<PAGE> 1
Rule 497(e)
File Nos. 33-82366
and 811-08690
PROSPECTUS
August 20, 1999
THE DLB FUND GROUP
This Prospectus offers shares of the following Funds:
The DLB FIXED INCOME FUND seeks to achieve a high level of current
income consistent with preservation of capital through investment in a
portfolio of fixed income securities. The Fund invests primarily in
investment grade securities, or their equivalents, and seeks to sustain an
average dollar weighted portfolio maturity ranging from 5 to 12 years and a
duration ranging from 3.5 to 7 years.
The DLB VALUE FUND seeks long-term capital appreciation primarily
through investment in a portfolio of common stocks of established
companies. The Fund looks for stocks that its investment manager considers
undervalued at the time of purchase.
The DLB GROWTH FUND seeks long-term capital and income growth through
investment primarily in common stocks. The Fund focuses on companies that
have demonstrated, and are anticipated to continue demonstrating,
above-average growth and that the Fund's investment manager believes are
attractively valued.
The DLB DISCIPLINED GROWTH FUND seeks long-term growth of capital. It
uses a proprietary analysis of market factors to guide investment primarily
in common stocks of companies with medium and large capitalizations. The
Fund seeks to invest in securities of companies with strongly rising
earnings prospects and that the Fund's investment manager believes are
underpriced relative to their peers.
The DLB MID CAPITALIZATION FUND seeks long-term capital appreciation
primarily through investment in small to medium-size companies. The Fund
focuses on undervalued companies that have a market capitalization between
$400 million and $2 billion at the time of purchase.
The DLB MICRO CAPITALIZATION FUND seeks 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
Fund's investment manager to be realistically valued.
The DLB GLOBAL SMALL CAPITALIZATION FUND seeks long-term capital
appreciation through investment primarily in common stocks of foreign and
domestic companies with market capitalizations at the time of investment by
the Fund of up to $1.5 billion. The Fund focuses on value in its domestic
investments and growth in its foreign investments. The Fund normally
expects to invest approximately 40% to 60% of its assets outside the United
States.
These Funds are intended primarily to serve as investment vehicles for
institutional investors and high net worth individuals. The minimum initial
investment in a Fund is $100,000, and the minimum for each subsequent investment
in a Fund is $10,000. David L. Babson and Company Incorporated is the Funds'
investment manager (the "Manager"). Babson-Stewart Ivory International serves as
the subadvisor (the "Subadvisor") for the Global Small Capitalization Fund and
is responsible for the Fund's international investments.
This Prospectus describes important information about the Funds. Please read it
carefully and keep it for future reference.
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF THE FUNDS OR PASSED ON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ABOUT THE FUNDS 1
DLB Fixed Income Fund 1
DLB Value Fund 4
DLB Growth Fund 7
DLB Disciplined Growth Fund 8
DLB Mid Capitalization Fund 10
DLB Micro Capitalization Fund 13
DLB Global Small Capitalization Fund 15
Fees and Expenses 18
Descriptions of Principal Investment Risks 20
Policies Applicable to the Funds 27
HOW THE FUNDS ARE MANAGED 29
The Manager 29
The Subadviser 29
Investment Advisory Fees 29
Portfolio Managers 30
Certain Performance Information 31
Related to other Accounts
Managed by the Manager
INVESTING IN THE FUNDS 33
How to Open an Account 33
How to Purchase Shares 34
How to Sell Shares 36
How Share Price Is Determined 37
Distribution and Service (Rule 12b-1) Plans 38
DISTRIBUTIONS 39
TAXES 40
FINANCIAL HIGHLIGHTS 41
APPENDIX 49
ADDITIONAL INVESTMENT TECHNIQUES AND PRACTICES 49
</TABLE>
<PAGE> 3
ABOUT THE FUNDS
DLB FIXED INCOME FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Fixed Income Fund (the "Fixed
Income Fund") is to achieve a high level of current income consistent
with preservation of capital through investment in a portfolio of fixed
income securities.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund will invest substantially all of
its total assets in fixed income securities. The Fund invests primarily
in publicly traded, domestic fixed income securities, including U.S.
Treasury and agency obligations, mortgage- and asset-backed securities,
U.S. dollar-denominated bonds of foreign issuers and corporate debt
securities. The Fund may invest in other fixed income securities, such
as Rule 144A private placements and collateralized mortgage
obligations.
Maturity & Duration The Fund generally will have an average dollar
weighted portfolio maturity ranging from 5 to 12
years. The Fund generally will have a duration
ranging from 3.5 to 7 years. The Fund's portfolio
may include securities with maturities and
durations outside these ranges.
Portfolio Quality The Fund will invest primarily in investment grade
fixed income securities or their equivalents as
determined by the Manager. An investment grade
security is any security that is rated investment
grade at the time of purchase (i.e., at least Baa
as determined by Moody's Investors Service, Inc.,
or BBB as determined by Standard & Poor's Corp.).
Sector Allocation The Manager allocates the Fund's assets among the
wide array of market sectors noted above based on
its assessment of the relative value between the
sectors.
Security Selection In picking individual fixed income securities of
non-governmental issuers, the Manager prefers
companies that possess one or more of the
following characteristics:
* Market share leader
* Strong discretionary cash flow
* Stable to growing earnings
* Conservative accounting
* Established management team
* Favorable capital structure
* Higher levels of tangible
fixed assets
The Manager will also use economic analysis,
interest rate trends, supply and demand trends,
and sector based credit quality ratios as factors
when picking individual securities.
-1-
<PAGE> 4
PRINCIPAL INVESTMENT RISKS
Interest Rate Risk
Credit Risk
Allocation Risk
Company Risk
Market Risk
Restricted Securities Risk
Mortgage- and Asset-Backed Securities Risk
Foreign Issuer Risk
Non-Diversification Risk
You will find a discussion of these risks, and others that may affect
your investment in the Funds, in the section entitled "Description of
Principal Investment Risks," beginning on page 20.
There is no guarantee that the Fund will achieve its objective, and you
could lose money on your investment. Furthermore, the Manager, despite
using various investment and risk analysis techniques, may not achieve
the results expected from an investment in the Fund.
PAST PERFORMANCE
The bar chart below provides an indication of the risks of investing in
the Fund by showing you how the Fund's performance, measured in terms
of the total return for each full calendar year since the Fund's
inception, has varied from year to year. The table following the bar
chart compares the Fund's average annual total returns over time to
those of a broad-based securities market index. As with all mutual
funds, past performance is not a prediction of future performance.
[BAR CHART]
1996 - 3.70%
1997 - 9.03%
1998 - 8.04%
BEST QUARTER: 3RD QUARTER 1998, +4.04% WORST QUARTER: 1ST QUARTER 1996, -0.88%
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (July 25, 1995)
------ ---------------
<S> <C> <C>
FIXED INCOME FUND +8.04% +7.80%
LEHMAN BROTHERS AGGREGATE BOND INDEX +8.68% +8.20%
</TABLE>
DLB Fixed Income Fund -2-
<PAGE> 5
PAST PERFORMANCE (continued)
The LEHMAN BROTHERS AGGREGATE BOND INDEX, a broad-based index composed of
securities from the Lehman Brothers Government/Corporate Bond Index, Lehman
Brothers Mortgage-Backed Securities Index and Lehman Brothers Asset-Backed
Securities Index, represents an index of securities comparable to those in which
the Fund invests.
Both the chart and table assume reinvestment of dividends and distributions. The
performance results in the chart and table reflect the effects of voluntary
expense limitations in effect during the relevant periods. Without these
limitations, the Fund's returns would have been lower.
DLB Fixed Income Fund - 3
<PAGE> 6
DLB VALUE FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Value Fund (the "Value Fund") is
long-term capital appreciation primarily through investment in a
portfolio of common stocks of established companies.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund will invest substantially all of
its total assets in common stocks.
The Fund invests primarily in undervalued stocks of established
companies. Ordinarily, these will be companies with large market
capitalizations (generally $5 billion or greater), although the Fund
may invest in companies with market capitalizations at the time of
purchase of only $1 billion or greater. Securities purchased by the
Fund ordinarily are listed on national securities exchanges or on the
NASDAQ.
The Manager will select securities for investment based on its
assessment of whether the securities are likely to provide favorable
capital appreciation over the long term. The Manager will invest in
common stocks of companies with an earnings and dividend ranking of
"B-" or better by Standard & Poor's, or a financial strength rating of
"B" or better by Value Line, measured at the time of initial
investment. (For a description of these ratings, see "Appendix
Description of Stock Ratings" in the Fund's Statement of Additional
Information.) The Fund may continue to hold, and even increase its
investment in, securities that drop below these ratings after their
initial purchase by the Fund.
When investing the Fund's assets, the Manager strongly considers common
stocks whose current prices do not adequately reflect, in its opinion,
the true value of the underlying company in relation to earnings,
dividends and/or assets. To find suitable investments, the Manager
screens a broad universe of potential stocks using quantitative
measures of valuation and earnings growth. After identifying
inexpensive securities (determined on a relative, rather than an
absolute, basis) that show signs of financial strength, the Manager
concentrates on basic valuation measures, including price-to-earnings
ratios, price-to-book ratios and current yields, to further narrow the
field. The Manager then uses fundamental analysis, emphasizing an
issuer's historic financial performance, balance sheet strength,
management capability and competitive position. In addition, the
Manager may employ company visits and interviews with competitors and
suppliers.
The Fund's valuation characteristics are expected under normal
circumstances to be more favorable than those of the S&P 500 Index
(i.e., lower price-to-earnings ratio, lower price-to-book ratio and
higher gross yield).
PRINCIPAL INVESTMENT RISKS
* Company Risk
* Out-of-Favor Risk
* Market Risk
* Equity Securities Risk
* Non-Diversification Risk
* Allocation Risk
-4-
<PAGE> 7
PRINCIPAL INVESTMENT RISK (Continued)
You will find a discussion of these risks, and others that may affect
your investment in the Funds, in the section entitled "Description of
Principal Investment Risks," beginning on page 20.
There is no guarantee that the Fund will achieve its objective, and you
could lose money on your investment. Furthermore, the Manager, despite
using various investment and risk analysis techniques, may not achieve
the results expected from an investment in the Fund.
PAST PERFORMANCE
The bar chart below provides an indication of the risks of investing in
the Fund by showing you how the Fund's performance, measured in terms
of the total return for each full calendar year since the Fund's
inception, has varied from year to year. The table following the bar
chart compares the Fund's average annual total returns over time to
those of a broad-based securities market index and to those of an index
of securities comparable to those in which the Fund invest.
<PAGE> 8
As with all mutual funds, past performance is not a prediction of
future performance.
[BAR CHART]
1996 - 23.99%
1997 - 26.35%
1998 - 5.25%
BEST QUARTER: 1ST QUARTER 1998, +13.55% WORST QUARTER: 3RD QUARTER 1998, -17.78%
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (July 25, 1995)
------ ---------------
<S> <C> <C>
VALUE FUND +5.25% +17.98%
S&P 500 INDEX +28.57% +28.29%
S&P BARRA LARGE CAP VALUE INDEX +14.67% +23.45%
</TABLE>
DLB Value Fund -5-
<PAGE> 9
PAST PERFORMANCE (Continued)
STANDARD & POOR'S 500 INDEX (S&P 500 INDEX) is a broad-based index of common
stocks frequently used as a general measure of stock market performance.
The S&P BARRA LARGE CAP VALUE INDEX is an unmanaged index of those common stocks
that have the lowest price-to-book ratios comprising half of the aggregate
market capitalization of the S&P 500 Index.
Both the chart and table assume reinvestment of dividends and distributions. The
performance results in the chart and table reflect the effects of voluntary
expense limitations in effect during the relevant periods. Without these
limitations, the Fund's returns would have been lower.
DLB Value Fund - 6
<PAGE> 10
DLB GROWTH FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Growth Fund (the "Growth Fund") is
long-term capital appreciation and income through investment primarily
in common stocks. Current yield is secondary to the long-term growth
objective.
PRINCIPAL INVESTMENT STRATEGIES
The Fund believes the true value of a company's stock is determined by
its earning power, its dividend-paying ability and, in many cases, its
assets. Consequently, the Fund will seek its objective by remaining
substantially fully invested in the common stocks of progressive, well
managed companies in growing industries that have demonstrated both a
consistent and an above-average ability to increase their earnings and
dividends and that have favorable prospects of sustaining such growth.
The Fund's investable universe includes medium-to large-size companies.
The Fund considers medium-size companies to be those with market
capitalizations ranging from $1 billion to $10 billion and large-size
companies to be those with market capitalizations over $10 billion.
To find suitable investments, the Manager first uses database screening
to narrow the Fund's investment universe, based on a company's historic
level of revenue, cash flow and earnings growth. Next, the Manager uses
a quantitative model to sort stocks based on revision to analysts'
earnings estimates and valuation analysis, to identify, within this
narrowed universe, companies with the strongest signs of earnings
growth and the most attractive valuation. The Manager believes that
revisions to analysts' earning estimates form trends that affect a
stock's price. For example, rising earnings estimates generally reflect
a potential share price increase. Valuation analysis helps to identify
stocks with low relative price-to-earnings ratios, which, on average,
tend to outperform stocks with higher price-to-earnings ratios. In the
third and most important step of the process, the Manager conducts
fundamental analysis on the top companies from the output of the
earlier analyses, researching the companies and their managements,
competitors and suppliers. As a result of this analysis, the Manager
selects what it believes to be the best companies for the Fund's
portfolio.
PRINCIPAL INVESTMENT RISKS
* Company Risk
* Market Risk
* Equity Securities Risk
* Non-Diversification Risk
* Allocation Risk
You will find a discussion of these risks, and others that may affect
your investment in the Funds, in the section entitled "Description of
Principal Investment Risks," beginning on page 20.
There is no guarantee that the Fund will achieve its objective, and you
could lose money on your investment. Furthermore, the Manager, despite
using various investment and risk analysis techniques, may not achieve
the results expected from an investment in the Fund.
PAST PERFORMANCE
Because the Fund is new, information on the Fund's performance is not
provided in this section.
-7-
<PAGE> 11
DLB DISCIPLINED GROWTH FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Disciplined Growth Fund (the
"Disciplined Growth Fund") is long-term capital appreciation. It uses a
proprietary analysis of market factors to guide investment primarily in
common stocks of companies with medium and large capitalizations. The
DLB Disciplined Growth Fund was formerly known as the DLB Quantitative
Equity Fund.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all
of its total assets in common stocks and other equity securities.
The Manager believes that a disciplined investment strategy based
predominately on quantitative factors can exploit systematic
mispricings in the securities markets. The Manager seeks to exploit
these mispricings by constructing a portfolio using a proprietary
analytical model. This analytical model uses a two-part quantitative
analysis, involving revisions to analysts' earnings estimates and
valuation analysis, to identify, within this narrowed universe,
companies with the strongest signs of earnings growth and the most
attractive valuation. The Manager believes that revisions to analysts'
earnings estimates form trends that affect a stock's price. For
example, rising earnings estimates generally reflect a potential share
price increase. Valuation analysis helps to identify stocks with low
relative price-to-earnings ratios, which, on average, tend to
outperform stocks with higher price-to-earnings ratios. The Manager
then selects securities for the Fund based on these analyses, with
weight also given to the impact of transaction costs and the
portfolio's overall characteristics, including sector weightings, beta
(volatility), market capitalization, yield and liquidity. The Fund's
characteristics, such as capitalization, yield, sector weight and beta
(volatility), are expected, under normal circumstances, to approximate
those of the Russell 1000 Growth Index.
PRINCIPAL INVESTMENT RISKS
* Company Risk
* Small Company Risk
* Market Risk
* Equity Securities Risk
* Non-Diversification Risk
* Allocation Risk
You will find a discussion of these risks, and others that may affect
your investment in the Funds, in the section entitled "Description of
Principal Investment Risks," beginning on page 20.
There is no guarantee that the Fund will achieve its objective, and you
could lose money on your investment. Furthermore, the Manager, despite
using various investment and risk analysis techniques, may not achieve
the results expected from an investment in the Fund.
-8-
<PAGE> 12
PAST PERFORMANCE
The bar chart below provides an indication of the risks of investing in
the Fund by showing you how the Fund's performance, measured in terms
of the total return for each full calendar year since the Fund's
inception, has varied from year to year. The table following the bar
chart compares the Fund's average annual total returns over time to
those of a broad-based securities market index and to those of an index
of securities comparable to those in which the Fund invests. As with
all mutual funds, past performance is not a prediction of future
performance.
[BAR CHART:]
1997 - 32.23%
1998 - 25.75%
BEST QUARTER: 4TH QUARTER 1998, +23.80% WORST QUARTER: 3RD QUARTER 1998, -15.77%
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (August 26, 1996)
------ -----------------
<S> <C> <C>
DISCIPLINED GROWTH FUND +25.75% +32.39%
S&P 500 INDEX +28.57% +30.96%
RUSSELL 1000 GROWTH INDEX +38.71% +34.96%
</TABLE>
STANDARD & POOR'S 500 INDEX (S&P 500 INDEX) is a broad-based unmanaged index of
common stocks frequently used as a general measure of stock market performance.
The RUSSELL 1000 GROWTH INDEX is an unmanaged index that contains those stocks
with a greater than average growth orientation among the stocks of the 1,000
largest U.S. companies based on total market capitalization. Securities in this
index tend to exhibit higher price-to-book ratios and higher forecasted growth
than the value universe.
Both the chart and table assume reinvestment of dividends and distributions. The
performance results in the chart and table reflect the effects of voluntary
expense limitations in effect during the relevant periods. Without these
limitations, the Fund's returns would have been lower.
DLB Disciplined Growth Fund - 9
<PAGE> 13
DLB MID CAPITALIZATION FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Mid Capitalization Fund (the "Mid
Cap Fund") is long-term capital appreciation primarily through
investment in small to medium-size companies. At the time of investment
by the Fund, each of these companies will have a market capitalization
between $400 million and $2 billion.
PRINCIPAL INVESTMENT STRATEGIES
Market Capitalization: Under normal circumstances, the Fund will invest
substantially all of its total assets in the common stocks of companies
that have a market capitalization between $400 million and $2 billion
at the time of investment. These companies are at the smaller end of
the market capitalization spectrum for what the mutual fund industry
typically considers to be mid cap companies. This spectrum generally
extends up to $5 billion in market capitalization.
Security Selection: In selecting securities for investment, the Manager
strongly considers common stocks of those companies that satisfy the
Fund's market capitalization criteria and whose current prices do not
adequately reflect, in the Manager's opinion, the ongoing business
value of the underlying companies.
Using a core value investment strategy, the Manager finds companies
that are out of favor with investors. The Fund's investment strategy
focuses on bottom-up stock-picking using fundamental analysis, rather
than market or economic forecasts. More specifically, the Fund invests
in companies that the Manager believes possess the following
characteristics:
* Strong financials
* Proven products or services
* Dominant market share
* Sustainable competitive advantage
* Attractive valuation
* Potential for improving margins
* Potential for accelerating earnings
PRINCIPAL INVESTMENT RISKS
* Company Risk
* Small Company Risk
* Market Risk
* Out-of-Favor Risk
* Equity Securities Risk
* Non-Diversification Risk
* Allocation Risk
You will find a discussion of these risks, and others that may affect
your investment in the Funds, in the section entitled "Description of
Principal Investment Risks," beginning on page 20.
There is no guarantee that the Fund will achieve its objective, and you
could lose money on your investment. Furthermore, the Manager, despite
using various investment and risk analysis techniques, may not achieve
the results expected from an investment in the Fund.
-10-
<PAGE> 14
PAST PERFORMANCE
The bar chart below provides an indication of the risks of investing in
the Fund by showing you how the Fund's performance, measured in terms
of the total return for each full calendar year since the Fund's
inception, has varied from year to year. The table following the bar
chart compares the Fund's average annual returns over time to those of
two broad-based securities market indices. As with all mutual funds,
past performance is not a prediction of future performance.
[BAR CHART:]
1996 - 14.75%
1997 - 32.95%
1998 - -8.67%
BEST QUARTER: 2ND QUARTER 1997, +14.69% WORST QUARTER: 3RD QUARTER 1998, -18.30%
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (July 25, 1995)
------ ---------------
<S> <C> <C>
MID CAP FUND -8.67% +12.79%
RUSSELL 2500 INDEX +0.39% +14.67%
RUSSELL 2000 INDEX -2.55% +12.43%
</TABLE>
The RUSSELL 2500 INDEX is a broad-based index that consists of the bottom 500
securities in the Russell 1000 Index and all 2000 securities in the Russell 2000
Index, representing approximately 22% of the Russell 3000 total market
capitalization. This index is a commonly used measure of the stock performance
of small and medium-size companies in the United States.
DLB Mid Capitalization Fund -11-
<PAGE> 15
The RUSSELL 2000 INDEX is a broad-based index that consists of the bottom 2000
securities in the Russell 3000 Index, representing approximately 11% of the
Russell 3000 total market capitalization. This index is a commonly used measure
of the stock performance of small and medium-size companies in the United
States.
Both the chart and table assume reinvestment of dividends and distributions. The
performance results in the chart and table reflect the effects of voluntary
expense limitations in effect during the relevant periods. Without these
limitations, the Fund's returns would have been lower.
DLB Mid Capitalization Fund -12-
<PAGE> 16
DLB MICRO CAPITALIZATION FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Micro Capitalization Fund (the
"Micro Cap Fund") is long-term capital appreciation 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.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund will invest substantially all of
its total assets in common stocks. The Fund generally intends to invest
in stocks of smaller companies with market capitalizations of $10
million to $250 million ("micro cap companies") at the time of purchase
which are listed on a national or regional exchange or traded
over-the-counter with prices quoted daily in the financial press. The
Manager will select investments for the Fund based on its assessment of
whether the securities are likely to provide favorable capital
appreciation over the long term.
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 from their intrinsic value.
The Manager will seek to identify companies that are mispriced as
compared with their expected earnings stream.
Although the Fund's investment process emphasizes fundamental analysis,
the Manager first uses computer screening and industry sources to
narrow the Fund's investment universe. The Manager screens these
candidates by looking for further signs of quality and growth, such as
revenue and earnings per share growth. The Manager then makes decisions
using fundamental analysis on stocks that come through its initial
screens, emphasizing an issuer's historic financial performance,
balance sheet strength, management capability, profitability and
competitive position. Specifically, the Manager looks for the following
characteristics:
* Sustainable competitive advantage
* Strong management
* Long product cycles
* Pricing flexibility
* Small size as a competitive advantage
* High sustained return on investment
* Attractive valuation
* Above-average earnings per share growth
Out of this analysis, the Manager selects what it believes to be the
best companies for the Fund's portfolio.
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.
-13-
<PAGE> 17
PRINCIPAL INVESTMENT RISKS
* Company Risk
* Small Company Risk
* Emerging Growth Companies Risk
* Market Risk
* Equity Securities Risk
* Non-Diversification Risk
* Allocation Risk
You will find a discussion of these risks, and others that may affect
your investment in the Funds, in the section entitled "Description of
Principal Investment Risks," beginning on page 20.
There is no guarantee that the Fund will achieve its objective, and you
could lose money on your investment. Furthermore, the Manager, despite
using various investment and risk analysis techniques, may not achieve
the results expected from an investment in the Fund.
PAST PERFORMANCE
Because the Fund is new, information on the Fund's performance is not
provided in this section.
DLB Micro Capitalization Fund -14-
<PAGE> 18
DLB GLOBAL SMALL CAPITALIZATION FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Global Small Capitalization Fund
(the "Global Small Cap Fund") is long-term capital appreciation through
investment primarily in common stocks of foreign and domestic companies
with market capitalizations at the time of purchase of up to $1.5
billion ("small cap companies").
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund will invest substantially all of
its total assets in common stocks of domestic and foreign small cap
companies. The Fund normally expects to invest approximately 40% to 60%
of its assets outside of the United States and the remaining 60% to 40%
of its assets inside the United States.
The Manager is responsible for the Fund's domestic investments, while
the Subadvisor, Babson-Stewart, Ivory International, is responsible for
the Fund's international investments. The Fund will invest only in
exchange-traded securities and securities traded through established
over-the-counter trading systems that the Manager or the Subadvisor
believes provide comparable liquidity to exchange-traded securities.
The Fund may invest up to 15% of its assets in the emerging markets in
Asia, Latin America, the Middle East, Southern Europe, Eastern Europe
(including the former Soviet Union) and Africa.
The Manager selects domestic investments for the Fund generally based
on value factors, while the Subadvisor selects foreign investments for
the Fund generally based on growth factors.
Domestic Investments: To select domestic stocks for the Fund, the
Manager seeks small cap companies that are
out of favor with investors. The Fund's
domestic investment strategy focuses on
bottom-up stock-picking, using fundamental
analysis rather than making market or
economic forecasts. More specifically, the
Fund invests in companies that the Manager
believes possess the following
characteristics:
* Strong financials
* Proven track record
* Dominant market share
* Sustainable competitive advantage
* Attractive valuation
* Potential for improving margins
* Potential for accelerating earnings
Foreign Investments: For the Fund's overseas investments, the
Subadvisor, using a bottom-up stock
selection strategy, focuses on companies
with high growth potential. Fundamental
analysis identifies companies with above-
average earnings growth, high profitability
and cash flow and strong management. To find
attractive prospects, the Subadvisor uses
in-depth financial analysis and on-site
visits, in addition to evaluating currency
and political issues that might impact a
company's profitability. While growth is the
primary focus of the Fund's international
investments, the Subadvisor also looks to
valuation measures, such as
price-to-earnings and price-to-book ratios,
to make sure that a stock is reasonably
priced before buying it for the Fund.
-15-
<PAGE> 19
PRINCIPAL INVESTMENT RISKS
* Company Risk
* Small Company Risk
* Emerging Growth Companies Risk
* Foreign Issuer Risk
* Foreign Currency Risk
* Foreign Emerging Markets Risk
* Out-of-Favor Risk
* Market Risk
* Equity Securities Risk
* Non-Diversification Risk
* Allocation Risk
You will find a discussion of these risks, and others that may affect
your investment in the Funds, in the section entitled "Description of
Principal Investment Risks," beginning on page 20.
There is no guarantee that the Fund will achieve its objective, and you
could lose money on your investment. Furthermore, the Manager and
Subadvisor, despite using various investment and risk analysis
techniques, may not achieve the results expected from an investment in
the Fund.
PAST PERFORMANCE
The bar chart below provides an indication of the risks of investing in
the Fund by showing you how the Fund's performance, measured in terms
of the total return for each full calendar year since the Fund's
inception, has varied from year to year. The table following the bar
chart compares the Fund's average annual total returns over time to
those of two broad-based securities market indices and to those of an
index of securities comparable to those in which the Fund invests. As
with all mutual funds, past performance is not a prediction of future
performance.
[BARCHART:]
1996 - 9.85%
1997 - 4.66%
1998 - 3.73%
BEST QUARTER: 4TH QUARTER 1998, +13.28% WORST QUARTER: 3RD QUARTER 1998, -17.24%
DLB Global Small Capitalization Fund -16-
<PAGE> 20
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (July 19, 1995)
<S> <C> <C>
GLOBAL SMALL CAP FUND +3.73% +6.35%
SALOMON BROTHERS EMI, EX-U.S. +12.15% +3.18%
RUSSELL 2500 INDEX +0.39% +14.66%
COMBINED INDEX +6.53% +11.62%
</TABLE>
The SALOMON BROTHERS EXTENDED MARKET INDEX (EMI), EX-U.S., is a broad-based
index that represents the bottom 20% of the cumulative available market capital
of the Salomon Brothers Broad Market Index outside the United States. The
Salomon Brothers Broad Market Index fully represents the universe of
institutionally available global stocks. All companies with an available market
capitalization of greater than US $100 million are included in the index.
The RUSSELL 2500 INDEX is a broad-based index that consists of the bottom 500
securities in the Russell 1000 Index and all 2000 securities in the Russell 2000
Index, representing approximately 22% of the Russell 3000 total market
capitalization. This index is a commonly used measure of medium and small stock
performance in the United States.
The COMBINED INDEX is a composite of the Salomon Brothers EMI, ex-U.S. Index,
and the Russell 2500 Index, weighted in each (monthly) period to reflect the
proportions of the Fund's assets invested in international and domestic
securities, respectively, during the period. The Fund calculates the Combined
Index solely for the purpose of presenting an "index" that resembles the Fund's
mix of domestic and foreign investments.
Both the chart and table assume reinvestment of dividends and distributions. The
performance results in the chart and table reflect the effects of voluntary
expense limitations in effect during the relevant periods. Without these
limitations, the Fund's returns would have been lower.
DLB Global Small Capitalization Fund -17-
<PAGE> 21
FEES AND EXPENSES
As an investor, you pay certain fees and expenses in connection with your
investment. These fees and expenses will vary depending on the Fund in which you
invest. The fee table shown below is meant to assist you in understanding these
fees and expenses.
Annual Fund Operating Expenses Expressed as a Percentage of Average
Daily Net Assets (Expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
FIXED DISCIPLINED MICRO GLOBAL
INCOME VALUE GROWTH GROWTH MID CAP CAP SMALL
FUND FUND FUND FUND FUND FUND CAP FUND
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees 0.40% 0.55% 0.55% 0.75% 0.60% 1.00% 1.00%
Distribution and/or Service None None None None None None None
(12b-1) Fees (a)
Other Expenses (b) 0.40% 0.20% 0.40% 0.39% 0.42% 1.06% (d) 1.00%
TOTAL ANNUAL FUND
OPERATING EXPENSES 0.80% 0.75% 0.95% 1.14% 1.02% 2.06% 2.00%
Fee Waiver 0.25% None(e) 0.15% 0.24% 0.12% 0.76% 0.50%
Net Expenses(c) 0.55% 0.80% 0.80% 0.90% 0.90% 1.30% 1.50%
</TABLE>
(a) The Funds have adopted distribution and services plans pursuant to
Rule 12b-1 that permit payments by each Fund at an annual rate of up
to 0.50% of the Fund's average daily net assets. The Trustees,
however, have no intention of implementing the plans during the Funds'
current fiscal year. See "Investing in the Funds --Distribution and
Service (12b-1) Plans."
(b) "Other Expenses" include accounting and audit fees, custodian fees,
transfer agent fees, legal fees, registration fees, printing fees and
fees paid to the DLB Fund Group's independent Trustees.
(c) The Manager has contractually agreed with each Fund to bear certain
expenses for the current fiscal year to the extent that the Fund's
Total Annual Fund Operating Expenses--, other than brokerage
commissions, hedging transaction fees and other investment related
costs, extraordinary, non-recurring and certain other unusual
expenses, such as litigation and other extraordinary legal expenses,
securities lending fees and expenses, and transfer taxes--, would
otherwise exceed the percentages of the Fund's average daily net
assets noted in the bottom line of the chart. Therefore, Net Expenses
represents, for each Fund, the highest fee that you will pay on an
investment in that Fund. The Manager's fee waiver and expense
limitation agreement with the Funds cannot be unilaterally terminated
by the Manager during the Funds 1999 fiscal year.
(d) "Other Expenses" for the Micro Cap Fund are based on estimated amounts
for the current fiscal year.
(e) Note that the actual Total Annual Fund Operating
Expenses of the Value Fund for fiscal year 1998 (0.75%) were less than
the Net Expenses (0.80%) allowable under the fee waiver and expense
limitation reimbursement agreement between the Manager and the Fund as
currently in effect.
-18-
<PAGE> 22
EXAMPLES. These examples are intended to help you compare the cost of investing
in the Funds with the cost of investing in other mutual funds. The examples
assume that you invest $10,000 in each of the Funds for the time periods
indicated, that your investment earns a 5% return each year and that each Fund's
operating expenses remain the same. Since the Funds do not impose any
shareholder fees, the figures shown would be the same whether or not you
redeemed your shares at the end of a period. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Fixed Income Fund $ 56 $231 $ 421 $ 969
Value Fund $ 77 $241 $ 418 $ 933
Growth Fund $ 82 $289 $ 513 $1,157
Disciplined Growth Fund $ 92 $340 $ 607 $1,370
Mid Cap Fund $ 92 $314 $ 554 $1,242
Micro Cap Fund $133 $577 (a) (a)
Global Small Cap Fund $154 $584 $1,040 $2,304
</TABLE>
(a) Because the Micro Cap Fund is new, information on the cost of
investing in the Micro Cap Fund is provided only for periods of 1
and 3 years.
Fees and Expenses -19-
<PAGE> 23
DESCRIPTIONS OF PRINCIPAL INVESTMENT RISKS
This section explains the principal investment risks associated with
investments in the Funds. These risks are the primary reasons for possible
decreases in the value of investments in the Funds. The Fund summaries, on pages
1 to 17, identify which of these risks apply to each Fund. The types of risks
and the extent to which they affect the value of investments in the Funds may
change over time, particularly as the types of investments made by the Funds
change.
ALLOCATION RISK
The Manager will use its judgment when allocating the Fixed Income
Fund's investments among various segments of the fixed income markets. The
Manager may miss attractive investment opportunities by underweighting markets
where there are significant returns. The Fixed Income Fund could lose value if
the Manager overweights markets where there are significant declines.
With regard to all of the Funds, the Manager - and, in the case of the
Global Small Cap Fund, the Subadvisor - has discretion to determine the
investments made by a Fund. The Past Performance sections in the Fund summaries
present index performance results for purposes of comparison, but no Fund is
managed with the goal of mirroring the securities of any particular index. A
Fund's investment style (e.g., value or growth) may result in that Fund being
overweighted or underweighted compared with industry sectors in the index and
may result in that Fund holding securities within a particular sector that are
different from the securities included in the index for that sector. Thus, a
Fund's returns may vary substantially from the performance of the index with
which it is compared.
Applies to: All Funds
COMPANY RISK
A company's economic condition influences the prices of its securities.
The price of any security held by any Fund may rise or fall for a number of
reasons, including but not limited to the following:
* management decisions
* changes in management
* changing demand for the company's goods or services
* changes in or differences between actual and anticipated
earnings
* the potential for takeovers and acquisitions
* increased production costs
* stricter government regulation
* a rating agency downgrade
Applies to: All Funds
-20-
<PAGE> 24
CREDIT RISK
The issuer of a fixed income security may not be able to pay principal
and/or interest when due. The value of a fixed income security generally will
fall if the issuer fails to pay principal or interest when due, a rating agency
downgrades the issuer or other information negatively influences the market's
perceptions of the issuer's credit risk.
Certain lower-rated investment grade fixed income securities and
comparable unrated securities in which a Fund may invest have speculative
characteristics. Changes in economic conditions or adverse developments
affecting particular companies or industries are more likely to lead to a
weakened capacity to make principal and interest payments on such obligations
than in the case of higher-rated securities.
As explained in the section entitled "Policies Applicable to the
Funds," the Fixed Income Fund may hold up to 5% of its assets in
non-investment grade securities. Lower quality debt instruments involve greater
volatility of price and yield, and greater risk of loss of principal and
interest, and generally reflect a greater possibility of an adverse change in
financial condition which would affect the ability of the issuer to make
payments of principal and interest. The market price for lower quality
securities generally responds to short-term corporate and market developments
to a greater extent than higher-rated securities because these developments are
perceived to have a more direct relationship to the ability of an issuer of
lower quality securities to meet its ongoing debt obligations.
Applies to: Fixed Income Fund
EMERGING GROWTH COMPANIES RISK
Investments in emerging growth companies may exhibit more abrupt or
erratic market movements because they may have the following characteristics:
* limited product lines, markets and financial resources,
including access to capital
* management by one or a few key individuals
* securities that are less liquid and fewer in number
* securities that trade less frequently and in limited volume
* shorter operating histories
* less experienced management
These characteristics may cause the securities of emerging growth companies to
suffer steeper than average price declines after disappointing earnings reports
and to be more difficult to sell at satisfactory prices.
Applies to: Micro Cap Fund, Global Small Cap Fund
Description of Principal Investment Risks -21-
<PAGE> 25
EQUITY SECURITIES RISK
All of the Funds except the Fixed Income Fund invest primarily in
common stocks. Common stocks are securities that represent an ownership interest
(or the right to acquire an ownership interest) in a company. Although these
types of securities offer greater potential for long-term growth, they are more
volatile and more risky than some other forms of investment. Therefore, the
value of your investment in a Fund may sometimes decrease.
Applies to: All Funds Except Fixed Income Fund
FOREIGN CURRENCY RISK
Investments in securities denominated in foreign currencies are at
times more volatile than investments in securities denominated in U.S. dollars.
These securities involve the risk that their values, in terms of U.S. dollars,
may fluctuate without any change in the inherent value of the securities due to
changes in the currency exchange rate. In addition, certain foreign countries
present the risk that they may impose currency exchange controls.
As of January 1, 1999, many European countries adopted a single
European currency, the "euro." At this time, the consequences of the adoption of
the new currency on foreign exchange rates, interest rates and the values of
European securities remain unclear. The consequences of adopting the euro may
adversely impact the value and/or volatility of securities held by the Global
Small Cap Fund.
Applies to: Global Small Cap Fund
FOREIGN ISSUER RISK
Investments in the securities of foreign companies and securities
traded primarily in foreign markets are generally less liquid and at times more
volatile than investments in the securities of domestic companies and securities
traded in domestic markets. They also involve a variety of special risks,
including risks of:
* less rigorous accounting, auditing and financial reporting
standards than are customary in the United States
* adverse political or regulatory developments
* higher trading and settlement costs
* limited, slower or more costly legal remedies
* special tax considerations
If a Fund concentrates a substantial amount of its assets in issuers
located in a single country or a limited number of countries, it assumes the
risk that economic, political and social conditions in that country or those
countries will have a significant impact on its investment performance.
Description of Principal Investment Risks -22-
<PAGE> 26
FOREIGN EMERGING MARKETS RISK
In addition, beyond the general risks associated with any foreign
investment, certain foreign countries present the following risks:
* expropriation of assets
* imposition of currency exchange controls
* confiscatory taxation
* limitations on investments in certain issuers in those
countries
* limitations on expatriation of cash and/or assets
* political or financial instability
* adverse diplomatic developments
This set of risks represents the risks generally associated with "emerging
markets." Emerging markets are those countries in the initial stages of their
industrialization cycles with low per capita income. Emerging markets have
demonstrated greater volatility than the markets of developed countries with
economies that are more mature.
If a Fund concentrates a substantial amount of its assets in issuers
located in a single country or a limited number of countries, it assumes the
risk that economic, political and social conditions in that country or those
countries will have a significant impact on its investment performance.
Investment in certain foreign countries or emerging markets may exacerbate this
risk.
Applies to: Global Small Cap Fund
INTEREST RATE RISK
The values of fixed income securities, such as bonds, notes and
asset-backed securities, generally vary inversely to changes in prevailing
interest rates. For example, when interest rates rise, the values of fixed
income securities tend to fall. This risk is generally greater for securities
with longer maturities and durations. Fluctuations in the values of fixed income
securities held by a Fund will not affect the income paid by the Fund but will
affect the value of the Fund's shares.
Interest rate risk will have a greater influence on the price of a
fixed income security if the security has a longer maturity or duration. Fixed
income securities with longer maturities or durations therefore are more
volatile than fixed income securities with shorter maturities or durations. The
average maturity of a Fund's fixed income investments will affect the volatility
of the Fund's share price.
Applies to: Fixed Income Fund
MARKET RISK
The value of the securities held by the Funds may fall due to changing
economic, political or market conditions, the general outlook for corporate
earnings, changing interest rates, investor sentiment or disappointing earnings
results.
Applies to: All Funds
Description of Principal Investment Risks -23-
<PAGE> 27
MORTGAGE- AND ASSET-BACKED SECURITIES RISK
CREDIT RISK
As with fixed income securities generally, mortgage- and asset-backed
securities present the risk that the issuer will default on principal and
interest payments. The U.S. Government or its agencies guarantees the payment of
principal and interest on some mortgage-backed securities, but in other cases it
may be difficult to enforce rights against the assets underlying other mortgage-
and asset-backed securities when an issuer defaults. Nevertheless, insurance or
other forms of guarantee may support mortgage- and asset-backed securities
issued by private lending institutions or other financial intermediaries.
MATURITY RISK
Mortgage-Backed Securities: A mortgage-backed security matures when all
the mortgages in the pool mature or are prepaid. Therefore, mortgage-backed
securities do not have a fixed maturity, and their expected maturities may vary
when interest rates change.
* When interest rates fall, homeowners are more likely to
prepay their mortgage loans. An increased prepayment rate
on a Fund's mortgage-backed securities will result in an
unforeseen loss of interest income to the Fund. In
addition, because prepayments increase when interest rates
fall, the prices of mortgage-backed securities do not
increase as much as those of other fixed income securities
when interest rates fall. Furthermore, increased
prepayments may need to be reinvested, in turn, at lower
interest rates.
* When interest rates rise, homeowners are less likely to
prepay their mortgage loans. A decreased prepayment rate
lengthens the expected maturity of a mortgage-backed
security. Therefore, the prices of mortgage-backed
securities may decrease more than prices of other fixed
income securities when interest rates rise.
Collateralized Mortgage Obligations: Collateralized mortgage
obligations (CMOs) are a type of mortgage-backed security. CMOs are issued in
separate classes with different expected maturities. As its underlying mortgage
pool experiences prepayments, a CMO pays off investors in classes in accordance
with the CMO's governing instrument (generally, the CMO first pays investors who
have purchased classes with shorter expected maturities). By investing in CMOs,
a Fund may better manage the prepayment risk of mortgage-backed securities.
However, unanticipated prepayments may cause the actual maturity of a CMO to be
substantially shorter than its expected maturity, and prepayments at levels
lower than expected may cause the actual maturity of a CMO to be longer than its
expected maturity. These changes in a CMO's maturity could result in declines in
the CMO's value.
Asset-Backed Securities: Asset-backed securities are securities that
are backed by pools of obligations, such as pools of automobile loans,
educational loans and credit card receivables, both secured and unsecured.
Asset-backed securities have prepayment risks similar to those of
mortgage-backed securities. However, the levels of principal prepayment tend not
to vary much with interest rates, and the short-term nature of the assets
underlying asset-backed securities tends to dampen the impact of changes in the
levels of prepayment. In addition, the following may cause holders of
asset-backed securities to experience delays in payment on the securities, which
may result in losses to a Fund holding the securities:
* unanticipated legal or administrative costs of enforcing the
contracts on the assets
* depreciation of the collateral securing the contracts
* damage to or destruction of the collateral securing the
contracts
Applies to: Fixed Income Fund
Description of Principal Investment Risks -24-
<PAGE> 28
NON-DIVERSIFICATION RISK
Each Fund is non-diversified, which means that it may invest a
relatively high percentage of its assets in the securities of relatively few
issuers. Investment in the securities of a limited number of issuers may
increase the risk of loss to a Fund should there be a decline in the market
value of any one portfolio security. Investment in a non-diversified fund
therefore entails greater risks than investment in a diversified fund. Given
that the Funds are not diversified, no Fund is intended to be a complete
investment program.
Applies to: All Funds
OUT-OF-FAVOR RISK
There are risks in investing in unpopular stocks. The factors causing a
stock's unpopularity may continue longer than expected or may worsen. These
factors may range from a drop in earnings expectations to a major business
problem. As a result, the stock's value may drop, or it may not appreciate as
the Manager expected.
Furthermore, unpopular stocks involve the risk that the financial
markets do not follow the company. Therefore, even if a company experiences
improved performance, the price of the company's stock may not rise in
conjunction with the improvement in performance. Thus, the stock's value may not
appreciate as the Manager expects.
Applies to: Value Fund, Mid Cap Fund, Global Small Cap Fund
RESTRICTED SECURITIES RISK
Securities that are not registered under the Securities Act of 1933, as
amended (the "1933 Act"), including securities issued in accordance with Rule
144A under the 1933 Act ("Rule 144A securities"), present certain risks.
Investments in Rule 144A securities could cause the liquidity of a Fund to
decrease if the market's interest for those securities decreases, particularly
because this market is limited to investors known as "qualified institutional
buyers." Under such conditions, a Fund may not be able to sell those securities
when it wants to, and a Fund may have to sell those securities at an
unsatisfactory price. Market quotations may be less readily available for Rule
144A securities, and thus judgment may play a greater role in the valuation of
these securities than it would in the valuation of unrestricted securities.
Applies to: Fixed Income Fund
Description of Principal Investment Risks -25-
<PAGE> 29
SMALL COMPANY RISK
The securities of mid cap, small cap and micro cap companies may change
in value more than those of larger, more established companies because mid cap,
small cap and micro cap companies are more likely to:
* depend upon a single proprietary product or market niche,
* have limited product lines, markets or financial resources,
* depend on a limited management group,
* have fewer, less liquid securities outstanding, and
* have securities that trade less frequently and in limited
volume.
In general, the securities of mid cap, small cap and micro cap companies are
more sensitive to purchase and sale transactions. Therefore, the prices of those
securities tend to be more volatile than the prices of securities of larger
companies.
In many instances, the securities of mid cap, small cap and micro cap
companies are traded only over-the-counter or on a regional securities exchange.
Furthermore, 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 disposing of these
securities, a Fund may have to sell at discounts from quoted prices, settle for
a less than satisfactory price, or make a series of small sales over an extended
period of time.
Applies to: Disciplined Growth Fund, Mid Cap Fund, Micro Cap Fund, Global
Small Cap Fund
Description of Principal Investment Risks -26-
<PAGE> 30
POLICIES APPLICABLE TO THE FUNDS
CASH RESERVES. Each Fund generally intends to stay fully invested in
the types of securities that represent its principal investment strategies.
However, each Fund may hold a portion of its assets in cash, money market
instruments or other high-quality short-term debt obligations readily changeable
to cash, such as treasury bills, commercial paper or repurchase agreements, at
the discretion of the Manager and/or Subadvisor to provide for expenses and
anticipated redemption payments and to carry out an orderly investment program
in accordance with the Fund's investment policies.
CHANGE IN CAPITALIZATION/CHANGE IN CREDIT RATING. At the time of making
an investment, the principal investment strategies of the Value Fund, the Mid
Cap Fund, the Micro Cap Fund and the Global Small Cap Fund limit investments by
those Funds to issuers that meet certain market capitalization requirements. For
example, the Micro Cap Fund may invest only in companies that have market
capitalizations at the time of investment between $10 million and $250 million.
However, once the initial investment has complied with the market capitalization
requirements, the Fund may continue to hold, and may even add to its holdings
of, securities of companies whose market capitalizations later transgress the
specified maximum (or minimum) capitalization. Thus, for instance, the Micro Cap
Fund does not have to sell, and may hold or add to its holdings of, the
securities of an issuer even if that issuer's market capitalization increases
above $250 million after the Fund makes its investment in the issuer.
Similarly, the Fixed Income Fund may hold securities that lose
investment grade quality after the Fund's investment in those securities if, in
the opinion of the Manager, the investment remains appropriate under the
circumstances. If at any time, however, more than 5% of the Fixed Income Fund's
assets are below investment grade quality, the Manager will dispose of such
securities as are necessary to reduce the holdings to 5% or less.
CHANGES TO INVESTMENT OBJECTIVES. Except for policies identified as
"fundamental" in this Prospectus or the Statement of Additional Information, the
Trustees may change the investment objective and policies of each Fund without
shareholder approval. Any such change may result in a Fund having an investment
objective and policies different from the objective and policies which you
considered appropriate when you invested in the Fund. A Fund will notify you of
any changes in its investment objective or policies through a revised prospectus
or other written communication.
-27-
<PAGE> 31
PRIMARY INVESTMENTS
Under normal circumstances, each Fund will invest not less than 65% of
its assets in the types of securities listed below:
Name of Fund Type of Securities
- ------------ ------------------
Fixed Income Fund Fixed income securities
Value Fund Common stocks
Growth Fund Common stocks
Disciplined Growth Fund Common stocks and other equity securities
MidCap Fund Common stocks of companies that have a
market capitalization between $400 million
and $2 billion at the time of purchase
MicroCap Fund Common stocks
Global Small Cap Fund Common stocks of domestic and foreign
companies with market capitalization at
the time of investment by the Fund of up
to $1.5 billion.
TEMPORARY DEFENSIVE POSITION. The Growth Fund may from time to time,
take temporary defensive positions in securities convertible into common stock,
preferred stock, high grade bonds or other defensive issues in attempting to
respond to adverse market, economic, political, or other conditions. Keep in
mind that a temporary defensive strategy still has the possibility of losing
money and may prevent the Fund from achieving its investment objective.
YEAR 2000 ISSUE. Like other businesses and governments around the
world, the Funds could be adversely affected if the computer systems used by
their service providers, the companies with which they do business, and the
companies in which they invest have problems processing date-related information
from and after January 1, 2000. This is commonly known as the "Year 2000 issue."
The Funds, which have no application systems of their own, are working
diligently with their service providers (including the Manager, the Subadvisor
and Investors Bank & Trust Company, the Funds' custodian and transfer agent) to
identify and remedy any Year 2000 issues. Furthermore, the Manager and
Subadvisor consider a company's efforts to address the Year 2000 issue as a
factor when making investment decisions for the Funds. The Funds do not
anticipate that the Year 2000 issue will have a significant negative effect on
an investment in any Fund. However, the Funds can give no assurance that their
actions and those of their service providers will preclude all significant
negative effects.
Policies Applicable to the Funds -28-
<PAGE> 32
HOW THE FUNDS ARE MANAGED
THE MANAGER
Each Fund is advised and managed by its Manager, David L. Babson and Company
Incorporated. Founded in 1940, the Manager provides investment advisory services
to a substantial number of institutional and other investors, including other
registered investment companies. As of December 31, 1998, the Manager had over
$21 billion in assets under management. The Manager is located at One Memorial
Drive, Cambridge, Massachusetts 02142.
Under separate Management Contracts relating to each Fund, the Manager selects
and reviews each Fund's investments and provides executive and other personnel
for the management of The DLB Fund Group. The Manager carries out its duties
subject to the policies adopted by The DLB Fund Group's Board of Trustees.
THE SUBADVISOR
The Manager employs at its own expense the Subadvisor, Babson-Stewart Ivory
International, to manage the international component of the Global Small Cap
Fund's portfolio. The Subadvisor was established in 1987 and is a general
partnership owned 50% by the Manager and 50% by Stewart-Ivory & Company
(International) Limited ("Stewart Ivory"), an indirect wholly owned subsidiary
of Stewart Ivory (Holdings) Ltd., which is controlled by its executives. Stewart
Ivory and its predecessor organizations have been managing investments
internationally from Edinburgh since 1873. The Subadvisor provides investment
advisory services to a substantial number of institutional and other investors,
including other registered investment companies. The Subadvisor is located at
One Memorial Drive, Cambridge, Massachusetts 02142.
INVESTMENT ADVISORY FEES
For the fiscal year ended December 31, 1998, each Fund paid the Manager an
investment management fee as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEE
(AS A % OF AVERAGE
NAME OF FUND DAILY NET ASSETS)
<S> <C>
Fixed Income Fund 0.40%
Value Fund 0.55
Growth Fund (annualized) 0.55
Disciplined Growth Fund 0.75
Mid Cap Fund 0.60
Micro Cap Fund (annualized) 1.00
Global Small Cap Fund 1.00
</TABLE>
The fees shown above do not reflect the Manager's partial waiver of its
management fee in 1998, as the Manager does not intend to waive any of its
management fees in 1999. However, the Manager has contractually agreed to limit
each Fund's total expenses for the current fiscal year as described in the
section entitled "Fees and Expenses."
-29-
<PAGE> 33
PORTFOLIO MANAGERS
FUND PORTFOLIO MANAGER
FIXED INCOME Edward L. Martin, Executive Vice President and Director
FUND of the Manager, is primarily responsible for the
day-to-day management of the Fixed Income Fund. Mr.
Martin, who has 23 years of investment experience, has
been employed by the Manager in portfolio management for
over 14 years. He has managed the Fund since its
inception. Mr. Martin is assisted in the day-to-day
management of the Fund by a team of investment
professionals at the Manager.
VALUE FUND Anthony M. Maramarco, Senior Vice President, is primarily
responsible for the day-to-day management of the Value
Fund. Mr. Maramarco, who has 18 years of investment
experience, has been employed by the Manager (and a
company which merged into the Manager) since 1993.
Effective May 27, 1999, Mr. Maramarco became primarily
responsible for the day-to-day management of the Fund,
replacing Roland W. Whitridge as a portfolio manager. For
the past two years, he has assisted Mr. Whitridge in the
management of the Fund. Mr. Maramarco is assisted in the
day-to-day management of the Fund by a team of investment
professionals at the Manager.
GROWTH FUND James B. Gribbell, Senior Vice President of the Manager,
is primarily responsible for the day-to-day management of
the Growth Fund. Mr. Gribbell, a Chartered Financial
Analyst with 10 years of investment experience, has been
employed by the Manager in portfolio management for over
5 years. He has managed the Fund since its inception. Mr.
Gribbell is assisted in the day-to-day management of the
Fund by a team of investment professionals at the
Manager.
DISCIPLINED Michael Caplan, Senior Vice President of the Manager, is
GROWTH FUND primarily responsible for the day-to-day management of
the Disciplined Growth Fund. Mr. Caplan, who has 13 years
of investment experience, has managed the Fund since its
inception. Mr. Caplan has been employed by the Manager
(and a company which merged into the Manager) since 1995,
prior to which he was employed as a portfolio manager by
State Street Global Advisors. Mr. Caplan is assisted in
the day- to-day management of the Fund by Kathleen
Golden.
MID CAP FUND Dennis J. Scannell, Senior Vice President of the Manager,
is primarily responsible for the day-to-day management of
the Mid Cap Fund. Mr. Scannell, who has 14 years of
investment experience, has been employed by the Manager
in portfolio management for over 5 years. He has managed
the Fund since August 1998. Mr. Scannell is assisted in
the day-to-day management of the Fund by a team of
investment professionals at the Manager.
MICRO CAP FUND PAUL S. SZCZYGIEL, Senior Vice President of the Manager,
is primarily responsible for the day-to-day management of
the Micro Cap Fund. Mr. Szczygiel, a Chartered Financial
Analyst with over 14 years of investment experience, has
managed the Fund since its inception. Mr. Szczygiel has
been employed by the Manager (and a company which merged
into the Manager) in portfolio management since 1994,
prior to which he was an Associate Director at Bear
Stearns. Mr. Szczygiel is assisted in the day-to-day
management of the Fund by a team of investment
professionals at the Manager.
-30-
<PAGE> 34
GLOBAL SMALL DENNIS J. SCANNELL, Senior Vice President of the Manager,
CAP FUND and JAMES W. BURNS and JOHN G.L. WRIGHT, each Managing
Directors of the Subadvisor, are primarily responsible
for the day-to-day management of the Global Small Cap
Fund. Mr. Scannell, who has 14 years of investment
experience, has been employed by the Manager in portfolio
management for over 5 years. He has managed the Fund's
domestic investments since August 1998. Mr. Scannell is
assisted in the day-to- day management of the Fund's
domestic investments by a team of investment
professionals at the Manager.
Mr. Wright, who has been employed by the Subadviser for
over 27 years, and Mr. Burns, who has been employed by
the Subadviser for over 8 years, each have been
responsible for management of the Fund's international
investments since its inception. They are assisted by a
team of investment professionals who have
responsibilities for specific countries.
CERTAIN PERFORMANCE INFORMATION RELATED TO OTHER ACCOUNTS MANAGED BY THE MANAGER
The information presented below provides related performance information which
may be useful to consider before investing in the Growth Fund or the Micro Cap
Fund. THE QUOTED PERFORMANCE DATA BELOW DOES NOT REPRESENT THE HISTORICAL
PERFORMANCE OF THE GROWTH FUND OR THE MICRO CAP FUND AND SHOULD NOT BE
INTERPRETED AS BEING INDICATIVE OF THE PAST OR FUTURE PERFORMANCE OF THOSE
FUNDS. The expenses, timing of purchase and sales of portfolio securities,
availability of cash flows, brokerage commissions, portfolio composition and
investment policies of the Growth and Micro Cap Funds, as well as any changes in
market conditions, are all reasons that the performance results of those Funds
may vary from the related performance results shown below.
GROWTH
In addition to serving as investment advisor to The DLB Fund Group, the Manager
has also served as the investment subadvisor to the Babson Growth Fund, a
registered investment company, since its inception. The performance information
presented below represents the average annual total returns (expenses) of the
Babson Growth Fund for the one-, three-, five- and ten-year periods ended
December 31, 1998, adjusted to give effect to the fees and expenses of the
Growth Fund (without giving effect to any expense waivers or reimbursements).
James B. Gribbell, the individual primarily responsible for the day-to-day
management of the Growth Fund, has been the individual primarily responsible for
the day-to-day management of the Babson Growth Fund since January 1, 1996. From
1993 to 1995, Mr. Gribbell was the assistant portfolio manager of the Babson
Growth Fund.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Babson Growth Fund* 32.09% 27.13% 21.80% 16.17%
Russell 1000 Growth Index** 38.71% 30.62% 25.70% 20.57%
------- ------- ------ ------
</TABLE>
* As of December 31, 1998, the Babson Growth Fund had $512 million in assets.
** The RUSSELL 1000 GROWTH INDEX is an unmanaged index that contains those
Russell 1000 Index securities with a greater-than-average growth orientation.
Securities in this index tend to exhibit higher price-to-book and
price-to-earnings ratios, lower dividend yields and higher forecasted growth
than the value universe.
-31-
<PAGE> 35
MICRO CAP In addition to serving as investment advisor to The DLB Fund Group,
the Manager has also served since May 1, 1994, as the investment manager of
other private accounts that have investment objectives, policies and strategies
that are substantially similar (although not necessarily identical) to those of
the Micro Cap Fund (collectively, the "Micro Cap Accounts"). The performance
information shown below, which represents the average annual total returns for
the one- and three-year and since inception periods ended December 31, 1998, is
based on a composite of the Micro Cap Accounts, which has been adjusted to give
effect to the estimated fees and expenses of the Micro Cap Fund (without giving
effect to any expense waivers or reimbursements) during the 1999 fiscal year.
The performance of the composite shown below has been calculated in accordance
with standards established by the Association for Investment Management and
Research. The performance represents total return, which includes capital
appreciation and income.
Unlike the Micro Cap Fund, the Micro Cap Accounts include accounts that were not
registered under the Investment Company Act of 1940 and therefore were not
subject to certain investment limitations, diversification requirements, and
other restrictions imposed by that Act. In addition, the Micro Cap Accounts
include accounts that were not subject to Subchapter M of the Internal Revenue
Code, which imposes certain limitations on the investment operations of the
Fund. If the Micro Cap Accounts had all been registered under the 1940 Act, and
subject to Subchapter M of the Code, their performance might have been adversely
affected.
Paul S. Szczygiel, the individual primarily responsible for the day-to-day
management of the Micro Cap Fund, has been the individual primarily responsible
for the day-to-day management of the Micro Cap Accounts since the inception of
those accounts on May 1, 1994.
<TABLE>
<CAPTION>
Since
Inception
1 Year 3 Years (5/1/94)
------ ------- ---------
<S> <C> <C> <C>
Micro Cap Accounts* -6.28% 29.30% 28.32%
Russell 2000 Index** -2.55% 11.58% 18.27%
</TABLE>
* As of December 31, 1998, the composite had 4 accounts totaling $28.5 million
in assets.
** THE RUSSELL 2000 INDEX is an unmanaged index that consists of the bottom
2,000 securities in the Russell 3000 Index, representing approximately 11% of
the Russell 3000 total market capitalization. This index is a commonly used
measure of the stock performance of small and medium-size companies in the
United States.
-32-
<PAGE> 36
INVESTING IN THE FUNDS
HOW TO OPEN AN ACCOUNT
Before investing in a Fund you will need to open an account with The DLB Fund
Group. You can open an account by completing and returning to The DLB Fund Group
a signed account application. Account applications are available from The DLB
Fund Group, whose address and toll free number are provided on the back of this
Prospectus.
When completing the application, please be sure to provide your social security
number or taxpayer identification number on the application and designate the
account(s) to which funds or securities may be transferred upon redemption.
Designation of additional accounts or any change in the accounts originally
designated must be made by you in writing, with the signature medallion
guaranteed by a commercial bank, a member firm of a domestic securities exchange
or one of certain other financial institutions.
-33-
<PAGE> 37
HOW TO PURCHASE SHARES
You may purchase shares of each Fund directly from The DLB Fund Group on any day
when the NYSE is open for business. The NYSE is closed on weekend days, national
holidays and Good Friday. Before placing an order for Fund shares, you should
call the Manager at 1-888-722-2766, Attn:
Maureen M. Bates.
The purchase price of a share of the Fund is the net asset value next determined
after your purchase order is received in good order. In most cases, if the
Funds' Transfer Agent, Investors Bank & Trust Company ("IBT"), does not receive
the consideration before the relevant deadline, The DLB Fund Group will not
consider the purchase to be in good order. This means that you must resubmit the
purchase order and consideration on the following business day, unless IBT can
credit the consideration to the account of a specific Fund. The Funds do not
impose a sales charge on purchases.
MINIMUM INVESTMENT. The minimum initial investment in a Fund is $100,000, and
the minimum for each subsequent investment is $10,000. If you open multiple
accounts with The DLB Fund Group, you may aggregate your investments in the
Funds to satisfy the minimum investment requirement. You may also satisfy the
minimum initial investment requirement by making an initial investment of at
least $25,000 in a Fund and investing the remainder of the $100,000 minimum
initial investment within 12 months.
PURCHASES. You may purchase shares of a Fund utilizing the following methods:
-> CASH (by wire transfer only). You must transmit all federal
funds to IBT to Account No. 777777722 for the account of the
specific Fund. ("Federal funds" are monies credited to IBT's
account with the Federal Reserve Bank of Boston.) The deadline
for wiring federal funds is 2:00 p.m. Eastern time.
-> SECURITIES (only by transferring common stocks on deposit at
The Depository Trust Company ("DTC") or appropriate fixed
income securities, which the Manager has determined are
acceptable). In the case of an investment in-kind, you must
place your securities on deposit at DTC by 4:00 p.m. Eastern
time, the deadline for transferring those securities to the
account designated by the custodian for the Funds (IBT).
The Manager will not accept securities, in exchange for Fund
shares, unless:
-> the Manager, in its sole discretion, believes the
securities are appropriate investments for the Fund.
(The Manager will accept securities, in exchange for
Fund shares, for investment only and not for
resale.);
-> you represent and agree 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
-> the securities may be acquired under the investment
restrictions applicable to the relevant Fund.
-34-
<PAGE> 38
The Manager will value securities it accepts in exchange for
Fund shares in accordance with the relevant Fund's procedures
for valuation described under "How Share Price Is Determined"
as of the time of the next determination of net asset value
after acceptance. All dividends, interest, subscription or
other rights that are reflected in the market price of
accepted securities at the time of valuation become the
property of the relevant Fund and must be delivered to The DLB
Fund Group upon receipt by you from the issuer. If you
purchase Fund shares in exchange for securities, you may, if
you are subject to Federal income taxation, recognize a gain
or loss for federal income tax purposes, depending upon your
basis in the securities tendered. In all cases, the Manager
reserves the right to reject any particular investment.
-> CASH AND SECURITIES. You will need to follow the above
instructions for purchases made with a combination of cash and
securities.
Purchases will be made in full and fractional shares of each Fund calculated to
three decimal places. The DLB Fund Group will send to shareholders written
confirmation (including a statement of shares owned) at the time of each
transaction.
The DLB Fund Group reserves the right at any time to reject an order.
-35-
<PAGE> 39
HOW TO SELL SHARES
You may redeem Fund shares on any day when the NYSE is open for business.
The Funds will redeem their shares at a price equal to their net asset value per
share next determined after IBT receives the redemption request in good order. A
redemption request is in good order if it:
-> includes the correct name in which shares are registered, your
account number and the number of shares or the dollar amount
of shares to be redeemed; and
-> 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.)
There is no redemption fee for any of the Funds.
REDEMPTION REQUESTS. You should send redemption requests to The DLB Fund Group.
In order to help facilitate the timely payment of redemption proceeds, you
should telephone the Manager at 1-888-722-2766, Attn: Maureen M. Bates, at least
two days before submitting a request.
PAYMENT OF REDEMPTION PROCEEDS. The DLB Fund Group will make payment on
redemption as promptly as possible and in any event within seven days after IBT
receives your redemption request in good order.
-> CASH PAYMENTS. The DLB Fund Group will make cash payments
generally by transfer of Federal funds for payment into your
account the next business day following the redemption
request.
-> IN KIND. If the Manager determines, in its sole discretion,
that it would be detrimental to the best interests of the
remaining shareholders of a Fund to make payment wholly or
partly in cash, the Fund may instead pay the redemption price
in whole or in part by a distribution in kind of readily
marketable securities held by the Fund. The DLB Fund Group
will transfer and deliver in-kind redemptions as you direct.
The DLB Fund Group will value securities used to redeem Fund
shares in kind in accordance with the relevant Fund's
procedures for valuation described under "How Share Price Is
Determined." You generally will incur brokerage charges on the
sale of any securities that you receive in payment of
redemptions.
Each Fund may suspend the right of redemption and may postpone payment for more
than seven days when the NYSE 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 NYSE 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.
-36-
<PAGE> 40
HOW SHARE PRICE IS DETERMINED
The DLB Fund Group determines the net asset value of a share of each Fund
at 4:15 p.m., Eastern time, on each day that the NYSE is open. The DLB Fund
Group does not accept orders or compute a Fund's their net asset value on days
when the NYSE is closed.
The DLB Fund Group determines the net asset value per share for a Fund 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.
The DLB Fund Group values portfolio securities based on market value or, where
market quotations are not readily available, based on fair value. More
specifically, The DLB Fund Group values portfolio securities (including options
and futures contracts) for which market quotations are available at the last
quoted sale price, or, if there is no reported sale, at the closing bid price.
The DLB Fund Group values securities traded in the over-the-counter market at
the most recent bid price as obtained from one or more dealers that make markets
in the securities. For portfolio securities that are traded both in the
over-the-counter market and on one or more stock exchanges, The DLB Fund Group
will value the securities according to the broadest and most representative
market. The DLB Fund Group values unlisted securities for which market
quotations are not readily available 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 one or more brokers. 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 DLB Fund Group's Board of
Trustees. Determination of fair value will be based upon those 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.
FOREIGN SECURITIES. Because of time zone differences, foreign exchanges and
securities markets will usually be closed before the closing of the NYSE.
Therefore, The DLB Fund Group will determine the value of foreign securities as
of the closing of those exchanges and securities markets. Events affecting the
values of foreign securities, however, may occasionally occur between the
closings of such exchanges and securities markets and the time a Fund determines
its net asset value. If an event materially affecting the value of foreign
securities occurs during this period, then The DLB Fund Group will value such
securities at fair value as determined in good faith in accordance with
procedures adopted by the Trustees. In addition, certain foreign markets may be
open on days when the Funds do not accept orders or price their shares.
The prices of foreign securities are quoted in foreign currencies. The DLB Fund
Group converts the values of foreign currencies into U.S. dollars at the rate of
exchange prevailing at the time it determines net asset value. Changes in the
exchange rate, therefore, will affect the net asset value of shares of a Fund
even when there has been no change in the values of the foreign securities
measured in terms of the currency in which they are denominated.
-37-
<PAGE> 41
DISTRIBUTION AND SERVICE (RULE 12B-1) PLANS
The DLB Fund Group has adopted a distribution and services plan for each
Fund (each, a "Plan") under Rule 12b-1 of the Investment Company Act of 1940.
The Trustees, however, have no intention of implementing any Plan during The DLB
Fund Group's current fiscal year. The purposes of a Plan, if implemented, would
be to compensate and/or reimburse investment dealers and other persons for
services provided and expenses incurred in promoting sales of shares, reducing
redemptions or improving services provided to shareholders by such dealers and
other persons. Each Plan would permit a Fund to pay an annual asset-based charge
of up to 0.50% for these purposes, 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 Trustees would determine the
amount of payments under each Plan, and the specific purposes for which they are
made.
-38-
<PAGE> 42
DISTRIBUTIONS
Each Fund intends to pay out as dividends substantially all of its net
investment income (which comes from dividends and any interest it receives from
its investments and net short-term capital gains). Each Fund also intends to
distribute substantially all of its net long-term capital gains, if any, after
giving effect to any available capital loss carryovers. The Fixed Income Fund's
policy is to declare and pay distributions of its net investment income monthly.
The policy of each other Fund is to declare and pay distributions of its net
investment income at least annually. Each Fund also intends to distribute net
short-term capital gains and net long-term capital gains at least annually.
Each Fund will pay all dividends and/or distributions in shares of the relevant
Fund, at net asset value, unless you elect to receive cash. You may make this
election by marking the appropriate box on the application form or by writing to
The DLB Fund Group.
-39-
<PAGE> 43
TAXES
The following is a general summary of the federal income tax consequences for
the Funds and shareholders who are U.S. citizens or residents or domestic
corporations. You should consult your own tax advisors about the tax
consequences of investments in a Fund in light of your particular tax
situations. You should also consult your own tax advisors about consequences
under foreign, state, local or other applicable tax laws.
Each Fund is treated as a separate taxable entity for federal income tax
purposes. Each Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended. By
so qualifying, a Fund itself will not pay federal income tax on the income and
gain distributed annually to its shareholders. Distributions of ordinary income
and short-term capital gains, whether received in cash or reinvested shares,
will be taxable as ordinary income to shareholders subject to federal income
tax. Designated distributions of long-term capital gains are taxable as such,
regardless of how long a shareholder may have owned shares in the Fund or
whether the distributions are received in cash or in reinvested shares.
The sale, exchange or redemption of Fund shares may give rise to a gain or loss.
In general, any gain realized upon a taxable disposition of shares will be
treated as long-term capital gain if the shares have been held for more than 12
months. Otherwise, the gain on the sale, exchange or redemption of Fund shares
will be treated as short-term capital gain. In general, any loss realized upon a
taxable disposition of shares will be treated as long-term capital loss if the
shares have been held for more than 12 months, and otherwise as short-term
capital loss. Any loss recognized on the sale or disposition of shares of the
Fund 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 of the Fund. All or a portion of any loss realized
upon a taxable disposition of a Fund's shares will be disallowed if other shares
of the same Fund are purchased within 30 days before or after the disposition.
In such a case, the basis of the newly purchased shares will be adjusted to
reflect the disallowed loss.
Distributions are taxable to a shareholder of a Fund even if they are paid
from income or gains earned by the Fund prior to the shareholder's investment
(and thus were included in the price paid by the shareholder). The DLB Fund
Group will provide federal tax information annually, including information about
dividends and distributions paid during the preceding year.
FOREIGN WITHHOLDING TAXES. The Global Small Cap Fund's investments in foreign
securities may be subject to foreign withholding taxes. In that case, the Fund's
yield on those securities would be decreased. Shareholders may be entitled to
claim a credit or deduction with respect to foreign taxes. In addition, the
Fund's investments in foreign securities or foreign currencies may increase or
accelerate the Fund's recognition of ordinary income and may affect the timing
or amount of the Fund's distributions.
-40-
<PAGE> 44
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each Fund's
financial performance for the period of the Fund's operations (since each Fund
is less than 5 years old). Certain information reflects financial results for a
single Fund share. The total returns in each table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by Deloitte & Touche LLP, whose report, along with each Fund's financial
statements, is included in each Fund's Annual Report. All Annual Reports are
available upon request as indicated on the back cover page of this Prospectus.
-41-
<PAGE> 45
DLB FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
Years Ended December 31, December 31,
1998 1997 1996 1995**
---- ---- ---- ------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value- beginning of period $ 10.61 $ 10.11 $ 10.26 $10.00
------- ------- ------- ------
Income from investment operations:
Net investment income .63 .42 .53 .28
Net realized and unrealized gain (loss) on investments .20 .49 (.15) .37
------- ------- ------- ------
.83 .91 .38 .65
------- ------- ------- ------
Less distributions to shareholders:
From net investment income (1) (.63) (.41) (.53) (.28)
From net realized gain on investments (.09) -- -- (.11)
------- ------- ------- ------
(.72) (.41) (.53) (.39)
------- ------- ------- ------
Net asset value- end of period $ 10.72 $ 10.61 $ 10.11 $10.26
======= ======= ======= ======
Total return 8.04% 9.03% 3.70% 14.75%*
Ratios and Supplemental Data:
Ratio of expenses to average net assets .55% .55% .55% .55%*
Ratio of net investment income to average net assets 5.71% 5.74% 6.36% 6.24%*
Portfolio turnover 50% 44% 65% 42%
Net assets at end of period (000 omitted) $33,858 $32,155 $15,261 $5,325
</TABLE>
The Manager has agreed with the Fund to reduce its management fee and bear
certain expenses, such that the Fund's total expenses do not exceed .55% of
average daily net assets. Without such agreement and had the 1995 expenses been
limited to that permitted by state securities law, the investment income per
share and ratios would have been:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net investment income $ .60 $ .38 $ .44 $ .19
Ratios (to average net assets):
Expenses .80% 1.06% 1.66% 2.50%*
Net investment income 5.45% 5.22% 5.25% 4.33%*
</TABLE>
* Annualized
* * For the period from July 25, 1995 (commencement of operations) to
December 31, 1995.
(1) Distributions in excess of net investment income for the year ended
December 31, 1996 were less than $.01 per share.
-42-
<PAGE> 46
DLB VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
Years Ended December 31, December 31,
1998 1997 1996 1995**
--------- -------- -------- ------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value- beginning of period $ 14.91 $ 12.53 $ 10.58 $ 10.00
--------- -------- -------- --------
Income from investment operations:
Net investment income .27 .15 .16 .09
Net realized and unrealized gain on investments .50 3.15 2.38 .73
--------- -------- -------- --------
0.77 3.30 2.54 .82
--------- -------- -------- --------
Less distributions to shareholders:
From net investment income (0.27) (.15) (.16) (.09)
From net realized gain on investments (0.93) (.70) (.41) (.15)
In excess of net realized gain on investment -- (.07) (.02) --
--------- -------- -------- --------
(1.20) (.92) (.59) (.24)
--------- -------- -------- --------
Net asset value- end of period $ 14.48 $ 14.91 $ 12.53 $ 10.58
========= ======== ======== ========
Total Return 5.25% 26.35% 23.99% 18.64% *
Ratios and Supplemental Data:
Ratio of expenses to average net assets .60% .71% .80% .80% *
Ratio of net investment income to average net assets 1.85% 1.40% 1.56% 2.02% *
Portfolio turnover 21% 25% 23% 7%
Net assets at end of period (000 omitted) $ 71,911 $ 56,449 $ 19,228 $ 10,818
</TABLE>
The Manager has agreed with the Fund to reduce its management fee and bear
certain expenses, such that the Fund's total expenses do not exceed .80% of
average daily net assets. Without such agreement, the investment income per
share and ratios would have been:
<TABLE>
<S> <C> <C> <C> <C>
Net investment income $ .25 $ .13 $ .09 $ .02
Ratios (to average net assets):
Expenses .75% .92% 1.50% 2.43% *
Net investment income 1.69% 1.19% .86% 0.40% *
</TABLE>
* Annualized
** For the period from July 25, 1995 (commencement of operations) to December
31, 1995.
-43-
<PAGE> 47
DLB GROWTH FUND
FINANCIAL HIGHLIGHTS
PERIOD FROM JANUARY 20, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Per share data (for a share outstanding throughout
the period):
Net asset value- beginning of period $ 10.00
--------
Income from investment operations:
Net investment income .05
Net realized and unrealized gain on investments 3.09
--------
3.14
========
Less distributions to shareholders:
From net investment income (.05)
From net gain on investments (0.27)
--------
(0.32)
--------
Net asset value- end of period $ 12.82
========
Total return 31.33%
Ratios and Supplemental Data:
Ratio of expenses to average net assets .80% *
Ratio of net investment income to average net assets .48% *
Portfolio turnover 34%
Net assets at end of period (000 omitted) $ 33,054
</TABLE>
The Manager has agreed with the Fund to reduce its management fee and bear
certain expenses, such that the Fund's total expenses do not exceed .80% of
average daily net assets. Without such agreement, the investment income per
share and ratios would have been:
<TABLE>
<S> <C>
Net investment income $ .03
Ratios (to average net assets):
Expenses .95% *
Net investment income .32% *
</TABLE>
* Annualized
-44-
<PAGE> 48
DLB DISCIPLINED GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------- Period Ended
December 31,
1998 1997 1996 **
---------- ---------- ------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value- beginning of period $ 14.55 $ 11.66 $ 10.00
---------- ---------- ----------
Income from investment operations:
Net investment income 0.01 .03 .01
Net realized and unrealized gain on investments 3.72 3.73 1.84
---------- ---------- ----------
3.73 3.76 1.85
---------- ---------- ----------
Less distributions to shareholders:
From net investment income (.01) (.03) (.01)
From net realized gain on investments (2.38) (.83) (.18)
In excess of net realized gain on investment -- (.01) --
---------- ---------- ----------
(2.39) (.87) (.19)
---------- ---------- ----------
Net asset value- end of period $ 15.89 $ 14.55 $ 11.66
========== ========== ==========
Total Return 25.71% 32.23% 18.51%
Ratios and Supplemental Data:
Ratio of expenses to average net assets .90% .90% .90% *
Ratio of net investment income to average net assets .08% .23% .43% *
Portfolio turnover 81% 46% 10%
Net assets at end of period (000 omitted) $ 35,308 $ 25,069 $ 13,897
</TABLE>
The Manager has agreed with the Fund to reduce its management fee and bear
certain expenses, such that the Fund's total expenses do not exceed .90% of
average daily net assets. Without such agreement, the investment loss per share
and ratios would have been:
<TABLE>
<S> <C> <C> <C>
Net investment loss $ (.02) $ (.06) $ (.01)
Ratios (to average net assets):
Expenses 1.14% 1.55% 1.82% *
Net investment loss (.17%) (.43%) (.50%)*
</TABLE>
* Annualized
** For the period from August 26, 1996 (commencement of operations) to
December 31, 1996.
-45-
<PAGE> 49
DLB MID CAPITALIZATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, Period Ended
------------------------ December 31,
1998 1997 1996 1995**
---- ---- ---- ------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
Net asset value- beginning of period $ 14.19 $ 11.51 $ 10.75 $ 10.00
------- ------- ------- -------
Income from investment operations:
Net investment income .10 .08 .15 .08
Net realized and unrealized gain (loss) on investments (1.36) 3.72 1.44 .84
------- ------- ------- -------
(1.26) 3.80 1.59 .92
------- ------- ------- -------
Less distributions to shareholders:
From net investment income (1) (.10) (.08) (.15) (.08)
From net realized gain on investments (2) (.93) (1.04) (.68) (.09)
------- ------- ------- -------
(1.03) (1.12) (.83) (.17)
------- ------- ------- -------
Net asset value-end of period $ 11.90 $ 14.19 $ 11.51 $10.75
======= ======= ======= ======
Total Return (8.63%) 32.95% 14.75% 21.17% *
Ratios and Supplemental Data:
Ratio of expenses to average net assets .76% .90% .90% .90% *
Ratio of net investment income to average net assets .77% .78% 1.28% 1.90% *
Portfolio turnover 28% 32% 25% 6%
Net assets at end of period (000 omitted) $ 29,940 $27,358 $ 13,690 $ 10,929
</TABLE>
The Manager has agreed with the Fund to reduce its management fee and bear
certain expenses, such that the Fund's total expenses do not exceed .90% of
average daily net assets. Without such agreement and had the 1995 expenses been
limited to that permitted by state securities law, the investment income per
share and ratios would have been:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net investment income $ .06 $ .04 $ .05 $ .01
Ratios (to average net assets):
Expenses 1.02% 1.33% 1.77% 2.50% *
Net investment income .51% .36% .41% .32% *
</TABLE>
* Annualized
** For the period from July 25, 1995 (commencement of operations) to
December 31, 1995.
(1) Distributions in excess of net investment income for the year ended
December 31, 1996 were less than $.01 per share.
(2) Distributions in excess of net realized gain on investments for the
year ended December 31, 1996 were less than $.01 per share.
-46-
<PAGE> 50
DLB MICRO CAPITALIZATION FUND
FINANCIAL HIGHLIGHTS
PERIOD FROM JULY 20, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Per share data (for a share outstanding throughout
the period):
Net asset value- beginning of period $ 10.00
--------
Loss from investment operations:
Net investment loss (.01)
Net realized and unrealized loss on investments (1.38)
--------
(1.39)
--------
Net asset value- end of period $ 8.61
========
Total return (13.90%)
Ratios and Supplemental Data:
Ratio of expenses to average net assets 1.30% *
Ratio of net investment loss to average net assets (.28%)*
Portfolio turnover 51%
Net assets at end of period (000 omitted) $ 19,910
</TABLE>
The Manager has agreed with the Fund to reduce its management fee and bear
certain expenses, such that the Fund's total expenses do not exceed 1.30% of
average daily net assets. Without such agreement, the investment loss per share
and ratios would have been:
<TABLE>
<S> <C>
Net investment loss $ (.03)
Ratios (to average net assets):
Expenses 1.77% *
Net investment loss (.76%)*
</TABLE>
* Annualized
-47-
<PAGE> 51
DLB GLOBAL SMALL CAPITALIZATION FUND
FINANCIAL HIGHLIGHTS
- ---------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, Period Ended
-------------------------------------- December 31,
1998 1997 1996 1995**
---- ---- ---- ------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value- beginning of period $ 11.27 $ 11.19 $ 10.33 $ 10.00
---------- ---------- ---------- -------
Income from investment operations:
Net investment income .01 .02 .01 .07
Net realized and unrealized gain on investments .40 .50 1.01 .33
--- --- ---- ---
.41 .52 1.02 .40
--- --- ---- ---
Less distributions to shareholders:
From net investment income (.01) (.01) (.01) (.07)
In excess of net investment income (.08) -- -- --
From net realized gain on investments (.81) (.02) (.11) --
In excess of net realized gain on investment -- (.01) (.04) --
Tax return of capital -- (.40) -- --
--- --- ---- ---
(.90) (.44) (.16) (.07)
---- ---- ---- ----
Net asset value- end of period $ 10.78 $ 11.27 $ 11.19 $ 10.33
========== ========== ========== =======
Total return 3.73% 4.66% 9.85% 4.07%
Ratios and Supplemental Data:
Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.46% *
Ratio of net investment income to average net assets .10% .22% .09% 1.46% *
Portfolio turnover 36% 44% 22% 5%
Net assets at end of period (000 omitted) $ 14,310 $ 13,887 $ 12,586 $10,509
</TABLE>
The Manager has agreed with the Fund to reduce its management fee and bear
certain expenses, such that the Fund's total expenses do not exceed 1.50% of
average daily net assets. Without such agreement and had the 1995 expenses been
limited to that permitted by state securities law, the investment income (loss)
per share and ratios would have been:
<TABLE>
<S> <C> <C> <C> <C>
Net investment income (loss) $ (.08) $ (.05) $ (.10) $ .02
Ratios (to average net assets):
Expenses 2.00% 2.14% 2.36% 2.50% *
Net investment income (loss) (.40%) (.42%) (.77%) .42% *
</TABLE>
* Annualized
* * For the period from July 19, 1995 (commencement of operations) to
December 31, 1995.
-48-
<PAGE> 52
APPENDIX
ADDITIONAL INVESTMENT TECHNIQUES AND PRACTICES
In addition to each Fund's principal investment strategies, which are described
in the section entitled "About the Funds," each Fund may, in pursuing its
investment objective, engage in other investment techniques and practices. The
chart below identifies those additional, non-principal investment techniques and
practices that are described in the SAI.
INVESTMENT TECHNIQUES/PRACTICES FUNDS
DEBT SECURITIES
Convertible Securities All Funds
Loans and Other Direct Indebtedness Fixed Income Fund
Money Market Instruments All Funds
Municipal Bonds Fixed Income Fund
Strips and Residuals Fixed Income Fund
Zero Coupon Securities Fixed Income Fund
Equity Securities
Preferred Stocks All Funds
REITs All Funds
Foreign Equity Exposure
American Depositary Receipts (ADRs) All Funds
Foreign Equity Securities All Funds
Futures Contracts Disciplined Growth Fund
Indexed Securities Fixed Income Fund
Lending of Portfolio Securities All Funds
Leverage Transactions
Dollar-Roll Transactions Fixed Income Fund
Reverse Repurchase Agreements Fixed Income Fund
Options Disciplined Growth Fund
Portfolio Turnover All Funds
Repurchase Agreements All Funds
Restricted/Illiquid Securities All Funds
Interest Rate Swaps and Related Instruments Fixed Income Fund
Warrants and Rights All Funds (Other than Fixed
Income Fund)
"When-Issued" Securities All Funds
-49-
<PAGE> 53
THE DLB FUND GROUP
One Memorial Drive
Cambridge, Massachusetts 02142
LEARNING MORE ABOUT THE FUNDS
You can learn more about the Funds in The DLB Fund Group by reading the
Funds' ANNUAL AND SEMIANNUAL REPORTS and the STATEMENT OF ADDITIONAL INFORMATION
(SAI). This information is available free upon request.
In the Annual and Semi-Annual Reports, you will find a listing of
portfolio securities and a discussion of market conditions and investment
strategies that significantly affected each Fund's performance during the period
covered by the Report. The SAI includes additional information about each Fund's
investment policies, risks and operations. The SAI is incorporated by reference
into this Prospectus (which means it is legally considered a part of this
Prospectus).
HOW TO OBTAIN MORE INFORMATION
FROM THE DLB FUND GROUP: You may request information about the Funds
(including the Annual and Semi-Annual Reports and the SAI) or make shareholder
inquiries by any of the following methods:
By regular mail or The DLB Fund Group
overnight courier c/o David L. Babson and Company Incorporated
Marketing Department
Attention: Maureen M. Bates
One Memorial Drive
Cambridge, Massachusetts 02142
By telephone 1-888-722-2766
Call for account or Fund information Monday
through Friday 9 a.m. to 5 p.m. (Eastern time).
By telefax 1-617-494-1511
FROM THE SEC: You may review and copy information about the Funds
(including the SAI) at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information regarding the operation of the SEC's public
reference room. You may obtain copies of this information, upon payment of a
copying fee, by writing to the SEC's Public Reference Section, Washington, DC
20549-6009. Alternatively, if you have access to the Internet, you may obtain
information about the Funds from the SEC's Internet site at http://www.sec.gov.
Investment Company Act File Number: 811-08690.
