108,643
Interest 23,708
Total investment income 132,351
EXPENSES:
Management fee 45,284
Custodian fee 35,040
Legal fees 31,092
Accounting and audit fees 25,804
Trustees' fees 5,438
Total expenses 142,658
Reduction of expenses by investment manager (76,551)
Net expenses 66,107
Net investment income 66,244
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) (identified cost basis):
Investment transactions (35,270)
Foreign currency transactions 6,373
Net realized loss (28,897)
Change in unrealized appreciation:
Investments 371,748
Translation of assets and liabilities in foreign currency 183
Net unrealized gain on investments and foreign currency 371,931
Net realized and unrealized gain on investments and foreign currency 343,034
Increase in net assets from operations $ 409,278
</TABLE>
See notes to financial statements.
-8-
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM JULY 19, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 66,244
Net realized loss on investments and foreign currency transactions (28,897)
Net unrealized gain on investments and foreign currency translation 371,931
Increase in net assets from operations 409,278
Distributions declared to shareholders from net investment income (72,224)
Fund share (principal) transactions:
Net proceeds from sale of shares 10,000,000
Net asset value of shares issued to shareholders in reinvestment of distributions 72,224
Increase in net assets from Fund share transactions 10,072,224
Total increase in net assets 10,409,278
NET ASSETS:
At beginning of period 100,000
At end of period (including accumulated undistributed net investment
income of $393) $ 10,509,278
</TABLE>
See notes to financial statements.
-9-
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
FINANCIAL HIGHLIGHTS
PERIOD FROM JULY 19, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $ 10.00
Net investment income 0.07
Net realized and unrealized gain on investments 0.33
Total income from investment operations 0.40
Less distributions declared to shareholders from net investment income (0.07)
Net asset value - end of period $ 10.33
Total return 8.96%
Ratios and Supplemental Data:
Ratio of expenses to average net assets 1.46%
Ratio of net investment income to average net assets 1.46%
Portfolio turnover 5%
Net assets at end of period (000 omitted) $ 10,509
The manager has agreed with the Fund to reduce its investment management fee and
bear certain expenses, such that expenses do not exceed 1.50% of average daily
net assets on an annualized basis. If the fee and expenses had been incurred by
the Fund and had expenses been limited to that required by state securities law,
the net investment income per share and ratios would have been:
Net investment income $ 0.02
Ratios (to average net assets):
Expenses 2.50%*
Net investment income 0.42%*
* Annualized.
</TABLE>
See notes to financial statements.
-10-
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Global Small Capitalization Fund (the "Fund") is a non-diversified
series of The DLB Fund Group (the "Trust").
The Trust is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATIONS - Equity securities listed on securities exchanges
or reported through the NASDAQ system are valued at last sale prices.
Unlisted equity securities or listed equity securities for which last sale
prices are not available are valued at last quoted bid prices. Short-term
obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Securities for which there are no
such quotations or valuations are valued at fair value as determined in
good faith by or at the direction of the Trustees.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates.
Purchases and sales of foreign investments and income and expenses are
converted into U.S. dollars based upon currency exchange rates prevailing
on the respective dates of such transactions. Gains and losses
attributable to foreign currency exchange rates on sales of securities are
recorded for financial statement purposes as net realized gains and losses
on investments. Gains and losses attributable to foreign exchange rate
movements on income and expenses are recorded for financial statement
purposes as foreign currency transaction gains and losses. That portion of
both realized and unrealized gains and losses on investments that results
from fluctuations in foreign currency exchange rates is not separately
disclosed.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - The Fund may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may
arise upon entering these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
The Fund will enter into forward contracts for hedging purposes only. The
Fund may enter into contracts to deliver or receive foreign currency it
will receive from or require for its normal investment activities. It may
also use contracts in a manner intended to protect foreign
currency-denominated securities from declines in value due to unfavorable
exchange rate movements. The forward foreign currency exchange contracts
are adjusted by the daily exchange rate of the underlying currency, and
any gains or losses are recorded for financial statement purposes as
unrealized until the contract settlement date.
-11-
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded
on the trade date. Dividend income is recorded on the ex-dividend date for
dividends received in cash. Dividend payments received in additional
securities are recorded on the ex-dividend date in an amount equal to the
value of the security on such date. Interest income is recorded on the
accrual basis.
TAX MATTERS AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code ( the "Code") applicable to
regulated investment companies and to distribute to shareholders all of
its taxable income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods required
under provisions of the Code which may differ from generally accepted
accounting principles, the basis on which these financial statements are
prepared. Accordingly, the amount of net investment income and net
realized gain reported on these financial statements may differ from that
reported on the Fund's tax return, and consequently, the character of
distributions to shareholders reported in the financial highlights may
differ from that reported to shareholders on Form 1099-DIV. Foreign taxes
have been provided for on interest and dividend income earned on foreign
investments in accordance with the applicable country's tax rates and to
the extent unrecoverable are recorded as a reduction of investment income.
Distributions to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a
financial reporting basis and requires that only distributions in excess
of tax basis earnings and profits are reported in the financial statements
as a return of capital. Differences in the recognition or classification
of income between the financial statements and tax earnings and profits
which result in temporary over-distributions for financial statement
purposes, are classified as distributions in excess of net investment
income or accumulated net realized gains.
During the period ended December 31, 1995, $6,373 was reclassified from
accumulated undistributed net realized gain on investments to accumulated
undistributed net investment income, due to differences between book and
tax accounting for foreign currency transactions. This change had no
effect on net assets or net asset value per share.
At December 31, 1995, the Fund, for federal income tax purposes, had a
capital loss carryforward of $35,270 which may be applied against any net
taxable realized gains of each succeeding year until the earlier of its
utilization or expiration on December 31, 2003.
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT MANAGER - The Fund has a management contract with David L.
Babson & Co., Inc. ("DLB") to provide overall investment advisory and
administrative services, and general office facilities. The management fee
is computed daily and paid monthly at an effective annual rate of 1.00% of
average daily net assets.
DLB has entered into a sub-advisory agreement with Babson-Stewart Ivory
International ("BSI") with respect to the management of the international
component of the Fund's portfolio. Under the sub-advisory agreement, DLB
pays BSI a monthly fee at the annual rate of 0.50% of average daily net
assets.
-12-
<PAGE>
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
For the period ended December 31, 1995, the management fee amounted to
$45,284, all of which was waived by DLB and, additionally, $31,267 of Fund
expenses were borne by DLB.
The Fund pays no compensation directly to its Trustees who are officers of
the investment manager, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from DLB.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations,
aggregated $10,490,197 and $516,694, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate cost $ 10,142,533
Gross unrealized appreciation $ 862,978
Gross unrealized depreciation (491,230)
Net unrealized appreciation $ 371,748
5. SHARES OF BENEFICIAL INTEREST
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares during the period were as follows:
SHARES AMOUNT
Shares sold 1,000,000 $ 10,000,000
Shares issued to shareholders in reinvestment
of distributions 7,012 72,224
Net increase 1,007,012 $ 10,072,224
* * * * * *
-13-
<PAGE>
DELOITTE &
TOUCHE LLP
125 Summer Street Telephone: (617) 261-8000
Boston, Massachusetts 02110-1617 Facsimile: (617) 261-8111
INDEPENDENT AUDITORS' REPORT
To the Trustees of the DLB Fund Group and Shareholders of
DLB Value Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of DLB Value Fund (a separate series of The DLB
Fund Group) as of December 31, 1995, and the related statements of operations
and changes in net assets, and the financial highlights for the period from July
25, 1995 (commencement of operations) to December 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at December 31, 1995 by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of DLB Value Fund at
December 31, 1995, the results of its operations, the changes in its net assets,
and its financial highlights for the period from July 25, 1995 (commencement of
operations) to December 31, 1995 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
February 1, 1996
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
<PAGE>
DLB VALUE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS - 97.4%
ISSUER SHARES VALUE
<S> <C> <C>
CHEMICALS - 2.3%
Dupont 3,500 $244,562
PAPER/FOREST PRODUCTS - 6.7%
Potlatch Corp. 6,000 240,000
Weyerhaeuser 6,000 259,500
Willamette Ind. 4,000 225,000
724,500
AEROSPACE - 5.0%
Boeing 3,500 274,312
Lockheed Martin Corp. 3,400 268,600
542,912
ENVIRONMENTAL - 2.2%
Safety-Kleen 15,500 242,187
APPAREL - TEXTILE - 2.6%
Reebok International 10,100 285,325
RECREATION - 1.8%
Huffy Corp. 19,000 192,375
PRINTING AND PUBLISHING - 2.1%
Harcourt General 5,500 230,312
RETAIL DISCOUNT - 2.2%
K MART 32,200 233,450
RETAIL - GENERAL - 4.7%
Penny JC 5,000 238,125
Sears Roebuck & Co. 7,000 273,000
511,125
FOOD PRODUCERS - 2.5%
Grand Metropolitan ADR 9,500 273,125
DRUGS - 2.1%
Lilly, Eli & Co. 3,982 223,988
</TABLE>
-2-
<PAGE>
DLB VALUE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS - 97.4% (CONTINUED)
ISSUER SHARES VALUE
<S> <C> <C>
MEDICAL SUPPLIES AND SERVICES - 3.9%
Guidant Corp. 3,521 148,762
Tenet Healthcare Corp. 13,300 275,975
424,737
OIL - DOMESTIC - 2.0%
Atlantic Richfield 2,000 221,500
OIL - INTERNATIONAL - 2.6%
Royal Dutch Pete NY Reg. N Gldr. 2,000 282,250
BANKS - 9.8%
Chase Manhattan 4,500 272,812
First Bank System 5,500 272,938
First Interstate Bancorp 1,800 245,700
National City Corp. 8,000 265,000
1,056,450
FINANCIAL SERVICES - 12.2%
American Express 6,500 268,938
Salomon Inc. 7,000 248,500
Student Loan Corp. 8,200 278,800
Student Loan Marketing 4,300 283,262
Transamerica 3,300 240,488
1,319,988
INSURANCE COMPANIES - 7.4%
Aetna Life & Casualty 4,000 277,000
Allstate Corp. 6,400 263,200
General RE Corp. 1,700 263,500
803,700
</TABLE>
-3-
<PAGE>
DLB VALUE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS - 97.4% (CONTINUED)
ISSUER SHARES VALUE
<S> <C> <C>
DIVERSIFIED - 2.0%
Hanson PLC Sponsored ADR 14,000 213,500
PROFESSIONAL SERVICES - 4.7%
ABM 10,000 277,500
PHH Corp. 5,000 233,750
511,250
COMPUTER RELATED - 4.3%
Apple Computer 6,700 213,563
International Business Machines 2,700 247,725
461,288
COMPUTER SOFTWARE - 2.5%
Shared Med. Sys. Corp. 5,000 271,875
OFFICE EQUIPMENT - 4.6%
Wallace Computer 4,100 223,963
Xerox 2,000 274,000
497,963
AIRLINES - 2.2%
KLM Royal Dutch Air 6,658 234,695
TRUCKING AND SHIPPING - 2.3%
Overseas Shipholding 13,400 254,600
ELECTRICAL POWER - 2.7%
Texas Utilities 7,000 287,875
TOTAL COMMON STOCKS (IDENTIFIED COST, $9,966,759) 10,545,532
REPURCHASE AGREEMENT - 3%
Bank of New York, dated 12/29/95, due
1/2/96 (Secured by $324,000 U. S. Treasury
Notes, due 9/30/97, Market Value $331,340) 320,107
Total Investments (Identified cost $10,286,866) 10,865,639
Other Assets, Less Liabilities (0.4%) (48,061)
NET ASSETS - 100% $10,817,578
</TABLE>
See notes to financial statements.
-4-
<PAGE>
DLB VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (identified cost, $10,286,866) $ 10,865,639
Interest and dividends receivable 16,870
Total assets 10,882,509
LIABILITIES:
Payable for investments purchased 45,744
Accrued expenses and other liabilities 19,187
Total liabilities 64,931
NET ASSETS $ 10,817,578
NET ASSETS CONSIST OF:
Paid-in capital $ 10,238,563
Unrealized appreciation on investments 578,773
Accumulated undistributed net investment income 242
Total $ 10,817,578
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,022,591
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST OUTSTANDING) $ 10.58
</TABLE>
See notes to financial statements.
-5-
<PAGE>
DLB VALUE FUND
STATEMENT OF OPERATIONS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
Dividends (net of foreign tax withheld of $1,932) $ 111,574
Interest 16,211
Total investment income 127,785
EXPENSES:
Management fee 24,862
Custodian fee 28,213
Accounting and audit fees 22,263
Trustees' fees 5,438
Legal fees 28,867
Other 121
Total expenses 109,764
Reduction of expenses by investment manager (73,081)
Net expenses 36,683
Net investment income 91,102
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain on investments (identified cost basis) 147,693
Change in unrealized appreciation 578,773
Net realized and unrealized gain on investments 726,466
Increase in net assets from operations $ 817,568
</TABLE>
See notes to financial statements.
-6-
<PAGE>
DLB VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 91,102
Net realized gain on investments 147,693
Net unrealized gain on investments 578,773
Increase in net assets from operations 817,568
Distributions declared to shareholders:
From net investment income (90,860)
From net realized gain on investments (147,693)
Total distributions declared to shareholders (238,553)
Fund share (principal) transactions:
Net proceeds from sale of shares 10,000,000
Net asset value of shares issued to shareholders in reinvestment of distributions 238,553
Increase in net assets from Fund share transactions 10,238,553
Total increase in net assets 10,817,568
NET ASSETS:
At beginning of period 10.00
At end of period (including accumulated undistributed net investment income of
$242) $ 10,817,578
</TABLE>
See notes to financial statements.
-7-
<PAGE>
DLB VALUE FUND
FINANCIAL HIGHLIGHTS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $ 10.00
Income from investment operations:
Net investment income 0.09
Net realized and unrealized gain on investments 0.73
Total income from investment operations 0.82
Less distributions declared to shareholders:
From net investment income (0.09)
From net realized gain on investments (0.15)
Total distributions declared to shareholders (0.24)
Net asset value - end of period $ 10.58
Total return 18.64%*
Ratios and Supplemental Data:
Ratio of expenses to average net assets 0.80%*
Ratio of net investment income to average net assets 2.02%*
Portfolio turnover 7%
Net assets at end of period (000 omitted) $ 10,818
The manager has agreed with the Fund to reduce its management fee and bear
certain expenses, such that expenses do not exceed 0.80% of average daily net
assets on an annualized basis. If the fee and expenses had been incurred by the
Fund, the net investment income per share and ratios would have been:
Net investment income $ 0.02
Ratios (to average net assets):
Expenses 2.43%*
Net investment income 0.40%*
* Annualized.
</TABLE>
See notes to financial statements.
-8-
<PAGE>
DLB VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Value Fund (the "Fund") is a non-diversified series of The DLB Fund
Group (the "Trust").
The Trust is organized as a Massachusetts business trust, and is
registered under the Investment Company Act of 1940, as amended as an
open-end management investment company.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATIONS - Equity securities listed on securities exchanges
or reported through the NASDAQ system are valued at last sale prices.
Unlisted equity securities or listed equity securities for which last
sale prices are not available are valued at last quoted bid prices.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Securities for which
there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are
recorded on the trade date. Dividend income is recorded on the
ex-dividend date for dividends received in cash. Dividend payments
received in additional securities are recorded on the ex-dividend date
in an amount equal to the value of the security on such date. Interest
income is recorded on the accrual basis.
TAX MATTERS AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code ("Code") applicable to regulated
investment companies and to distribute to shareholders all of its
taxable income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods
required under provisions of the Code which may differ from generally
accepted accounting principles, the basis on which these financial
statements are prepared. Accordingly, the amount of net investment
income and net realized gain reported on these financial statements may
differ from that reported on the Fund's tax return, and consequently,
the character of distributions to shareholders reported in the financial
highlights may differ from that reported to shareholders on Form
1099-DIV. Distributions to shareholders are recorded on the ex-dividend
date.
The Fund distinguishes between distributions on a tax basis and a
financial reporting basis and requires that only distributions in excess
of tax basis earnings and profits are reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax
earnings and profits which result in temporary over-distributions for
financial statement purposes, are classified as distributions in excess
of net investment income or accumulated net realized gains.
-9-
<PAGE>
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT MANAGER - The Fund has a management agreement with David L.
Babson & Co., Inc. ("DLB") to provide overall investment advisory and
administrative services, and general office facilities. The management
fee is computed daily and paid monthly at an annual rate of 0.55% of
average daily net assets.
For the period ended December 31, 1995, the management fee amounted to
$24,862, all of which was waived by DLB and, additionally, $48,219 of
Fund expenses were borne by DLB.
The Fund pays no compensation directly to its Trustees who are officers
of the investment manager, or to officers of the Fund, all of whom
receive remuneration for their services to the Fund from DLB.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations
aggregated $10,538,734 and $719,669, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax
basis, are as follows:
Aggregate cost $ 10,286,866
Gross unrealized appreciation $ 1,113,361
Gross unrealized depreciation (534,588)
Net unrealized appreciation $ 578,773
5. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest
(without par value). Transactions in Fund shares during the period were
as follows:
SHARES AMOUNT
Shares sold 1,000,000 $ 10,000,000
Shares issued to shareholders in reinvestment
of distributions 22,590 238,553
Net increase 1,022,590 $ 10,238,553
* * * * * *
-10-
<PAGE>
DELOITTE &
TOUCHE LLP
125 Summer Street Telephone: (617) 261-8000
Boston, Massachusetts 02110-1617 Facsimile: (617) 261-8111
INDEPENDENT AUDITORS' REPORT
To the Trustees of the DLB Fund Group and
Shareholders of DLB Mid Capitalization Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of DLB Mid Capitalization Fund (a separate series
of The DLB Fund Group) as of December 31, 1995, and the related statements of
operations and changes in net assets, and the financial highlights for the
period from July 25, 1995 (commencement of operations) to December 31, 1995.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at December 31, 1995 by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of DLB Mid
Capitalization Fund at December 31, 1995, the results of its operations, the
changes in its net assets, and its financial highlights for the period from July
25, 1995 (commencement of operations) to December 31, 1995 in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
February 1, 1996
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
<PAGE>
DLB MID CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS - 98.0%
ISSUER SHARES VALUE
<S> <C> <C>
CHEMICALS SPECIALTY - 4.6%
Calgon Carbon 22,900 $274,800
M. A. Hanna 8,100 226,800
501,600
METALS AND MINING - 2.2%
Martin Marietta Materials 11,400 235,125
PAPER/FOREST PRODUCTS - 1.7%
Albany International Corp. Class A (*) 10,300 186,688
AEROSPACE - 3.1%
E G & G 14,000 339,500
CONSTRUCTION - 2.4%
Southdown 13,200 257,400
ENVIRONMENTAL - 2.5%
Safety-Kleen 17,300 270,312
MACHINERY/EQUIPMENT - 6.6%
BW/IP Inc., Class A 14,500 239,250
Harsco Corp. 5,100 296,438
Trinity Industries 6,000 189,000
724,688
APPAREL - TEXTILE - 4.4%
National Service Industries 9,300 301,088
Stride Rite 23,400 175,500
476,588
AUTO PARTS MANUFACTURERS - 8.3%
Armor All Products 17,000 308,125
Arvin Industries 8,600 141,900
Bandag Inc., Class A (*) 2,600 201,400
Standard Products 14,500 255,563
906,988
FURNITURE AND APPLIANCES - 5.4%
Herman Miller 11,300 339,000
LA-Z-BOY Chair 8,000 247,000
586,000
RECREATION - 1.9%
King World Productions 5,400 209,925
</TABLE>
-2-
<PAGE>
DLB MID CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS - 98.0% (CONTINUED)
ISSUER SHARES VALUE
<S> <C> <C>
PRINTING AND PUBLISHING - 11.0%
CCH Inc., Class B 12,800 705,600
Central Newspapers A 8,200 257,275
Lee Enterprises 10,200 234,600
1,197,475
RETAIL - SPECIALTY - 1.8%
Fingerhut Companies 14,200 197,025
WHOLESALERS - 2.4%
Waban Inc. 14,100 264,375
FOOD PRODUCERS - 2.3%
Dean Foods Co. 9,000 247,500
FOOD RETAILERS - 2.7%
Vons Companies 10,600 299,450
COSMETIC TOILETRY - 1.8%
Alberto Culver, Class A 6,500 198,250
TOBACCO - 2.2%
Dimon Inc. 13,800 243,225
COAL GAS AND PIPE - 5.5%
Cabot Oil & Gas Corp. 16,500 241,310
Nabors Industries 32,300 359,337
600,647
OIL - DOMESTIC - 2.0%
Quaker State Corp. 17,700 223,461
BANKS - 6.6%
First Commercial Corp. 8,239 271,890
First Security Corp. 7,000 269,500
Firstier Financial 4,100 180,400
721,790
INSURANCE COMPANIES - 4.3%
Gallagher (*) 5,700 212,325
Hartford Steam Boiler Ins. 5,200 260,000
472,325
ELECTRONIC/INSTRUMENT - 3.1%
Intergraph Corp. 10,100 159,075
Scitex 13,400 182,575
341,650
</TABLE>
-3-
<PAGE>
DLB MID CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS - 98.0% (CONTINUED)
ISSUER SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS - 1.8%
Octel Communications 6,000 193,500
TRUCKING AND SHIPPING - 5.2%
Alexander & Baldwin 8,700 200,100
Hunt JB Transport 11,300 189,275
Overseas Shipholding 9,300 176,700
NATURAL GAS - 2.3%
Equitable Resources 8,000 250,000
Total common stocks (Identified cost $9,959,887) 10,711,562
REPURCHASE AGREEMENT - 2.6%
Bank of New York, dated 12/29/95, due 1/2/96 (secured by $284,000
U.S. Treasury Notes, due 9/30/97, market value $290,433) 280,633
Total investments (Identified cost $10,240,520) 10,992,195
Other Assets, Less Liabilities - (0.6%) (63,321)
NET ASSETS - 100% $10,928,874
(*) Non-income producing security
</TABLE>
See notes to financial statements.
-4-
<PAGE>
DLB MID CAPITALIZATION FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (identified cost, $10,240,520) $ 10,992,195
Dividends and interest receivable 22,888
Total assets 11,015,083
LIABILITIES:
Payable for investments purchased 62,493
Accrued expenses and other liabilities 23,716
Total liabilities 86,209
NET ASSETS $ 10,928,874
NET ASSETS CONSIST OF:
Paid-in capital $ 10,176,967
Unrealized appreciation on investments 751,675
Accumulated undistributed net investment income 232
Total $ 10,928,874
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,016,544
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST OUTSTANDING) $ 10.75
</TABLE>
See notes to financial statements.
-5-
<PAGE>
DLB MID CAPITALIZATION FUND
STATEMENT OF OPERATIONS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
Dividends $ 96,748
Interest 27,489
Total investment income 124,237
EXPENSES:
Management fee 26,445
Custodian fee 28,634
Accounting and audit fees 24,368
Legal fees 31,594
Trustees' fees 5,438
Total expenses 116,479
Reduction of expenses by investment manager (76,123)
Net expenses 40,356
Net investment income 83,881
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain (identified cost basis) 93,308
Change in unrealized appreciation 751,675
Net realized and unrealized gain on investments 844,983
Increase in net assets from operations $928,864
</TABLE>
See notes to financial statements.
-6-
<PAGE>
DLB MID CAPITALIZATION FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 83,881
Net realized gain on investments 93,308
Net unrealized gain on investments 751,675
Increase in net assets from operations 928,864
Distributions declared to shareholders:
From net investment income (83,531)
From net realized gain on investments (93,308)
Total distributions declared to shareholders (176,839)
Fund share (principal) transactions:
Net proceeds from sale of shares 10,000,000
Net asset value of shares issued to shareholders in reinvestment of distributions 176,839
Increase in net assets from Fund share transactions 10,176,839
Total increase in net assets 10,928,864
NET ASSETS:
At beginning of period 10
At end of period (including accumulated undistributed net investment income of $232) $ 10,928,874
</TABLE>
See notes to financial statements.
-7-
<PAGE>
DLB MID CAPITALIZATION FUND
FINANCIAL HIGHLIGHTS
PERIOD FROM JULY 25, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value - beginning of period $ 10.00
Income from investment operations -
Net investment income 0.08
Net realized and unrealized gain on investments 0.84
Total income from investment operations 0.92
Less distributions declared to shareholders:
From net investment income (0.08)
From net realized gain on investments (0.09)
Total distributions declared to shareholders (0.17)
Net asset value - end of period $ 10.75
Total return 21.17%*
Ratios and Supplemental Data:
Ratio of expenses to average net assets 0.90%*
Ratio of net investment income to average net assets 1.90%*
Portfolio turnover 6%
Net assets at end of period (000 omitted) $ 10,929.00
The manager has agreed with the Fund to reduce its management fee and bear
certain expenses, such that expenses do not exceed 0.90% of average daily net
assets on an annualized basis. If the fee and expenses had been incurred by
the Fund and had expenses been limited to that permitted by state securities
law, the net investment income per share and ratios would have been:
Net investment income $ 0.01
Ratios (to average net assets):
Expenses 2.50%*
Net investment income 0.32%*
*Annualized.
</TABLE>
See notes to financial statements.
-8-
<PAGE>
DLB MID CAPITALIZATION FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Mid Capitalization Fund (the "Fund") is a non-diversified series of
The DLB Fund Group (the "Trust").
The Trust is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATIONS - Equity securities listed on securities exchanges
or reported through the NASDAQ system are valued at last sale prices.
Unlisted equity securities or listed equity securities for which last sale
prices are not available are valued at last quoted bid prices. Short-term
obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Securities for which there are no
such quotations or valuations are valued at fair value as determined in
good faith by or at the direction of the Trustees.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded
on the trade date. Dividend income is recorded on the ex-dividend date for
dividends received in cash. Dividend payments received in additional
securities are recorded on the ex-dividend date in an amount equal to the
value of the security on such date. Interest income is recorded on the
accrual basis.
TAX MATTERS AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code ("Code") applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Fund files a
tax return annually using tax accounting methods required under provisions
of the Code which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the amount of undistributed net investment income and net
realized gain reported on these financial statements may differ from that
reported on the Fund's tax return, and consequently, the character of
distributions to shareholders reported in the financial highlights may
differ from that reported to shareholders on Form 1099-DIV. Distributions
to shareholders are recorded on the ex-dividend date.
The Fund distinguishes between distributions on a tax basis and a
financial reporting basis and requires that only distributions in excess
of tax basis earnings and profits are reported in the financial statements
as a return of capital. Differences in the recognition or classification
of income between the financial statements and tax earnings and profits
which result in temporary over-distributions for financial statement
purposes, are classified as distributions in excess of net investment
income or accumulated net realized gains. During the period ended December
31, 1995, $118 was reclassified from accumulated undistributed net
investment income to paid-in capital, due to differences between book and
tax accounting for foreign currency transactions. This change had no
effect on the net assets or net asset value per share.
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<PAGE>
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT MANAGER - The Fund has a management contract with David L.
Babson & Co., Inc. ("DLB") to provide overall investment advisory and
administrative services, and general office facilities. The management fee
is computed daily and paid monthly at an effective annual rate of 0.60% of
average daily net assets.
For the period ended December 31, 1995, the management fee amounted to
$26,445, of which all was waived by DLB and, additionally, $49,678 of Fund
expenses were borne by DLB.
The Fund pays no compensation directly to its Trustees who are officers of
the investment manager, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from DLB.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations,
aggregated $10,398,892 and $532,430, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate cost $ 10,240,520
Gross unrealized appreciation $ 1,290,834
Gross unrealized depreciation (539,159)
Net unrealized appreciation $ 751,675
5. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest
(without par value). Transactions in Fund shares during the period were as
follows:
SHARES AMOUNT
Shares sold 1,000,000 $ 10,000,000
Shares issued to shareholders in reinvestment
of distributions 16,543 176,839
Net increase 1,016,543 $ 10,176,839
* * * * * *
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<PAGE>
THE DLB FUND GROUP
FORM N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Index to Financial Statements and Supporting Schedules:
(1) Financial Statements:
Financial highlights for Fixed Income Fund (a).
Financial highlights for Global Small Cap Fund (a).
Financial highlights for Value Fund (a).
Financial highlights for Mid Cap Fund (a).
Statementof Assets and Liabilities for Fixed Income
Fund as of December 31, 1995 (b).
Statementof Operations for Fixed Income Fund for the
period from July 25, 1995 to December 31,
1995 (b).
Statementof Changes in Net Assets for Fixed Income
Fund for the period from July 25, 1995
December 31, 1995 (b).
Notes to financial statements for Fixed Income Fund (b).
Statement of Assets and Liabilities for Global Small
Cap Fund as of December 31, 1995 (b).
Statementof Operations for Global Small Cap Fund for
the period from July 19, 1995 to December
31, 1995 (b).
Statementof Changes in Net Assets for Global Small
Cap Fund for the period from July 19, 1995
to December 31, 1995 (b).
Notes to financial statements for Global Small Cap
Fund (b).
Statement of Assets and Liabilities for Value Fund as of
December 31, 1995 (b).
Statementof Operations for Value Fund for the period
from July 25, 1995 to December 31, 1995 (b).
Statementof Changes in Net Assets for Value Fund for
the period from July 25, 1995 to December
31, 1995 (b).
Notes to financial statements for Value Fund (b).
Statement of Assets and Liabilities for Mid Cap Fund as
of December 31, 1995 (b).
Statementof Operations for Mid Cap Fund for the
period from July 25, 1995 to December 31,
1995(b).
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<PAGE>
Statementof Changes in Net Assets for Mid Cap Fund
for the period from July 25, 1995 to
December 31, 1995 (b).
Notes to Financial Statements for Mid Cap Fund (b).
(2) Supporting Schedules:
Schedule I - Portfolio of investments
owned as of December 31, 1995,
for Fixed Income Fund (b).
- Portfolio of investments owned as
of December 31, 1995 for Global
Small Cap Fund (b).
- Portfolio of investments owned as
of December 31, 1995 for Value
Fund (b).
- Portfolio of investments owned as
of December 31, 1995 for Mid Cap
Fund (b).
Schedules II through IX omitted because the required
matter is not present.
(a) Included in Part A.
(b) Included in Part B.
(b) Exhibits:
(1) Agreement and Declaration of Trust
(2) By-Laws*
(3) Not Applicable
(4) Not Applicable
(5) Forms of Management Contracts*
(a) Management Contract between the Trust
and David L. Babson & Co., Inc. (the
"Manager") on behalf of the Fixed Income
Fund
(b) Management Contract between the Trust
and the Manager on behalf of the Global
Small Cap Fund
(c) Sub-Advisory Agreement between the
Manager and Babson-Stewart Ivory
International (the "Sub-Adviser") on
behalf of the Global Small Cap Fund
(d) Management Contract between the Trust
and the Manager on behalf of the Value
Fund
- --------
* Incorporated by reference to Registrant's initial Annual Report on Form
N-SAR for the period ending December 31, 1995 (File No. 811-08690) filed
electronically on February 29, 1996.
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<PAGE>
(e) Management Contract between the Trust
and the Manager on behalf of the Mid Cap
Fund
(6) Not Applicable
(7) Not Applicable
(8) Form of Custodian Agreement between the
Trust and Investors Bank & Trust Company
("IBT")**
(9) Form of Transfer Agency Agreement between
the Trust and IBT**
(10) Opinion and Consent of Ropes & Gray***
(11) Consent of Deloitte & Touche LLP dated
March 18, 1996
(12) Not Applicable
(13) Letter of Understanding relating to
initial capital***
(14) Not Applicable
(15) Not Applicable
(16) Not Applicable
(17) Financial Data Schedules for the:
(a) Fixed Income Fund
(b) Global Small Cap Fund
(c) Value Fund
(d) Mid Cap Fund
(18) Not Applicable
Powers of Attorney****
- -------------
Item 25. Persons Controlled by or under Common Control with Registrant.
As of December 31, 1995, in excess of 99% of the outstanding shares of
beneficial interest of the Fixed Income Fund, Value Fund and Mid Cap Fund were
held by Massachusetts Mutual Life Insurance Company ("Mass Mutual"), and 99% and
1% of the
- --------
** Incorporated by reference to Registrant's initial Registration Statement
on Form N- 1A (File No. 33-82366) filed on August 3, 1994.
***Incorporated by reference to Registrant's Pre-Effective Amendment No. 2
filed on June 30, 1995.
**** Incorporated by reference to Registrant's Pre-Effective Amendment No.
1 filed on October 12, 1994.
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<PAGE>
shares of the Global Small Cap Fund were held by Mass Mutual and David L. Babson
& Co., Inc., respectively.
Item 26. Number of Holders of Securities.
Number of Record Holders
as of the date of this
Title of Class Registration Statement
-------------- ----------------------
Shares of Beneficial Interest of Fixed Income Fund 2
Shares of Beneficial Interest of Global Small Cap Fund 2
Shares of Beneficial Interest of Value Fund 2
Shares of Beneficial Interest of Mid Cap Fund 2
Item 27. Indemnification.
Article VIII, Sections 1, 2 and 3 of Registrant's Agreement and
Declaration of Trust provides as follows with respect to indemnification of the
Trustees and officers of Registrant against liabilities which may be incurred by
them in such capacities:
Section 1. Trustees, Officers, Etc. The Trust shall indemnify each of
its Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise) (hereinafter referred to
as a "Covered Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding to be liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by Trust in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article, provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust
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<PAGE>
shall be insured against losses arising from any such advance payments or (c)
either a majority of the disinterested Trustees acting on the matter (provided
that a majority of the disinterested Trustees then in office act on the matter),
or independent legal counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a full trial type
inquiry) that there is reason to believe that such Covered Person will be found
entitled to indemnification under this Article.
Section 2. Compromise Payment. As to any matter disposed of (whether by
a compromise payment, pursuant to a consent decree or otherwise) without an
adjudication by a court, or by any other body before which the proceeding was
brought, that such Covered Person is liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, indemnification
shall be provided if (a) approved, after notice that it involves such
indemnification, by at least a majority of the disinterested Trustees acting on
the matter (provided that a majority of the disinterested Trustees then in
office act on the matter) upon a determination, based upon a review of readily
available facts (as opposed to a full trial type inquiry) that such Covered
Person is not liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based upon a review of readily
available facts (as opposed to a full trial type inquiry) to the effect that
such indemnification would not protect such Person against any liability to the
Trust to which he would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. Any approval pursuant to this Section shall not
prevent the recovery from any Covered Person of any amount paid to such Covered
Person in accordance with this Section as indemnification if such Covered Person
is subsequently adjudicated by a court of competent jurisdiction to have been
liable to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Section 3. Indemnification Not Exclusive. The right of indemnification
hereby provided shall not be exclusive of or affect any other rights to which
such Covered Person may be entitled. As used in this Article VIII, the term
"Covered Person" shall include such person's heirs, executors and administrators
and a "disinterested Trustee" is a Trustee who is not an "interested person" of
the Trust as defined in Section 2(a)(19) of the 1940 Act (or who has been
exempted from being an "interested person" by any rule, regulation or order of
the Commission), and against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this Article shall
affect any rights to indemnification to which personnel of the Trust, other than
Trustees or officers, and other persons may be entitled by contract or otherwise
under law, nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person; provided, however, that the Trust shall
not purchase or maintain any such liability insurance in contravention of
applicable law, including without limitation the 1940 Act.
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<PAGE>
Item 28. Business and Other Connections of Adviser.
No director or officer of David L. Babson & Co., Inc., the Registrant's
investment adviser, has been engaged for his own account or in the capacity of
director, officer, employee, partner or trustee in any other business,
profession, vocation or employment of a substantial nature.
Item 29. Principal Underwriters -- Not Applicable.
Item 30. Location of Accounts and Records.
The accounts, books or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
will be kept by the Registrant, the Manager and the Sub-Adviser at their
respective principal business offices at One Memorial Drive, Cambridge,
Massachusetts 02142 and by the Registrant's Custodian and Transfer Agent at its
principal business office at 89 South Street, Boston, Massachusetts 02205.
Item 31. Management Services.
There are no management-related service contracts not discussed in Part
A or Part B.
Item 32. Undertakings.
The Registrant hereby undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders containing the information required by Item 5A of Form N-1A omitted
from the Prospectus, upon request and without charge.
C-6
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust of The DLB Fund Group
is on file with the Secretary of The Commonwealth of Massachusetts and notice is
hereby given that this instrument is executed on behalf of the Registrant by an
officer of the Registrant as an officer and not individually and the obligations
of or arising out of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property of
the relevant series of the Registrant.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that it meets all of the requirements for effectiveness of this Post-Effective
Amendment pursuant to Rule 485(b) under the Securities Act of 1933, as amended,
and has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Cambridge, The
Commonwealth of Massachusetts, on the 15th day of March, 1996.
THE DLB FUND GROUP
By: /s/ Ronald E. Gwozdz
--------------------
Ronald E. Gwozdz
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment of The DLB Fund Group has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
* Trustee; Chairman March 15, 1996
- -----------------------------------
Peter C. Thompson
* Trustee; Principal Executive March 15, 1996
- -----------------------------------
Ronald E. Gwozdz Officer; and President
* Treasurer; Principal Financial March 15, 1996
- -----------------------------------
Edson B. Olds IV Officer and Principal
Accounting Officer
* Trustee March 15, 1996
- -----------------------------------
Charles E. Hugel
* Trustee March 15, 1996
- -----------------------------------
Richard A. Nenneman
* Trustee March 15, 1996
- -----------------------------------
Peter S. Schliemann
Trustee March 15, 1996
Richard J. Phelps
</TABLE>
*By /s/ Ronald E. Gwozdz
--------------------
Ronald E. Gwozdz
Attorney-In-Fact
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<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1 Agreement and Declaration of Trust
11 Consent of Deloitte & Touche LLP dated March 18, 1996
17(a) Financial Data Schedule for Fixed Income Fund
17(b) Financial Data Schedule for Global Small Cap Fund
17(c) Financial Data Schedule for Value Fund
17(d) Financial Data Schedule for Mid Cap Fund
C-9
EXHIBIT 1
AGREEMENT AND DECLARATION OF TRUST
OF
THE DLB FUND GROUP
THIS AGREEMENT AND DECLARATION OF TRUST made in Boston,
Massachusetts this 1st day of August, 1994 by the Trustee hereunder and the
holders of shares of beneficial interest issued hereunder and to be issued
hereunder as hereinafter provided:
WITNESSETH that
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Massachusetts business trust in accordance with the
provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby direct that this Agreement and
Declaration of Trust be filed with the Secretary of State of The Commonwealth of
Massachusetts and with the Clerk of every city or town where such association or
trust has a usual place of business, and do hereby declare that they will hold
all cash, securities and other assets, which they may from time to time acquire
in any manner as Trustees hereunder IN TRUST to manage and dispose of the same
upon the following terms and conditions for the pro rata benefit of the holders
from time to time of Shares in this trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Section 1. This Trust shall be known as The DLB Fund Group, and the
Trustees shall conduct the business of the Trust under that name or any other
name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required
by the context or specifically provided
(a) "Trust" refers to the Massachusetts business trust established by
this Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustee of the Trust named in Article IV
hereof or any Trustees elected in accordance with such Article;
(c) "Shares" means the equal proportionate units or interest into which
the beneficial interest in the Trust or in the Trust property belonging to any
Series of the Trust (or in the property belonging to any Series allocable to any
Class of that Series) (as the context may require) shall be divided from time to
time;
<PAGE>
(d) "Shareholder" means a record owner of Shares;
(e) "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Commission" and "principal underwriter" shall have the
meanings given them in the 1940 Act;
(g) "Declaration of Trust" and "this Declaration" shall mean this
Agreement and Declaration of Trust, as amended or restated from time to time;
(h) "Bylaws" shall mean the Bylaws of the Trust as amended from time to
time;
(i) "Series Company" refers to the form of registered open-end
investment company described in Section 18(f)(2) of the 1940 Act or in any
successor statutory provision;
(j) "Series" refers to Series of Shares established and designated
under or in accordance with the provisions of Article III; and
(k) "Class" refers to any Class of Shares of a Series established and
designated under or in accordance with the provisions of Article III. The Shares
of a Class shall represent a subset of Shares of a Series and the Shares of each
Class, together with the Shares of all other Classes of the same Series, shall
constitute all Shares of that Series.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed investment
primarily in securities (including options), debt instruments, money market
instruments, commodities, commodity contracts and options thereon.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in
the Trust shall at all times be divided into an unlimited number of Shares,
without par value. Subject to the provisions of Section 6 of this Article III,
each Share shall have the voting rights as provided in Article V hereof, and
holders of the Shares of any Series or Class shall be entitled to receive
dividends, when and as declared with respect thereto in the manner provided in
Article VI, Section 1 hereof. No Share shall have any priority or preference
over any other Share of the same Series and Class with respect to dividends or
distributions upon termination of the Trust or of such Series or Class made
pursuant to Article IX, Section 4 hereof. Unless the Trustees have authorized
the issuance of Shares of a Series in two or more Classes, all
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<PAGE>
dividends and distributions shall be made ratably among all Shareholders of a
particular Series from the assets belonging to such Series according to the
number of Shares of such Series held of record by such Shareholders on the
record date for any dividend or on the date of termination, as the case may be.
The Trustees may from time to time divide or combine the Shares of any
particular Series or Class into a greater or lesser number of Shares of that
Series or Class without thereby changing the proportionate beneficial interest
of the Shares of that Series or Class in the assets belonging to that Series (or
allocable to the Shares of that Class) or in any way affecting the rights of
Shares of any other Series or Class.
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series. No
certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the transfer of Shares of each Series and
Class and similar matters. The record books of the Trust as kept by the Trust or
any transfer or similar agent, as the case may be, shall be conclusive as to who
are the Shareholders of each Series and Class and as to the number of Shares of
each Series and Class held from time to time by each.
Section 3. Investments in the Trust. The Trustees shall accept
investments in the Trust from such persons and on such terms and for such
consideration as they from time to time authorize.
Section 4. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the same nor entitle the representative
of any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but entitles such representative
only to the rights of said deceased Shareholder under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners of each other. Neither the Trust nor the Trustees, nor any
officer, employee or agent of the Trust shall have any power to bind personally
any Shareholders, nor except as specifically provided herein to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay.
Section 5. Power of Trustees to Change Provisions Relating to Shares.
Notwithstanding any other provisions of this Declaration of Trust and without
limiting the power of the Trustees to amend the Declaration of Trust as provided
elsewhere herein, the Trustees shall have the power to amend this Declaration of
Trust, at any time and from time to
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<PAGE>
time, in such manner as the Trustees may determine in their sole discretion,
without the need for Shareholder action, so as to add to, delete, replace or
otherwise modify any provisions relating to the Shares contained in this
Declaration of Trust for the purpose of (i) responding to or complying with any
regulations, orders, rulings or interpretations of any governmental agency or
any laws, now or hereafter applicable to the Trust, or (ii) designating and
establishing Series or Classes in addition to the Series or Classes established
in Section 6 of this Article III; provided that before adopting any such
amendment in clause (i) without Shareholder approval the Trustees shall
determine that it is consistent with the fair and equitable treatment of all
Shareholders. The establishment and designation of any Series or Class of Shares
in addition to the Series or Classes established and designated in Section 6 of
this Article III shall be effective upon the execution by a majority of the then
Trustees of an amendment to this Declaration of Trust, taking the form of a
complete restatement or otherwise, setting forth such establishment and
designation and the relative rights and preferences of such Series or Class, or
as otherwise provided in such instrument.
Without limiting the generality of the foregoing, the Trustees may, for
the above-stated purposes, amend the Declaration of Trust to:
(a) create one or more Series or Classes of Shares (with respect to or
in addition to any Series or Classes already existing or otherwise) with such
rights and preferences and such eligibility requirements for investment therein
as the Trustees shall determine, and reclassify any or all outstanding Shares as
shares of particular Series or Classes in accordance with such eligibility
requirements;
(b) amend any of the provisions set forth in paragraphs (a) through (j)
of Section 6 of this Article III;
(c) combine one or more Series or Classes of Shares into a single
Series or Class on such terms and conditions as the Trustees shall determine;
(d) change or eliminate any eligibility requirements for investment in
Shares of any Series or Class, including without limitation the power to provide
for the issue of Shares of any Series or Class in connection with any merger or
consolidation of the Trust with another trust or company or any acquisition by
the Trust of part or all of the assets of another trust or company;
(e) change the designation of any Series or Class of Shares;
(f) change the method of allocating dividends among the various Series
and Classes of Shares;
(g) allocate any specific assets or liabilities of the Trust or any
specific items of income or expense of the Trust to one or more Series or
Classes of Shares;
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<PAGE>
(h) specifically allocate assets to any or all Series or Classes of
Shares or create one or more additional Series or Classes of Shares which are
preferred over all other Series or Classes of Shares in respect of assets
specifically allocated thereto or any dividends paid by the Trust with respect
to any net income, however determined, earned from the investment and
reinvestment of any assets so allocated or otherwise and provide for any special
voting or other rights with respect to such Series or Classes; or
(i) divide one or more Series of Shares into one or more Classes on
such terms and conditions as the Trustees may determine.
Section 6. Establishment and Designation of Series. Without limiting
the authority of the Trustees set forth in Section 5, inter alia, to establish
and designate any further Series or Classes or to modify the rights and
preferences of any Series or Classes, the "DLB Fixed Income Fund," the "DLB
Global Small Capitalization Fund," the "DLB Value Fund," and the "DLB Mid
Capitalization Fund" shall be, and hereby are, established and designated as
separate Series of the Trust.
Shares of each Series established in this Section 6 shall have the
following relative rights and preferences:
(a) Assets Belonging to Series. All consideration received by the Trust
for the issue or sale of Shares of a particular Series, together with all assets
in which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof from whatever source derived, including, without
limitation, any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that Series for
all purposes, subject only to the rights of creditors, and shall be so recorded
upon the books of account of the Trust. Such consideration, assets, income,
earnings, profits and proceeds thereof, from whatever source derived, including,
without limitation, any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
belonging to" that Series. In the event that there are any assets, income,
earnings, profits and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular Series (collectively "General
Assets"), the Trustees shall allocate such General Assets to, between or among
any one or more of the Series established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem fair and
equitable, and any General Asset so allocated to a particular Series shall
belong to that Series. Each such allocation by the Trustees shall be conclusive
and binding upon the Shareholders of all Series for all purposes.
(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged solely with the liabilities of the Trust in
respect to that Series, expenses, costs, charges and reserves attributable to
that Series, and any general liabilities of the Trust
-5-
<PAGE>
which are not readily identifiable as belonging to any particular Series but
which are allocated and charged by the Trustees to and among any one or more of
the Series established and designated from time to time in a manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. The
liabilities, expenses, costs, charges, and reserves so charged to a Series are
herein referred to as "liabilities belonging to" that Series. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the shareholders of all Series for all purposes.
(c) Dividends, Distributions, Redemptions, and Repurchases.
Notwithstanding any other provisions of this Declaration, including, without
limitation, Article VI, no dividend or distribution (including, without
limitation, any distribution paid upon termination of the Trust or of any
Series) with respect to, nor any redemption or repurchase of, the Shares of any
Series shall be effected by the Trust other than from the assets belonging to
such Series, nor shall any Shareholder of any particular Series otherwise have
any right or claim against the assets belonging to any other Series except to
the extent that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series.
(d) Voting. Notwithstanding any of the other provisions of this
Declaration, including, without limitation, Section 1 of Article V, the
Shareholders of any particular Series or Class shall not be entitled to vote on
any matters as to which such Series or Class is not affected. On any matter
submitted to a vote of Shareholders, all Shares of the Trust then entitled to
vote shall be voted by individual Series, unless otherwise required by the 1940
Act or other applicable law or as specifically required under this Declaration
or the Bylaws or as otherwise determined by the Trustees.
(e) Equality. All the Shares of each particular Class of a Series shall
represent an equal proportionate interest in the assets and liabilities
belonging to that Series allocable to that Class and all Shares of each
particular Series shall represent an equal proportionate interest in the assets
belonging to that Series (subject to the liabilities belonging to that Series),
and each Share of any particular Series shall be equal to each other Share of
that Series.
(f) Fractions. Any fractional Share of a Series or Class shall carry
proportionately all the rights and obligations of a whole share of that Series
or Class, including rights with respect to voting, receipt of dividends and
distributions, redemption of Shares and termination of the Trust.
(g) Exchange Privilege. The Trustees shall have the authority to
provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series of Shares in
accordance with such requirements and procedures as may be established by the
Trustees.
(h) Combination of Series. The Trustees shall have the authority,
without the approval of the Shareholders of any Series or Class unless otherwise
required by applicable
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law, to combine the assets and liabilities belonging to any two or more Series
or Classes into assets and liabilities belonging to a single Series or Class.
(i) Elimination of Series. At any time that there are no Shares
outstanding of any particular Series previously established and designated, the
Trustees may amend this Declaration of Trust to abolish that Series and to
rescind the establishment and designation thereof, such amendment to be effected
in the manner provided in Section 5 of this Article III.
(j) Assets and Liabilities Allocable to a Class. The assets and
liabilities belonging to a Series shall be fully allocated among all the Classes
of that Series. For purposes of determining the assets and liabilities belonging
to a Series which are allocable to a Class of that Series, subject to the
provisions of paragraph (f) of Section 5 of this Article III, the provisions of
paragraphs (a) and (b) of this Section 6 shall apply, mutatis mutandis, as if
each Class were a Series.
Section 7. Indemnification of Shareholders. In case any Shareholder or
former Shareholder shall be held to be personally liable solely by reason of his
or her being or having been a Shareholder of the Trust or of a particular Series
and not because of his or her acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets of the Series of which he is a Shareholder or former Shareholder to
be held harmless from and indemnified against all loss and expense arising from
such liability.
Section 8. No Preemptive Rights. Shareholders shall have no preemptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust.
Section 9. Derivative Claims. No Shareholder shall have the right to
bring or maintain any court action, proceeding or claim on behalf of this Trust
or any Series without first making demand on the Trustees requesting the
Trustees to bring or maintain such action, proceeding or claim. Such demand
shall be excused only when the plaintiff makes a specific showing that
irreparable injury to the Trust or Series would otherwise result. Such demand
shall be mailed to the Clerk of the Trust at the Trust's principal office and
shall set forth in reasonable detail the nature of the proposed court action,
proceeding or claim and the essential facts relied upon by the Shareholder to
support the allegations made in the demand. The Trustees shall consider such
demand within 45 days of its receipt by the Trust. In their sole discretion, the
Trustees may submit the matter to a vote of Shareholders of the Trust or Series,
as appropriate. Any decision by the Trustees to bring, maintain or settle (or
not to bring, maintain or settle) such court action, proceeding or claim, or to
submit the matter to a vote of Shareholders shall be made by the Trustees in
their business judgment and shall be binding upon the Shareholders. Any decision
by the Trustees to bring or maintain a court action, proceeding or suit on
behalf of the Trust or a Series shall be subject to the right of the
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Shareholders under Article V, Section 1 hereof to vote on whether or not such
court action, proceeding or suit should or should not be brought or maintained.
ARTICLE IV
The Trustees
Section 1. Election and Tenure. The initial Trustee shall be Peter C.
Thompson. Trustees may fix the number of Trustees, fill vacancies in the
Trustees, including vacancies arising from an increase in the number of
Trustees, or remove Trustees with or without cause. Each Trustee shall serve
during the continued lifetime of the Trust until he dies, resigns or is removed,
or, if sooner, until the next meeting of Shareholders called for the purpose of
electing Trustees and until the election and qualification of his successor. Any
Trustee may resign at any time by written instrument signed by him and delivered
to any officer of the Trust or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. Except to the extent expressly provided in a written agreement with the
Trust, no Trustee resigning and no Trustee removed shall have any right to any
compensation for any period following his resignation or removal, or any right
to damages on account of such removal. The Shareholders may fix the number of
Trustees and elect Trustees at any meeting of Shareholders called by the
Trustees for that purpose.
Section 2. Effect of Death, Resignation, Etc. of a Trustee. The death,
declination, resignation, retirement, removal or incapacity of the Trustees, or
any of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust.
Section 3. Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or convenient to carry out that responsibility
including the power to engage in securities transactions of all kinds on behalf
of the Trust. Without limiting the foregoing, the Trustees may adopt Bylaws not
inconsistent with this Declaration of Trust providing for the regulation and
management of the affairs of the Trust and may amend and repeal them to the
extent that such Bylaws do not reserve that right to the Shareholders; they may
fill vacancies in or remove from their number (including any vacancies created
by an increase in the number of Trustees); they may remove from their number
with or without cause; they may elect and remove such officers and appoint and
terminate such agents as they consider appropriate; they may appoint from their
own number and terminate one or more committees consisting of two or more
Trustees which may exercise the powers and authority of the Trustees to the
extent that the Trustees determine; they may employ one or more custodians of
the assets of the Trust and may authorize such custodians to employ
subcustodians and to deposit all or any part of such assets in a system or
systems for the central handling of securities or with a Federal Reserve Bank;
they may retain a transfer agent or a shareholder servicing agent, or both; they
may provide for the distribution of Shares by the Trust, through one or more
principal underwriters
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or otherwise; they may set record dates for the determination of Shareholders
with respect to various matters; and in general they may delegate such authority
as they consider desirable to any officer of the Trust, to any committee of the
Trustees and to any agent or employee of the Trust or to any such custodian or
underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options with respect to or otherwise deal in any property rights relating
to any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its own
name or in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(g) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;
(h) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited to
claims for taxes;
(i) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
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(j) To borrow funds or other property;
(k) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters, or
independent contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such person as Trustee, officer, employee, agent,
investment adviser, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person against
liability; and
(m) To pay pensions as deemed appropriate by the Trustees and to adopt,
establish and carry out pension, profit-sharing, share bonus, share purchase,
savings, thrift and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity contracts as
a means of providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust.
(n) To enter into forward commitments, futures contracts and swap
contracts and to buy and sell options on futures contracts or swap contracts and
to buy and or to enter into transactions with respect to any other securities or
derivative instruments.
(o) To engage in any other lawful act or activity in which corporations
organized under the Massachusetts Business Corporation Act may engage.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. The Trustees shall
not be required to obtain any court order to deal with any assets of the Trust
or take any other action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees are
authorized to pay or cause to be paid out of the principal or income of the
Trust, or partly out of principal and partly out of income, as they deem fair,
all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, or in connection with the management thereof,
including but not limited to, the Trustee's compensation and such expenses and
charges for the services of the Trust's officers, employees, investment adviser
or manager, principal underwriter, auditor, counsel, custodian, transfer agent,
shareholder servicing agent,
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and such other agents or independent contractors and such other expenses and
charges as the Trustees may deem necessary or proper to incur.
Section 5. Payment of Expenses by Shareholders. The Trustees shall have
the power, as frequently as they may determine, to cause each Shareholder, or
each Shareholder of any particular Series, to pay directly, in advance or
arrears, for charges of the Trust's custodian or transfer, shareholder servicing
or similar agent, an amount fixed from time to time by the Trustees, by setting
off such charges due from such Shareholder from declared but unpaid dividends
owed such Shareholder and/or by reducing the number of Shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such Shareholder.
Section 6. Ownership of Assets of the Trust. Title to all of the assets
of the Trust shall at all times be considered as vested in the Trustees.
Section 7. Advisory, Management and Distribution Contracts. Subject to
such requirements and restrictions as may be set forth in the Bylaws, the
Trustees may, at any time and from time to time, contract for exclusive or
nonexclusive advisory and/or management services for the Trust or for any Series
with David L. Babson & Co., Inc. or any other partnership, corporation, trust,
association or other organization (the "Manager"); and any such contract may
contain such other terms as the Trustees may determine, including without
limitation, authority for a Manager to determine from time to time without prior
consultation with the Trustees what investments shall be purchased, held, sold
or exchanged and what portion, if any, of the assets of the Trust shall be held
uninvested and to make changes in the Trust's investments. The Trustees may
also, at any time and from time to time, contract with the Manager or any other
partnership, corporation, trust, association or other organization, appointing
it exclusive or nonexclusive distributor, principal underwriter or placement
agent for the Shares, every such contract to comply with such requirements and
restrictions as may be set forth in the Bylaws; and any such contract may
contain such other terms as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter, placement agent, distributor
or affiliate or agent of or for any partnership, corporation, trust,
association, or other organization, or of or for any parent or
affiliate of any organization, with which an advisory or management
contract, or principal underwriter's or distributor's contract, or
placement agreement, or transfer, shareholder servicing or other agency
contract may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a Shareholder or
has an interest in the Trust, or that
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(ii) any partnership, corporation, trust, association or other
organization with which an advisory or management contract or principal
underwriter's or distributor's contract, or placement agreement, or
transfer, shareholder servicing or other agency contract may have been
or may hereafter be made also has an advisory or management contract,
or principal underwriter's or distributor's contract, or transfer,
shareholder servicing or other agency contract with one or more other
corporations, trusts, associations, or other organizations, or has
other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or
executing the same or create any liability or accountability to the
Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Article IV, Section 1, (ii)
with respect to any amendment of this Declaration of Trust to the extent and as
provided in Article IX, Section 8, (iii) to the same extent as the stockholders
of a Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders, (iv) with
respect to the termination of the Trust or any Series to the extent and as
provided in Article IX, Section 4, and (v) with respect to such additional
matters relating to the Trust as may be required by this Declaration of Trust,
the Bylaws or any registration of the Trust with the Commission (or any
successor agency) or any state, or as the Trustees may consider necessary or
desirable. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. At any time when no Shares of a Series
or Class are outstanding the Trustees may exercise all rights of Shareholders of
that Series or Class with respect to matters affecting that Series or Class and
may with respect to that Series or Class take any action required by law, this
Declaration of Trust or the Bylaws to be taken by the Shareholders.
Section 2. Voting Power and Meetings. Meetings of the Shareholders may
be called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 and for such other purposes as may be prescribed by law,
by this Declaration of Trust or by the Bylaws. Meetings of the Shareholders may
also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary
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or desirable. A meeting of Shareholders may be held at any place designated by
the Trustees. Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating the time and place of the meeting,
to each Shareholder at the Shareholder's address as it appears on the records of
the Trust. Whenever notice of a meeting is required to be given to a Shareholder
under this Declaration of Trust or the Bylaws, a written waiver thereof,
executed before or after the meeting by such Shareholder or his attorney
thereunto authorized and filed with the records of the meeting, shall be deemed
equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger quorum is
required by law, by the Bylaws or by this Declaration of Trust, 10% of the
Shares entitled to vote shall constitute a quorum at a Shareholders' meeting.
When any one or more Series or Class is to vote as a single class separate from
any other Shares which are to vote on the same matters as a separate class or
classes, 10% of the Shares of each such class entitled to vote shall constitute
a quorum at a Shareholder's meeting of that class. Any meeting of Shareholders
may be adjourned from time to time by a majority of the votes properly cast upon
the question, whether or not a quorum is present, and the meeting may be held as
adjourned within a reasonable time after the date set for the original meeting
without further notice. When a quorum is present at any meeting, a majority of
the Shares voted shall decide any questions and a plurality shall elect a
Trustee, except when a larger vote is required by any provision of this
Declaration of Trust or the Bylaws or by law. If any question on which the
Shareholders are entitled to vote would adversely affect the rights of any
Series or Class of Shares, the vote of a majority (or such larger vote as is
required as aforesaid) of the Shares of such Series or class which are entitled
to vote, voting separately, shall be required to decide such question.
Section 4. Action by Written Consent. Any action taken by Shareholders
may be taken without a meeting if Shareholders holding a majority of the Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or by the Bylaws)
and/or holding a majority (or such larger proportion as aforesaid) of the Shares
of any Series or Class entitled to vote separately on the matter consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the
Shareholders of any Series or Class who are entitled to vote or act at any
meeting or any adjournment thereof, the Trustees may from time to time fix a
time as the record date for determining the Shareholders of such Series or Class
having the right to notice of and to vote at such a meeting and any adjournment
thereof, and in such case only Shareholders of record on such record date shall
have such right, notwithstanding any transfer of Shares on the books of the
Trust after the record date. For the purpose of determining the Shareholders of
any Series or Class who are entitled to receive payment of any dividend or of
any other distribution, the Trustees may from
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time to time fix a date, which shall be before the date for the payment of such
dividend or such other payment, as the record date for determining the
Shareholders of such Series or Class having the right to receive such dividend
or distribution. Without fixing a record date the Trustees may for voting and/or
distribution purposes close the register or transfer books for one or more
Series or Class for all or any part of the period between a record date and a
meeting of shareholders or the payment of a distribution. Nothing in this
section shall be construed as precluding the Trustees from setting different
record dates for different Series or Classes.
Section 6. Additional Provisions. The Bylaws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Net Income, Distributions, and Redemptions and Repurchases
Section 1. Distributions of Net Income. The Trustees shall each year,
or more frequently if they so determine in their sole discretion, distribute to
the Shareholders of each Series or Class, in shares of that Series or Class,
cash or otherwise, an amount approximately equal to the net income attributable
to the assets belonging to such Series or Class and may from time to time
distribute to the Shareholders of each Series or Class, in shares of that Series
or Class, cash or otherwise, such additional amounts, but only from the assets
belonging to such Series (or allocable to such Class), as they may authorize.
All dividends and distributions on Shares of a particular Series or Class shall
be distributed pro rata to the holders of that Series or Class in proportion to
the number of Shares of that Series or Class held by such holders and recorded
on the books of the Trust at the date and time of record established for that
payment of such dividend or distributions.
The manner of determining net income, income, asset values, capital
gains, expenses, liabilities and reserves of any Series or Class may from time
to time be altered as necessary or desirable in the judgment of the Trustees to
conform such manner of determination to any other method prescribed or permitted
by applicable law. Net income shall be determined by the Trustees or by such
person as they may authorize at the times and in the manner provided in the
Bylaws. Determinations of net income of any Series or Class and determination of
income, asset values, capital gains, expenses, and liabilities made by the
Trustees, or by such person as they may authorize, in good faith, shall be
binding on all parties concerned. The foregoing sentence shall not be construed
to protect any Trustee, officer or agent of the Trust against any liability to
the Trust or its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
If, for any reason, the net income of any Series or Class determined at
any time is a negative amount, in the discretion of the Trustees the pro rata
share of such negative amount allocable to each Shareholder of such Series or
Class may constitute a liability of such
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Shareholder to that Series or Class which shall be paid out of such
Shareholder's account at such times and in such manner as the Trustees may from
time to time determine (x) out of the accrued dividend account of such
Shareholder, (y) by reducing the number of Shares of that Series or Class in the
account of such Shareholder, or (z) otherwise.
Section 2. Redemptions and Repurchases. The Trust shall purchase such
Shares as offered by any Shareholder for redemption, upon the presentation of a
proper instrument of transfer together with a request directed to the Trust or a
person designated by the Trust that the Trust purchase such Shares or in
accordance with such other procedures for redemption as the Trustees may from
time to time authorize; and the Trust will pay therefor the net asset value
thereof, as determined in accordance with the Bylaws, the 1940 Act and the rules
of the Commission. Payment for said Shares shall be made by the Trust to the
Shareholder within seven days after the date on which the request is made or in
accordance with such other procedures, consistent with the 1940 Act and the
rules of the Commission, as the Trustees may from time to time authorize. The
obligation set forth in this Section 2 is subject to the provision that in the
event that at any time the New York Stock Exchange (the "Exchange") is closed
for other than weekends or holidays, or if permitted by the rules of the
Commission during periods when trading on the Exchange is restricted or during
any emergency which makes it impracticable for the Trust to dispose of the
investments of the applicable Series or to determine fairly the value of the net
assets belonging to such Series or during any other period permitted by order of
the Commission for the protection of investors, such obligations may be
suspended or postponed by the Trustees. The Trust may also purchase or
repurchase Shares at a price not exceeding the net asset value of such Shares in
effect when the purchase or repurchase or any contract to purchase or repurchase
is made.
The redemption price may in any case or cases be paid wholly or partly
in kind if the Trustees determine that such payment is advisable in the
interests of the remaining Shareholders of the Series or Class the Shares of
which are being redeemed. In making any such payment wholly or partly in kind,
the Trust shall, so far as may be practicable, deliver assets which approximate
the diversification of all of the assets belonging at the time to the Series or
Class the Shares of which are being redeemed. Subject to the foregoing, the fair
value, selection and quantity of securities or other property so paid or
delivered as all or part of the redemption price may be determined by or under
authority of the Trustees. In no case shall the Trust be liable for any delay of
any corporation or other person in transferring securities selected for delivery
as all or part of any payment in kind.
Section 3. Redemptions at the Option of the Trust. The Trust shall have
the right at its option and at any time to redeem Shares of any Shareholder at
the net asset value thereof as described in Section 1 of this Article VI: (i) if
at such time such Shareholder owns Shares of any Series or Class having an
aggregate net asset value of less than an amount determined from time to time by
the Trustees; or (ii) to the extent that such Shareholder owns Shares equal to
or in excess of a percentage determined from time to time by the Trustees of the
outstanding Shares of the Trust or of any Series or Class.
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ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the amount of their
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment of the same by the Trust.
Section 2. Limitation of Liability. The Trustees shall not be
responsible or liable in any event for any neglect or wrong-doing of any
officer, agent, employee, Manager or principal underwriter of the Trust, nor
shall any Trustee be responsible for the act or omission of any other Trustee,
but nothing herein contained shall protect any Trustee against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust 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 or with
respect to their or his capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
ARTICLE VIII
Indemnification
Section 1. Trustees, Officers, Etc. The Trust shall indemnify each of
its Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise) (hereinafter referred to
as a "Covered Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding to be liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by Trust in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that indemnification
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of such expenses is not authorized under this Article, provided, however, that
either (a) such Covered Person shall have provided appropriate security for such
undertaking, (b) the Trust shall be insured against losses arising from any such
advance payments or (c) either a majority of the disinterested Trustees acting
on the matter (provided that a majority of the disinterested Trustees then in
office act on the matter), or independent legal counsel in a written opinion,
shall have determined, based upon a review of readily available facts (as
opposed to a full trial type inquiry) that there is reason to believe that such
Covered Person will be found entitled to indemnification under this Article.
Section 2. Compromise Payment. As to any matter disposed of (whether by
a compromise payment, pursuant to a consent decree or otherwise) without an
adjudication by a court, or by any other body before which the proceeding was
brought, that such Covered Person is liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, indemnification
shall be provided if (a) approved, after notice that it involves such
indemnification, by at least a majority of the disinterested Trustees acting on
the matter (provided that a majority of the disinterested Trustees then in
office act on the matter) upon a determination, based upon a review of readily
available facts (as opposed to a full trial type inquiry) that such Covered
Person is not liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based upon a review of readily
available facts (as opposed to a full trial type inquiry) to the effect that
such indemnification would not protect such Person against any liability to the
Trust to which he would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. Any approval pursuant to this Section shall not
prevent the recovery from any Covered Person of any amount paid to such Covered
Person in accordance with this Section as indemnification if such Covered Person
is subsequently adjudicated by a court of competent jurisdiction to have been
liable to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Section 3. Indemnification Not Exclusive. The right of indemnification
hereby provided shall not be exclusive of or affect any other rights to which
such Covered Person may be entitled. As used in this Article VIII, the term
"Covered Person" shall include such person's heirs, executors and administrators
and a "disinterested Trustee" is a Trustee who is not an "interested person" of
the Trust as defined in Section 2(a)(19) of the 1940 Act (or who has been
exempted from being an "interested person" by any rule, regulation or order of
the Commission), and against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this Article shall
affect any rights to indemnification to which personnel of the Trust, other than
Trustees or officers, and other persons may be entitled by contract or otherwise
under law, nor the power of the Trust to purchase and maintain liability
insurance
-17-
<PAGE>
on behalf of any such person; provided, however, that the Trust shall not
purchase or maintain any such liability insurance in contravention of applicable
law, including without limitation the 1940 Act.
Section 4. Shareholders. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of his or her being or
having been a Shareholder and not because of his or her acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all loss and expense
arising from such liability, but only out of the assets of the particular Series
of Shares of which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
Section 1. Trustees, Shareholders, Etc. Not Personally Liable; Notice.
All persons extending credit to, contracting with or having any claim against
the Trust or any Series shall look only to the assets of the Trust or to the
assets of that particular Series for payment under such credit, contract or
claim; and neither Shareholders nor the Trustees, nor any of the Trust's
officers, employees or agents, whether past, present or future, shall be
personally liable therefor. Nothing in this Declaration of Trust shall protect
any Trustee against any liability to which such Trustee would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office of
Trustee.
Every note, bond, contract, instrument, certificate or undertaking made
or issued on behalf of the Trust by the Trustees, by any officers or officer or
otherwise shall give notice that this Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts and shall recite that
the same was executed or made by or on behalf of the Trust or by them as Trustee
or Trustees or as officer or officers or otherwise and not individually and that
the obligations of such instrument are not binding upon any of them or the
shareholders individually but are binding only upon the assets and property of
the Trust or upon the assets belonging to the Series for the benefit of which
the Trustees have caused the note, bond, contract, instrument, certificate or
undertaking to be made or issued, and may contain such further recital as he or
they may deem appropriate, but the omission of any such recital shall not
operate to bind any Trustee or Trustees or officer or officers or Shareholders
or any other person individually.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his or
her own willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office
-18-
<PAGE>
of Trustee, and for nothing else, and shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust,
and shall be under no liability for any act or omission in accordance with such
advice or for failing to follow such advice. The Trustees shall not be required
to give any bond as such, nor any surety if a bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. Termination of Trust or Series. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by vote of at least 50% of the Shares of each
Series entitled to vote and voting separately by Series or by the Trustees by
written notice to the Shareholders. Any Series may be terminated at any time by
vote of at least 50% of the Shares of that Series or by the Trustees by written
notice to the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may be),
after paying or otherwise providing for all charges, taxes, expenses and
liabilities belonging, severally, to each Series (or the applicable Series, as
the case may be), whether due or accrued or anticipated as may be determined by
the Trustees, the Trust shall in accordance with such procedures as the Trustees
consider appropriate reduce the remaining assets belonging, severally, to each
Series (or the applicable Series, as the case may be), to distributable form in
cash or shares or other securities, or any combination thereof, and distribute
the proceeds belonging to each Series (or the applicable Series, as the case may
be), to the Shareholders of that Series, as a Series, ratably according to the
number of Shares of that Series held by the several Shareholders on the date of
termination.
Section 5. Merger and Consolidation. The Trustees may cause the Trust
to be merged into or consolidated with another trust or company or its shares
exchanged under or pursuant to any state or federal statute, if any, or
otherwise to the extent permitted by law, if such merger or consolidation or
share exchange has been authorized by vote of a majority of the outstanding
Shares, as such phrase is defined in the 1940 Act; provided that in all respects
not governed by statute or applicable law, the Trustees shall have power to
prescribe the procedure necessary or appropriate to accomplish a sale of assets,
merger or consolidation.
Section 6. Filing of Copies, References, Headings. The original or a
copy of this instrument and of each amendment hereto shall be kept at the office
of the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the Trust with the
Secretary of State of The Commonwealth of Massachusetts and with any other
governmental office where such filing may from time to time be required. Anyone
dealing with the Trust may rely on a certificate by an officer of the Trust as
to
-19-
<PAGE>
whether or not any such amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were the
original, may rely on a copy certified by an officer of the Trust to be a copy
of this instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein,"
"hereof" and "hereunder" shall be deemed to refer to this instrument as amended
or affected by any such amendments. Headings are placed herein for convenience
of reference only and shall not be taken as a part hereof or control or affect
the meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
Section 7. Applicable Law. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
Section 8. Amendments. This Declaration of Trust may be amended at any
time by an instrument in writing signed by a majority of the then Trustees when
authorized so to do by vote of a majority of the Shares entitled to vote, except
that amendments described in Article III, Section 5 hereof or having the purpose
of changing the name of the Trust or of supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or inconsistent
provision contained herein shall not require authorization by Shareholder vote.
IN WITNESS WHEREOF, the initial Trustee as aforesaid does hereto set
his hand this 1st day of August, 1994.
/c/Peter C. Thompson
--------------------
Peter C. Thompson
Initial Trustee
Dated: August 1, 1994
The address of the Trust is:
One Memorial Drive
Cambridge, MA 02142
The address of the Initial Trustee is c/o:
David L. Babson & Co., Inc.
One Memorial Drive
Cambridge, MA 02142
-20-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
: ss.
COUNTY OF MIDDLESEX )
Then personally appeared before me Peter C. Thompson, who acknowledged
the foregoing Agreement and Declaration of Trust to be his free act and deed.
Witness my hand and notarial seal.
Dated: August 1, 1994 /s/Anna A. Pasquale
-------------------
Notary Public
My commission expires: 6/3/99
-21-
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 2 to
Registration Statement No. 33-82366 of The DLB Fund Group of our reports each
dated February 1, 1996 of DLB Fixed Income Fund, DLB Global Small Capitalization
Fund, DLB Value Fund, and DLB Mid Capitalization Fund, each a series of The DLB
Fund Group and to the references to us under the headings "Condensed Financial
Information" in the Prospectus and "Experts" in the Statement of Additional
Information, both of which are part of such Registration Statement.
/s/Deloitte & Touche LLP
Boston, Massachusetts
March 18, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
EXHIBIT 17(a)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF DLB FIXED
INCOME FUND AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER>001
<NAME> DLB FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 5,112,299
<INVESTMENTS-AT-VALUE> 5,245,291
<RECEIVABLES> 80,409
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,325,706
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (567)
<TOTAL-LIABILITIES> (567)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> (5,192,147)
<SHARES-COMMON-STOCK> 518,789
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (132,992)
<NET-ASSETS> (5,325,139)
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> (152,090)
<OTHER-INCOME> 0
<EXPENSES-NET> 13,179
<NET-INVESTMENT-INCOME> 138,911
<REALIZED-GAINS-CURRENT> (53,226)
<APPREC-INCREASE-CURRENT> (132,992)
<NET-CHANGE-FROM-OPS> 325,129
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 139,227
<DISTRIBUTIONS-OF-GAINS> 53,159
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 500,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 18,788
<NET-CHANGE-IN-ASSETS> (5,325,129)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,911
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 81,886
<AVERAGE-NET-ASSETS> 5,082,266
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.37
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.39)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.26
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
EXHIBIT 17(b)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF DLB
GLOBAL SMALL CAPITALIZATION FUND AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER>002
<NAME> DLB GLOBAL SMALL CAPITALIZATION FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 10,142,533
<INVESTMENTS-AT-VALUE> 10,514,281
<RECEIVABLES> 135,775
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,650,056
<PAYABLE-FOR-SECURITIES> (104,880)
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (35,898)
<TOTAL-LIABILITIES> (140,778)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> (10,172,224)
<SHARES-COMMON-STOCK> 1,017,012
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (66,244)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 35,271
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (371,931)
<NET-ASSETS> (10,508,884)
<DIVIDEND-INCOME> (119,082)
<INTEREST-INCOME> (23,708)
<OTHER-INCOME> 10,439
<EXPENSES-NET> 66,107
<NET-INVESTMENT-INCOME> 66,244
<REALIZED-GAINS-CURRENT> 28,897
<APPREC-INCREASE-CURRENT> (371,931)
<NET-CHANGE-FROM-OPS> 409,278
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 72,224
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,010,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 7,012
<NET-CHANGE-IN-ASSETS> (10,409,278)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 45,284
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 142,658
<AVERAGE-NET-ASSETS> 9,956,998
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0.34
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.07)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.33
<EXPENSE-RATIO> 1.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
EXHIBIT 17(c)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF DLB VALUE
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER>003
<NAME> DLB VALUE FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 10,286,866
<INVESTMENTS-AT-VALUE> 10,865,639
<RECEIVABLES> 16,864
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,882,509
<PAYABLE-FOR-SECURITIES> (45,744)
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (19,187)
<TOTAL-LIABILITIES> (64,931)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> (10,238,563)
<SHARES-COMMON-STOCK> 1,022,591
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (242)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (578,773)
<NET-ASSETS> (10,817,578)
<DIVIDEND-INCOME> (111,574)
<INTEREST-INCOME> (16,211)
<OTHER-INCOME> 0
<EXPENSES-NET> 36,683
<NET-INVESTMENT-INCOME> 91,102
<REALIZED-GAINS-CURRENT> (147,693)
<APPREC-INCREASE-CURRENT> (578,773)
<NET-CHANGE-FROM-OPS> 817,568
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 90,860
<DISTRIBUTIONS-OF-GAINS> 147,693
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,000,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 22,590
<NET-CHANGE-IN-ASSETS> (10,817,568)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24,862
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 109,763
<AVERAGE-NET-ASSETS> 10,312,183
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 0.73
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.24)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.58
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
EXHIBIT 17(d)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF DLB MID
CAPITALIZATION FUND AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER>004
<NAME> DLB MID CAPITALIZATION FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 10,240,402
<INVESTMENTS-AT-VALUE> 10,992,195
<RECEIVABLES> 22,882
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,015,083
<PAYABLE-FOR-SECURITIES> (62,493)
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (23,716)
<TOTAL-LIABILITIES> (86,209)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> (10,176,967)
<SHARES-COMMON-STOCK> 1,016,544
<SHARES-COMMON-PRIOR> 1
<ACCUMULATED-NII-CURRENT> (232)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (751,675)
<NET-ASSETS> (10,928,874)
<DIVIDEND-INCOME> (96,748)
<INTEREST-INCOME> (27,489)
<OTHER-INCOME> 0
<EXPENSES-NET> 40,356
<NET-INVESTMENT-INCOME> 83,881
<REALIZED-GAINS-CURRENT> (93,308)
<APPREC-INCREASE-CURRENT> (751,675)
<NET-CHANGE-FROM-OPS> 928,864
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 83,531
<DISTRIBUTIONS-OF-GAINS> 93,308
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,000,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 16,543
<NET-CHANGE-IN-ASSETS> (10,928,864)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26,445
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 116,479
<AVERAGE-NET-ASSETS> 10,054,454
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 0.84
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.17)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.75
<EXPENSE-RATIO> 0.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
