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PROSPECTUS
THE DLB GROWTH FUND
One Memorial Drive
Cambridge, Massachusetts 02142
(617) 225-3800
January 20, 1998
The DLB Growth Fund (the "Fund") is a newly organized portfolio of The DLB
Fund Group (the "Trust"), an open-end management investment company offering
non-diversified portfolios with different investment objectives and strategies.
The Fund is intended primarily to serve as an investment vehicle for
institutional investors. The Fund's investment manager is David L. Babson & Co.,
Inc. (the "Manager").
Shares of the Fund are sold to investors by the Trust. The minimum initial
investment in the 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 The DLB Growth Fund. Please read this Prospectus
carefully and keep it for further reference.
A Statement of Additional Information dated January 20, 1998 is available
at no charge by writing to the Trust, c/o David L. Babson & Co., Inc., Marketing
Department, Attention: Maureen Madden Bates, One Memorial Drive, Cambridge,
Massachusetts 02142, or by telephoning (617) 225-3800. The Statement of
Additional Information, which contains more detailed information about the Fund,
has been filed with the Securities and Exchange Commission and is incorporated
by reference into this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE 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
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FUND EXPENSES........................................................... 3
INVESTMENT OBJECTIVES AND POLICIES AND ASSOCIATED RISKS................. 4
PURCHASE OF SHARES...................................................... 6
REDEMPTION OF SHARES.................................................... 7
DETERMINATION OF NET ASSET VALUE........................................ 8
DISTRIBUTIONS........................................................... 8
TAXES ............................................................... 9
MANAGEMENT OF THE TRUST................................................ 10
PERFORMANCE INFORMATION................................................ 11
ORGANIZATION AND CAPITALIZATION OF THE TRUST........................... 11
SHAREHOLDER INQUIRIES.................................................. 11
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FUND EXPENSES
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<TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<S> <C>
Management Fees (after fee waiver) (a).................... .35%
12b-1 Fees(b)............................................. 0
Other Expenses(after fee waiver)(a)(c).................... .45%
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Total Fund Operating Expenses (after fee waiver) (a)...... .80%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE:
You would pay the following Years
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<S> <C> <C>
expenses on a $1,000 investment,
assuming a 5% annual return, 1 3
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with or without redemption at
the end of each period: $8 $26
</TABLE>
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(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%, "Other Expenses" would be .95% and Total Fund Operating
Expenses would be 1.50%.
(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 Plan."
(c) "Other Expenses" are based on estimated amounts for the Fund's first full
fiscal year.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses of the Fund that are borne by
holders of Fund shares. THE FIVE PERCENT ANNUAL RETURN AND EXPENSES USED IN
CALCULATING THE EXAMPLE ARE NOT A REPRESENTATION OF PAST OR FUTURE PERFORMANCE
OR EXPENSES; ACTUAL PERFORMANCE AND/OR EXPENSES MAY BE MORE OR LESS THAN SHOWN.
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INVESTMENT OBJECTIVES AND POLICIES AND ASSOCIATED RISKS
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The investment objective of the DLB Growth Fund is to seek long-term
capital and income growth through investment primarily in common stocks. The
Fund is designed for investors seeking above-average total return over longer
periods of time. Current yield is secondary to this long-term growth objective.
The Fund generally defines "above average total return" as total return that is
higher than return generated by traditional investment vehicles other than
equity products, including but not limited to, passbook savings accounts,
certificates of deposit, bonds, U.S. government securities and traditional
insurance products, such as whole life policies and annuities.
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. The Manager
will select which issues to invest in based on its assessment of whether the
issue is likely to provide favorable capital appreciation and income growth over
the long-term. Necessary reserves will be held in cash or high-quality
short-term debt obligations readily changeable to cash, such as treasury bills,
commercial paper or repurchase agreements. There are no restrictions or
guidelines regarding the investment of Fund assets in shares listed on an
exchange or traded over-the-counter.
BASIC INVESTMENT STRATEGY. The Fund believes the true value of a company's
stock is determined by its earning power, dividend paying ability, and in many
cases, its assets. Consequently, the Fund will seek its objective by remaining
substantially fully invested in the common stocks of progressive, well-managed
companies in growing industries which have demonstrated both a consistent and an
above-average ability to increase their earnings and dividends and which have
favorable prospects of sustaining such growth.
The Fund also believes that the intrinsic worth and the consequent value of
the stock of most well-managed and successful companies usually does not change
rapidly, even though wide variations in the price may occur. Normally, long-term
positions in stocks of the portfolio companies selected will be taken and
maintained while the company's record and prospects continue to meet with the
Manager's approval. While the Fund does not have a policy of seeking short-term
trading profits, it is possible that holdings may be increased when a stock is
considered to be undervalued and decreased when it is considered to be
overvalued. The Fund also reserves the freedom to invest in securities
convertible into common stocks, preferred stocks, high grade bonds or other
defensive issues when, in the Manager's judgment, economic and market conditions
make such a course desirable and indicate that the shareholders' interests are
likely to be best served.
The Fund cannot guarantee that these objectives will be achieved because
there are inherent risks in the ownership of any investment. The value of the
Fund's shares will reflect changes in the market value of its investments, and
dividends paid by the Fund will vary with the income it receives from these
investments, but through careful management and diversification it will seek to
reduce risk and enhance the opportunities for long-term growth of capital and
income.
The Fund does not intend to concentrate its investments in any particular
industry. Without the approval of shareholders, it will not purchase a security
if as a result of such purchase 25% or more of its total assets will be invested
in a particular industry.
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PORTFOLIO TURNOVER. Although portfolio turnover is not a limiting factor
with respect to the investment decisions for the Fund, the Fund expects to
experience relatively low portfolio turnover rates. It is anticipated that under
normal circumstances the annual portfolio turnover rate of the Fund will not
exceed 30%. 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 Fund, and could involve realization of capital gains that would be
taxable when distributed to shareholders. See "Taxes" below and "Portfolio
Transactions" in the Statement of Additional Information for additional
information. The tax consequences of portfolio transactions may be a secondary
consideration for tax-exempt investors.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. Under
repurchase agreements the Fund acquires a security 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 the Fund to earn
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 the Fund to expenses, delays and
risks of loss.
FIRM COMMITMENTS. The Fund may enter into firm commitment agreements for
the purchase of securities at an agreed-upon price on a specified future date.
The Fund will only enter into firm commitment arrangements with parties which
the Manager determines present minimal credit risks. The Fund will maintain, in
a segregated account with its custodian, cash or securities in an amount equal
to the Fund's obligations under firm commitment agreements. The Fund bears the
risk that the other party will fail to satisfy its obligations to the Fund. Such
a default may subject the Fund to expenses, delays and risks of loss.
LOANS OF PORTFOLIO SECURITIES. The Fund may make secured loans of portfolio
securities on up to 33 1/3% 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
parties that are believed by the Manager to be of relatively high credit
standing. Securities loans are made 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 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. As a non-diversified fund, the 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 the
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.
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CHANGES TO INVESTMENT OBJECTIVES. The investment objective and policies of
the Fund may be changed by the Trustees without shareholder approval. Any such
change may result in the 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 Fund will be notified of any changes in the Fund's
investment objective or policies through a revised prospectus or other written
communication.
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PURCHASE OF SHARES
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Shares of the 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 the Fund is $100,000, and the minimum for each
subsequent investment is $10,000. The purchase price of a share of the Fund is
the net asset value next determined after a purchase order is received in good
order. No sales charge is imposed on purchases of Fund shares.
Shares of the 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 acquired for investment only and
not for resale and 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 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 Fund. Investors interested in purchases through
exchange should telephone the Manager at (617) 225-3800, Attn: Maureen Madden
Bates.
Investors should call the offices of the Trust before attempting to place
an order for Fund shares. The Trust reserves the right at any time to reject an
order.
The deadline for wiring federal funds to the Trust is 2:00 p.m. Eastern
time; in the case of an investment in-kind, the investor's securities must be
placed on deposit at DTC, and 4:00 p.m. Eastern time is the deadline for
transferring those securities to the account designated by the Fund's custodian,
Investors Bank & Trust Company. In most cases, 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.
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All federal funds must be transmitted to Investors Bank & Trust Company to
Account No. 777777722 for the account of the 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 the 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.
12B-1 PLAN. The Trust has adopted a distribution and services plan (the
"Plan") for the Fund under Rule 12b-1 of the Investment Company Act of 1940, but
the Trustees do not intend to implement such Plan during the Trust's current
fiscal year. The purposes of the 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.
The Plan would permit payments by the Fund for such purposes at an annual rate
of up to .50% of the Fund's average daily 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 the 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 the Plan.
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REDEMPTION OF SHARES
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Shares of the 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
the Fund. 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) 225-3800, Attn:
Maureen Madden Bates, 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 the 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 readily marketable securities held
by the Fund in lieu of cash. Securities used to redeem Fund shares in kind will
be valued in accordance with the 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.
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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.
The 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 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
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The net asset value of a share of the Fund is determined at 4:15 p.m.,
Eastern time, on each day on which the New York Stock Exchange is open. The net
asset value per share for the 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 (including options
and futures contracts) 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. Short term debt securities with a remaining maturity of 60 days or
less will be valued at amortized cost, unless conditions dictate otherwise.
Illiquid securities or restricted securities will be valued at fair value based
on information supplied by a broker. 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.
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DISTRIBUTIONS
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The 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). The 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. The Fund's present policy
is to declare and pay distributions of its dividends and interest at least
annually. The 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 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
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The following is a general summary of the federal income tax consequences
for the Fund and shareholders who are U.S. citizens or residents or domestic
corporations. The last paragraph of this section contains information relevant
to foreign investors. Shareholders should consult their own tax advisors about
the tax consequences of investments in the 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.
The Fund is treated as a separate taxable entity for federal income tax
purposes. The 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, the 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 net gains on capital assets held for more than
one year but not more than 18 months and net gains on capital assets held for
more than 18 months are taxable as such, regardless of how long a shareholder
may have owned shares in the Fund or whether received in cash or in 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 Fund 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 or corporations 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.
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
and certain other conditions apply. Foreign shareholders with respect to whom
income from the Fund is "effectively connected" with a U.S.
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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 all foreign investors are urged to consult their tax
advisors.
NEW WITHHOLDING TAX RULES FOR PAYMENTS AFTER 1998. The Internal Revenue
Service recently revised its regulations affecting the application to foreign
investors of the back-up withholding and withholding tax rules described above.
The new regulations will generally be effective for payments made on or after
January 1, 1999 (although transition rules will apply). In some circumstances,
the new rules will increase the certification and filing requirements imposed on
foreign investors in order to qualify for exemption from the 31% back-up
withholding tax and for reduced withholding tax rates under income tax treaties.
Foreign investors in the Fund should consult their tax advisors with respect to
the potential application of these new regulations.
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MANAGEMENT OF THE TRUST
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The 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., a
registered investment adviser, 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 a separate Management Contract relating to the Fund, the Manager
selects and reviews the 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 the Fund, the right of the Fund or of the Trust to use the
identifying name "DLB" may be withdrawn.
The Fund pays the Manager a monthly fee at the annual rate of .55% the
Fund's average daily net assets. The Manager, however, has agreed to waive a
portion of its fee and to bear certain expenses for the current fiscal year to
the extent the Fund's annual expenses (including the management fee but
excluding brokerage commissions and transfer taxes) would exceed .80% of the
Fund's average daily net assets.
James B. Gribbell, a portfolio manager of the Manager, is primarily
responsible for the day-to-day management of the Fund. He is a Chartered
Financial Analyst. Mr. Gribbell has been employed by the Manager in portfolio
management for more than five years.
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PERFORMANCE INFORMATION
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Total return data may from time to time be included in advertisements about
the Fund. "Total return" for the one-year period and for the life of the Fund,
each through the most recent calendar quarter, represents the average annual
compounded rate of return on an investment of $1000 in the Fund at net asset
value (assuming immediate reinvestment of any dividends or capital gains
distributions at net asset value). Quotations of 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 the 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 the Fund's
portfolio, and the Fund's operating expenses. Investment performance also often
reflects the risks associated with the Fund's investment objective and policies.
These factors should be considered when comparing the Fund's investment results
to those of other mutual funds and other investment vehicles.
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ORGANIZATION AND CAPITALIZATION OF THE TRUST
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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
seven series of shares, each representing a different fund. 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 of
the Trust 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 fund, are entitled to receive the net assets of the 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 the Fund and therefore
is deemed to "control" the 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 Fund for any such
liability.
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SHAREHOLDER INQUIRIES
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Shareholders may direct inquiries to the Trust c/o David L. Babson & Co.,
Inc., Marketing Department, Attn: Maureen Madden Bates, One Memorial Drive,
Cambridge, Massachusetts 02142 (617- 225-3800).
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When required by the Investment Company Act of 1940, the Manager's
discussion of the performance of the Fund in its most recent fiscal year as well
as a comparison of the 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.
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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
John Hancock Tower
200 Clarendon Street, 5th Floor
Boston, MA 02116
TRANSFER AGENT
Investors Bank & Trust Company
John Hancock Tower
200 Clarendon Street, 5th Floor
Boston, MA 02116
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THE DLB GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
January 20, 1998
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the prospectus of The DLB Growth Fund dated
January 20, 1998, 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 Madden Bates, One Memorial Drive, Cambridge,
Massachusetts 02142, or by telephoning (617) 225-3800.
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<TABLE>
TABLE OF CONTENTS
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CAPTION PAGE
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INVESTMENT OBJECTIVES AND POLICIES AND ASSOCIATED RISKS.......................1
INVESTMENT RESTRICTIONS.......................................................1
INCOME DIVIDENDS, DISTRIBUTIONS AND TAX STATUS................................2
MANAGEMENT OF THE TRUST.......................................................4
INVESTMENT ADVISORY AND OTHER SERVICES........................................6
PORTFOLIO TRANSACTIONS........................................................7
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES..............................8
DETERMINATION OF NET ASSET VALUE.............................................11
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INVESTMENT OBJECTIVES AND POLICIES AND ASSOCIATED RISKS
The investment objective and policies of The DLB Growth Fund (the "Fund")
of The DLB Fund Group (the "Trust") are set forth in the Fund's Prospectus.
INVESTMENT RESTRICTIONS
Without a vote of the majority of the outstanding voting securities of the
Fund, the Trust will not take any of the following actions with respect to the
Fund:
(1) Borrow money in excess of 33 1/3% 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. Such borrowings
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.
(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 Fund has 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
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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 Restriction 1 above, the Fund has
no current intention in the coming year of borrowing money from banks.
It is contrary to the present policy of the Fund, which may be changed by
the Trustees without shareholder approval, to 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.
Except as otherwise indicated in Restriction 1 or in Restriction (c) in the
immediately preceding paragraph, 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 the Fund, means the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares of the Fund, or (2) 67% or more of the shares
of the Fund present at a meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy.
INCOME DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
The 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) distribute at least 90%
of its dividend, interest and certain other income (including, in general,
short-term capital gains) each year; and (c) 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
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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 the 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 the Fund and the distributions which it may make are
summarized in the Prospectus under the heading "Taxes." The 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 the 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 the Fund or another fund of The DLB Fund Group.
Certain transactions entered into by the 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 Fund in certain "passive foreign investment companies"
could subject the Fund to a U.S. federal income tax or other charge on
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 distributions of net gains on capital assets held for more
than one year but not more than eighteen months and of net gains on capital
assets held for more than 18 months are taxable to investors as such, regardless
of how long a shareholder may have owned shares in the Fund or whether such
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 the Fund, except certain organizations or entities, including
private foundations, social clubs, and others, which may be subject to tax on
dividends or capital gains.
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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
the 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. A
corporate shareholder will only be eligible to claim a dividends-received
deduction with respect to a dividend from the Fund if the shareholder held its
shares on the ex-dividend date and for at least 45 more days during the 90-day
period surrounding the ex-dividend date.
If the Fund invests in foreign securities, it 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.
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 58, has been the Executive Vice President of the
Manager since March 1996 and a Director since August 1995. Mr. Gwozdz has been
the Managing Director of Babson-Stewart Ivory International 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 64, 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 69, 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 Asea 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 68, 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.
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Richard J. Phelps, age 69, 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.
*Deemed to be an "interested person" of the Trust and the Manager, as defined by
the 1940 Act
OFFICERS
Ronald E. Gwozdz, President.
DeAnne B. Dupont, age 43, Treasurer, is the Vice President of the Manager.
Frank L. Tarantino, age 57, Clerk, is the Senior Vice President and Chief
Operating Officer of the Manager. Mr. Tarantino was President of Liberty
Securities Corporation from 1994 to 1997, and was previously Executive Vice
President of State Street Research & Management Company.
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 fees paid to each Trustee
by the Trust for the Trust's most recently completed fiscal year are shown
below:
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<TABLE>
<CAPTION>
Total Compensation
Aggregate from Registrant
Compensation and Fund Complex
Name of Trustee from Registrant* Paid to Trustees
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<S> <C> <C>
Ronald E. Gwozdz $0 $0
Charles E. Hugel 11,000 11,000
Richard A. Nenneman 11,000 11,000
Richard J. Phelps 11,000 11,000
Peter C. Thompson 0 0
</TABLE>
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*Includes an annual retainer and an attendance fee for each meeting attended.
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.
Massachusetts Mutual Life Insurance Company also currently owns more than 25% of
the outstanding shares of each Fund and therefore is deemed to "control" the
Fund within the meaning of the Investment Company Act of 1940. As disclosed in
the Prospectus under the heading "Management of the Trust," under a separate
Management Contract (the "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 the Fund and
will make investment decisions on behalf of the Fund and place all orders for
the purchase and sale of portfolio securities. 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, the Fund 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 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.
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CUSTODIAL ARRANGEMENTS. Investors Bank & Trust Company ("IBT") serves as
the Trust's custodian on behalf of The DLB Fund Group of which The DLB Growth
Fund is a part. As such, IBT holds in safekeeping certificated securities and
cash belonging to the Fund and, in such capacity, is the registered owner of
securities in book-entry form belonging to the Fund. Upon instruction, IBT
receives and delivers cash and securities of the 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 the Fund on a daily basis.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS
Investment decisions for the Fund and for the other investment advisory
clients of the Manager and its 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 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.
BROKERAGE AND RESEARCH SERVICES
Transactions on U.S. stock exchanges, commodities markets and futures
markets and other agency transactions involve the payment by the 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 the Fund usually includes an undisclosed dealer commission or
mark-up. In underwritten offerings, the price paid by the Fund includes a
disclosed, fixed commission or discount retained by the underwriter or dealer.
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
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from third parties with which such broker-dealers have arrangements. Consistent
with this practice, the Manager may receive brokerage and research services and
other similar services from many broker-dealers with which the Manager place the
Fund's 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 investment professionals. Where the
services referred to above are not used exclusively by the Manager for research
purposes, the Manager, based upon 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 or its
affiliates in advising various of their clients (including the Fund), although
not all of these services would necessarily be useful and of value in managing
the Fund. The management fee paid by the Fund is not reduced because the Manager
or its affiliates may receive these services even though the Manager might
otherwise be required to purchase some of these services for cash.
The Manager places orders for the purchase and sale of portfolio
investments for the Fund and buys and sells investments for the Fund through a
substantial number of brokers and dealers. In so doing, the Manager uses its
best efforts to obtain for the Fund 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, having in mind the Fund's best interests, consider all
factors it deems relevant, including, by way of illustration, price, 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 the Management
Contract, the Manager may cause the Fund to pay a broker-dealer which provides
"brokerage and research services" (as defined in the 1934 Act) to the Manager an
amount of disclosed commission for effecting securities transactions on stock
exchanges and other transactions for the Fund on an agency basis in excess of
the commission which another broker-dealer would have charged for effecting that
transaction. The Manager's authority to cause the Fund 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 will use its
best effort to obtain the most favorable price and execution available with
respect to such transactions, as described above.
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
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of the Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts. The fiscal year for the Fund ends on December 31.
Each share of the Fund represents an equal proportionate interest in the
Fund. Shares of the Trust do not have any preemptive rights. Upon liquidation of
the Fund, shareholders of the 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.
The DLB Fund Group includes the following funds, with the inception dates
listed: Fixed Income Fund, July 25, 1995; Global Small Cap Fund, July 19, 1995;
Value Fund, July 25, 1995; Mid Cap Fund, July 25, 1995; Global Bond Fund, August
26, 1996; Quantitative Equity Fund, August 26, 1996; and Growth Fund, January
20, 1998.
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 of funds within The DLB Fund Group vote by individual
fund on all 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 within The DLB Fund Group, 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.
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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 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.
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
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misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
DETERMINATION OF NET ASSET VALUE
As indicated in the Prospectus, 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 New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
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