DLB
THE DLB FIXED INCOME FUND
SEMI ANNUAL REPORT
APRIL 30, 2000
[EXPERIENCE TO MANAGE THE FUTURE]
<PAGE>
DLB FIXED INCOME FUND
-------------------------------
FUND INVESTMENT OBJECTIVE
THE DLB FIXED INCOME FUND seeks to achieve a high level of current income
consistent with preservation of capital through investment in a portfolio of
fixed income securities.
MARKET OVERVIEW
WHILE Y2K MAY HAVE BEEN A NON-EVENT FOR COMPUTER USERS, IT HAS CERTAINLY BEEN
FULL OF SURPRISES FOR DOMESTIC BOND INVESTORS. The consensus outlook for higher
interest rates and improving spread sectors in the new year has so far proved
incorrect. Instead, the U.S. Treasury yield curve inversion has intensified and
credit spreads have ballooned. The Lehman Aggregate Index, a broad market proxy,
returned +1.91% for the four months ended April 30th, 2000 while the Lehman
Intermediate Aggregate Index returned +1.35% over the same period.
SHORT-TERM INTEREST RATES HAVE BEEN INCREASING STEADILY THIS YEAR WITH THE YIELD
ON THREE-MONTH TREASURY BILLS RISING 51 BASIS POINTS YEAR TO DATE. The Federal
Reserve raised short-term rates three times during 1999 and three times thus far
in 2000, pushing the Fed Funds rate up a total of 175 basis point over the
course of this tightening cycle. Because the Fed continues to struggle with the
potential inflationary impact of a robust U.S. economy, it has indicated it may
need to tighten monetary policy further in order to slow domestic growth.
THE LONG END OF THE TREASURY YIELD CURVE, ON THE OTHER HAND, MARCHED TO THE BEAT
OF A DIFFERENT DRUMMER THIS YEAR. Ten-year Treasury yields are actually about 16
basis points LOWER through April, while thirty-year Treasury yields have fallen
by 49 basis points. As of 4/30/2000, one year Treasury Bills yielded 6.22% and
thirty-year bonds yielded 5.99%. This inverted yield curve is partly due to the
Fed's aggressive tightening policy. The inversion has also been influenced by
the Treasury's debt reduction announcements. The pace of this reduction and
potential for a growing scarcity of long maturity Treasuries has caused a bit of
panic buying by investors. Strong investor demand has helped drive long Treasury
rates below short-term rates. Implications surrounding the scarcity value of the
30-year Treasury has created much confusion over the appropriateness of
long-term Treasury as a pricing benchmark for other debt instruments.
<PAGE>
DLB FIXED INCOME FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW
THE UNCERTAINTY OF TREASURY BENCHMARKS ADDED TO THE ANGST OF "SPREAD SECTOR"
BUYERS, CAUSING SPREADS TO WIDEN SHARPLY, THUS INCREASING THE "RISK PREMIUM"
REQUIRED BY INVESTORS IN CORPORATE AND MORTGAGE BACKED BONDS. An aggressively
tightening Fed, stock market declines, surging LBO and other event risk
activities, and high yield fund outflows have not helped the overall tone of the
market. All of the major spread sectors, including high quality and high yield
corporates, mortgages and yankees, have underperformed similar maturity
Treasuries recently. Even U.S. Federal agency debt, viewed by some investors as
a viable candidate to replace Treasuries as a "benchmark" for market pricing
purposes, suffered amid verbal sparring in Washington regarding the actual
versus implied level of U.S. Treasury support for these issuers.
YIELD SPREADS, OR ADVANTAGE OVER SIMILAR MATURITY TREASURIES FOR CORPORATES AND
MORTGAGE BACKED BONDS, ARE CURRENTLY AT LEVELS NOT SEEN SINCE THE LAST U.S.
RECESSION IN THE EARLY '90'S. Thus, spread sectors appear historically cheap.
The question is, could they get cheaper near term, or is the worst over? We feel
that investors with a longer-term horizon who focus on careful security
selection will be well rewarded over time by adding to spread sector exposure at
these levels.
IN LIGHT OF THE RECENT CHEAPENING THAT NON-TREASURY SECURITIES EXPERIENCED
THROUGHOUT THE FIRST QUARTER, WE ADDED OPPORTUNISTICALLY TO CORPORATE BONDS. Our
strategy is focused on adding to liquid, high quality names. We added to our
exposure in Ontario, a AA rated, highly liquid Yankee bond. We established a new
position in AA rated Wal-Mart, one of the strongest players in a retail market
environment that has been difficult for many. We continue to pay particular
attention to our bond exposure on the long end of the yield curve, as that
segment of the maturity spectrum is particularly volatile in an inverted yield
curve environment.
<PAGE>
DLB FIXED INCOME FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW (CONT.)
--------------------------------------------------------------------------------
TOP 10 HOLDINGS % OF FUND ASSETS
--------------------------------------------------------------------------------
FHLMC Gold #C00680 7.8
FNMA #323380 3.9
MBNAM 1999-BA 3.4
FNMA #252717 3.3
FNMA #490107 3.1
Champion Intl. Corp. 2.9
US Treasury Bond 2.9
Genl Motors Accept Corp. 2.6
Ontario Province 2.5
Burlington North Santa Fe Mtn 2.4
TOTAL 34.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECTOR LEHMAN
BREAKDOWNS (%) PORTFOLIO AGGREGATE DIFFERENCE
--------------------------------------------------------------------------------
Corporate 41 18 +23
Mortgage Backed 27 34 -7
Treasury 5 33 -28
Asset Backed 9 1 +8
Agency 0 8 -8
Yankee 11 5 +6
Commercial Mortgage Backed 5 1 +4
Cash 2 0 +2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
QUALITY LEHMAN
BREAKDOWNS (%) PORTFOLIO AGGREGATE DIFFERENCE
--------------------------------------------------------------------------------
Treasury 5 33 -28
Agency 26 42 -16
AAA 18 4 +14
AA 6 4 +2
A 20 10 +10
Baa 25 7 +18
Below Baa 0 0 0
--------------------------------------------------------------------------------
<PAGE>
DLB FIXED INCOME FUND
-------------------------------
PERFORMANCE REVIEW
DLB FIXED INCOME FUND'S PERFORMANCE FOR THE SIX-MONTH PERIOD ENDED APRIL 30,
2000 WAS 1.07%. This slightly lagged the performance of the Fund's benchmark,
the Lehman Brother's Aggregate Index, during the same time period which was
1.41%. The Fund is overweight in Corporate bonds, and Corporate, Mortgage and
Agency bonds have all underperformed Treasuries through April 30, 2000. High
quality bonds outperformed low quality bonds, which has helped the Fund a bit
given its high average quality. Long duration Treasuries outperformed long
duration Corporates due to the Treasury curve inversion. The Fund's position in
several high quality Yankee bonds has also helped performance, for Yankees are
not susceptible to some of the factors causing Corporate bond spreads to widen.
OUTLOOK
THE YIELD CURVE INVERSION HAS BEEN ONE OF THE BIGGEST STORIES OF THE BOND MARKET
SO FAR THIS YEAR. This inversion will continue to be a primary driver of bond
market returns in 2000. The Fed will stay on the course to tighten aggressively
and the budget surplus situation will continue to put downward pressure on
interest rates on the long end of the bond market. Corporate spreads are at
recessionary levels of cheapness, and are very attractive for investors with a
long-term horizon. There is a disconnect between what the stock market and
corporate spreads are saying about company fundamentals, and either "old
economy" stocks will weaken, or corporate bonds should tighten. We continue our
efforts to avoid corporate names that could incur event risk of any sort, and
look to the stock market and corporations' credit quality for clues in making
such judgements.
<PAGE>
DLB FIXED INCOME FUND
-------------------------------
GROWTH OF A
$100,000 INVESTMENT
Cumulative Total Return Since Inception 7/25/95
<TABLE><CAPTION>
LEHMAN BROTHERS LEHMAN BROTHERS
DLB AGGREGATE DLB AGGREGATE
DATE FIXED INCOME BOND INDEX DATE FIXED INCOME BOND INDEX
---- ------------ ---------- ---- ------------ ----------
<S> <C> <C> <C> <C> <C>
$100,000.00 $100,000.00 31-Dec-97 $120,379.04 $121,267.76
31-Jul-95 $100,100.00 $100,150.00 31-Jan-98 $121,968.05 $122,819.99
31-Aug-95 $101,501.40 $101,361.82 28-Feb-98 $121,858.28 $122,721.73
30-Sep-95 $102,404.76 $102,345.02 31-Mar-98 $122,309.15 $123,138.98
31-Oct-95 $103,602.90 $103,675.51 30-Apr-98 $122,871.77 $123,779.31
30-Nov-95 $105,105.14 $105,230.64 31-May-98 $123,891.61 $124,955.21
31-Dec-95 $106,461.00 $106,703.87 30-Jun-98 $124,907.52 $126,017.33
31-Jan-96 $107,397.85 $107,408.12 31-Jul-98 $125,107.37 $126,281.97
28-Feb-96 $106,356.09 $105,539.22 31-Aug-98 $126,521.09 $128,340.36
31-Mar-96 $105,526.52 $104,800.44 30-Sep-98 $129,949.81 $131,343.53
30-Apr-96 $105,009.44 $104,213.56 31-Oct-98 $129,001.17 $130,647.40
30-May-96 $104,799.42 $104,005.13 30-Nov-98 $129,594.58 $131,392.10
30-Jun-96 $105,836.93 $105,398.80 31-Dec-98 $130,061.12 $131,786.27
31-Jul-96 $106,048.61 $105,683.38 31-Jan-99 $131,036.58 $132,721.95
31-Aug-96 $105,942.56 $105,503.72 28-Feb-99 $128,599.30 $130,399.32
30-Sep-96 $107,605.86 $107,339.48 31-Mar-99 $129,576.65 $131,116.52
31-Oct-96 $109,790.25 $109,722.42 30-Apr-99 $129,822.85 $131,536.09
30-Nov-96 $111,557.88 $111,598.67 31-May-99 $128,342.87 $130,378.57
31-Dec-96 $110,408.83 $110,560.80 30-Jun-99 $127,855.16 $129,961.36
31-Jan-97 $110,850.47 $110,903.54 31-Jul-99 $127,267.03 $129,402.53
28-Feb-97 $111,072.17 $111,180.80 31-Aug-99 $127,139.76 $129,337.82
31-Mar-97 $109,872.59 $109,946.69 30-Sep-99 $128,525.59 $130,838.14
30-Apr-97 $111,399.82 $111,595.89 31-Oct-99 $128,654.11 $131,322.24
31-May-97 $112,380.14 $112,656.05 30-Nov-99 $128,654.11 $131,309.11
30-Jun-97 $113,796.13 $113,996.66 31-Dec-99 $127,972.25 $130,665.76
31-Jul-97 $116,527.23 $117,074.57 31-Jan-00 $127,716.30 $130,234.56
31-Aug-97 $115,653.28 $116,079.44 29-Feb-00 $128,878.52 $131,810.40
30-Sep-96 $117,295.55 $117,797.41 31-Mar-00 $130,824.59 $133,550.30
31-Oct-97 $118,937.69 $119,505.48 30-Apr-00 $130,039.64 $133,163.00
30-Nov-97 $119,151.78 $120,055.20
</TABLE>
--------------------------------------------------------------------------------
TOTAL RETURNS (%) FOR PERIODS ENDED 4/30/00
--------------------------------------------------------------------------------
6 Months One Year Annualized
11/1/99- 5/1/99- Since Inception
4/30/00 4/30/00 7/25/95-
4/30/00
DLB FIXED INCOME FUND 1.07 0.16 5.58
Lehman Brothers Aggregate Bond Index 1.41 1.26 6.11
--------------------------------------------------------------------------------
DISCLOSURE STATEMENT
LEHMAN BROTHERS AGGREGATE BOND INDEX is an unmanaged index that is composed of
securities from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and the Asset-Backed Securities Index. Total return comprises
price appreciation/depreciation and income as a percentage of the original
investment. Indexes are rebalanced monthly by market capitalization. Securities
in the Fund do not match those in the Index, and the performance of the Fund
will differ.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Investment return and share
price will fluctuate with market conditions, and investors may have a gain or
loss when shares are sold. The Fund's total return reflects an expense
limitation in effect during the periods shown. In the absence of such expense
limitation, returns would have been lower.
<PAGE>
DLB FIXED INCOME FUND
-------------------------------
This report and the Fund financial statements contained herein are submitted for
the general information of the shareholders of the DLB Fixed Income Fund. The
report is not intended for distribution to prospective investors unless preceded
or accompanied by a current prospectus.
BABSON SECURITIES CORPORATION
One Memorial Drive, Cambridge, MA 02142
June 2000
<PAGE>
===========================================
DLB Fixed Income Fund
Financial Statements for the Six Months
Ended April 30, 2000 and the Ten Months
Ended October 31,1999
<PAGE>
DLB FIXED INCOME FUND
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS:
Portfolio of Investments as of April 30, 2000 1 - 3
Statement of Assets and Liabilities as of April 30, 2000 4
Statement of Operations for the Six Months Ended April 30, 2000 5
Statements of Changes in Net Assets for the Six Months Ended
April 30, 2000, the Ten Months Ended October 31, 1999,
and the Year Ended December 31, 1998 6
Financial Highlights for the Six Months Ended April 30, 2000,
the Ten Months Ended October 31, 1999, and the Four-Year
Period Ended December 31, 1998 7
Notes to Financial Statements 8 - 10
<PAGE>
DLB FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS (Unaudited)
April 30, 2000
<TABLE><CAPTION>
-------------------------------------------------------------------------------------------------------------------------
BONDS - 97.9%
S&P/MOODY'S
BOND RATING PRINCIPAL
(UNAUDITED) ISSUER AMOUNT VALUE
<S> <C> <C> <C>
US GOVERNMENT - 5.2%
AAA US Treasury Note, 7.25%, 2004 $ 100,000 $ 102,375
AAA US Treasury Note, 6.50%, 2006 225,000 224,507
AAA US Treasury Note, 8.125%, 2021 510,000 618,615
AAA US Treasury Note, 6.125%, 2029 200,000 200,468
------------
1,145,965
------------
MORTGAGES - 27.7%
AAA FHLMC Gold Pool #G00143, 7.50%, 2023 156,861 153,675
AAA FHLMC Gold Pool #C00680, 6.00%, 2028 1,866,041 1,692,853
AAA FNMA Pool #346537, 6.00%, 2011 348,131 326,045
AAA FNMA Pool #323380, 6.50%, 2028 897,374 837,358
AAA FNMA Pool #490107, 6.50%, 2029 715,772 667,901
AAA FNMA Pool #252717, 7.50%, 2029 724,995 709,364
AAA GNMA Pool #780332, 8.00%, 2009 176,617 179,266
AAA GNMA Pool #410343, 7.50%, 2011 318,566 318,665
AAA GNMA Pool #423828, 6.00%, 2011 286,582 269,029
AAA GNMA Pool #398964, 7.50%, 2011 183,581 183,638
AAA GNMA Pool #357262, 7.50%, 2023 224,430 220,713
AAA GNMA Pool #380866, 7.00%, 2024 57,555 55,361
AAA GNMA Pool #432175, 8.00%, 2026 23,802 23,862
AAA GNMA Pool #441009, 8.00%, 2026 136,961 137,303
AAA Green Tree Financial 1995-1 A-5, 8.40%, 2025 89,285 89,699
AAA Green Tree Financial 1996-2 A-3, 6.90%, 2027 200,000 198,692
------------
6,063,424
------------
ASSET BACKED - 12.8%
AAA California Infrastructure PG&E-1, 6.42%, 2008 350,000 336,151
AAA California Infrastructure SCE-1, 6.22%, 2004 300,000 295,593
AAA Comed Transitional Funding Trust, 5.63%, 2009 450,000 408,231
AAA DLJ Commercial Mortgage Corp., 6.11%, 2007 310,043 293,281
AAA JP Morgan Commercial Mortgage Finance Corp.,
6.507%, 2035 400,000 369,756
AAA MBNA Master Cr. Card Trust, 5.9%, 2011 815,000 734,437
AAA Nomura Asset Securities Corporation, 6.59%, 2028 400,000 372,750
------------
2,810,199
------------
BANKS - 1.7%
A Suntrust Banks, 6.00%, 2026 400,000 366,864
------------
</TABLE>
1
<PAGE>
<TABLE><CAPTION>
S&P/MOODY'S
BOND RATING PRINCIPAL
(UNAUDITED) ISSUER AMOUNT VALUE
<S> <C> <C> <C>
FINANCIAL - 7.5%
AA Associates Corp. N.A., 5.8%, 2004 $ 300,000 $ 280,299
A Ford Capital BV, 10.125%, 2000 100,000 101,502
A Ford Motor Credit, 7.25%, 2003 350,000 346,154
A Ford Motor Credit, 7.375%, 2009 350,000 338,317
A General Motors Accept Corp., 7.75%, 2010 575,000 567,853
------------
1,634,125
------------
INDUSTRIAL - 21.3%
BAA Airgas Inc., 7.14%, 2004 415,000 406,704
BAA American Stores, 8.00%, 2026 450,000 451,922
A Cardinal Health, 6.00%, 2006 150,000 132,051
BAA Champion International, 7.20%, 2026 675,000 618,840
BAA Comdisco Inc., 6.375%, 2001 300,000 293,103
BAA Comdisco Inc., 6.13%, 2001 250,000 246,173
A Consolidated Edison, 6.15%, 2008 400,000 357,800
BAA Georgia-Pacific Corporation, 9.95%, 2002 175,000 182,009
A International Business Machines, 6.22%, 2027 400,000 382,124
BAA Telecommunications Inc., 9.80%, 2012 170,000 196,789
BAA Time Warner Inc., 9.15%, 2023 150,000 164,385
BAA Time Warner Entertainment, 8.375%, 2023 325,000 330,441
BAA Tosco Corp., 7.25%, 2007 150,000 142,497
AA Wal-Mart Stores, 6.875%, 2009 350,000 335,944
BAA Worldcom Incorporated, 7.75%, 2007 425,000 423,143
------------
4,663,925
------------
INTERNATIONAL - 13.9%
BAA Canadian National Railroad, 7.00%, 2004 350,000 338,083
BAA Hellenic Republic, 6.95%, 2008 300,000 289,515
A Quebec Province, 7.5%, 2029 400,000 391,140
AA Ontario Province, 5.5%, 2008 625,000 552,119
BAA Oslo Seismic Services, 8.28%, 2011 387,022 382,486
BAA Petro Geo-Services, 7.50%, 2007 400,000 378,756
BAA Province of Newfoundland, 7.32%, 2023 350,000 334,660
BAA Southern Investments UK, 6.375%, 2001 400,000 389,654
------------
3,056,413
------------
TRANSPORTATION - 7.8%
BAA Burlington Northern Santa Fe Corporation, 6.05%, 2001 525,000 518,249
AA Continental Airlines, 7.256%, 2020 297,616 274,330
AA Continental Airlines pass-thru, 8.048%, 2020 150,000 145,134
BAA JB Hunt Transport Services, Inc., 6.25%, 2000 500,000 498,175
BAA Wisconsin Central Transportation, 6.625%, 2008 300,000 269,049
------------
1,704,937
------------
TOTAL BONDS (identified cost, $22,467,807) 21,445,852
</TABLE>
2
<PAGE>
<TABLE><CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENT - 1.0%
Investors Bank & Trust Repurchase Agreement, 4.94%,
dated 4/28/00, $212,972 due on 5/1/00 (secured by
Federal Government Agency securities), at cost $ 212,884 $ 212,884
------------
TOTAL INVESTMENTS (identified cost, $22,680,691) 21,658,736
Other assets, less liabilities - 1.1% 255,077
------------
NET ASSETS - 100% $ 21,913,813
============
See notes to financial statements.
</TABLE>
3
<PAGE>
DLB FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
April 30, 2000
--------------------------------------------------------------------------------
ASSETS:
Investments, at value (identified cost, $22,680,691) $ 21,658,736
Interest receivable 279,554
Receivable from investment manager 19,794
------------
21,958,084
------------
LIABILITIES:
Accrued management fees 6,976
Accrued expenses 37,295
------------
44,271
------------
NET ASSETS $ 21,913,813
============
NET ASSETS CONSIST OF:
Paid-in capital $ 23,727,264
Unrealized depreciation of investments (1,021,955)
Accumulated net realized loss on investment transactions (803,604)
Accumulated undistributed net investment income 12,108
------------
Total $ 21,913,813
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 2,212,316
============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE
PER SHARE (NET ASSETS / SHARES OF BENEFICIAL INTEREST
OUTSTANDING) $ 9.91
============
See notes to financial statements.
4
<PAGE>
DLB FIXED INCOME FUND
STATEMENT OF OPERATIONS (Unaudited)
Six Months Ended April 30, 2000
--------------------------------------------------------------------------------
INTEREST INCOME $ 1,052,369
-----------
EXPENSES:
Management fee 63,246
Trustees' fees 3,000
Custodian fees 33,140
Accounting and audit fees 15,390
Registration fees 9,666
Legal fees 8,421
Transfer agent fee 4,269
Printing 2,096
Miscellaneous 471
-----------
139,699
Reduction of expenses by investment manager (52,735)
-----------
Net expenses 86,964
-----------
Net investment income 965,405
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized loss (identified cost basis) (787,710)
Change in unrealized depreciation 136,748
-----------
Net realized and unrealized loss on investments (650,962)
-----------
Increase in net assets from operations $ 314,443
===========
See notes to financial statements
5
<PAGE>
DLB FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
-------------------------------------------------------------------------------------------------------
Six Months Ten Months Year Ended
Ended Ended December 31,
April 30, 2000 October 31, 1999 1998
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 965,405 $ 1,709,187 $ 1,877,785
Net realized gain (loss) on investments (787,710) 28,638 291,288
Net unrealized appreciation (depreciation)
of investments 136,748 (2,150,902) 368,912
------------ ------------ ------------
314,443 (413,077) 2,537,985
------------ ------------ ------------
Distributions to shareholders:
From net investment income (970,442) (1,699,687) (1,894,627)
From net realized gain on investments (15,363) (4,038) (290,918)
In excess of net realized gain on investments (15,894) -- --
------------ ------------ ------------
(1,001,699) (1,703,725) (2,185,545)
------------ ------------ ------------
Fund share transactions:
Net proceeds from sales of shares 2,166,228 5,422,205 2,275,531
Net asset value of shares issued in
reinvestment of distributions 784,801 1,229,402 1,669,653
Cost of shares reacquired (16,890,068) (1,852,775) (2,594,499)
------------ ------------ ------------
(13,939,039) 4,798,832 1,350,685
------------ ------------ ------------
Total increase (decrease) in net assets (14,626,295) 2,682,030 1,703,125
NET ASSETS:
At beginning of period 36,540,108 33,858,078 32,154,953
------------ ------------ ------------
At end of period (including accumulated
undistributed net investment income of
$12,108, $17,145 and $6,502 , respectively) $ 21,913,813 $ 36,540,108 $ 33,858,078
============ ============ ============
</TABLE>
See notes to financial statements
6
<PAGE>
DLB FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Six Months Ten Months Years Ended December 31, Period
Ended Ended ------------------------------------ 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 $ 10.12 $ 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 (2) (.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) Distributios in excess of net investmet icome for the year ended December 31, 1996 were less than $.01 per share.
(2) Distributions in excess of net realized gains on investments for the six months ended April 30, 2000 were less than $.01
per share.
</TABLE>
See notes to financial statements.
7
<PAGE>
DLB FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. BUSINESS AND ORGANIZATION
DLB Fixed Income Fund (the "Fund") is a non-diversified series of The DLB
Fund Group (the "Trust"), a Massachusetts business trust. The Trust is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
During 1999, the Fund changed its year end from December 31 to October
31.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION - Debt securities other than short-term obligations,
including listed issues, are valued on the basis of valuations furnished
by dealers or by a pricing service, with consideration to factors such as
institutional-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon exchange or
over-the-counter prices. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good
faith by or at the direction of the Trustees. Short-term obligations,
which mature in 60 days or less, are valued at amortized cost, which
approximates market value.
REPURCHASE AGREEMENTS - Securities purchased under agreements to resell
to the original owner are recorded at cost. The Fund may enter into such
agreements with institutions that the Fund's investment adviser has
determined to be creditworthy. The Fund requires that the securities so
purchased be transferred to the custodian under terms that enable the
Fund to obtain such securities in the event of a default. The Fund
monitors, on a daily basis, the value of the securities to assure that
such value, including accrued interest, is greater than amounts owed to
the Fund.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded
on the trade date. Interest income is recorded on the accrual basis. All
premium and original issue discount are amortized or accreted for
financial statement and tax reporting purposes as required by federal
income tax regulations.
TAXES AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute to shareholders all of
its taxable income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is necessary.
The Fund files a tax return annually using tax accounting methods
required by the Code, which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the net investment income and net realized gain reported in
these financial statements may differ from the amounts reported on the
Fund's tax return, and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The
Fund distinguishes between distributions for tax purposes and financial
reporting purposes. Differences between income for financial
8
<PAGE>
reporting purposes and tax-basis earnings and profits may result in the
reporting of temporary over-distributions in the financial statements.
Such over-distributions are classified as distributions in excess of net
investment income or accumulated net realized gains. Distributions, if
any, in excess of tax-basis earnings and profits are reported as return
of capital.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements. Actual results could differ from those such
estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund engages David L. Babson & Company Inc. ("Babson") to provide
investment advisory and administrative services and general office
facilities. The fee for such services is computed daily and paid monthly
at an effective annual rate of .40% of average daily net assets. For the
six months ended April 30, 2000, the management fee amounted to $63,246.
Babson has agreed to pay the Fund's operating expenses such that the
Fund's total aggregate expenses do not exceed .55% of average daily net
assets. For the six months ended April 30, 2000, $52,735 of fund expenses
were borne by Babson.
The Fund pays no compensation directly to the Trustees who also are
officers of the investment manager, nor to the officers of the Fund, all
of whom receive remuneration for their services to the Fund from Babson.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations,
for the six months ended April 30, 2000 were as follows:
<TABLE><CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
U. S. Government securities $ 11,222,211 $ 17,988,647
============ ============
Investments (non-U.S. Government securities) $2,667,312 $9,787,904
============ ============
</TABLE>
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate cost $ 22,680,691
============
Gross unrealized appreciation $ 21,578
Gross unrealized depreciation (1,043,533)
------------
Net unrealized depreciation $ (1,021,955)
============
9
<PAGE>
5. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE><CAPTION>
Six Months Ten Months Year
Ended Ended Ended
April 30, October 31, December 31,
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Shares sold 217,272 514,248 208,434
Shares issued in reinvestment
of distributions 78,741 119,145 155,364
Redemptions (1,694,158) (179,883) (237,538)
---------- ---------- ----------
Net increase (decrease) (1,398,145) 453,510 126,260
========== ========== ==========
</TABLE>
10
<PAGE>
DLB
THE DLB GLOBAL SMALL CAP FUND
SEMI ANNUAL REPORT
APRIL 30, 2000
[EXPERIENCE TO MANAGE THE FUTURE]
<PAGE>
DLB GLOBAL SMALL CAP FUND
-------------------------------
FUND INVESTMENT OBJECTIVE
THE DLB GLOBAL SMALL CAPITALIZATION FUND seeks long-term capital appreciation
through investment primarily in common stocks of foreign and domestic companies
with market capitalization at the time of investment by the Fund of up to $1.5
billion.
MARKET OVERVIEW
ECONOMIC GROWTH IN THE INTERNATIONAL MARKETS CONTINUED TO ACCELERATE DURING THE
FIRST PART OF THE YEAR, PARTICULARLY IN EUROPE. As a result, central banks
around the world followed the lead of the Federal Reserve in the US by raising
interest rates. Continental European economies received an additional boost from
the continuing weakness of the Euro, which fell to an all time low against the
Dollar.
IN THE DOMESTIC MARKET, THE FIRST HALF OF THE FISCAL YEAR WAS CHARACTERIZED BY
THREE MAJOR FACTORS: 1) a runaway market for technology stocks in the 4th
quarter of 1999, 2) continued general dominance of growth stocks until late in
the 1st quarter of 2000, and 3) unprecedented volatility throughout the period.
PORTFOLIO STRATEGY REVIEW--INTERNATIONAL
BABSON-STEWART IVORY INTERNATIONAL, THE FUND'S SUBADVISOR, IS RESPONSIBLE FOR
THE INTERNATIONAL INVESTMENTS. The strategy is driven by stock selection, with a
strong focus on small to medium sized companies with high growth potential.
SMALLER COMPANIES STARTED THE YEAR IN AN EXTREMELY STRONG FASHION BUT RECENTLY
INVESTORS HAVE TURNED MORE CAUTIOUS UNTIL THE IMPACT OF RISING INTEREST RATES
HAVE BEEN DIGESTED. The Fund has benefited from strong moves in a number of
stocks whose profits have come in above expectation. In addition, corporate
activity has helped underpin some share prices.
JAPAN REMAINS THE AREA OF GREATEST CONCERN BECAUSE THERE ARE SIGNS THAT THE MUCH
NEEDED REFORM PACKAGE IS STALLING. Apart from that, prospects for international
smaller companies remain bright due to modest valuations and improving earnings
forecasts provided that interest rates are not raised to levels that would choke
off any economic recovery.
THE FUND'S TOP TEN NON-US HOLDINGS AND COUNTRY WEIGHTINGS CAN BE FOUND ON THE
FOLLOWING PAGE.
<PAGE>
DLB GLOBAL SMALL CAP FUND
-------------------------------
--------------------------------------------------------------------------------
TOP 10 INTERNATIONAL EQUITY HOLDINGS % OF TOTAL FUND ASSETS
--------------------------------------------------------------------------------
Swisslog (Switzerland) 2.4
M6 Television (France) 2.3
Beru (Germany) 2.0
Bipop-Carire (Italy) 2.0
Classeditori (Italy) 1.9
Marschollek Lauten (Germany) 1.8
Bank Sarasin (Switzerland) 1.6
Royal Canin (France) 1.6
Capita (United Kingdom) 1.5
Kingston Communications (United Kingdom) 1.4
TOTAL 18.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOP 10 COUNTRIES % OF TOTAL PORTFOLIO
--------------------------------------------------------------------------------
United States 43.4
United Kingdom 12.9
Japan 11.2
France 7.7
Germany 6.6
Italy 4.5
Switzerland 4.0
Netherlands 1.8
Hong Kong 1.2
Belgium 0.8
TOTAL 94.1
--------------------------------------------------------------------------------
PORTFOLIO STRATEGY REVIEW--DOMESTIC
DAVID L. BABSON & COMPANY INC., THE FUND'S INVESTMENT MANAGER, FOCUSES ON SMALL
TO MID SIZED DOMESTIC COMPANIES WITH STRONG AND IMPROVING COMPETITIVE POSITIONS
THAT ARE NEGLECTED BY OTHER INSTITUTIONAL INVESTORS AND THEREFORE TRADE AT LOW
RELATIVE VALUATIONS. We believe that companies with good earnings growth,
positive earnings surprises and upward earnings revisions will outperform over
the long run.
ALTHOUGH VALUE UNDERPERFORMED FOR THE FULL PERIOD, THE SPECULATIVE BUBBLE THAT
CARRIED THE MARKETS IN LATE 1999 AND EARLY 2000 APPEARS TO HAVE BEEN PIERCED.
The extent of speculation in certain sectors of the market and the potential
change in market leadership to value stocks indicate heightened volatility as we
go forward.
<PAGE>
DLB GLOBAL SMALL CAP FUND
-------------------------------
THE STRONGEST PERFORMING SECTORS OF THE DOMESTIC SMALL CAP MARKET OVER THE SIX
MONTH PERIOD ENDED APRIL 30, 2000 WERE TECHNOLOGY STOCKS, ENERGY, HEALTH CARE
AND PRODUCER DURABLES. Rising oil prices and meteoric growth estimates for
technology, biotechnology, and technology-related capital equipment spending
drove these sectors.
THE FUND'S PORTFOLIO is overweighted compared to the Russell 2000 index in
energy, roughly equally weighted in capital goods (although underweighted in
tech-related producer durables) and dramatically underweighted in technology and
health care.
THE FUND'S TOP TEN US HOLDINGS AND SECTOR WEIGHTINGS CAN BE FOUND BELOW:
--------------------------------------------------------------------------------
TOP 10 DOMESTIC EQUITY HOLDINGS % OF TOTAL FUND ASSETS
--------------------------------------------------------------------------------
Newpark Resources Inc. 1.9
Belden Inc. 1.6
Policy Mgmt. Systems 1.5
Perkinelmer Inc. 1.5
Dime Bancorp Inc. 1.4
Dal-Tile Intl. Inc. 1.4
ACNeilsen Corp. 1.3
Golden State Bancorp 1.3
Martin Marietta Materials 1.3
Unova Inc. 1.3
TOTAL 14.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DOMESTIC SECTOR % DOMESTIC RUSSELL
DIVERSIFICATION (%) PORTFOLIO 2500 DIFFERENCE
--------------------------------------------------------------------------------
Financial Services 20.2 16.4 +3.8
Materials & Processing 18.2 7.3 +10.9
Consumer Discretionary 17.7 14.6 +3.1
Energy 12.4 3.7 +8.7
Producer Durables 10.0 9.9 +0.1
Technology 8.7 25.1 -16.4
Autos & Transportation 5.2 3.1 +2.1
Consumer Staples 3.3 2.1 +1.2
Health Care 0.0 11.6 -11.6
Utilities 0.0 5.4 -5.4
Other 4.3 0.8 +3.5
--------------------------------------------------------------------------------
<PAGE>
DLB GLOBAL SMALL CAP FUND
-------------------------------
PERFORMANCE REVIEW
INTERNATIONAL STOCK MARKETS ENJOYED A STRONG FINISH TO THE OLD MILLENIUM AND
THIS CONTINUED INTO THE EARLY MONTHS OF THE NEW ONE. Smaller companies also
benefited from additional capital inflows as investors recognized the improving
economic environment outside the US. During the later part of the period some
profits were taken as interest rates began to rise. The performance of the
international portion of the portfolio was well ahead of the benchmark thanks to
good stock selection.
THE VALUE APPROACH USED IN MANAGING THE US PORTION OF THE FUND'S PORTFOLIO WAS
CLEARLY OUT FAVOR FOR THE FIRST FOUR MONTHS OF THE SEMI-ANNUAL PERIOD, BUT
RALLIED DRAMATICALLY IN THE LAST TWO MONTHS.
OVERALL, THE FUND RETURNED 7.90% FOR THE FIRST HALF OF THE FISCAL YEAR ENDING
APRIL 30, compared to 5.63% for the Salomon EMI World (ex-US) Index, 22.00% for
the Russell 2500 Index and 10.31% for the Combined Index, an index calculated
solely for the purpose of presenting an "index" that resembles the Fund's mix of
domestic and foreign investments (see the next page for additional information
about the Combined Index).
OUTLOOK
ON THE INTERNATIONAL FRONT, RECENT MARKET STRENGTH WILL BE TESTED BY THE
DELICATE BALANCING ACT OF RAISING INTEREST RATES TO CONTROL INFLATION AND NOT
CHOKING OFF ECONOMIC RECOVERY. Provided that central banks are not too hawkish,
smaller companies should continue to make progress. From an earnings and
valuation standpoint the asset class is still attractive although the portfolio
may be tilted more towards Europe in the coming months.
IN THE US, THE CURRENT ENVIRONMENT IS AN UNUSUALLY OPPORTUNE ONE FOR VALUE
INVESTORS, ESPECIALLY IN THE SMALL CAP SECTOR. Rarely has there been such a
combination of cheap relative valuations and real earnings growth potential from
a portion of the market as there is now in small cap value. As investors begin
to increasingly question the wisdom of committing additional funds to high
priced, high tech companies offering more in the way of visions than earnings
visibility, and paradigms rather than profitability, the focus will come back to
more traditional measures of investment attractiveness.
<PAGE>
DLB GLOBAL SMALL CAP FUND
-------------------------------
GROWTH OF A
$100,000 INVESTMENT
Cumulative Total Return Since Inception 7/19/95
<TABLE><CAPTION>
DLB GLOBAL COMBINED SALOMON RUSSELL
DATE SMALL CAP INDEX EMI(ex-U.S.) 2500
---- --------- ----- ------------ ----
<S> <C> <C> <C> <C>
$100,000.00 $100,000.00 $100,000.00 $100,000.00
31-Jul-95 $100,300.00 $105,860.00 $105,830.00 $102,170.00
31-Aug-95 $98,795.50 $104,928.43 $103,152.50 $103,804.72
30-Sep-95 $99,793.33 $111,454.98 $103,957.09 $105,745.87
31-Oct-95 $98,396.23 $108,133.62 $100,963.13 $102,436.02
30-Nov-95 $100,993.89 $111,572.27 $102,033.34 $106,810.04
31-Dec-95 $104,013.61 $114,897.12 $105,941.21 $108,636.49
31-Jan-96 $106,426.72 $116,390.79 $107,826.97 $109,407.81
28-Feb-96 $109,853.66 $118,904.83 $109,509.07 $112,700.99
31-Mar-96 $112,567.05 $121,508.84 $112,027.77 $115,000.09
30-Apr-96 $115,291.17 $127,584.29 $117,920.44 $120,313.09
31-May-96 $116,605.49 $128,413.58 $116,965.28 $123,573.58
30-Jun-96 $115,089.62 $126,795.57 $116,976.98 $119,779.87
31-Jul-96 $109,450.23 $120,176.84 $112,555.25 $111,011.98
31-Aug-96 $110,763.63 $123,758.11 $113,692.06 $117,395.17
30-Sep-96 $111,062.69 $126,394.16 $114,328.73 $122,478.38
31-Oct-96 $110,562.91 $125,762.19 $113,882.85 $121,670.02
30-Nov-96 $113,481.77 $129,535.06 $115,750.53 $127,546.69
31-Dec-96 $114,264.79 $128,952.15 $113,620.72 $129,294.07
31-Jan-97 $110,996.82 $129,016.63 $111,166.51 $132,862.59
28-Feb-97 $109,450.23 $120,465.27 $114,446.18 $109,357.90
31-Mar-97 $108,749.74 $117,104.29 $112,924.04 $104,403.99
30-Apr-97 $106,737.87 $116,858.37 $111,241.47 $105,729.92
31-May-97 $112,480.37 $125,903.21 $118,372.05 $115,467.65
30-Jun-97 $116,507.17 $129,869.16 $121,047.26 $120,190.27
31-Jul-97 $119,326.64 $132,765.24 $119,219.45 $127,233.42
31-Aug-97 $118,014.05 $131,012.74 $114,128.78 $129,001.97
30-Sep-96 $120,929.00 $136,620.08 $116,160.27 $137,438.70
31-Oct-97 $116,696.48 $130,827.39 $111,571.94 $131,267.70
30-Nov-97 $115,482.84 $128,433.25 $106,595.83 $131,858.40
31-Dec-97 $117,907.98 $128,484.62 $104,240.06 $134,350.53
31-Jan-98 $117,176.95 $129,962.20 $108,586.87 $132,294.96
28-Feb-98 $125,543.38 $139,527.42 $116,687.45 $141,899.58
31-Mar-98 $133,490.28 $145,861.96 $122,171.76 $148,128.97
30-Apr-98 $134,224.48 $146,678.79 $123,100.27 $148,691.86
31-May-98 $135,271.43 $144,654.62 $125,389.93 $141,792.56
30-Jun-98 $130,455.76 $142,614.99 $121,728.55 $141,962.71
31-Jul-98 $127,624.87 $137,395.28 $120,888.62 $132,209.87
31-Aug-98 $109,846.73 $116,373.80 $106,067.68 $107,275.09
30-Sep-98 $107,968.35 $118,806.02 $103,309.92 $114,891.62
31-Oct-98 $116,238.73 $126,290.79 $110,603.60 $121,176.19
30-Nov-98 $119,167.94 $131,392.94 $114,142.91 $127,174.41
31-Dec-98 $122,302.06 $136,858.89 $116,905.17 $134,881.18
31-Jan-99 $119,807.10 $136,530.43 $116,542.76 $134,651.88
28-Feb-99 $114,475.68 $130,973.64 $114,281.83 $125,805.26
31-Mar-99 $117,429.15 $134,915.95 $118,567.40 $128,497.49
30-Apr-99 $124,921.13 $144,454.50 $124,981.90 $139,998.01
31-May-99 $129,805.55 $143,558.88 $121,707.37 $142,167.98
30-Jun-99 $135,711.70 $149,545.29 $125,857.59 $149,560.72
31-Jul-99 $134,571.72 $151,294.97 $130,564.67 $146,614.37
31-Aug-99 $134,464.07 $150,659.53 $132,575.36 $142,025.34
30-Sep-99 $134,235.48 $149,484.39 $132,257.18 $139,909.16
31-Oct-99 $133,899.89 $149,992.63 $130,934.61 $142,973.17
30-Nov-99 $141,050.14 $152,527.51 $135,412.58 $151,051.16
31-Dec-99 $150,895.44 $165,217.80 $144,349.81 $167,440.21
31-Jan-00 $144,950.16 $161,252.57 $140,784.37 $163,589.08
29-Feb-00 $150,661.20 $172,620.88 $146,683.23 $187,211.35
31-Mar-00 $154,939.98 $175,641.74 $147,284.63 $184,347.01
30-Apr-00 $144,481.53 $165,472.09 $138,300.27 $174,429.15
</TABLE>
--------------------------------------------------------------------------------
TOTAL RETURNS (%) FOR PERIODS ENDED 4/30/00
--------------------------------------------------------------------------------
6 Months One Year Annualized
11/1/99- 5/1/99- Since Inception
4/30/00 4/30/00 7/19/95-
4/30/00
DLB GLOBAL SMALL CAP FUND 7.90 15.66 8.22
Combined Index 10.31 14.55 12.49
Salomon EMI (ex-U.S.) Index 5.63 10.66 6.67
Russell 2500 Index 22.00 24.61 16.97
--------------------------------------------------------------------------------
DISCLOSURE STATEMENT
THE DLB GLOBAL SMALL CAPITALIZATION FUND invests in a combination of domestic
and international securities. The relative proportions of the Fund's assets
fluctuate over time.
The "COMBINED INDEX" used as a benchmark to measure the performance of this Fund
is a composite of the Russell 2500 Index and Salomon Brothers Extended Market
Index, ex-U.S., (EMI), weighted in each (monthly) period to reflect the
proportions of the Fund's assets invested in domestic and international
securities, respectfully, during such period. As of April 30, 2000, such
proportions were 43.4% domestic, 56.6% international. 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. Securities in the Fund do
not match those in the Index and the performance of the Fund will differ.
SALOMON BROTHERS EXTENDED MARKET INDEX, EX-U.S., (EMI) is an unmanaged index
that represents the bottom 20% of the cumulative available market capital of the
BMI. The EMI defines the small stock index outside the U.S. SALOMON BROTHERS
BROAD MARKET INDEX (BMI) is an unmanaged index that fully represents the
universe of institutionally available global stocks. All companies with an
available market capitalization greater than U.S. $100 million are included in
the index. Securities in the Fund do not match those in the Index and the
performance of the Fund will differ.
RUSSELL 2500 INDEX is an unmanaged index that measures the performance of the
smallest 2500 companies in the Russell 3000 Index, representing approximately
17% of the Russell 3000 total market capitalization. This index is a good
measure of small to medium-small stock performance in the U.S. Securities in the
Fund do not match those in the Index and the performance of the Fund will
differ.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Investment return and share
price will fluctuate with market conditions, and investors may have a gain or
loss when shares are sold. The Fund's total return reflects an expense
limitation in effect during the periods shown. In the absence of such expense
limitation, returns would have been lower.
<PAGE>
DLB GLOBAL SMALL CAP FUND
-------------------------------
This report and the Fund financial statements contained herein are submitted for
the general information of the shareholders of the DLB Global Small
Capitalization Fund. The report is not intended for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
BABSON SECURITIES CORPORATION
One Memorial Drive, Cambridge, MA 02142
June 2000
<PAGE>
===========================================
DLB GLOBAL SMALL
CAPITALIZATION FUND
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED APRIL 30, 2000 AND THE TEN MONTHS
ENDED OCTOBER 31, 1999
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
TABLE OF CONTENTS
<TABLE><CAPTION>
------------------------------------------------------------------------------------------------
<S> <C>
FINANCIAL STATEMENTS:
Portfolio of Investments as of April 30, 2000 1 - 5
Statement of Assets and Liabilities as of April 30, 2000 6
Statement of Operations for the Six Months Ended April 30, 2000 7
Statements of Changes in Net Assets for the Six Months Ended
April 30, 2000, the Ten Months Ended October 31, 1999, and
the Year Ended December 31, 1998 8
Financial Highlights for the Six Months Ended April 30, 2000,
the Ten Months Ended October 31, 1999, and the
Four-Year Period Ended December 31, 1998 9
Notes to Financial Statements 10 - 13
</TABLE>
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
--------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS - 89.6%
ISSUER SHARES VALUE
DOMESTIC
AEROSPACE - 1.4%
Perkinelmer, Inc. 4,600 $ 251,850
----------
APPAREL - 0.9%
Unifi Inc. (*) 16,100 164,019
----------
AUTO PARTS - 2.0%
Exide Corporation 20,900 201,163
Snap-On Inc. 5,800 153,338
----------
354,501
----------
BANKS - 2.8%
Commerce Bancorp Inc. NS 1,900 75,406
Dime Bancorp, Inc. 11,500 215,625
Golden State Bancorp, Inc. (*) 13,300 204,488
----------
495,519
----------
BUILDING SUPPLIES - 1.2%
Dal-Tile International Inc. (*) 22,200 216,450
----------
CHEMICAL - SPECIALTY - 0.6%
UCAR Inrternational 8,600 113,416
----------
COAL GAS & PIPE - 1.1%
Nabors Industries Inc. (*) 5,100 201,131
----------
DIVERSIFIED - 0.5%
Carlisle Companies 2,200 90,613
----------
ELECTRICAL EQUIPMENT - 2.9%
Belden Inc. 9,000 267,188
Gerber Scientific Inc. 9,600 133,200
Magnetek, Inc. 13,200 109,725
----------
510,113
----------
ELECTRONICS & INSTRUMENTS - 0.5%
Scitex Corporation Ltd. (*) 8,200 97,375
----------
FOOD PRODUCERS - 0.8%
Ralcorp Holdings Inc. (*) 11,000 151,358
----------
FURNITURE & APPLIANCES - 0.3%
La-Z-Boy Incorporated 3,300 51,769
----------
INSURANCE COMPANIES - 2.2%
HCC Insurance Holdings, Inc. 16,600 195,050
HSB Group, Inc. 6,600 191,400
----------
386,450
----------
1
<PAGE>
ISSUER SHARES VALUE
MACHINERY & EQUIPMENT - 3.9%
Foster Wheeler Corporation 20,500 $ 188,344
Harsco Corporation 5,100 151,406
Roper Industries, Inc. 5,200 163,800
Unova Inc. (*) 14,200 198,800
----------
702,350
----------
METALS & MINING - 2.0%
Martin Marietta Corporation 4,700 249,100
Ryerson Tull, Inc. 9,100 112,613
----------
361,713
----------
MISCELLANEOUS - 0.3%
Advo Inc. 1,500 45,000
----------
NATURAL GAS - 1.1%
Equitable Resources, Inc. 4,400 204,050
----------
OFFICE SUPPLIES - 0.9%
Wallace Computer Services 15,100 165,156
----------
OIL SERVICES - 2.2%
Newpark Resources Inc. 30,400 250,800
Stolt Comex Seaway S. A 11,200 135,100
----------
385,900
----------
PAPER & FOREST PRODUCTS - 1.0%
Albany International Corp. 11,314 171,831
----------
PRINTING & PUBLISHING - 3.0%
ACNeilsen Corporation (*) 9,000 207,563
Central Newspapers, Inc. 4,600 141,163
Hollinger International 14,900 188,113
----------
536,839
----------
PROFESSIONAL SERVICES - 1.5%
Policy Management Systems Corporation (*) 19,500 258,375
----------
REAL ESTATE - 0.9%
Prentiss Properties Trust 7,000 166,250
----------
SPECIALTY RETAIL - 1.2%
Enesco Group Inc. 14,400 64,800
Tupperware Corp. 7,700 143,338
----------
208,138
----------
TOBACCO - 0.3%
Dimon Incorporated 20,500 46,688
----------
TRANSPORTATION - 0.9%
Fritz Companies Inc. (*) 16,700 160,738
----------
WHOLESALERS - 0.2%
BJ's Wholesale Club Inc. 800 28,350
----------
2
<PAGE>
ISSUER SHARES VALUE
FOREIGN
AUSTRALIA - 0.8%
F. H. Faulding & Company Ltd. (Pharmaceuticals) 19,000 $ 75,944
United Construction Group Ltd. (Aerospace & Defense) 90,000 74,047
----------
149,991
----------
BELGIUM - 0.9%
Colruyt NV (Food Retailers) 4,000 156,184
----------
FRANCE - 8.1%
Brioche Pasquier, SA (Food Producers) 2,000 167,871
Infogrames Entertainment (Leisure) (*) 7,000 203,207
M6 - Metropole Television (Media) 700 395,377
Neopost (Post office equipment - electronics) 4,600 145,738
Royal Canin SA (Food Producers) 3,000 282,690
SR Teleperformance (Telemarketing services) 750 240,328
----------
1,435,211
----------
GERMANY - 6.4%
Adcon Telemetry (Electronic equipment) 5,000 90,427
Beru AG (Automobile parts) 12,000 356,145
GFK (Market research services) 4,000 162,491
MLP Pref., Non Voting (Life Insurance) (**) 600 283,803
Rhoen-Klinikum, AG (Private Healthcare) 6,000 242,624
----------
1,135,490
----------
HONG KONG - 1.3%
Asia Satellite Telecoms Hldgs. (Media) 18,000 53,593
Four Seas Mercantile Holding (Food Producer) 210,000 53,901
Four Seas Frozen - NOT HELD 79,170 5,080
Vitasoy International Holdings, Ltd. (Food Producers) 528,500 110,556
----------
223,130
----------
ITALY - 4.7%
Banca Popolare Di Milano (Banking) 15,000 97,105
BIPOP-CARIRE Spa (Banking) 4,000 360,968
Classeditori Spa (Media) 25,000 380,259
----------
838,332
----------
JAPAN - 11.2%
C Two-Network Co. Ltd. (Retailing) 600 99,934
Fancl Corporation (Cosmetics, Toiletries) 910 132,452
Ichiyoshi Securities (Specialty finance) 12,000 114,147
Japan Airport Terminal Co., Ltd. (Airport Services) 15,000 123,668
Megane Top (Household products) 5,400 149,901
Misumi Corporation (Distributors) 2,200 214,358
MKC Stat (Software & computer services) 3,000 61,626
Mycal Card Inc. (Consumer Credit) 5,430 201,480
Q'sai Co. Ltd. (Health Beverages) 3,000 195,704
Right On (General retailer) 2,000 161,745
Ryohin Keikaku Company, Ltd.(Retailer) 1,000 185,525
T&K Toka Company Ltd. (Chemicals) 4,200 106,874
Union Tool Co. (Engineering) 1,000 135,651
Yokowo (Electronic equipment) 4,000 112,518
----------
1,995,583
----------
3
<PAGE>
ISSUER SHARES VALUE
NETHERLANDS - 1.8%
Exact Holding (Software & computer services) 3,000 $ 169,509
Kempen & Co (Financial) 3,500 148,672
----------
318,181
----------
NEW ZEALAND - 0.2%
Guinness Peat Group (Other Financial) 66,551 42,065
----------
SINGAPORE - 0.3%
Overseas Union Enterprises (Real Estate) 15,000 37,776
TIBS Holdings Limited (Transport) 31,500 23,245
----------
61,021
----------
SPAIN - 0.7%
Azkoyen (Vending machines) 14,000 123,760
----------
SWITZERLAND - 4.0%
Bank Sarasin (Banking) 110 296,662
Swisslog (Electronic equipment) 950 418,547
----------
715,209
----------
THAILAND - 0.2%
Matichon Public Co. Ltd (Media) 24,000 40,962
----------
UNITED KINGDOM - 12.9%
Baltimore Technologies PLC (Software) (*) 2,000 202,266
Peter Black Holdings, PLC (Household Goods) 19,000 79,828
Brake Brothers PLC (Food Retailers) 18,000 181,673
N Brown Group PLC (General Retailers) 17,000 166,260
Capita Group, PLC (Service Outsourcing) 10,000 257,723
Cattles PLC (Other Financial) 52,000 174,538
Highbury House (Media) 100,000 95,453
IMS Group, (Telecommunications) 12,000 38,025
Independent Energy (Utility) 2,000 72,763
Independent Insurance Group, PLC (General Insurer) 19,000 66,301
Kingston Communications (Telecommunications) (*) 20,000 251,307
Leeds Sporting (Football Club) 400,000 137,702
Mentmore Abbey (Storage Facilities) 35,000 97,213
Redrow Group PLC (Housebuilder) 52,000 153,789
Rotork PLC (Engineering) 13,000 48,822
SSL International (Healthcare) 13,000 132,734
St. James's Place Capital PLC (Life Insurance) 27,000 91,470
Teamtalk.com (Internet) 60,000 49,291
----------
2,297,158
----------
TOTAL COMMON AND PREFERRED STOCKS
(identified cost, $14,044,876) 15,958,794
4
<PAGE>
PRINCIPAL
AMOUNT VALUE
REPURCHASE AGREEMENT - 8.9%
Investors Bank & Trust Repurchase Agreement, 4.94%,
dated 4/28/00, $1,581,378 due on 5/1/00 (secured by
Federal Government Agency securities), at cost $1,580,727 $1,580,727
----------
TOTAL INVESTMENTS (identified cost, $15,625,603) 17,539,521
Other assets, less liabilities - 1.5% 274,038
----------
NET ASSETS - 100% $17,813,559
===========
</TABLE>
(*) Non-income producing security
(**) Preferred Stock
See notes to financial statements.
5
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
---------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (identified cost, $15,625,603) $ 17,539,521
Foreign cash, at value (cost, $3,903) 3,903
Receivable for investments sold 441,203
Dividends and interest receivable 25,357
Receivable for fund shares sold 1,899
Receivable from investment manager 13,009
Other assets 8,475
------------
18,033,367
------------
LIABILITIES:
Payable for fund shares reacquired 1,147
Payable for investments purchased 165,611
Accrued management fees 13,701
Accrued expenses 39,349
------------
219,808
------------
NET ASSETS $ 17,813,559
============
NET ASSETS CONSIST OF:
Paid-in capital $ 14,858,587
Unrealized appreciation of investments and translation of assets and
liabilities in foreign currencies 1,912,339
Accumulated undistributed net realized gain on investments and
foreign currency transactions 1,083,734
Accumulated distributions in excess of net investment income (41,101)
------------
Total $ 17,813,559
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,465,930
============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST OUTSTANDING) $ 12.15
============
</TABLE>
See notes to financial statements.
6
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 2000
<TABLE><CAPTION>
-----------------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME:
Dividends (net of foreign tax withheld of $4,201) $ 90,414
Interest 25,385
-----------
115,799
-----------
EXPENSES:
Management fee 86,382
Trustees' fees 3,000
Custodian fees 41,066
Accounting and audit fees 15,937
Legal fees 8,421
Registration fees 8,612
Transfer agent fee 4,269
Miscellaneous 2,470
-----------
170,157
Reduction of expenses by investment manager (40,585)
-----------
Net expenses 129,572
-----------
Net investment loss (13,773)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) (identified cost basis):
Investment transactions 1,122,772
Foreign currency transactions and forward foreign currency exchange
contracts and other transactions denominated in foreign currency (36,330)
-----------
Net realized gain on investments and foreign currency 1,086,442
-----------
Change in unrealized appreciation (depreciation):
Investments 137,711
Foreign currency and forward foreign currency exchange contracts
and other transactions denominated in foreign currency (2,507)
-----------
Net unrealized gain on investments and foreign currency 135,204
-----------
Net realized and unrealized gain on investments and foreign currency 1,221,646
-----------
Increase in net assets from operations $ 1,207,873
===========
</TABLE>
See notes to financial statements.
7
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
----------------------------------------------------------------------------------------------------------------
Six Months Ten Months Year
Ended Ended Ended
April 30, 2000 October 31, 1999 December 31, 1998
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (13,773) $ 11,851 $ 14,762
Net realized gain on investments
and foreign currency 1,086,442 834,326 1,044,400
Net unrealized appreciation (depreciation)
of investments and foreign currency 135,204 502,573 (538,247)
------------ ------------ ------------
1,207,873 1,348,750 520,915
------------ ------------ ------------
Distributions to shareholders:
From net investment income -- -- (14,762)
In excess of net investment income -- -- (93,233)
From net realized gain on investments and
foreign currency transactions (803,298) (72) (989,096)
------------ ------------ ------------
(803,298) (72) (1,097,091)
------------ ------------ ------------
Fund share transactions:
Net proceeds from sales of shares 1,420,621 572,236 827,306
Net asset value of shares issued in
reinvestment of distributions 803,298 72 1,097,091
Cost of shares reacquired (430,393) (615,352) (925,539)
------------ ------------ ------------
1,793,526 (43,044) 998,858
------------ ------------ ------------
Total increase in net assets 2,198,101 1,305,634 422,682
NET ASSETS:
At beginning of period 15,615,458 14,309,824 13,887,142
------------ ------------ ------------
At end of period (including accumulated distributions
in excess of net investment income of
$41,101, $27,328 and $70,207, respectively) $ 17,813,559 $ 15,615,458 $ 14,309,824
============ ============ ============
</TABLE>
See notes to financial statements.
8
<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 (loss) (.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 (loss) 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>
See notes to financial statements.
9
<PAGE>
DLB GLOBAL SMALL CAPITALIZATION FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Global Small Capitalization Fund (the "Fund") is a non-diversified
series of The DLB Fund Group (the "Trust"), a Massachusetts business
trust. The Trust is registered under the Investment Company Act of 1940,
as amended, as an open-end management investment company.
During 1999, the Fund changed its year end from December 31 to October
31.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION - Equity securities listed on securities exchanges
or reported through the NASDAQ system are valued at last sale prices.
Unlisted equity securities or listed equity securities for which last
sale prices are not available are valued at last quoted bid prices.
Securities for which there are no such quotations or valuations are
valued at fair value as determined in good faith by or at the direction
of the Trustees. Short-term obligations, which mature in 60 days or
less, are valued at amortized cost, which approximates market value.
REPURCHASE AGREEMENTS - Securities purchased under agreements to resell
to the original owner are recorded at cost. The Fund may enter into such
agreements with institutions that the Fund's investment adviser has
determined to be creditworthy. The Fund requires that the securities so
purchased be transferred to the custodian under terms that enable the
Fund to obtain such securities in the event of a default. The Fund
monitors, on a daily basis, the value of the securities to assure that
such value, including accrued interest, is greater than amounts owed to
the Fund.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars at current exchange rates. Purchases and
sales of foreign investments and income and expenses are converted into
U.S. dollars at currency exchange rates prevailing on the respective
dates of such transactions. Security transaction gains and losses
attributable to changes in foreign currency exchange rates are recorded
for financial statement purposes as net realized gains and losses on
investments. Income and expense gains and losses that are attributable
to changes in foreign exchange rates are recorded for financial
statement purposes as foreign currency transaction gains and losses. The
portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - The Fund may enter into
forward foreign currency exchange contracts for the purchase or sale of
a specific foreign currency at a fixed price on a future date. The risks
associated with these contracts include the possible inability of
counterparties to meet the terms of the contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S.
dollar. The Fund enters into forward contracts for hedging purposes
only. The Fund may enter into contracts to deliver or receive foreign
currency it will receive from or require for its normal investment
activities. It may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value resulting
from unfavorable exchange rate movements. Forward foreign currency
exchange contracts are adjusted by the daily change in the exchange
rates of the underlying currencies, and any gains or losses are recorded
for financial statement purposes as unrealized until the contract
settlement date.
10
<PAGE>
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are
recorded on the trade date. Dividend income is recorded on the
ex-dividend date. Dividend payments received in additional securities
are recorded in an amount equal to the value of the securities received.
Interest income is recorded on the accrual basis.
TAXES AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute to shareholders all of
its taxable income, including any net realized gains on investments.
Accordingly, no provision for federal income or excise tax is necessary.
The Fund files a tax return annually using tax accounting methods
required by the Code, which may differ from generally accepted
accounting principles, the basis on which these financial statements are
prepared. Accordingly, the net investment income and net realized gain
reported in these financial statements may differ from the amounts
reported on the Fund's tax return, and, consequently, the character of
distributions to shareholders reported in the financial highlights may
differ from that reported to shareholders on Form 1099-DIV.
Foreign taxes are provided with respect to interest and dividend income
earned in foreign currencies in accordance with applicable tax rates. To
the extent that such taxes are unrecoverable, they are recorded as a
reduction of net investment income.
Distributions to shareholders are recorded on the ex-dividend date. The
Fund distinguishes between distributions for tax purposes and financial
reporting purposes. Differences between income for financial reporting
purposes and tax-basis earnings and profits may result in the reporting
of temporary over-distributions in the financial statements. Such
over-distributions are classified as distributions in excess of net
investment income or accumulated net realized gains. Distributions, if
any, in excess of tax-basis earnings and profits are reported as return
of capital.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements. Actual results could differ from those such
estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund engages David L. Babson & Company Inc. ("Babson") to provide
investment advisory and administrative services and general office
facilities. The fee for such services is computed daily and paid monthly
at an effective annual rate of 1.00% of average daily net assets. For
the six months ended April 30, 2000, the management fee amounted to
$86,382. Babson has agreed to pay the Fund's operating expenses such
that the Fund's total aggregate expenses do not exceed 1.50% of average
daily net assets. For the six months ended April 30, 2000, $40,585 of
Fund expenses were borne by Babson.
11
<PAGE>
Babson has entered into a sub-advisory agreement with Babson-Stewart
Ivory International ("BSII"), an affiliate of Babson, with respect to
the management of the international component of the Fund's portfolio.
Under the sub-advisory agreement, Babson pays BSII a monthly fee at the
effective annual rate of .50% of average daily net assets.
The Fund pays no compensation directly to the Trustees who also are
officers of the investment manager, nor to the officers of the Fund, all
of whom receive remuneration for their services to the Fund from Babson.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations,
for the six months ended April 30, 2000 aggregated $4,934,808 and
$3,776,134, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax
basis, are as follows:
Aggregate cost $ 15,625,603
============
Gross unrealized appreciation $ 4,268,360
Gross unrealized depreciation (2,354,442)
------------
Net unrealized appreciation $ 1,913,918
============
5. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
Six Months Ten Months Year
Ended Ended Ended
April 30, October 31, December 31,
2000 1999 1998
--------- --------- ---------
Shares sold 111,857 50,868 74,346
Shares issued in reinvestment
of distributions 64,834 6 103,499
Redemptions (33,787) (55,596) (81,996)
--------- --------- ---------
Net increase (decrease) 142,904 (4,722) 95,849
========= ========= =========
12
<PAGE>
6. RISKS ASSOCIATED WITH FOREIGN INVESTMENTS
Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks
not present in domestic investments. For example, there is generally
less publicly available information about foreign companies,
particularly those not subject to disclosure and reporting requirements
of the U.S. securities laws. Foreign issuers are generally not bound by
uniform accounting, auditing, and financial reporting requirements and
standards of practice comparable to those applicable to domestic
issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of
funds or other assets of the Fund, political or financial instability or
diplomatic and other developments that could affect such investments.
Foreign stock markets, while growing in volume and sophistication, are
generally not as developed as those in the United States, and securities
of some foreign issuers (particularly those located in developing
countries) may be less liquid and more volatile than securities of
comparable U.S. companies. In general, there is less overall government
supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
13
<PAGE>
DLB
THE DLB ENTERPRISE III FUND
SEMI ANNUAL REPORT
APRIL 30, 2000
[EXPERIENCE TO MANAGE THE FUTURE]
<PAGE>
THE DLB ENTERPRISE III FUND
-------------------------------
FUND INVESTMENT OBJECTIVE
THE DLB ENTERPRISE III FUND seeks long-term capital appreciation primarily
through investment in small to medium-size companies.
MARKET OVERVIEW
THE FIRST HALF OF THE FISCAL YEAR ENDING OCTOBER 31, 2000 WAS CHARACTERIZED BY
THREE MAJOR FACTORS: 1) a runaway market for technology stocks in the 4th
quarter of 1999, 2) continued general dominance of growth stocks until late in
the 1st quarter of 2000 and, 3) unprecedented volatility throughout the period.
WITH THE NOTABLE EXCEPTION OF THE MAJOR VALUE INDICES, MANY BROAD MARKET AND
GROWTH BENCHMARKS ACHIEVED ALL-TIME HIGHS ON OR CLOSE TO THE LAST DAY OF THE
MILLENIUM. Technology stocks continued to be the driving force in these
record-setting indices.
THE WALL STREET JOURNAL REFERRED TO IT AS "THIS JEKYLL AND HYDE STOCK MARKET."
The phrases "New Economy Stocks" and "Old Economy Stocks" became part of the
investment jargon. No matter how it was described, the split between growth and
value persisted throughout the first two months of 2000. Although returns for
most benchmarks were negative in January, relative performance for value
investors was positive. This shift in investor sentiment was brief, however, and
the market once again favored growth over value in February. Value mounted a
comeback late in March, and this positive absolute and relative performance
continued through the end of April.
VOLATILITY, AS MEASURED BY INTRADAY PRICE MOVEMENTS, REACHED LEVELS NEVER SEEN
BEFORE IN 1999 AND IN THE 1ST QUARTER OF 2000. To put this volatility into
historical perspective, in 1994 the NASDAQ, S&P 500, and Russell 2000 indices
experienced intraday price movements of 2% or more only 2% of the time. In 1999,
2% price swings in the NASDAQ Index occurred almost half the time and in the S&P
500 Index almost one-quarter of the time. This volatility increased to 76% for
NASDAQ and 56% for the S&P 500 during the 1st quarter of 2000!
A MAJOR CONTRIBUTION TO THIS VOLATILITY AND THE SEE-SAW BETWEEN GROWTH AND VALUE
WAS THE CONTINUED EFFORTS BY THE FED TO SLOW THE ECONOMY. As short-term rates
were raised by the Fed and uncertainty as to future increases burdened market
psychology, investor's sentiment and momentum changed frequently.
<PAGE>
THE DLB ENTERPRISE III FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW
OUR INVESTMENT APPROACH FOCUSES ON COMPANIES WITH STRONG AND IMPROVING
COMPETITIVE POSITIONS THAT ARE NEGLECTED BY OTHER INSTITUTIONAL INVESTORS AND
THEREFORE TRADE AT LOW RELATIVE VALUATIONS. We believe that companies with good
earnings growth, positive earnings surprises and upward earnings revisions will
outperform over the long run.
THE BEST AND WORST PERFORMING STOCKS IN THE FUND FOR THE SEMI-ANNUAL FISCAL
PERIOD ENDED APRIL 30, 2000 ARE LISTED BELOW:
--------------------------------------------------------------------------------
BEST PERFORMERS BUSINESS GAIN (%)
--------------------------------------------------------------------------------
Nabors Oil Service 74%
Belden Specialty wire and cable 56%
Martin Marietta Materials Aggregates supplier 36%
Perkin Elmer Diversified technology 36%
Equitable Resources Natural gas utility 27%
--------------------------------------------------------------------------------
NABORS INDUSTRIES IS SEEING ITS BUSINESS PROSPECTS IMPROVE DUE TO THE SUSTAINED
INCREASE IN OIL AND NATURAL GAS PRICES. Belden's stock took off after the
company reported both outstanding earnings in the 4th Quarter of 1999 resulting
from strong organic growth in all of its businesses, particularly networking
cable, and significant operating profit margin improvement from the integration
of a recent acquisition. Martin Marietta Materials continues to benefit from
accelerating spending on the U.S. highway system due to the previously passed
landmark highway legislation (known as TEA-21). PerkinElmer's gain resulted from
accelerating revenue and earnings growth in all of its businesses. Additionally,
it is the beneficiary of future revenue growth resulting from accelerating
demand by fiber-optic/telecom equipment manufacturers for PerkinElmer's
optoelectronic component parts. Equitable Resources continues to benefit from
improved pricing of natural gas, ongoing cost reductions, the implementation of
operational improvements, and select add-on acquisitions.
<PAGE>
THE DLB ENTERPRISE III FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW (CONT.)
--------------------------------------------------------------------------------
UNDERPERFORMERS BUSINESS LOSS (%)
--------------------------------------------------------------------------------
Safety-Kleen Waste management 81
Vlasic Foods Pickles and frozen foods 70
Enesco Collectibles and giftware 64
Total Renal Care Dialysis centers 59
Wallace Computer Business svcs./print mgmt. 51
--------------------------------------------------------------------------------
SAFETY-KLEEN HAD GREAT DIFFICULTY INTEGRATING ACQUISITIONS AND MAINTAINING THE
FINANCIAL INTEGRITY OF ITS REPORTING SYSTEMS. Vlasic International suffered from
an earnings shortfall relative to analysts' expectations due to poor performance
in several non-core operations. The stock has been sold out of the portfolio.
For Enesco, the market continued to react to the fact that sales have been
declining in its traditional card and gift shop retail distribution channel, as
that sector loses share in the overall retail market. However, Enesco is making
inroads in penetrating the mass merchandiser channel. Total Renal Care suffered
from problems in its systems integration following a large acquisition. The
stock was subsequently sold. Wallace's stock was weak because the integration of
its "Integrated Graphics" acquisition is taking longer than anticipated. It has
subsequently announced a restructuring plan that will generate cost savings and
substantially improve earnings as the sales ramp up.
THE FUND'S TOP TEN HOLDINGS AND SECTOR WEIGHTINGS AS OF APRIL 30, 2000 ARE SHOWN
BELOW:
--------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS % OF FUND ASSETS
--------------------------------------------------------------------------------
Newpark Resources Inc. 4.4
Belden Inc. 3.8
Policy Management Systems 3.5
Perkinelmer Inc. 3.4
Dime Bancorp Inc. 3.3
Dal-Tile Intl. Inc. 3.3
ACNeilsen Corp. 3.1
Golden State Bancorp 3.1
Martin Marietta Materials 3.0
Unova Inc. 3.0
TOTAL 33.9
--------------------------------------------------------------------------------
<PAGE>
THE DLB ENTERPRISE III FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW (CONT.)
--------------------------------------------------------------------------------
SECTOR RUSSELL
DIVERIFICATION (%) PORTFOLIO 2000 DIFFERENCE
--------------------------------------------------------------------------------
Financial Services 20.2 16.4 +3.8
Materials & Processing 18.2 7.3 +10.9
Consumer Discretionary 17.7 14.6 +3.1
Energy 12.4 3.7 +8.7
Producer Durables 10.0 9.9 +0.1
Technology 8.7 25.1 -16.4
Autos & Transportation 5.2 3.1 +2.1
Consumer Staples 3.3 2.1 +1.2
Health Care 0.0 11.6 -11.6
Utilities 0.0 5.4 -5.4
Other 4.3 0.8 +3.5
--------------------------------------------------------------------------------
PERFORMANCE REVIEW
The Fund's value approach was clearly out favor for the first four months of the
semi-annual period, returning -15.7% vs. 7.1% for the Russell 2000 Value Index
and 58.8% for the Russell 2000 Growth Index. It did however rally dramatically
during the last two months of the period returning 10.6% vs. 1.1% for the
Russell 2000 Value Index and -19.6% for the Russell 2000 Growth Index. Despite
the Fund's out performance of the benchmark during the last two months of the
period, it remained behind the Russell 2000 Value Index and the Russell 2000
Growth Index for the six months ended April 30, 2000. The return for the Fund
during the full six-month period was approximately -6.8% vs. 8.2% for the
Russell 2000 Value Index and 27.8% for the Russell 2000 Growth Index.
OUTLOOK
THERE HAS BEEN AMPLE DISCUSSION AMONG MARKET PUNDITS OF THE RELATIVE MERITS OF
THE "NEW" ECONOMY VERSUS THE "OLD" ECONOMY AND THE COMPANIES THAT POPULATE EACH
GROUP. Up until the abrupt change in market direction witnessed in March,
gigantic premiums were being paid by investors for companies in the former
group, while old economy stocks generally languished.
DESPITE THE EFFORTS OF SOME TO JUSTIFY STRATOSPHERIC VALUATIONS FOR A CERTAIN
GROUP OF STOCKS BY DECLARING THEM PART OF THE "NEW" ECONOMY, SUCH A
CLASSIFICATION IS MISLEADING AND INVALID. History shows that the one economic
constant is change and successful companies incorporate that change to enhance
their future prospects. For example, the development of the Internet has not
suddenly
<PAGE>
THE DLB ENTERPRISE III FUND
-------------------------------
OUTLOOK (CONT.)
made "bricks and mortar" retailers obsolete. Traditional retailers either have
developed, or are in the midst of developing, their own Internet capabilities to
supplement their store location and catalog strategies. Indeed, it appears as
though many of the formerly high flying "e-tailing" companies have the obsolete
business model as they attempt to reach the consumer through only one channel,
the Internet, while their more sizeable competitors can reach the consumer
through multiple channels. As a result, many of the e-tailing companies have
seen their valuations crushed recently.
THE BUSINESS TO BUSINESS E-COMMERCE SECTOR IS SEEING SIMILAR ADJUSTMENTS BY
OLD-LINE FIRMS. The initiative of the auto manufacturers to set up their own
e-commerce network with their suppliers, rather than working through a "new"
economy intermediary, will be imitated by other major manufacturers and is yet
another example of established companie utilizing new technology to become more
efficient and profitable.
THE CURRENT ENVIRONMENT IS AN UNUSUALLY OPPORTUNE ONE FOR VALUE INVESTORS,
ESPECIALLY IN THE SMALL CAP SECTOR. Rarely has there been such a combination of
cheap relative valuations and real earnings growth potential from a portion of
the market as there is now in small cap value. As investors begin to
increasingly question the wisdom of committing additional funds to high priced,
high tech companies offering more in the way of visions than earnings
visibility, and paradigms rather than profitability, the focus will come back to
more traditional measures of investment attractiveness.
WE ARE HOPEFUL THAT THE MARKET ACTION EXPERIENCED IN MARCH AND IN APRIL EXTENDS
OUT TO CORRECT THE VALUATION IMBALANCES THAT REMAIN IN THE MARKET. The Fund's
portfolio is well positioned to benefit from this trend reversal (or return to
sanity, depending on one's perspective).
<PAGE>
THE DLB ENTERPRISE III FUND
-------------------------------
GROWTH OF A
$100,000 INVESTMENT
Cumulative Total Return Since Inception 7/25/95
<TABLE><CAPTION>
DLB RUSSELL
ENTERPRISE III RUSSELL RUSSELL 2000 VALUE
DATE FUND 2500 INDEX 2000 INDEX INDEX
---- ---- ---------- ---------- -----
<S> <C> <C> <C> <C>
$100,000.00 $100,000.00 $100,000.00 $100,000.00
31-Jul-95 $100,500.00 $102,210.00 $102,200.00 $101,240.00
31-Aug-95 $99,696.00 $103,845.36 $104,315.54 $104,246.83
30-Sep-95 $100,792.66 $105,787.27 $106,182.79 $105,800.11
31-Oct-95 $98,595.38 $102,476.13 $101,436.42 $101,578.68
30-Nov-95 $106,897.11 $106,851.86 $105,696.75 $105,611.36
31-Dec-95 $109,270.22 $108,679.02 $108,487.14 $108,885.31
31-Jan-96 $111,302.65 $109,450.65 $108,367.81 $109,603.95
28-Feb-96 $114,652.86 $112,745.11 $111,748.88 $111,324.73
31-Mar-96 $117,702.62 $115,045.11 $114,028.56 $113,662.55
30-Apr-96 $119,232.76 $120,360.19 $120,129.09 $116,765.54
30-May-96 $121,879.73 $123,621.96 $124,862.17 $119,719.71
30-Jun-96 $119,746.83 $119,826.76 $119,730.34 $118,307.01
31-Jul-96 $112,118.96 $111,055.44 $109,277.88 $112,013.08
31-Aug-96 $116,087.97 $117,441.13 $115,626.92 $116,874.45
30-Sep-96 $117,202.41 $122,526.33 $120,147.94 $120,065.12
31-Oct-96 $115,983.51 $121,717.66 $118,297.66 $121,457.88
30-Nov-96 $122,188.63 $127,596.62 $123,171.52 $127,992.31
31-Dec-96 $125,402.19 $129,344.69 $126,398.61 $132,152.06
31-Jan-97 $126,380.32 $132,914.61 $128,926.59 $134,187.20
28-Feb-97 $127,467.19 $130,934.18 $125,806.56 $135,461.98
31-Mar-97 $127,581.91 $125,002.86 $119,868.49 $131,831.60
30-Apr-97 $127,581.91 $126,590.40 $120,204.13 $133,769.52
31-May-97 $137,711.92 $138,249.37 $133,570.82 $144,417.58
30-Jun-97 $146,318.91 $143,903.77 $139,301.01 $151,725.11
31-Jul-97 $156,663.66 $152,336.53 $145,778.51 $158,097.56
31-Aug-97 $158,731.62 $154,454.01 $149,116.84 $160,611.31
30-Sep-96 $164,398.34 $164,555.30 $160,032.19 $171,291.97
31-Oct-97 $160,469.22 $157,166.77 $153,006.78 $166,632.83
30-Nov-97 $159,923.62 $157,874.02 $152,012.23 $168,465.79
31-Dec-97 $166,784.35 $160,857.84 $154,672.45 $174,176.78
31-Jan-98 $160,429.86 $158,396.72 $152,228.62 $171,024.18
28-Feb-98 $171,130.54 $169,896.32 $163,478.32 $181,371.14
31-Mar-98 $177,479.48 $177,354.77 $170,213.62 $188,734.81
30-Apr-98 $180,762.85 $178,028.71 $171,149.80 $189,659.61
31-May-98 $174,888.06 $169,768.18 $161,924.83 $182,945.66
30-Jun-98 $167,490.29 $169,971.90 $162,264.87 $181,921.16
31-Jul-98 $159,166.02 $158,294.83 $149,121.41 $167,676.74
31-Aug-98 $132,251.05 $128,440.43 $120,162.03 $141,418.56
30-Sep-98 $136,840.16 $137,559.70 $129,570.72 $149,408.71
31-Oct-98 $144,831.63 $145,084.21 $134,857.21 $153,846.15
30-Nov-98 $149,176.58 $152,265.88 $141,923.73 $158,015.38
31-Dec-98 $152,383.87 $161,493.19 $150,708.80 $162,977.06
31-Jan-99 $148,802.85 $161,218.66 $152,713.23 $159,277.48
28-Feb-99 $137,925.36 $150,626.59 $140,343.46 $148,398.83
31-Mar-99 $140,876.97 $153,850.00 $142,532.82 $147,181.96
30-Apr-99 $151,245.51 $167,619.57 $155,303.76 $160,619.67
31-May-99 $161,999.07 $170,217.68 $157,571.19 $165,550.69
30-Jun-99 $165,579.25 $179,069.00 $164,693.41 $171,543.63
31-Jul-99 $157,200.94 $175,541.34 $160,180.81 $167,478.05
31-Aug-99 $147,721.72 $170,046.89 $154,254.12 $161,348.35
30-Sep-99 $145,033.18 $167,513.20 $154,284.97 $158,121.38
31-Oct-99 $140,029.54 $171,181.73 $154,917.54 $154,958.95
30-Nov-99 $141,443.84 $180,853.50 $164,166.12 $155,764.74
31-Dec-99 $140,071.83 $200,476.11 $182,749.72 $160,546.72
31-Jan-00 $128,922.11 $195,865.16 $179,807.45 $156,356.45
29-Feb-00 $118,041.09 $224,148.09 $209,493.66 $165,909.83
31-Mar-00 $131,639.42 $220,718.62 $195,688.03 $166,689.60
30-Apr-00 $130,546.81 $208,843.96 $183,907.61 $167,673.07
</TABLE>
--------------------------------------------------------------------------------
TOTAL RETURNS (%) FOR PERIODS ENDED 4/30/00
--------------------------------------------------------------------------------
6 Months One Year Annualized
11/1/99- 5/1/99- Since Inception
4/30/00 4/30/00 7/25/95-
4/30/00
DLB ENTERPRISE III FUND -6.77 -13.68 5.66
Russell 2500 Index 22.00 24.61 16.30
Russell 2000 Index 18.72 18.42 13.33
Russell 2000 Value Index 8.20 4.40 11.25
--------------------------------------------------------------------------------
DISCLOSURE STATEMENT
IN PAST YEARS, the Fund has compared its returns to those of the Russell 2500
Index. In future semi-annual and annual reports, the Fund will compare its
returns 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 the Fund's inception, the
Fund's investment policies continue to require the Fund to invest in companies
with a market capitalization 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 have a lower weighted average
market capitalization than the Russell 2500 Index, provides a more appropriate
comparison based on market capitalization.
THE RUSSELL 2500 INDEX is an unmanaged index that measures the performance of
the smallest 2500 companies in the Russell 3000 Index, representing
approximately 17% of the Russell 3000 total market capitalization. Securities in
the Fund do not match those in the Index, and performance of the Fund will
differ.
THE RUSSELL 2000 INDEX measures the performance of the 2000 smallest companies
in the Russell 3000 Index, which represents approximately 8% of the total market
capitalization of the Russell 3000 Index. Securities in the Fund do not match
those in the Index, and performance of the Fund will differ.
THE RUSSELL 2000 VALUE INDEX measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
Securities in the Fund do not match those in the Index, and performance of the
Fund will differ.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Investment return and share
price will fluctuate with market conditions, and investors may have a gain or
loss when shares are sold. The Fund's total return reflects an expense
limitation in effect during the periods shown. In the absence of such expense
limitation, returns would have been lower.
<PAGE>
THE DLB ENTERPRISE III FUND
-------------------------------
This report and the Fund financial statements contained herein are submitted for
the general information of the shareholders of the DLB Enterprise III Fund. The
report is not intended for distribution to prospective investors unless preceded
or accompanied by a current prospectus.
BABSON SECURITIES CORPORATION
One Memorial Drive, Cambridge, MA 02142
June 2000
<PAGE>
===========================================
DLB ENTERPRISE III
FUND
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED APRIL 30, 2000 AND THE TEN MONTHS
ENDED OCTOBER 31, 1999
<PAGE>
DLB ENTERPRISE III FUND
TABLE OF CONTENTS
<TABLE><CAPTION>
-------------------------------------------------------------------------------------------------------------
<S> <C>
FINANCIAL STATEMENTS:
Portfolio of Investments as of April 30, 2000 1 - 3
Statement of Assets and Liabilities as of April 30, 2000 4
Statement of Operations for the Six Months Ended April 30, 2000 5
Statements of Changes in Net Assets for the Six Months Ended April 30, 2000,
the Ten Months Ended October 31, 1999, and the Year Ended December 31, 1998 6
Financial Highlights for the Six Months Ended April 30, 2000, the Ten Months
Ended October 31, 1999, and for each of the years in the Four-Year Period
Ended December 31, 1998 7
Notes to Financial Statements 8 - 10
</TABLE>
<PAGE>
DLB ENTERPRISE III FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 91.8%
ISSUER SHARES VALUE
AEROSPACE - 3.3%
Perkin Elmer, Inc. 22,400 $1,133,325
----------
APPAREL - 2.4%
Unifi Inc. (*) 82,000 835,375
----------
AUTO PARTS - 4.4%
Exide Corporation 87,500 842,188
Snap-On Inc. 25,600 676,800
----------
1,518,988
----------
BANKS - 7.2%
Commerce Bancorp, Inc. 8,300 329,406
Dime Bancorp, Inc. 59,500 1,115,625
Golden State Bancorp, Inc. (*) 67,600 1,039,350
----------
2,484,381
----------
BUILDING SUPPLIES - 3.2%
Dal-Tile International Inc. (*) 113,000 1,101,750
----------
CHEMICAL - SPECIALTY - 1.7%
UCAR International, Inc. 44,800 590,800
----------
COAL GAS & PIPE - 2.6%
Nabors Industries Inc. (*) 22,400 883,400
----------
DIVERSIFIED - 1.1%
Carlisle Companies Incorporated 9,400 387,163
----------
ELECTRICAL EQUIPMENT - 7.1%
Belden Inc. 43,400 1,288,438
Gerber Scientific Inc. 42,100 584,138
Magnetek Incorporated (*) 67,200 558,600
----------
2,431,176
----------
ELECTRONICS & INSTRUMENTS - 1.4%
Scitex Corporation Ltd. (*) 41,600 494,000
----------
FOOD PRODUCERS - 2.3%
Ralcorp Holdings Inc. (*) 56,000 773,500
----------
FURNITURE & APPLIANCES - 0.8%
La-Z-Boy Incorporated 17,100 268,256
----------
1
<PAGE>
ISSUER SHARES VALUE
INSURANCE COMPANIES - 5.4%
HCC Insurance Holdings, Inc. 74,200 $ 871,850
HSB Group, Inc. 33,750 978,750
----------
1,850,600
----------
MACHINERY & EQUIPMENT - 10.5%
Foster Wheeler Corporation 104,000 955,500
Harsco Corporation 27,600 819,375
Roper Industries, Inc. 25,700 809,550
Unova Inc. (*) 72,200 1,010,800
----------
3,595,225
----------
METALS & MINING - 4.7%
Martin Marietta Materials 19,400 1,028,200
Ryerson Tull Inc. 46,500 575,438
----------
1,603,638
----------
MISCELLANEOUS - 0.5%
ADVO, Inc. 6,200 186,000
----------
NATURAL GAS - 2.8%
Equitable Resources, Inc. 20,600 955,325
----------
OFFICE EQUIPMENT - 2.4%
Wallace Computer Services 76,600 837,813
----------
OIL SERVICES - 6.1%
Newpark Resources, Inc. 180,700 1,490,775
Stolt Comex Seaway S. A. 49,000 591,063
----------
2,081,838
----------
PAPER & FOREST PRODUCTS - 2.3%
Albany International Corp. 52,265 793,775
----------
PRINTING & PUBLISHING - 7.4%
ACNeilsen Corporation (*) 45,800 1,056,263
Central Newspapers, Inc. 21,300 653,644
Hollinger International 67,000 845,875
----------
2,555,782
----------
PROFESSIONAL SERVICES - 3.4%
Policy Management Systems Corporation (*) 89,200 1,181,900
----------
REAL ESTATE - 2.5%
Prentiss Properties Trust 35,700 847,870
----------
SPECIALTY RETAIL - 2.7%
Enesco Group Inc. 57,500 258,750
Tupperware Corporation 35,600 671,950
----------
930,700
----------
TOBACCO - 0.7%
Dimon Incorporated 106,000 251,750
----------
2
<PAGE>
ISSUER SHARES VALUE
TRANSPORTATION - 2.3%
Fritz Companies Inc. (*) 82,300 $ 792,138
----------
WHOLESALERS - 0.4%
BJ's Wholesale Club, Inc. 3,600 127,575
----------
TOTAL COMMON STOCKS
(identified cost, $35,157,257) 31,494,043
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT - 3.7%
Investors Bank & Trust Repurchase Agreement, 4.94%,
dated 4/28/00, $1,286,225 due on 5/1/00 (secured by
Federal Government Agency securities), at cost $1,285,696 1,285,696
----------
TOTAL INVESTMENTS (identified cost, $36,442,953) 32,779,739
Other assets, less liabilities - 4.5% 1,536,464
----------
NET ASSETS - 100% $34,316,203
==========
(*) Non-income producing security
</TABLE>
See notes to financial statements.
3
<PAGE>
DLB ENTERPRISE III FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
----------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (identified cost, $36,442,953) $ 32,779,739
Receivable for investments sold 1,604,595
Receivable for fund shares sold 553,443
Dividends and interest receivable 13,684
Receivable from investment manager 9,563
------------
34,961,024
------------
LIABILITIES:
Payable for investments purchased 565,368
Payable for Fund shares reacquired 32,175
Accrued management fee 15,101
Accrued expenses 32,177
------------
644,821
------------
NET ASSETS $ 34,316,203
============
NET ASSETS CONSIST OF:
Paid-in capital $ 41,290,611
Unrealized depreciation of investments (3,663,214)
Accumulated net realized loss on investment transactions (3,410,385)
Accumulated undistributed net investment income 99,191
------------
Total $ 34,316,203
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,573,088
============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST OUTSTANDING) $ 9.60
============
</TABLE>
See notes to financial statements.
4
<PAGE>
DLB ENTERPRISE III FUND
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 2000
<TABLE><CAPTION>
----------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME:
Dividends $ 260,164
Interest 42,444
------------
302,608
------------
EXPENSES:
Management fee 98,149
Trustees' fees 3,194
Custodian fees 32,784
Accounting and audit fees 14,745
Registration fees 10,369
Legal fees 9,169
Transfer agent fee 3,913
Miscellaneous 2,505
------------
174,828
Reduction of expenses by investment manager (27,604)
------------
Net expenses 147,224
------------
Net investment income 155,384
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized loss (identified cost basis) (3,363,630)
Change in unrealized appreciation 663,606
------------
Net realized and unrealized loss on investments (2,700,024)
------------
Decrease in net assets from operations $ (2,544,640)
============
</TABLE>
See notes to financial statements.
5
<PAGE>
DLB ENTERPRISE III FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
----------------------------------------------------------------------------------------------------------------
Six Months Ten Months Year
Ended Ended Ended
April 30, 2000 October 31, 1999 December 31, 1998
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 155,384 $ 204,015 $ 222,522
Net realized gain (loss) on investments (3,363,630) 1,556,752 2,187,410
Net unrealized appreciation (depreciation)
of investments 663,606 (3,928,866) (5,034,660)
------------ ------------ ------------
(2,544,640) (2,168,099) (2,624,728)
------------ ------------ ------------
Distributions to shareholders:
From net investment income (260,208) (2,565) (223,867)
From net realized gain on investments (1,556,753) (12,380) (2,175,064)
In excess of net realized gain on investments (46,755) -- --
------------ ------------ ------------
(1,863,716) (14,945) (2,398,931)
------------ ------------ ------------
Fund share transactions:
Net proceeds from sales of shares 10,599,198 15,739,311 9,402,929
Net asset value of shares issued in
reinvestment of distributions 1,863,716 14,945 2,398,931
Cost of shares reacquired (6,350,404) (10,899,305) (4,195,749)
------------ ------------ ------------
6,112,510 4,854,951 7,606,111
------------ ------------ ------------
Total increase in net assets 1,704,154 2,671,907 2,582,452
NET ASSETS:
At beginning of period 32,612,049 29,940,142 27,357,690
------------ ------------ ------------
At end of period (including accumulated undistributed
net investment income of $99,191, $204,015, and
$2,565, respectively) $ 34,316,203 $ 32,612,049 $ 29,940,142
============ ============ ============
</TABLE>
See notes to financial statements.
6
<PAGE>
DLB ENTERPRISE III 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 $ 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>
See notes to financial statements.
7
<PAGE>
DLB ENTERPRISE III FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Enterprise III Fund (the "Fund") is a non-diversified series of The DLB
Fund Group (the "Trust"), a Massachusetts business trust. The Trust is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
During 1999, the Fund changed its year end from December 31 to October 31.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices
are not available are valued at last quoted bid prices. Securities for
which there are no such quotations or valuations are valued at fair value
as determined in good faith by or at the direction of the Trustees.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value.
REPURCHASE AGREEMENTS - Securities purchased under agreements to resell to
the original owner are recorded at cost. The Fund may enter into such
agreements with institutions that the Fund's investment adviser has
determined to be creditworthy. The Fund requires that the securities so
purchased be transferred to the custodian under terms that enable the Fund
to obtain such securities in the event of a default. The Fund monitors, on
a daily basis, the value of the securities to assure that such value,
including accrued interest, is greater than amounts owed to the Fund.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded
on the trade date. Dividend income is recorded on the ex-dividend date.
Dividend payments received in additional securities are recorded in an
amount equal to the value of the securities received. Interest income is
recorded on the accrual basis.
TAXES AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute to shareholders all of its
taxable income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is necessary.
The Fund files a tax return annually using tax accounting methods required
by the Code, which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the net investment income and net realized gain reported in
these financial statements may differ from the amounts reported on the
Fund's tax return, and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders on Form 1099-DIV.
8
<PAGE>
Distributions to shareholders are recorded on the ex-dividend date. The
Fund distinguishes between distributions for tax purposes and financial
reporting purposes. Differences between income for financial reporting
purposes and tax-basis earnings and profits may result in the reporting of
temporary over-distributions in the financial statements. Such
over-distributions are classified as distributions in excess of net
investment income or accumulated net realized gains. Distributions, if any,
in excess of tax-basis earnings and profits are reported as return of
capital.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from those such estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund engages David L. Babson & Company Inc. ("Babson") to provide
investment advisory and administrative services and general office
facilities. The fee for such services is computed daily and paid monthly at
an effective annual rate of .60% of average daily net assets. For the six
months ended April 30, 2000, the management fee amounted to $98,149. Babson
has agreed to pay the Fund's operating expenses such that the Fund's total
aggregate expenses do not exceed .90% of average daily net assets. For the
six months ended April 30, 2000, $27,604 of fund expenses were borne by
Babson.
The Fund pays no compensation directly to the Trustees who also are
officers of the investment manager, nor to the officers of the Fund, all of
whom receive remuneration for their services to the Fund from Babson.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations, for
the six months ended April 30, 2000 aggregated $10,050,303 and $6,199,770,
respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate cost $ 36,442,953
============
Gross unrealized appreciation $ 3,320,057
Gross unrealized depreciation (6,983,271)
------------
Net unrealized depreciation $ (3,663,214)
============
9
<PAGE>
5. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
Six Months Ten Months Year
Ended Ended Ended
April 30, October 31, December 31,
2000 1999 1998
--------- --------- ---------
Shares sold 1,071,959 1,355,408 701,642
Shares issued in reinvestment
of distributions 187,309 1,208 208,181
Redemptions (671,242) (888,231) (321,680)
--------- --------- ---------
Net increase 588,026 468,385 588,143
========= ========= =========
10
<PAGE>
DLB
THE DLB DISCIPLINED GROWTH FUND
SEMI ANNUAL REPORT
APRIL 30, 2000
[EXPERIENCE TO MANAGE THE FUTURE]
<PAGE>
THE DLB DISCIPLINED GROWTH FUND
-------------------------------
FUND INVESTMENT OBJECTIVE
THE DLB DISCIPLINED GROWTH FUND seeks long-term capital appreciation.
MARKET OVERVIEW
THE FIRST HALF OF THE FISCAL YEAR ENDING OCTOBER 31, 2000 WAS CHARACTERIZED BY
THREE MAJOR FACTORS: 1) a runaway market for technology stocks in the 4th
quarter of 1999, 2) continued general dominance of growth stocks until late in
the 1st quarter of 2000 and, 3) unprecedented volatility throughout the period.
WITH THE NOTABLE EXCEPTION OF THE MAJOR VALUE INDICES, MANY BROAD MARKET AND
GROWTH BENCHMARKS ACHIEVED ALL-TIME HIGHS ON OR CLOSE TO THE LAST DAY OF THE
MILLENIUM. Technology stocks continued to be the driving force in these
record-setting indices.
THE WALL STREET JOURNAL REFERRED TO IT AS "THIS JEKYLL AND HYDE STOCK MARKET."
The phrases "New Economy Stocks" and "Old Economy Stocks" became part of the
investment jargon. No matter how it was described, the split between growth and
value persisted throughout the first two months of 2000. Although returns for
most benchmarks were negative in January, relative performance for value
investors was positive. This shift in investor sentiment was brief, however, and
the market once again favored growth over value in February. Value mounted a
comeback late in March, and this positive absolute and relative performance
continued through the end of April.
VOLATILITY, AS MEASURED BY INTRADAY PRICE MOVEMENTS, REACHED LEVELS NEVER SEEN
BEFORE IN 1999 AND IN THE 1ST QUARTER OF 2000. To put this volatility into
historical perspective, in 1994 the NASDAQ, S&P 500, and Russell 2000 indices
experienced intraday price movements of 2% or more only 2% of the time. In 1999,
2% price swings in the NASDAQ Index occurred almost half the time and in the S&P
500 Index almost one-quarter of the time. This volatility increased to 76% for
NASDAQ and 56% for the S&P 500 during the 1st quarter of 2000!
A MAJOR CONTRIBUTION TO THIS VOLATILITY AND THE SEE-SAW BETWEEN GROWTH AND VALUE
WAS THE CONTINUED EFFORTS BY THE FED TO SLOW THE ECONOMY. As short-term rates
were raised by the Fed and uncertainty as to future increases burdened market
psychology, investor's sentiment and momentum changed frequently.
<PAGE>
THE DLB DISCIPLINED GROWTH FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW
THE BASIC STRATEGY OF THIS FUND IS TO FIND UNDER-PRICED STOCKS THAT ARE
EXPERIENCING A POSITIVE CHANGE IN MARKET SENTIMENT. These stocks should tend to
get the largest investment returns as the market revalues the stock to a
"fairer" market value. The Fund uses this strategy to build a diversified
portfolio that is sensitive to its benchmark, the Russell 1000 Growth Index, by
using powerful stock selection techniques and a disciplined portfolio
construction process. The two factors used in the strategy are Earnings Revision
and Relative Valuation, both of which have a strong basis in economic theory and
were not necessarily powerful the last quarter of 1999, but have come on strong
in early 2000.
IN THE PAST SIX MONTHS, WE'VE SEEN THE MARKET REACH SPECULATIVE HIGHS AND THEN
MAINLY LOSE IT. Until the end of February, we saw dramatic volatility (generally
very positive) in the Large Cap markets -- however this was the sort of
volatility that does not help a price-sensitive, growth portfolio.
DURING MARCH THE MARKET DRAMATICALLY TURNED ITS FOCUS TOWARDS STOCKS THAT
APPEARED TO BE EXECUTING WELL AND HAD BEEN OUT OF FAVOR IN THE GO-GO MARKET --
I.E., MANY OF THE CLASSICALLY UNDERVALUED STOCKS. As mentioned above, the
strategy of the Fund is to find classically undervalued growth-oriented stocks
and this was the kind of period that the strategy was made for. To provide a
sense of how well Value did during the month of March, the Russell 1000 Value
Index rose by more than 12% in March, far outdistancing the Russell 1000 Growth
Index (by roughly 5%). It has been quite a while since we've seen such a
positive spread between these two styles. April saw continued contractions in
the Russell 1000 Growth index which lost almost 5% of it's value.
WE CONTINUE TO MAINTAIN OUR PORTFOLIO DISCIPLINE OF REMAINING SECTOR-NEUTRAL TO
OUR BENCHMARK, CONTAINING THE RISKS IN SUCH A VOLATILE MARKET OF MISSING OR
OVERSHOOTING A MARKET ROTATION, IN OR OUT OF A PARTICULAR SECTOR. Our market
capitalization, beta, and yield demonstrate that the Fund is and remains
oriented towards large-Cap, growth-oriented stocks.
THE FUND'S TOP TEN HOLDINGS AND SECTOR WEIGHTINGS CAN BE FOUND ON THE FOLLOWING
PAGE.
<PAGE>
THE DLB DISCIPLINED GROWTH FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW (CONT.)
--------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS % OF FUND ASSETS
--------------------------------------------------------------------------------
Intel Corporation 7.68
Advanced Micro Dev. 5.25
General Electric 4.99
Microsoft 4.73
Cisco Systems Inc. 3.53
Applied Materials Inc. 3.39
Merck & Co. Inc. 3.28
Brinker International 3.20
ADC Telecommunications 3.19
Arrow Electronics 2.87
TOTAL 42.11
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECTOR RUSSELL 1000
DIVERSIFICATION (%) PORTFOLIO GROWTH DIFFERENCE
--------------------------------------------------------------------------------
Technology 43.5 43.5 0.0
Healthcare 16.3 15.0 +1.3
Consumer Discretionary 18.8 15.3 +3.5
Consumer Staples 1.4 6.2 -4.8
Energy 2.4 0.8 +1.6
Materials & Processing 1.0 0.4 +0.6
Producer Durables 6.2 2.9 +3.3
Autos & Transportation 0.4 0.4 0.0
Financial Services 2.5 4.2 -1.7
Utilities 2.6 4.1 -1.5
Other 5.0 7.2 -2.2
--------------------------------------------------------------------------------
PERFORMANCE REVIEW
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2000, THE PORTFOLIO ENJOYED
CONSIDERABLE OUTPERFORMANCE AGAINST ITS LARGE-CAP GROWTH BENCHMARK, THE RUSSELL
1000 GROWTH INDEX. The Fund returned 23.5% vs. 18.7% for the benchmark. We do
observe that many fundamentally sound stocks that have been dormant for over a
year or more have started to see life. The Fund is a grateful beneficiary of the
market's renewed interest in fundamentals.
<PAGE>
THE DLB DISCIPLINED GROWTH FUND
-------------------------------
OUTLOOK
LOOKING TO THE FUTURE, WE ARE HOPEFUL THAT THE MARKET WILL CONTINUE TO MAINTAIN
AND SUSTAIN ITS FOCUS ON FUNDAMENTALS. Over history, a persistent disciplined
approach to buying companies with relatively low valuations and increasing
market sentiment has been a winning strategy. Increasing domestic inflation and
increased energy prices have delivered a "reality" message to much of the
narrowly-based froth that has been in this market for the past few years. The
market's present emphasis on bottom-line results, operating context, and market
development is more in line with a rational, long-term oriented investment
environment -- one that offers a good chance for the success of this Fund's
strategy.
<PAGE>
THE DLB DISCIPLINED GROWTH FUND
-------------------------------
GROWTH OF A
$100,000 INVESTMENT
Cumulative Total Return Since Inception 8/26/96
<TABLE><CAPTION>
DLB DLB
DISCIPLINED RUSSELL DISCIPLINED RUSSELL
DATE GROWTH 1000 GROWTH DATE GROWTH 1000 GROWTH
---- ------ ----------- ---- ------ -----------
<S> <C> <C> <C> <C> <C>
$100,000.00 $100,000.00 30-Jun-98 $188,885.05 $179,087.40
26-Aug-96 $98,500.00 $100,240.00 31-Jul-98 $182,368.51 $177,905.42
30-Sep-96 $106,399.70 $107,537.47 31-Aug-98 $151,128.79 $151,201.82
31-Oct-96 $110,102.41 $108,182.70 30-Sep-98 $159,093.27 $162,814.12
30-Nov-96 $120,099.71 $116,307.22 31-Oct-98 $169,322.97 $175,904.37
31-Dec-96 $118,502.38 $114,027.60 30-Nov-98 $184,832.96 $189,290.69
31-Jan-97 $127,449.31 $122,020.93 31-Dec-98 $196,958.00 $206,364.71
28-Feb-97 $128,163.03 $121,191.19 31-Jan-99 $205,013.58 $218,478.32
31-Mar-97 $123,382.55 $114,634.74 28-Feb-99 $193,614.83 $208,493.86
30-Apr-97 $131,920.62 $122,246.49 31-Mar-99 $198,319.67 $219,481.49
31-May-97 $139,849.05 $131,072.69 30-Apr-99 $204,150.26 $219,766.82
30-Jun-97 $144,631.89 $136,315.60 31-May-99 $207,008.37 $213,019.98
31-Jul-97 $160,281.06 $148,365.89 30-Jun-99 $219,656.58 $227,931.37
31-Aug-97 $154,382.71 $139,686.49 31-Jul-99 $214,384.82 $220,683.16
30-Sep-96 $164,510.22 $146,559.07 31-Aug-99 $214,256.19 $224,280.29
31-Oct-97 $153,553.84 $141,136.38 30-Sep-99 $208,064.19 $219,570.41
30-Nov-97 $159,189.26 $147,134.68 31-Oct-99 $213,889.98 $236,147.97
31-Dec-97 $156,674.07 $148,782.58 30-Nov-99 $216,627.78 $248,899.96
31-Jan-98 $160,982.61 $153,231.18 31-Dec-99 $239,005.42 $274,785.56
28-Feb-98 $175,310.06 $164,754.17 31-Jan-00 $226,362.04 $261,898.11
31-Mar-98 $180,586.90 $171,327.86 29-Feb-00 $237,068.96 $274,704.93
30-Apr-98 $181,237.01 $173,692.18 31-Mar-00 $265,019.39 $294,373.81
31-May-98 $178,445.96 $168,759.33 30-Apr-00 $264,197.83 $280,361.61
</TABLE>
--------------------------------------------------------------------------------
TOTAL RETURNS (%) FOR PERIODS ENDED 4/30/00
--------------------------------------------------------------------------------
6 Months One Year Annualized
11/1/99- 5/1/99- Since Inception
4/30/00 4/30/00 8/26/96-
4/30/00
DLB DISCIPLINED GROWTH FUND 23.50 29.40 29.58
Russell 1000 Growth Index 18.72 27.58 30.98
--------------------------------------------------------------------------------
DISCLOSURE STATEMENT
RUSSELL 1000 GROWTH INDEX is an unmanaged index that contains those Russell 1000
securities with a greater-than-average growth orientation. Securities in this
index tend to exhibit higher price-to-book ratios and higher forecasted growth
values than the Value universe. Securities in the Fund do not match those in the
Index, and the performance of the Fund will differ.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Investment return and share
price will fluctuate with market conditions, and investors may have a gain or
loss when shares are sold. The Fund's total return reflects an expense
limitation in effect during the periods shown. In the absence of such expense
limitation, returns would have been lower.
<PAGE>
THE DLB DISCIPLINED GROWTH FUND
-------------------------------
This report and the Fund financial statements contained herein are submitted for
the general information of the shareholders of the DLB Disciplined Growth Fund.
The report is not intended for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
BABSON SECURITIES CORPORATION
One Memorial Drive, Cambridge, MA 02142
June 2000
<PAGE>
===========================================
DLB Disciplined
Growth Fund
Financial Statements for the Six Months
Ended April 30, 2000 and the Ten Months
Ended October 31, 1999
<PAGE>
DLB DISCIPLINED GROWTH FUND
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS:
Portfolio of Investments as of April 30, 2000 1 - 3
Statement of Assets and Liabilities as of April 30, 2000 4
Statement of Operations for the Six Months Ended April 30, 2000 5
Statements of Changes in Net Assets for the Six Months Ended
April 30, 2000, the Ten Months Ended October 31, 1999, and
the Year Ended December 31, 1998 6
Financial Highlights for the Six Months Ended April 30, 2000, the
Ten Months Ended October 31, 1999, and the Years Ended
December 31, 1998, 1997 and 1996 7
Notes to Financial Statements 8 - 10
<PAGE>
DLB DISCIPLINED GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
--------------------------------------------------------------------------------------------------
COMMON STOCKS - 97.6%
ISSUER SHARES VALUE
<S> <C> <C>
APPAREL & TEXTILE - 5.0%
Jones Apparel Group, Inc. (*) 47,200 $1,401,250
Liz Claiborne Inc. 27,000 1,250,438
-----------
2,651,688
-----------
AUTO & TRUCK MANUFACTURERS - .4%
Paccar Inc. 4,600 218,788
-----------
CHEMICALS - 2.7%
Cytec Industries Inc. 16,500 497,063
FMC Corporation 15,500 901,906
-----------
1,398,969
-----------
COMPUTER RELATED - 5.8%
Cisco Systems, Inc. 26,600 1,844,127
Hewlett-Packard Company 8,800 1,188,000
-----------
3,032,127
-----------
COMPUTER SOFTWARE - 10.0%
Autodesk, Inc. 26,400 1,013,100
Computer Associates International, Inc. 14,350 800,909
Microsoft Corporation (*) 35,500 2,476,125
Oracle Corporation 11,800 943,263
-----------
5,233,397
-----------
COAL, GAS & PIPE - 1.1%
The Coastal Corporation 11,400 572,138
-----------
DIVERSIFIED - .8%
Loews Corporation 8,000 441,000
-----------
DRUGS - 6.6%
Genzyme Corporation-General Division (*) 21,200 1,034,825
Merck & Co., Inc. 24,700 1,716,650
Pfizer Inc. 16,300 686,638
-----------
3,438,113
-----------
ELECTRICAL EQUIPMENT - 7.1%
Altera Corporation (*) 10,600 1,083,850
General Electric Company 16,600 2,610,350
-----------
3,694,200
-----------
</TABLE>
1
<PAGE>
<TABLE><CAPTION>
ISSUER SHARES VALUE
<S> <C> <C>
ELECTRIC POWER - 2.2%
DTE Energy Co. 8,500 $ 277,313
PECO Energy Company 6,200 258,463
Public Service Enterprise Group Incorporated 17,000 609,875
-----------
1,145,651
-----------
ELECTRONICS & INSTRUMENTS - 15.8%
ADC Telecommunications 27,500 1,670,625
Applied Materials Inc. 17,400 1,771,538
Arrow Electronics, Inc. 34,300 1,502,769
National Semiconductor Corporation 15,500 941,625
Sanmina Corporation 13,000 780,813
SCI Systems Inc. 12,400 660,300
Teradyne, Inc. 8,500 935,000
-----------
8,262,670
-----------
FINANCIAL SERVICES - 2.3%
Lehman Brothers Holdings Inc. 12,000 984,750
PMI Group, Inc. 5,000 242,188
-----------
1,226,938
-----------
FOOD PRODUCERS - 1.1%
Keebler Foods Company 18,400 578,450
-----------
FOOD RETAILERS - 1.6%
Starbucks Corporation 28,200 852,610
-----------
MEDICAL SUPPLIES & SERVICES - 7.4%
Baxter International Inc. 9,100 592,634
Beckman Coulter, Inc. 20,200 1,309,213
Biomet, Inc. 25,900 924,306
Dentsply International Inc. 26,600 773,063
Oxford Health Plans, Inc. 14,300 271,700
-----------
3,870,916
-----------
OIL SERVICES - .8%
BJ Services Company 5,900 414,473
-----------
PROFESSIONAL SERVICES - .8%
Manpower Inc. 11,900 420,219
-----------
RESTAURANT & LODGING - 3.2%
Brinker International, Inc. 52,500 1,673,438
-----------
RETAIL - DISCOUNT - 3.1%
The TJX Companies Inc. 73,100 1,402,606
Wal Mart Stores Inc. 4,200 232,575
-----------
1,635,181
-----------
</TABLE>
2
<PAGE>
<TABLE><CAPTION>
ISSUER SHARES VALUE
<S> <C> <C>
RETAIL - GENERAL - 3.3%
Federated Department Stores, Inc. 18,100 $ 615,400
Sears, Roebuck and Co. 29,900 1,095,088
-----------
1,710,488
-----------
SEMICONDUCTORS - 16.5%
Advanced Micro Devices, Inc. 31,400 2,755,350
Intel Corporation 31,700 4,019,955
Novellus Systems, Inc. 15,400 1,026,988
Texas Instruments 5,000 814,375
-----------
8,616,668
-----------
TOTAL COMMON STOCKS
(identified cost, $38,302,721) 51,088,122
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT - 2.4%
Investors Bank & Trust Repurchase Agreement, 4.94%,
dated 4/28/00, $1,244,508 due on 5/1/00 (secured by
Federal Government Agency securities), at cost $1,243,996 1,243,996
-----------
TOTAL INVESTMENTS (identified cost, $39,546,717) 52,332,118
Other assets, less liabilities - (0.0%) (18,995)
-----------
NET ASSETS - 100% $52,313,123
===========
(*) Non-income producing security
</TABLE>
See notes to financial statements.
3
<PAGE>
DLB DISCIPLINED GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
April 30, 2000
<TABLE><CAPTION>
-------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (identified cost, $39,546,717) $ 52,332,118
Receivable for fund shares sold 30,249
Dividends and interest receivable 2,384
Receivable from investment manager 12,713
52,377,464
LIABILITIES:
Accrued management fees 28,837
Accrued expenses 35,504
64,341
NET ASSETS $ 52,313,123
============
NET ASSETS CONSIST OF:
Paid-in capital $ 36,462,220
Unrealized appreciation of investments 12,785,401
Accumulated net investment loss (55,180)
Accumulated undistributed net realized gain on investment transactions 3,120,682
Total $ 52,313,123
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 2,753,333
============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE
PER SHARE (NET ASSETS / SHARES OF BENEFICIAL INTEREST
OUTSTANDING) $ 19.00
============
</TABLE>
See notes to financial statements.
4
<PAGE>
DLB DISCIPLINED GROWTH FUND
STATEMENT OF OPERATIONS (Unaudited)
Six Months Ended April 30, 2000
<TABLE><CAPTION>
----------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME:
Dividends $ 139,770
Interest 8,894
-----------
148,664
-----------
EXPENSES:
Management fee 169,870
Trustees' fees 3,000
Custodian fees 30,387
Accounting and audit fees 14,745
Registration expense 10,257
Legal fees 8,788
Transfer agent fee 4,241
Miscellaneous 2,693
-----------
243,981
Reduction of expenses by investment manager (40,137)
-----------
Net expenses 203,844
-----------
Net investment loss (55,180)
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Realized gain (identified cost basis) 3,130,458
Change in unrealized appreciation 6,707,347
-----------
Net realized and unrealized gain on investments 9,837,805
-----------
Increase in net assets from operations $ 9,782,625
===========
</TABLE>
See notes to financial statements
5
<PAGE>
DLB DISCIPLINED GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
--------------------------------------------------------------------------------------------------------------
Six Months Ten Months Year
Ended Ended Ended
April 30, 2000 October 31, 1999 December 31, 1998
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ (55,180) $ (65,839) $ 22,336
Net realized gain on investments 3,130,458 5,080,337 4,595,904
Net unrealized appreciation (depreciation)
on investments 6,707,347 (1,765,520) 2,342,094
------------ ------------ ------------
9,782,625 3,248,978 6,960,334
------------ ------------ ------------
Distributions to shareholders:
From net investment income -- (2,240) (27,930)
From net realized gain on investments (5,011,166) (9,521) (4,590,140)
------------ ------------ ------------
(5,011,166) (11,761) (4,618,070)
------------ ------------ ------------
Fund share transactions:
Net proceeds from sales of shares 2,834,008 4,425,941 3,940,252
Net asset value of shares issued in
reinvestment of distributions 4,983,828 11,698 4,586,644
Cost of shares reacquired (1,959,423) (1,299,361) (630,887)
------------ ------------ ------------
5,858,413 3,138,278 7,896,009
------------ ------------ ------------
Total increase in net assets 10,629,872 6,375,495 10,238,273
NET ASSETS:
At beginning of period 41,683,251 35,307,756 25,069,483
------------ ------------ ------------
At end of period (including accumulated net
investment loss of $55,180, and accumulated
undistributed net investment income of $0, and
$2,240, respectively) $ 52,313,123 $ 41,683,251 $ 35,307,756
============ ============ ============
</TABLE>
See notes to financial statements.
6
<PAGE>
<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 investments -- -- -- (.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 net realized gain on investments for the ten months ended October 31,
1999 were less than $.01 per share.
</TABLE>
See notes to financial statements.
7
<PAGE>
DLB DISCIPLINED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Disciplined Growth Fund (the "Fund"), formerly known as DLB
Quantitative Equity Fund, is a non-diversified series of The DLB Fund
Group (the "Trust"), a Massachusetts business trust. The Trust is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. During 1999, the Fund changed its
year end from December 31 to October 31.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION - Equity securities listed on securities exchanges
or reported through the NASDAQ system are valued at last sale prices.
Unlisted equity securities or listed equity securities for which last
sale prices are not available are valued at last quoted bid prices.
Securities for which there are no such quotations or valuations are
valued at fair value as determined in good faith by or at the direction
of the Trustees. Short-term obligations, which mature in 60 days or less,
are valued at amortized cost, which approximates market value.
REPURCHASE AGREEMENTS - Securities purchased under agreements to resell
to the original owner are recorded at cost. The Fund may enter into such
agreements with institutions that the Fund's investment adviser has
determined to be creditworthy. The Fund requires that the securities so
purchased be transferred to the custodian under terms that enable the
Fund to obtain such securities in the event of a default. The Fund
monitors, on a daily basis, the value of the securities to assure that
such value, including accrued interest, is greater than amounts owed to
the Fund.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded
on the trade date. Dividend income is recorded on the ex-dividend date.
Dividend payments received in additional securities are recorded in an
amount equal to the value of the securities. Interest income is recorded
on the accrual basis.
TAXES AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute to shareholders all of
its taxable income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is necessary.
The Fund files a tax return annually using tax accounting methods
required by the Code, which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the net investment income and net realized gain reported in
these financial statements may differ from the amounts reported on the
Fund's tax return, and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders on Form 1099-DIV.
8
<PAGE>
Distributions to shareholders are recorded on the ex-dividend date. The
Fund distinguishes between distributions for tax purposes and financial
reporting purposes. Differences between income for financial reporting
purposes and tax-basis earnings and profits may result in the reporting
of temporary over-distributions in the financial statements. Such
over-distributions are classified as distributions in excess of net
investment income or accumulated net realized gains. Distributions, if
any, in excess of tax-basis earnings and profits are reported as return
of capital.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements. Actual results could differ from those such
estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund engages David L. Babson & Company Inc. ("Babson") to provide
investment advisory and administrative services and general office
facilities. The fee for such services is computed daily and paid monthly
at an effective annual rate of .75% of average daily net assets. For the
six months ended April 30, 2000, the management fee amounted to $169,870.
Babson has agreed to pay the Fund's operating expenses such that the
Fund's total aggregate expenses do not exceed .90% of average daily net
assets. For the six months ended April 30, 2000, $40,137 of fund expenses
were borne by Babson.
The Fund pays no compensation directly to the Trustees who also are
officers of the investment manager, nor to the officers of the Fund, all
of whom receive remuneration for their services to the Fund from Babson.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations,
for the six months ended April 30, 2000 aggregated $25,948,703 and
$26,145,384, respectively. The cost and unrealized appreciation or
depreciation in value of the investments owned by the Fund, as computed
on a federal income tax basis, are as follows:
Aggregate cost $ 39,546,717
============
Gross unrealized appreciation $ 13,878,963
Gross unrealized depreciation (1,093,562)
------------
Net unrealized appreciation $ 12,785,401
============
9
<PAGE>
5. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE><CAPTION>
Six Months Ten Months Year
Ended Ended Ended
April 30, October 31, December 31,
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Shares sold 157,679 270,747 249,348
Shares issued in reinvestment
of distributions 290,602 660 290,618
Redemptions (111,376) (77,526) (40,944)
------- ------- -------
Net increase 336,905 193,881 499,022
======= ======= =======
</TABLE>
10
<PAGE>
DLB
THE DLB VALUE FUND
SEMI ANNUAL REPORT
APRIL 30, 2000
[EXPERIENCE TO MANAGE THE FUTURE]
<PAGE>
DLB VALUE FUND
-------------------------------
FUND INVESTMENT OBJECTIVE
THE DLB VALUE FUND seeks long-term capital appreciation primarily through
investment in a portfolio of common stocks of established companies.
MARKET OVERVIEW
THE FIRST HALF OF THE FISCAL YEAR ENDING OCTOBER 31, 2000 WAS CHARACTERIZED BY
THREE MAJOR FACTORS: 1) a runaway market for technology stocks in the 4th
quarter of 1999, 2) continued general dominance of growth stocks until late in
the 1st quarter of 2000 and, 3) unprecedented volatility throughout the period.
WITH THE NOTABLE EXCEPTION OF THE MAJOR VALUE INDICES, MANY BROAD MARKET AND
GROWTH BENCHMARKS ACHIEVED ALL-TIME HIGHS ON OR CLOSE TO THE LAST DAY OF THE
MILLENIUM. Technology stocks continued to be the driving force in these
record-setting indices.
THE WALL STREET JOURNAL REFERRED TO IT AS "THIS JEKYLL AND HYDE STOCK MARKET."
The phrases "New Economy Stocks" and "Old Economy Stocks" became part of the
investment jargon. No matter how it was described, the split between growth and
value persisted throughout the first two months of 2000. Although returns for
most benchmarks were negative in January, relative performance for value
investors was positive. This shift in investor sentiment was brief, however, and
the market once again favored growth over value in February. Value mounted a
comeback late in March, and this positive absolute and relative performance
continued through the end of April.
VOLATILITY, AS MEASURED BY INTRADAY PRICE MOVEMENTS, REACHED LEVELS NEVER SEEN
BEFORE IN 1999 AND IN THE 1ST QUARTER OF 2000. To put this volatility into
historical perspective, in 1994 the NASDAQ, S&P 500, and Russell 2000 indices
experienced intraday price movements of 2% or more only 2% of the time. In 1999,
2% price swings in the NASDAQ Index occurred almost half the time and in the S&P
500 Index almost one-quarter of the time. This volatility increased to 76% for
NASDAQ and 56% for the S&P 500 during the 1st quarter of 2000!
A MAJOR CONTRIBUTION TO THIS VOLATILITY AND THE SEE-SAW BETWEEN GROWTH AND VALUE
WAS THE CONTINUED EFFORTS BY THE FED TO SLOW THE ECONOMY. As short-term rates
were raised by the Fed and uncertainty as to future increases burdened market
psychology, investor's sentiment and momentum changed frequently.
<PAGE>
DLB VALUE FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW
WHAT WE HAVE REFERRED TO AS "THE STOCK MARKET'S CHOPPY SUMMER OF 1999 BECAME AN
EXPLOSIVE GROWTH MARKET IN THE 4TH QUARTER.
TECHNOLOGY WAS THE BEST PERFORMING SECTOR OF THE S&P 500--GAINING 34% IN THE 4TH
QUARTER. The median yield for these companies was 0.0%, the median P/E on 2000
earnings was 87 times, and the median price-to-book was 17. Thus, the key to
superior investment performance in 1999 was to buy very large capitalization,
low dividend paying, high P/E, and high price-to-book stocks. Our value
disciplines do not allow us to invest in the kinds of companies that have
dominated market performance.
THE MARKET CONTINUED TO FAVOR GROWTH IN THE FIRST QUARTER, GRANTING US JUST A
FEW "VALUE DAYS" TO REMIND US OF THE POWER OF OUR DEEP-VALUE ORIENTATION. Though
returns were negative in January for both growth and value, relative performance
for value investors was strong. Despite this brief shift in investor sentiment,
the market once again favored growth over value in February.
THERE WAS A DISTINCT TURNAROUND FROM GROWTH TO VALUE BEGINNING AROUND THE MIDDLE
OF MARCH, HOWEVER, AS TECHNOLOGY ISSUES BEGAN TO GIVE BACK SOME OF THEIR
OUTSIZED GAINS OF 1999 AND EARLY 2000, AND STOCKS REPRESENTING THE "OLD ECONOMY"
("VALUE" STOCKS) BEGAN TO SHOW SIGNS OF LIFE AFTER A MORIBUND 1999 AND
PARTICULARLY NEGATIVE FIRST TWO MONTHS OF 2000. The acceleration of these two
market forces in the first couple of weeks in April continued to benefit the
Fund's relative performance.
THE DLB VALUE FUND'S VALUATION CHARACTERISTICS CONTINUE TO BE EXTREMELY
ATTRACTIVE. As of April 30, 2000, the average price/earnings ratio based on
estimated earnings for 2000 for the companies in the Fund is only 12.4, compared
to 25.2 times for the S&P 500 and 17.1 times for the S&P/BARRA Value index. The
average price-to-book is 1.6, compared to 5.0 and 3.0 for the S&P 500 and S&P
500/BARRA Value indices respectively. Also, the Fund's current gross yield
(2.8%) continues to be higher than the corresponding figure for the market
(1.1%).
THE FUND'S TOP TEN HOLDINGS AND SECTOR WEIGHTINGS CAN BE FOUND ON THE FOLLOWING
PAGE:
<PAGE>
DLB VALUE FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW (CONT.)
--------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS % OF FUND ASSETS
--------------------------------------------------------------------------------
Diageo Plc. 2.94
Raytheon Co. Class B 2.86
Boeing 2.74
Limited Inc. 2.67
Dana Corp. 2.66
USX-- US Steel Group 2.61
Tenet Healthcare Corp. 2.60
Allstate Corp. 2.59
Albertsons 2.59
United Health Group 2.58
TOTAL 26.82
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECTOR DIVERSIFICATION (%) PORTFOLIO S&P 500 DIFFERENCE
--------------------------------------------------------------------------------
Basic Materials 14.8 2.9 +11.9
Capital Goods/Construction 11.8 7.7 +4.1
Communication Services 0.0 10.2 +10.2
Consumer Cyclical 10.5 11.2 -0.7
Consumer Staples 8.3 5.7 +2.6
Energy 7.5 6.2 +1.3
Financial 23.3 13.0 +10.3
Healthcare 8.1 10.2 -2.1
Miscellaneous 0.0 1.1 -1.1
Technology 7.4 29.1 -21.7
Transport & Services 5.9 0.7 +5.2
Utilities 2.4 2.0 -0.4
--------------------------------------------------------------------------------
PERFORMANCE REVIEW
ALTHOUGH THE FUND'S DEEP VALUE ORIENTATION AND SLIGHTLY SMALLER AVERAGE MARKET
CAPITALIZATION, HIGHER QUALITY, AND POSITIVE EARNINGS WORKED AGAINST IT DURING
THE EARLY MONTHS OF THIS 6-MONTH PERIOD, THESE CHARACTERISTICS HAVE WORKED TO
ITS DISTINCT ADVANTAGE SINCE THE MIDDLE OF MARCH. In short, the Fund has
participated in the market's return to value recently. Despite the value style
coming back into favor in mid-March, the Fund trailed the S&P 500 and S&P
500/BARRA Value indices during the six-month period. This is evident in the
Fund's return of -6.31% for the six-month period vs. the return of the S&P 500
Index of 7.19% and the S&P 500/BARRA index return of 2.69% for the same
six-month period.
<PAGE>
DLB VALUE FUND
-------------------------------
OUTLOOK
WE REMAIN COMMITTED TO THE HOLDINGS IN THE FUND. We have stayed true to our
discipline and continue to believe that when the schizophrenic market begins to
evidence signs of normalcy the stocks in the Fund's portfolio will benefit as
their values are recognized by a broader range of investors. We have seen signs
of this in the latter part of this reporting period, and we are hopeful that our
recent recovery in performance will persist for an extended period of time.
<PAGE>
DLB VALUE FUND
-------------------------------
GROWTH OF A
$100,000 INVESTMENT
Cumulative Total Return Since Inception 7/25/95
<TABLE><CAPTION>
DLB S&P BARRA DLB S&P BARRA
DATE VALUE FUND S&P 500 VALUE DATE VALUE FUND S&P 500 VALUE
---- ---------- ------- ----- ---- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000.00 $100,000.00 $100,000.00 30-Nov-97 $170,644.53 $182,875.31 $172,783.68
31-Jul-95 $100,800.00 $102,400.00 $100,250.00 31-Dec-97 $169,415.89 $186,020.77 $176,619.48
31-Aug-95 $100,699.20 $102,656.00 $101,102.13 31-Jan-98 $169,754.72 $188,085.60 $174,447.06
30-Sep-95 $104,294.16 $106,988.08 $104,620.48 28-Feb-98 $182,825.83 $201,646.57 $187,530.59
31-Oct-95 $102,093.55 $106,602.93 $102,988.40 31-Mar-98 $192,369.34 $211,970.88 $197,038.39
30-Nov-95 $106,789.86 $111,282.79 $108,384.99 30-Apr-98 $196,582.23 $214,111.78 $199,363.44
31-Dec-95 $108,178.13 $113,430.55 $111,387.26 31-May-98 $189,878.78 $210,429.06 $196,552.42
31-Jan-96 $110,428.23 $117,287.19 $114,717.73 30-Jun-98 $191,815.54 $218,972.48 $198,046.22
28-Feb-96 $113,398.75 $118,377.96 $115,796.08 31-Jul-98 $179,309.17 $216,629.47 $193,748.61
31-Mar-96 $116,880.09 $119,514.39 $118,505.71 31-Aug-98 $150,512.12 $185,304.85 $162,593.84
30-Apr-96 $118,306.03 $121,271.25 $119,714.47 30-Sep-98 $157,706.59 $197,182.89 $172,479.54
30-May-96 $121,370.16 $124,400.05 $121,522.16 31-Oct-98 $171,521.69 $213,213.86 $185,984.69
30-Jun-96 $120,654.07 $124,872.77 $120,938.85 30-Nov-98 $177,576.41 $226,134.62 $195,674.49
31-Jul-96 $116,467.38 $119,353.39 $115,835.23 31-Dec-98 $178,304.47 $239,159.98 $202,542.67
31-Aug-96 $120,252.57 $121,871.75 $119,032.28 31-Jan-99 $174,363.94 $249,156.86 $206,634.03
30-Sep-96 $124,040.52 $128,733.13 $124,126.86 28-Feb-99 $175,340.38 $241,408.08 $202,191.40
31-Oct-96 $125,057.65 $132,286.16 $128,322.35 31-Mar-99 $179,040.06 $251,064.41 $208,317.80
30-Nov-96 $134,874.68 $142,287.00 $138,139.01 30-Apr-99 $201,455.88 $260,780.60 $226,274.79
31-Dec-96 $134,132.87 $139,469.72 $135,873.53 31-May-99 $198,998.12 $254,626.18 $222,269.73
31-Jan-97 $139,806.69 $148,186.57 $142,137.30 30-Jun-99 $201,823.89 $268,757.93 $230,804.88
28-Feb-97 $142,155.44 $149,342.43 $143,174.91 31-Jul-99 $195,204.07 $260,372.68 $223,696.09
31-Mar-97 $136,909.91 $143,204.45 $138,278.32 31-Aug-99 $189,406.51 $259,070.82 $218,036.58
30-Apr-97 $139,374.28 $151,753.76 $143,463.76 30-Sep-99 $178,439.87 $251,972.28 $209,511.35
31-May-97 $147,402.24 $160,995.56 $152,458.94 31-Oct-99 $183,614.62 $267,922.12 $221,327.79
30-Jun-97 $152,752.94 $168,208.17 $158,282.87 30-Nov-99 $179,556.74 $273,360.94 $220,021.96
31-Jul-97 $166,668.74 $181,597.54 $170,945.50 31-Dec-99 $179,251.50 $289,461.90 $228,294.78
31-Aug-97 $162,068.68 $171,428.07 $163,218.76 31-Jan-00 $166,435.01 $274,930.92 $221,035.01
30-Sep-96 $171,063.49 $180,822.33 $172,783.38 29-Feb-00 $149,392.07 $269,734.72 $207,220.32
31-Oct-97 $163,468.27 $174,782.87 $166,442.23 31-Mar-00 $170,381.65 $296,114.78 $228,833.40
30-Apr-00 $172,017.32 $287,201.72 $227,300.22
</TABLE>
--------------------------------------------------------------------------------
TOTAL RETURNS (%) FOR PERIODS ENDED 4/30/00
--------------------------------------------------------------------------------
6 Months One Year Annualized
11/1/99- 5/1/99- Since Inception
4/30/00 4/30/00 7/25/95-
4/30/00
DLB VALUE FUND -6.31 -14.61 11.89
S&P 500 Index 7.19 10.13 23.84
S&P 500 / BARRA Value Index 2.69 0.46 18.52
--------------------------------------------------------------------------------
DISCLOSURE STATEMENT
STANDARD & POORS 500 INDEX is an index of common stocks frequently used as a
general measure of stock market performance. The index assumes reinvestment of
all distributions and interest payments and does not take into account brokerage
fees or taxes. Securities in the Fund do not match those in the Index and
performance of the Fund will differ.
The S&P 500/BARRA 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. The Index is rebalanced semi-annually on
January 1 and July 1. Securities in the Fund do not match those in the Index and
performance of the Fund will differ.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Investment return and share
price will fluctuate with market conditions, and investors may have a gain or
loss when shares are sold. The Fund's total return reflects an expense
limitation in effect during the periods shown. In the absence of such expense
limitation, returns would have been lower.
<PAGE>
DLB VALUE FUND
-------------------------------
This report and the Fund financial statements contained herein are submitted for
the general information of the shareholders of the DLB Value Fund. The report is
not intended for distribution to prospective investors unless preceded or
accompanied by a current prospectus.
BABSON SECURITIES CORPORATION
One Memorial Drive, Cambridge, MA 02142
June 2000
<PAGE>
===========================================
DLB VALUE FUND
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED APRIL 30, 2000 AND THE TEN MONTHS
ENDED OCTOBER 31, 1999
<PAGE>
DLB VALUE FUND
TABLE OF CONTENTS
<TABLE><CAPTION>
-------------------------------------------------------------------------------------------------------------
<S> <C>
FINANCIAL STATEMENTS:
Portfolio of Investments as of April 30, 2000 1 - 3
Statement of Assets and Liabilities as of April 30, 2000 4
Statement of Operations for the Six Months Ended April 30, 2000 5
Statements of Changes in Net Assets for the Six Months Ended April 30, 2000,
the Ten Months Ended October 31, 1999, and the Year Ended December 31, 1998 6
Financial Highlights for the Six Months Ended April 30, 2000, the Ten Months
Ended October 31, 1999, and the Four-Year Period Ended December 31, 1998 7
Notes to Financial Statements 8 - 10
</TABLE>
<PAGE>
DLB VALUE FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 95.4%
ISSUER SHARES VALUE
AEROSPACE - 8.0%
The Boeing Company 49,700 $1,972,469
Lockheed Martin Corporation 69,600 1,731,300
Raytheon Company 92,800 2,059,000
----------
5,762,769
----------
AIRLINES - 2.1%
KLM Royal Dutch Airlines 87,285 1,489,300
----------
AUTO PARTS - 2.7%
Dana Corporation 63,000 1,913,625
----------
BANKS - 9.3%
The Chase Manhattan Corporation 24,600 1,772,738
National City Corporation 105,300 1,790,100
U.S. Bancorp 74,000 1,503,125
Wells Fargo & Company 39,200 1,609,650
----------
6,675,613
----------
BUILDING SUPPLIES - 1.1%
Hanson PLC Sponsored ADR 21,400 782,438
----------
CHEMICALS - GENERAL - 2.6%
E. I. Du Pont de Nemours and Company 38,700 1,835,831
----------
CHEMICALS - SPECIALTY - 1.3%
Millenium Chemicals Inc. 45,400 905,163
----------
COMPUTER RELATED - 4.7%
Apple Computer Inc. (*) 12,700 1,575,594
International Business Machines Corporation 15,900 1,774,838
----------
3,350,432
----------
ELECTRIC POWER - 2.3%
TXU Corp. 49,500 1,667,531
----------
FINANCIAL SERVICES - 8.2%
American Express Company 10,400 1,560,650
Citigroup Inc. 31,204 1,854,688
SLM Holding Corporation 49,750 1,557,790
The Student Loan Corporation 23,500 940,000
----------
5,913,128
----------
1
<PAGE>
ISSUER SHARES VALUE
FOOD PRODUCERS - 2.9%
Diageo plc 62,340 $2,119,560
----------
FOOD RETAILERS - 2.6%
Albertson's, Inc. 57,100 1,859,319
----------
HOUSEWARES - 2.3%
Fortune Brands, Inc. 67,300 1,682,500
----------
INSURANCE COMPANIES - 4.7%
The Allstate Corporation 78,500 1,854,563
Berkshire Hathaway Inc., Class B (*) 798 1,529,068
----------
3,383,631
----------
MEDICAL SUPPLIES & SERVICES - 7.8%
Aetna Inc. 32,000 1,852,000
Tenet Healthcare Corporation (*) 73,400 1,871,700
United Healthcare Corporation 27,900 1,860,581
----------
5,584,281
----------
METALS & MINING - 0.5%
Martin Marietta Materials, Inc. 7,100 376,300
----------
OFFICE EQUIPMENT - 2.4%
Xerox Corporation 65,000 1,718,438
----------
OFFICE SUPPLIES - 2.2%
Wallace Computer Services, Inc. 144,600 1,581,563
----------
OIL - DOMESTIC - 2.5%
USX - Marathon Group 76,700 1,788,069
----------
OIL - INTERNATIONAL - 4.7%
BP Amoco Plc 31,816 1,622,616
Royal Dutch Petroleum Company 30,400 1,744,200
----------
3,366,816
----------
PAPER & FOREST PRODUCTS - 7.1%
Potlatch Corporation 42,400 1,672,150
Weyerhaeuser Company 33,500 1,790,156
Willamette Industries, Inc. 42,600 1,626,788
----------
5,089,095
----------
PRINTING & PUBLISHING - 2.3%
Harcourt General, Inc. 44,200 1,651,975
----------
RAILROADS - 2.4%
CSX Corporation 40,900 856,344
Norfolk Southern Corporation 51,400 905,925
----------
1,762,269
----------
RETAIL - GENERAL - 2.4%
Sears, Roebuck and Co. 47,600 1,743,350
----------
2
<PAGE>
ISSUER SHARES VALUE
RETAIL - SPECIALTY - 2.7%
The Limited Inc. 42,600 $1,924,988
----------
STEEL - 2.6%
USX - U.S. Steel Group 74,900 1,877,181
----------
TRUCKING & SHIPPING - 1.1%
Overseas Shipholding Group, Inc. 31,400 822,289
----------
TOTAL COMMON STOCKS
(identified cost, $71,442,718) 68,627,454
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT - 6.2%
Investors Bank & Trust Repurchase Agreement, 4.94%,
dated 4/28/00, $4,466,169 due on 5/1/00 (secured by
Federal Government Agency securities), at cost $4,464,331 4,464,331
----------
TOTAL INVESTMENTS (identified cost, $75,907,049) 73,091,785
Other assets, less liabilities - (1.6%) (1,140,533)
----------
NET ASSETS - 100% $71,951,252
==========
(*) Non-income producing security
</TABLE>
See notes to financial statements.
3
<PAGE>
DLB VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
----------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (identified cost, $75,907,049) $ 73,091,785
Receivable for investments sold 842,366
Receivable for fund shares sold 44,718
Dividends and interest receivable 96,672
------------
74,075,541
------------
LIABILITIES:
Payable for investments purchased 1,887,859
Payable for fund shares reacquired 168,197
Accrued management fee 30,266
Accrued expenses 37,967
------------
2,124,289
------------
NET ASSETS $ 71,951,252
============
NET ASSETS CONSIST OF:
Paid-in capital $ 75,668,917
Unrealized depreciation of investments (2,815,264)
Accumulated net realized loss on investment transactions (1,278,243)
Accumulated undistributed net investment income 375,842
------------
Total $ 71,951,252
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 5,701,591
============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE
PER SHARE (NET ASSETS / SHARES OF BENEFICIAL INTEREST
OUTSTANDING) $ 12.62
============
</TABLE>
See notes to financial statements.
4
<PAGE>
DLB VALUE FUND
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 2000
<TABLE><CAPTION>
----------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME:
Dividends (net of foreign tax withheld of $4,664) $ 746,255
Interest 68,194
------------
814,449
------------
EXPENSES:
Management fee 184,709
Trustees' fees 3,000
Custodian fees 34,696
Accounting and audit fees 15,297
Registration fee 13,501
Legal fees 8,751
Transfer agent fee 4,241
Miscellaneous 2,537
------------
266,732
------------
Net investment income 547,717
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized loss (identified cost basis) (1,255,679)
Change in unrealized depreciation (3,751,770)
------------
Net realized and unrealized loss on investments (5,007,449)
------------
Decrease in net assets from operations $ (4,459,732)
============
</TABLE>
See notes to financial statements.
5
<PAGE>
DLB VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
----------------------------------------------------------------------------------------------------------------
Six Months Ten Months Year
Ended Ended Ended
April 30, 2000 October 31, 1999 December 31, 1998
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 547,717 $ 1,422,633 $ 1,237,016
Net realized gain (loss) on investments (1,255,679) 5,248,005 4,274,144
Net unrealized depreciation of investments (3,751,770) (4,541,428) (2,709,889)
------------ ------------ ------------
(4,459,732) 2,129,210 2,801,271
------------ ------------ ------------
Distributions to shareholders:
From net investment income (1,594,508) (8,992) (1,228,024)
From net realized gain on investments (5,032,987) (5,665) (4,256,810)
------------ ------------ ------------
(6,627,495) (14,657) (5,484,834)
------------ ------------ ------------
Fund share transactions:
Net proceeds from sales of shares 32,439,834 28,017,225 27,948,166
Net asset value of shares issued in
reinvestment of distributions 6,610,228 14,621 5,469,771
Cost of shares reacquired (30,394,105) (27,674,902) (15,272,460)
------------ ------------ ------------
8,655,957 356,944 18,145,477
------------ ------------ ------------
Total increase (decrease) in net assets (2,431,270) 2,471,497 15,461,914
NET ASSETS:
At beginning of period 74,382,522 71,911,025 56,449,111
------------ ------------ ------------
At end of period (including accumulated
undistributed net investment income of $375,842,
$1,422,633 and $8,992, respectively) $ 71,951,252 $ 74,382,522 $ 71,911,025
============ ============ ============
</TABLE>
See notes to financial statements.
6
<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 investments (2) -- -- -- (.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 were less than $.01 per share.
(2) Distributions in excess of net realized gain on investments for the six months ended April 30, 2000 were less than $.01
per share.
</TABLE>
See notes to financial statements.
7
<PAGE>
DLB VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Value Fund (the "Fund") is a non-diversified series of The DLB Fund
Group (the "Trust"), a Massachusetts business trust. The Trust is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
During 1999, the Fund changed its year end from December 31 to October 31.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices
are not available are valued at last quoted bid prices. Securities for
which there are no such quotations or valuations are valued at fair value
as determined in good faith by or at the direction of the Trustees.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value.
REPURCHASE AGREEMENTS - Securities purchased under agreements to resell to
the original owner are recorded at cost. The Fund may enter into such
agreements with institutions that the Fund's investment adviser has
determined to be creditworthy. The Fund requires that the securities so
purchased be transferred to the custodian under terms that enable the Fund
to obtain such securities in the event of a default. The Fund monitors, on
a daily basis, the value of the securities to assure that such value,
including accrued interest, is greater than amounts owed to the Fund.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars at current exchange rates. Purchases and
sales of foreign investments and income and expenses are converted into
U.S. dollars at currency exchange rates prevailing on the respective dates
of such transactions. Security transaction gains and losses attributable to
changes in foreign currency exchange rates are recorded for financial
statement purposes as net realized gains and losses on investments. Income
and expense gains and losses that are attributable to changes in foreign
exchange rates are recorded for financial statement purposes as foreign
currency transaction gains and losses. The portion of both realized and
unrealized gains and losses on investments that results from fluctuations
in foreign currency exchange rates is not separately disclosed.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded
on the trade date. Dividend income is recorded on the ex-dividend date.
Dividend payments received in additional securities are recorded in an
amount equal to the value of the securities. Interest income is recorded on
the accrual basis.
TAXES AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute to shareholders all of its
taxable income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is necessary.
8
<PAGE>
The Fund files a tax return annually using tax accounting methods required
by the Code, which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the net investment income and net realized gain reported in
these financial statements may differ from the amounts reported on the
Fund's tax return, and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The
Fund distinguishes between distributions for tax purposes and financial
reporting purposes. Differences between income for financial reporting
purposes and tax-basis earnings and profits may result in the reporting of
temporary over-distributions in the financial statements. Such
over-distributions are classified as distributions in excess of net
investment income or accumulated net realized gains. Distributions, if any,
in excess of tax-basis earnings and profits are reported as return of
capital.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from those such estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund engages David L. Babson & Company Inc. ("Babson") to provide
investment advisory and administrative services and general office
facilities. The fee for such services is computed daily and paid monthly at
an effective annual rate of .55% of average daily net assets. For the six
months ended April 30, 2000, the management fee amounted to $184,709.
Babson has agreed to pay the Fund's operating expenses such that the Fund's
total aggregate expenses do not exceed .80% of average daily net assets.
The Fund pays no compensation directly to the Trustees who also are
officers of the investment manager, nor to the officers of the Fund, all of
whom receive remuneration for their services to the Fund from Babson.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations, for
the six months ended April 30, 2000 aggregated $18,663,241 and $16,680,729,
respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate cost $ 75,907,049
============
Gross unrealized appreciation $8,217,071
Gross unrealized depreciation (11,032,335)
------------
Net unrealized depreciation $ (2,815,264)
============
9
<PAGE>
5. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
Six Months Ten Months Year
Ended Ended Ended
April 30, October 31, December 31,
2000 1999 1998
--------- --------- ---------
Shares sold 2,513,790 1,827,660 1,766,141
Shares issued in reinvestment
of distributions 514,816 902 380,870
Redemptions (2,317,111) (1,803,494) (968,493)
--------- --------- ---------
Net increase 711,495 25,068 1,178,518
========= ========= =========
10
<PAGE>
DLB
THE DLB GROWTH FUND
SEMI ANNUAL REPORT
APRIL 30, 2000
[EXPERIENCE TO MANAGE THE FUTURE]
<PAGE>
DLB GROWTH FUND
-------------------------------
FUND INVESTMENT OBJECTIVE
THE DLB GROWTH FUND seeks long-term capital and income growth through investment
primarily in common stocks.
MARKET OVERVIEW
THE FIRST HALF OF THE FISCAL YEAR ENDING OCTOBER 31, 2000 WAS CHARACTERIZED BY
THREE MAJOR FACTORS: 1) a runaway market for technology stocks in the 4th
quarter of 1999, 2) continued general dominance of growth stocks until late in
the 1st quarter of 2000 and, 3) unprecedented volatility throughout the period.
WITH THE NOTABLE EXCEPTION OF THE MAJOR VALUE INDICES, MANY BROAD MARKET AND
GROWTH BENCHMARKS ACHIEVED ALL-TIME HIGHS ON OR CLOSE TO THE LAST DAY OF THE
MILLENIUM. Technology stocks continued to be the driving force in these
record-setting indices.
THE WALL STREET JOURNAL REFERRED TO IT AS "THIS JEKYLL AND HYDE STOCK MARKET."
The phrases "New Economy Stocks" and "Old Economy Stocks" became part of the
investment jargon. No matter how it was described, the split between growth and
value persisted throughout the first two months of 2000. Although returns for
most benchmarks were negative in January, relative performance for value
investors was positive. This shift in investor sentiment was brief, however, and
the market once again favored growth over value in February. Value mounted a
comeback late in March, and this positive absolute and relative performance
continued through the end of April.
VOLATILITY, AS MEASURED BY INTRADAY PRICE MOVEMENTS, REACHED LEVELS NEVER SEEN
BEFORE IN 1999 AND IN THE 1ST QUARTER OF 2000. To put this volatility into
historical perspective, in 1994 the NASDAQ, S&P 500, and Russell 2000 indices
experienced intraday price movements of 2% or more only 2% of the time. In 1999,
2% price swings in the NASDAQ Index occurred almost half the time and in the S&P
500 Index almost one-quarter of the time. This volatility increased to 76% for
NASDAQ and 56% for the S&P 500 during the 1st quarter of 2000!
A MAJOR CONTRIBUTION TO THIS VOLATILITY AND THE SEE-SAW BETWEEN GROWTH AND VALUE
WAS THE CONTINUED EFFORTS BY THE FED TO SLOW THE ECONOMY. As short-term rates
were raised by the Fed and uncertainty as to future increases burdened market
psychology, investor's sentiment and momentum changed frequently.
<PAGE>
DLB GROWTH FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW
THE DLB GROWTH FUND REMAINS COMMITTED TO INVESTING IN HIGH GROWTH, HIGH QUALITY
BUSINESSES DESPITE THE RECENT VOLATILITY IN THE U.S. STOCK MARKET. In our last
report to shareholders (October 1999) we highlighted several trends taking place
that impacted our investment strategy. These trends are all still in place
today, so it is appropriate to revisit them briefly.
IN OCTOBER WE TALKED ABOUT THE ACCELERATING BUILDOUT AND USE OF THE INTERNET BY
BOTH CONSUMERS AND BUSINESSES. Demand for Internet capacity, otherwise known as
bandwidth, continues its unabated growth. Investment spending on equipment to
support the Internet infrastructure, both in fiber optics and wireless continues
to grow at a high rate. This strong demand for network capacity and the
resulting rapid growth in capital spending on telecommunications infrastructure
continues to create opportunities for many companies in the DLB Growth Fund.
TELECOMMUNICATIONS EQUIPMENT MAKERS CISCO SYSTEMS AND LUCENT TECHNOLOGIES ARE
TOP HOLDINGS IN THE FUND. Fiberoptic cable and component suppliers Corning and
JDS Uniphase are core holdings that are experiencing enormous demand for their
products. Semiconductor companies Intel, Analog Devices and Vitesse
Semiconductor are all benefiting from high growth in the telecom and wireless
space.
TRENDS IN THE HEALTHCARE SECTOR ARE ALSO SIMILAR TO SIX MONTHS AGO, AND REMAIN
POLITICAL IN NATURE. The upcoming presidential election in November and the
threat of potential healthcare reform that will follow continues to weigh
heavily on the healthcare sector. Healthcare service providers (HMO's,
hospitals, nursing homes, surgery centers) are especially vulnerable, and we are
avoiding this segment of the market in the DLB Growth Fund. Within the
healthcare sector we are focusing on the medical device companies with high
growth rates (Guidant and Medtronic are both core holdings) and the large
pharmaceutical companies with deep pipelines of new products (Pfizer and
Pharmacia are both owned in the Fund).
IN THE FALL OF 1999 WE VOICED OUR CONCERNS OVER THE RISING INTEREST RATE
ENVIRONMENT AND THE CHANCE THAT RATES COULD RISE THROUGH MOST OF 2000 AS WELL AS
1999. This concern has become a reality this year, with the Fed becoming much
more aggressive at raising short-term rates in the first 4 months of 2000. At
this point we expect short rates to continue to rise for at least the next
several months
<PAGE>
DLB GROWTH FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW (CONT.)
until there are signs that the economy is slowing down its torrid pace of growth
and inflationary pressures are under control.
RISING INTEREST RATES AREN'T NECESSARILY A BAD THING FOR THE STOCK MARKET LONGER
TERM. As long as the bond market feels comfortable that the Fed will ultimately
be successful in controlling inflation, financial assets - bonds and stocks -
should do okay. Our exposure to the interest rate senitive finance sector in the
DLB Growth Fund is currently less than 10% of total assets, and has been at that
level for the past 6 months.
THE FUND'S TOP TEN HOLDINGS AND SECTOR WEIGHTINGS CAN BE FOUND BELOW.
--------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS % OF FUND ASSETS
--------------------------------------------------------------------------------
Cisco Systems 5.0
Liberty Media Group 4.5
Analog Devices 4.1
Lucent Technologies 3.8
Corning 3.7
Paychex 3.5
EMC 3.4
Amer Int'l Group 3.2
Pfizer 3.2
General Electric 3.0
TOTAL 37.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECTOR DIVERSIFICATION (%) PORTFOLIO S&P 500 DIFFERENCE
--------------------------------------------------------------------------------
Basic Materials 0.0 2.7 -2.7
Capital Goods/Construction 4.1 2.5 1.6
Communication Services 8.1 10.1 -2.0
Consumer Cyclical 7.1 12.3 -5.2
Consumer Staples 2.8 5.3 -2.5
Energy 0.5 6.2 -5.7
Financial 10.9 12.8 -1.9
Healthcare 13.7 10.3 +3.4
Miscellaneous 4.0 1.1 +2.9
Technology 48.8 27.8 +21.0
Transport & Services 0.0 0.7 -0.7
Utilities 0.0 2.0 -2.0
--------------------------------------------------------------------------------
<PAGE>
DLB GROWTH FUND
-------------------------------
PERFORMANCE REVIEW
THE PAST 6 MONTHS HAVE BEEN VERY REWARDING FOR INVESTORS IN THE DLB GROWTH FUND.
The Fund gained 23.4% in this time period compared to 7.2% for the S&P 500 Index
and 18.7% for the Russell 1000 Growth Index.
IN RECENT MONTHS PERFORMANCE IN THE TECHNOLOGY AND TELECOMMUNICATIONS SECTORS
HAVE BEEN LARGE CONTRIBUTORS TO RETURNS IN THE FUND. A broad based cyclical
recovery in the semiconductor industry has also been a driver of performance.
HEALTHCARE STOCKS STAGED A NICE RECOVERY IN EARLY 2000, AFTER BEING A DRAG ON
PERFORMANCE THROUGHOUT 1999. Many of the Fund's healthcare holdings were
contributors to performance in recent months after a frustrating year last year
for these investments.
OUTLOOK
LOOKING FORWARD WE EXPECT TO SEE CONTINUED STRONG UNDERLYING OPERATING RESULTS
THROUGHOUT MANY SEGMENTS OF THE TECHNOLOGY AND TELECOM SECTOR, BUT WITH
VALUATIONS AS HIGH AS THEY ARE TODAY WE ARE BRACING OURSELVES FOR SOME
VOLATILITY AND UNCERTAINTY IN THE SHORT TERM. Healthcare stocks face political
pressure eminating from Washingtn over the next 12-18 months, which we feel will
restrain investment performance in the group for several more quarters.
Companies in the finance sector continue to "fight the Fed" with the rising
interest rate environment we are currently experiencing, and as a result we are
cautious on the finance sector in general for the next several months. We
continue to avoid the pure "dot.com" Internet companies, and feel that without
any compelling valuation support this part of the market is especially
vulnerable to rising interest rates and a potential change in investor
sentiment.
IN CONCLUSION, WE REMAIN COMMITTED TO BUILDING ON OUR LONGSTANDING TRADITION OF
INVESTING IN NEW GROWTH OPPORTUNITIES, without losing sight of the fundamental
investment disciplines that have served our clients and shareholders well since
the Fund's inception.
<PAGE>
DLB GROWTH FUND
-------------------------------
GROWTH OF A
$100,000 INVESTMENT
Cumulative Total Return Since Inception 1/20/98
<TABLE><CAPTION>
DLB RUSSELL 1000 DLB RUSSELL 1000
DATE GROWTH FUND GROWTH INDEX S&P 500 DATE GROWTH FUND GROWTH INDEX S&P 500
---- ----------- ------------ ------- ---- ----------- ------------ -------
<S> <C> <C> <C> <S> <C> <C> <C>
$100,000.00 $100,000.00 $100,000.00 31-Mar-99 $130,608.47 $147,847.71 $136,167.15
20-Jan-98 $101,900.00 $103,220.00 $102,010.00 30-Apr-99 $131,731.71 $148,039.91 $141,436.82
28-Feb-98 $108,900.53 $110,982.14 $109,364.92 31-May-99 $128,346.20 $143,495.09 $138,098.91
31-Mar-98 $110,697.39 $115,410.33 $114,964.40 30-Jun-99 $134,802.02 $153,539.74 $145,763.40
30-Apr-98 $114,793.19 $117,002.99 $116,125.55 31-Jul-99 $132,550.82 $148,657.18 $141,215.58
31-May-98 $110,488.45 $113,680.11 $114,128.19 31-Aug-99 $130,496.28 $151,080.29 $140,509.50
30-Jun-98 $114,189.81 $120,637.33 $118,761.79 30-Sep-99 $126,085.51 $147,907.60 $136,659.54
31-Jul-98 $114,395.35 $119,841.13 $117,491.04 31-Oct-99 $132,440.22 $159,074.63 $145,310.09
31-Aug-98 $97,396.20 $101,852.97 $100,501.83 30-Nov-99 $136,850.48 $167,664.66 $148,259.89
30-Sep-98 $104,291.85 $109,675.28 $106,944.00 31-Dec-99 $148,564.88 $185,101.78 $156,992.40
31-Oct-98 $112,291.04 $118,493.17 $115,638.55 31-Jan-00 $143,201.69 $176,420.51 $149,111.38
30-Nov-98 $120,993.59 $127,510.50 $122,646.25 29-Feb-00 $161,416.94 $185,047.47 $146,293.17
31-Dec-98 $131,326.45 $139,011.95 $129,710.67 31-Mar-00 $172,877.55 $198,296.87 $160,600.64
31-Jan-99 $131,431.51 $147,171.95 $135,132.58 30-Apr-00 $163,334.71 $188,857.94 $155,766.56
28-Feb-99 $124,058.20 $140,446.19 $130,929.95
</TABLE>
--------------------------------------------------------------------------------
TOTAL RETURNS (%) FOR PERIODS ENDED 4/30/00
--------------------------------------------------------------------------------
6 Months One Year Annualized
11/1/99- 5/1/99- Since Inception
4/30/00 4/30/00 1/20/98-
4/30/00
DLB GROWTH FUND 23.35 24.01 23.44
Russell 1000 Growth Index 18.72 27.58 30.06
S&P 500 Index 7.20 10.13 20.01
--------------------------------------------------------------------------------
DISCLOSURE STATEMENT
RUSSELL 1000 GROWTH INDEX is an unmanaged index that contains those Russell 1000
securities with a greater-than-average growth orientation. Securities in this
index tend to exhibit higher price-to-book ratios and higher forecasted growth
values than the Value universe. Securities in the Fund do not match those in the
Index, and performance of the Fund will differ.
STANDARD & POORS 500 INDEX is an index of common stocks frequently used as a
general measure of stock market performance. The index assumes reinvestment of
all distributions and interest payments and does not take into account brokerage
fees or taxes. Securities in the Fund do not match those in the Index and
performance of the Fund will differ.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Investment return and share
price will fluctuate with market conditions, and investors may have a gain or
loss when shares are sold. The Fund's total return reflects an expense
limitation in effect during the periods shown. In the absence of such expense
limitation, returns would have been lower.
<PAGE>
DLB GROWTH FUND
-------------------------------
This report and the Fund financial statements contained herein are submitted for
the general information of the shareholders of the DLB Growth Fund. The report
is not intended for distribution to prospective investors unless preceded or
accompanied by a current prospectus.
BABSON SECURITIES CORPORATION
One Memorial Drive, Cambridge, MA 02142
June 2000
<PAGE>
===========================================
DLB GROWTH FUND
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED APRIL 30, 2000 AND THE TEN MONTHS
ENDED OCTOBER 31, 1999
<PAGE>
DLB GROWTH FUND
TABLE OF CONTENTS
<TABLE><CAPTION>
----------------------------------------------------------------------------------------------
<S> <C>
FINANCIAL STATEMENTS:
Portfolio of Investments as of April 30, 2000 1 - 3
Statement of Assets and Liabilities as of April 30, 2000 4
Statement of Operations for the Six Months Ended April 30, 2000 5
Statements of Changes in Net Assets for the Six Months Ended
April 30, 2000, the Ten Months Ended October 31, 1999,
and the Period Ended December 31, 1998 6
Financial Highlights for the Six Months Ended April 30, 2000, the
Ten Months Ended October 31, 1999, and the Period Ended
December 31, 1998 7
Notes to Financial Statements 8 - 10
</TABLE>
<PAGE>
DLB GROWTH FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 96.3%
ISSUER SHARES VALUE
BANKS - .4%
Mellon Financial Corporation 19,500 $ 626,438
----------
BEVERAGES - .5%
Anheuser-Busch Companies, Inc. 5,900 416,319
PepsiCo, Inc. 12,600 462,263
----------
878,583
----------
COMMUNICATION EQUIPMENT - 6.8%
Lucent Technologies 103,600 6,442,625
Nokia Corp. 82,400 4,686,500
----------
11,129,125
----------
COMPUTER RELATED - 13.9%
Cisco Systems, Inc. (*) 122,800 8,513,491
EMC Corp. (*) 42,100 5,849,269
International Business Machines Corporation 27,900 3,114,338
Solectron Corporation 107,600 5,037,025
----------
22,514,123
----------
COMPUTER SERVICES - 1.4%
Automatic Data Processing, Inc. 41,100 2,211,694
----------
COMPUTER SOFTWARE - 8.2%
America Online, Inc. 79,100 4,731,169
Cadence Design Systems, Inc. (*) 61,700 1,037,331
Citrix Systems, Inc. 29,000 1,770,813
Legato Systems, Inc. 72,800 941,850
Microsoft Corporation (*) 51,900 3,620,025
Red Hat, Inc. 12,100 303,256
Siebel Systems, Inc. 6,300 774,113
webMethods, Inc. 1,500 135,000
----------
13,313,557
----------
COSMETIC & TOILETRY - .6%
The Gillette Company 25,300 936,100
----------
DIVERSIFIED - 3.9%
Corning Incorporated 31,700 6,260,750
----------
1
<PAGE>
ISSUER SHARES VALUE
DRUGS - 8.6%
American Home Products Corporation 46,900 $2,635,194
Bristol-Meyers Squibb Company 42,100 2,207,619
Pfizer Inc. 127,600 5,375,150
Pharmacia & Upjohn Inc. 74,177 3,704,214
----------
13,922,177
----------
ELECTRICAL EQUIPMENT - 3.3%
General Electric Company 31,400 4,937,650
----------
ELECTRONICS & INSTRUMENTS - 8.9%
Analog Devices (*) 90,600 6,959,213
Applied Materials, Inc. 16,095 1,638,672
Flextronics International Ltd. 45,500 3,196,375
JDS Uniphase Corporation 14,800 1,535,500
KLA Tencor Corp. (*) 15,000 1,123,125
----------
14,452,885
----------
FINANCIAL SERVICES - 6.8%
Federal Home Loan Mortgage Corporation 109,700 5,039,344
Paychex, Inc. 113,800 5,988,725
----------
11,028,069
----------
FOOD RETAILERS - 1.6%
Safeway Inc. (*) 57,800 2,550,425
----------
INSURANCE COMPANIES - 3.3%
American International Group, Inc. 49,125 5,388,398
----------
MACHINERY & EQUIPMENT - 1.0%
Tyco International Ltd. 35,400 1,626,188
----------
MEDIA - 8.7%
AT & T Corporation, Liberty Media Group (*) 153,300 7,655,419
Comcast Corporation 48,300 1,883,700
Cox Communications, Inc. 41,900 1,793,844
Inifnity Broadcasting Corporation 83,200 2,823,600
----------
14,156,563
----------
MEDICAL SUPPLIES & SERVICES - 4.6%
Guidant Corporation (*) 81,600 4,681,800
Medtronic, Inc. 53,100 2,757,881
----------
7,439,681
----------
OIL - INTERNATIONAL - .5%
Exxon Mobil Corporation 9,747 757,220
----------
RETAIL - SPECIALTY - 2.8%
CVS Corporation 36,300 1,579,050
Home Depot, Inc. 53,700 3,010,556
----------
4,589,606
----------
2
<PAGE>
ISSUER SHARES VALUE
SEMICONDUCTORS - 7.8%
Avanex Corporation 1,900 $ 231,563
Intel Corporation 37,300 4,730,106
Linear Technology Corporation 26,200 1,496,675
Maxim Integrated Products, Inc. 21,100 1,367,544
Microchip Technology Incorporated (*) 23,650 1,467,778
Vitesse Semiconductor Corporation (*) 50,600 3,443,963
----------
12,737,629
----------
TELECOMMUNICATIONS - 3.1%
E. Biscom Spa 1,700 336,290
MCI Worldcom, Inc. (*) 56,100 2,549,044
Nextel Partners, Inc. 18,800 412,425
QUALCOMM Incorporated 15,500 1,680,781
----------
4,978,540
----------
TOTAL COMMON STOCKS
(identified cost, $134,352,800) 156,435,401
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT - 3.7%
Investors Bank & Trust Repurchase Agreement, 4.94%,
dated 4/28/00, $5,941,374 due on 5/1/00 (secured by
Federal Government Agency securities), at cost $ 5,938,929 5,938,929
----------
TOTAL INVESTMENTS (identified cost, $140,291,729) 162,374,330
Other assets, less liabilities - 0.0% 134,292
----------
NET ASSETS - 100% $162,508,622
============
</TABLE>
(*) Non-income producing security
See notes to financial statements.
3
<PAGE>
DLB GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
----------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (identified cost, $140,291,729) $162,374,330
Receivable for fund shares sold 466,615
Dividends and interest receivable 44,329
------------
162,885,274
------------
LIABILITIES:
Payable for fund shares reaquired 268,759
Accrued management fee 67,418
Accrued expenses 40,475
------------
376,652
------------
NET ASSETS $162,508,622
============
NET ASSETS CONSIST OF:
Paid-in capital $132,065,276
Unrealized appreciation of investments 22,082,601
Accumulated net investment loss (37,250)
Accumulated undistributed net realized gain on investment transactions 8,397,995
------------
$162,508,622
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 10,666,274
============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST OUTSTANDING) $ 15.24
============
</TABLE>
See notes to financial statements.
4
<PAGE>
DLB GROWTH FUND
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 2000
<TABLE><CAPTION>
----------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME:
Dividends (net of foreign tax withholdings of $2,012 ) $ 284,843
Interest 160,433
------------
445,276
------------
EXPENSES:
Management fee 378,715
Trustees' fees 3,000
Custodian fees 49,237
Registration fee 16,260
Accounting and audit fees 15,298
Legal fees 7,398
Transfer agent fee 4,203
Miscellaneous 2,294
------------
476,405
------------
Net investment loss (31,129)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain (identified cost basis) 9,362,326
Change in unrealized appreciation 18,508,675
------------
Net realized and unrealized gain on investments 27,871,001
------------
Increase in net assets from operations $ 27,839,872
============
</TABLE>
See notes to financial statements.
5
<PAGE>
DLB GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
----------------------------------------------------------------------------------------------------------------
Six Months Ten Months Period
Ended Ended Ended
April 30, 2000 October 31, 1999 December 31, 1998*
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
INCREASE IN NET ASSETS:
From operations:
Net investment income (loss) $ (31,129) $ 177,493 $ 128,567
Net realized gain on investments 9,362,326 4,819,251 677,899
Net unrealized appreciation (depreciation)
of investments 18,508,675 (3,520,316) 7,094,242
------------ ------------ ------------
27,839,872 1,476,428 7,900,708
------------ ------------ ------------
Distributions to shareholders:
From net investment income (183,614) (1,548) (127,019)
From net realized gain on investments (5,783,582) (3,062) (674,837)
------------ ------------ ------------
(5,967,196) (4,610) (801,856)
------------ ------------ ------------
Fund share transactions:
Net proceeds from sales of fund shares 59,567,698 130,816,308 25,153,000
Net asset value of shares issued in
reinvestment of distributions 5,967,196 4,610 801,856
Cost of shares reacquired (40,890,046) (49,355,356) --
------------ ------------ ------------
24,644,848 81,465,562 25,954,856
------------ ------------ ------------
Total increase in net assets 46,517,524 82,937,380 33,053,708
NET ASSETS:
At beginning of period 115,991,098 33,053,718 10
------------ ------------ ------------
At end of period (including accumulated net
investment loss of $37,250 and accumulated
undistributed net investment income of $177,493
and $1,548, respectively) $162,508,622 $115,991,098 $ 33,053,718
============ ============ ============
* For the period from January 20, 1998 (commencement of operations) to December 31, 1998
</TABLE>
See notes to financial statements.
6
<PAGE>
DLB GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
--------------------------------------------------------------------------------------------------------
Six Months Ten Months Period
Ended Ended Ended
April 30, 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 (loss) -- .02 .05
Net realized and unrealized gain on investments 2.94 .09 3.09
--------- --------- ---------
2.94 .11 3.14
--------- --------- ---------
Less distributions to shareholders:
From net investment income (1) (0.02) -- (.05)
From net realized gain on investments (1) (0.61) -- (.27)
--------- --------- ---------
(0.63) -- (.32)
--------- --------- ---------
Net asset value - end of period $ 15.24 $ 12.93 $ 12.82
========= ========= =========
Total return 23.35% .85% 31.33%
Ratios and Supplemental Data:
Ratio of expenses to average net assets .69%* .68%* .80%*
Ratio of net investment income (loss) 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
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 $ -- $ -- $ .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 realized gain on investments for the ten
months ended October 31, 1999 were less than $.01 per share.
</TABLE>
See notes to financial statements.
7
<PAGE>
DLB GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Growth Fund (the "Fund") is a non-diversified series of The DLB Fund
Group (the "Trust"), a Massachusetts business trust. The Trust is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
During 1999, the Fund changed its year end from December 31 to October 31.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices
are not available are valued at last quoted bid prices. Securities for
which there are no such quotations or valuations are valued at fair value
as determined in good faith by or at the direction of the Trustees.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value.
REPURCHASE AGREEMENTS - Securities purchased under agreements to resell to
the original owner are recorded at cost. The Fund may enter into such
agreements with institutions that the Fund's investment adviser has
determined to be creditworthy. The Fund requires that the securities so
purchased be transferred to the custodian under terms that enable the Fund
to obtain such securities in the event of a default. The Fund monitors, on
a daily basis, the value of the securities to assure that such value,
including accrued interest, is greater than amounts owed to the Fund.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded
on the trade date. Dividend income is recorded on the ex-dividend date.
Dividend payments received in additional securities are recorded in an
amount equal to the value of the securities. Interest income is recorded on
the accrual basis.
TAXES AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute to shareholders all of its
taxable income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is necessary.
The Fund files a tax return annually using tax accounting methods required
by the Code, which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the net investment income and net realized gain reported in
these financial statements may differ from the amounts reported on the
Fund's tax return, and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders on Form 1099-DIV.
8
<PAGE>
Distributions to shareholders are recorded on the ex-dividend date. The
Fund distinguishes between distributions for tax purposes and financial
reporting purposes. Differences between income for financial reporting
purposes and tax-basis earnings and profits may result in the reporting of
temporary over-distributions in the financial statements. Such
over-distributions are classified as distributions in excess of net
investment income or accumulated net realized gains. Distributions, if any,
in excess of tax-basis earnings and profits are reported as return of
capital.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from those such estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund engages David L. Babson & Company Inc. ("Babson") to provide
investment advisory and administrative services and general office
facilities. The fee for such services is computed daily and paid monthly at
an effective annual rate of .55% of average daily net assets. For the six
months ended April 30, 2000, the management fee amounted to $378,715.
Babson has agreed to pay the Fund's operating expenses such that the Fund's
total aggregate expenses do not exceed .80% of average daily net assets.
The Fund pays no compensation directly to the Trustees who also are
officers of the investment manager, nor to the officers of the Fund, all of
whom receive remuneration for their services to the Fund from Babson.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations, for
the six months ended April 30, 2000 aggregated $86,305,760 and $73,471,594,
respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate cost $140,291,729
============
Gross unrealized appreciation $ 30,544,036
Gross unrealized depreciation (8,461,435)
------------
Net unrealized appreciation $ 22,082,601
============
9
<PAGE>
5. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE><CAPTION>
Period from
January 20, 1998
Six Months Ten Months (commencement of
Ended Ended operations) to
April 30, October 31, December 31,
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Shares sold 4,120,599 10,276,496 2,515,233
Shares issued in reinvestment
of distributions 438,120 350 63,188
Redemptions (2,866,121) (3,881,592) --
--------- --------- ---------
Net increase 1,692,598 6,395,254 2,578,421
========= ========= =========
</TABLE>
10
<PAGE>
DLB
THE DLB MICRO CAPITALIZATION FUND
SEMI ANNUAL REPORT
APRIL 30, 2000
[EXPERIENCE TO MANAGE THE FUTURE]
<PAGE>
DLB MICRO CAP FUND
-------------------------------
FUND INVESTMENT OBJECTIVE
THE DLB MICRO CAPITALIZATION FUND seeks long-term capital appreciation through
investment investing 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.
MARKET OVERVIEW
THE FIRST HALF OF THE FISCAL YEAR ENDING OCTOBER 31, 2000 WAS CHARACTERIZED BY
THREE MAJOR FACTORS: 1) a runaway market for technology stocks in the 4th
quarter of 1999, 2) continued general dominance of growth stocks until late in
the 1st quarter of 2000 and, 3) unprecedented volatility throughout the period.
WITH THE NOTABLE EXCEPTION OF THE MAJOR VALUE INDICES, MANY BROAD MARKET AND
GROWTH BENCHMARKS ACHIEVED ALL-TIME HIGHS ON OR CLOSE TO THE LAST DAY OF THE
MILLENIUM. Technology stocks continued to be the driving force in these
record-setting indices.
THE WALL STREET JOURNAL REFERRED TO IT AS "THIS JEKYLL AND HYDE STOCK MARKET."
The phrases "New Economy Stocks" and "Old Economy Stocks" became part of the
investment jargon. No matter how it was described, the split between growth and
value persisted throughout the first two months of 2000. Although returns for
most benchmarks were negative in January, relative performance for value
investors was positive. This shift in investor sentiment was brief, however, and
the market once again favored growth over value in February. Value mounted a
comeback late in March, and this positive absolute and relative performance
continued through the end of April.
VOLATILITY, AS MEASURED BY INTRADAY PRICE MOVEMENTS, REACHED LEVELS NEVER SEEN
BEFORE IN 1999 AND IN THE 1ST QUARTER OF 2000. To put this volatility into
historical perspective, in 1994 the NASDAQ, S&P 500, and Russell 2000 indices
experienced intraday price movements of 2% or more only 2% of the time. In 1999,
2% price swings in the NASDAQ Index occurred almost half the time and in the S&P
500 Index almost one-quarter of the time. This volatility increased to 76% for
NASDAQ and 56% for the S&P 500 during the 1st quarter of 2000!
A MAJOR CONTRIBUTION TO THIS VOLATILITY AND THE SEE-SAW BETWEEN GROWTH AND VALUE
WAS THE CONTINUED EFFORTS BY THE FED TO SLOW THE ECONOMY. As short-term rates
were raised by the Fed and uncertainty as to future increases burdened market
psychology, investor's sentiment and momentum changed frequently.
<PAGE>
DLB MICRO CAP FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW
DURING THE FIRST SIX MONTHS OF FISCAL 2000, WE REDUCED OUR TECHNOLOGY HOLDINGS
AS VALUATIONS SKYROCKETED. We reduced or sold our positions in Elantec
Semiconductor, DSP Group, Performance Technologies, and Signal Technology, all
of which we believe became overvalued.
DURING THE SAME PERIOD, WE ADDED TO OUR ENERGY EXPOSURE. We already owned Stone
Energy and Chieftan International, but added a group of services companies.
These included RPC, Gulfmark, and CE Franklin. The companies provide supply
boats, well services, and parts distribution. The key is that demand for their
product is related to well activity rather than new development and
construction. As a result, they benefit from the increase in petroleum prices
quickly. Also, each of these companies occupies a niche mostly related to
geographic location.
OTHER PORTFOLIO ADDITIONS HAVE NO REAL INDUSTRY THEME. II - VI, pronounced "two
six", is a company that makes crystals that condition laser beams. Another new
addition is called Lifeline, which made famous the phrase, "Help, I've fallen
and I can't get up!" Its monitoring system is the most sophisticated in the
business. Lifeline also has by far the best distribution in its segment and
lucrative new applications. Finally, we have added Shufflemaster, which makes
automated card shufflers. It dominates single deck shufflers and has introduced
an improved multideck shuffler.
WHILE THERE IS NO INDUSTRY THEME TO THESE COMPANIES, THEY ALL FIT OUR STRATEGY
WELL. All have high returns on assets, little debt leverage, and the potential
for sustained EPS growth. Market volatility creates value opportunities like
these.
THE FUND'S TOP TEN HOLDINGS AND SECTOR WEIGHTINGS CAN BE FOUND ON THE FOLLOWING
PAGE.
<PAGE>
DLB MICRO CAP FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW(CONT.)
--------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS % OF FUND ASSETS
--------------------------------------------------------------------------------
Morrison Management 3.6
Woodhead 2.9
Saga Communication 2.9
Elantec Semiconductor 2.9
Kollmorger 2.8
Bacon 2.8
Signal Technology 2.8
Performance Food Group 2.8
Mechanics Financial 2.6
Gasonics International 2.6
TOTAL 28.7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECTOR RUSSELL
DIVERIFICATION (%) PORTFOLIO 2000 DIFFERENCE
--------------------------------------------------------------------------------
Technology 12.3 23.3 -11.0
Healthcare 5.3 12.2 -6.9
Consumer Discretionary 17.8 14.6 3.2
Consumer Staples 5.8 2.2 3.6
Energy 6.8 4.5 2.3
Materials & Processing 12.6 7.5 5.1
Producer Durables 12.6 9.5 3.1
Autos & Transportation 8.0 2.9 5.1
Financial Services 16.8 17.2 -0.4
Utilities 2.1 5.1 -3.0
Other 0.0 0.9 -0.9
--------------------------------------------------------------------------------
PERFORMANCE REVIEW
THROUGH THE SIX MONTHS ENDED APRIL 30, 2000, THE DLB MICRO CAP FUND WAS UP
30.5%. The Fund's benchmark, the Russell 2000 was only up 18.7% for the same
time period. We are pleased with these results because value stocks lagged
through most of the period. The Russell 2000 Value was up only 8.2% for the same
period. So our style worked against us, but not nearly as much as in fiscal
1999.
<PAGE>
DLB MICRO CAP FUND
-------------------------------
OUTLOOK
WE ARE BECOMING MORE OPTIMISTIC ABOUT THE STOCK MARKET. The Federal Reserve has
driven interest rates up over the last year and some economic indicators are
showing the strain. We feel that the Fed will stop raising rates in the second
half of 2000, which will buoy the stock market. This may not bode well in the
near term for this Fund, however, because leveraged companies perform better
than our steadier companies when economic cycles turn.
LONGER TERM, WE SHOULD DO WELL. This period of uncertainty opened several
opportunities to invest in solid companies at favorable prices. Only the future
will determine if we have selected the right ones. That said, we have improved
our output and we remain very optimistic about our long-term prospects.
<PAGE>
DLB MICRO CAP FUND
-------------------------------
GROWTH OF A
$100,000 INVESTMENT
Cumulative Total Return Since Inception 7/25/95
<TABLE><CAPTION>
RUSSELL RUSSELL
DLB RUSSELL 2000 VALUE DLB RUSSELL 2000 VALUE
DATE MICRO CAP FUND 2000 INDEX INDEX DATE MICRO CAP FUND 2000 INDEX INDEX
---- -------------- ---------- ----- ---- -------------- ---------- -----
<S> <C> <C> <C> <S> <C> <C> <C>
$100,000.00 $100,000.00 $100,000.00 30-Jun-99 $94,107.83 $100,348.05 $93,596.98
Jul-98 $95,100.00 $90,860.00 $91,496.51 31-Jul-99 $94,710.12 $97,598.51 $91,375.66
31-Aug-98 $74,301.63 $73,214.99 $77,167.40 31-Aug-99 $92,408.66 $93,987.37 $88,035.53
30-Sep-98 $77,704.64 $78,947.72 $81,525.30 30-Sep-99 $92,011.30 $94,006.17 $86,275.44
31-Oct-98 $80,401.00 $82,168.79 $83,946.03 31-Oct-99 $88,606.88 $94,391.59 $84,549.16
30-Nov-98 $82,097.46 $86,474.43 $86,218.26 30-Nov-99 $94,003.04 $100,026.77 $84,987.33
31-Dec-98 $86,095.60 $91,827.20 $88,921.80 31-Dec-99 $97,988.77 $111,349.80 $87,596.44
31-Jan-99 $83,598.83 $93,048.50 $86,903.46 31-Jan-00 $100,732.46 $109,557.07 $85,310.17
28-Feb-99 $78,699.94 $85,511.57 $80,970.14 29-Feb-00 $108,055.71 $127,644.94 $90,522.63
31-Mar-99 $77,401.39 $86,845.55 $80,302.14 31-Mar-00 $118,223.75 $119,233.14 $90,948.08
30-Apr-99 $82,602.76 $94,626.92 $87,632.84 30-Apr-00 $115,681.94 $112,055.30 $91,484.68
31-May-99 $87,104.61 $96,008.47 $90,326.39
</TABLE>
--------------------------------------------------------------------------------
TOTAL RETURNS (%) FOR PERIODS ENDED 4/30/00
--------------------------------------------------------------------------------
6 Months One Year Annualized
11/1/99- 5/1/99- Since Inception
4/30/00 4/30/00 7/20/98-
4/30/00
DLB MICRO CAP FUND 30.54 40.03 8.26
Russell 2000 Index 18.72 18.42 6.45
Russell 2000 Value Index 8.20 4.40 -4.53
--------------------------------------------------------------------------------
DISCLOSURE STATEMENT
RUSSELL 2000 INDEX is an unmanaged index that measures the performance of the
2000 smallest stocks in the Russell 3000 Index that represent approximately 8%
of the U.S. equity market capitalization. Securities in the Fund do not match
those in the Index, and performance of the Fund will differ.
RUSSELL 2000 VALUE INDEX measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
Securities in the Fund do not match those in the Index, and performance of the
Fund will differ.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Investment return and share
price will fluctuate with market conditions, and investors may have a gain or
loss when shares are sold. The Fund's total return reflects an expense
limitation in effect during the periods shown. In the absence of such expense
limitation, returns would have been lower.
<PAGE>
DLB MICRO CAP FUND
-------------------------------
This report and the Fund financial statements contained herein are submitted for
the general information of the shareholders of the DLB Micro Capitalization
Fund. The report is not intended for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
BABSON SECURITIES CORPORATION
One Memorial Drive, Cambridge, MA 02142
June 2000
<PAGE>
===========================================
DLB Micro Capitalization
Fund
Financial Statements for the Six Months
Ended April 30, 2000 and the Ten Months
Ended October 31, 1999
<PAGE>
DLB MICRO CAPITALIZATION FUND
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS:
Portfolio of Investments as of April 30, 2000 1- 4
Statement of Assets and Liabilities as of April 30, 2000 5
Statement of Operations for the Six Months Ended April 30, 2000 6
Statements of Changes in Net Assets for the Six Months Ended
April 30, 2000, the Ten Months Ended October 31, 1999, and
the Period from July 20, 1998 (commencement of operations)
to December 31, 1998 7
Financial Highlights for the Six Months Ended April 30, 2000, the
Ten Months Ended October 31, 1999, and the Period from
July 20, 1998 (commencement of operations) to
December 31, 1998 8
Notes to Financial Statements 9 - 11
<PAGE>
DLB MICRO CAPITALIZATION FUND
PORTFOLIO OF INVESTMENTS (Unaudited)
April 30, 2000
<TABLE><CAPTION>
--------------------------------------------------------------------------------------------------
COMMON STOCKS - 83.5%
ISSUER SHARES VALUE
<S> <C> <C>
AIRLINES - 1.5%
Hub Group Inc. (*) 17,500 $ 210,000
Mesaba Holdings, Inc. (*) 41,000 512,500
-----------
722,500
-----------
AUTO PARTS - 0.8%
Dura Automotive Systems Inc. (*) 23,600 383,500
-----------
BANKS - 5.7%
CFS Bancorp Inc. 86,100 758,756
Financial Institutions Inc. 47,500 590,781
First Essex Bancorp 35,600 556,250
First Republic Bank 25,300 496,513
Pacific Crest Capital, Inc. 32,100 389,213
-----------
2,791,513
-----------
CHEMICAL - SPECIALTY - 3.0%
Balchem Corporation 56,800 525,400
Penford Corporation 57,400 968,625
-----------
1,494,025
-----------
COMMUNICATION EQUIPMENT - 1.5%
Cunningham Graphics International Inc.(*) 30,700 736,800
-----------
COMPUTER RELATED - 2.0%
Meta Group, Inc. 35,200 792,000
PCD Inc. 33,100 165,500
-----------
957,500
-----------
CONSTRUCTION - 0.7%
Crossman Communities, Inc. (*) 22,000 356,125
-----------
CONTAINERS - 2.8%
US Can Corporation (*) 75,000 1,378,125
-----------
DIVERSIFIED - 2.9%
Astronics Corp. 43,700 437,000
Bacou USA Inc. 50,100 995,738
-----------
1,432,738
-----------
ELECTRONICS & INSTRUMENTS - 6.2%
ADE Corp/Mass 47,100 830,138
Esco Electronics Corporation 8,800 143,550
Lifeline Systems Inc. 23,000 264,500
Signal Technology Corp. 57,600 1,267,200
Spectrum Control Inc. 55,100 554,444
-----------
3,059,832
-----------
</TABLE>
1
<PAGE>
<TABLE><CAPTION>
ISSUER SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT - 6.0%
Kollmorgen Corporation 72,500 $ 1,069,375
LSI Industries Inc. 100 1,788
MTS Systems Corporation 56,100 424,256
SBS Technologies, Inc. 11,300 389,850
Woodhead Industries, Inc. 63,400 1,061,950
-----------
2,947,219
-----------
ELECTRICAL POWER - 1.8%
Bangor Hydro-Electric Co. 52,600 867,900
-----------
EXPLORATION & DRILLING - 3.4%
CE Franklin Ltd 86,400 507,600
RPC, Inc. 47,300 478,913
Stone Energy Corporation (*) 14,000 661,500
-----------
1,648,013
-----------
FINANCIAL SERVICES - 0.7%
Webster Financial Corporation 15,422 329,645
-----------
FOOD RETAILERS - 2.1%
Performance Food Group Company (*) 39,200 1,033,900
-----------
INSURANCE COMPANIES - 1.6%
Highlands Insurance Group Inc. (*) 96,600 802,988
Stewart Information Services Corporation 100 1,425
-----------
804,413
-----------
MACHINERY & EQUIPMENT - 6.7%
Gardner Denver, Inc. 45,400 791,663
Gasonics International Corp. 35,000 1,155,000
Hardinge, Inc. 38,600 434,250
Robbins & Myers, Inc. 36,200 882,375
-----------
3,263,288
-----------
MEDIA - 2.5%
Gray Communications Systems Inc. 26,400 283,800
Grupo Radio Centro S.A. de C.V 100 1,400
Saga Communications Inc. (*) 46,675 945,169
-----------
1,230,369
-----------
MEDICAL SUPPLIES & SERVICES - 5.4%
ICU Medical, Inc. 23,800 520,625
Meridian Diagnostics, Inc. 107,200 743,700
Morrison Management Specialists, Inc. 49,390 1,367,486
-----------
2,631,811
-----------
METAL PRODUCTS - 1.6%
CompX International, Inc. 38,500 760,375
-----------
OIL - DOMESTIC - 0.0%
Prima Energy Corporation 100 2,863
-----------
OIL - INTERNATIONAL - 1.8%
Chieftain International, Inc. (*) 45,900 872,100
-----------
</TABLE>
2
<PAGE>
<TABLE><CAPTION>
ISSUER SHARES VALUE
<S> <C> <C>
PAPER & FOREST PRODUCTS - 1.7%
Fibermark Inc. (*) 68,900 $ 826,800
-----------
PHOTO & OPTICAL - 1.0%
II VI Inc. 12,000 486,000
-----------
PROFESSIONAL SERVICES - 1.1%
Carey International Inc. (*) 17,600 162,800
Charles River Associates, Incorporated 18,600 377,813
Hall, Kinion & Associates, Inc. 100 2,456
Ventiv Health, Inc. 100 1,056
-----------
544,125
-----------
REAL ESTATE - 1.5%
Mid-Atlantic Realty Trust REIT 77,400 735,300
-----------
RECREATION - 1.1%
Steinway Musical Instruments Inc. 26,500 520,063
-----------
SAVINGS & LOANS - 3.3%
Flushing Financial Corp. 39,100 547,400
Lawrence Savings Bank (*) 47,000 329,000
Mech Financial Inc. 23,900 763,306
-----------
1,639,706
-----------
SEMICONDUCTORS - 2.6%
Elantec Semiconductor Inc. 31,800 1,287,900
-----------
SPECIALTY RETAIL - 1.9%
Bridgford Foods Corporation 59,053 546,240
School Specialty Inc. (*) 20,600 383,675
-----------
929,915
-----------
STEEL - 1.9%
Schnitzer Stl Inds Class A 57,700 937,625
-----------
TRANSPORTATION - 1.0%
GulfMark Offshore, Inc. 28,600 504,071
-----------
TRUCKING & SHIPPING - 2.4%
Covenant Transport Inc., Class A 28,100 383,756
Forward Air Corporation 22,800 783,750
-----------
1,167,506
-----------
WHOLESALERS - 3.3%
Scansource, Inc. (*) 20,100 693,450
United Natural Foods, Inc. 60,800 919,600
-----------
1,613,050
-----------
TOTAL COMMON STOCKS
(identified cost, $38,270,479) 40,896,615
</TABLE>
3
<PAGE>
<TABLE><CAPTION>
PRINCIPAL VALUE
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT - 16.90%
Investors Bank & Trust Repurchase Agreement, 4.94%, $8,303,979 $ 8,303,979
dated 4/28/00, $8,307,397 due on 5/1/00 (secured by
Federal Government Agency securities), at cost
TOTAL INVESTMENTS (identified cost, $46,574,458) 49,200,594
Other assets, less liabilities - (0.4%) (214,012)
-----------
NET ASSETS - 100% $48,986,582
===========
(*) Non-income producing security
</TABLE>
See notes to financial statements.
4
<PAGE>
DLB MICRO CAPITALIZATION FUND
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
April 30, 2000
<TABLE><CAPTION>
------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (identified cost, $46,574,458 ) $49,200,594
Receivable for fund shares sold 120,644
Dividends and interest receivable 26,355
Receivable from investment manager 6,362
-----------
49,353,955
-----------
LIABILITIES:
Payable for investments purchased 261,903
Payable for Fund shares reacquired 36,975
Accrued management fee 36,003
Accrued expenses 32,492
-----------
367,373
-----------
NET ASSETS $48,986,582
===========
NET ASSETS CONSIST OF:
Paid-in capital $41,432,551
Unrealized appreciation of investments 2,626,136
Accumulated undistributed net realized gain on investment transactions 4,849,887
Accumulated undistributed net investment income 78,008
-----------
$48,986,582
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 4,305,878
===========
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE
PER SHARE (NET ASSETS / SHARES OF BENEFICIAL INTEREST
OUTSTANDING) $ 11.38
===========
</TABLE>
See notes to financial statements.
5
<PAGE>
DLB MICRO CAPITALIZATION FUND
STATEMENT OF OPERATIONS (Unaudited)
Six Months Ended April 30, 2000
--------------------------------------------------------------------------------
NET INVESTMENT INCOME:
Interest $ 146,878
Dividends 180,647
-----------
327,525
-----------
EXPENSES:
Management fee 191,935
Trustees' fees 2,985
Custodian fees 38,395
Accounting and audit fees 14,670
Registration fees 11,603
Legal fees 8,421
Transfer agent fee 4,204
Miscellaneous 2,390
-----------
274,603
Reduction of expenses by investment manager (25,086)
-----------
Net expenses 249,517
-----------
Net investment income 78,008
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain (identified cost basis) 5,024,699
Change in unrealized appreciation 4,797,340
-----------
Net realized and unrealized gain on investments 9,822,039
-----------
Increase in net assets from operations $ 9,900,047
===========
See notes to financial statements.
6
<PAGE>
DLB MICRO CAPITALIZATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
Six Months Ten Months Period Ended
Ended Ended December 31,
April 30, 2000 October 31, 1999 1998*
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
INCREASE IN NET ASSETS:
From operations:
Net investment income (loss) $ 78,008 $ (38,703) $ (22,705)
Net realized gain (loss) on investments 5,024,699 1,618,801 (1,198,252)
Net unrealized appreciation (depreciation)
of investments 4,797,340 (556,308) (1,614,896)
------------ ------------ ------------
9,900,047 1,023,790 (2,835,853)
------------ ------------ ------------
Distributions to shareholders:
From net realized gain on investments (556,658) -- --
------------ ------------ ------------
Fund share transactions:
Net proceeds from sales of fund shares 9,397,178 11,120,455 22,745,914
Net asset value of shares issued in
reinvestment of distributions 264,882 -- --
Cost of shares reacquired (1,837,815) (235,368) --
------------ ------------ ------------
7,824,245 10,885,087 22,745,914
------------ ------------ ------------
Total increase in net assets 17,167,634 11,908,877 19,910,061
NET ASSETS:
At beginning of period 31,818,948 19,910,071 10
------------ ------------ ------------
At end of period (including accumulated undistributed
net investment income of $78,008, $0, and $0,
respectively) $ 48,986,582 $ 31,818,948 $ 19,910,071
============ ============ ============
* For the period from July 20, 1998 (commencement of operations) to December 31, 1998.
</TABLE>
See notes to financial statements.
7
<PAGE>
DLB MICRO CAPITALIZATION FUND
FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
Six Months Ten Months Period
Ended Ended Ended
April 30, 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 $ 8.89 $ 8.61 $ 10.00
---------- ---------- ----------
Gain (loss) from investment operations:
Net investment income (loss) .01 (.01) (.01)
Net realized and unrealized gain (loss) on investments 2.63 .29 (1.38)
---------- ---------- ----------
2.64 .28 (1.39)
---------- ---------- ----------
Less 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 income (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 income (loss)
per share and ratios would have been:
Net investment income (loss) $ .01 $ (.02) $ (.03)
Ratios (to average net assets):
Expenses 1.43% * 1.51% * 1.77% *
Net investment income (loss) .27% * (.39%)* (.76%)*
* Annualized
** For the period from July 20, 1998 (commencement of operations) to December 31, 1998.
</TABLE>
See notes to financial statements.
8
<PAGE>
DLB MICRO CAPITALIZATION FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Micro Capitalization Fund (the "Fund") is a non-diversified series of
The DLB Fund Group (the "Trust"), a Massachusetts business trust. The
Trust is registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company.
During 1999, the Fund changed its year end from December 31 to October
31.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION - Equity securities listed on securities exchanges
or reported through the NASDAQ system are valued at last sale prices.
Unlisted equity securities or listed equity securities for which last
sale prices are not available are valued at last quoted bid prices.
Securities for which there are no such quotations or valuations are
valued at fair value as determined in good faith by or at the direction
of the Trustees. Short-term obligations, which mature in 60 days or less,
are valued at amortized cost, which approximates market value.
REPURCHASE AGREEMENTS - Securities purchased under agreements to resell
to the original owner are recorded at cost. The Fund may enter into such
agreements with institutions that the Fund's investment adviser has
determined to be creditworthy. The Fund requires that the securities so
purchased be transferred to the custodian under terms that enable the
Fund to obtain such securities in the event of a default. The Fund
monitors, on a daily basis, the value of the securities to assure that
such value, including accrued interest, is greater than amounts owed to
the Fund.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded
on the trade date. Dividend income is recorded on the ex-dividend date.
Dividend payments received in additional securities are recorded in an
amount equal to the value of the securities. Interest income is recorded
on the accrual basis.
TAXES AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute to shareholders all of
its taxable income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is necessary.
9
<PAGE>
The Fund files a tax return annually using tax accounting methods
required by the Code, which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the net investment income and net realized gain reported in
these financial statements may differ from the amounts reported on the
Fund's tax return, and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The
Fund distinguishes between distributions for tax purposes and financial
reporting purposes. Differences between income for financial reporting
purposes and tax-basis earnings and profits may result in the reporting
of temporary over-distributions in the financial statements. Such
over-distributions are classified as distributions in excess of net
investment income or accumulated net realized gains. Distributions, if
any, in excess of tax-basis earnings and profits are reported as return
of capital.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements. Actual results could differ from those such
estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund engages David L. Babson & Company Inc. ("Babson") to provide
investment advisory and administrative services and general office
facilities. The fee for such services is computed daily and paid monthly
at an effective annual rate of 1.00% of average daily net assets. For the
six months ended April 30, 2000, the management fee amounted to $191,935.
Babson has agreed to pay the Fund's operating expenses such that the
Fund's total aggregate expenses do not exceed 1.30% of average daily net
assets. For the six months ended April 30, 2000, $25,086 of fund expenses
were borne by Babson.
The Fund pays no compensation directly to the Trustees who also are
officers of the investment manager, nor to the officers of the Fund, all
of whom receive remuneration for their services to the Fund from Babson.
10
<PAGE>
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations,
for the six months ended April 30, 2000 aggregated $24,604,744 and
$21,673,731, respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate cost $46,574,458
===========
Gross unrealized appreciation $ 5,722,266
Gross unrealized depreciation (3,096,130)
-----------
Net unrealized appreciation $ 2,626,136
===========
5. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE><CAPTION>
Period from
Six Months July 20, 1998
Ended Ten Months (commencement of
April 30, Ended operations) to
2000 October 31, 1999 December 31, 1998
---- ---------------- -----------------
<S> <C> <C> <C>
Shares sold 872,461 1,291,792 2,311,291
Shares issued in reinvestment
of distributions 28,299 -- --
Redemptions (172,288) (25,678) --
--------- --------- ---------
Net increase 728,472 1,266,114 2,311,291
========= ========= =========
</TABLE>
11
<PAGE>
DLB
THE DLB INTERNATIONAL FUND
SEMI ANNUAL REPORT
APRIL 30, 2000
[EXPERIENCE TO MANAGE THE FUTURE]
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
-------------------------------------
FUND INVESTMENT OBJECTIVE
THE DLB STEWART IVORY INTERNATIONAL Fund seeks long-term growth of capital
through investment primarily in equity securities of foreign companies.
MARKET OVERVIEW
ECONOMIC GROWTH CONTINUED TO ACCELERATE OVER THE PERIOD, PARTICULARLY IN EUROPE
AND IN ASIA EX-JAPAN. As a result, central banks around the world followed the
lead of the Federal Reserve in the US by raising interest rates. Continental
European economies received an additional boost from the continuing weakness of
the Euro, which fell to an all-time low against the Dollar. Renewed economic
weakness in Japan, reflecting low consumer confidence, was the exception among
major economies, and the Bank of Japan has so far maintained its "zero interest
rate" policy.
MARKETS IN LATE 1999 AND EARLY 2000 WERE LED BY STRENGTH IN THE SO-CALLED "NEW
ECONOMY" GROWTH ECTORS, NOTABLY TECHNOLOGY/MEDIA/TELECOMMUNICATIONS (TMT). There
was some catch-up in more traditional industry sectors from March 2000, as
investors became more cautious towards the more highly rated sectors, awaiting
the impact of rising interest rates on economic growth prospects.
CONCERNS ABOUT "YEAR 2000" ISSUES GAVE WAY TO RENEWED CONFIDENCE IN
INTERNATIONAL MARKETS TOWARDS YEAR END, and the transition to the new century
passed with little of the disruption to electronic and telecommunication
services which had been feared.
PORTFOLIO STRATEGY REVIEW
OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2000 WE REDUCED OUR HOLDINGS IN THE UK
AND CHINA/HONG KONG, AND ADDED TO CONTINENTAL EUROPE, AUSTRALIA, AND BRAZIL. We
are still slightly under the index weighting in Europe, but reduced the
disparity with additions to holdings in Germany, Belgium, Luxembourg, and
Switzerland. With economic growth accelerating in the core European area we have
found a greater selection of companies with good growth prospects. New names
added included Schering (pharmaceuticals), SCM Microsystems (computer hardware
design) in Germany, SES Astra (satellite broadcaster) in Luxembourg, Buhrmann
(office products) in the Netherlands, Modern Times (media) in Sweden, ABB
(engineering) and Vontobel (banking) in Switzerland.
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
-------------------------------------
PORTFOLIO STRATEGY REVIEW (CONT.)
IN THE PACIFIC AREA WE ADDED NEW HOLDINGS IN DAIHATSU MOTOR (AUTOS) OMRON
(INDUSTRIAL CONTROLS), TDK (ELECTRONICS) IN JAPAN, BHP (RESOURCES) IN AUSTRALIA,
CHEUNG KONG (PROPERTY) IN HONG KONG. In emerging markets we reinstated a holding
in Brazil, with a purchase of Tele Norte Leste ADR (telecoms).
THE FUND'S TOP TEN HOLDINGS AND COUNTRY WEIGHTINGS CAN BE FOUND BELOW:
--------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS % OF FUND ASSETS
--------------------------------------------------------------------------------
Vodafone AirTouch (United Kingdom) 2.8
Total Fina Elf (France) 2.3
Nokia (Finland) 2.3
Hoya Corp. (Japan) 2.2
L.M. Ericsson 'B' (Sweden) 2.2
Capita Group (United Kingdom) 2.1
Sony (Japan) 2.1
Nomura Securities (Japan) 1.9
Securitas 'B' (Sweden) 1.8
Energis (United Kingdom) 1.8
TOTAL 21.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOP 10 COUNTRIES % OF FUND ASSETS
--------------------------------------------------------------------------------
Japan 26.3
UK 20.7
France 7.8
Sweden 6.1
Netherlands 5.9
Germany 5.2
Switzerland 3.9
Italy 3.3
Spain 2.4
Hong Kong 2.3
TOTAL 83.9
--------------------------------------------------------------------------------
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
-------------------------------------
PERFORMANCE REVIEW
OVER THE SIX MONTHS ENDED APRIL 30, 2000, THE FUND'S PERFORMANCE WAS AHEAD OF
THE BENCHMARK, WITH A GAIN OF 16.00%, COMPARED WITH A RISE OF 6.84% IN THE MSCI
EUROPE, AUSTRALASIA, FAR EAST (EAFE) INDEX. The Fund's exposure to the
fast-growing telecoms and business service sectors contributed strongly to this
result, with the relative absence of "dot.com" exposure enabling us to hold up
relatively well in the recent downturn in the high-tech area.
OUTLOOK
WITH A STRONG BIAS TOWARDS "GROWTH" SECTORS WE HAVE A PORTFOLIO STYLE WHICH DOES
NOT REPLICATE THE INDICES, AND WHICH MAY UNDER-PERFORM MARKETS DURING PERIODS
WHEN DEPRESSED "VALUE" STOCKS ARE IN FAVOUR. We firmly believe that high quality
companies selected for their above-average earnings growth, combined wth solid
financial strength, will outperform markets in the medium to long term.
OVER RECENT YEARS THE US MARKET HAS SEEN SIGNIFICANT BENEFITS FROM CORPORATE
RESTRUCTURING AND RATIONALISATION, AND ALSO FROM NEW SAVINGS PATTERNS WHICH
FAVOUR EQUITY INVESTMENT. International markets are showing similar influences,
but are at a relatively early stage compared with the US, and we believe these
factors will continue to exert a positive influence on share prices. We strongly
believe that our approach is well suited to deliver superior investment results.
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
-------------------------------------
Growth of a
$100,000 Investment
Cumulative Total Return Since Inception 11/1/99
<TABLE><CAPTION>
DLB
STEWART IVORY
INTERNATIONAL
DATE FUND MSCI EAFE
<S> <C> <C>
$100,000.00 $100,000.00
Nov 1999 $190,992.97 $199,125.72
Dec 1999 $209,041.81 $217,027.13
Jan 2000 $197,063.71 $203,267.61
Feb 2000 $213,144.11 $208,776.16
Mar 2000 $216,895.45 $216,918.43
Apr 2000 $207,243.60 $205,551.90
May 2000 $200,446.01 $200,577.55
</TABLE>
--------------------------------------------------------------------------------
TOTAL RETURNS (%) FOR PERIODS ENDED 4/30/00
--------------------------------------------------------------------------------
6 Months
11/1/99-
4/30/00
DLB STEWART IVORY INTERNATIONAL FUND 16.00
MSCI EAFE 6.84
--------------------------------------------------------------------------------
DISCLOSURE STATEMENT
THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, 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.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Investment return and share
price will fluctuate with market conditions, and investors may have a gain or
loss when shares are sold. The Fund's total return reflects an expense
limitation in effect during the periods shown. In the absence of such expense
limitation, returns would have been lower.
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
-------------------------------------
This report and the Fund financial statements contained herein are submitted for
the general information of the shareholders of the DLB Stewart Ivory
International Fund. The report is not intended for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
BABSON SECURITIES CORPORATION
One Memorial Drive, Cambridge, MA 02142
June 2000
<PAGE>
===========================================
DLB STEWART IVORY
INTERNATIONAL FUND
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED APRIL 30, 2000
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
TABLE OF CONTENTS
<TABLE><CAPTION>
--------------------------------------------------------------------------------------------------
<S> <C>
FINANCIAL STATEMENTS:
Portfolio of Investments as of April 30, 2000 1 - 3
Statement of Assets and Liabilities as of April 30, 2000 4
Statement of Operations for the Six Months Ended April 30, 2000 5
Statement of Changes in Net Assets for the Six Months Ended April 30, 2000 6
Financial Highlights for the Six Months Ended April 30, 2000 7
Notes to Financial Statements 8 - 11
</TABLE>
<PAGE>
DLB INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS - 96.1%
ISSUER SHARES VALUE
U.K. - 20.5%
Bank of Scotland - (Banking) 64,000 $ 567,240
Bowthorpe - (Electronic Equipment) 60,000 1,106,529
Capita Group - (Business services, outsourcing) 54,000 1,384,142
Cattles Holdings - (Consumer finance) 116,000 387,239
Electrocomponents - (Electronic component distribution) 72,000 722,746
Energis - (Telecom networks)(*) 24,000 1,183,660
Glaxo Wellcome - (Pharmaceuticals) 26,000 801,588
Hays - (Business services, logistics) 126,000 865,264
Kingfisher - (Retailing) 57,000 466,388
Lloyds TSB - (Banking) 63,000 615,735
Logica - (IT Consultancy) 36,000 1,084,119
Wm.Morrison - (Supermarkets) 255,000 585,364
Shell Transport & Trading - (Integrated oil, gas) 88,000 715,587
SmithKline Beecham - (Pharmaceuticals) 57,004 779,364
SSL International - (Healthcare products) 41,000 416,349
Vodafone AirTouch - (Cellular telecoms) 394,000 1,805,822
-----------
13,487,136
-----------
IRELAND - 1.3%
Kerry Group A - (Food manufacturing) 67,000 850,438
-----------
BELGIUM - 0.6%
Colruyt (Post Split) - (Supermarkets) 10,000 386,617
-----------
DENMARK - 1.0%
ISS Intl Service System B - (Cleaning, building services)(*) 10,000 631,822
-----------
FINLAND - 2.3%
Nokia - (Telecom equipment) 26,000 1,492,782
-----------
FRANCE - 7.8%
AXA - (Insurance, financial services) 7,000 1,038,833
Banque Nationale de Paris - (Banking) 9,000 728,011
Lafarge (Br) - (Cement) 6,500 538,797
Pinault Printemps-Redoute - (Retailing) 3,700 747,055
Sanofi - Synthelabo - (Pharmaceuticals) 15,000 580,271
Total Fina Elf - (Integrated oil, gas) 10,000 1,518,623
-----------
5,151,590
-----------
1
<PAGE>
ISSUER SHARES VALUE
GERMANY - 5.2%
DePfa (Dt Pfandbriefban) - (Financial services) 8,000 $ 822,550
Fantastic - (Broadcasting software)(*) 9,000 165,420
Fresenius N-Vtg Pref - (Medical equipment)(**) 4,000 898,981
Schering - (Pharmaceuticals) 5,000 712,907
SCM Microsystems - (Smart cards)(*) 10,000 826,644
-----------
3,426,502
-----------
ITALY - 3.3%
BIPOP -CARIRE S.P.A - (Financial services) 12,000 1,091,552
Luxottica ADR - (Eyeglass frames, retailing) 45,000 1,074,375
-----------
2,165,927
-----------
LUXEMBOURG - 1.0%
SES Astra - (Satellite broadcasting)(*) 4,400 669,095
-----------
NETHERLANDS - 5.9%
Buhrmann NV - (Office products) 35,000 902,848
Getronics NV - (IT services) 9,000 537,205
ING Group - (Financial services) 16,000 873,795
Kon KPN NV - (Telecom networks) 5,000 504,312
VNU - (Publishing, media services) 20,000 1,070,952
-----------
3,889,112
-----------
PORTUGAL - 1.4%
Portugal Telecom (Reg) - (Telecom networks) 82,000 915,487
-----------
SPAIN - 2.4%
BB Vizcaya Argentaria - (Banking) 45,000 614,183
Telefonica SA - (Telecom networks)(*) 44,321 987,222
-----------
1,601,405
-----------
SWEDEN - 5.0%
L.M. Ericsson 'B' - (Electrical, telecom equipment) 16,000 1,422,421
Modern Times B - (Media, publishing)(*) 10,000 491,913
Nordic Baltic (formerly Nordbanken) - (Financial services) 25,000 157,557
Securitas 'B' - (Security services) 46,000 1,190,407
-----------
3,262,298
-----------
SWITZERLAND - 3.9%
ABB - (Engineering) 7,000 785,764
Novartis (Regd) - (Pharmaceuticals) 550 768,622
Vontobel Hldgs (Br) - (Financial services) 450 997,215
-----------
2,551,601
-----------
AUSTRALIA - 2.1%
Brambles Inds - (Transportation) 23,000 646,757
Broken Hill Proprietary - (Energy, resources) 44,000 473,347
Lend Lease - (Property, financial services) 25,000 270,639
-----------
1,390,743
-----------
CHINA - 0.9%
China Telecom - (Telecom networks)(*) 80,000 577,686
-----------
2
<PAGE>
ISSUER SHARES VALUE
JAPAN - 26.3%
Credit Saison - (Financial services) 37,600 $ 614,027
Daihatsu Motor - (Autos) 150,000 802,184
Fuji Bank - (Banking) 66,000 549,593
Fuji Photo Film - (Photographic products) 21,000 841,321
Hoshiden - (Electronic components) 20,000 932,642
Hoya Corp - (Glass, electronic components) 14,000 1,424,870
Ito Yokado - (Supermarkets) 4,000 292,006
Japan Airport Terminal - (Airport services) 49,000 403,951
Matsushita Comm Ind - (Industrial, electronic equipment) 6,000 940,415
Nippon Comsys - (Telecom equipment, engineering) 48,000 928,201
Nomura Securities - (Securities house) 49,000 1,233,161
NTT Docomo - (Cellular telecoms) 310 1,035,437
Omron - (Industrial equipment) 20,000 544,041
Promise - (Financial services) 12,600 1,020,078
Sanwa Bank - (Banking) 45,000 473,318
Secom - (Security services) 14,000 1,173,575
Sony - (Consumer electronics) 12,000 1,382,864
Takeda Chemical - (Pharmaceuticals, chemicals) 13,000 855,200
TDK Corp. - (Electronic components) 7,000 937,176
Terumo - (Medical equipment) 30,000 907,661
-----------
17,291,721
-----------
HONG KONG - 2.3%
Asia Satellite Telecoms - (Satellite operator) 54,000 168,800
Cheung Kong - (Property, investments) 45,000 537,248
Hong Kong & China Gas - (Gas utility) 346,940 380,802
Swire Pacific 'B' - (Property, airlines, trading) 575,000 428,129
-----------
1,514,979
-----------
SINGAPORE - 0.6%
Overseas Union Bank - (Banking) 47,964 219,142
Overseas Union Enterprise - (Hotels, investment holdings) 75,000 188,906
-----------
408,048
-----------
BRAZIL - 0.6%
Tele Norte Leste ADR - (Telecom networks) 21,225 378,085
-----------
HUNGARY - 0.8%
Gedeon Richter GDS (144A) - (Pharmaceuticals) 8,900 493,668
-----------
TOTAL COMMON AND PREFERRED STOCKS
(identified cost, $44,895,055) 63,233,493
PRINCIPAL
AMOUNT VALUE
REPURCHASE AGREEMENT - 2.4%
Investors Bank & Trust Repurchase Agreement, 4.94%,
dated 4/28/00, $1,538,732 due on 5/1/00 (secured by
Federal Government Agency securities), at cost $ 1,538,099 1,538,099
-----------
TOTAL INVESTMENTS (identified cost, $46,433,154) 64,771,592
Other assets, less liabilities - 1.5% 1,004,901
-----------
NET ASSETS - 100% $65,776,493
===========
</TABLE>
(*) Non-income producing security
(**) Preferred Stock
See notes to financial statements.
3
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (identified cost, $46,433,154) $ 64,771,592
Foreign cash, at value (cost, $1,291,156) 1,291,156
Dividends and interest receivable 230,218
Receivable for fund shares sold 612,405
Receivable from investment manager 11,912
Other assets 23,337
------------
66,940,620
------------
LIABILITIES:
Payable for investments purchased 1,076,734
Accrued management fees 38,463
Accrued expenses 48,930
------------
1,164,127
------------
NET ASSETS $ 65,776,493
============
NET ASSETS CONSIST OF:
Paid-in capital $ 41,534,878
Unrealized appreciation of investments and translation of assets and
liabilities in foreign currencies 18,294,533
Accumulated undistributed net realized gain on investments and
foreign currency transactions 5,939,426
Accumulated undistributed net investment income 7,656
------------
Total $ 65,776,493
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 5,671,725
============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST OUTSTANDING) $ 11.60
============
</TABLE>
See notes to financial statements.
4
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 2000
<TABLE><CAPTION>
------------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME:
Dividends (net of foreign tax withheld of $37,201) $ 284,809
Interest 53,637
------------
338,446
------------
EXPENSES:
Management fee 248,538
Trustees' fees 2,873
Custodian fees 66,063
Registration fees 17,535
Accounting and audit fees 16,491
Legal fees 7,940
Transfer agent fee 4,250
Miscellaneous 1,782
------------
365,472
Reduction of expenses by investment manager (34,682)
------------
Net expenses 330,790
------------
Net investment income 7,656
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (identified cost basis):
Investment transactions 5,998,243
Foreign currency transactions and forward foreign currency exchange
contracts and other transactions denominated in foreign currency (58,818)
------------
Net realized gain on investments and foreign currency 5,939,425
------------
Change in unrealized appreciation (depreciation):
Investments 4,003,423
Foreign currency and forward foreign currency exchange contracts
and other transactions denominated in foreign currency (43,905)
------------
Net unrealized gain on investments and foreign currency 3,959,518
------------
Net realized and unrealized gain on investments and foreign
currency 9,898,943
------------
Increase in net assets from operations $ 9,906,599
============
</TABLE>
See notes to financial statements.
5
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 2000
<TABLE><CAPTION>
------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 7,656
Net realized gain on investments and foreign currency 5,939,425
Net unrealized appreciation of investments and foreign currency 3,959,518
----------
9,906,599
----------
Fund share transactions:
Net proceeds from sales of shares 1,541,595
Net proceeds from merger of Limited Partnership 61,680,896
Cost of shares reacquired (7,352,598)
----------
55,869,893
----------
Total increase in net assets 65,776,492
----------
NET ASSETS:
At beginning of period --
At end of period (including accumulated undistributed
net investment income of $7,656) $65,776,492
==========
</TABLE>
See notes to financial statements.
6
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 2000
<TABLE><CAPTION>
--------------------------------------------------------------------------------
<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
and foreign currency 1.60
----------
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%)*
</TABLE>
* Annualized
See notes to financial statements.
7
<PAGE>
DLB STEWART IVORY INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Stewart Ivory International Fund (the "Fund") is a non-diversified
series of The DLB Fund Group (the "Trust"), a Massachusetts business trust.
The Trust is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices
are not available are valued at last quoted bid prices. Securities for
which there are no such quotations or valuations are valued at fair value
as determined in good faith by or at the direction of the Trustees.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value.
REPURCHASE AGREEMENTS - Securities purchased under agreements to resell to
the original owner are recorded at cost. The Fund may enter into such
agreements with institutions that the Fund's investment adviser has
determined to be creditworthy. The Fund requires that the securities so
purchased be transferred to the custodian under terms that enable the Fund
to obtain such securities in the event of a default. The Fund monitors, on
a daily basis, the value of the securities to assure that such value,
including accrued interest, is greater than amounts owed to the Fund.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars at current exchange rates. Purchases and
sales of foreign investments and income and expenses are converted into
U.S. dollars at currency exchange rates prevailing on the respective dates
of such transactions. Security transaction gains and losses attributable to
changes in foreign currency exchange rates are recorded for financial
statement purposes as net realized gains and losses on investments. Income
and expense gains and losses that are attributable to changes in foreign
exchange rates are recorded for financial statement purposes as foreign
currency transaction gains and losses. The portion of both realized and
unrealized gains and losses on investments that results from fluctuations
in foreign currency exchange rates is not separately disclosed.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - The Fund may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. The risks
associated with these contracts include the possible inability of
counterparties to meet the terms of the contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
The Fund enters into forward contracts for hedging purposes only. The Fund
may enter into contracts to deliver or receive foreign currency it will
receive from or require for its normal investment activities. It may also
use contracts in a manner intended to protect foreign currency-denominated
securities from declines in value resulting from unfavorable exchange rate
movements. Forward foreign currency exchange contracts are adjusted by the
daily change in the exchange rates of the underlying currencies, and any
gains or losses are recorded for financial statement purposes as unrealized
until the contract settlement date.
8
<PAGE>
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded
on the trade date. Dividend income is recorded on the ex-dividend date.
Dividend payments received in additional securities are recorded in an
amount equal to the value of the securities received. Interest income is
recorded on the accrual basis.
TAXES AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute to shareholders all of its
taxable income, including any net realized gains on investments.
Accordingly, no provision for federal income or excise tax is necessary.
The Fund files a tax return annually using tax accounting methods required
by the Code, which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the net investment income and net realized gain reported in
these financial statements may differ from the amounts reported on the
Fund's tax return, and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders on Form 1099-DIV.
Foreign taxes are provided with respect to interest and dividend income
earned in foreign currencies in accordance with applicable tax rates. To
the extent that such taxes are unrecoverable, they are recorded as a
reduction of net investment income.
Distributions to shareholders are recorded on the ex-dividend date. The
Fund distinguishes between distributions for tax purposes and financial
reporting purposes. Differences between income for financial reporting
purposes and tax-basis earnings and profits may result in the reporting of
temporary over-distributions in the financial statements. Such
over-distributions are classified as distributions in excess of net
investment income or accumulated net realized gains. Distributions, if any,
in excess of tax-basis earnings and profits are reported as return of
capital.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from those such estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund engages David L. Babson & Company Inc. ("Babson") to provide
investment advisory and administrative services and general office
facilities. The fee for such services is computed daily and paid monthly at
an effective annual rate of .75% of average daily net assets. For the six
months ended April 30, 2000, the management fee amounted to $248,538.
Babson has agreed to pay the Fund's operating expenses such that the Fund's
total aggregate expenses do not exceed 1.00% of average daily net assets.
For the six months ended April 30, 2000, $34,682 of Fund expenses were
borne by Babson.
9
<PAGE>
Babson has entered into a sub-advisory agreement with Babson-Stewart Ivory
International ("BSII"), an affiliate of Babson, with respect to the
management of the international component of the Fund's portfolio. Under
the sub-advisory agreement, Babson pays BSII a monthly fee at the effective
annual rate of .375% of average daily net assets.
The Fund pays no compensation directly to theTrustees who also are officers
of the investment manager, nor to the officers of the Fund, all of whom
receive remuneration for their services to the Fund from Babson.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations, for
the six months ended April 30, 2000 aggregated $18,257,360 and $21,066,065,
respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate cost $ 46,433,154
==============
Gross unrealized appreciation $ 20,868,845
Gross unrealized depreciation (2,530,407)
--------------
Net unrealized appreciation $ 18,338,438
==============
5. SHARES OF BENEFICIAL INTEREST
On November 2, 1999, the Fund commenced investment operations by acquiring
all the assets of the Babson-Stewart Ivory International Limited
Partnership III ("Limited Partnership"). The acquisition was accomplished
by a tax free exchange of 6,168,090 shares of the Fund (valued at
$61,680,896) for the Limited Partnership's net assets on that date
($61,680,896), including $14,335,015 of unrealized appreciation. The
Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
Six Months
Ended
April 30, 2000
--------------
Shares sold 130,997
Shares issued from merger of Limited Partnership 6,168,090
Redemptions (627,362)
--------------
Net increase 5,671,725
==============
10
<PAGE>
6. RISKS ASSOCIATED WITH FOREIGN INVESTMENTS
Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those
not subject to disclosure and reporting requirements of the U.S. securities
laws. Foreign issuers are generally not bound by uniform accounting,
auditing, and financial reporting requirements and standards of practice
comparable to those applicable to domestic issuers. Investments in foreign
securities also involve the risk of possible adverse changes in investment
or exchange control regulations, expropriation or confiscatory taxation,
limitation on the removal of funds or other assets of the Fund, political
or financial instability or diplomatic and other developments that could
affect such investments. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the United
States, and securities of some foreign issuers (particularly those located
in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. In general, there is less overall
government supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
11
<PAGE>
DLB
THE DLB EMERGING MARKETS FUND
SEMI ANNUAL REPORT
APRIL 30, 2000
[EXPERIENCE TO MANAGE THE FUTURE]
<PAGE>
DLB EMERGING MARKETS FUND
-------------------------------
FUND INVESTMENT OBJECTIVE
THE DLB EMERGING MARKETS FUND seeks long-term growth of capital primarily
through equity investments that will generally be concentrated in what the
Fund's subadvisor considers to be the developing markets around the world.
MARKET OVERVIEW
THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS (FREE) INDEX (MSCI
EMF) ROSE 22 PER CENT OVER THE LAST 12 MONTHS AS GLOBAL EMERGING MARKETS
RECOVERED THROUGH 1999 FROM A VERY LOW BASE. While the recovery was global in
nature, Emerging Europe was the best performing region with most markets showing
significant gains.
UNDOUBTEDLY THE BIGGEST INFLUENCE ON MARKETS AROUND THE GLOBE OVER THE LAST 12
MONTHS HAS BEEN THE RISE, AND SUBSEQUENT FALL, OF TECHNOLOGY STOCKS. This sector
came generally to be referred to by the acronym 'TMT' (telecommunications, media
and technology) and this description more accurately reflects what we saw play
out in global emerging markets.
PURE TECHNOLOGY COMPANIES FOCUSED ON SOFTWARE OR INTERNET SERVICES ARE NOT
HEAVILY REPRESENTED IN AN EMERGING MARKETS CONTEXT, PERHAPS WITH THE NOTABLE
EXCEPTIONS OF COUNTRIES SUCH AS INDIA AND ISRAEL. Rather it was
telecommunications and media companies that were viewed by many investors as an
appropriate conduit through which to gain exposure to the rising global IT
expenditure.
JUST AS THE TMT STOCKS LED MARKETS UP LAST YEAR, SO THEY HAVE LED THEM DOWN IN
APRIL. A considerble portion of 1999's gains have been given back over this
period. It is perhaps no great surprise that emerging markets have suffered as
investors have recently become more risk-averse, yet there remains a fairly
compelling underlying story to global emerging markets at present and, as ever,
indiscriminate selling presents opportunities for the stock-picker.
PORTFOLIO STRATEGY REVIEW
THE PORTFOLIO CONTINUES TO FAVOUR ASIA, WHILST WE REMAIN CAUTIOUS ON LATIN
AMERICA. This has been a fairly consistent position and one that we do not
anticipate altering significantly in the short-term. Over the years, Latin
America has proved less fertile territory than elsewere, there being relatively
few genuinely competitive, world-class companies outside the realm of natural
resources and basic industry.
<PAGE>
DLB EMERGING MARKETS FUND
-------------------------------
PORTFOLIO STRATEGY REVIEW (CONT.)
RECENT STOCK DECISIONS HAVE BEEN AIMED AT TAKING ADVANTAGE OF MANY ANOMALIES IN
'UNLOVED' SECTORS. We continue to reposition the portfolio, favouring the
abundant reasonably priced growth opportunities available. For example, we have
added to our holdings in Beijing Capital International Airport (China:
airports), Pliva (Croatia: pharmaceuticals) and Yazicilar (Turkey: conglomerate)
over the last quarter. We are beginning to see more interest in these types of
companies and fully expect them to outperform through the balance of 2000.
THE FUND'S TOP TEN HOLDINGS AND TOP TEN COUNTRIES CAN BE FOUND BELOW.
--------------------------------------------------------------------------------
TOP 10 EQUITY HOLDINGS % OF FUND ASSETS
--------------------------------------------------------------------------------
Asustek (Taiwan) 3.4
Samsung Electronics (South Korea) 2.8
Housing Development Finance (India) 2.8
China Telecom (China/Hong Kong) 2.2
Taiwan Semiconductor (Taiwan) 2.1
Pliva (Croatia) 2.0
H & CB (South Korea) 2.0
Guangdong Kelon (China) 1.8
Walmart de Mexico (Mexico) 1.8
Gedeon Richter (Hungary) 1.7
TOTAL 22.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOP 10 COUNTRIES % OF FUND ASSETS
--------------------------------------------------------------------------------
South Korea 12.1
China 9.9
Taiwan 9.6
Mexico 9.3
Brazil 9.3
India 6.8
South Africa 5.7
Turkey 5.0
Thailand 3.6
Israel 3.6
TOTAL 74.9
--------------------------------------------------------------------------------
<PAGE>
DLB EMERGING MARKETS FUND
-------------------------------
PERFORMANCE REVIEW
THE FUND HAS PERFORMED WELL SINCE INCEPTION, RISING 16.1 PER CENT AGAINST A GAIN
OF 13.9 PER CENT IN THE MSCI EMERGING MARKETS FREE INDEX, THE FUND'S BENCHMARK.
Our style, being relatively conservative, is not best suited to momentum-driven
markets such as we saw in the last quarter of 1999 and the first couple of
months of this year. However, we firmly believe that continued outperformance
rests on ensuring we do not overpay for growth. That philosophy has served us
well historically and leaves us currently well placed.
OUTLOOK
WE HAVE HELD A POSITIVE VIEW OF THE OUTLOOK FOR THE GLOBAL EMERGING MARKETS
ASSET CLASS THROUGHOUT THE LAST 12 MONTHS AND THAT STANCE REMAINS UNCHANGED.
While we are clearly seeing an impact from the current volatility in the NASDAQ,
and other world markets, we continue to expect robust economic growth in all
emerging regions in 2000.
GDP GROWTH WILL RANGE FROM 2-4% IN EMERGING EUROPE AND LATIN AMERICA, TO AROUND
6% IN ASIA. This cyclical recovery underpins the prospects for many emerging
market companies. These markets are typically less exposed to conceptual
technology plays and currently present some compelling reasonably priced growth
opportunities.
TECHNOLOGY IS CERTAINLY STILL A SIGNIFICANT GROWTH AREA, BUT WE EXPECT MARKET
LEADERSHIP TO CONTINUE TO CHANGE. We have felt for some time that TMT valuations
are largely overdone and, in fact, moved quite aggressively to reduce what
exposure we did have to this sector through February and March this year. We
would also argue that there is a major difference between the quality
infrastructure companies, generally focused on hardware, which have long-term
defensible franchises, and the software/ internet content mania that has swept
the globe.
<PAGE>
DLB EMERGING MARKETS FUND
-------------------------------
Growth of a
$100,000 Investment
Cumulative Total Return Since Inception 11/1/99
DLB
STEWART IVORY
EMERGING MARKETS MSCI EMF
FUND INDEX
$100,000.00 $100,000.00
30-Nov-99 $108,100.00 $108,970.00
Dec 1999 $122,596.21 $122,830.98
Jan 2000 $122,792.36 $123,567.97
Feb 2000 $124,290.43 $125,199.07
Mar 2000 $124,588.73 $125,812.54
Apr 2000 $116,091.78 $113,885.51
May 2000 $111,390.06 $109,182.04
--------------------------------------------------------------------------------
TOTAL RETURNS (%) FOR PERIODS ENDED 10/31/99
--------------------------------------------------------------------------------
11/1/99 (Inception)-
4/30/00
DLB STEWART IVORY EMERGING MARKETS FUND 16.1
MSCI EMF Index 13.9
--------------------------------------------------------------------------------
DISCLOSURE STATEMENT
MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX (MSCI EMERGING
MARKETS FREE). The MSCI Emerging Markets Free Index is a composite index
measuring constituents that are open to non-domestic investors in 25 emerging
markets around the world. The performance results in the table assume the
reinvestment of dividends and distributions.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Investment return and share
price will fluctuate with market conditions, and investors may have a gain or
loss when shares are sold. The Fund's total return reflects an expense
limitation in effect during the periods shown. In the absence of such expense
limitation, returns would have been lower.
<PAGE>
DLB EMERGING MARKETS FUND
-------------------------------
This report and the Fund financial statements contained herein are submitted for
the general information of the shareholders of the DLB Stewart Ivory Emerging
Markets Fund. The report is not intended for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
BABSON SECURITIES CORPORATION
One Memorial Drive, Cambridge, MA 02142
June 2000
<PAGE>
===========================================
DLB STEWART IVORY
EMERGING MARKETS FUND
FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED APRIL 30, 2000
<PAGE>
DLB STEWART IVORY EMERGING MARKETS FUND
TABLE OF CONTENTS
<TABLE><CAPTION>
-----------------------------------------------------------------------------------------------
<S> <C>
FINANCIAL STATEMENTS:
Portfolio of Investments as of April 30, 2000 1 - 4
Statement of Assets and Liabilities as of April 30, 2000 5
Statement of Operations for the Six Months Ended April 30, 2000 6
Statement of Changes in Net Assets for the Six Months Ended April 30, 2000 7
Financial Highlights for the Six Months Ended April 30, 2000 8
Notes to Financial Statements 9 - 12
</TABLE>
<PAGE>
DLB EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS - 95.2%
ISSUER SHARES VALUE
ARGENTINA - 0.8%
IRSA GDR - (Property) 4,046 $ 119,357
Quinsa Prf ADR - (Food & Beverages)(**) 12,000 114,000
----------
233,357
----------
BRAZIL - 9.5%
Aracruz ADR - (Manufacturing) 19,000 355,063
Bradesco Prf - (Financial)(**) 61,300,000 447,792
Cemig Cia Ener Mg Prf - (Utilities)(**) 16,800,000 255,672
CST PN - (Resources) 29,000,000 404,427
Embratel ADR - (Telecoms) 19,500 438,750
Petrobras PN - (Resources)(**) 1,500,000 357,028
Tele Norte Leste ADR - (Telecoms) 17,873 318,371
Tele Sudeste Cellular ADR - (Telecoms) 6,500 277,875
----------
2,854,978
----------
CHILE - 3.1%
Antofagasta - (Resources) 55,000 341,530
Banco Edwards ADR - (Financial) 10,837 178,133
D & S ADR - (Retail) 8,000 136,000
Vina Concha y Toro ADR - (Food & Beverages) 7,000 269,500
----------
925,163
----------
MEXICO - 9.2%
Cemex New ADR - (Construction Materials) 20,000 437,500
Coca Cola Femsa ADS - (Food & Beverages) 8,000 148,500
Grupo Modelo 'C' - (Food & Beverages) 155,000 329,087
Grupo Bimbo 'A' NPV - (Food & Beverages) 70,000 90,510
Grupo Carso SA de CV - (Telecoms) 80,000 271,762
Kimberly-Clark De Mexico 'A' - (Manufacturing) 125,000 402,070
Televisa ADR - (Media)(*) 2,400 152,250
Telefonos de Mexico ADR (L) -(Telecoms) 8,000 470,500
Walmex C- (Retail) 220,000 468,259
----------
2,770,438
----------
1
<PAGE>
ISSUER SHARES VALUE
CHINA - 8.4%
Beijing Capital Int Airport H - (Transport) 1,800,000 $ 302,707
China Resources Beijing Land - (Property) 2,000,000 166,887
China Telecom - (Telecoms)(*) 95,000 686,002
Guangdong Kelon 'H' - (Manufacturing) 800,000 498,094
Guangshen Railway 'H'- (Transport) 3,500,000 422,353
Huaneng Power - (Utilities) 1,050,000 239,932
Road King Infrastructure - (Transport) 450,000 219,521
----------
2,535,496
----------
HONG KONG - 0.8%
Asia Satellite Telecoms - (Telecoms) 55,000 171,926
Chen Hsong Holdings - (Manufacturing) 450,000 77,410
----------
249,336
----------
INDIA - 5.9%
Hindalco - (Resources) 20,000 322,978
MSDW India Inv Fund - (Country Funds)(*) 120,000 1,455,000
----------
1,777,978
----------
INDONESIA - 0.7%
Astra International - (Manufacturing) 500,000 201,893
----------
KOREA - 11.5%
H & CB GDR (144A) - (Financial) 29,194 499,850
Hite Brewery - (Food & Beverages) 8,500 241,216
Kookmin Bank GDR - (Financial) 34,300 370,906
Korea Telecom ADR - (Telecoms) 10,350 357,075
Korea Electric Power ADR - (Utilities) 12,100 198,138
Pohang Iron & Steel ADR - (Construction Materials) 25,100 527,100
Samsung Electronics GDR - (Manufacturing) 5,500 743,434
Samsung Fire & Marine - (Financial) 14,600 298,577
SK Corporation - (Holding Company) 12,000 226,486
----------
3,462,782
----------
MALAYSIA - 3.6%
Chemical Company of Malaysia - (Manufacturing) 100,000 186,827
Genting - (Hotels/Leisure) 112,000 450,912
IOI Corp - (Manufacturing) 600,000 442,070
----------
1,079,809
----------
PHILIPPINES - 1.0%
Philippine Lng Dist Tele ADR - (Telecoms) 15,500 285,781
----------
SINGAPORE - 0.9%
Clipsal Industries - (Manufacturing) 194,000 263,636
----------
SRI LANKA - 1.0%
John Keells Holdings - (Food & Beverages) 193,750 296,278
----------
TAIWAN - 9.2%
ROC Taiwan Fund - (Country Fund)(*) 149,000 1,434,124
Taiwan Fund Inc. - (Country Fund)(*) 65,100 1,322,344
----------
2,756,468
----------
2
<PAGE>
ISSUER SHARES VALUE
THAILAND - 4.5%
EGCO F/R - (Utilities) 456,900 $ 554,781
Golden Land Properties F/R - (Property)(*) 625,000 134,550
PTT Exploration & Prod. F/R - (Resources) 70,000 354,686
Thai President Food F/R - (Food & Beverages) 60,400 306,044
----------
1,350,061
----------
CROATIA - 1.7%
Pliva GDR(144A) - (Manufacturing) 41,500 514,907
----------
EGYPT - 1.6%
Al-Ahram Bev GDR(144a) - (Food & Beverages)(*) 27,000 479,393
----------
ESTONIA - 0.4%
Eesti Telekom GDR 144A - (Telecoms) 5,000 118,003
----------
GREECE - 1.0%
OTE - (Telecoms) 13,800 310,989
----------
HUNGARY - 3.4%
Gedeon Richter GDS (144A) - (Manufacturing) 8,800 488,121
Matav ADR - (Telecoms) 8,000 278,500
OTP GDR (144A) - (Financial) 6,100 270,878
----------
1,037,499
----------
ISRAEL - 3.7%
Bank Leumi le Israel - (Financial) 160,000 347,284
Blue Square Israel ADS - (Retail) 13,500 125,719
ECI Telecom - (Telecoms) 7,000 194,688
Galileo Technology - (Manufacturing)(*) 9,000 158,063
Orbotech - (Manufacturing)(*) 3,400 289,850
----------
1,115,604
----------
POLAND - 1.3%
Softbank - (Manufacturing) 1,700 73,483
TPSA GDR 144A - (Telecoms) 43,500 319,133
----------
392,616
----------
RUSSIA - 1.2%
LUKoil Holdings Spon ADR - (Resources) 6,000 361,680
----------
SOUTH AFRICA - 5.6%
Bidvest - (Financial) 30,000 221,043
Dimension data hldgs - (Manufacturing)(*) 18,000 118,037
Impala Platinum Holdings - (Resources) 5,000 158,414
New Clicks Holdings - (Retail) 172,000 254,730
Reunert - (Holding Companies) 270,000 370,027
Sappi - (Manufacturing) 20,000 139,994
Softline - (Manufacturing)(*) 413,000 424,198
----------
1,686,443
----------
3
<PAGE>
ISSUER SHARES VALUE
TURKEY- 5.2%
Akcansa Cimento SA - (Construction Materials) 11,200,000 $ 247,629
Koc Holding - (Holding Companies) 1,300,000 260,813
Migros - (Retail) 600,000 407,802
Yapi Ve Kredi Bank - (Financial) 9,000,000 287,427
Yazicilar - (Holding Companies)(*) 3,700,000 357,523
----------
1,561,194
----------
TOTAL COMMON AND PREFERRED STOCKS
(identified cost, $28,355,670) 28,621,782
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT - 4.4%
Investors Bank & Trust Repurchase Agreement, 4.94%,
dated 4/28/00, $1,332,290 due on 5/1/00 (secured by
Federal Government Agency securities), at cost $1,331,742 1,331,742
----------
TOTAL INVESTMENTS (identified cost, $29,687,412) 29,953,524
Other assets, less liabilities - 0.4% 121,918
----------
NET ASSETS - 100% $30,075,442
==========
</TABLE>
(*) Non-income producing security
(**) Preferred Stock
See notes to financial statements.
4
<PAGE>
DLB STEWART IVORY EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2000
<TABLE><CAPTION>
----------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (identified cost, $29,687,412) $ 29,953,528
Foreign cash, at value (cost, $73,531) 73,531
Dividends and interest receivable 114,447
Receivable from investment manager 8,786
Other assets 451
------------
30,150,743
------------
LIABILITIES:
Accrued management fees 29,373
Accrued expenses 45,928
------------
75,301
------------
NET ASSETS $ 30,075,442
============
NET ASSETS CONSIST OF:
Paid-in capital $ 26,105,897
Unrealized appreciation of investments and translation of assets and
liabilities in foreign currencies 264,499
Accumulated undistributed net realized gain on investments and
foreign currency transactions 3,717,209
Accumulated net investment loss (12,163)
------------
Total $ 30,075,442
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 2,589,982
============
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE
(NET ASSETS / SHARES OF BENEFICIAL INTEREST OUTSTANDING) $ 11.61
============
</TABLE>
See notes to financial statements.
5
<PAGE>
DLB STEWART IVORY EMERGING MARKETS FUND
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 2000
<TABLE><CAPTION>
----------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME:
Dividends (net of foreign tax withheld of $10,218) $ 213,295
Interest 50,575
------------
263,870
------------
EXPENSES:
Management fee 187,448
Trustees' fees 2,886
Custodian fees 56,074
Accounting and audit fees 16,566
Registration fees 15,976
Legal fees 7,979
Transfer agent fee 4,270
Miscellaneous 15,948
------------
307,147
Reduction of expenses by investment manager (31,114)
------------
Net expenses 276,033
------------
Net investment loss (12,163)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) (identified cost basis):
Investment transactions 3,726,571
Foreign currency transactions and forward foreign currency exchange
contracts and other transactions denominated in foreign currency (9,362)
------------
Net realized gain on investments and foreign currency 3,717,209
------------
Change in unrealized appreciation (depreciation):
Investments 266,116
Foreign currency and forward foreign currency exchange contracts
and other transactions denominated in foreign currency (1,617)
------------
Net unrealized gain on investments and foreign currency 264,499
------------
Net realized and unrealized gain on investments and foreign
currency 3,981,708
------------
Increase in net assets from operations $ 3,969,545
============
</TABLE>
See notes to financial statements.
6
<PAGE>
DLB STEWART IVORY EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 2000
<TABLE><CAPTION>
------------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment loss $ (12,163)
Net realized gain on investments and foreign currency 3,717,209
Net unrealized appreciation of investments and foreign currency 264,499
------------
3,969,545
------------
Fund share transactions:
Net proceeds from sales of shares 26,138,309
Cost of shares reacquired (32,412)
------------
26,105,897
------------
Total increase in net assets 30,075,442
NET ASSETS:
At beginning of period --
------------
At end of period (including accumulated net investment loss of $12,163) $ 30,075,442
============
</TABLE>
See notes to financial statements.
7
<PAGE>
DLB STEWART IVORY EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 2000
<TABLE><CAPTION>
------------------------------------------------------------------------------------------------
<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 loss --
Net realized and unrealized gain on investments and foreign currency 1.61
------------
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 loss 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 (0.29%)*
</TABLE>
* Annualized
See notes to financial statements.
8
<PAGE>
DLB STEWART IVORY EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION
DLB Stewart Ivory Emerging Markets Fund (the "Fund") is a non-diversified
series of The DLB Fund Group (the "Trust"), a Massachusetts business trust.
The Trust is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
investment operations on November 1, 1999.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices
are not available are valued at last quoted bid prices. Securities for
which there are no such quotations or valuations are valued at fair value
as determined in good faith by or at the direction of the Trustees.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value.
REPURCHASE AGREEMENTS - Securities purchased under agreements to resell to
the original owner are recorded at cost. The Fund may enter into such
agreements with institutions that the Fund's investment adviser has
determined to be creditworthy. The Fund requires that the securities so
purchased be transferred to the custodian under terms that enable the Fund
to obtain such securities in the event of a default. The Fund monitors, on
a daily basis, the value of the securities to assure that such value,
including accrued interest, is greater than amounts owed to the Fund.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars at current exchange rates. Purchases and
sales of foreign investments and income and expenses are converted into
U.S. dollars at currency exchange rates prevailing on the respective dates
of such transactions. Security transaction gains and losses attributable to
changes in foreign currency exchange rates are recorded for financial
statement purposes as net realized gains and losses on investments. Income
and expense gains and losses that are attributable to changes in foreign
exchange rates are recorded for financial statement purposes as foreign
currency transaction gains and losses. The portion of both realized and
unrealized gains and losses on investments that results from fluctuations
in foreign currency exchange rates is not separately disclosed.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - The Fund may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. The risks
associated with these contracts include the possible inability of
counterparties to meet the terms of the contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
The Fund enters into forward contracts for hedging purposes only. The Fund
may enter into contracts to deliver or receive foreign currency it will
receive from or require for its normal investment activities. It may also
use contracts in a manner intended to protect foreign currency-denominated
securities from declines in value resulting from unfavorable exchange rate
movements. Forward foreign currency exchange contracts are adjusted by the
daily change in the exchange rates of the underlying currencies, and any
gains or losses are recorded for financial statement purposes as unrealized
until the contract settlement date.
9
<PAGE>
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded
on the trade date. Dividend income is recorded on the ex-dividend date.
Dividend payments received in additional securities are recorded in an
amount equal to the value of the securities received. Interest income is
recorded on the accrual basis.
TAXES AND DISTRIBUTIONS - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute to shareholders all of its
taxable income, including any net realized gain on investments.
Accordingly, no provision for federal income or excise tax is necessary.
<PAGE>
The Fund files a tax return annually using tax accounting methods required
by the Code, which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the net investment income and net realized gain reported in
these financial statements may differ from the amounts reported on the
Fund's tax return, and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders on Form 1099-DIV.
Foreign taxes are provided with respect to interest and dividend income
earned in foreign currencies in accordance with applicable tax rates. To
the extent that such taxes are unrecoverable, they are recorded as a
reduction of net investment income.
Distributions to shareholders are recorded on the ex-dividend date. The
Fund distinguishes between distributions for tax purposes and financial
reporting purposes. Differences between income for financial reporting
purposes and tax-basis earnings and profits may result in the reporting of
temporary over-distributions in the financial statements. Such
over-distributions are classified as distributions in excess of net
investment income or accumulated net realized gains. Distributions, if any,
in excess of tax-basis earnings and profits are reported as return of
capital.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from those such estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund engages David L. Babson & Company Inc. ("Babson") to provide
investment advisory and administrative services and general office
facilities. The fee for such services is computed daily and paid monthly at
an effective annual rate of 1.25% of average daily net assets. For the six
months ended April 30, 2000, the management fee amounted to $187,448.
Babson has agreed to pay the Fund's operating expenses such that the Fund's
total aggregate expenses do not exceed 1.75% of average daily net assets.
For the six months ended April 30, 2000, $31,114 of fund expenses were
borne by Babson.
10
<PAGE>
Babson has entered into a sub-advisory agreement with Babson-Stewart Ivory
International ("BSII"), an affiliate of Babson, with respect to the
management of the international component of the Fund's portfolio. Under
the sub-advisory agreement, Babson pays BSII a monthly fee at the effective
annual rate of .875% of average daily net assets.
The Fund pays no compensation directly to the Trustees who also are
officers of the investment manager, nor to the officers of the Fund, all of
whom receive remuneration for their services to the Fund from Babson.
4. PORTFOLIO SECURITIES
Purchases and sales of investments, other than short-term obligations, for
the six months ended April 30, 2000 aggregated $36,943,611 and $12,497,784,
respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate cost $ 29,687,412
===============
Gross unrealized appreciation $ 2,996,813
Gross unrealized depreciation (2,730,697)
---------------
Net unrealized appreciation $ 266,116
===============
5. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
Six Months Ended
April 30, 2000
--------------
Shares sold 2,592,545
Redemptions (2,563)
--------------
Net increase 2,589,982
==============
11
<PAGE>
6. RISKS ASSOCIATED WITH FOREIGN INVESTMENTS
Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those
not subject to disclosure and reporting requirements of the U.S. securities
laws. Foreign issuers are generally not bound by uniform accounting,
auditing, and financial reporting requirements and standards of practice
comparable to those applicable to domestic issuers. Investments in foreign
securities also involve the risk of possible adverse changes in investment
or exchange control regulations, expropriation or confiscatory taxation,
limitation on the removal of funds or other assets of the Fund, political
or financial instability or diplomatic and other developments that could
affect such investments. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the United
States, and securities of some foreign issuers (particularly those located
in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. In general, there is less overall
government supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
12
