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File No. 33-82366
File No. 811-08690
As filed with the Securities and Exchange Commission
on April 30, 1998
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. 7 /X/
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 9 /X/
THE DLB FUND GROUP
(Exact Name of Registrant as Specified in Charter)
One Memorial Drive, Cambridge, Massachusetts 02142
(Address of Principal Executive Office)
(617) 225-3800
(Registrant's Telephone Number, Including Area Code)
Ronald E. Gwozdz with a copy to:
David L. Babson and Company Incorporated Gregory D. Sheehan, Esq.
One Memorial Drive Ropes & Gray
Cambridge, Massachusetts 02142 One International Place
(Name and Address of Agent for Service) Boston, Massachusetts 02110
Approximate date of proposed public As soon as practicable after the date
offering: this registration statement becomes
effective
It is proposed that this filing become effective (check appropriate box):
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<S> <C>
/ / Immediately upon filing pursuant to paragraph / / on (date) pursuant to paragraph (b)
(b)
/ / 60 days after filing pursuant to paragraph (a)(1) / / on (date) pursuant to paragraph (a)(1)
/X/ 75 days after filing pursuant to paragraph (a)(2) / / on (date) pursuant to paragraph (a)(2) of rule
485.
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If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously-filed post-effective amendment.
This amendment relates solely to the DLB Micro Capitalization Fund. No
information relating to any other series of the registrant is amended or
superseded hereby.
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THE DLB FUND GROUP
CROSS REFERENCE SHEET
FORM N-1A
Part A: Information Required in Prospectus
Location in the
N-1A Registration Statement
Item No Item by Prospectus Heading
- ------- ---- ---------------------
1. Cover Page Cover Page
2. Synopsis "Fund Expenses"
3. Condensed Financial Not Applicable
Information
4. General Description of the "Organization and Capitalization of the
Registrant Trust," "Investment Objectives and
Policies and Associated Risks" and Cover
Page
5. Management of the Fund "Management of the Trust"
5A. Management's Discussion of Not Applicable
Fund Performance
6. Capital Stock and Other "Distributions," "Taxes" and
Securities "Shareholder Inquiries"
7. Purchase of Securities Being "Purchase of Shares" and "Determination
Offered of Net Asset Value"
8. Redemption or Repurchase "Redemption of Shares" and
"Determination of Net Asset Value"
9. Pending Legal Proceedings Not Applicable
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Part B: Information Required in
Statement of Additional Information ("SAI")
Location in the
N-1A Registration Statement
Item No. Item by SAI Heading
- -------- ---- --------------
10. Cover Page Cover Page
11. Table of Contents "Table of Contents"
12. General Information and Not Applicable
History
13. Investment Objective and "Investment Objectives and Policies and
Policies Associated Risks" in the Prospectus and
SAI and "Investment Restrictions"
14. Management of the Registrant "Management of the Trust"
15. Control Persons and "Description of the Trust
Principal Holders of and Ownership of Shares"
Securities
16. Investment Advisory and "Investment Advisory and
Other Services Other Services"
17. Brokerage Allocation "Portfolio Transactions"
18. Capital Stock and Other "Description of the Trust and Ownership
Securities of Shares"
19. Purchase, Redemption and "Purchase of Shares" and "Redemption of
Pricing of Securities Being Shares" in Prospectus and "Determination
Offered of Net Asset Value"
20. Tax Status "Income Dividends, Distributions and
Tax Status"
21. Underwriters Not Applicable
22. Calculation of Performance Not Applicable
Data
23 Financial Statements Not Applicable
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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 MICRO CAPITALIZATION FUND
One Memorial Drive
Cambridge, Massachusetts 02142
(617) 225-3800
July 14, 1998
The DLB Micro Capitalization 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 Fund. Please read this Prospectus carefully and
keep it for further reference.
A Statement of Additional Information dated July 14, 1998 is available at no
charge by writing to the Trust, c/o David L. Babson and Company Incorporated,
Marketing Department, Attention: Maureen M. 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
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............................................................... 9
TAXES ...................................................................... 9
MANAGEMENT OF THE TRUST..................................................... 10
PERFORMANCE INFORMATION..................................................... 11
ORGANIZATION AND CAPITALIZATION OF THE TRUST................................ 11
SHAREHOLDER INQUIRIES....................................................... 12
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FUND EXPENSES
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after fee waiver) (a)................ 0.80%
12b-1 Fees(b)......................................... 0
Other Expenses(a)(c)................ 0.50
----
Total Fund Operating Expenses (after fee waiver) (a).. 1.30%
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: $14 $41
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(a) The Manager has agreed with the Fund to reduce its management
fee 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 1.30% 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 1.30%. Absent such agreement by the Manager to waive its fee and bear
certain expenses, management fees would be 1.00%, "Other Expenses" would be
0.50% 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 0.50%
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
The investment objective of the DLB Micro Capitalization Fund is to seek
long-term capital growth through investment primarily in common stocks of
smaller, faster-growing companies whose securities at the time of purchase are
considered by the Manager to be realistically valued. The Fund is designed to be
an investment vehicle for that part of an investor's capital which can
appropriately be exposed to above-average risk. The Fund is not intended to be a
complete investment program.
BASIC INVESTMENT STRATEGY. The Fund generally intends to invest in stocks
of smaller companies with market capitalization of $10 million to $250 million
at the time of purchase and which are listed on a national or regional exchange
or over-the-counter with prices quoted daily in the financial press. 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.
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. In addition,
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.
Smaller companies are typically in or nearer the entrepreneurial stage
than the institutionalized, professionally managed status of larger companies.
Generally, smaller companies offer the possibility of more rapid sales and
profit expansion -- if they are successful -- than larger, older and more mature
businesses. At the same time, smaller, less-seasoned firms are generally subject
to greater business risk. See "Risks Associated with Smaller Companies" below.
The Manager believes that there are persistent stock price inefficiencies
in the market for stocks of smaller companies. As a result of limited coverage
and ownership, smaller company stocks frequently trade at significant discounts
to their intrinsic value. The Manager will seek to identify companies which are
mispriced as compared to their expected earnings stream.
The Fund's investment process is founded on fundamental analysis with an
emphasis on high quality companies with a differentiated product strategy. This
quality should generate above-average returns on assets, equity and earnings per
share growth. The Manager will invest in companies whose returns are a product
of operations, rather than of financial leverage. The Manager will also focus on
the quality of reported earnings and on the opinions of industry contacts
regarding the companies in which it invests.
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.
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 any one industry.
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RISKS ASSOCIATED WITH SMALLER COMPANIES. The Fund is intended to be an
investment vehicle for that part of an investor's capital which can
appropriately be exposed to above-average risk. The Fund is not designed to
offer a complete or balanced investment program suitable for all investors.
While smaller companies generally have potential for rapid growth, they
often involve higher risk because they may lack the management experience,
financial resources, product diversification and competitive strengths of larger
corporations. While the Manager cannot eliminate this risk, it will seek to
minimize it by diversifying its investments among a broad list of companies.
In many instances, the securities of smaller companies are traded only
over-the-counter or on a regional securities exchange, and the frequency and
volume of their trading are substantially less than is typical of larger
companies. Therefore, the securities of smaller companies may be subject to
wider price fluctuations. When making larger sales, the Fund may have to sell
portfolio holdings at discounts from quoted prices or may have to make a series
of small sales over an extended period of time.
PORTFOLIO TURNOVER. Although portfolio turnover is not a limiting factor
with respect to the investment decisions for the Fund, the Fund expects to
experience moderate portfolio turnover rates. It is anticipated that under
normal circumstances the annual portfolio turnover rate of the Fund will not
exceed 100%. However, in any particular year, market conditions may result in
greater turnover 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. To the extent that portfolio
turnover results in realization of net short-term capital gains, such gains are
ordinarily taxed to shareholders at ordinary income tax rates. For additional
information, see "Taxes" below and "Portfolio Transactions" in the Statement of
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 other liquid assets 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 331/3% 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
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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.
CHANGES TO INVESTMENT OBJECTIVES. The investment objective and (except for
policies identified as "fundamental" in this Prospectus or the Statement of
Additional Information) 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.
PURCHASE OF SHARES
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") , 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
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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 M. 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, 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 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
at present, the Trustees have no intention of implementing the Plan. 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.
REDEMPTION OF SHARES
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 M. 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
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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.
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.
DETERMINATION OF NET ASSET VALUE
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 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
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.
TAXES
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 will not itself 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 (i) for more
than one year but not more than 18 months and (ii) for more than 18 months are
taxable as such, regardless of how long a shareholder may have owned shares in
the Fund or whether such distributions are 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.
Dividends and distributions on the Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed.
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
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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. 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.
The U.S. Treasury Department and the Internal Revenue Service have announced
that the effective date of these regulations will be amended to apply to
payments made on or after January 1, 2000. Foreign investors in the Fund should
consult their tax advisors with respect to the potential application of these
new regulations.
MANAGEMENT OF THE TRUST
The Fund is advised and managed by David L. Babson and Company
Incorporated, 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 and
Company Incorporated, 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 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 1% 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
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<PAGE> 15
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 1.30% of the Fund's average daily net assets.These fees and expenses and
the terms applicable to them are described under "Shareholder Transaction and
Fund Expenses" above.
Paul S. Szczygiel, a Vice President of the Manager, is primarily
responsible for the day-to-day management of the Fund. He is a Chartered
Financial Analyst. Mr. Szczygiel has been employed by the Manager (and by a
company which has been merged into the Manager) in portfolio management since
1994. Prior to that time, Mr.Szczygiel was employed as an Associate Director at
Bear Stearns.
PERFORMANCE INFORMATION
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.
ORGANIZATION AND CAPITALIZATION OF THE TRUST
The Trust was established on August 1, 1994 as a business trust under
Massachusetts law. The Fund was organized on July 14, 1998, as a series of the
Trust. 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 eight
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.
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<PAGE> 16
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.
SHAREHOLDER INQUIRIES
Shareholders may direct inquiries to the Trust c/o David L. Babson and
Company Incorporated, Marketing Department, Attn: Maureen M. Bates, One Memorial
Drive, Cambridge, Massachusetts 02142 (617-225-3800).
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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<PAGE> 17
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, 16th 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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<PAGE> 18
THE DLB MICRO CAPITALIZATION FUND
STATEMENT OF ADDITIONAL INFORMATION
JULY 14, 1998
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the prospectus of The DLB Micro Capitalization
Fund dated July 14, 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 and Company Incorporated,
Marketing Department, Attention: Maureen Madden Bates, One Memorial Drive,
Cambridge, Massachusetts 02142, or by telephoning (617) 225-3800.
<PAGE> 19
Table of Contents
Caption Page
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
<PAGE> 20
INVESTMENT OBJECTIVES AND POLICIES AND ASSOCIATED RISKS
The investment objective and policies of the DLB Micro Capitalization 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
-1-
<PAGE> 21
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 Trust (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 and to qualify for the favorable tax treatment
accorded regulated investment companies and their shareholders, 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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<PAGE> 22
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.
If the Fund engages in certain transactions, such as firm commitments and
hedging transactions, including hedging transactions in options, futures
contracts, and straddles, or other similar transactions, it will be subject to
special tax rules (including constructive sale, mark-to-market, straddle, wash
sale, and short sale rules), the effect of which may be to 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.
The Fund's investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a discount may)
require the Fund to accrue and distribute income not yet received. In such
cases, the Fund may be required to sell assets (including when it is not
advantageous to do so) to generate the cash necessary to distribute as
dividends to its shareholders all of its income and gains and therefore to
eliminate any tax liability at the Fund level.
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 taxable 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 taxable 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
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<PAGE> 23
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
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 59, 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.
*James W. MacAllen, age 54, Chairman of the Trustees, has been the
President, Chief Executive Officer and a Director of the Manager and a
Managing Director of Babson-Stewart Ivory International since April 1, 1998. He
has been employed as Executive Vice President, Chief Investment Officer and has
served a Director of the Manager since 1996, prior to which he was a Portfolio
Manager for Hagler, Mastrovita & Hewitt,an investment management company, since
1994, and before that, Chief Investment Officer at Wilmington Capital
Management, Inc.
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.
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<PAGE> 24
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.
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; Stockton Baseball Co., USA ,which operates a minor league baseball
team ; 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 44, Treasurer, is the Vice President of the Manager.
Frank L. Tarantino, age 58, 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 and Company Incorporated, 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 fiscal year ended 12/31/97 are shown below:
-5-
<PAGE> 25
<TABLE>
<CAPTION>
Total Compensation
Aggregate from Registrant
Compensation and Fund Complex
Name of Trustee from Registrant* Paid to Trustees
- ------------------------------------------------------------------------------
<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
James W. MacAllen 0 0
</TABLE>
- ---------------
*Includes an annual retainer and an attendance fee for each meeting attended.
**Retired from service as a Trustee effective April 22,1998.
INVESTMENT ADVISORY AND OTHER SERVICES
Management Contracts
The Trust's investment manager, David L. Babson and Company Incorporated
(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 the 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 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 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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<PAGE> 26
Custodial Arrangements. Investors Bank & Trust Company ("IBT") serves as
the Trust's custodian. 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.
Transfer Agent. IBT also serves as the transfer agent for the Trust on
behalf of the Funds.
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. In the case of securities traded in
the over-the-counter markets, 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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<PAGE> 27
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, considers 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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<PAGE> 28
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; Growth Fund, January 20,
1998 and Micro Capitalization Fund, July 14, 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 Trust 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 Trust, 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.
-9-
<PAGE> 29
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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<PAGE> 30
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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<PAGE> 31
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: None
(b) Exhibits:
(1) (a) Agreement and Declaration of Trust*
(b) Amendment No.1 to Agreement and Declaration of
Trust*
(c) Amendment No. 2 to Agreement and Declaration of
Trust
(d) Amendment No. 3 to 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 and Company Incorporated (the "Manager") on
behalf of the DLB Fixed Income Fund*
(b) Management Contract between the Trust and the
Manager on behalf of the DLB Global Small
Capitalization Fund*
(c) Sub-Advisory Agreement between the Manager and
Babson-Stewart Ivory International ("BSII") on
behalf of the DLB Global Small Capitalization
Fund*
(d) Management Contract between the Trust and the
Manager on behalf of the DLB Value Fund*
(e) Management Contract between the Trust and the
Manager on behalf of the DLB Mid Capitalization
Fund*
- ----------
* Incorporated by reference to Registrant's Post-Effective Amendment
No. 5 filed on February 19, 1997.
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(f) Management Contract between the Trust and the
Manager on behalf of the DLB Global Bond Fund**
(g) Sub-Advisory Agreement between the Manager and
Potomac Babson Incorporated ("PBI") on behalf of
the DLB Global Bond Fund**
(h) Management Contract between the Trust and the
Manager on behalf of the DLB Quantitative Equity
Fund**
(i) Management Contract between the Trust and the
Manager on behalf of the DLB Growth Fund
(j) Management Contract between the Trust and the
Manager on behalf of the DLB Micro Capitalization
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) Not Applicable
(12) Not Applicable
(13) Letter of Understanding relating to Initial Capital*
(14) Not Applicable
(15) Not Applicable
(16) Not Applicable
(17) Not Applicable
(18) Not Applicable
(19)(a) Powers of Attorney for Ronald E. Gwozdz, Charles E.
Hugel, Richard A. Nenneman, Richard J. Phelps and
DeAnne B. Dupont*
(b) Power of Attorney for James W. MacAllen
- ----------
* Incorporated by reference to Registrant's Post-Effective Amendment
No. 5 filed on February 19, 1997.
** Incorporated by reference to Registrant's Post-Effective Amendment
No. 4 filed on July 31, 1996.
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Item 25. Persons Controlled by or under Common Control with Registrant.
At and as of the date of this Post-Effective Amendment, the Registrant
did not, directly or indirectly, control any Person. Massachusetts Mutual Life
Insurance Company ("MassMutual") currently owns more than 25% of the outstanding
shares of the Fixed Income Fund, the Global Small Capitalization Fund, the Mid
Capitalization Fund, the Global Bond Fund and the Quantitative Equity Fund and
therefore is deemed to "control" each such Fund within the meaning of the
Investment Company Act of 1940 (the "1940 Act"). Massachusetts Mutual Life
Insurance Company Separate Investment Account N.V. currently owns more than 25%
of the outstanding shares of the Value Fund and therefor is deemed to "control"
such Fund within the meaning of the 1940 Act. The following entities also are,
or may be deemed to be, controlled by MassMutual through the direct or indirect
ownership of such entities' stock.
1. MassMutual Holding Company, a Delaware corporation, all the stock of
which is owned by MassMutual.
2. MML Series Investment Fund, a registered open-end investment company
organized as a Massachusetts business trust, all of the shares of which
are owned by separate accounts of MassMutual and companies controlled
by MassMutual.
3. MassMutual Institutional Funds, a registered open-end investment
company organized as a Massachusetts business trust, all of the shares
of which are owned by MassMutual.
4. MML Bay State Life Insurance Company, a Connecticut life and health
insurer, all the stock of which is owned by MassMutual.
5. MassMutual of Ireland, Ltd., incorporated in the Republic of Ireland,
which formerly operated a group life and health claim office for
MassMutual, all of the stock of which is owned by MassMutual.
6. CM Assurance Company, a Connecticut life, accident, disability and
health insurer, all the stock of which is owned by MassMutual.
7. CM Benefit Insurance Company, a Connecticut life, accident, disability
and health insurer, all the stock of which is owned by MassMutual.
8. C.M. Life Insurance Company, a Connecticut life, accident, disability
and health insurer, all the stock of which is owned by MassMutual.
9. MML Distributors, LLC, formerly known as Connecticut Mutual Financial
Services, LLC, a registered broker-dealer incorporated as a limited
liability company in Connecticut. MassMutual has a 99% ownership
interest and G.R. Phelps & Co. has a 1% ownership interest.
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10. Panorama Series Fund, Inc., a registered open-end investment company
organized as a Maryland corporation. Shares of the fund are sold only
to MassMutual and its affiliates.
11. MassMutual Holding Trust I, a Massachusetts business trust, which acts
as a holding company for certain MassMutual investment subsidiaries,
all of the stock of which is owned by MassMutual Holding Company.
12. MassMutual Holding Trust II, a Massachusetts business trust, which acts
as a holding company for certain MassMutual subsidiaries and
affiliates, all of the stock of which is owned by MassMutual Holding
Company.
13. MassMutual Holding MSC, Inc., a Massachusetts corporation, which acts
as a holding company for MassMutual positions in investment entities
organized outside the United States, all of the stock of which is owned
by MassMutual Holding Company.
14. MML Investors Services, Inc. is a registered broker-dealer incorporated
in Massachusetts. MassMutual Holding Company owns 86% of the capital
stock and G.R. Phelps & Co. owns 4% of the capital stock of MML
Investor Services, Inc.
15. G.R. Phelps & Company, Inc. is a Connecticut corporation which formerly
operated as a securities broker-dealer, all the stock of which is owned
by MassMutual Holding Company.
16. MassMutual International, Inc., a Delaware corporation then acts as a
holding company of foreign insurance companies and provides service to
international insurance companies, all of the stock of which is owned
by MassMutual Holding Company.
17. MassLife Seguros de Vida S.A. (Argentina), a life insurance company
incorporated in Argentina. MassMutual International, Inc. owns 99.99%
of the outstanding capital stock of MassLife Seguros de Vida S.A.
18. Cornerstone Real Estate Advisers, Inc., a Massachusetts equity real
estate advisory corporation, all the stock of which is owned by
MassMutual Holding Trust I.
19. DLB Acquisition Corporation ("DLB Acquisition"), a Delaware
corporation. MassMutual Holding Trust I owns 83.7% of the outstanding
capital stock of DLB Acquisition, which serves as a holding company for
David L. Babson and Company Incorporated.
20. Oppenheimer Acquisition Corporation ("OAC") is a Delaware corporation
which serves as a holding company for OppenheimerFunds, Inc. MassMutual
Holding Trust I owns 89% of the capital stock of OAC.
21. Antares Leveraged Capital Corp., a Delaware corporation that operates
as a finance
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<PAGE> 35
company. MassMutual Holding Trust I owns approximately 99% of the
capital stock of Antares.
22. Charter Oak Capital Management, Inc., a Delaware corporation that
operates as an investment manager. MassMutual Holding Trust I owns 80%
of the capital stock of Charter Oak.
23. MML Realty Management Corporation, a former property manager
incorporated in Massachusetts, all the stock of which is owned by
MassMutual Holding Trust II.
24. Westheimer 335 Suites, Inc. was incorporated in Delaware to serve as a
general partner of the Westheimer 335 Suites Limited Partnership.
MassMutual Holding Trust II owns all the stock of Westheimer 335
Suites, Inc.
25. CM Advantage, Inc., a Connecticut corporation that acts as a general
partner in real estate limited partnerships. MassMutual Holding Trust
II owns all of the outstanding stock.
26. CM International, Inc., a Delaware corporation that holds a mortgage
pool and issues collateralized mortgage obligations. MassMutual Holding
Trust II owns all the outstanding stock of CM International, Inc.
27. CM Property Management, Inc., a Connecticut real estate holding
company, all the stock of which is owned by MassMutual Holding Trust
II.
28. Urban Properties, Inc., a Delaware real estate holding and development
company, all the stock of which is owned by MassMutual Holding Trust
II.
29. MMHC Investment, Inc., a Delaware corporation which is a passive
investor in MassMutual/Darby CBO LLC, MassMutual High Yield Partners
LLC and other MassMutual investments. MassMutual Holding Trust II owns
all the outstanding stock of MMHC Investment, Inc.
30. HYP Management, Inc., a Delaware corporation which is the LLC Manager
for MassMutual High Yield Partners LLC and owns 1.28% of the LLC units
of such entity. MassMutual Holding Trust II owns all the outstanding
stock of HYP Management, Inc.
31. MassMutual Corporate Value Limited, a Cayman Islands corporation that
owns approximately 93% of MassMutual Corporate Value Partners Limited.
MassMutual Holding MSC, Inc. owns 46.19% of the outstanding capital
stock of MassMutual Corporate Value Limited.
32. MassMutual International (Bermuda) Ltd., a Bermuda life insurance
company, all of the stock of which is owned by MassMutual International
Inc.
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<PAGE> 36
33. MassMutual Internacional (Chile) S.A, a Chilean corporation, which
operates as a holding company. MassMutual International Inc. owns 99.9%
of the outstanding shares and MassMutual Holding Company owns the
remaining 0.1% of the shares.
34. MassMutual International (Luxembourg) S.A, a Luxembourg corporation,
which operates as an insurance company. MassMutual International Inc.
owns 99.9% of the outstanding shares and MassMutual Holding Company
owns the remaining 0.1% of the shares.
35. Mass Seguros de Vida S.A., a life insurance company incorporated in
Chile. MassMutual Internacional (Chile), S.A. owns 33.5% of the
outstanding capital stock of Mass Seguros de Vida S.A.
36. MML Insurance Agency, Inc., a licensed insurance broker incorporated in
Massachusetts, all of the stock of which is owned by MML Investors
Services, Inc.
37. MML Securities Corporation, a Massachusetts securities corporation, all
of the stock of which is owned by MML Investors Services, Inc.
38. OppenheimerFunds, Inc., a registered investment adviser incorporated in
Colorado, all of the stock of which is owned by Oppenheimer Acquisition
Corporation.
39. David L. Babson and Company Incorporated, a registered investment
adviser incorporated in Massachusetts, all of the stock of which is
owned by DLB Acquisition.
40. Cornerstone Office Management, LLC, a Delaware limited liability
company that is 50% owned by Cornerstone Real Estate Advisers, Inc. and
50% owned by MML Realty Management Corporation.
41. Westheimer 335 Suites Limited Partnership, a Texas limited partnership
of which Westheimer 335 Suites, Inc. is the general partner.
42. MassMutual High Yield Partners LLC, a Delaware limited liability
company that operates as a high yield bond fund. MassMutual holds
5.28%, MMHC Investment Inc. holds 35.99%, and HYP Management, Inc.
holds 1.28%, for a total of 42.55% of the ownership interest in this
company.
43. MassMutual Corporate Value Partners Limited, a Cayman Islands
corporation that operates as a high yield bond fund. MassMutual
Corporate Value Limited holds approximately 93% ownership interest in
this company.
44. DISA Insurance Services Agency of America, Inc. (Alabama), a licensed
insurance broker incorporated in Alabama. MML Insurance Agency, Inc.
owns all the shares of outstanding stock.
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<PAGE> 37
45. Diversified Insurance Services Agency of America, Inc. (Hawaii), a
licensed insurance broker incorporated in Hawaii. MML Insurance Agency,
Inc. owns all the shares of outstanding stock.
46. MML Insurance Agency of Nevada, Inc., a Nevada corporation that
operates as an insurance broker, all of the stock of which is owned by
MML Insurance Agency, Inc.
47. MML Insurance Agency of Ohio, Inc., a subsidiary of MML Insurance
Agency, Inc. incorporated in the state of Ohio that operates as an
insurance broker. The outstanding capital stock is controlled by MML
Insurance Agency, Inc. by means of a voting trust.
48. MML Insurance Agency of Texas, Inc., a subsidiary of MML Insurance
Agency, Inc. incorporated in the state of Texas, operates as an
insurance broker. The outstanding capital stock is controlled by MML
Insurance Agency, Inc. by means of a voting trust.
49. MML Insurance Agency of Mississippi, P.C., a Mississippi professional
corporation that operates as an insurance broker, all of the stock of
which is owned by MML Insurance Agency, Inc.
50. Origen Inversiones S.A., a Chilean corporation which operates as a
holding company. MassMutual Internacional (Chile) S.A. holds a 33.5%
ownership interest in this corporation.
51. Babson Securities Corporation, a registered broker-dealer incorporated
in Massachusetts, all of the stock of which is owned by David L. Babson
and Company, Incorporated.
52. Potomac Babson Incorporated, a Massachusetts corporation that is a
registered investment adviser. David L. Babson and Company Incorporated
owns 60% of the outstanding shares of Potomac Babson Incorporated.
53. Babson-Stewart-Ivory International, a Massachusetts general
partnership, which operates as a registered investment adviser. David
L. Babson and Company Incorporated holds a 50% ownership interest in
the partnership.
54. Oppenheimer Series Fund Inc., a Maryland corporation and a registered
open-end investment company of which MassMutual and its affiliates own
a majority of the outstanding shares of beneficial interest.
55. Centennial Asset Management Corporation, a Delaware corporation that
serves as the investment adviser and general distributor of the
Centennial Funds. OppenheimerFunds, Inc. owns all the stock of
Centennial Asset Management Corporation.
56. HarbourView Asset Management Corporation, a registered investment
adviser
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incorporated in New York, all the stock of which is owned by
OppenheimerFunds, Inc.
57. OppenheimerFunds Distributor, Inc., a registered broker-dealer
incorporated in New York, all the stock of which is owned by
OppenheimerFunds, Inc.
58. Oppenheimer Partnership Holdings, Inc., a Delaware holding company, all
the stock of which is owned by OppenheimerFunds, Inc.
59. Shareholder Financial Services, Inc., a transfer agent incorporated in
Colorado, all the stock of which is owned by OppenheimerFunds, Inc.
60. Shareholder Services, Inc., a transfer agent incorporated in Colorado,
all the stock of which is owned by OppenheimerFunds, Inc.
61. MultiSource Service, Inc., a Colorado corporation that is a registered
broker-dealer and operates as a clearing broker, 80% of the stock of
which is owned by OppenheimerFunds, Inc.
62. Centennial Capital Corporation, a former sponsor of unit investment
trust that is incorporated in Delaware, all the stock of which is owned
by Centennial Asset Management Corporation.
63. Cornerstone Suburban Office Investors, LP, a Delaware limited
partnership, which operates as a real estate investment company.
Cornerstone Office Management, LLC holds a 1% general partnership
interest in this fund and MassMutual holds a 99% limited partnership
interest.
64. 505 Waterford Park Limited Partnership, a Delaware limited partnership,
which holds title to an office building in Minneapolis, Minnesota. MML
Realty Management Corporation holds a 1% general partnership interest
in this partnership and MassMutual holds a 99% limited partnership
interest.
65. 9048-5434 Quebec, Inc., a Quebec corporation, which operates as the
owner of hotel property in Montreal, Quebec, Canada. MassMutual Holding
MSC, Inc. owns all the shares of 9048-5434 Quebec, Inc.
66. 1279342 Ontario Limited, an Ontario corporation, which operates as the
owner of a hotel property in Ontario, Canada. MassMutual Holding MSC,
Inc. owns all the shares of 1279342 Ontario Limited.
67. Oppenheimer Real Asset Management, Inc., a commodity trading adviser
incorporated in Delaware, all the stock of which is owned by
OppenheimerFunds, Inc.
68. MassMutual/Darby CBO IM Inc., a Delaware corporation which operates as
the LLC Manager of MassMutual/Darby CBO LLC. MMHC Investment, Inc. owns
50% of the
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capital stock of this company.
69. MassMutual/Darby CBO LLC, a Delaware limited liability company that
operates as a fund investing in high yield debt securities of U.S. and
emerging market issuers. MassMutual holds 1.79%, MMHC Investment Inc.
holds 44.91% and MassMutual High Yield Partners LLC holds 2.39% of the
ownership interest in this company.
70. MassMutual Internacional (Argentina) S.A., an Argentina corporation,
which operates as a holding company. MassMutual International Inc. owns
99.9% of the outstanding shares and MassMutual Holding Company owns the
remaining 0.1% of the shares.
71. Compania Seguros de VidaCorp, S.A. a Chilean Insurance company. Origen
Inversiones S.A. owns 99% of the outstanding shares of this company.
72. MassMutual/Carlson CBO N.V., a Netherlands Antilles corporation which
operates as a collateralized bond obligation fund. MassMutual Holding
MSC, Inc. owns 99% of the outstanding shares.
MassMutual is the investment adviser to the following investment
companies, and as such may be deemed to control them.
1. MassMutual Corporate Investors, a registered closed-end Massachusetts
business trust.
2. MassMutual Participation Investors, a registered closed-end
Massachusetts business trust.
3. MML Series Investment Fund, a registered open-end Massachusetts
business trust, all of the shares of which are owned by separate
accounts of MassMutual and companies controlled by MassMutual.
4. MassMutual Institutional Funds, a registered open-end Massachusetts
business trust, all of the shares of which are owned by MassMutual.
5. MassMutual/Carlson CBO N.V., a Netherlands Antilles corporation that
operates as a collateralized bond obligation fund. MassMutual Holding
MSC, Inc. owns 99% of the outstanding shares.
6. MassMutual Corporate Value Partners Limited, a Cayman Islands
corporation that operates as a high-yield bond fund. MassMutual
Corporate Value Limited holds an approximately 93% ownership interest
in this company.
7. MassMutual High Yield Partners LLC, a Delaware limited liability
company, that operates as a high yield bond fund. MassMutual holds
5.28%, MMHC Investment Inc. holds 35.99%, and HYP Management, Inc.
holds 1.28% for a total of 42.55% of the ownership interest in the
company.
8. MassMutual/Darby CBO, LLC, a Delaware limited liability company that
operates as a fund investing in high yield debt securities of U.S. and
emerging market issuers. MassMutual owns 1.79%, MMHC Investment, Inc.
owns 44.91% and Mass Mutual High Yield Partners LLC owns 2.39% of the
ownership interest in this company.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class as of March 31, 1998
-------------- ------------------------
Shares of Beneficial Interest of Fixed Income Fund 14
Shares of Beneficial Interest of Global Small Cap Fund 5
Shares of Beneficial Interest of Value Fund 16
Shares of Beneficial Interest of Mid Cap Fund 5
Shares of Beneficial Interest of Global Bond Fund 5
Shares of Beneficial Interest of Quantitative Equity Fund 7
Shares of Beneficial Interest of Growth Fund 3
Item 27. Indemnification.
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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 the 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 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
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<PAGE> 41
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.
Item 28. Business and Other Connections of Adviser.
No director or officer of David L. Babson and Company Incorporated, 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 at any time
during the past two fiscal years.
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 and the Manager at their respective principal
business offices at One Memorial Drive, Cambridge, Massachusetts 02142, and by
IBT, the Registrant's Custodian and Transfer Agent, at its principal business
office at 200 Clarendon Street, Boston, Massachusetts 02116.
Item 31. Management Services.
There are no management-related service contracts not discussed in Part A
or Part B.
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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.
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NOTICE
A copy of the Agreement and Declaration of Trust of The DLB Fund Group, as
amended, 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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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 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 30th day of April, 1998.
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 to the Registration Statement of The DLB Fund Group has
been signed below by the following persons in the capacities and on the dates
indicated.
* Trustee; Chairman April 30 , 1998
- --------------------
James W. MacAllen
/s/ Ronald E. Gwozdz Trustee; Principal Executive April 30 , 1998
- --------------------
Ronald E. Gwozdz Officer; President
* Treasurer; Principal Financial April 30 , 1998
- --------------------
DeAnne B. Dupont Officer; Principal
Accounting Officer
* Trustee April 30 , 1998
- --------------------
Charles E. Hugel
* Trustee April 30 , 1998
- --------------------
Richard A. Nenneman
* Trustee April 30 , 1998
- --------------------
Richard J. Phelps
*By /s/ Ronald E. Gwozdz
---------------------------
Ronald E. Gwozdz
Attorney-In-Fact
C-14
<PAGE> 45
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
1(c) Amendment No. 2 to Agreement and Declaration of Trust
1(d) Amendment No. 3 to Agreement and Declaration of Trust
5(i) Form of Management Contract between the Trust and the
Manager on behalf of the DLB Growth Fund
5(j) Form of Management Contract between the Trust and the
Manager on behalf of the DLB Micro Capitalization Fund
19(b) Power of Attorney for James W. MacAllen
<PAGE> 1
Exhibit 1(c)
THE DLB FUND GROUP
AMENDMENT NO. 2
AGREEMENT AND DECLARATION OF TRUST
The undersigned, being at least a majority of the Trustees of The DLB
Fund Group, a Massachusetts business trust, created and existing under an
Agreement and Declaration of Trust dated August 1, 1994, as amended by Amendment
No. 1 thereto dated May 16, 1996 (the "Agreement"), a copy of which is on file
in the Office of the Secretary of State of The Commonwealth of Massachusetts, do
hereby direct that this Amendment No.2 be filed with the Secretary of State of
The Commonwealth of Massachusetts and do hereby amend to read in its entirety
the first sentence of Section 6 of Article III of the Agreement as follows:
"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", the "DLB Mid Capitalization Fund", the "DLB
Quantitative Equity Fund", the "DLB Global Bond Fund" and the "DLB
Growth Fund" shall be, and hereby are, established and designated as
separate Series of the Trust."
The foregoing amendment shall become effective as of the time it is
filed with the Secretary of State of The Commonwealth of Massachusetts.
<PAGE> 2
IN WITNESS WHEREOF, we have hereunto set our hands for ourselves and
our successors and assigns this 17th day of December, 1997.
/S/RONALD E. GWOZDZ
----------------------
Ronald E. Gwozdz
/S/CHARLES E. HUGEL
----------------------
Charles E. Hugel
/S/RICHARD A. NENNEMAN
----------------------
Richard A. Nenneman
/S/ RICHARD J. PHELPS
----------------------
Richard J. Phelps
/S/ PETER C. THOMPSON
----------------------
Peter C. Thompson
-2-
<PAGE> 3
COMMONWEALTH OF MASSACHUSETTS )
) ss:
COUNTY OF MIDDLESEX )
Then personally appeared before me each of the above-named Trustees and
acknowledged the foregoing instrument to be their free act and deed.
Dated: December 17, 1997 /S/
-----------------------------
Notary Public
My Commission Expires:
-3-
<PAGE> 1
EXHIBIT 1(D)
THE DLB FUND GROUP
AMENDMENT NO. 3
AGREEMENT AND DECLARATION OF TRUST
The undersigned, being at least a majority of the Trustees of The DLB
Fund Group, a Massachusetts business trust, created and existing under an
Agreement and Declaration of Trust dated August 1, 1994, as amended by Amendment
No. 1 thereto dated May 16, 1996 and Amendment No. 2 thereto dated December 17,
1997 (the "Agreement"), a copy of which is on file in the Office of the
Secretary of State of The Commonwealth of Massachusetts, do hereby direct that
this Amendment No. 3 be filed with the Secretary of State of The Commonwealth of
Massachusetts and do hereby amend the first sentence of Section 6 of Article III
of the Agreement to read in its entirety as follows:
"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", the "DLB Mid Capitalization Fund", the "DLB
Quantitative Equity Fund", the "DLB Global Bond Fund", the "DLB Growth
Fund" and the "DLB Micro Capitalization Fund" shall be, and hereby are,
established and designated as separate Series of the Trust."
The foregoing amendment shall become effective as of the time it is
filed with the Secretary of State of The Commonwealth of Massachusetts.
<PAGE> 2
IN WITNESS WHEREOF, we have hereunto set our hands for ourselves and
our successors and assigns this 22nd day of April, 1998.
/S/ RONALD E. GWOZDZ
---------------------
Ronald E. Gwozdz
/S/ CHARLES E. HUGEL
---------------------
Charles E. Hugel
/S/ JAMES W. MACALLEN
----------------------
James W. MacAllen
/S/ RICHARD A. NENNEMAN
-----------------------
Richard A. Nenneman
/S/ RICHARD J. PHELPS
----------------------
Richard J. Phelps
-2-
<PAGE> 3
COMMONWEALTH OF MASSACHUSETTS )
) ss:
COUNTY OF MIDDLESEX )
Then personally appeared before me each of the above-named Trustees and
acknowledged the foregoing instrument to be their free act and deed.
Dated: April 22, 1998 /S/MAUREEN M. BATES
-------------------
Notary Public
My Commission Expires: 9/22/00
<PAGE> 1
EXHIBIT 5(i)
MANAGEMENT CONTRACT
Management Contract (the "Contract") executed as of January 20, 1998
between THE DLB FUND GROUP, a Massachusetts business trust (the "Trust") on
behalf of its DLB Growth Fund (the "Fund"), and DAVID L. BABSON & CO., INC., a
Massachusetts corporation (the "Manager").
W I T N E S S E T H:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust and to such
policies as the Trustees may determine, the Manager will, at its expense, (i)
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 its portfolio securities and (ii) furnish office space and equipment, provide
bookkeeping and clerical services (excluding determination of net asset value,
shareholder accounting services and fund accounting services) and pay all
salaries, fees and expenses of officers and Trustees of the Trust who are
affiliated with the Manager. In the performance of its duties, the Manager will
comply with the provisions of the Agreement and Declaration of Trust and By-laws
of the Trust and the Fund's stated investment objective, policies and
restrictions.
(b) In placing orders for the portfolio transactions of the Fund, the
Manager will seek the best price and execution available, except to the extent
it may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its best efforts to obtain for
the Fund the most favorable price and execution available, the Manager shall
consider all factors it deems relevant, including, without limitation, the
overall net economic result to the Fund (involving price paid or received and
any commissions and other costs paid), the efficiency with which the transaction
is effected, the ability to effect the transaction at all where a large block is
involved, availability of the broker to stand ready to execute possibly
difficult transactions in the future and the financial strength and stability of
the broker. Subject to such policies as the Trustees may determine, the Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Contract or otherwise solely by reason of its having caused the
Fund to pay a broker or dealer that provides brokerage and research services to
the Manager an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Manager determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Manager's overall
<PAGE> 2
responsibilities with respect to the Fund and to other clients of the Manager as
to which the Manager exercises investment discretion.
(c) Subject to the provisions of the Agreement and Declaration of Trust of
the Trust and the Investment Company Act of 1940, the Manager, at its expense,
may select and contract with investment consultants or sub-advisers (the
"Consultants" or "Sub-Advisers," as applicable) for the Fund. The Manager will
compensate any Consultant or Sub-Adviser of the Fund for its services to the
Fund. The Manager may terminate the services of the Consultant or Sub-Adviser at
any time in its sole discretion and shall at such time assume the
responsibilities of such Consultant or Sub-Adviser unless and until a successor
Consultant or Sub-Adviser is selected.
(d) The Manager shall not be obligated under this Contract to pay any
expenses of or for the Trust or of or for the Fund not expressly assumed by the
Manager pursuant to this Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a partner, shareholder, director, officer or
employee of, or be otherwise interested in, the Manager, and in any person
controlling, controlled by or under common control with the Manager, and that
the Manager and any person controlling, controlled by or under common control
with the Manager may have an interest in the Trust. It is also understood that
the Manager and persons controlling, controlled by or under common control with
the Manager have and may have advisory, management service, distribution or
other contracts with other organizations and persons, and may have other
interests and businesses.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the Manager's
services rendered, for the facilities furnished and for the expenses borne by
the Manager pursuant to Section 1, a fee, computed and paid monthly at the
annual rate of 0.55% of the Fund's average daily net asset value. Such average
daily net asset value of the Fund shall be determined by taking an average of
all of the determinations of such net asset value during such month while this
Contract is in effect. Such fee shall be payable for each month within five (5)
business days after the end of such month.
In the event that expenses of the Fund for any fiscal year should exceed
the expense limitation on investment company expenses imposed by any statute or
regulatory authority of any jurisdiction in which shares of the Fund are
qualified for offer and sale, the compensation due the Manager for such fiscal
year shall be reduced by the amount of such excess by a reduction or refund
thereof. In the event that the expenses of the Fund exceed any expense
limitation which the Manager may, by written notice to the Trust, voluntarily
declare to be effective with respect to the Fund, subject to such terms and
conditions as the Manager may prescribe in such notice,
-2-
<PAGE> 3
the compensation due the Manager shall be reduced, and, if necessary, the
Manager shall bear the Fund's expenses to the extent required by such expense
limitation.
If the Manager shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Fund, and by the vote, cast in person
at a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not interested persons of the Trust or of the
Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall remain
in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this Contract by
not more than sixty days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of the Fund, and
(ii) a majority of the Trustees of the Trust who are not interested
persons of the Trust or of the Manager, by vote cast in person at a
meeting called for the purpose of voting on such approval, do not
specifically approve at least annually the continuance of this Contract,
then this Contract shall automatically terminate at the close of business
on the second anniversary of its execution, or upon the expiration of one
year from the effective date of the last such continuance, whichever is
later; provided, however, that if the continuance of this Contract is
submitted to the shareholders of the Fund for their approval and such
shareholders fail to approve such continuance of this Contract as provided
herein, the Manager may continue to serve hereunder in a manner consistent
with the Investment Company Act of 1940 and the rules and regulations
thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of a
majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
-3-
<PAGE> 4
Termination of this Contract pursuant to this Section 5 shall be without
the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority of
the outstanding shares" of the Fund means the affirmative vote, at a duly called
and held meeting of shareholders, (a) of the holders of 67% or more of the
shares of the Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting are present in person or by proxy, or (b) of
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person,"
"control," "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the rules and
regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; and the phrase
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the rules and regulations
thereunder.
7. NONLIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross negligence on
the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust, or to
any shareholder of the Trust, for any act or omission in the course of, or
connected with, rendering services hereunder.
8. INITIALS "DLB."
The Manager owns the initials "DLB" and such initials may be used by the
Trust only with the consent of the Manager. The Manager consents to the use by
the Trust of the name "The DLB Fund Group" or any other name embodying the
initials "DLB", in such forms as the Manager shall in writing approve, but only
on condition and so long as (i) this Contract shall remain in full force and
effect and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Contract expressed herein to be performed, fulfilled or
complied with by it. No such name shall be used by the Trust at any time or in
any place or for any purposes or under any conditions except as in this section
provided. The foregoing authorization by the Manager to the Trust to use said
initials as part of a business or name is not exclusive of the right of the
Manager itself to use, or to authorize others to use, the same; the Trust
acknowledges and agrees that as between the Manager and the Trust, the Manager
has the exclusive right so to use, or authorize others to use, said initials and
the Trust agrees to take such action as may reasonably be requested by the
Manager to give full effect to the provisions of this section (including,
without limitation, consenting to such use of said initials). Without limiting
the generality of the foregoing, the Trust
-4-
<PAGE> 5
agrees that, upon any termination of this Contract by either party or upon the
violation of any of its provisions by the Trust, the Trust will, at the request
of the Manager made within six months after the Manager has knowledge of such
termination or violation, use its best efforts to change the name of the Trust
so as to eliminate all reference, if any, to the initials "DLB" and will not
thereafter transact any business in a name containing the initials "DLB" in any
form or combination whatsoever, or designate itself as the same entity as or
successor to an entity of such name, or otherwise use the initials "DLB" or any
other reference to the Manager. Such covenants on the part of the Trust shall be
binding upon it, its trustees, officers, stockholders, creditors and all other
persons claiming under or through it.
9. EXERCISE OF VOTING RIGHTS.
Except as instructed otherwise by the Trustees of the Trust, the Manager
shall at its discretion exercise or procure the exercise of any voting right
attaching to investments of the Fund.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on file
with the Secretary of State of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations 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 Fund.
-5-
<PAGE> 6
IN WITNESS WHEREOF, THE DLB FUND GROUP and DAVID L. BABSON & CO., INC.
have each caused this instrument to be signed in duplicate on its behalf by its
duly authorized representative, all as of the day and year first above written.
THE DLB FUND GROUP
By /s/ Ronald E. Gwozdz
-----------------------------
Title: President
DAVID L. BABSON & CO., INC.
By /s/ Ronald E. Gwozdz
-----------------------------
Title: Executive Vice President
-6-
<PAGE> 1
EXHIBIT 5(J)
MANAGEMENT CONTRACT
Management Contract (the "Contract") executed as of ______ __, 1998
between THE DLB FUND GROUP, a Massachusetts business trust (the "Trust") on
behalf of its DLB Micro Capitalization Fund (the "Fund"), and DAVID L. BABSON &
CO., INC., a Massachusetts corporation (the "Manager").
W I T N E S S E T H:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust and to
such policies as the Trustees may determine, the Manager will, at its expense,
(i) 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 its portfolio securities and (ii) furnish office space and
equipment, provide bookkeeping and clerical services (excluding determination of
net asset value, shareholder accounting services and fund accounting services)
and pay all salaries, fees and expenses of officers and Trustees of the Trust
who are affiliated with the Manager. In the performance of its duties, the
Manager will comply with the provisions of the Agreement and Declaration of
Trust and By-laws of the Trust and the Fund's stated investment objective,
policies and restrictions.
(b) In placing orders for the portfolio transactions of the Fund, the
Manager will seek the best price and execution available, except to the extent
it may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its best efforts to obtain for
the Fund the most favorable price and execution available, the Manager shall
consider all factors it deems relevant, including, without limitation, the
overall net economic result to the Fund (involving price paid or received and
any commissions and other costs paid), the efficiency with which the transaction
is effected, the ability to effect the transaction at all where a large block is
involved, availability of the broker to stand ready to execute possibly
difficult transactions in the future and the financial strength and stability of
the broker. Subject to such policies as the Trustees may determine, the Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Contract or otherwise solely by reason of its having caused the
Fund to pay a broker or dealer that provides brokerage and research services to
the Manager an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Manager determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
<PAGE> 2
terms of either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of the Manager as
to which the Manager exercises investment discretion.
(c) Subject to the provisions of the Agreement and Declaration of Trust
of the Trust and the Investment Company Act of 1940, the Manager, at its
expense, may select and contract with investment consultants or sub-advisers
(the "Consultants" or "Sub-Advisers," as applicable) for the Fund. The Manager
will compensate any Consultant or Sub-Adviser of the Fund for its services to
the Fund. The Manager may terminate the services of the Consultant or
Sub-Adviser at any time in its sole discretion and shall at such time assume the
responsibilities of such Consultant or Sub-Adviser unless and until a successor
Consultant or Sub-Adviser is selected.
(d) The Manager shall not be obligated under this Contract to pay any
expenses of or for the Trust or of or for the Fund not expressly assumed by the
Manager pursuant to this Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a partner, shareholder, director, officer or
employee of, or be otherwise interested in, the Manager, and in any person
controlling, controlled by or under common control with the Manager, and that
the Manager and any person controlling, controlled by or under common control
with the Manager may have an interest in the Trust. It is also understood that
the Manager and persons controlling, controlled by or under common control with
the Manager have and may have advisory, management service, distribution or
other contracts with other organizations and persons, and may have other
interests and businesses.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the Manager's
services rendered, for the facilities furnished and for the expenses borne by
the Manager pursuant to Section 1, a fee, computed and paid monthly at the
annual rate of 1% of the Fund's average daily net asset value. Such average
daily net asset value of the Fund shall be determined by taking an average of
all of the determinations of such net asset value during such month while this
Contract is in effect. Such fee shall be payable for each month within five (5)
business days after the end of such month.
In the event that expenses of the Fund for any fiscal year should
exceed the expense limitation on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction in which shares of the Fund
are qualified for offer and sale, the compensation due the Manager for such
fiscal year shall be reduced by the amount of such excess by a reduction or
refund thereof. In the event that the expenses of the Fund exceed any expense
limitation which the Manager may, by written notice to the Trust, voluntarily
declare to be effective with respect to the Fund, subject to such terms and
conditions as the Manager may prescribe in such notice,
-2-
<PAGE> 3
the compensation due the Manager shall be reduced, and, if necessary, the
Manager shall bear the Fund's expenses to the extent required by such expense
limitation.
If the Manager shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Fund, and by the vote, cast in person
at a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not interested persons of the Trust or of the
Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by
the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager, by vote cast in
person at a meeting called for the purpose of voting on such approval,
do not specifically approve at least annually the continuance of this
Contract, then this Contract shall automatically terminate at the close
of business on the second anniversary of its execution, or upon the
expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Contract is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such
continuance of this Contract as provided herein, the Manager may
continue to serve hereunder in a manner consistent with the Investment
Company Act of 1940 and the rules and regulations thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
-3-
<PAGE> 4
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person,"
"control," "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the rules and
regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; and the phrase
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the rules and regulations
thereunder.
7. NONLIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross negligence on
the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust, or to
any shareholder of the Trust, for any act or omission in the course of, or
connected with, rendering services hereunder.
8. INITIALS "DLB."
The Manager owns the initials "DLB" and such initials may be used by
the Trust only with the consent of the Manager. The Manager consents to the use
by the Trust of the name "The DLB Fund Group" or any other name embodying the
initials "DLB", in such forms as the Manager shall in writing approve, but only
on condition and so long as (i) this Contract shall remain in full force and
effect and (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Contract expressed herein to be performed, fulfilled or
complied with by it. No such name shall be used by the Trust at any time or in
any place or for any purposes or under any conditions except as in this section
provided. The foregoing authorization by the Manager to the Trust to use said
initials as part of a business or name is not exclusive of the right of the
Manager itself to use, or to authorize others to use, the same; the Trust
acknowledges and agrees that as between the Manager and the Trust, the Manager
has the exclusive right so to use, or authorize others to use, said initials and
the Trust agrees to take such action as may reasonably be requested by the
Manager to give full effect to the provisions of this section (including,
without limitation, consenting to such use of said initials). Without limiting
the generality of the foregoing, the Trust
-4-
<PAGE> 5
agrees that, upon any termination of this Contract by either party or upon the
violation of any of its provisions by the Trust, the Trust will, at the request
of the Manager made within six months after the Manager has knowledge of such
termination or violation, use its best efforts to change the name of the Trust
so as to eliminate all reference, if any, to the initials "DLB" and will not
thereafter transact any business in a name containing the initials "DLB" in any
form or combination whatsoever, or designate itself as the same entity as or
successor to an entity of such name, or otherwise use the initials "DLB" or any
other reference to the Manager. Such covenants on the part of the Trust shall be
binding upon it, its trustees, officers, stockholders, creditors and all other
persons claiming under or through it.
9. EXERCISE OF VOTING RIGHTS.
Except as instructed otherwise by the Trustees of the Trust, the
Manager shall at its discretion exercise or procure the exercise of any voting
right attaching to investments of the Fund.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
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 Fund.
-5-
<PAGE> 6
IN WITNESS WHEREOF, THE DLB FUND GROUP and DAVID L. BABSON & CO., INC.
have each caused this instrument to be signed in duplicate on its behalf by its
duly authorized representative, all as of the day and year first above written.
THE DLB FUND GROUP
By /s/ Ronald E. Gwozdz
--------------------------
Title: President
DAVID L. BABSON & CO., INC.
By /s/ Ronald E. Gwozdz
-------------------------
Title: Executive Vice President
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EXHIBIT 19(b)
POWER OF ATTORNEY
I, the undersigned trustee and officer of The DLB Fund Group (the
"Trust"), hereby constitute and appoint Ronald E. Gwozdz and Frank L. Tarantino,
and each of them singly, my true and lawful attorneys with full power to sign
for me, and in my name and in the capacities indicated below, the Registration
Statement on Form N-1A with respect to the Trust's shares of beneficial interest
and other matters set forth therein, and any and all amendments to such
Registration Statement, and to file the same with all exhibits thereto, and
other documents in connection thereunder, with the Securities and Exchange
Commission, granting unto my said attorneys, and each of them acting alone, full
power and authority to do and perform each and every act and thing requisite or
necessary to be done in the premises, as fully to all intents and purposes as he
might or could do in person, and hereby ratify and confirm all that said
attorneys or any of them may lawfully do or cause to be done by virtue thereof.
WITNESS my hand on the date set forth below.
Signature Title Date
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/s/ James W. MacAllen Trustee and Chairman of the April 22, 1998
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James W. MacAllen
