================================================================================
THE DLB FUND GROUP
Supplement to Prospectus dated September 4, 2000
DLB GLOBAL SMALL CAPITALIZATION FUND
The Board of Trustees which oversees the DLB Global Small
Capitalization Fund (the "Global Small Cap Fund") has decided to terminate the
Global Small Cap Fund effective October 31, 2000, or as soon thereafter as is
practicable (the "Termination Date"). In connection with the termination of the
Global Small Cap Fund, the Board of Trustees has suspended the sale of the
Global Small Cap Fund's shares effective July 19, 2000, except that shareholders
as of July 19, 2000 will be permitted to purchase additional shares of the
Global Small Cap Fund through October 2, 2000. Consequently, purchase orders for
Global Small Cap Fund shares from individuals who were not shareholders of the
Fund as of July 19, 2000 received on or after July 20, 2000 will be rejected by
the Global Small Cap Fund, and all purchase orders for Global Small Cap Fund
shares received on or after October 2, 2000 will be rejected by the Global Small
Cap Fund.
Shareholders of the Global Small Cap Fund as of July 19, 2000 have
received a formal Notice of Termination which is designed to answer any
questions concerning the Global Small Cap Fund's termination. As described more
fully in this Notice, until the Termination Date, shareholders may choose to
redeem their Global Small Cap Fund shares. If a shareholder takes no action, his
or her shares will automatically be redeemed on the Termination Date and the
proceeds distributed to such shareholder promptly thereafter.
THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 5, 2000
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<PAGE>
THE DLB FUND GROUP
This Prospectus offers shares of the following Funds:
o 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.
o DLB VALUE FUND
seeks long-term capital appreciation primarily through investment in a
portfolio of common stocks of established companies.
o DLB CORE GROWTH FUND
seeks long-term capital and income growth through investment primarily
in common stocks.
o DLB DISCIPLINED GROWTH FUND
seeks long-term capital appreciation.
o DLB ENTERPRISE III FUND
seeks long-term capital appreciation primarily through investment in
small to medium-size companies.
o DLB SMALL COMPANY OPPORTUNITIES FUND
seeks 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 Fund's investment manager to
be realistically valued.
o 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.
o DLB STEWART IVORY INTERNATIONAL FUND
seeks long-term growth of capital through investment primarily in
equity securities of foreign companies. Income is an incidental
consideration.
o DLB STEWART IVORY EMERGING MARKETS FUND
seeks long-term growth of capital primarily through equity investments
that will generally be concentrated in what the Fund's investment
subadvisor considers to be the developing markets around the world.
David L. Babson & Company Inc. (the "Manager") is the investment manager for
each of the 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 STATEMENT TO THE CONTRARY IS A CRIME.
PROSPECTUS
September 4, 2000
<PAGE>
TABLE OF CONTENTS
ABOUT THE FUNDS 1
DLB Fixed Income Fund 1
DLB Value Fund 5
DLB Core Growth Fund 8
DLB Disciplined Growth Fund 11
DLB Enterprise III Fund 14
DLB Small Company Opportunities Fund 17
DLB Global Small Capitalization Fund 21
DLB Stewart Ivory International Fund 25
DLB Stewart Ivory Emerging Markets Fund 30
DESCRIPTIONS OF PRINCIPAL INVESTMENT RISKS 34
TEMPORARY DEFENSIVE POSITIONS 40
HOW THE FUNDS ARE MANAGED 41
The Manager 41
The Subadvisor 41
Investment Advisory Fees 41
Portfolio Managers 41
Certain Performance Information Related to Other Accounts 43
INVESTING IN THE FUNDS 46
How to Open an Account 46
How to Purchase Shares 46
How to Sell Shares 47
How Share Price is Determined 48
Distribution and Service (Rule 12b-1) Plans 49
Principal Underwriter 49
DISTRIBUTIONS 50
TAXES 51
FINANCIAL HIGHLIGHTS 52
APPENDIX 62
Additional Investment Policies and Risk Considerations 62
<PAGE>
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 (but no less
than 65%) of its total assets in fixed income securities.
MARKET SECTORS: 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, taking into account the average
life of mortgage and asset-backed securities. 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 Ratings Services, a division of
The McGraw-Hill Companies, Inc.).
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:
o Market share leader
o Established management team
o Strong discretionary cash flow
o Favorable capital structure
o Stable to growing earnings
o High levels of tangible fixed assets
o Conservative accounting
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.
PRINCIPAL INVESTMENT RISKS
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.
The Fixed Income Fund is subject to several risks, any of which could cause you
to lose money. These include:
INTEREST RATE RISK: When interest rates rise, the value of fixed income
securities in the Fund's portfolio will generally fall. This risk is greater for
securities and portfolios with longer maturities or durations.
-1-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
CREDIT RISK: Credit risk is the risk that the issuer of a fixed income security
will not be able to pay interest and principal when due. The value of a fixed
income security will generally fall if the issuer defaults on its obligation to
pay principal or interest, a rating agency downgrades the issuer's credit
rating, or other news affects the market's perception of the issuer's credit
risk. Credit risk is greater for lower quality and sovereign debt issues.
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
ALLOCATION RISK: The Fund will allocate its investments among various segments
of the fixed income markets based on judgments made by the Manager. The Fund
could miss attractive investment opportunities by underweighting markets where
there are significant returns, or could lose value overweighting markets where
there are significant declines.
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in an issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
MORTGAGE- AND ASSET-BACKED SECURITIES RISK: A mortgage-backed security matures
when all 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 rise or fall. When interest rates fall, prepayments on
mortgage loans increase. An increased rate of prepayments on the Fund's
mortgage-backed securities will result in an unforeseen loss of interest income
to the Fund as the Fund may be required to reinvest assets at a lower interest
rate. Because prepayments increase when interest rates fall, the prices of
mortgage-backed securities do not increase as much as other fixed income
securities when interest rates fall. When interest rates rise, prepayments on
mortgage loans are more likely to decrease. A decreased rate of prepayments
lengthens the expected maturity of a mortgage-backed security. Therefore, the
prices of mortgage-backed securities may decrease more than the prices of other
fixed income securities when interest rates rise. Asset-backed securities not
only have prepayment risks similar to mortgage-backed securities, but also have
additional risks relating to the collateral securing the contracts.
RESTRICTED SECURITIES RISK: The Fund's investments in unregistered or restricted
securities are subject to liquidity risk. This means that because there may not
be adequate supply or demand for a security, it may be harder to purchase or
sell at a satisfactory price.
NON-DIVERSIFICATION RISK: Because the Fund may invest its assets in a small
number of issuers, the Fund is more susceptible than a diversified fund to any
economic, political or regulatory event adversely affecting a particular issuer.
FOREIGN ISSUER RISK: The securities of foreign issuers can be less liquid and
more volatile than those of U.S. issuers due to increased risk of adverse
issuer, political, regulatory, market or economic developments.
You will find a more detailed discussion of these risks, and others that may
affect your investment in the Funds, in the section entitled "Descriptions of
Principal Investment Risks," beginning on page 34.
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
-2-
<PAGE>
PAST PERFORMANCE (CONT.)
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.
1996 1997 1998 1999
---- ---- ---- ----
3.70% 9.03% 8.04% -1.61%
Best Quarter: 3rd Quarter 1998, +4.04% Worst Quarter: 2nd Quarter 1999, -1.34%
The Fund's year-to-date return through June 30, 2000 was 3.37%
================================================================================
Average Annual Total Returns
For the periods ended December 31, 1999
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Since Inception
1 Year 7/25/95
--------------------------------------------------------------------------------
Fixed Income Fund -1.61% 5.63%
Lehman Brothers -0.82% 6.13%
Aggregate Bond Index
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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.
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 0.40%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2) 0.39%
------
Total Annual Fund Operating Expenses 0.79%
Fee Waiver (0.24%)
------
Net Expenses (3) 0.55%
======
(1) The Fund has adopted a distribution and service plan pursuant to Rule 12b-1
that permits payments by the Fund at an annual rate of up to 0.50% of the
Fund's average daily net assets. The Trustees, however, have no intention
of implementing the plan during the Fund's current fiscal year. See
"Investing in the Funds-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
(3) The Manager has contractually agreed with the 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 percentage of the Fund's average daily
net assets noted in the bottom line of the table. The Manager's expense
agreement with the Fund may not be terminated prior to September 4, 2001.
In addition, it will automatically continue for successive one-year periods
unless either The DLB Fund Group or the Manager terminates the agreement by
giving six months' notice to the other party.
-3-
<PAGE>
EXPENSE INFORMATION (CONT.)
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment earns a 5% return each year and that the Fund's
operating expenses remain the same, except that the expense reimbursement is
reflected only for the first year of each period. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$56 $228 $415 $956
Since the Fund does 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.
-4-
<PAGE>
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 (but no less
than 65%) 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 makes
decisions using 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 yields).
PRINCIPAL INVESTMENT RISKS
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.
The Value Fund is subject to several risks, any of which could cause you to lose
money. These include:
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
EQUITY SECURITIES RISK: Equity securities tend to be more volatile and riskier
than some other
-5-
<PAGE>
PRINCIPAL INVESTMENT RISKS
investment options. Equity securities may experience sudden, unpredictable drops
in value or long periods of decline in value. This may occur because of factors
affecting the securities markets generally, an entire industry or sector or a
particular company.
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in an issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
OUT-OF-FAVOR RISK: This is the risk of investing in unpopular stocks. Different
stocks go in and out of favor depending on market conditions. Therefore, this
Fund's performance may be better or worse than other funds with different
investment styles.
NON-DIVERSIFICATION RISK: Because the Fund may invest its assets in a small
number of issuers, the Fund is more susceptible than a diversified fund to any
economic, political or regulatory event adversely affecting a particular issuer.
ALLOCATION RISK: The Fund is not managed with the goal of mirroring the
securities in any particular benchmark index and the Fund's returns may vary
substantially from the performance of the index or indices with which it is
compared.
You will find a more detailed discussion of these risks, and others that may
affect your investment in the Funds, in the section entitled "Descriptions of
Principal Investment Risks," beginning on page 34.
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.
1996 1997 1998 1999
---- ---- ---- ----
23.99% 26.35% 5.25% 0.53%
Best Quarter: 1st Quarter 1998, +13.55% Worst Quarter: 3rd Quarter 1998, -17.78%
The Fund's year-to-date return through June 30, 2000 was -5.55%
================================================================================
Average Annual Total Returns
For the periods ended December 31, 1999
================================================================================
Since Inception
1 Year 7/25/95
--------------------------------------------------------------------------------
Value Fund 0.53% 13.86%
S&P 500 Index 21.04% 26.03%
S&P 500 / Barra 12.72% 20.14%
Large Cap Value Index
================================================================================
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.
-6-
<PAGE>
PAST PERFORMANCE (CONT.)
The S&P 500 / 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 prior to 1999. Without these limitations, the
Fund's returns would have been lower.
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 0.55%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2) 0.19%
------
Total Annual Fund Operating Expenses 0.74%
======
(1) The Fund has adopted a distribution and service plan pursuant to Rule 12b-1
that permits payments by the Fund at an annual rate of up to 0.50% of the
Fund's average daily net assets. The Trustees, however, have no intention
of implementing the plan during the Fund's current fiscal year. See
"Investing in the Funds-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment earns a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$76 $237 $411 $918
Since the Fund does 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.
-7-
<PAGE>
DLB CORE GROWTH FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Core Growth Fund (the "Core Growth Fund") is
long-term capital and income growth through investment primarily in common
stocks. Current yield is secondary to the long-term growth objective. The Core
Growth Fund was formerly known as the DLB Growth Fund.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, substantially all (but no less than 65%) of the
Fund's total assets will be invested in common stocks.
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 primarily includes
medium- and 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 revisions to analysts' earnings estimates and
valuation analysis. 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. 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
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.
The Core Growth Fund is subject to several risks, any of which could cause you
to lose money. These include:
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
EQUITY SECURITIES RISK: Equity securities tend to be more volatile and riskier
than some other investment options. Equity securities may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors affecting the securities markets generally, an entire
industry or sector or a particular company.
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in an issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
-8-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
NON-DIVERSIFICATION RISK: Because the Fund may invest its assets in a small
number of issuers, the Fund is more susceptible than a diversified fund to any
economic, political or regulatory event adversely affecting a particular issuer.
ALLOCATION RISK: The Fund is not managed with the goal of mirroring the
securities in any particular benchmark index and the Fund's returns may vary
substantially from the performance of the index or indices with which it is
compared.
You will find a more detailed discussion of these risks, and others that may
affect your investment in the Funds, in the section entitled "Descriptions of
Principal Investment Risks," beginning on page 34.
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Fund by comparing 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.
1999
----
13.13%
Best Quarter: 4th Quarter 1999, +17.82% Worst Quarter: 3rd Quarter 1999, -6.46%
The Fund's year-to-date return through June 30, 2000 was 9.67%
================================================================================
Average Annual Total Returns
For the periods ended December 31, 1999
================================================================================
Since Inception
1 Year 1/20/98
--------------------------------------------------------------------------------
Core Growth Fund 13.13% 21.93%
S&P 500 Index 21.04% 24.20%
Russell 1000
Growth Index 33.16% 34.52%
================================================================================
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 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 for the "since inception" period shown in the table reflects the
effects of voluntary expense limitations in effect prior to 1999. Without these
limitations, the Fund's returns would have been lower.
-9-
<PAGE>
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 0.55%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2) 0.13%
------
Total Annual Fund Operating Expenses 0.68%
======
(1) The Fund has adopted a distribution and service plan pursuant to Rule 12b-1
that permits payments by the Fund at an annual rate of up to 0.50% of the
Fund's average daily net assets. The Trustees, however, have no intention
of implementing the plan during the Fund's current fiscal year. See
"Investing in the Funds-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment earns a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$69 $218 $379 $847
Since the Fund does 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.
-10-
<PAGE>
DLB DISCIPLINED GROWTH FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Disciplined Growth Fund (the "Disciplined
Growth Fund") is long-term capital appreciation. 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 (but no
less than 65%) of its total assets in common stocks and other equity securities.
The Fund uses a proprietary analysis of market factors to guide investments
primarily in common stocks of companies with medium and large capitalizations.
The Manager believes that a disciplined investment strategy based predominantly
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 model uses a quantitative
analysis, involving revisions to analysts' earnings estimates, valuation
analysis and overall market sentiment analysis, to identify companies with the
strongest signs of earnings growth and the most attractive valuation. The
Manager believes that revisions to analysts' earnings estimates and positive
market sentiment 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, are expected, under normal circumstances, to approximate those of the
Russell 1000 Growth Index.
PRINCIPAL INVESTMENT RISKS
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.
The Disciplined Growth Fund is subject to several risks, any of which could
cause you to lose money. These include:
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
EQUITY SECURITIES RISK: Equity securities tend to be more volatile and riskier
than some other investment options. Equity securities may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors affecting the securities markets generally, an entire
industry or sector or a particular company.
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in an issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
SMALL COMPANY RISK: Investing in securities of small companies may involve
greater risk than investing in more established companies. Often, small
companies and the industries in which they are focused are still evolving, and
they are
-11-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
more sensitive to changing market conditions than larger companies in more
established industries. Small companies often have limited product lines and
financial resources and less experienced management. Also, because they may have
fewer securities outstanding and the frequency and volume of trading may be
less, these securities may be less liquid than securities of larger companies.
Consequently, their securities may be more volatile and have returns that vary,
sometimes significantly, from the overall stock market.
NON-DIVERSIFICATION RISK: Because the Fund may invest its assets in a small
number of issuers, the Fund is more susceptible than a diversified fund to any
economic, political or regulatory event adversely affecting a particular issuer.
ALLOCATION RISK: The Fund is not managed with the goal of mirroring the
securities in any particular benchmark index and the Fund's returns may vary
substantially from the performance of the index or indices with which it is
compared.
You will find a more detailed discussion of these risks, and others that may
affect your investment in the Funds, in the section entitled "Descriptions of
Principal Investment Risks," beginning on page 34.
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.
1997 1998 1999
---- ---- ----
32.23% 25.76% 21.35%
Best Quarter: 4th Quarter 1998, +23.85% Worst Quarter: 3rd Quarter 1998, -15.77%
The Fund's year-to-date return through June 30, 2000 was 9.13%
================================================================================
Average Annual Total Returns
For the periods ended December 31, 1999
================================================================================
Since Inception
1 Year 8/26/96
--------------------------------------------------------------------------------
Disciplined Growth Fund 21.35% 29.06%
S&P 500 Index 21.04% 28.15%
Russell 1000 Growth Index 33.16% 33.69%
================================================================================
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 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.
-12-
<PAGE>
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 0.75%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2) 0.34%
------
Total Annual Fund Operating Expenses 1.09%
Fee Waiver (0.19%)
------
Net Expenses (3) 0.90%
======
(1) The Fund has adopted a distribution and service plan pursuant to Rule 12b-1
that permits payments by the Fund at an annual rate of up to 0.50% of the
Fund's average daily net assets. The Trustees, however, have no intention
of implementing the plan during the Fund's current fiscal year. See
"Investing in the Funds-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
(3) The Manager has contractually agreed with the 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 percentage of the Fund's average daily
net assets noted in the bottom line of the table. The Manager's expense
agreement with the Fund may not be terminated prior to September 4, 2001.
In addition, it will automatically continue for successive one-year periods
unless either The DLB Fund Group or the Manager terminates the agreement by
giving six months' notice to the other party.
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment earns a 5% return each year and that the Fund's
operating expenses remain the same, except that the expense reimbursement is
reflected only for the first year of each period. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$92 $328 $582 $1,312
Since the Fund does 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.
-13-
<PAGE>
DLB ENTERPRISE III FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Enterprise III Fund (the "Enterprise III
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.
The DLB Enterprise III Fund was formerly known as the DLB Mid Capitalization
Fund.
PRINCIPAL INVESTMENT STRATEGIES
MARKET CAPITALIZATION: Under normal circumstances, the Fund will invest
substantially all (but no less than 65%) 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.
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 one or more of the following characteristics:
o Strong financials
o Proven products or services
o Dominant market share
o Sustainable competitive advantage
o Attractive valuation
o Potential for improving margins
o Potential for accelerating earnings
PRINCIPAL INVESTMENT RISKS
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.
The Enterprise III Fund is subject to several risks, any of which could cause
you to lose money. These include:
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
EQUITY SECURITIES RISK: Equity securities tend to be more volatile and riskier
than some other investment options. Equity securities may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors affecting the securities markets generally, an entire
industry or sector or a particular company.
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in an issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
SMALL COMPANY RISK: Investing in securities of small companies may involve
greater risk than investing in more established companies. Often, small
companies and the industries in which they are focused are still evolving, and
they are more sensitive to changing market conditions
-14-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
than larger companies in more established industries. Small companies often have
limited product lines and financial resources and less experienced management.
Also, because they may have fewer securities outstanding and the frequency and
volume of trading may be less, these securities may be less liquid than
securities of larger companies. Consequently, their securities may be more
volatile and have returns that vary, sometimes significantly, from the overall
stock market.
OUT-OF-FAVOR RISK: This is the risk of investing in unpopular stocks. Different
stocks go in and out of favor depending on market conditions. Therefore, this
Fund's performance may be better or worse than other funds with different
investment styles.
NON-DIVERSIFICATION RISK: Because the Fund may invest its assets in a small
number of issuers, the Fund is more susceptible than a diversified fund to any
economic, political or regulatory event adversely affecting a particular issuer.
ALLOCATION RISK: The Fund is not managed with the goal of mirroring the
securities in any particular benchmark index and the Fund's returns may vary
substantially from the performance of the index or indices with which it is
compared.
You will find a more detailed discussion of these risks, and others that may
affect your investment in the Funds, in the section entitled "Descriptions of
Principal Investment Risks," beginning on page 34.
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.
1996 1997 1998 1999
---- ---- ---- ----
14.75% 32.95% -8.63% -8.08%
Best Quarter: 2nd Quarter 1999, +17.55% Worst Quarter: 3rd Quarter 1998, -18.30%
The Fund's year-to-date return through June 30, 2000 was -4.08%
================================================================================
Average Annual Total Returns
For the periods ended December 31, 1999
================================================================================
Since Inception
1 Year 7/25/95
--------------------------------------------------------------------------------
Enterprise III Fund -8.08% 7.76%
Russell 2500 Index 24.15% 16.54%
Russell 2000 Index 21.26% 14.22%
Russell 2000 Value Index -1.49% 11.05%
================================================================================
In past years, the Fund has compared its returns to those of the Russell 2500
Index. In future Prospectuses, the Fund will compare its return to those of the
Russell 2000 Index and the Russell 2000 Value Index. The reason for this change
is that while the market capitalization of the companies included in the Russell
2500 Index has increased since inception, the Fund's investment policy continues
to require the Fund to invest in companies with market capitalizations between
$400 million and $2 billion at the time of investment by the Fund. As a result,
the Fund believes that the Russell 2000 Index and the Russell 2000 Value Index,
which
-15-
<PAGE>
PAST PERFORMANCE (CONT.)
have a lower weighted market capitalization than the Russell 2500 Index,
provide a more appropriate comparison based on market capitalization.
The RUSSELL 2500 INDEX is a broad-based index that measures the smallest 2500
companies in the Russell 3000 Index, representing approximately 17% of the
Russell 3000 total market capitalization.
The RUSSELL 2000 INDEX is a broad-based index that consists of the 2000 smallest
securities in the Russell 3000 Index, representing approximately 8% 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.
The RUSSELL 2000 VALUE INDEX is an unmanaged index that measures the performance
of those Russell 2000 companies with lower price-to-book ratios and lower
forecasted growth values.
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.
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 0.60%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2) 0.40%
------
Total Annual Fund Operating Expenses 1.00%
Fee Waiver (0.10%)
------
Net Expenses (3) 0.90%
======
(1) The Fund has adopted a distribution and service plan pursuant to Rule 12b-1
that permits payments by the Fund at an annual rate of up to 0.50% of the
Fund's average daily net assets. The Trustees, however, have no intention
of implementing the plan during the Fund's current fiscal year. See
"Investing in the Funds-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
(3) The Manager has contractually agreed with the 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 percentage of the Fund's average daily
net assets noted in the bottom line of the table. The Manager's expense
agreement with the Fund may not be terminated prior to September 4, 2001.
In addition, it will automatically continue for successive one-year periods
unless either The DLB Fund Group or the Manager terminates the agreement by
giving six months' written notice to the other party.
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The examples assume that
you invest $10,000 in the Fund for the time periods indicated, that your
investment earns a 5% return each year and that the Fund's operating expenses
remain the same, except that the expense reimbursement is reflected only for the
first year of each period. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$92 $308 $543 $1,216
Since the Fund does 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.
-16-
<PAGE>
DLB SMALL COMPANY OPPORTUNITIES FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Small Company Opportunities Fund (the "Small
Company Opportunities 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. The Small Company Opportunities Fund was formerly known as
the DLB Micro Capitalization Fund.
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund will invest substantially all (but no less
than 65%) of its total assets in common stocks of smaller companies. The Fund
will invest primarily in equity securities of micro capitalization companies.
Micro capitalization companies are those with capitalizations at the time of
purchase of no more than 50% of the weighted average market capitalization of
the Russell 2000 Index, measured as of the last time the Index was rebalanced,
which is generally June 30 of each year. (This 50% figure was approximately $465
million as of June 30, 2000). The Fund may also invest to a lesser extent in
companies with market capitalizations in excess of 50% of the weighted average
market capitalization of the Russell 2000 Index. 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:
o Sustainable competitive advantage
o Strong management
o Long product cycles
o Pricing flexibility
o Small size as a competitive advantage
o High sustained return on investment
o Above-average earnings per share growth
o Attractive valuation
Out of this analysis, the Manager selects what it believes to be the best
companies for the Fund's portfolio.
The Fund may purchase stocks in initial public offerings ("IPOs") and may sell
such securities without regard to how long the Fund has held the securities. The
market capitalizations of the companies whose securities the Fund purchases in
IPOs may be outside the Fund's market capitalization range stated above.
The Fund is designed to be an investment vehicle for that part of your capital
which can appropriately be exposed to above-average risk.
PRINCIPAL INVESTMENT RISKS
There is no guarantee that the Fund will achieve its objective, and you could
lose money on your investment. Furthermore, the Manager, despite
-17-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
using various investment and risk analysis techniques, may not achieve the
results expected from an investment in the Fund.
The Small Company Opportunities Fund is subject to several risks, any of which
could cause you to lose money. These include:
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
EQUITY SECURITIES RISK: Equity securities tend to be more volatile and riskier
than some other investment options. Equity securities may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors affecting the securities markets generally, an entire
industry or sector or a particular company.
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in an issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
SMALL COMPANY RISK: Investing in securities of small companies may involve
greater risk than investing in more established companies. Often, small
companies and the industries in which they are focused are still evolving, and
they are more sensitive to changing market conditions than larger companies in
more established industries. Small companies often have limited product lines
and financial resources and less experienced management. Also, because they may
have fewer securities outstanding and the frequency and volume of trading may be
less, these securities may be less liquid than securities of larger companies.
Consequently, their securities may be more volatile and have returns that vary,
sometimes significantly, from the overall stock market.
EMERGING GROWTH COMPANIES RISK: Investments in emerging growth companies may be
subject to more abrupt or erratic market movements and may involve greater risks
than investments in other companies. Emerging growth companies often have
limited product lines, markets and financial resources and may depend on
management by one or a few key individuals. The shares of emerging growth
companies may also suffer steeper than average price declines after
disappointing earnings reports and are more difficult to sell at satisfactory
prices.
NON-DIVERSIFICATION RISK: Because the Fund may invest its assets in a small
number of issuers, the Fund is more susceptible than a diversified fund to any
economic, political or regulatory event adversely affecting a particular issuer.
ALLOCATION RISK: The Fund is not managed with the goal of mirroring the
securities in any particular benchmark index and the Fund's returns may vary
substantially from the performance of the index or indices with which it is
compared.
You will find a more detailed discussion of these risks, and others that may
affect your investment in the Funds, in the section entitled "Descriptions of
Principal Investment Risks," beginning on page 34.
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Fund by comparing 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.
-18-
<PAGE>
1999
----
13.81%
Best Quarter: 2nd Quarter 1999, +21.58% Worst Quarter: 1st Quarter 1999, -10.10%
The Fund's year-to-date return through June 30, 2000 was 29.05%
================================================================================
Average Annual Total Returns
For the periods ended December 31, 1999
================================================================================
Since Inception
1 Year 7/20/98
--------------------------------------------------------------------------------
Small Company Opportunities Fund 13.81% -1.35%
Russell 2000 Index 21.26% 7.48%
Russell 2000 Value Index -1.49% -8.21%
================================================================================
The RUSSELL 2000 INDEX is a broad-based index that consists of the 2000 smallest
securities in the Russell 3000 Index, representing approximately 8% 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.
The RUSSELL 2000 VALUE INDEX is an unmanaged index that measures the performance
of those Russell 2000 companies with lower price-to-book ratios and lower
forecasted growth values.
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.
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 1.00%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2) .51%
------
Total Annual Fund Operating Expenses 1.51%
Fee Waiver (0.21%)
------
Net Expenses (3) 1.30%
======
(1) The Fund has adopted a distribution and service plan pursuant to Rule 12b-1
that permits payments by the Fund at an annual rate of up to 0.50% of the
Fund's average daily net assets. The Trustees, however, have no intention
of implementing the plan during the Fund's current fiscal year. See
"Investing in the Funds-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
(3) The Manager has contractually agreed with the 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 percentage of the Fund's average daily
net assets noted in the bottom line of the table. The Manager's expense
agreement with the Fund may not be terminated prior to September 4, 2001.
In addition, it will automatically continue for successive one-year periods
unless either The DLB Fund Group or the Manager terminates the agreement by
giving six months' written notice to the other party.
-19-
<PAGE>
EXPENSE INFORMATION (CONT.)
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment earns a 5% return each year and that the Fund's
operating expenses remain the same, except that the expense reimbursement is
reflected only for the first year of each period. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$132 $457 $804 $1,784
Since the Fund does 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.
-20-
<PAGE>
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 (but no less
than 65%) of its total assets in common stocks of domestic and foreign small cap
companies. The Fund normally expects to invest approximately 40-60% of its
assets outside the United States and the remaining 60-40% 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 one or more of the
following characteristics:
o Strong financials
o Proven track record
o Dominant market share
o Sustainable competitive advantage
o Attractive valuation
o Potential for improving margins
o 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.
PRINCIPAL INVESTMENT RISKS
There is no guarantee that the Fund will achieve its objective, and you could
lose money on your investment. Furthermore, the Manager and the Subadvisor,
despite using various investment and risk analysis techniques, may not achieve
the results expected from an investment in the Fund.
The Global Small Cap Fund is subject to several risks, any of which could cause
you to lose money. These include:
-21-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
EQUITY SECURITIES RISK: Equity securities tend to be more volatile and riskier
than some other investment options. Equity securities may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors affecting the securities markets generally, an entire
industry or sector or a particular company.
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in an issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
FOREIGN ISSUER RISK: The securities of foreign issuers can be less liquid and
more volatile than those of U.S. issuers due to increased risk of adverse
issuer, political, regulatory, market or economic developments.
FOREIGN CURRENCY RISK: This is the risk that the value of dividends or interest
paid by foreign securities, or the value of the securities themselves, may fall
if currency exchange rates change.
SMALL COMPANY RISK: Investing in securities of small companies may involve
greater risk than investing in more established companies. Often, small
companies and the industries in which they are focused are still evolving, and
they are more sensitive to changing market conditions than larger companies in
more established industries. Small companies often have limited product lines
and financial resources and less experienced management. Also, because they may
have fewer securities outstanding and the frequency and volume of trading may be
less, these securities may be less liquid than securities of larger companies.
Consequently, their securities may be more volatile and have returns that vary,
sometimes significantly, from the overall stock market.
EMERGING GROWTH COMPANIES RISK: Investments in emerging growth companies may be
subject to more abrupt or erratic market movements and may involve greater risks
than investments in other companies. Emerging growth companies often have
limited product lines, markets and financial resources and may depend on
management by one or a few key individuals. The shares of emerging growth
companies may also suffer steeper than average price declines after
disappointing earnings reports and are more difficult to sell at satisfactory
prices.
FOREIGN EMERGING MARKETS RISK: Emerging countries are subject to serious, and
potentially continuing, economic, social and political problems or instability.
Stock markets in many emerging countries are poorly regulated, relatively small,
expensive and risky. Foreigners are often limited in their ability to invest in,
and withdraw assets from, these markets. Additional regulatory restrictions may
be imposed on foreign investors under emergency conditions. Risks generally
associated with foreign securities and currencies also apply, often to a greater
extent.
ALLOCATION RISK: The Fund is not managed with the goal of mirroring the
securities in any particular benchmark index and the Fund's returns may vary
substantially from the performance of the index or indices with which it is
compared.
OUT-OF-FAVOR RISK: This is the risk of investing in unpopular stocks. Different
stocks go in and out of favor depending on market conditions. Therefore, this
Fund's performance may be better or worse then other funds with different
investment styles.
NON-DIVERSIFICATION RISK: Because the Fund may invest its assets in a small
number of issuers, the Fund is more susceptible than a
-22-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
diversified fund to any economic, political or regulatory event adversely
affecting a particular issuer.
FORWARD FOREIGN CURRENCY CONTRACTS RISK: Although the Fund's general approach is
to leave currency exposure unhedged, the Fund may engage in forward foreign
currency transactions in order to facilitate settlement of a Fund's transaction
or to reduce the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. Unanticipated changes in
currency prices may result in overall poorer performance for the Fund than if it
had not engaged in forward foreign currency exchange contracts. Because forward
contracts are agreements between parties, there is also some risk associated
with using forward foreign currency contracts.
You will find a more detailed discussion of these risks, and others that may
affect your investment in the Funds, in the section entitled "Descriptions of
Principal Investment Risks," beginning on page 34.
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.
1996 1997 1998 1999
---- ---- ---- ----
9.85% 4.66% 3.73% 23.38%
Best Quarter: 2nd Quarter 1999, +15.56% Worst Quarter: 3rd Quarter 1998, -17.24%
The Fund's year-to-date return through June 30, 2000 was -4.33%
================================================================================
Average Annual Total Returns
For the periods ended December 31, 1999
================================================================================
Since Inception
1 Year 7/19/95
--------------------------------------------------------------------------------
Global Small Cap Fund 23.38% 9.92%
Salomon Brothers EMI, 23.48% 8.20%
ex-U.S.
Russell 2500 Index 24.15% 17.26%
Combined Index 20.72% 13.44%
================================================================================
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 U.S. $100 million are included in the index.
The RUSSELL 2500 INDEX is a broad-based index that consists of the 500 smallest
securities in the Russell 1000 Index and all 2000 securities in the Russell 2000
Index, representing approximately 17% 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
-23-
<PAGE>
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.
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 1.00%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2) 1.03%
------
Total Annual Fund Operating Expenses 2.03%
Fee Waiver (0.53%)
------
Net Expenses (3) 1.50%
======
(1) The Fund has adopted a distribution and service plan pursuant to Rule 12b-1
that permits payments by the Fund at an annual rate of up to 0.50% of the
Fund's average daily net assets. The Trustees, however, have no intention
of implementing the plan during the Fund's current fiscal year. See
"Investing in the Fund-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
(3) The Manager has contractually agreed with the 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 percentage of the Fund's average daily
net assets noted in the bottom line of the table. The Manager's expense
agreement with the Fund may not be terminated prior to September 4, 2001.
In addition, it will automatically continue for successive one-year periods
unless either The DLB Fund Group or the Manager terminates the agreement by
giving six months' written notice to the other party.
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment earns a 5% return each year and that the Fund's
operating expenses remain the same, except that the expense reimbursement is
reflected only for the first year of each period. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$153 $585 $1,044 $2,316
Since the Fund does 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.
-24-
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Stewart Ivory International Fund (the
"International Fund") is long-term growth of capital through investment
primarily in equity securities of foreign companies. Income is an incidental
consideration.
PRINCIPAL INVESTMENT STRATEGIES
WHERE THE FUND INVESTS: Under normal conditions, the Fund expects to invest
substantially all (but no less than 65%) of its assets in equity securities of
companies that:
o are domiciled outside the Untied States;
o have their primary business carried on outside the United States; or
o have their principal securities trading market outside the United States.
The Fund will look to such factors as location of a company's assets, personnel,
sales and earnings to determine whether that company's primary business is
carried on outside the United States.
In addition to common stocks, the Fund may buy preferred stocks, convertible
securities and other securities having equity features when the Subadvisor,
Babson-Stewart Ivory International, believes the potential for appreciation will
equal or exceed that available from investments in common stocks.
INVESTMENT APPROACH: In pursuing its investment objectives, the Fund invests in
companies that the Subadvisor believes will benefit from:
o global economic trends;
o promising technologies or products; and
o specific country opportunities resulting from changing geopolitical,
currency or economic relationships.
These companies generally are established companies whose securities are listed
on a foreign exchange (although the Fund is permitted to buy securities traded
over-the-counter).
To identify attractive investments, the Subadvisor uses a bottom-up stock
selection strategy. While the Subadvisor considers stock selection the key to
successful investment, cultural, economic, political and thematic factors play a
significant role in the Fund's asset allocation process.
The Fund anticipates that its investments will be spread broadly around the
world and will include companies of varying sizes as measured by assets, sales
or capitalization.
CURRENCY HEDGING POLICY: The Fund's general approach is to leave currency
exposure unhedged. The Subadvisor considers currency outlook when determining
the Fund's geographical diversification. Derivatives are not used, nor is
currency exposure actively managed, to seek enhancements to investment returns.
The Fund may purchase foreign currencies or engage in forward foreign currency
transactions in order to expedite settlement of portfolio transactions. In
exceptional circumstances, the Fund may use forward foreign currency exchange
contracts or other currency transactions to protect a position if fundamental or
technical analysis suggests that is necessary.
PRINCIPAL INVESTMENT RISKS
There is no guarantee that the Fund will achieve its objective, and you could
lose money on your investment. Furthermore, the Subadvisor, despite using
various investment and risk
-25-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
analysis techniques, may not achieve the results expected from an investment in
the Fund.
The International Fund is subject to several risks, any of which could cause you
to lose money. These include:
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
FOREIGN ISSUER RISK: The securities of foreign issuers can be less liquid and
more volatile than those of U.S. issuers due to increased risk of adverse
issuer, political, regulatory, market or economic developments.
FOREIGN CURRENCY RISK: This is the risk that the value of dividends or interest
paid by foreign securities, or the value of the securities themselves, may fall
if currency exchange rates change.
EQUITY SECURITIES RISK: Equity securities tend to be more volatile and riskier
than some other investment options. Equity securities may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors affecting the securities markets generally, an entire
country, region, industry or sector or a particular company.
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in a issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
FOREIGN EMERGING MARKETS RISK: Emerging countries are subject to serious, and
potentially continuing, economic, social and political problems or instability.
Stock markets in many emerging countries are poorly regulated, relatively small,
expensive and risky. Foreigners are often limited in their ability to invest in,
and withdraw assets from, these markets. Additional regulatory restrictions may
be imposed on foreign investors under emergency conditions. Risks generally
associated with foreign securities and currencies also apply, often to a greater
extent.
ALLOCATION RISK: The Fund is not managed with the goal of mirroring the
securities in any particular benchmark index and the Fund's returns may vary
substantially from the performance of the index with which it is compared.
TAX RISK: Investors in this Fund may be subject to significant tax liabilities
arising from gains that arose in the Fund prior to their investment, but were
recognized thereafter because of a change in the Fund's corporate form.
SMALL COMPANY RISK: Investing in securities of small companies may involve
greater risk than investing in more established companies. Often, small
companies and the industries in which they are focused are still evolving, and
they are more sensitive to changing market conditions than larger companies in
more established industries. Small companies often have limited product lines
and financial resources and less experienced management. Also, because they may
have fewer securities outstanding and the frequency and volume of trading may be
less, these securities may be less liquid than securities of larger companies.
Consequently, their securities may be more volatile and have returns that vary,
sometimes significantly, from the overall stock market.
EMERGING GROWTH COMPANIES RISK: Investments in emerging growth companies may be
subject to more abrupt or erratic market movements and may involve greater risks
than investments in other companies. Emerging growth companies often have
limited product lines, markets and financial resources and may depend on
management by one or a few key individuals. The shares of emerging growth
companies may
-26-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
also suffer steeper than average price declines after disappointing earnings
reports and are more difficult to sell at satisfactory prices.
NON-DIVERSIFICATION RISK: Because the Fund may invest its assets in a small
number of issuers, the Fund is more susceptible than a diversified fund to any
economic, political or regulatory event adversely affecting a particular issuer.
RESTRICTED SECURITIES RISK: The Fund's investments in unregistered or restricted
securities are subject to liquidity risk. This means that because there may not
be adequate supply or demand for a security, it may be harder to purchase or
sell at a satisfactory price.
FORWARD FOREIGN CURRENCY CONTRACTS RISK: Although the Fund's general approach is
to leave currency exposure unhedged, the Fund may engage in forward foreign
currency transactions in order to facilitate settlement of a Fund's transaction
or to reduce the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. Unanticipated changes in
currency prices may result in overall poorer performance for the Fund than if it
had not engaged in forward foreign currency exchange contracts. Because forward
contracts are agreements between parties, there is also some credit risk
associated with using forward foreign currency contracts.
You will find a more detailed discussion of these risks, and others that may
affect your investment in the Funds, in the section entitled "Descriptions of
Principal Investment Risks," beginning on page 34.
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 inception of the Fund's predecessor, has
varied from year-to-year. The table following the bar chart compares the Fund's
average annual total return over time to those of a broad-based securities
market index.
The Fund commenced operations on November 1, 1999 upon the Fund's predecessor,
Babson-Stewart Ivory International Limited Partnership III (the "Limited
Partnership"), transferring all of its assets to the Fund on that date in a tax
free transaction. The performance shown in the bar chart and table below
includes the performance results of the Limited Partnership for the period prior
to the Fund's commencement of operations. In each case, the performance of the
Limited Partnership has been adjusted to give effect to the estimated fees and
expenses of the International Fund (without giving effect to any expense waivers
or reimbursements) during the fiscal year ending October 31, 2000.
Although the Limited Partnership operated with investment objectives, policies
and guidelines that were substantially the same as those of the Fund, the
Limited Partnership, unlike the Fund, was not registered under the Investment
Company Act of 1940 and therefore was not subject to certain investment
limitations, diversification requirements, and other restrictions imposed by
that Act. In addition, the Limited Partnership was not subject to Subchapter M
of the Internal Revenue Code, which imposes certain limitations on the
investment operations of the Fund. If the Limited Partnership had been
registered under the 1940 Act and subject to Subchapter M of the Code, its
performance might have been lower.
AS WITH ALL MUTUAL FUNDS, PAST PERFORMANCE IS NOT A PREDICTION OF FUTURE
PERFORMANCE.
-27-
<PAGE>
PAST PERFORMANCE (CONT.)
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
-1.88% 7.66% 12.06% 2.49% 15.80% 31.88%
Best Quarter: 4th Quarter 1999, +21.23% Worst Quarter: 3rd Quarter 1998, -12.50%
The Fund's year-to-date return through June 30, 2000 was -2.14%
================================================================================
Average Annual Total Returns
For the periods ended December 31, 1999
================================================================================
Since Inception
1 Year 5 Years 5/1/93
--------------------------------------------------------------------------------
International Fund
(and predecessor
Limited Partnership) 31.88% 13.56% 11.70%
MSCI EAFE Index 27.30% 13.15% 12.33%
================================================================================
The MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, ASIA, FAR EAST INDEX
(MSCI EAFE) is a broad-based index that is composed of approximately 1,000
stocks traded on 20 stock exchanges from around the world.
Both the chart and table assume reinvestment of dividends and distributions. The
Fund's year-to-date return stated under the bar chart reflects the effects of
voluntary expense limitations during the period. Without these limitations, the
Fund's return would have been lower.
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES
(Fees paid directly from your investment)
Purchase Premium
(as % of offering price)(1)(2) 0.50%
(1) The purchase premium is paid to and retained by the Fund itself and is
designed to prevent transaction costs (such as brokerage fees and other
costs of investing the amount invested by the shareholder) caused by
shareholder activity from adversely affecting the Fund as a whole, by
essentially allocating those costs to the shareholder generating the
activity, rather than to the Fund as a whole. Footnote 2 below describes
certain instances in which the Manager may reduce or waive the purchase
premium with respect to a particular purchase.
(2) The purchase premium for the Fund may generally NOT be waived due to
offsetting transactions, and may be waived in only rare circumstances. The
premium will only be waived for this Fund (i) if the purchase is part of a
transfer from another Fund where the Manager is able to transfer securities
between the Funds to effect the transaction, (ii) during periods (expected
to exist only rarely) when the Manager determines that the Fund is
substantially underweighted with respect to its cash position so that a
purchase will not require a securities transaction, (iii) if shares are
purchased through reinvestment of dividends, or (iv) in certain other
instances (not including offsetting transactions) where it is compelling to
the Manager that the purchase will not result in transaction costs to the
Fund. Any waiver with respect to this Fund must be arranged in advance with
the Manager.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 0.75%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2) (3) 0.36%
------
Total Annual Fund Operating Expenses 1.11%
Fee Waiver (0.11%)
------
Net Expenses (4) 1.00%
======
-28-
<PAGE>
EXPENSE INFORMATION (CONT.)
(1) The Fund has adopted a distribution and service plan pursuant to Rule 12b-1
that permits payments by the Fund at an annual rate of up to 0.50% of the
Fund's average daily net assets. The Trustees, however, have no intention
of implementing the plan during the Fund's current fiscal year. See
"Investing in the Funds-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
(3) "Other Expenses" for the International Fund are based on estimated amounts
for the current fiscal year.
(4) The Manager has contractually agreed with the 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 percentage of the Fund's average daily
net assets noted in the bottom line of the table. The Manager's expense
agreement with the Fund may not be terminated prior to September 4, 2001.
In addition, it will automatically continue for successive one-year periods
unless either The DLB Fund Group or the Manager terminates the agreement by
giving six months' written notice to the other party.
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment earns a 5% return each year and that the Fund's
operating expenses remain the same, except that the expense reimbursement is
reflected only for the first year of each period. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
$151 $390
In the Examples, expenses include the Purchase Premium. The figures shown would
be the same whether or not you redeemed your shares at the end of a period.
-29-
<PAGE>
DLB STEWART IVORY EMERGING MARKETS FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Stewart Ivory Emerging Markets Fund (the
"Emerging Markets Fund") is to produce long-term growth of capital primarily
through equity investments that will generally be concentrated in what the
Subadvisor considers to be the developing markets around the world ("developing
markets").
PRINCIPAL INVESTMENT STRATEGIES
WHERE THE FUND INVESTS: Under normal circumstances, the Fund ill invest
substantially all (but no less than 65%) of its total assets in equity
securities--including common stocks, convertible securities, depository receipts
and preferred stocks--of companies that:
o are domiciled in developing markets;
o have their principal operations based in developing markets; or
o have their principal securities trading market within developing markets.
INVESTMENT APPROACH: In pursuing its investment objective, the Fund looks
primarily for equity securities of well managed and financially sound growth
companies operating in growth business areas. Although the Fund is primarily a
growth investor, the Fund's Subadvisor, Babson-Stewart Ivory International, also
considers the timing and valuation of potential investments, given the
volatility of emerging stock markets.
Attractive companies are identified by the Subadvisor through a research
intensive, bottom-up investment approach that includes visits to relevant
countries and, where possible, company visits. While stock selection is
considered the key to successful investment, cultural, economic, political and
thematic factors play an important part in the Fund's asset allocation process.
As a result of the Fund's focus on growth companies operating in growth business
areas, the Fund will likely have a strong service industry bias. Few listed
manufacturing companies in emerging economies possess the niche characteristics
(brand names, dominant market share, hurdles for entrants, etc.) conducive to
predictable and sustainable growth.
Under normal circumstances, the Subadvisor will try to limit the risks
associated with investing in the stock markets of emerging markets by spreading
the Fund's investments geographically and sectorally. Generally, the Fund does
not intend to invest more than 20% of its total assets in any one particular
country.
Certain foreign countries do not permit the Fund to make direct investments in
their markets until the Fund has complied with certain requirements. Therefore,
during the initial period after commencement of operations, the Fund expects to
invest in foreign and domestic funds and other pooled investment vehicles that
invest primarily or exclusively in such countries to a greater extent than after
such period. Investments in these funds and investment vehicles may cause you
indirectly to incur higher fees and expenses, because both the Fund and the fund
or investment vehicle in which it invests charge fees and expenses.
CURRENCY HEDGING POLICY: The Fund's general approach is to leave currency
exposure unhedged. The Subadvisor considers currency outlook when determining
the Fund's geographical diversification. Derivatives are not used, nor is
currency exposure actively managed, to seek enhancements to investment returns.
The Fund may, however, purchase foreign currencies or engage in forward foreign
currency transactions in order to expedite settlement of portfolio transactions.
-30-
<PAGE>
PRINCIPAL INVESTMENT RISKS
There is no guarantee that the Fund will achieve its objective, and you could
lose money on your investment. Furthermore, the Subadvisor, despite using
various investment and risk analysis techniques, may not achieve the results
expected from an investment in the Fund.
The Emerging Markets Fund is subject to several risks, any of which could cause
an investor to lose money. These include:
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
FOREIGN EMERGING MARKETS RISK: Emerging countries are subject to serious, and
potentially continuing, economic, social and political problems or instability.
Stock markets in many emerging countries are poorly regulated, relatively small,
expensive and risky. Foreigners are often limited in their ability to invest in,
and withdraw assets from, these markets. Additional regulatory restrictions may
be imposed on foreign investors under emergency conditions. Risks generally
associated with foreign securities and currencies also apply, often to a greater
extent.
FOREIGN ISSUER RISK: The securities of foreign issuers can be less liquid and
more volatile than those of U.S. issuers due to increased risk of adverse
issuer, political, regulatory, market or economic developments.
FOREIGN CURRENCY RISK: This is the risk that the value of dividends or interest
paid by foreign securities, or the value of the securities themselves, may fall
if currency exchange rates change.
EQUITY SECURITIES RISK: Equity securities tend to be more volatile and riskier
than some other investment options. Equity securities may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors affecting the securities markets generally, an entire
country, region, industry or sector or a particular company.
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in an issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
ALLOCATION RISK: The Fund is not managed with the goal of mirroring the
securities in any particular benchmark index and the Fund's returns may vary
substantially from the performance of the index with which it is compared.
SMALL COMPANY RISK: Investing in securities of small companies may involve
greater risk than investing in more established companies. Often, small
companies and the industries in which they are focused are still evolving, and
they are more sensitive to changing market conditions than larger companies in
more established industries. Small companies often have limited product lines
and financial resources and less experienced management. Also, because they may
have fewer securities outstanding and the frequency and volume of trading may be
less, these securities may be less liquid than securities of larger companies.
Consequently, their securities may be more volatile and have returns that vary,
sometimes significantly, from the overall stock market.
EMERGING GROWTH COMPANIES RISK: Investments in emerging growth companies may be
subject to more abrupt or erratic market movements and may involve greater risks
than investments in other companies. Emerging growth companies often have
limited product lines, markets and financial resources and may depend on
management by one or a few key individuals. The shares of emerging growth
companies may also suffer steeper than average price declines after
disappointing earnings reports and are more difficult to sell at satisfactory
prices.
-31-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
NON-DIVERSIFICATION RISK: Because the Fund may invest its assets in a
small number of issuers, the Fund is more susceptible than a diversified fund to
any economic, political or regulatory event adversely affecting a particular
issuer.
RESTRICTED SECURITIES RISK: The Fund's investments in unregistered or restricted
securities are subject to liquidity risk. This means that because there may not
be adequate supply or demand for a security, it may be harder to purchase or
sell at a satisfactory price.
FORWARD FOREIGN CURRENCY CONTRACTS RISK: Although the Fund's general approach is
to leave currency exposure unhedged, the Fund may engage in forward foreign
currency transactions in order to facilitate settlement of a Fund's transaction
or to reduce the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. Unanticipated changes in
currency prices may result in overall poorer performance for the Fund than if it
had not engaged in forward foreign currency exchange contracts. Because forward
contracts are agreements between parties, there is also some credit risk
associated with using forward foreign currency contracts.
You will find a discussion of these risks, and others that may affect your
investment in the Funds, in the section entitled "Descriptions of Principal
Investment Risks," beginning on page 34.
PAST PERFORMANCES
Because the Fund has been in existence for less than one full calendar year,
information on the Fund's performance is not provided in this section.
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES
(Fees paid directly from your investment)
Purchase Premium
(as % of offering price)(1)(2) 0.50%
(1) The purchase premium is paid to and retained by the Fund itself and is
designed to prevent transaction costs (such as brokerage fees and other
costs of investing the amount invested by the shareholder) caused by
shareholder activity from adversely affecting the Fund as a whole, by
essentially allocating those costs to the shareholder generating the
activity, rather than to the Fund as a whole. Footnote 2 below describes
certain instances in which the Manager may reduce or waive the purchase
premium with respect to a particular purchase.
(2) The purchase premium for the Fund may generally NOT be waived due to
offsetting transactions, and may be waived in only rare circumstances. The
premium will only be waived for this Fund (i) if the purchase is part of a
transfer from another Fund where the Manager is able to transfer securities
between the Funds to effect the transaction, (ii) during periods (expected
to exist only rarely) when the Manager determines that the Fund is
substantially underweighted with respect to its cash position so that a
purchase will not require a securities transaction, (iii) if shares are
purchased through reinvestment of dividends, or (iv) in certain other
instances (not including offsetting transactions) where it is compelling to
the Manager that the purchase will not result in transaction costs to the
Fund. Any waiver with respect to this Fund must be arranged in advance with
the Manager.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 1.25%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2) (3) 0.70%
------
Total Annual Fund Operating Expenses 1.95%
Fee Waiver (0.20%)
------
Net Expenses (4) 1.75%
======
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EXPENSE INFORMATION (CONT.)
(1) The Fund has adopted a distribution and service plan pursuant to Rule 12b-1
that permits payments by the Fund at an annual rate of up to 0.50% of the
Fund's average daily net assets. The Trustees, however, have no intention
of implementing the plan during the Fund's current fiscal year. See
"Investing in the Funds-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
(3) "Other Expenses" for the Emerging Markets Fund are based on estimated
amounts for the current fiscal year.
(4) The Manager has contractually agreed with the 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 table. The Manager's expense
agreement with the Fund may not be terminated prior to September 4, 2001.
In addition, it will automatically continue for successive one-year periods
unless either The DLB Fund Group or the Manager terminates the agreement by
giving six months' written notice to the other party.
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment earns a 5% return each year and that the Fund's
operating expenses remain the same, except that the expense reimbursement is
reflected only for the first year of each period. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
$227 $640
In the Examples, expenses include the Purchase Premium. The figures shown would
be the same whether or not you redeemed your shares at the end of a period.
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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 your investments in the Funds. The Fund summaries, on pages 1 to 33,
identify which of these risks apply to each Fund. The types of risks and the
extent to which they affect the value of your investment 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 International Fund, and the Emerging Markets 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 benchmark index. A Fund's investment
style (e.g., value or growth) may result in that Fund being overweighted or
underweighted compared with industry sectors or countries in the index and may
result in that Fund holding securities within a particular sector or country
that are different from the securities included in the index for that sector or
country. 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:
o management decisions
o changes in management
o changing demand for the company's goods or services
o changes in or differences between actual and anticipated earnings
o the potential for takeovers and acquisitions
o increased production costs
o stricter government regulations
o a rating agency downgrade
APPLIES TO: ALL FUNDS
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.
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<PAGE>
CREDIT RISK (CONT.)
As explained in the Appendix, 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 high-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 one or more of the following
characteristics:
o limited product lines, markets and financial resources, including access to
capital
o management by one or a few key individuals
o securities that are less liquid and fewer in number
o securities that trade less frequently and in limited volume
o shorter operating history
o less experienced management
These characteristics, among others, 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: SMALL COMPANY OPPORTUNITIES FUND,
GLOBAL SMALL CAP FUND,
INTERNATIONAL FUND,
EMERGING MARKETS FUND
EQUITY SECURITIES RISK
All of the Funds except the Fixed Income Fund invest primarily in equity
securities. Equity securities 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. Equity
securities may experience sudden, unpredictable drops in value or long periods
of decline in value. This may occur because of factors affecting the securities
market generally, an entire industry or sector or a particular company.
Therefore, the value of your investment in a Fund may 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.
APPLIES TO: GLOBAL SMALL CAP FUND,
INTERNATIONAL FUND,
EMERGING MARKETS 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:
o less rigorous accounting, auditing and financial reporting standards than
are customary in the United States
o adverse political or regulatory developments
o higher trading and settlement costs
o limited public information
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<PAGE>
FOREIGN ISSUER RISK (CONT.)
o limited, slower or more costly legal remedies
o special tax considerations
o a company borrowing in currencies different from its revenue stream
o communications between the United States and foreign countries being less
reliable than within the United States
o a Fund's agent having difficulty keeping informed about corporate actions
which may affect the prices of portfolio securities
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.
APPLIES TO: FIXED INCOME FUND,
GLOBAL SMALL CAP FUND,
INTERNATIONAL FUND,
EMERGING MARKETS FUND
FOREIGN EMERGING MARKETS RISK
In addition, beyond the general risks associated with any foreign investment,
certain foreign countries present the following risks:
o expropriation of assets
o imposition of currency exchange controls
o confiscatory taxation
o limitations on investments in certain issuers in those countries
o limitations on expatriation of cash and/or assets
o political, social or financial instability
o adverse diplomatic developments
o restricted stock market access
o volatile stock markets
o limited stock market regulation
o low correlation with major international stock market performance
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 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,
INTERNATIONAL FUND,
EMERGING MARKETS FUND
FORWARD FOREIGN CURRENCY CONTRACTS RISK
A forward foreign currency exchange contract is a contract individually
negotiated and privately traded by currency traders and their customers. A
forward contract involves an obligation to purchase or sell a specific currency
for an agreed price at a future date, which may be any fixed number of days from
the date of the contract. A forward contract may be for a single price or for a
range of prices. A Fund would be required to segregate assets to cover forward
foreign currency exchange contracts that require it to purchase foreign
currency.
The purpose of entering into these contracts is to facilitate settlement of a
Fund's transaction or to minimize the risk to a Fund from adverse changes in the
relationship between the U.S. dollar and foreign currencies. At the same time,
these contracts may limit potential gain from a positive change in the
relationship between the U.S. dollar and foreign currencies.
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<PAGE>
FORWARD FOREIGN CURRENCY CONTRACTS RISK (CONT.)
Unanticipated changes in currency prices may result in poorer overall
performance for a Fund than if it had not engaged in forward currency exchange
contracts. Because forward contracts are agreements between parties, there is
also some credit risk associated with using forward foreign currency contracts.
APPLIES TO: GLOBAL SMALL CAP FUND,
INTERNATIONAL FUND,
EMERGING MARKETS 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
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 guarantee
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 have 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.
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<PAGE>
MORTGAGE- AND ASSET-BACKED SECURITIES RISK (CONT.)
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:
o unanticipated legal or administrative costs of enforcing the contracts on
the assets
o depreciation of the collateral securing the contracts
o damage to or destruction of the collateral securing the contracts
APPLIES TO: FIXED INCOME FUND
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 its stock may drop, or it may not rise in conjunction
with the improvement in performance as the Manager expected.
APPLIES TO: VALUE FUND,
ENTERPRISE III 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 ("Restricted Securities"), present certain risks. Investments in
Restricted Securities could cause the liquidity of a Fund to decrease if the
market's interest for those securities decreases, particularly because the
market for these securities may be limited to certain qualified investors.
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RESTRICTED SECURITIES RISK (CONT.)
Under these 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 Restricted
Securities, and thus judgment may play a greater role in the valuation of these
securities than it would in the valuation of unrestricted securities.
In foreign markets, and particularly in emerging markets, investing in
securities not registered under applicable securities laws may exacerbate the
risks of investing in domestic Restricted Securities or in registered securities
of companies located in foreign or emerging markets, as the case may be. In
particular, the liquidity of such securities and the information available
regarding such securities may be extremely limited.
APPLIES TO: FIXED INCOME FUND,
INTERNATIONAL FUND,
EMERGING MARKETS FUND
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:
o depend upon a single proprietary product or market niche,
o have limited product lines, markets or financial resources,
o depend on a limited management group,
o have fewer, less liquid securities outstanding, and
o 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,
ENTERPRISE III FUND,
SMALL COMPANY OPPORTUNITIES FUND,
GLOBAL SMALL CAP FUND,
INTERNATIONAL FUND,
EMERGING MARKETS FUND
TAX RISK
The International Fund is the successor to the Babson-Stewart Ivory
International Limited Partnership III, a Delaware limited partnership (the
"Limited Partnership"), which transferred all of its assets to the International
Fund in a tax-free transaction on November 1, 1999. The Limited Partnership had
been in operation since May 1, 1993, and as of October 31, 1999, the unrealized
gains in the Limited Partnership's portfolio represented approximately 22.92% of
the aggregate net asset value of the Limited Partnership. Accordingly, any new
investors in the International Fund who are taxable on their income and gains
would be subject to significant tax liabilities arising from gains that arose in
the International Fund prior to their investment, but were recognized
thereafter. These gains would economically represent a return of capital to the
investor, but would be taxable as if the investor had recognized the gains.
Therefore, investors who are taxable on their income and gains should carefully
consider this significant tax risk prior to investing in shares of the
International Fund and should be aware that they may be subject to significant
tax liabilities at any time after investment, even in periods in which the Fund
is experiencing losses.
APPLIES TO: INTERNATIONAL FUND
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TEMPORARY DEFENSIVE POSITIONS
CORE GROWTH FUND
The Core Growth Fund may, from time to time, take temporary defensive positions
in securities convertible into common stocks, preferred stocks, 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.
INTERNATIONAL FUND AND EMERGING MARKETS FUND
The International Fund and the Emerging Markets Fund may hold fixed income
securities (including those of foreign governments or companies) for temporary
defensive purposes when the Subadvisor believes that prevailing market,
economic, political or currency conditions so warrant and for temporary
investment. Similarly, each Fund may invest in cash and cash equivalents
(including foreign money market instruments, such as banker's acceptances,
certificates of deposit, commercial paper, short-term government and corporate
obligations and repurchase agreements) for temporary defensive purposes and
liquidity. Although each Fund expects to be primarily invested in foreign
issues, the Funds may--for temporary defensive purposes--invest in U.S. issues,
including cash and cash equivalents and high quality, short-term obligations. In
addition, each Fund may enter into repurchase agreements. 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.
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HOW THE FUNDS ARE MANAGED
THE MANAGER
Each Fund is advised and managed by its Manager, David L. Babson & Company Inc.
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 June 30, 2000, the Manager had over $60
billion in assets under management. The Manager's principal locations are One
Memorial Drive, Cambridge, Massachusetts 02142, and 1295 State Street,
Springfield, Massachusetts 01111.
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 and the investment portfolios of the International Fund and the
Emerging Markets Fund. 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 International"). Stewart Ivory
International is a wholly-owned subsidiary of Stewart Ivory & Co. Ltd. ("Stewart
Ivory"). Stewart Ivory, in turn, is a wholly owned subsidiary of Colonial
Limited, which through its subsidiaries (collectively, "Colonial First State"),
operates an international fund management business. Colonial Limited is a wholly
owned subsidiary of the Commonwealth Bank of Australia, a large Australian bank.
Stewart Ivory and its predecessor organizations have been managing investments
internationally from Edinburgh since 1873. The Subadvisor also provides
investment advisory services to 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 period ended October 31, 1999, each Fund (other than the
International and Emerging Markets Funds, which are new) paid the Manager an
investment management fee as follows:
Management Fee
(as a % of Average
Name of Fund Daily Net Assets)
-------------------------------------------------------------
Fixed Income Fund 0.40%
Value Fund 0.55
Growth Fund 0.55
Disciplined Growth Fund 0.75
Enterprise III Fund 0.60
Micro Cap Fund 1.00
Global Small Cap Fund 1.00
The current investment management fee paid by each Fund to the Manager is
identified under "Expense Information" for each Fund, in the "About the Funds"
section of the Prospectus.
PORTFOLIO MANAGERS
FIXED INCOME FUND: MARY WILSON KIBBE, Executive Vice President of the Manager,
is primarily responsible for the day-to-day management of the Fixed Income Fund.
She became primarily responsible for the day-to-day management of the Fund
effective October 21, 1999, the date on which she joined the Manager. Ms. Kibbe
has 23 years of investment experience. Ms. Kibbe is assisted in the day-to-day
management of the Fund by a team of investment professionals at the Manager.
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PORTFOLIO MANAGERS (CONT.)
VALUE FUND: ANTHONY M. MARAMARCO, Senior Vice President of the Manager, 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. Mr. Maramarco
became primarily responsible for the day-to-day management of the Fund effective
May 27, 1999 and had assisted in the management of the Fund since 1997. Mr.
Maramarco is assisted in the day-to-day management of the Fund by a team of
investment professionals at the Manager.
CORE GROWTH FUND: JAMES B. GRIBBELL, Senior Vice President of the Manager, is
primarily responsible for the day-to-day management of the Core 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 GROWTH FUND: MICHAEL CAPLAN, Senior Vice President of the Manager,
is 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.
ENTERPRISE III FUND: LANCE F. JAMES, Executive Vice President of the Manager, is
primarily responsible for the day-to-day management of the Enterprise III Fund.
Mr. James has been employed by the Manager in portfolio management since 1986.
He became primarily responsible for the day-to-day management of the Fund
effective March 20, 2000. Mr. James is assisted in the day-to-day management of
the Fund by a team of investment professionals at the Manager.
SMALL COMPANY OPPORTUNITIES FUND: PAUL S. SZCZYGIEL and ROBERT K. BAUMBACH are
primarily responsible for the day-to-day management of the Small Company
Opportunities Fund. Mr. Szczygiel is a Senior Vice President of the Manager and
a Chartered Financial Analyst. He has over 16 years of investment experience and
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.
Baumbach, also a Senior Vice President of the Manager and a Chartered Financial
Analyst, has 15 years of investment experience. He has been employed by the
Manager since November 1999, prior to which he was a Senior Vice President and
Senior Analyst at Putnam Investments. Mr. Baumbach has assisted in the
management of the Fund since joining the Manager. Mr. Szczygiel and Mr. Baumbach
are supported by a team of investment professionals at the Manager.
GLOBAL SMALL CAP FUND: LANCE F. JAMES, Executive Vice President of the Manager,
and JAMES W. BURNS, Managing Director of the Subadvisor, are primarily
responsible for the day-to-day management of the Global Small Cap Fund. Mr.
James has been employed by the Manager in portfolio management since 1986. He
became primarily responsible for the day-to-day management of the Fund's
domestic portfolio effective March 20, 2000. Mr. James is assisted in the
day-to-day management of the Fund's domestic investments by a team of investment
professionals at the Manager.
Mr. Burns, who has been employed by Colonial First State (and Stewart Ivory
prior to its acquisition by Colonial First State) for over 9 years, has been
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<PAGE>
PORTFOLIO MANAGERS (CONT.)
a portfolio manager of the Fund's international investments since its inception.
Mr. Burns is assisted by a team of investment professionals that have
responsibilities for specific countries.
INTERNATIONAL FUND: JAMES W. BURNS, a Managing Director of the Subadvisor, is
primarily responsible for the day-to-day management of the International Fund.
Mr. Burns, who has been employed by Colonial First State (and Stewart Ivory
prior to its acquisition by Colonial First State) for over 9 years, has been a
portfolio manager of the Fund and its predecessor, Babson-Stewart Ivory
International Limited Partnership III, since its inception. Mr. Burns is
assisted by a team of investment professionals that have responsibility for
specific countries.
EMERGING MARKETS FUND: ANGUS J. TULLOCH and STUART W. PAUL are primarily
responsible for the day-to-day management of the Emerging Markets Fund. Mr.
Tulloch, who is head of the Colonial First State's U.K. based Asia Pacific
(ex-Japan) desk, has been employed by Colonial First State (and Stewart Ivory
prior to its acquisition by Colonial First State) for over 10 years. Mr. Paul, a
Chartered Financial Analyst, is the joint head of Colonial First State's
Emerging Markets desk, and has been employed by Colonial First State (and
Stewart Ivory prior to its acquisition by Colonial First State) since 1994.
Prior to that, he was a Chartered Accountant with Ernst & Young. Mr. Tulloch and
Mr. Paul have managed the Fund since its inception. They are assisted by a team
of investment professionals that have responsibility for specific countries.
CERTAIN PERFORMANCE INFORMATION RELATED TO OTHER ACCOUNTS
BABSON GROWTH FUND The information presented below provides related performance
information which may be useful to consider before investing in the DLB Core
Growth Fund. THE QUOTED PERFORMANCE DATA BELOW DOES NOT REPRESENT THE HISTORICAL
PERFORMANCE OF THE DLB CORE GROWTH FUND AND SHOULD NOT BE INTERPRETED AS BEING
INDICATIVE OF THE PAST OR FUTURE PERFORMANCE OF THE FUND. The expenses, timing
of purchases and sales of portfolio securities, availability of cash flows,
brokerage commissions, portfolio composition and investment policies of the DLB
Core Growth Fund, as well as any changes in market conditions, are all reasons
that the performance results of the Fund may vary from the related performance
results shown below.
In addition to serving as investment advisor to the DLB Core Growth Fund, the
Manager has also served as the investment subadvisor to the Babson Growth Fund
since its inception. The Babson Growth Fund is a registered investment company
having substantially similar (although not necessarily identical) investment
objectives, policies and strategies as the DLB Core Growth Fund. James B.
Gribbell, the individual primarily responsible for the day-to-day management of
the DLB Core 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.
The bar chart below illustrates the variability of returns achieved by the
Manager for the Babson Growth Fund. The table following the bar chart compares
the average annual total returns that the Manager achieved for the Babson Growth
Fund 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 Babson Growth Fund
invests. In each case, the performance of the Babson Growth Fund has been
adjusted to give effect to the fees and expenses of the DLB Core Growth Fund
(without giving effect to any expense waivers or reimbursements) during the 1999
fiscal year.
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<PAGE>
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
-9.52% 25.95% 9.01% 10.18% -0.65%
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
31.31% 21.68% 27.85% 32.09% 12.40%
Best Quarter: 4th Quarter 1998, +26.20% Worst Quarter: 3rd Quarter 1990, -17.28%
The Babson Growth Fund's year-to-date return through June 30, 2000 was -5.18%
================================================================================
Average Annual Total Returns
For Similar Account*
For the periods ended December 31, 1999
================================================================================
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Babson Growth Fund 12.40% 23.81% 24.84% 15.22%
S&P 500 Index 21.04% 27.56% 28.56% 18.21%
Russell 1000
Growth Index 33.16% 34.07% 32.41% 20.32%
================================================================================
* As of December 31, 1999, the Babson Growth Fund had $500 million in assets.
The STANDARD & POORS 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 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.
SMALL COMPANY OPPORTUNITIES ACCOUNTS The information presented below provides
related performance information which may be useful to consider before investing
in the Small Company Opportunities Fund. THE QUOTED PERFORMANCE DATA BELOW DOES
NOT REPRESENT THE HISTORICAL PERFORMANCE OF THE SMALL COMPANY OPPORTUNITIES FUND
AND SHOULD NOT BE INTERPRETED AS BEING INDICATIVE OF THE PAST OR FUTURE
PERFORMANCE OF THE FUND. The expenses, timing of purchases and sales of
portfolio securities, availability of cash flows, brokerage commissions,
portfolio composition and investment policies of the Small Company Opportunities
Fund, as well as any changes in market conditions, are all reasons that the
performance results of the Fund may vary from the related performance results
shown below.
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 Small
Company Opportunities Fund (collectively, the "Small Company Opportunities
Accounts").
Paul S. Szczygiel, the Small Company Opportunities Fund's portfolio manager, has
also been the portfolio manager of the Small Company Opportunities Accounts
since the inception of those accounts (May 1, 1994).
The performance information shown below is based on a composite o the Small
Company Opportunities Accounts adjusted to give effect to the estimated fees and
expenses of the Small Company Opportunities Fund (without giving effect to any
expense waivers or reimbursements) during the 1999 fiscal year. The bar chart
below illustrates the variability of returns achieved by the Manager for the
Small Company Opportunities Accounts. The table following the bar chart compares
the average annual total returns that the Manager achieved for the Small Company
Opportunities Accounts 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
Small Company Opportunities Accounts invest.
-44-
<PAGE>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
35.77% 56.70% 47.19% -6.28% 10.83%
Best Quarter: 2nd Quarter 1999, +22.31% Worst Quarter: 3rd Quarter 1998, -21.57%
The Micro Cap Accounts' year-to-date return through June 30, 2000 was 30.62%
================================================================================
Average Annual Total Returns
For Similar Account*
For the periods ended December 31, 1999
================================================================================
Since
Inception
1 Year 3 Years 5 Years 5/1/94
--------------------------------------------------------------------------------
Small Company Opp. Accounts 10.83% 15.20% 26.60% 25.05%
Russell 2000 Index 21.26% 13.08% 16.69% 14.65%
Russell 2000 Value Index -1.49% 6.69% 13.14% 11.28%
================================================================================
* As of December 31, 1999, the Micro Cap Accounts consisted of 4 accounts
totaling $64.8 million in assets.
The RUSSELL 2000 INDEX is a broad-based index that consists of the 2000 smallest
securities in the Russell 3000 Index, representing approximately 8% 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.
The RUSSELL 2000 VALUE INDEX is an unmanaged index that measures the performance
of those Russell 2000 companies with lower price-to-book ratios and lower
forecasted growth values.
Unlike the Small Company Opportunities Fund, the Small Company Opportunities
Accounts are comprised of 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 Small Company Opportunities Accounts are comprised of
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 Small Company Opportunities Accounts had all been registered under the 1940
Act, and subject to Subchapter M of the Code, their performance might have been
adversely affected.
-45-
<PAGE>
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.
HOW TO PURCHASE SHARES
You may purchase shares of each Fund directly from The DLB Fund Group on any day
when the New York Stock Exchange ("NYSE") is open for business. The NYSE is
closed on weekend days, most national holidays and Good Friday. Before placing
an order for Fund shares, you should call the Manager at 1-888-722-2766, Attn:
The DLB Fund Group Coordinator.
PURCHASE PRICE: The purchase price of a share of a Fund, other than the
International Fund and the Emerging Markets Fund, is the net asset value next
determined after your purchase order is received in good order. Generally, a
purchase order is in good order if the Funds' Transfer Agent, Investors Bank &
Trust Company ("IBT"), has received the consideration for the Fund shares before
the relevant deadline, which is described below under "Purchases."
Shares of the International Fund and the Emerging Markets Fund are sold at their
offering price, which is the net asset value per share next determined after
your purchase order is received in good order plus any purchase premium
established from time to time by The DLB Fund Group for the particular Fund. All
purchase premiums are paid to and retained by the Fund and are intended to cover
the brokerage and other costs associated with putting the investment to work in
the relevant markets. For each of the International Fund and the Emerging
Markets Fund, the purchase premium currently in effect is 0.50% of the amount
invested. These premiums are paid to and retained by the Fund itself and are
designed to allocate transaction costs caused by shareholder activity to the
shareholder generating the activity, rather than to the Fund as a whole.
Purchase premiums are not sales loads. In certain limited circumstances, the
purchase premiums for the International Fund or the Emerging Markets Fund may be
waived in part or in full. These circumstances are described in footnote 2 to
the Shareholder Fees table of the "Expense Information" section relating to such
Fund.
In most cases, if the Funds' Transfer Agent, 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.
-46-
<PAGE>
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:
o 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.);
o 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
o the securities may be acquired under the investment restrictions applicable
to the relevant Fund.
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.
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:
o 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
o 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.
-47-
<PAGE>
REDEMPTION REQUESTS: You should send redemption requests to The DLB Fund Group.
To help facilitate the timely payment of redemption proceeds, you should
telephone the Manager at 1-888-722-2766, Attn: The DLB Fund Group Coordinator,
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 Fund 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 reasons 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.
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 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. 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
that are deemed relevant under the circumstances, including the
-48-
<PAGE>
HOW SHARE PRICE IS DETERMINED (CONT.)
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. The use of fair value pricing by the
Funds may cause the net asset value of its hares to differ significantly from
the net asset value that would be calculated using current market values.
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, the Funds may hold portfolio
securities that are primarily listed on foreign exchanges that trade on weekends
or other days when the Funds do not accept orders or price their shares. As a
result, the value of any such securities held by a Fund may change on days when
you will not be able to purchase or redeem the Fund's 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.
DISTRIBUTION AND SERVICE(RULE 12B-1) PLANS
The DLB Fund Group has adopted a distribution and service 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, to reduce
redemptions or to improve 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
were made.
PRINCIPAL UNDERWRITER
Babson Securities Corp. ("BSC") serves as the principal underwriter of each
Fund. In its capacity as principal underwriter, BSC solicits applications for
the purchase of shares of each Fund and may assist investors in transmitting
applications to each Fund or its agent. BSC does not, however, buy or sell or
accept orders for the purchase or sale of shares of any Fund.
-49-
<PAGE>
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 realized 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 realized 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.
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<PAGE>
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 advisor about the tax consequences
of investments in a Fund in light of your particular tax situation. You should
also consult your own tax advisor about consequences under foreign, 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.
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). This issue can arise
in any Fund, in particular with respect to distributions on shares of the
International Fund, which had unrealized gains at the time of its formation.
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 or another 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.
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 investments of the Global Small Cap Fund, the
International Fund and the Emerging Markets Fund in foreign securities may be
subject to foreign withholding taxes. In that case, the Funds' yields on those
securities would be decreased. Shareholders may be entitled to claim a credit or
deduction with respect to foreign taxes. In addition, the Funds' investments in
foreign securities or foreign currencies may increase or accelerate the Funds'
recognition of ordinary income and may affect the timing or amount of the Funds'
distributions.
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<PAGE>
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).
The financial highlights for each of the periods through October 31, 1999, have
been derived from the Funds' financial statements, which have been audited by
Deloitte & Touche LLP, whose report, along with each Fund's financial
statements, is included in each Fund's Annual Report. The information for the
six-month period ended April 30, 2000, which is unaudited, is included in each
Fund's Semi-Annual Report. Each Fund's Annual and Semi-Annual Reports are
available upon request as indicated on the back cover of this Prospectus.
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<PAGE>
DLB FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Six Mos.
Ended Ten Months
April 30, Ended Years Ended December 31, Period Ended
2000 October 31, ------------------------------------ December 31,
(Unaudited) 1999 1998 1997 1996 1995**
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data
(for a share outstanding throughout each period):
Net asset value- beginning of period $ 10.12 $ 10.72 $ 10.61 $ 10.11 $ 10.26 $ 10.00
----------- ----------- ----------- ----------- ---------- ----------
Income from investment operations:
Net investment income .31 .48 .63 .42 .53 .28
Net realized and unrealized gain (loss) on
investments (.20) (.60) .20 .49 (.15) .37
----------- ----------- ----------- ----------- ---------- ----------
.11 (.12) .83 .91 .38 .65
----------- ----------- ----------- ----------- ---------- ----------
Less distributions to shareholders:
From net investment income (1) (.31) (.48) (.63) (.41) (.53) (.28)
From net realized gain on investments (.01) -- (.09) -- -- (.11)
----------- ----------- ----------- ----------- ---------- ----------
(.32) (.48) (.72) (.41) (.53) (.39)
----------- ----------- ----------- ----------- ---------- ----------
Net asset value- end of period $ 9.91 $ 10.12 $ 10.72 $ 10.61 $ 10.11 $ 10.26
=========== =========== =========== =========== ========== ==========
Total return 1.07% (1.08%) 8.04% 9.03% 3.70% 14.75%*
Ratios and Supplemental Data:
Ratio of expenses to average net assets .55%* .55%* .55% .55% .55% .55%*
Ratio of net investment income to average net assets 6.08%* 5.63%* 5.71% 5.74% 6.36% 6.24%*
Portfolio turnover 44% 58% 50% 44% 65% 42%
Net assets at end of period (000 omitted) $ 21,914 $ 36,540 $ 33,858 $ 32,155 $ 15,261 $ 5,325
The manager has agreed with the Fund to reduce its management fee and/or 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:
Net investment income $ .25 $ .46 $ .60 $ .38 $ .44 $ .19
Ratios (to average net assets):
Expenses .88%* .79%* .80% 1.06% 1.66% 2.50%*
Net investment income 5.75%* 5.40%* 5.45% 5.22% 5.25% 4.33%*
---------------------------------------------------------------------------------------------------------------------------------
* 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.
</TABLE>
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<PAGE>
DLB VALUE FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Six Months Ten Months
Ended Ended Years Ended December 31, Period Ended
April 30, October 31, --------------------------------- December 31,
2000 1999 1998 1997 1996 1995**
(Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data
(for a share outstanding throughout each period):
Net asset value- beginning of period $ 14.91 $ 14.48 $ 14.91 $ 12.53 $ 10.58 $ 10.00
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income .11 .29 .27 .15 .16 .09
Net realized and unrealized gain on
investments (1.03) .14 .50 3.15 2.38 .73
------- ------- ------- ------- ------- -------
(0.92) 0.43 .77 3.30 2.54 .82
------- ------- ------- ------- ------- -------
Less distributions to shareholders:
From net investment income (1) (.33) - (.27) (.15) (.16) (.09)
From net realized gain on investments (1) (1.04) - (.93) (.70) (.41) (.15)
In excess of net realized gain on investment - - - (.07) (.02) -
------- ------- ------- ------- ------- -------
(1.37) - (1.20) (.92) (.59) (.24)
------- ------- ------- ------- ------- -------
Net asset value- end of period $ 12.62 $ 14.91 $ 14.48 $ 14.91 $ 12.53 $ 10.58
======= ======= ======= ======= ======= =======
Total Return (6.31%) 2.98% 5.25% 26.35% 23.99% 18.64% *
Ratios and Supplemental Data:
Ratio of expenses to average net assets .79% * .74% * .60% .71% .80% .80% *
Ratio of net investment income to
average net assets 1.61% * 2.22% * 1.85% 1.40% 1.56% 2.02% *
Portfolio turnover 25% 28% 21% 25% 23% 7%
Net assets at end of period (000 omitted) $71,951 $74,383 $71,911 $56,449 $19,228 $10,818
For certain periods indicated below, the manager has agreed with the Fund to reduce its management fee and/or 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:
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% *
------------------------------------------------------------------------------------------------------------------------------------
* Annualized
** For the period from July 25, 1995 (commencement of operations) to December 31, 1995.
(1) Distributions from net investment income and from net realized gain on investments for the ten months ended October 31,
1999 was less than $.01 per share.
</TABLE>
-54-
<PAGE>
DLB CORE GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Six Months Ten Months Period Ended
Ended April 30, Ended October 31, December 31,
2000 1999 1998**
(Unaudited)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data
(for a share outstanding throughout each period):
Net asset value- beginning of period $12.93 $12.82 $10.00
------ ------ ------
Income from investment operations:
Net investment income - 0.02 0.05
Net realized and unrealized gain on investments 2.94 0.09 3.09
----- ----- ----
2.94 0.11 3.14
----- ----- ----
Less distributions to shareholders:
From net investment income (1) (0.02) - (0.05)
From net gain on investments (1) (0.61) - (0.27)
----- ----- ----
(0.63) - (0.32)
----- ----- ----
Net asset value- end of period $15.24 $12.93 $12.82
====== ====== ======
Total return 23.35% 0.85% 31.33%
Ratios and Supplemental Data:
Ratio of expenses to average net assets .69% * .68% * .80% *
Ratio of net investment income to average net assets (.04%)* .19% * .48% *
Portfolio turnover 54% 66% 34%
Net assets at end of period (000 omitted) $162,509 $115,991 $33,054
The manager has agreed with the Fund to reduce its management fee and/or 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:
Net investment income $ - $ - $ .03
Ratios (to average net assets):
Expenses - - .95% *
Net investment income - - .32% *
-----------------------------------------------------------------------------------------------------------------------
* Annualized
** For the period from January 20, 1998 (commencement of operations) to December 31, 1998.
(1) Distributions from net investment income and from net gain on investments for the ten months ended October 31,
1999 was less than $.01 per share.
</TABLE>
-55-
<PAGE>
DLB DISCIPLINED GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Six Months Ten Months Years Ended December 31,
Ended Ended ------------------------- Period Ended
April 30, October 31, December 31,
2000 1999 1998 1997 1996 **
(Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data
(for a share outstanding throughout each period):
Net asset value- beginning of period $ 17.25 $ 15.89 $ 14.55 $ 11.66 $ 10.00
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (.02) (.03) .01 .03 .01
Net realized and unrealized gain on investments 3.85 1.39 3.72 3.73 1.84
---------- ---------- ---------- ---------- ----------
3.83 1.36 3.73 3.76 1.85
---------- ---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income (1) -- -- (.01) (.03) (.01)
From net realized gain on investments (1) (2.08) -- (2.38) (.83) (.18)
In excess of net realized gain on investment -- -- -- (.01) --
---------- ---------- ---------- ---------- ----------
(2.08) -- (2.39) (.87) (.19)
---------- ---------- ---------- ---------- ----------
Net asset value- end of period $ 19.00 $ 17.25 $ 15.89 $ 14.55 $ 11.66
========== ========== ========== ========== ==========
Total Return 23.50% 8.60% 25.71% 32.23% 18.51%
Ratios and Supplemental Data:
Ratio of expenses to average net assets .90% * .90% * .90% .90% .90% *
Ratio of net investment income (loss) to average net assets (.24%)* (.20%) * .08% .23% .43% *
Portfolio turnover 57% 97% 81% 46% 10%
Net assets at end of period (000 omitted) $ 52,313 $ 41,683 $ 35,308 $ 25,069 $13,897
The manager has agreed with the Fund to reduce its management fee and/or 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:
Net investment loss $ (.03) $ (.06) $ (.02) $ (.06) $ (.01)
Ratios (to average net assets):
Expenses 1.07% * 1.09% * 1.14% 1.55% 1.82% *
Net investment loss (.41%)* (.39%) * (.17%) (.43%) (.50%)*
------------------------------------------------------------------------------------------------------------------------------------
* Annualized
** For the period from August 26, 1996 (commencement of operations) to December 31, 1996.
(1) Distributions from net investment income and from realized gains on investments for the ten months ended October 31, 1999
were less than $.01 per share.
</TABLE>
-56-
<PAGE>
DLB ENTERPRISE III FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Six Months Ten Months Years Ended December 31,
Ended Ended ------------------------------------- Period Ended
April 30, October 31, December 31,
2000 1999 1998 1997 1996 1995**
(Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data
(for a share outstanding throughout each period):
Net asset value- beginning of period $ 10.93 $ 11.90 $ 14.19 $ 11.51 $ 10.75 $ 10.00
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income .04 .07 .10 .08 .15 .08
Net realized and unrealized gain (loss) on
investments (.75) (1.04) (1.36) 3.72 1.44 .84
--------- --------- --------- --------- --------- ---------
(.71) (.97) (1.26) 3.80 1.59 .92
--------- --------- --------- --------- --------- ---------
Less distributions to shareholders:
From net investment income (1) (2) (.09) -- (.10) (.08) (.15) (.08)
From net realized gain on investments (1) (2) (.51) -- (.93) (1.04) (.68) (.09)
In excess of realized gain on investments (1) (.02) -- -- -- -- --
--------- --------- --------- --------- --------- ---------
(.62) -- (1.03) (1.12) (.83) (.17)
--------- --------- --------- --------- --------- ---------
Net asset value- end of period $ 9.60 $ 10.93 $ 11.90 $ 14.19 $ 11.51 $ 10.75
========= ========= ========= ========= ========= =========
Total Return (6.77%) (8.11%) (8.63%) 32.95% 14.75% 21.17% *
Ratios and Supplemental Data:
Ratio of expenses to average net assets .90% * .90% * .76% .90% .90% .90% *
Ratio of net investment income to
average net assets .94% * .71% * .77% .78% 1.28% 1.90% *
Portfolio turnover 20% 48% 28% 32% 25% 6%
Net assets at end of period (000 omitted) $ 34,316 $ 32,612 $ 29,940 $ 27,358 $ 13,690 $ 10,929
The manager has agreed with the Fund to reduce its management fee and/or 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:
Net investment income $ .04 $ .06 $ .06 $ .04 $ .05 $ .01
Ratios (to average net assets):
Expenses 1.07% * 1.00% * 1.02% 1.33% 1.77% 2.50% *
Net investment income .77% * .61% * .51% .36% .41% .32% *
------------------------------------------------------------------------------------------------------------------------------------
* Annualized
** For the period from July 25, 1995 (commencement of operations) to December 31, 1995.
(1) Distributions in excess of net investment income and distributions in excess of net realized gain on investments for the
year ended December 31, 1996 were less than $.01 per share.
(2) Distributions from net investment income and from net realized gains on investments for the ten months ended October 31,
1999 were less than $.01 per share.
</TABLE>
-57-
<PAGE>
DLB SMALL COMPANY OPPORTUNITIES FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
------------------------------------------------------------------------------------
Six Months
Ended Ten Months Period
April 30, Ended Ended
2000 October 31, December 31,
(Unaudited) 1999 1998**
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data
(for a share outstanding throughout each period):
Net asset value--beginning of period $ 8.89 $ 8.61 $ 10.00
------- ------- -------
Gain (loss) from investment operations:
Net investment loss .01 (.01) (.01)
Net realized and unrealized gain (loss)
on investments 2.63 .29 (1.38)
------- ------- -------
2.64 .28 (1.39)
------- ------- -------
Lss distributions to shareholders:
From net realized gain on investments (.15) -- --
------- ------- -------
Net asset value--end of period $ 11.38 $ 8.89 $ 8.61
======= ======= =======
Total return 30.54% 2.92% (13.90%)
Ratios and Supplemental Data:
Ratio of expenses to average net assets 1.30%* 1.30%* 1.30%*
Ratio of net investment loss to average
net assets .40%* (.18%)* (.28%)*
Portfolio turnover 64% 68% 51%
Net assets at end of period (000 omitted) $48,987 $31,819 $19,910
The Manager has agreed with the Fund to reduce its management fee and/or 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:
Net investment loss $ .01 $ (.02) $ (.03)
Ratios (to average net assets):
Expenses 1.43%* 1.51%* 1.77%*
Net investment loss .27%* (.39%)* (.76%)*
------------------------------------------------------------------------------------
* Annualized
** For the period from July 20, 1998 (commencement of operations) to December 31, 1998.
</TABLE>
-58-
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Six Months Ten Months
Ended Ended Years Ended December 31, Period Ended
April 30, October 31, ------------------------------ December 31,
2000 1999 1998 1997 1996 1995**
(Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data
(for a share outstanding throughout each period):
Net asset value- beginning of period $11.80 $10.78 $11.27 $11.19 $10.33 $10.00
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (.01) .01 .01 .02 .01 .07
Net realized and unrealized gain on investments
and foreign currency .95 1.01 .40 .50 1.01 .33
------ ------ ------ ------ ------ ------
.94 1.02 .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 and foreign
currency transactions (1) (.59) -- (.81) (.02) (.11) --
In excess of net realized gain on investments and
foreign currency transactions -- -- -- (.01) (.04) --
Tax return of capital -- -- -- (.40) -- --
------ ------ ------ ------ ------ ------
(.59) -- (.90) (.44) (.16) (.07)
------ ------ ------ ------ ------ ------
Net asset value- end of period $12.15 $11.80 $10.78 $11.27 $11.19 $10.33
====== ====== ====== ====== ====== ======
Total return 7.90% 9.48% 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% 1.50% 1.50% 1.46% *
Ratio of net investment income to average net assets .16% * .10% * .10% .22% .09% 1.46% *
Portfolio turnover 30% 45% 36% 44% 22% 5%
Net assets at end of period (000 omitted) $17,814 $15,615 $14,310 $13,887 $12,586 $10,509
The manager has agreed with the Fund to reduce its management fee and/or 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:
Net investment income (loss) $ (.04) $ (.04) $ (.08) $ (.05) $ (.10) $ .02
Ratios (to average net assets):
Expenses 1.97% * 2.03% * 2.00% 2.14% 2.36% 2.50% *
Net investment income (loss) (.62%)* (.43%)* (.40%) (.42%) (.77%) .42% *
------------------------------------------------------------------------------------------------------------------------------------
* Annualized
** For the period from July 19, 1995 (commencement of operations) to December 31, 1995.
(1) Distributions from net realized gain on investments for the ten months ended October 31, 1999 was less than $.01 per share.
</TABLE>
-59-
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
------------------------------------------------------------------------------
Six Months
Ended
April 30, 2000
(Unaudited)
------------------------------------------------------------------------------
<S> <C>
Per share data
(for a share outstanding throughout each period):
Net asset value--beginning of period $ 10.00
----------
Income from investment operations:
Net investment income --
Net realized and unrealized gain on investments 1.60
and foreign currency ----------
Net asset value--end of period $ 11.60
==========
Total return 16.00%
Ratios and Supplemental Data:
Ratio of expenses to average net assets 1.00%
Ratio of net investment income to average net assets .02%
Portfolio turnover 30%
Net assets at end of period (000 omitted) $ 65,776
The Manager has agreed with the Fund to reduce its management fee and/or bear
certain expenses, such that the Fund's total expenses do not exceed 1.00% of
average daily net assets. Without such agreement, the investment loss per share
and ratios would have been:
Net investment loss $ (.01)
Ratios (to average net assets):
Expenses 1.11%*
Net investment loss (.08%)*
--------------------------------------------------------------------------------
* Annualized
</TABLE>
-60-
<PAGE>
DLB STEWART IVORY EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
------------------------------------------------------------------------------
Six Months
Ended
April 30, 2000
(Unaudited)
------------------------------------------------------------------------------
<S> <C>
Per share data
(for a share outstanding throughout each period):
Net asset value--beginning of period $ 10.00
----------
Income from investment operations:
Net investment income --
Net realized and unrealized gain on investments 1.61
and foreign currency ----------
Net asset value--end of period $ 11.61
==========
Total return 16.10%
Ratios and Supplemental Data:
Ratio of expenses to average net assets 1.75%*
Ratio of net investment income to average net assets (.08%)*
Portfolio turnover 43%
Net assets at end of period (000 omitted) $ 30,075
The Manager has agreed with the Fund to reduce its management fee and/or bear
certain expenses, such that the Fund's total expenses do not exceed 1.75% of
average daily net assets. Without such agreement, the investment loss per share
and ratios would have been:
Net investment loss $ (.02)
Ratios (to average net assets):
Expenses 1.95%*
Net investment loss (.29%)*
--------------------------------------------------------------------------------
* Annualized
</TABLE>
-61-
<PAGE>
APPENDIX
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
The Funds may invest in a wide range of investments and engage in various
investment transactions and practices, in addition to the Funds' principal
investment strategies described in the section entitled "About the Funds." These
practices are pursuant to non-fundamental policies and therefore may be changed
by the Board of Trustees of The DLB Fund Group without the consent of
shareholders. Some of the more significant practices and associated risks are
discussed below. You will find additional information about the Funds'
investment policies and associated risks in the Statement of Additional
Information.
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 Enterprise III Fund, the Small Company Opportunities Fund and
the Global Small Cap Fund generally limit investments by those Funds to issuers
that meet certain market capitalization requirements. For example, the
Enterprise III Fund invests primarily in companies that have market
capitalizations at the time of investment between $400 million and $2 billion.
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
Enterprise III 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 $2 billion 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 that 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.
-62-
<PAGE>
EURO RISK
The Global Small Cap Fund, the International Fund and, to a lesser extent, the
other Funds may be subject to an additional risk regarding their foreign
securities holdings. On January 1, 1999, eleven countries in the European
Monetary Union adopted the Euro as their official currency. However, their
current currencies (for example, the franc, the mark and the lire) will also
continue in use until January 1, 2002. After that date, it is expected that only
the Euro will be used in those countries. A common currency is expected to
confer some benefits in those markets, by consolidating the government debt
market for those countries and reducing some currency risks and costs. But the
conversion to the new currency will affect the Funds operationally and may
adversely impact the value and/or volatility of the securities held by the
Funds.
STATEMENT OF ADDITIONAL INFORMATION
In the Statement of Additional Information you will find a list of fundamental
and non-fundamental investment restrictions applicable to the Funds. The
Statement of Additional Information also describes the following investment
techniques and practices that may be used by the Funds, as indicated below:
ALL FUNDS:
o Money Market Instruments
o Preferred Stocks
o Convertible Securities
o When-Issued Securities
o Restricted / Illiquid Securities
o Repurchase Agreements
o Portfolio Turnover
o Lending of Portfolio Securities
o Derivatives
o Warrants and Rights
o REITs
o Foreign Securities
FIXED INCOME FUND:
o Adjustable Rate Securities
o Interest Rate Swaps and Related Instruments
o Municipal Bonds
o Strips and Residuals
o Zero Coupon Securities
o Loans and Other Direct Debt Instruments
o Reverse Repurchase Agreements and Dollar Roll Transactions
DISCIPLINED GROWTH FUND:
o Financial Futures
o Options
GLOBAL SMALL CAP FUND, INTERNATIONAL FUND AND EMERGING MARKETS FUND:
o Pooled Investment Vehicles
o Foreign Currency Transactions
You will also find additional information regarding the Global Small Cap Fund's
policies with respect to the geographic diversification of its investments in
the Statement of Additional Information.
-63-
<PAGE>
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 SEMI-ANNUAL 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 OVERNIGHT COURIER
The DLB Fund Group
c/o David L. Babson & Company Inc.
Marketing Department
Attention: The DLB Fund Group Coordinator
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: Information about the Funds (including the SAI) can be reviewed
and copied at the SEC's public reference room in Washington D.C. Information on
the operation of the public reference room may be obtained by calling the SEC at
1-202-942-8090. Reports and other information about the Funds are available on
the EDGAR database on the SEC's Internet site at http://www.sec.gov. Investors
may also make an electronic request at: [email protected] or write to: SEC,
Public Reference Section, Washington, D.C., 20549-0102. A fee will be charged
for making copies.
Investment Company Act File Number 811-08690
