As filed with the Securities and Exchange Commission on October 24, 2000
Registration Nos. 033-82366 and 811-08690
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER [X]
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 21 [X]
REGISTRATION STATEMENT UNDER [X]
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 23 [X]
(Check appropriate box or boxes)
THE DLB FUND GROUP
(Exact name of registrant as specified in charter)
One Memorial Drive, Cambridge, MA 02142
(Address of principal executive offices)
Registrant's Telephone Number, Including Area Code: (617) 225-3800
Name and address
of agent for service: Copy to:
--------------------- --------
John E. Deitelbaum, Counsel Gregory D. Sheehan, Esq.
David L. Babson & Company Inc. Ropes & Gray
One Memorial Drive One International Place
Cambridge, MA 02142 Boston, MA 02110
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b) of Rule 485
[X] On December 19, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On _____________ pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On _____________ pursuant to paragraph (a)(2)
If appropriate, check the following box:
[X] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Note: This Post-Effective Amendment No. 21 to the Form N-1A Registration
Statement of The DLB Fund Group (the "Trust") relates only to the following
Series of the Trust: DLB Enhanced Index Growth Fund, DLB Enhanced Index Value
Fund and DLB Small Capitalization Value Fund. No information relating to any
other series of Registrant is amended or superseded hereby.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 24, 2000
THE DLB FUND GROUP
This Prospectus offers shares of the following Funds:
o DLB ENHANCED INDEX GROWTH FUND
seeks to outperform the total return performance of its benchmark
index (the Russell 1000 Growth Index), while maintaining risk
characteristics similar to those of the benchmark
o DLB ENHANCED INDEX VALUE FUND
seeks to outperform the total return performance of its benchmark
index (the Russell 1000 Value Index), while maintaining risk
characteristics similar to those of the benchmark
o DLB SMALL CAPITALIZATION VALUE FUND
seeks long-term capital appreciation primarily through investment
in small to medium-size companies
David L. Babson & Company Inc. (the "Manager") is the investment manager for
each of the Funds.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SHARES OF THE FUNDS OR PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY STATEMENT TO THE CONTRARY IS A CRIME.
PROSPECTUS
December 18, 2000
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES WHERE THE OFFER IS NOT PERMITTED.
<PAGE>
TABLE OF CONTENTS
ABOUT THE FUNDS 1
DLB Enhanced Index Growth Fund 1
DLB Enhanced Index Value Fund 4
DLB Small Company Value Fund 7
DESCRIPTIONS OF PRINCIPAL INVESTMENT RISKS 10
TEMPORARY DEFENSIVE POSITIONS 12
HOW THE FUNDS ARE MANAGED 13
The Manager 13
Investment Advisory Fees 13
Portfolio Managers 13
Certain Performance Information Related to Other Accounts 14
INVESTING IN THE FUNDS 16
How to Open an Account 16
How to Purchase Shares 16
How to Sell Shares 17
How Share Price is Determined 18
Distribution and Service (Rule 12b-1) Plans 19
Principal Underwriter 19
DISTRIBUTIONS 20
TAXES 21
APPENDIX 22
Additional Investment Policies and Risk Considerations 22
<PAGE>
ABOUT THE FUNDS
DLB ENHANCED INDEX GROWTH FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Enhanced Index Growth Fund (the "Enhanced
Index Growth Fund") is to outperform the total return performance of its
benchmark index, the Russell 1000 Growth Index, while maintaining risk
characteristics similar to those of the benchmark.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all (but no
less than 65%) of its total assets in common stocks of companies included in the
Fund's benchmark index. The Manager believes that a systematic strategy that
exploits market inefficiencies can be used to produce a portfolio for the Fund
that will outperform the Fund's benchmark index while maintaining risk
characteristics similar to the benchmark.
The Manager uses quantitative analysis to identify groups of stocks included
within the Fund's benchmark index that the Manager believes will outperform OR
underperform the index. The Manager identifies these stocks through a
proprietary quantitative model that ranks all stocks within the index based on
several factors relating to a company's valuation, earnings quality, stock price
momentum and earnings improvement. Based on these rankings, the Manager
constructs a broadly diversified portfolio (the Fund will generally hold
approximately 90% of the securities in the index) by (1) overweighting
high-ranking stocks, (2) underweighting low-ranking stocks (or not holding them
at all), and (3) market-weighting those stocks that do not have especially high
or low rankings. Neither market timing nor macro economic forecasting are used
by the Manager in constructing the Fund's portfolio.
BENCHMARK INDEX: The Fund's benchmark index is the Russell 1000 Growth Index,
which is an unmanaged index that contains those stocks with a greater than
average growth orientation among the stocks of the 1,000 largest U.S. companies
based on total market capitalization. Securities in this index tend to exhibit
higher price-to-book ratios and higher forecasted growth than the value
universe.
PRINCIPAL INVESTMENT RISKS
There is no guarantee that the Fund will achieve its objective, and you could
lose money on your investment. Furthermore, the Manager, despite using various
investment and risk analysis techniques, may not achieve the results expected
from an investment in the Fund.
The Enhanced Index Growth Fund is subject to several risks, any of which could
cause you to lose money. These include:
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
EQUITY SECURITIES RISK: Equity securities tend to be more volatile and riskier
than some other investment options. Equity securities may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors affecting the securities markets generally, an entire
industry or sector or a particular company.
-1-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in an issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
MANAGEMENT RISK: Whether or not the Fund succeeds in outperforming its benchmark
index will depend on the Manager's ability to successfully determine which
stocks in the index to overweight, underweight or avoid altogether.
INVESTMENT STYLE RISK: Different equity investment styles (e.g., growth and
value) go in and out of favor depending on market conditions. Therefore, this
Fund's performance may be better or worse than other funds with different
investment styles.
PORTFOLIO TURNOVER RISK: Changes are made in the Fund's portfolio whenever the
Manager believes such changes are desirable. Consequently, the Fund's portfolio
turnover may be high. Increased portfolio turnover rates may result in higher
costs from brokerage commissions, dealer-mark-ups and other transaction costs
and may also result in higher taxable capital gains. Higher costs associated
with increased portfolio turnover may offset gains in the Fund's performance.
You will find a more detailed discussion of these risks, and others that may
affect your investment in the Funds, in the section entitled "Descriptions of
Principal Investment Risks," beginning on page 10.
PAST PERFORMANCE
Because the Fund has been in existence for less than one full calendar year,
information on the Fund's performance is not provided in this section.
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 0.50%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2) (3) 0.87%
----
Total Annual Fund Operating Expenses 1.37%
----
Fee Waiver (0.67%)
----
Net Expenses (4) 0.70%
====
(1) The Fund has adopted (but not implemented) a distribution and service plan
pursuant to Rule 12b-1 that permits payments by the Fund at an annual rate
of up to 0.50% of the Fund's average daily net assets. See "Investing in
the Funds-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
(3) "Other Expenses" for the Enhanced Index Growth Fund are based on estimated
amounts for the current fiscal year.
(4) The Manager has contractually agreed with the Fund to bear certain expenses
for the current fiscal year to the extent that the Fund's Total Annual Fund
Operating Expenses--other than brokerage commissions, hedging transaction
fees and other investment related costs, extraordinary, non-recurring and
certain other unusual expenses, such as litigation and other extraordinary
legal expenses, securities lending fees and expenses, and transfer
taxes--would otherwise exceed the percentages of the Fund's average daily
net assets noted in the bottom line of the table. The Manager's expense
agreement with the Fund may not be terminated prior to December 20, 2001.
In addition, it will automatically continue for successive one-year periods
unless either The DLB Fund Group or the Manager terminates the agreement by
giving six months' written notice to the other party.
-2-
<PAGE>
EXPENSE INFORMATION (CONT.)
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment earns a 5% return each year and that the Fund's
operating expenses remain the same, except that the expense reimbursement is
reflected only for the first year of each period. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
$72 $368
Since the Fund does not impose any redemption fees, the figures shown would be
the same whether or not you redeemed your shares at the end of a period.
-3-
<PAGE>
DLB ENHANCED INDEX VALUE FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Enhanced Index Value Fund (the "Enhanced
Index Value Fund") is to outperform the total return performance of its
benchmark index, the Russell 1000 Value Index, while maintaining risk
characteristics similar to those of the benchmark.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest substantially all (but no
less than 65%) of its total assets in common stocks of companies included in the
Fund's benchmark index. The Manager believes that a systematic strategy that
exploits market inefficiencies can be used to produce a portfolio for the Fund
that will outperform the Fund's benchmark index while maintaining risk
characteristics similar to the benchmark.
The Manager uses quantitative analysis to identify groups of stocks included
within the Fund's benchmark index that the Manager believes will outperform OR
underperform the index. The Manager identifies these stocks through a
proprietary quantitative model that ranks all stocks within the index based on
several factors relating to a company's valuation, earnings quality, stock price
momentum and earnings improvement. Based on these rankings, the Manager
constructs a broadly diversified portfolio (the Fund will generally hold
approximately 90% of the securities in the index) by (1) overweighting
high-ranking stocks, (2) underweighting low-ranking stocks (or not holding them
at all), and (3) market-weighting those stocks that do not have especially high
or low rankings. Neither market timing nor macro economic forecasting are used
by the Manager in constructing the Fund's portfolio.
BENCHMARK INDEX: The Fund's benchmark index is the Russell 1000 Value Index,
which is an unmanaged index that contains those stocks with a greater than
average value orientation among the stocks of the 1,000 largest U.S. companies
based on total market capitalization. Securities in this index tend to exhibit
lower price-to-book ratios and lower forecasted growth values than the growth
universe.
PRINCIPAL INVESTMENT RISKS
There is no guarantee that the Fund will achieve its objective, and you could
lose money on your investment. Furthermore, the Manager, despite using various
investment and risk analysis techniques, may not achieve the results expected
from an investment in the Fund.
The Enhanced Index Value Fund is subject to several risks, any of which could
cause you to lose money. These include:
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
EQUITY SECURITIES RISK: Equity securities tend to be more volatile and riskier
than some other investment options. Equity securities may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors affecting the securities markets generally, an entire
industry or sector or a particular company.
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in an issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
-4-
<PAGE>
PRINCIPAL INVESTMENT RISKS
INVESTMENT STYLE RISK: Different equity investment styles (e.g., growth and
value) go in and out of favor depending on market conditions. Therefore, this
Fund's performance may be better or worse than other funds with different
investment styles.
MANAGEMENT RISK: Whether or not the Fund succeeds in outperforming its benchmark
index will depend on the Manager's ability to successfully determine which
stocks in the index to overweight, underweight or avoid altogether.
PORTFOLIO TURNOVER RISK: Changes are made in the Fund's portfolio whenever the
Manager believes such changes are desirable. Consequently, the Fund's portfolio
turnover may be high. Increased portfolio turnover rates may result in higher
costs from brokerage commissions, dealer-mark-ups and other transaction costs
and may also result in higher taxable capital gains. Higher costs associated
with increased portfolio turnover may offset gains in the Fund's performance.
You will find a more detailed discussion of these risks, and others that may
affect your investment in the Funds, in the section entitled "Descriptions of
Principal Investment Risks," beginning on page 10.
PAST PERFORMANCE
Because the Fund has been in existence for less than one full calendar year,
information on the Fund's performance is not provided in this section.
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 0.50%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2) (3) 0.87%
----
Total Annual Fund Operating Expenses 1.37%
----
Fee Waiver (0.67%)
----
Net Expenses (4) 0.70%
====
(1) The Fund has adopted (but not implemented) a distribution and service plan
pursuant to Rule 12b-1 that permits payments by the Fund at an annual rate
of up to 0.50% of the Fund's average daily net assets. See "Investing in
the Funds-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
(3) "Other Expenses" for the Enhanced Index Value Fund are based on estimated
amounts for the current fiscal year.
(4) The Manager has contractually agreed with the Fund to bear certain expenses
for the current fiscal year to the extent that the Fund's Total Annual Fund
Operating Expenses--other than brokerage commissions, hedging transaction
fees and other investment related costs, extraordinary, non-recurring and
certain other unusual expenses, such as litigation and other extraordinary
legal expenses, securities lending fees and expenses, and transfer
taxes--would otherwise exceed the percentages of the Fund's average daily
net assets noted in the bottom line of the table. The Manager's expense
agreement with the Fund may not be terminated prior to December 20, 2001.
In addition, it will automatically continue for successive one-year periods
unless either The DLB Fund Group or the Manager terminates the agreement by
giving six months' written notice to the other party.
-5-
<PAGE>
EXPENSE INFORMATION (CONT.)
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment earns a 5% return each year and that the Fund's
operating expenses remain the same, except that the expense reimbursement is
reflected only for the first year of each period. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
$72 $368
Since the Fund does not impose any redemption fees, the figures shown would be
the same whether or not you redeemed your shares at the end of a period.
-6-
<PAGE>
DLB SMALL CAPITALIZATION VALUE FUND
INVESTMENT OBJECTIVE
The investment objective of the DLB Small Capitalization Value Fund (the "Small
Cap Value Fund") is long-term capital appreciation primarily through investment
in small to medium-size companies.
PRINCIPAL INVESTMENT STRATEGIES
MARKET CAPITALIZATION: Under normal circumstances, the Fund will invest
substantially all (but no less than 65%) of its total assets in the securities
of companies whose market capitalizations at the time of initial purchase by the
Fund are included in the Russell 2000 Index. The range of capitalization of
companies included in the Russell 2000 Index will fluctuate as market prices
increase or decrease.
SECURITY SELECTION: In selecting securities for investment, the Manager
considers common stocks of those companies that satisfy the Fund's market
capitalization criteria and whose current prices do not adequately reflect, in
the Manager's opinion, the ongoing business value of the underlying companies.
Using a core value investment strategy, the Manager finds companies that are out
of favor with investors. The Fund's investment strategy focuses on bottom-up
stock-picking using fundamental analysis, rather than market or economic
forecasts. More specifically, the Fund invests in companies that the Manager
believes possess one or more of the following characteristics:
o Strong financials
o Proven products or services
o Dominant market share
o Sustainable competitive advantage
o Attractive valuation
o Potential for improving margins
o Potential for accelerating earnings
PRINCIPAL INVESTMENT RISKS
There is no guarantee that the Fund will achieve its objective, and you could
lose money on your investment. Furthermore, the Manager, despite using various
investment and risk analysis techniques, may not achieve the results expected
from an investment in the Fund.
The Small Cap Value Fund is subject to several risks, any of which could cause
you to lose money. These include:
MARKET RISK: This is the risk that the price of a security or securities held by
the Fund will fall due to changing economic, political or market conditions.
EQUITY SECURITIES RISK: Equity securities tend to be more volatile and riskier
than some other investment options. Equity securities may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors affecting the securities markets generally, an entire
industry or sector or a particular company.
COMPANY RISK: Prices of securities react to the economic condition of the
issuer. The Fund's investments in an issuer may rise and fall based on factors
such as the issuer's actual and anticipated earnings, changes in management, and
the potential for takeovers and acquisitions.
SMALL COMPANY RISK: Investing in securities of small companies may involve
greater risk than investing in more established companies. Often, small
companies and the industries in which they are focused are still evolving, and
they are more sensitive to changing market conditions than larger companies in
more established industries. Small companies often have limited product lines
and financial resources and less experienced management. Also, because they may
have fewer securities outstanding and the
-7-
<PAGE>
PRINCIPAL INVESTMENT RISKS (CONT.)
frequency and volume of trading may be less, these securities may be less liquid
than securities of larger companies. Consequently, their securities may be more
volatile and have returns that vary, sometimes significantly, from the overall
stock market.
INVESTMENT STYLE RISK: Different equity investment styles (e.g., growth and
value) go in and out of favor depending on market conditions. Therefore, this
Fund's performance may be better or worse than other funds with different
investment styles.
NON-DIVERSIFICATION RISK: Because the Fund may invest its assets in a small
number of issuers, the Fund is more susceptible than a diversified fund to any
economic, political or regulatory event adversely affecting a particular issuer.
MANAGEMENT RISK: This is the risk that the Fund will underperform other funds
with similar investment objectives due to poor investment decisions by the
Manager.
You will find a more detailed discussion of these risks, and others that may
affect your investment in the Funds, in the section entitled "Descriptions of
Principal Investment Risks," beginning on page 10.
PAST PERFORMANCE
Because the Fund has been in existence for less than one full calendar year,
information on the Fund's performance is not provided in this section.
EXPENSE INFORMATION
As an investor, you pay certain fees and expenses in connection with your
investment. The table shown below describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES EXPRESSED
AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
(Expenses that are deducted from Fund assets)
Management Fees 0.70%
Distribution and Service (12b-1) Fees (1) None
Other Expenses (2)(3) 0.38%
----
Total Annual Fund Operating Expenses 1.08%
Fee Waiver (0.23%)
----
Net Expenses (4) 0.85%
====
(1) The Fund has adopted (but not implemented) a distribution and service plan
pursuant to Rule 12b-1 that permits payments by the Fund at an annual rate
of up to 0.50% of the Fund's average daily net assets. See "Investing in
the Funds-- Distribution and Service (Rule 12b-1) Plans."
(2) "Other Expenses" include accounting and audit fees, administrative fees,
custodian fees, transfer agent fees, legal fees, registration fees,
printing fees and fees paid to The DLB Fund Group's independent Trustees.
(3) "Other Expenses" for the Small Cap Value Fund are based on estimated
amounts for the current fiscal year.
(4) The Manager has contractually agreed with the Fund to bear certain expenses
for the current fiscal year to the extent that the Fund's Total Annual Fund
Operating Expenses--other than brokerage commissions, hedging transaction
fees and other investment related costs, extraordinary, non-recurring and
certain other unusual expenses, such as litigation and other extraordinary
legal expenses, securities lending fees and expenses, and transfer
taxes--would otherwise exceed the percentages of the Fund's average daily
net assets noted in the bottom line of the table. The Manager's expense
agreement with the Fund may not be terminated prior to December 20, 2001.
In addition, it will automatically continue for successive one-year periods
unless either The DLB Fund Group or the Manager terminates the agreement by
giving six months' written notice to the other party.
-8-
<PAGE>
EXPENSE INFORMATION (CONT.)
EXAMPLES
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment earns a 5% return each year and that the Fund's
operating expenses remain the same, except that the expense reimbursement is
reflected only for the first year of each period. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
$87 $321
Since the Fund does not impose any redemption fees, the figures shown would be
the same whether or not you redeemed your shares at the end of a period.
-9-
<PAGE>
DESCRIPTIONS OF PRINCIPAL INVESTMENT RISKS
This section explains the principal investment risks associated with investments
in the Funds. These risks are the primary reasons for possible decreases in the
value of your investments in the Funds. The Fund summaries, on pages 1 to 9,
identify which of these risks apply to each Fund. The types of risks and the
extent to which they affect the value of your investment in the Funds may change
over time, particularly as the types of investments made by the Funds change.
COMPANY RISK
A company's economic condition influences the prices of its securities. The
price of any security held by any Fund may rise or fall for a number of reasons,
including but not limited to the following:
o management decisions
o changes in management
o changing demand for the company's goods or services
o changes in or differences between actual and anticipated earnings
o the potential for takeovers and acquisitions
o increased production costs
o stricter government regulations
o a rating agency downgrade
APPLIES TO: ALL FUNDS
EQUITY SECURITIES RISK
All of the Funds invest primarily in equity securities. Equity securities are
securities that represent an ownership interest (or the right to acquire an
ownership interest) in a company. Although these types of securities offer
greater potential for long-term growth, they are more volatile and more risky
than some other forms of investment. Equity securities may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors affecting the securities market generally, an entire industry
or sector or a particular company. Therefore, the value of your investment in a
Fund may decrease.
APPLIES TO: ALL FUNDS
MANAGEMENT RISK
The Manager has discretion to determine the investments made by each Fund and no
Fund is passively managed. The Small Cap Value Fund may therefore underperform
other funds with similar investment objectives due to poor investment decisions
by the Manager. Likewise, the Enhanced Index Growth Fund and the Enhanced Index
Value Fund may not outperform their respective benchmark indices due to the
Manager's inability to successfully determine which stocks in the indices to
overweight, underweight or avoid altogether. Therefore, a Fund's return may be
lower from the performance of the index with which it is compared. APPLIES TO:
ALL FUNDS
MARKET RISK
The value of the securities held by the Funds may fall due to changing economic,
political or market conditions, the general outlook for corporate earnings,
changing interest rates, investor sentiment or disappointing earnings results.
APPLIES TO: ALL FUNDS
NON-DIVERSIFICATION RISK
The Small Cap Value Fund is non-diversified, which means that it may invest a
relatively high percentage of its assets in the securities of relatively few
issuers. Investment in the securities of a limited number of issuers may
increase the risk of loss to a Fund should there be a decline in the market
value of any one portfolio security. Investment in a non-diversified fund
therefore entails greater risks than investment in a diversified fund.
APPLIES TO: SMALL CAP VALUE FUND
-10-
<PAGE>
INVESTMENT STYLE RISK
Different equity investment styles (e.g., growth and value) go in and out of
favor depending on market conditions. Therefore, there is a risk that a Fund may
underperform other funds with different investment styles.
In addition, there are special risks investing in "value" stocks or stocks that
are otherwise out of favor with investors. The factors causing a stock's
unpopularity may continue longer than expected or may worsen. These factors may
range from a drop in earnings expectations to a major business problem. As a
result, the stock's value may drop, or it may not appreciate as the Manager
expected. Furthermore, unpopular stocks involve the risk that even if a company
experiences improved performance, the price of its stock may drop, or it may not
rise in conjunction with the improvement in performance as the Manager expected.
As with investing in "value" stocks, there are special risks involved in
investing in "growth" companies. The prices of growth company securities may
fall to a greater extent than the overall equity markets due to changing
economic, political or market factors. Growth company securities tend to be more
volatile in terms of price swings and trading volume than value stocks. Growth
companies, especially technology-related companies, have seen dramatic rises in
stock valuations. Funds investing in these types of companies also are exposed
to the risk that the market may deem their stock prices over-valued, which could
cause steep and/or volatile price swings.
APPLIES TO: ALL FUNDS
PORTFOLIO TURNOVER RISK
Changes are made in the Fund's portfolio whenever the Manager believes such
changes are desirable. Short-term transactions may result from liquidity needs,
securities having reached a price objective, purchasing securities in
anticipation of relatively short-term price gains, changes in the outlook for a
particular company or by reason of economic or other developments not foreseen
at the time of the investment decision. Portfolio turnover rates are generally
not a factor in making buy and sell decisions. Consequently, the Fund's
portfolio turnover may be high. Increased portfolio turnover rates may result in
higher costs from brokerage commissions, dealer-mark-ups and other transaction
costs and may also result in higher taxable capital gains. Higher costs
associated with increased portfolio turnover may offset gains in the Fund's
performance.
APPLIES TO: ALL FUNDS EXCEPT THE SMALL CAP VALUE FUND
SMALL COMPANY RISK
The securities of mid cap, small cap and micro cap companies may change in value
more abruptly than those of larger, more established companies because mid cap,
small cap and micro cap companies are more likely to:
o depend upon a single proprietary product or market niche,
o have limited product lines, markets or financial resources,
o depend on a limited management group,
o have fewer, less liquid securities outstanding, and
o have securities that trade less frequently and in limited volume.
In general, the securities of mid cap, small cap and micro cap companies are
more sensitive to purchase and sale transactions. Therefore, the prices of those
securities tend to be more volatile than the prices of securities of larger
companies.
In many instances, the securities of mid cap, small cap and micro cap companies
are traded only over-the-counter or on a regional securities exchange.
Furthermore, the frequency and volume of their trading are substantially lower
than is typical of larger companies. Therefore, the securities of smaller
companies may be subject to wider price fluctuations. When disposing of these
securities, a Fund may have to sell at discounts from quoted prices, settle for
a less than satisfactory price, or make a series of small sales over an extended
period of time.
APPLIES TO: SMALL CAP VALUE FUND
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TEMPORARY DEFENSIVE POSITIONS
SMALL CAP VALUE FUND
The Small Cap Value Fund may, from time to time, take temporary defensive
positions in securities convertible into common stocks, preferred stocks, high
grade bonds, U.S. Government securities, money market instruments or other
defensive issues in attempting to respond to adverse market, economic,
political, or other conditions. Keep in mind that a temporary defensive strategy
still has the possibility of losing money and may prevent the Fund from
achieving its investment objective.
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HOW THE FUNDS ARE MANAGED
THE MANAGER
Each Fund is advised and managed by its Manager, David L. Babson & Company Inc.
Founded in 1940, the Manager provides investment advisory services to a
substantial number of institutional and other investors, including other
registered investment companies. As of June 30, 2000, the Manager had over $60
billion in assets under management. The Manager's principal locations are One
Memorial Drive, Cambridge, Massachusetts 02142, and 1295 State Street,
Springfield, Massachusetts 01111.
Under separate Management Contracts relating to each Fund, the Manager selects
and reviews each Fund's investments and provides executive and other personnel
for the management of The DLB Fund Group. The Manager carries out its duties
subject to the policies adopted by The DLB Fund Group's Board of Trustees.
INVESTMENT ADVISORY FEES
Each Fund pays the Manager an investment management fee as follows:
Management Fee
(as a % of Average
Name of Fund Daily Net Assets)
----------------------------------------------------
Enhanced Core Growth Fund 0.50%
Enhanced Core Value Fund 0.50%
Small Cap Value Fund 0.70%
PORTFOLIO MANAGERS
ENHANCED INDEX GROWTH FUND, ENHANCED INDEX VALUE FUND:
The Enhanced Index Growth Fund and the Enhanced Index Value Fund are managed by
David L. Babson & Company Inc.'s quantitative investment team.
SMALL CAP VALUE FUND: LANCE F. JAMES, Executive Vice President of the Manager,
is primarily responsible for the day-to-day management of the Small Cap Value
Fund. Mr. James has been employed by the Manager in portfolio management since
1986. He has been primarily responsible for the day-to-day management of the
Fund since its inception. Mr. James is assisted in the day-to-day management of
the Fund by a team of investment professionals at the Manager.
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<PAGE>
CERTAIN PERFORMANCE INFORMATION RELATED TO OTHER ACCOUNTS
SMALL CAP VALUE ACCOUNTS
The information presented below provides related performance information which
may be useful to consider before investing in the Small Cap Value Fund. THE
QUOTED PERFORMANCE DATA BELOW DOES NOT REPRESENT THE HISTORICAL PERFORMANCE OF
THE SMALL CAP VALUE FUND AND SHOULD NOT BE INTERPRETED AS BEING INDICATIVE OF
THE PAST OR FUTURE PERFORMANCE OF THE FUND. The expenses, timing of purchases
and sales of portfolio securities, availability of cash flows, brokerage
commissions, portfolio composition and investment policies of the Small Cap
Value Fund, as well as any changes in market conditions, are all reasons that
the performance results of the Fund may vary from the related performance
results shown below.
In addition to serving as investment advisor to The DLB Fund Group, the Manager
has also served, since August 1, 1991, as the investment manager of other
accounts that have investment objectives, policies and strategies that are
substantially similar (although not necessarily identical) to those of the Small
Cap Value Fund (collectively, the "Small Cap Value Accounts"). Lance F. James,
the Small Cap Value Fund's portfolio manager, has also been the portfolio
manager of the Small Cap Value Accounts since 1991.
The performance information shown below is based on a composite of the Small Cap
Value Accounts adjusted to give effect to the higher estimated fees and expenses
of the Small Cap Value Fund (without giving effect to any expense waivers or
reimbursements) during the 2001 fiscal year. The bar chart below illustrates the
variability of returns achieved by the Manager for the Small Cap Value Accounts.
The table following the bar chart compares the average annual total returns that
the Manager achieved for the Small Cap Value Accounts over time to those of a
broad-based securities market index.
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
17.82% 28.41% 31.34% -5.69% 8.71%
Best Quarter: 2nd Quarter 1999, +17.34% Worst Quarter: 3rd Quarter 1998, -19.30%
The Small Cap Value Accounts' year-to-date return through September 30, 2000 was
8.19%.
================================================================================
Average Annual Total Returns
For Similar Account*
For the periods ended December 31, 1999
================================================================================
Since
Inception
1 Year 3 Years 5 Years (8/1/91)
--------------------------------------------------------------------------------
Small Cap Value 8.71% 10.43% 15.29% 17.40%
Accounts
Russell 2000
Value Index -1.49% 6.69% 13.14% 14.43%
================================================================================
* As of December 31, 1999, the Small Cap Value Accounts consisted of 21
accounts totaling approximately $1,215 million in assets.
The RUSSELL 2000 VALUE INDEX is an unmanaged index that measures the performance
of those companies in the Russell 2000 Index with lower price-to-book ratios and
lower forecasted growth values. The Russell 2000 Index is a broad-based index
that consists of the 2000 smallest securities in the Russell 3000 Index and is a
commonly used measure of the stock performance of small and medium-size
companies in the United States.
Unlike the Small Cap Value Fund, the Small Cap Value Accounts include accounts
that are not registered under the Investment Company Act of 1940 and therefore
are not subject to certain investment limitations,
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diversification requirements, and other restrictions imposed by that Act. In
addition, the Small Cap Value Accounts include accounts that are not subject to
Subchapter M of the Internal Revenue Code, which imposes certain limitations on
the investment operations of the Fund. If the Small Cap Value Accounts had all
been registered under the 1940 Act, and subject to Subchapter M of the Code,
their performance might have been adversely affected.
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<PAGE>
INVESTING IN THE FUNDS
HOW TO OPEN AN ACCOUNT
Before investing in a Fund you will need to open an account with The DLB Fund
Group. You can open an account by completing and returning to The DLB Fund Group
a signed account application. Account applications are available from The DLB
Fund Group, whose address and toll free number are provided on the back of this
prospectus.
When completing the application, please be sure to provide your social security
number or taxpayer identification number on the application and designate the
account(s) to which funds or securities may be transferred upon redemption.
Designation of additional accounts or any change in the accounts originally
designated must be made by you in writing, with the signature medallion
guaranteed by a commercial bank, a member firm of a domestic securities exchange
or one of certain other financial institutions.
HOW TO PURCHASE SHARES
You may purchase shares of each Fund directly from The DLB Fund Group on any day
when the New York Stock Exchange ("NYSE") is open for business. The NYSE is
closed on weekend days, most national holidays and Good Friday. Before placing
an order for Fund shares, you should call the Manager at 1-877-766-0014, Attn:
The DLB Fund Group Coordinator.
PURCHASE PRICE: The purchase price of a share of a Fund is the net asset value
next determined after your purchase order is received in good order. Generally,
a purchase order is in good order if the Funds' Transfer Agent, Investors Bank &
Trust Company ("IBT"), has received the consideration for the Fund shares before
the relevant deadline, which is described below under "Purchases."
In most cases, if the Funds' Transfer Agent, IBT, does not receive the
consideration before the relevant deadline, The DLB Fund Group will not consider
the purchase to be in good order. This means that you must resubmit the purchase
order and consideration on the following business day, unless IBT can credit the
consideration to the account of a specific Fund. The Funds do not impose a sales
charge on purchases.
MINIMUM INVESTMENT: The minimum initial investment in a Fund is $100,000, and
the minimum for each subsequent investment is $10,000. If you open multiple
accounts with The DLB Fund Group, you may aggregate your investments in the
Funds to satisfy the minimum investment requirement. You may also satisfy the
minimum initial investment requirement by making an initial investment of at
least $25,000 in a Fund and investing the remainder of the $100,000 minimum
initial investment within 12 months.
PURCHASES: You may purchase shares of a Fund utilizing the following methods:
CASH (by wire transfer only). You must transmit all federal funds to IBT to
Account No. 777777722 for the account of the specific Fund. ("Federal
funds" are monies credited to IBT's account with the Federal Reserve Bank
of Boston.) The deadline for wiring federal funds is 2:00 p.m. Eastern
time.
SECURITIES (only by transferring common stocks on deposit at The Depository
Trust Company ("DTC"), or appropriate fixed income securities, which the
Manager has determined are acceptable). In the case of an investment
in-kind, you must place your securities on deposit at DTC by 4:00 p.m.
Eastern time, the deadline for transferring those securities to the account
designated by the custodian for the Funds (IBT).
The Manager will not accept securities, in exchange for Fund shares, unless:
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o the Manager, in its sole discretion, believes the securities are
appropriate investments for the Fund. (The Manager will accept securities,
in exchange for Fund shares, for investment only and not for resale.);
o you represent and agree that all securities offered to the Fund are not
subject to any restrictions upon their sale by the Fund under the
Securities Act of 1933, or otherwise; and
o the securities may be acquired under the investment restrictions applicable
to the relevant Fund.
The Manager will value securities it accepts in exchange for Fund shares in
accordance with the relevant Fund's procedures for valuation described under
"How Share Price Is Determined" as of the time of the next determination of net
asset value after acceptance. All dividends, interest, subscription or other
rights that are reflected in the market price of accepted securities at the time
of valuation become the property of the relevant Fund and must be delivered to
The DLB Fund Group upon receipt by you from the issuer. If you purchase Fund
shares in exchange for securities, you may, if you are subject to federal income
taxation, recognize a gain or loss for federal income tax purposes, depending
upon your basis in the securities tendered. In all cases, the Manager reserves
the right to reject any particular investment.
CASH AND SECURITIES. You will need to follow the above instructions for
purchases made with a combination of cash and securities.
Purchases will be made in full and fractional shares of each Fund calculated to
three decimal places. The DLB Fund Group will send to shareholders written
confirmation (including a statement of shares owned) at the time of each
transaction. The DLB Fund Group reserves the right at any time to reject an
order.
HOW TO SELL SHARES
You may redeem Fund shares on any day when the NYSE is open for business.
The Funds will redeem their shares at a price equal to their net asset value per
share next determined after IBT receives the redemption request in good order. A
redemption request is in good order if it:
o includes the correct name in which shares are registered, your account
number and the number of shares or the dollar amount of shares to be
redeemed; and
o is signed correctly in accordance with the form of registration. (Persons
acting in a fiduciary capacity, or on behalf of a corporation, partnership
or trust, must specify, in full, the capacity in which they are acting.)
There is no redemption fee for any of the Funds.
REDEMPTION REQUESTS: You should send redemption requests to The DLB Fund Group.
To help facilitate the timely payment of redemption proceeds, you should
telephone the Manager at 1-877-766-0014, Attn: The DLB Fund Group Coordinator,
at least two days before submitting a request.
PAYMENT OF REDEMPTION PROCEEDS: The DLB Fund Group will make payment on
redemption as promptly as possible and in any event within seven days after IBT
receives your redemption request in good order.
CASH PAYMENTS. The DLB Fund Group will make cash payments generally by
transfer of Federal funds for payment into your account the next business
day following the redemption request.
IN KIND. If the Manager determines, in its sole discretion, that it would
be detrimental to the best interests of the remaining shareholders of a
Fund to make payment wholly or partly in cash, the Fund may instead pay the
redemption price in whole
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<PAGE>
or in part by a distribution in kind of readily marketable securities held
by the Fund. The DLB Fund Group will transfer and deliver in-kind
redemptions as you direct. The Fund will value securities used to redeem
Fund shares in kind in accordance with the relevant Fund's procedures for
valuation described under "How Share Price Is Determined." You generally
will incur brokerage charges on the sale of any securities that you receive
in payment of redemptions.
Each Fund may suspend the right of redemption and may postpone payment for more
than seven days when the NYSE is closed for reasons other than weekends or
holidays, or if permitted by the rules of the Securities and Exchange Commission
during periods when trading on the NYSE is restricted or during an emergency
which makes it reasonably impracticable for the Fund to dispose of its
securities or fairly determine the value of the net assets of the Fund, or
during any other period permitted by the Securities and Exchange Commission for
the protection of investors.
HOW SHARE PRICE IS DETERMINED
The DLB Fund Group determines the net asset value of a share of each Fund at
4:15 p.m., Eastern time, on each day that the NYSE is open. The DLB Fund Group
does not accept orders or compute a Fund's net asset value on days when the NYSE
is closed.
The DLB Fund Group determines the net asset value per share for a Fund by
dividing the total value of the Fund's portfolio investments and other assets,
less any liabilities, by the total outstanding shares of the Fund.
The DLB Fund Group values portfolio securities based on market value or, where
market quotations are not readily available, based on fair value. More
specifically, The DLB Fund Group values portfolio securities (including options
and futures contracts) for which market quotations are available at the last
quoted sale price, or, if there is no reported sale, at the closing bid price.
The DLB Fund Group values securities traded in the over-the-counter market at
the most recent bid price as obtained from one or more dealers that make markets
in the securities. For portfolio securities that are traded both in the
over-the-counter market and on one or more stock exchanges, The DLB Fund Group
will value the securities according to the broadest and most representative
market. The DLB Fund Group values unlisted securities for which market
quotations are not readily available at the most recent quoted bid price.
Short-term debt securities with a remaining maturity of 60 days or less will be
valued at amortized cost, unless conditions dictate otherwise. Other assets for
which no quotations are readily available are valued at fair value as determined
in good faith in accordance with procedures adopted by The DLB Fund Group's
Board of Trustees. Determination of fair value will be based upon those factors
that are deemed relevant under the circumstances, including the financial
condition and operating results of the issuer, recent third party transactions
(actual or proposed) relating to such securities and, in extreme cases, the
liquidation value of the issuer. The use of fair value pricing by the Funds may
cause the net asset value of its shares to differ significantly from the net
asset value that would be calculated using current market values.
FOREIGN SECURITIES: Because of time zone differences, foreign exchanges and
securities markets will usually be closed before the closing of the NYSE.
Therefore, The DLB Fund Group will determine the value of foreign securities as
of the closing of those exchanges and securities markets. Events affecting the
values of foreign securities, however, may occasionally occur between the
closings of such exchanges and securities markets and the time a Fund determines
its net asset value. If an event materially affecting the value of foreign
securities occurs during this period, then The DLB Fund Group will value such
securities at fair value as determined in good faith in accordance with
procedures adopted by the Trustees. In addition, the Funds may hold portfolio
securities that are primarily listed on
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<PAGE>
FOREIGN SECURITIES (CONT.)
foreign exchanges that trade on weekends or other days when the Funds do not
accept orders or price their shares. As a result, the value of any such
securities held by a Fund may change on days when you will not be able to
purchase or redeem the Fund's shares.
The prices of foreign securities are quoted in foreign currencies. The DLB Fund
Group converts the values of foreign currencies into U.S. dollars at the rate of
exchange prevailing at the time it determines net asset value. Changes in the
exchange rate, therefore, will affect the net asset value of shares of a Fund
even when there has been no change in the values of the foreign securities
measured in terms of the currency in which they are denominated.
DISTRIBUTION AND SERVICE(RULE 12B-1) PLANS
The DLB Fund Group has adopted, but not yet implemented, a distribution and
service plan for each Fund (each, a "Plan") under Rule 12b-1 of the Investment
Company Act of 1940. The purposes of a Plan, if implemented, would be to
compensate and/or reimburse investment dealers and other persons for services
provided and expenses incurred in promoting sales of shares, to reduce
redemptions or to improve services provided to shareholders by such dealers and
other persons. Each Plan would permit a Fund to pay an annual asset-based charge
of up to 0.50% for these purposes, subject to the authority of the Trustees to
reduce the amount of payments or to suspend the Plan for such periods as they
may determine. Subject to these limitations, the Trustees would determine the
amount of payments under each Plan, and the specific purposes for which they
were made.
PRINCIPAL UNDERWRITER
Babson Securities Corp. ("BSC") serves as the principal underwriter of each
Fund. In its capacity as principal underwriter, BSC solicits applications for
the purchase of shares of each Fund and may assist investors in transmitting
applications to each Fund or its agent. BSC does not, however, buy or sell or
accept orders for the purchase or sale of shares of any Fund.
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DISTRIBUTIONS
Each Fund intends to pay out as dividends substantially all of its net
investment income (which comes from dividends and any interest it receives from
its investments and net short-term capital gains). Each Fund also intends to
distribute substantially all of its net realized long-term capital gains, if
any, after giving effect to any available capital loss carryovers. The policy of
each Fund is to declare and pay distributions of its net investment income at
least annually. Each Fund also intends to distribute realized net short-term
capital gains and net long-term capital gains at least annually.
Each Fund will pay all dividends and/or distributions in shares of the relevant
Fund, at net asset value, unless you elect to receive cash. You may make this
election by marking the appropriate box on the application form or by writing to
The DLB Fund Group.
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<PAGE>
TAXES
The following is a general summary of the federal income tax consequences for
the Funds and shareholders who are U.S. citizens or residents or domestic
corporations. You should consult your own tax advisor about the tax consequences
of investments in a Fund in light of your particular tax situation. You should
also consult your own tax advisor about consequences under foreign, local or
other applicable tax laws.
Each Fund is treated as a separate taxable entity for federal income tax
purposes. Each Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended. By
so qualifying, a Fund itself will not pay federal income tax on the income and
gain distributed annually to its shareholders. Distributions of ordinary income
and short-term capital gains, whether received in cash or reinvested shares,
will be taxable as ordinary income to shareholders subject to federal income
tax. Designated distributions of long-term capital gains are taxable as such,
regardless of how long a shareholder may have owned shares in the Fund or
whether the distributions are received in cash or in reinvested shares.
Distributions are taxable to a shareholder of a Fund even if they are paid from
income or gains earned by the Fund prior to the shareholder's investment (and
thus were included in the price paid by the shareholder).
The sale, exchange or redemption of Fund shares may give rise to a gain or loss.
In general, any gain realized upon a taxable disposition of shares will be
treated as long-term capital gain if the shares have been held for more than 12
months. Otherwise, the gain on the sale, exchange or redemption of Fund shares
will be treated as short-term capital gain. In general, any loss realized upon a
taxable disposition of shares will be treated as long-term capital loss if the
shares have been held for more than 12 months, and otherwise as short-term
capital loss. Any loss recognized on the sale or disposition of shares of the
Fund held for six months or less will be treated as long-term capital loss to
the extent of any long-term capital gain distributions received by a shareholder
with respect to those shares of the Fund. All or a portion of any loss realized
upon a taxable disposition of a Fund's shares will be disallowed if other shares
of the same Fund are purchased within 30 days before or after the disposition.
In such a case, the basis of the newly purchased shares will be adjusted to
reflect the disallowed loss.
The DLB Fund Group will provide federal tax information annually, including
information about dividends and distributions paid during the preceding year.
FOREIGN WITHHOLDING TAXES: The investments of a Fund in foreign securities may
be subject to foreign withholding taxes. In that case, the Funds' yields on
those securities would be decreased. Shareholders may be entitled to claim a
credit or deduction with respect to foreign taxes. In addition, the Funds'
investments in foreign securities or foreign currencies may increase or
accelerate the Funds' recognition of ordinary income and may affect the timing
or amount of the Funds' distributions.
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APPENDIX
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
The Funds may invest in a wide range of investments and engage in various
investment transactions and practices, in addition to the Funds' principal
investment strategies described in the section entitled "About the Funds." These
practices are pursuant to non-fundamental policies and therefore may be changed
by the Board of Trustees of The DLB Fund Group without the consent of
shareholders. Some of the more significant practices and associated risks are
discussed below. You will find additional information about the Funds'
investment policies and associated risks in the Statement of Additional
Information.
CASH RESERVES
Each Fund generally intends to stay fully invested in the types of securities
that represent its principal investment strategies. However, each Fund may hold
a portion of its assets in cash, money market instruments or other high-quality
short-term debt obligations readily changeable to cash, such as treasury bills,
commercial paper or repurchase agreements, at the discretion of the Manager to
provide for expenses and anticipated redemption payments and to carry out an
orderly investment program in accordance with the Fund's investment policies.
CHANGE IN CAPITALIZATION /
CHANGE IN CREDIT RATING
At the time of making an investment, the principal investment strategies of the
Small Cap Value Fund generally limit investments by the Fund to issuers that
meet certain market capitalization requirements. However, once the initial
investment has complied with the market capitalization requirements, the Fund
may continue to hold, and may even add to its holdings of, securities of
companies whose market capitalizations later exceed the specified maximum (or
fail to meet minimum) capitalization.
CHANGES TO INVESTMENT OBJECTIVES
Except for policies identified as "fundamental" in this Prospectus or the
Statement of Additional Information, the Trustees may change the investment
objective and policies of each Fund without shareholder approval. Any such
change may result in a Fund having an investment objective and policies
different from the objective and policies that you considered appropriate when
you invested in the Fund. A Fund will notify you of any changes in its
investment objective or policies through a revised prospectus or other written
communication.
DERIVATIVES
In managing the Enhanced Index Growth Fund and the Enhanced Index Value Fund,
the Manager may use derivatives to establish a position in the equity securities
markets as a temporary substitute for purchasing or selling particular
securities. Derivatives are financial contracts whose value depend on, or are
derived from, the value of an underlying asset or index. In addition to other
risks such as the credit risk of the counterparty, derivatives involve the risk
of mispricing or improper valuation and the risk that changes in the value of
the derivative may not correlate perfectly with relevant assets and indices. In
addition, a Fund's use of derivatives may affect the timing and amount of taxes
payable by shareholders.
STATEMENT OF ADDITIONAL INFORMATION
In the Statement of Additional Information you will find a list of fundamental
and non-fundamental investment restrictions applicable to the Funds. The
Statement of Additional Information also describes the following investment
techniques and practices that may be used by the Funds, as indicated on the
following page:
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o Money Market Instruments
o Preferred Stocks
o Convertible Securities
o When-Issued Securities
o Restricted / Illiquid Securities
o Repurchase Agreements
o Portfolio Turnover
o Lending of Portfolio Securities
o Derivatives
o Warrants and Rights
o REITs
o Foreign Securities
o Investment Companies
o Financial Futures
o Options
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<PAGE>
THE DLB FUND GROUP
ONE MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02142
LEARNING MORE ABOUT THE FUNDS
You can learn more about the Funds in The DLB Fund Group by reading the
STATEMENT OF ADDITIONAL INFORMATION (SAI). The SAI is available free upon
request. The SAI includes additional information about each Fund's investment
policies, risks and operations. The SAI is incorporated by reference into this
Prospectus (WHICH MEANS IT IS LEGALLY CONSIDERED A PART OF THIS PROSPECTUS).
HOW TO OBTAIN MORE INFORMATION
FROM THE DLB FUND GROUP: You may request information about the Funds (including
the SAI) or make shareholder inquiries by any of the following methods:
BY REGULAR MAIL OR OVERNIGHT COURIER
The DLB Fund Group
c/o David L. Babson & Company Inc.
Marketing Department
Attention: The DLB Fund
Group Coordinator
One Memorial Drive
Cambridge, Massachusetts 02142
BY TELEPHONE
1-877-766-0014
Call for account or Fund information
Monday through Friday 9 a.m. to 5 p.m.
(Eastern time).
BY TELEFAX
1-617-494-1511
FROM THE SEC: Information about the Funds (including the SAI) can be reviewed
and copied at the SEC's public reference room in Washington D.C. Information on
the operation of the public reference room may be obtained by calling the SEC at
1-202-942-8090. Reports and other information about the Funds are available on
the EDGAR database on the SEC's Internet site at http://www.sec.gov. Investors
may also make an electronic request at: [email protected] or write to: SEC,
Public Reference Section, Washington, D.C., 20549-0102. A fee will be charged
for making copies.
Investment Company Act File Number 811-08690
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED OCTOBER 23, 2000
THE DLB FUND GROUP
DLB ENHANCED INDEX GROWTH FUND
DLB ENHANCED INDEX VALUE FUND
DLB SMALL CAPITALIZATION VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION
December 18, 2000
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the prospectus of The DLB Fund
Group dated December 18, as amended from time to time, and should be read in
conjunction therewith. Each reference to the term "Prospectus" in this Statement
of Additional Information shall mean The DLB Fund Group's prospectus relating to
the DLB Enhanced Index Growth Fund, DLB Enhanced Index Value Fund and DLB Small
Capitalization Value Fund (collectively, the "Funds").
A copy of the Prospectus may be obtained free of charge by writing The
DLB Fund Group, c/o David L. Babson & Company Inc., Marketing Department,
Attention: The DLB Fund Group Coordinator, One Memorial Drive, Cambridge,
Massachusetts 02142, or by telephoning 1-888-722-2766.
THE INFORMATION CONTAINED IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT
COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THIS
STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES WHERE THE OFFER IS NOT
PERMITTED.
<PAGE>
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES AND ASSOCIATED RISKS........................1
INVESTMENT RESTRICTIONS........................................................1
INCOME DIVIDENDS, DISTRIBUTIONS AND TAX STATUS.................................3
MANAGEMENT OF THE TRUST........................................................7
INVESTMENT ADVISORY AND OTHER SERVICES........................................10
ADDITIONAL INVESTMENT PRACTICES OF THE FUNDS..................................12
ADDITIONAL INVESTMENT PRACTICES OF THE FUNDS--FUTURES AND OPTIONS.............21
PORTFOLIO TRANSACTIONS........................................................26
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES..............................28
INVESTMENT PERFORMANCE........................................................30
DETERMINATION OF NET ASSET VALUE..............................................33
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES AND ASSOCIATED RISKS
The investment objective and principal investment strategies and risks
of each of the DLB Enhanced Index Growth Fund (the "Enhanced Index Growth
Fund"), DLB Enhanced Index Value Fund (the "Enhanced Index Value Fund"), and DLB
Small Capitalization Value Fund (the "Small Cap Value Fund") (each a "Fund," and
collectively the "Funds") of The DLB Fund Group (the "Trust") are set forth in
the Prospectus. This Statement of Additional Information includes additional
information on those investment strategies and risks and on other strategies in
which the Funds may engage and the risks associated with such strategies.
INVESTMENT RESTRICTIONS
Without a vote of the majority of the outstanding voting securities of
the relevant Fund, the Trust will not take any of the following actions with
respect to any Fund:
(1) Borrow money in excess of 33% of the value (taken at the
lower of cost or current value) of the Fund's total assets (not
including the amount borrowed) at the time the borrowing is made, and
then only from banks for temporary, extraordinary or emergency
purposes, except that the Fund may borrow through reverse repurchase
agreements or dollar rolls up to 33% of the value of the Fund's total
assets. Such borrowings (other than borrowings relating to reverse
repurchase agreements and dollar rolls) will be repaid before any
investments are purchased.
(2) Underwrite securities issued by other persons except to
the extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter under federal
securities laws.
(3) Purchase or sell real estate (including real estate
limited partnerships), although it may purchase securities of issuers
which deal in real estate, including securities of real estate
investment trusts, securities which represent interests in real estate
and securities which are secured by interests in real estate, and the
Fund may acquire and dispose of real estate or interests in real estate
acquired through the exercise of its rights as holder of debt
obligations secured by real estate or interests therein or for use as
office space for the Fund.
(4) Make loans, except by purchase of debt obligations
(including non-publicly traded debt obligations), by entering into
repurchase agreements or through the lending of the Fund's portfolio
securities. Loans of portfolio
<PAGE>
securities may be made with respect to up to 100% of the Fund's assets
in the case of each Fund.
(5) Issue any senior security (as that term is defined in the
Investment Company Act of 1940 (the "1940 Act")), if such issuance is
specifically prohibited by the 1940 Act or the rules and regulations
promulgated thereunder. (The Funds have no intention of issuing senior
securities except as set forth in Restriction 1 above.)
(6) Invest 25% or more of the value of its total assets in
securities of issuers in any one industry. (Securities issued or
guaranteed as to principal or interest by the U.S. Government or its
agencies or instrumentalities are not considered to represent
industries.)
(7) Purchase or sell commodities or commodity contracts,
including futures contracts, except that each Fund may purchase and
sell futures contracts, options (including options on commodities and
commodity contracts) and other financial instruments and may enter into
foreign exchange transactions.
(8) Other than the Small Cap Value Fund, either (i) invest
more than 5% of its total assets in the securities of any one issuer
(other than U.S. Government securities and repurchase agreements
relating thereto), although up to 25% of the Fund's total assets may be
invested without regard to this restriction or (ii) purchase voting
securities of any issuer if such purchase, at the time thereof, would
cause more than 10% of the outstanding voting securities of such issuer
to be held by the Fund.
Restrictions (1) through (8) above are deemed to be "fundamental"
investment policies.
In addition, it is contrary to the present policy of each Fund to:
(a) Invest in (i) securities which at the time of such
investment are not readily marketable, (ii) securities the disposition
of which is restricted under federal securities laws, excluding
restricted securities that have been determined by the Trustees of the
Trust (or the person designated by them to make such determination) to
be readily marketable, and (iii) repurchase agreements maturing
2
<PAGE>
in more than seven days if, as a result, more than 15% of the Fund's
net assets (taken at current value) would then be invested in
securities described in (i), (ii) and (iii) above.
Unlike Restrictions (1) through (8) above, Restriction (a) above is
deemed to be a "non-fundamental" investment policy of the applicable Funds and
therefore may be changed by the Trust's Trustees without shareholder approval.
Except as otherwise indicated in Restriction (1) or Restriction (a)
above, all percentage limitations on investments set forth herein and in the
Prospectus will apply at the time of the making of an investment and shall not
be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.
The phrase "shareholder approval," as used in the Prospectus, and the
phrase "vote of a majority of the outstanding voting securities," as used herein
with respect to a Fund, means the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares of that Fund, or (2) 67% or more of the
shares of that Fund present at a meeting if more than 50% of the outstanding
shares are represented at the meeting in person or by proxy.
INCOME DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
The tax status of each Fund and the distributions that it may make are
summarized in the Prospectus under the headings "Distributions" and "Taxes."
Each Fund intends to pay out substantially all of its ordinary income and net
short-term capital gains, and to distribute substantially all of its net capital
gain, if any, after giving effect to any available capital loss carry-over. Net
capital gain is the excess of net long-term capital gain over net short-term
capital loss.
Each Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). In order so to qualify and to qualify for the favorable tax treatment
accorded regulated investment companies and their shareholders, the Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, and gains from the
sale of stock, securities and foreign currencies, or other income (including but
not limited to gains from options, futures or firm commitments) derived with
respect to its business of investing in such stock, securities or currencies;
(b) distribute at least 90% of its dividend, interest and certain other income
(including, in general, short-term capital gains) each year; and (c) diversify
its holdings so that at the end of each fiscal quarter (i) at least 50% of the
market value of the Fund's assets is represented by cash items, U.S. Government
securities, securities of other
3
<PAGE>
regulated investment companies, and other securities, limited in respect of any
one issuer to a value not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its assets is invested in the securities (other
than those of the U.S. Government or other regulated investment companies) of
any one issuer or of two or more issuers which the Fund controls and which are
engaged in the same, similar or related trades or businesses. So long as a Fund
qualifies for treatment as a regulated investment company, the Fund will not be
subject to federal income tax on income paid to its shareholders in the form of
dividends or capital gain distributions.
If a Fund failed to qualify as a regulated investment company in any
taxable year, the Fund would be subject to tax on its taxable income at
corporate rates, and all distributions from earnings and profits, including any
distributions of net tax-exempt income and net long-term capital gains, would be
taxable to shareholders as ordinary income. In addition, the Fund could be
required to recognize unrealized gains, pay substantial taxes and interest and
make substantial distributions before requalifying for taxation as a regulated
investment company.
In general, all dividends derived from ordinary income and short-term
capital gain are taxable to investors as ordinary income (subject to special
rules concerning the availability of the dividends-received deduction for
corporations) and distributions of long-term capital gains are taxable to
investors as such, regardless of how long a shareholder may have owned shares in
the relevant Fund or whether such distributions are received in shares or cash.
Tax exempt organizations or entities will generally not be subject to federal
income tax on dividends or distributions from a Fund, except certain
organizations or entities, including private foundations, social clubs, and
others, which may be subject to tax on dividends or capital gains. Each
organization or entity should review its own circumstances and the federal tax
treatment of its income.
Dividends and distributions on each Fund's shares are generally subject
to federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.
Distributions are taxable to a shareholder of a Fund even if they are paid from
income or gains earned by the Fund prior to the shareholder's investment (and
thus were included in the price paid by the shareholder). A distribution paid to
shareholders in January generally is deemed to have been received by
shareholders on December 31 of the preceding year, if the distribution was
declared and payable to shareholders of record on a date in October, November or
December of that preceding year.
4
<PAGE>
An excise tax at the rate of 4% will be imposed on the excess, if any,
of each Fund's "required distribution" over its actual distribution in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund so elects) plus undistributed amounts from prior years. Each Fund
intends to make distributions sufficient to avoid imposition of the excise tax.
If a Fund engages in certain transactions, such as firm commitments and
hedging transactions, including hedging transactions in options, futures
contracts, and straddles, or other similar transactions, it will be subject to
special tax rules (including constructive sale, mark-to-market, straddle, wash
sale, and short sale rules), the effect of which may be to accelerate income,
defer losses, cause adjustments in the holding periods of the Fund's securities
and convert short-term capital gains or losses into long-term capital gains or
losses. Such transactions may therefore affect the amount, timing and character
of distributions to shareholders.
A Fund's investment in securities issued at a discount and certain
other obligations will (and investments in securities purchased at a discount
may) require the Fund to accrue and distribute income and gains not yet
received. In such cases, the Fund may be required to sell assets (including when
it is not advantageous to do so) to generate the cash necessary to distribute as
dividends to its shareholders all of its income and gains and therefore to
eliminate any tax liability at the Fund level.
Each Fund's transactions, if any, in foreign currencies are likely to
result in a difference between the Fund's book income and taxable income. This
difference may cause a portion of the Fund's income distributions to constitute
a return of capital for tax purposes or require the Fund to make distributions
exceeding book income to avoid excise tax liability and to qualify as a
regulated investment company.
Investment by a Fund in certain "passive foreign investment companies"
could subject the Fund to a U.S. federal income tax or other charge on
distributions received from, or the sale of its investment in, such a company,
which tax could not be eliminated by making distributions to Fund shareholders.
To avoid this treatment, a Fund may elect to mark to market annually all of its
stock in a passive foreign investment company. Alternatively, if a Fund elects
to treat a passive foreign investment company as a "qualified electing fund,"
different rules would apply, although the Funds do not currently expect to be in
the position to make such elections.
The dividends-received deduction for corporations will generally apply
to a Fund's dividends paid from investment income to the extent derived from
dividends
5
<PAGE>
received by the Fund from domestic corporations that would be entitled to such
deduction in the hands of the Fund if it were a regular corporation. A corporate
shareholder will only be eligible to claim a dividends-received deduction with
respect to a dividend from the Fund if the shareholder held its shares on the
ex-dividend date and for at least 45 more days during the 90-day period
surrounding the ex-dividend date. The dividends-received deduction is not
available to Subchapter S corporations.
BACK-UP WITHHOLDING. The back-up withholding rules set forth below do
not apply to tax exempt entities or corporations that furnish the Trust with an
appropriate certification. For other shareholders, however, the Trust is
generally required to withhold and remit to the U.S. Treasury 31% of all
distributions, whether distributed in cash or reinvested in shares, and 31% of
the proceeds of any redemption paid or credited to the shareholder's account if
an incorrect or no taxpayer identification number has been provided, where
appropriate certification has not been provided for a foreign shareholder, or
where the Trust is notified that the shareholder has underreported income in the
past (or the shareholder fails to certify that he is not subject to such
withholding). The back-up withholding is not an additional tax and is creditable
against a shareholder's tax liability. Special withholding rules, described
below, may apply to foreign shareholders.
FOREIGN WITHHOLDING TAXES. Certain of the Funds that invest in foreign
securities may be subject to foreign withholding taxes on income and gains
derived from foreign investments. Such taxes would reduce the yield on the
Fund's investments, but, as discussed below, may be taken as either a deduction
or a credit by U.S. investors if the Fund makes the election described below.
If, at the end of the fiscal year, more than 50% of the total assets of
any Fund are comprised of stock or securities of foreign corporations, the Trust
intends to make an election with respect to the relevant Fund which allows
shareholders whose income from the Fund is subject to U.S. taxation at the
graduated rates applicable to U.S. citizens, residents or domestic corporations
to claim a foreign tax credit or deduction (but not both) on their U.S. income
tax return. In such cases, the amount of qualified foreign income taxes paid by
the Fund would be treated as additional income to Fund shareholders from
non-U.S. sources and as foreign taxes paid by Fund shareholders. Investors
should consult their tax advisors for further information relating to the
foreign tax credit and deduction, which are subject to certain restrictions and
limitations (including with respect to a foreign tax credit, a holding period
requirement). Shareholders of any of the Funds whose income from the Fund is not
subject to U.S. taxation at the graduated rates applicable to U.S. citizens,
residents or domestic corporations may receive substantially different tax
treatment of distributions by the relevant Fund, and may be disadvantaged as a
result of the election described in this paragraph. Organizations that are
exempt from U.S. taxation will not be affected by the election described above.
6
<PAGE>
WITHHOLDING ON DISTRIBUTIONS TO FOREIGN INVESTORS. Dividend
distributions (including in general distributions derived from short-term
capital gains, dividends and interest) are in general subject to a U.S.
withholding tax of 30% when paid to a non-resident alien individual, foreign
estate or trust, a foreign corporation, or a foreign partnership ("foreign
shareholder"). Persons who are residents in a country, such as the United
Kingdom, that has an income tax treaty with the United States may be eligible
for a reduced withholding rate (upon filing of appropriate forms), and are urged
to consult their tax advisors regarding the applicability and effect of such a
treaty. Distributions of net long-term capital gains to a foreign shareholder
and any gain realized upon the sale of Fund shares by such a shareholder will
ordinarily not be subject to U.S. taxation, unless the recipient or seller is a
nonresident alien individual who is present in the United States for more than
183 days during the taxable year, and certain other conditions apply. Foreign
shareholders with respect to whom income from a Fund is "effectively connected"
with a U.S. trade or business carried on by such shareholder, however, will in
general be subject to U.S. federal income tax on the income derived from the
Fund at the graduated rates applicable to U.S. citizens, residents or domestic
corporations, whether such income is received in cash or reinvested in shares,
and may also be subject to a branch profits tax. Again, foreign shareholders
that are residents in a country with an income tax treaty with the United States
may obtain different tax results and all foreign investors are urged to consult
their tax advisors.
NEW WITHHOLDING TAX RULES FOR PAYMENTS AFTER 2000. The Internal Revenue
Service recently revised its regulations affecting the application to foreign
investors of the back-up withholding and withholding tax rules described above.
The new regulations will generally be effective for payments made on or after
January 1, 2001 (although transition rules will apply). In some circumstances,
the new rules will increase the certification and filing requirements imposed on
foreign investors in order to qualify for exemption from the 31% back-up
withholding tax and for reduced withholding tax rates under income tax treaties.
Foreign investors in a Fund should consult their tax advisors with respect to
the potential application of these new regulations.
MANAGEMENT OF THE TRUST
Pursuant to the Trust's Agreement and Declaration of Trust, the Board
of Trustees supervises the affairs of the Trust as conducted by David L. Babson
& Company Inc. (the "Manager"). The Trustees and officers of the Trust and their
principal occupations during the past five years are as follows:
7
<PAGE>
TRUSTEES
--------
CHARLES E. HUGEL, age 72, serves as a Director of Eldorado Bancshares,
Inc., a commercial bank holding company. He is also past Chairman of the Board
of Trustees of Lafayette College. Mr. Hugel is the former Chairman of Asea Brown
Boveri Inc., which principally engages in the manufacture of electrical
equipment and the generation, transmission, distribution and transportation of
power systems, the former Chairman, President and Chief Executive Officer of
Combustion Engineering, Inc. and a former Executive Vice President of American
Telephone and Telegraph Company. Mr. Hugel is also a former director of Eaton
Corp. (industrial and electronic products) and Pitney Bowes Inc. (office
products and services).
*KEVIN M. MCCLINTOCK, age 39, is an Executive Vice President and
Director of the Manager. He is the former Director of Equities and Fixed Income
of The Dreyfus Corporation, which is an investment manager, and a Managing
Director of Aeltus, an investment manager subsidiary of Aetna, which is a
provider of insurance and financial services.
RICHARD A. NENNEMAN, age 71, is the former Editor-in-Chief of The
Christian Science Monitor and a former Senior Vice President of Girard Bank. He
currently serves as a member of the boards of various civic associations.
RICHARD J. PHELPS, age 72, is the Chairman and Chief Executive Officer
of Phelps Industries, Inc., a manufacturer of pet and consumer products. He is
also the director of Superior Pet Products, U.K., a manufacturer of rawhide dog
treats; a director of Brisbane Bandits Baseball Company, which operates an
Australian baseball team; a director of Bio-Comp Corp., a manufacturer of
fertilizer; and a director of Babson-Stewart Ivory International, an open-end
investment company.
* Trustee who is or may be deemed to be an "interested person" (as such term is
defined in the 1940 Act) of the Trust or the Manager.
OFFICERS
--------
FRANK L. TARANTINO, age 56, President, is Executive Vice President,
Chief Operating Officer and Director of the Manager. Mr. Tarantino is also the
Director, President, Treasurer and Clerk of Babson Securities Corp., the
principal underwriter of the Trust. Before joining the Manager, Mr. Tarantino
was President of Liberty Securities Corporation from 1994 to 1997.
DEANNE B. DUPONT, age 46, Treasurer, is Senior Vice President of the
Manager.
8
<PAGE>
LANCE F. JAMES, age 46, Vice President, is an Executive Vice President
and Director of the Manager.
MARY WILSON KIBBE, age 46, Vice President, is an Executive Vice
President of the Manager. From 1997 through 1999, Ms. Kibbe was an Executive
Director of Massachusetts Mutual Life Insurance Company ("MassMutual"), a
company with which she had been associated since 1982.
JOHN E. DEITELBAUM, age 32, Clerk, is Counsel of the Manager and Second
Vice President and Associate General Counsel of MassMutual (since 2000). Mr.
Deitelbaum is also Assistant Clerk of Babson Securities Corp., the principal
underwriter of the Trust. Previously Mr. Deitelbaum was Vice President and
General Counsel of the Manager (1998-1999), Counsel of MassMutual (1996-1998)
and an associate at the law firm of Day Berry & Howard (1993-1996).
The mailing address of each of the officers and Trustees is c/o David
L. Babson & Company Inc., One Memorial Drive, Cambridge, Massachusetts 02142.
Except as stated above, the principal occupations of the officers and
Trustees for the last five years have been with the employers as shown above,
although in some cases they may have held different positions with such
employers.
TRUSTEE COMPENSATION
--------------------
The Trust pays each Trustee who is not an "interested person" of the
Trust a fee for his services. The Trustees periodically review their fees to
assure that such fees continue to be appropriate in light of their
responsibilities as well as in relation to fees paid to Trustees of other mutual
fund complexes. The fees paid to each Trustee by the Trust for the fiscal year
ended October 31, 1999, are shown below:
Total Compensation from
Aggregate Compensation Registrant and Fund
Name Of Trustee from Registrant* Complex Paid to Trustees
--------------- ---------------- ------------------------
Charles E. Hugel $10,250 $10,250
Richard A. Nenneman $10,250 $10,250
Richard J. Phelps $10,250 $10,250
Kevin M. McClintock $0 $0
9
<PAGE>
----------------------
* Includes an annual retainer and an attendance fee for each meeting attended.
The DLB Fund Group changed its fiscal year end in 1999 from December 31 to
October 31. Accordingly, figures shown for 1999 are for a ten-month period only.
Commencing on January 1, 2000, the annual retainer payable by the Trust to each
of the independent Trustees was increased to $16,000 and the per meeting fee was
set at $1,000.
CODE OF ETHICS
--------------
The Trust, the Manager, and Babson Securities Corporation, the principal
underwriter of the Funds ("BSC"), have adopted Codes of Ethics pursuant to the
requirements of the 1940 Act. These Codes of Ethics permit personnel subject to
the Codes to invest in securities, including securities that may be purchased or
held by the Funds.
INVESTMENT ADVISORY AND OTHER SERVICES
MANAGEMENT CONTRACTS
--------------------
The Manager has its principal locations at One Memorial Drive,
Cambridge, Massachusetts 02142, and 1295 State Street, Springfield,
Massachusetts 01111. The Manager is a wholly owned subsidiary of DLB Acquisition
Corp., a holding company that is a majority-owned subsidiary of MassMutual
Holding Trust I, which in turn is a holding company and wholly owned subsidiary
of MassMutual Holding Company, a holding company and a wholly owned subsidiary
of MassMutual, a mutual life insurance company. MassMutual also currently owns
more than 25% of the outstanding shares of each of the Funds and therefore is
deemed to "control" each such Fund within the meaning of the 1940 Act.
Under separate Management Contracts (each a "Management Contract")
between the Trust and the Manager, and subject to such policies as the Trustees
of the Trust may determine, the Manager will furnish continuously an investment
program for each Fund and will make investment decisions on behalf of the Fund
and place all orders for the purchase and sale of portfolio securities. Subject
to the control of the Trustees, the Manager also manages, supervises and
conducts the other affairs and business of the Trust, furnishes office space and
equipment, provides bookkeeping and certain clerical services and pays all
salaries, fees and expenses of officers and Trustees of the Trust who are
affiliated with the Manager. As indicated under "Portfolio Transactions," the
Trust's portfolio transactions may be placed with broker-dealers which furnish
the Manager, at no cost to the Manager, certain research, statistical and
quotation services of value to the Manager in advising the Trust or its other
clients.
10
<PAGE>
As disclosed in the Prospectus, each of the Funds pays the Manager a
monthly fee at the annual rate of the relevant Fund's average daily net assets
set forth therein. In addition, the Manager has agreed to bear certain expenses
through December 20, 2001, to the extent each of the Fund's annual expenses
(including the management fee, but excluding brokerage commissions, hedging
transaction fees and other investment related costs, extraordinary,
non-recurring and certain other unusual expenses, such as litigation expenses
and other extraordinary legal expenses, securities lending fees and expenses,
and transfer taxes) would exceed the percentage of the Fund's average daily net
assets set forth in the Prospectus.
Each Management Contract provides that the Manager shall not be subject
to any liability in connection with the performance of its services thereunder
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties. Each Management Contract also provides
that in the event the Manager ceases to be the manager of any Fund, the right of
the Fund or the Trust to use the identifying name "DLB" may be withdrawn.
Each Management Contract has an initial two-year term and will continue
in effect thereafter indefinitely so long as its continuance is approved at
least annually by (i) vote, cast in person at a meeting called for that purpose,
of a majority (or one, if there is only one) of those Trustees who are not
"interested persons" of the Manager or the Trust, and by (ii) the majority vote
of either the full Board of Trustees or the vote of a majority of the
outstanding shares of the relevant Fund. Each Management Contract automatically
terminates on assignment and is terminable on not more than 60 days' notice by
the Trust to the Manager. In addition, each Management Contract may be
terminated on not more than 60 days' written notice by the Manager to the Trust.
PRINCIPAL UNDERWRITER
---------------------
Babson Securities Corp. ("BSC"), a wholly owned subsidiary of the
Manager, serves as the principal underwriter of the Funds. As described in the
Prospectus, BSC solicits applications for the purchase of shares of the Funds
and may assist investors in transmitting applications to the Funds or their
agent as part of the Funds' continuous offering of their shares. During the
fiscal year ended October 31, 1999, BSC did not receive any compensation from
the Funds or the Trust for serving as principal underwriter of the Funds. BSC's
principal business address is One Memorial Drive, Cambridge, Massachusetts
02142.
11
<PAGE>
CUSTODIAL ARRANGEMENTS
----------------------
Investors Bank & Trust Company ("IBT") serves as the Trust's custodian
on behalf of the Funds. As such, IBT holds in safekeeping certificated
securities and cash belonging to a Fund and, in such capacity, is the registered
owner of securities in book-entry form belonging to a Fund. Upon instruction,
IBT receives and delivers cash and securities of a Fund in connection with Fund
transactions and collects all dividends and other distributions made with
respect to Fund portfolio securities. IBT also maintains certain accounts and
records of the Trust and calculates the total net asset value, total net income
and net asset value per share of each Fund on a daily basis.
TRANSFER AGENT/ADMINISTRATOR
----------------------------
In addition to serving as the Trust's custodian, IBT serves as the
Trust's transfer agent and dividend disbursing agent on behalf of the Funds.
IBT, under the terms of an administration agreement with the Trust, also
provides certain services to the Trust, including among others, assisting the
Trust in the following respects: (a) monitoring portfolio compliance, (b)
performing quarterly testing to establish each Fund's qualification as a
regulated investment company for tax purposes, and (c) maintaining effective
Blue Sky notification filings for states in which the Trust intends to solicit
sales of Fund shares.
INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------
Deloitte & Touche LLP is the Trust's independent public accountant,
providing audit services and assistance and consultation in connection with tax
returns and the reviewing of various filings with the Securities and Exchange
Commission (the "SEC").
ADDITIONAL INVESTMENT PRACTICES OF THE FUNDS
As noted in the Prospectus, each Fund may, in pursuing its investment
objective, engage in investment techniques and practices in addition to the
Fund's principal investment strategies. The following discussion provides more
detailed information about certain of these additional, non-principal investment
techniques and practices.
MONEY MARKET INSTRUMENTS. Each Fund may invest in money market
securities. Money market securities are high-quality, short-term debt
instruments that may be issued by the U.S. Government, corporations, banks or
other entities. They may have fixed, variable or floating interest rates.
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<PAGE>
U.S. GOVERNMENT SECURITIES. Each Fund may invest in U.S. Government
Securities. These include obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities. Payment of principal and
interest on U.S. Government obligations (i) may be backed by the full faith and
credit of the United States (as with U.S. Treasury obligations and GNMA
certificates) or (ii) may be backed solely by the issuing or guaranteeing agency
or instrumentality itself (as with FNMA notes). In the latter case, the investor
must look principally to the agency or instrumentality issuing or guaranteeing
the obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government would
provide financial support to its agencies or instrumentalities where it is not
obligated to do so. As a general matter, the value of debt instruments,
including U.S. Government obligations, declines when market interest rates
increase and rises when market interest rates decrease. Certain types of U.S.
Government obligations are subject to fluctuations in yield or value due to
their structure or contract terms.
BANK OBLIGATIONS. Each Fund may invest in bank obligations. These
include certificates of deposit, time deposits and bankers' acceptances. Time
deposits, other than overnight deposits, may be subject to withdrawal penalties
and if so they are deemed "illiquid" investments. Certificates of deposit are
negotiable certificates evidencing the obligation of a bank to repay funds
deposited with it for a specified period of time. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Time deposits that may be held by a
Fund will not benefit from insurance from the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the Federal Deposit Insurance
Corporation. Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity.
COMMERCIAL PAPER. Each Fund may invest in commercial paper, which
consists of short-term, unsecured promissory notes issued by corporations to
finance short-term credit needs. Commercial paper is usually sold on a discount
basis and has a maturity at the time of issuance not exceeding nine months. Each
Fund also may invest in non-convertible corporate debt securities (e.g., bonds
and debentures) with not more than one year remaining to maturity at the date of
settlement.
PREFERRED STOCKS. Each Fund may buy preferred stock. Preferred stock,
unlike common stock, has a stated dividend rate payable from the corporation's
earnings. Preferred stock dividends may be cumulative or non-cumulative,
participating, or auction rate. "Cumulative" dividend provisions require all or
a portion of prior unpaid dividends to be paid. If interest rates rise, the
fixed dividend on preferred stocks may be less attractive, causing the price of
preferred stocks to decline. Preferred stock may have mandatory sinking fund
provisions, as well as call/redemption provisions prior to
13
<PAGE>
maturity, which can be a negative feature when interest rates decline. Preferred
stock also generally has a preference over common stock on the distribution of a
corporation's assets in the event of liquidation of the corporation. Preferred
stock may be "participating" stock, which means that it may be entitled to a
dividend exceeding the stated dividend in certain cases. The rights of preferred
stock on distribution of a corporation's assets in the event of liquidation are
generally subordinate to the rights associated with a corporation's debt
securities.
CONVERTIBLE SECURITIES. Each Fund may purchase fixed-income convertible
securities, such as bonds or preferred stock, which may be converted at a stated
price within a specified period of time into a specified number of shares of
common stock of the same or a different issuer. Convertible securities are
senior to common stock in a corporation's capital structure, but usually are
subordinated to non-convertible debt securities. While providing a fixed-income
stream (generally higher in yield than the income from a common stock but lower
than that afforded by a non-convertible debt security), a convertible security
also affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation of the common stock into which it is
convertible. In general, the market value of a convertible security is the
higher of its "investment value" (i.e., its value as a fixed-income security) or
its "conversion value" (i.e., the value of the underlying shares of common stock
if the security is converted). As a fixed-income security, the market value of a
convertible security generally increases when interest rates decline and
generally decreases when interest rates rise. However, the price of a
convertible security also is influenced by the market value of the security's
underlying common stock. Thus, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer. While convertible securities are a form of debt
security in many cases, their conversion feature (allowing conversion into
equity securities) causes them to be regarded more as "equity equivalents."
WHEN-ISSUED SECURITIES. Each Fund may purchase or sell securities on a
"when-issued," delayed delivery or on a forward commitment basis ("forward
contracts"). When such transactions are negotiated, the price is fixed at the
time of commitment, but delivery and payment for the securities can take place a
month or more after the commitment date. The securities so purchased or sold are
subject to market fluctuations, and no interest accrues to the purchaser during
this period. At the time of delivery, the securities may be worth more or less
than the purchase or sale price. A Fund may use forward contracts to manage
interest rate exposure, as a temporary substitute for purchasing or selling
particular debt securities, or to take delivery of the underlying security
rather than closing out the forward contract.
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RESTRICTED/ILLIQUID SECURITIES. Each Fund may hold up to, but not more
than, 15% of its net assets in "illiquid securities," which are securities that
are not readily marketable, including securities whose disposition is restricted
by contract or under federal securities laws; provided, that in circumstances
where fluctuations in value result in the Fund's investment in illiquid
securities constituting more than 15% of the current value of its net assets,
the Fund will take reasonable steps to reduce its investments in illiquid
securities until such investments constitute no more than 15% of the Fund's net
assets. A Fund may not be able to dispose of such securities in a timely fashion
and for a fair price, which could result in losses to the Fund. In addition,
illiquid securities are generally more difficult to value.
PORTFOLIO TURNOVER. Although portfolio turnover is not a limiting
factor with respect to investment decisions for the Funds, the Small Cap Value
Fund expects to experience relatively modest portfolio turnover rates. It is
anticipated that under normal circumstances the annual portfolio turnover rate
of that Fund will not exceed 100%. However, in any particular year, market
conditions may result in greater turnover rates than the Manager currently
anticipates for the Small Cap Value Fund. The Manager will, however, make
changes to the portfolios of the Enhanced Index Growth Fund and the Enhanced
Index Value Fund whenever the Manager believes such changes are desirable and,
consequently, anticipates that each such Fund's portfolio turnover may be high.
Portfolio turnover may involve brokerage commissions and other transaction
costs, which the relevant Fund will bear directly, and could involve realization
of capital gains that would be taxable when distributed to shareholders. To the
extent that portfolio turnover results in realization of net short-term capital
gains, such gains ordinarily are taxed to shareholders at ordinary income tax
rates. See the "Taxes" section of the Prospectus and "Portfolio Transactions" in
this Statement of Additional Information for additional information.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements.
Under repurchase agreements, a Fund acquires a security for cash and obtains a
simultaneous commitment from the seller to repurchase the security at an
agreed-upon price and date. The resale price exceeds the acquisition price and
reflects an agreed-upon market rate unrelated to the coupon rate on the
purchased security. Repurchase transactions afford an opportunity for a Fund to
earn a return on temporarily available cash at no market risk, although there is
a risk that the seller may default on its obligation to pay the agreed-upon sum
on the redelivery date. Default may subject a Fund to expenses, delays and risks
of loss. Repurchase agreements entered into with foreign brokers, dealers and
banks involve additional risks similar to those of investing in foreign
securities. For a discussion of these risks, see the discussions of foreign
issuer risk and foreign currency risk below.
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LENDING OF PORTFOLIO SECURITIES. Each Fund may make secured loans of
portfolio securities on up to 33% of the Fund's total assets. The risks in
lending portfolio securities, as with other extensions of credit, consist of
possible delay in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. However, a Fund may make loans
of portfolio securities only to parties that the Manager or Subadvisor believes
have relatively high credit standing. Securities loans are made pursuant to
agreements requiring that loans be continuously secured by collateral in cash or
U.S. Government securities at least equal at all times to the market value of
the securities lent. The borrower pays to the lending Fund an amount equal to
any dividends or interest received on the securities lent. The Fund may invest
the cash collateral received or may receive a fee from the borrower. All
investments of cash collateral by a Fund are for the account and risk of the
Fund. Although voting rights or rights to consent with respect to the loaned
securities pass to the borrower, the Fund retains the right to call the loans at
any time on reasonable notice. The Fund may also call such loans in order to
sell the securities involved. The Fund pays various fees in connection with such
loans, including shipping fees and reasonable custodian and placement fees.
DERIVATIVES. Certain of the instruments in which the Funds may invest,
such as mortgage-backed securities and indexed securities, are considered to be
"derivatives." Derivatives are financial instruments whose values depend upon,
or are derived from, the value of an underlying asset, such as a security or
currency. The use of such instruments may result in a higher amount of
short-term capital gains (taxed at ordinary income tax rates) than would result
if the Funds did not use such instruments.
WARRANTS AND RIGHTS. Each Fund may invest in warrants and rights. A
warrant typically gives the holder the right to purchase underlying stock at a
specified price for a designated period of time. Warrants may be a relatively
volatile investment. The holder of a warrant takes the risk that the market
price of the underlying stock may never equal or exceed the exercise price of
the warrant. A warrant will expire without value if it is not exercised or sold
during its exercise period. Rights are similar to warrants, but normally have a
short duration and are distributed directly by the issuer to its shareholders.
Warrants and rights have no voting rights, receive no dividends, and have no
rights to the assets of the issuer.
REAL ESTATE INVESTMENT TRUSTS. Real estate investment trusts ("REITs")
that may be purchased by a Fund include equity REITs, which own real estate
directly, mortgage REITs, which make construction, development or long-term
mortgage loans, and hybrid REITs, which share characteristics of equity REITs
and mortgage REITs. Equity REITs will be affected by, among other things,
changes in the value of the
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underlying property owned by the REITs, while mortgage REITs will be affected
by, among other things, the value of the properties to which they have extended
credit.
Factors affecting the performance of real estate may include excess
supply of real property in certain markets, changes in zoning laws, completion
of construction, changes in real estate value and property taxes, sufficient
level of occupancy, adequate rent to cover operating expenses, and local and
regional markets for competing assets. The performance of real estate may also
be affected by changes in interest rates, prudent management of insurance risks
and social and economic trends. In addition, REITs are dependent upon the skill
of each REIT's management.
A Fund could, under certain circumstances, own real estate directly as
a result of a default on debt securities it owns or from an in-kind distribution
of real estate from a REIT. Risks associated with such ownership could include
potential liabilities under environmental laws and the costs of other regulatory
compliance. If the Fund has rental income or income from the direct disposition
of real property, the receipt of such income may adversely affect its ability to
retain its tax status as a regulated investment company and thus its ability to
avoid taxation on its income and gains distributed to its shareholders. REITs
are also subject to substantial cash flow dependency, defaults by borrowers,
self-liquidation and the risk of failing to qualify for tax-free pass-through of
income under the Code and/or to maintain exempt status under the 1940 Act. If a
Fund invests in REITs, investors would bear not only a proportionate share of
the expenses of the Fund, but also, indirectly, expenses of the REITs.
FOREIGN SECURITIES. Each Fund is permitted to invest in foreign
securities, including securities in emerging markets. If a Fund's securities are
held abroad, the countries in which such securities may be held and the
sub-custodian holding them must be approved by the Board of Trustees or its
delegate under applicable rules adopted by the SEC.
Foreign securities include debt, equity and hybrid instruments,
obligations and securities of foreign issuers, including governments of
countries other than the United States and companies organized under the laws of
countries other than the United States, companies that have their primary
business carried on outside the United States and companies that have their
principal securities trading market outside the United States. Foreign
securities also include securities of foreign issuers (i) represented by
American Depositary Receipts ("ADRs") or (ii) sponsored or unsponsored Global
Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs") to the
extent they come available.
ADRs are receipts typically issued by a United States bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. Generally,
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ADRs in registered form are designed for use in the United States securities
markets. Each Fund may invest in ADRs through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
underlying security and a depositary, whereas a depositary may establish an
unsponsored facility without participation by the issuer of the deposited
security. Holders of unsponsored depositary receipts generally bear all the
costs of such facilities and the depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
ADRs may not necessarily be denominated in the same currency as the securities
into which they may be converted and are subject to many of the risks associated
with owning the underlying foreign security. The Funds will treat the underlying
securities of an ADR as the investment for purposes of its investment policies
and restrictions.
GDRs and EDRs are typically issued by foreign depositaries and evidence
ownership interests in a security or pool of securities issued by either a
foreign or a U.S. corporation. Holders of unsponsored GDRs and EDRs generally
bear all the costs associated with establishing them. The depositary of an
unsponsored GDR or EDR is under no obligation to distribute shareholder
communications received from the underlying issuer or to pass through to the GDR
or EDR holders any voting rights with respect to the securities or pools of
securities represented by the GDR or EDR. GDRs and EDRs also may be denominated
in a currency different from the currency in which the underlying securities are
denominated. Registered GDRs and EDRs are generally designed for use in U.S.
securities markets, while bearer form GDRs and EDRs are generally designed for
non-U.S. securities markets. The Funds will treat the underlying securities of a
GDR or EDR as the investment for purposes of its investment policies and
restrictions.
Investments in foreign securities involve special risks and
considerations. As foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies, there may be
less publicly available information about a foreign company than about a
domestic company. For example, foreign markets have different clearance and
settlement procedures. Delays in settlement could result in temporary periods
when assets of a Fund are uninvested. The inability of a Fund to make intended
security purchases due to settlement problems could cause it to miss certain
investment opportunities. They may also entail certain other risks, such as the
possibility of one or more of the following: imposition of dividend or interest
withholding or confiscatory taxes, higher brokerage costs, thinner trading
markets, currency blockages or transfer restrictions, expropriation,
nationalization, military coups or other adverse political or economic
developments; less government supervision and regulation of securities
exchanges, brokers and listed companies; and the difficulty of enforcing
obligations in
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other countries. Purchases of foreign securities are usually made in foreign
currencies and, as a result, a Fund may incur currency conversion costs and may
be affected favorably or unfavorably by changes in the value of foreign
currencies against the U.S. dollar. Further, it may be more difficult for a
Fund's agents to keep currently informed about corporate actions that may affect
the prices of portfolio securities. Communications between the United States and
foreign countries may be less reliable than within the United States; thus
increasing the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Certain markets may require payment for
securities before delivery. A Fund's ability and decisions to purchase and sell
portfolio securities may be affected by laws or regulations relating to the
convertibility of currencies and repatriation of assets.
A number of current significant political, demographic and economic
developments may affect investments in foreign securities and in securities of
companies with operations overseas. Such developments include dramatic political
changes in government and economic policies in several Eastern European
countries and the republics composing the former Soviet Union, as well as the
unification of the European Economic Community. The course of any one or more of
these events and the effect on trade barriers, competition and markets for
consumer goods and services are uncertain. Similar considerations are of concern
with respect to developing countries. For example, the possibility of revolution
and the dependence on foreign economic assistance may be greater in these
countries than in developed countries. Management seeks to mitigate the risks
associated with these considerations through active professional management.
In addition to the general risks of investing in foreign securities,
investments in emerging markets involve special risks. Securities of many
issuers in emerging markets may be less liquid and more volatile than securities
of comparable domestic issuers. Emerging markets may have different clearance
and settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when a portion of the assets of a
Fund is uninvested and no return is earned thereon. The inability of a Fund to
make intended security purchases due to settlement problems could cause a Fund
to miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to a Fund due to
subsequent declines in values of the portfolio securities, decrease in the level
of liquidity in a Fund's portfolio, or, if a Fund has entered into a contract to
sell the security, possible liability to the purchaser. Certain markets may
require payment for securities before delivery, and in such markets a Fund bears
the risk that the securities will not be delivered and that the Fund's payments
will not be returned. Securities prices in emerging markets can be significantly
more volatile than in the more developed nations of the world, reflecting the
greater uncertainties of investing in less established markets and economies. In
particular, countries with
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emerging markets may have relatively unstable governments, present the risk of
nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets, and may have less protection of property
rights than more developed countries. The economies of countries with emerging
markets may be predominantly based on only a few industries, may be highly
vulnerable to changes in local or global trade conditions, and may suffer from
extreme and volatile debt burdens or inflation rates. Local securities markets
may trade a small number of securities and may be unable to respond effectively
to increases in trading volume, potentially making prompt liquidation of
substantial holdings difficult or impossible at times. Securities of issuers
located in countries with emerging markets may have limited marketability and
may be subject to more abrupt or erratic price movements.
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. A Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to that Fund of any restrictions on investments.
Investment in certain foreign emerging market debt obligations may be
restricted or controlled to varying degrees. These restrictions or controls may
at times preclude investment in certain foreign emerging market debt obligations
and increase the expenses of a Fund.
INVESTMENT COMPANIES. The Funds may invest in investment companies.
Investment companies include the category of investments commonly known as
mutual funds. An open-end investment company is a fund that redeems its shares
on a daily basis, while a closed-end investment company is a fund that does not
redeem its shares on a daily basis. An investment in a closed-end investment
company may be less liquid than an investment that can be sold any time a Fund
holding such an investment decides to sell. Since the value of an investment
company is based on the value of the individual securities it holds, an
investment company's value will fall if the value of its underlying securities
declines. As a shareholder of an investment company, a Fund will bear its
ratable share of the investment company's expenses, including management fees,
and will remain subject to the investment company's advisory and administration
fees with respect to the assets so invested.
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ADDITIONAL INVESTMENT PRACTICES OF THE FUNDS--FUTURES AND OPTIONS
In addition to the investment practices described in the preceding
section and in the Prospectus, the Funds may also engage in transactions
involving futures and options. The following sections provide more detailed
information about these practices.
SUMMARY - FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Funds may buy
and sell financial futures contracts on securities indices and fixed income
securities. A futures contract is a contract to buy or sell units of a
particular securities index, or a certain amount of a fixed income security, at
an agreed price on a specified future date. Depending on the change in value of
the index or security between the time when a Fund enters into and terminates a
futures contract, the Fund realizes a gain or loss. The Fund may purchase and
sell futures contracts for hedging purposes and to adjust that Fund's exposure
to relevant stock or bond markets. For example, when the Manager wants to
increase the Fund's exposure to equity securities, it may do so by taking long
positions in futures contracts on equity indices such as futures contracts on
the Standard & Poor's 500 Composite Stock Price Index ("S&P 500"). Similarly,
when the Manager wants to increase the Fund's exposure to fixed income
securities, it may do so by taking long positions in futures contracts relating
to fixed income securities such as futures contracts on U.S. Treasury bonds or
notes. The Fund may buy and sell call and put options on futures contracts or on
stock indices in addition to or as an alternative to purchasing or selling
futures contracts.
The use of futures and options involves certain special risks. Certain
risks arise because of the possibility of imperfect correlations between
movements in the prices of financial futures and options and movements in the
prices of the underlying securities index or securities that are the subject of
the hedge. The successful use of futures and options further depends on the
Manager's ability to forecast market or interest rate movements correctly. Other
risks arise from a Fund's potential inability to close out its futures or
related options positions, and there can be no assurance that a liquid secondary
market will exist for any futures contract or option at a particular time. The
Fund's ability to terminate option positions established in the over-the-counter
market may be more limited than for exchange-traded options and may also involve
the risk that securities dealers participating in such transactions would fail
to meet their obligations to the Fund. The use of futures or options on futures
for purposes other than hedging may be regarded as speculative. Certain
regulatory requirements may also limit the Fund's ability to engage in futures
and options transactions.
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SUMMARY - OPTIONS. The Funds may purchase and sell call and put options
on securities it owns or in which it may invest. A Fund receives a premium from
writing a call or put option, which increases the Fund's return if the option
expires unexercised or is closed out at a net profit. When the Fund writes a
call option, it gives up the opportunity to profit from any increase in the
price of a security above the exercise price of the option; when it writes a put
option, the Fund takes the risk that it will be required to purchase a security
from the option holder at a price above the current market price of the
security. The Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. The Fund may also from
time to time buy and sell combinations of put and call options on the same
underlying security to earn additional income. The aggregate value of the
securities underlying the options written by the Fund may not exceed 25% of the
Fund's total assets. The Fund's use of these strategies may be limited by
applicable law.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The Funds will comply
with guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will set
aside appropriate liquid assets in a segregated custodial account in the amount
prescribed. Securities held in a segregated account cannot be sold while the
futures or options strategy is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that segregation of a large
percentage of a Fund's assets could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.
COMBINED POSITIONS. The Funds may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, a Fund may purchase a put option and write a call option
on the same underlying instrument, in order to construct a combined position
whose risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at one
strike price and buying a call option at a lower price, in order to reduce the
risk of the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a Fund's current or anticipated
investments exactly. The Fund may invest in options and futures contracts based
on securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which
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involves a risk that the options or futures position will not track the
performance of the Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instruments, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts. The Fund may purchase or sell options and futures
contracts with a greater or lesser value than the securities it wishes to hedge
or intends to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not be
successful in all cases. If price changes in the Fund's options or futures
positions are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.
FUTURES CONTRACTS. When a Fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date. When
the Fund sells a futures contract, it agrees to sell the underlying instrument
at a specified future date. The price at which the purchase and sale will take
place is fixed when the Fund enters into the contract. Some currently available
futures contracts are based on specific securities, such as U.S. Treasury bonds
or notes, and some are based on indices of securities prices, such as the S&P
500. Futures can be held until their delivery dates, or can be closed out before
then if a liquid secondary market is available. The value of a futures contract
tends to increase and decrease in tandem with the value of its underlying
instrument. Therefore, purchasing futures contracts will tend to increase the
Fund's exposure to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument directly. When
the Fund sells a futures contract, by contrast, the value of its futures
position will tend to move in a direction contrary to the market. Selling
futures contracts, therefore, will tend to offset both positive and negative
market price changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument unless the
contract is held until the delivery date. However, both the purchaser and seller
are required to deposit "initial margin" with a futures broker, known as a
futures commission merchant ("FCM"), when the contract is entered into. Initial
margin deposits are typically equal to a percentage of the contract's value. If
the value of either party's position declines, that party will be
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required to make additional "variation margin" payments to settle the change in
value on a daily basis. The party that has a gain may be entitled to receive all
or a portion of this amount. Initial and variation margin payments do not
constitute purchasing securities on margin for purposes of a Fund's investment
limitations. In the event of the bankruptcy of an FCM that holds margin on
behalf of the Fund, the Fund may be entitled to return of margin owed to it only
in proportion to the amount received by the FCM's other customers, potentially
resulting in losses to the Fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The Funds have filed a
notice of eligibility for exclusion from the definition of the term "commodity
pool operator" with the Commodity Futures Trading Commission ("CFTC") and the
National Futures Association, which regulate trading in the futures markets. The
Funds intend to comply with Rule 4.5 under the Commodity Exchange Act. To the
extent the Funds do not engage in commodity futures or commodity options for
"bona fide" hedging purposes, the Rule requires the Funds to limit the initial
margin and premiums paid to establish such positions to 5% of net assets. The
amount by which a commodity option is "in the money" is excluded for these
purposes.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading volume
and liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily price
fluctuation limits for options and futures contracts, and may halt trading if a
contract's price moves upward or downward more than the limit in a given day. On
volatile trading days when the price fluctuation limit is reached or a trading
halt is imposed, it may be impossible for a Fund to enter into new positions or
close out existing positions. If the secondary market for a contract is not
liquid because of price fluctuation limits or otherwise, it could prevent prompt
liquidation of unfavorable positions, and potentially could require the Fund to
continue to hold a position until delivery or expiration regardless of changes
in its value. As a result, the Fund's access to other assets held to cover its
options or futures positions could also be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized
with respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter ("OTC") options (options not traded
on exchanges) generally are established through negotiation with the other party
to the option contract. While this type of arrangement allows a Fund greater
flexibility to tailor an option to its needs, OTC options generally involve
greater credit risk than exchange-traded options, which are guaranteed by the
clearing organization of the exchanges where they are traded.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a Fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed
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strike price. In return for this right, the Fund pays the current market price
for the option (known as the option premium). Options have various types of
underlying instruments, including specific securities, indices of securities
prices, and futures contracts. The Fund may terminate its position in a put
option that it has purchased by allowing it to expire or by exercising the
option. If the option is allowed to expire, the Fund will lose the entire
premium it paid. If the Fund exercises the option, it completes the sale of the
underlying instrument at the strike price. The Fund may also terminate a put
option position by closing it out in the secondary market at its current price,
if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if
security prices fall substantially. However, if the underlying instrument's
price does not fall enough to offset the cost of purchasing the option, a put
buyer can expect to suffer a loss (limited to the amount of the premium paid,
plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to suffer
a loss if security prices do not rise sufficiently to offset the cost of the
option.
WRITING PUT AND CALL OPTIONS. When a Fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party to the option chooses
to exercise it. When writing an option on a futures contract, the Fund will be
required to make margin payments to an FCM as described above for futures
contracts. The Fund may seek to terminate its position in a put option it writes
before exercise by closing out the option in the secondary market at its current
price. If the secondary market is not liquid for a put option the Fund has
written, however, the Fund must continue to be prepared to pay the strike price
while the option is outstanding, regardless of price changes, and must continue
to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it received. If
security prices remain the same over time, it is likely that the writer will
also profit, because it should be able to close out the option at a lower price.
If security prices fall, the put writer would expect to suffer a loss. This loss
should be less than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should mitigate the
effects of the decline. Writing a call option obligates the Fund to sell or
deliver the option's underlying instrument, in return for the strike price, upon
exercise of
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the option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS
--------------------
Investment decisions for the Funds and for the other investment
advisory clients of the Manager and its affiliates are made with a view to
achieving their respective investment objectives. Investment decisions are the
product of many factors in addition to basic suitability for the particular
client involved. Based on these factors, a particular security may be bought or
sold for certain clients but not others. Likewise, a particular security may be
bought for one or more clients when one or more other clients are selling the
security. In some instances, one client may sell a particular security to
another client. It also often happens that two or more clients simultaneously
purchase or sell the same security, in which event each day's transactions in
such security are, insofar as possible, averaged as to price and allocated
between such clients in a manner which in the Manager's opinion is equitable to
each and in accordance with the amount being purchased or sold by each. There
may be circumstances when purchases or sales of portfolio securities for one or
more clients will have an adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES
-------------------------------
Transactions on U.S. stock exchanges, commodities markets and futures
markets and other agency transactions involve the payment by a Fund of
negotiated brokerage commissions. Such commissions vary among different brokers.
A particular broker may charge different commissions according to such factors
as the difficulty and size of the transaction. Transactions in foreign
investments often involve the payment of fixed brokerage commissions, which may
be higher than those in the United States. In the case of securities traded in
the over-the-counter markets, the price paid by a Fund usually includes an
undisclosed dealer commission or mark-up. In underwritten offerings, the price
paid by a Fund includes a disclosed, fixed commission or discount retained by
the underwriter or dealer.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other investors to receive
brokerage and research services (as defined in the Securities Exchange Act of
1934, as amended, and the
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<PAGE>
rules promulgated thereunder (the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such advisers and from third parties
with which such broker-dealers have arrangements. Consistent with this practice,
the Manager may receive brokerage and research services and other similar
services from many broker-dealers with which the Manager places the Funds'
portfolio transactions and from third parties with which these broker-dealers
have arrangements. These services may include such matters as trade execution
services, general economic and market reviews, industry and company reviews,
evaluations of investments, recommendations as to the purchase and sale of
investments, newspapers, magazines, pricing services, quotation services, news
services and personal computers utilized by the Manager's investment
professionals. Where the services referred to above are not used exclusively by
the Manager for brokerage or research purposes, the Manager, based upon
allocations of expected use, would bear that portion of the cost of these
services which directly relates to their non-brokerage or non-research use. Some
of these services may be of value to the Manager or its affiliates in advising
various of their clients (including the Funds), although not all of these
services would necessarily be useful and of value in managing the Funds or any
particular Fund. The management fee paid by each Fund is not reduced because the
Manager, or its affiliates may receive these services even though the Manager
might otherwise be required to purchase some of these services for cash.
The Manager places orders for the purchase and sale of portfolio
investments for the Funds and buys and sells investments for the Funds through a
substantial number of brokers and dealers. In so doing, the Manager uses its
best efforts to obtain for the Funds the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable price and
execution, the Manager, having in mind each Fund's best interests, considers all
factors it deems relevant, including, by way of illustration, price, the size of
the transaction, the nature of the market for the security or other investment,
the amount of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial stability of
the broker-dealer involved and the quality of service rendered by the
broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, and by each Management
Contract, the Manager may cause a Fund to pay a broker-dealer which provides
"brokerage and research services" (as defined in the 1934 Act) to the Manager an
amount of disclosed commission for effecting securities transactions on stock
exchanges and other transactions for such Fund on an agency basis in excess of
the commission which another broker-dealer would have charged for effecting that
transaction. The Manager's authority to cause the Funds to pay any such greater
commissions is also subject to such policies as the Trustees may adopt from time
to time. It is the position of the staff of the SEC that Section 28(e) does not
apply to the payment of such greater commissions in "principal" transactions.
Accordingly, the Manager will use its best efforts to obtain the
27
<PAGE>
most favorable price and execution available with respect to such transactions,
as described above.
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES
The Trust, an open-end, management investment company, is organized as
a Massachusetts business trust under the laws of Massachusetts by an Agreement
and Declaration of Trust dated August 1, 1994, as amended (the "Declaration of
Trust"). A copy of the Declaration of Trust is on file with the Secretary of The
Commonwealth of Massachusetts. Each Fund is a diversified series of the Trust,
except for the Small Cap Value Fund, which is non-diversified. The fiscal year
for each Fund ends on October 31. Prior to July 22, 1999, the fiscal year for
each Fund ended on December 31.
Each share of each Fund represents an equal proportionate interest in
such Fund. Shares of the Trust do not have any preemptive rights. Shares are
freely transferable and are entitled to dividends as declared by the Trustees.
Upon liquidation of a Fund, shareholders of such Fund are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
The Trust has an unlimited number of authorized shares of beneficial
interest. The Declaration of Trust permits the Trustees, without shareholder
approval, to subdivide any series of shares into various sub-series of shares
with such dividend preferences and other rights as the Trustees may designate.
While the Trustees have no current intention to exercise this power, it is
intended to allow them to provide for an equitable allocation of the impact of
any future regulatory requirements that might affect various classes of
shareholders differently. The Trustees may also, without shareholder approval,
establish one or more additional separate portfolios for investments in the
Trust or merge two or more existing portfolios. Shareholders' investments in
such a portfolio would be evidenced by a separate series of shares.
The Declaration of Trust provides for the perpetual existence of the
Trust. The Trust, however, may be terminated at any time by vote of at least
two-thirds of the outstanding shares of the Trust. The Declaration of Trust
further provides that the Trustees may also terminate the Trust, or any Fund
thereof, upon written notice to the shareholders.
28
<PAGE>
VOTING RIGHTS
-------------
Shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held) and will vote (to the extent
provided herein) in the election of Trustees and the termination of the Trust
and on other matters submitted to the vote of shareholders. Shareholders vote by
individual Fund on all matters except that when required by the 1940 Act, shares
shall be voted in the aggregate and not by individual Fund. When the Trustees
have determined that the matter affects only the interests of one or more Funds,
then only shareholders of such Funds shall be entitled to vote thereon.
Shareholders of one Fund shall not be entitled to vote on matters exclusively
affecting another Fund, such matters including, without limitation, the adoption
of or change in the investment objective, policies or restrictions of the other
Fund and the approval of the investment advisory contract of the other Fund.
There will normally be no meetings of shareholders for the purpose of
electing Trustees except that in accordance with the 1940 Act (i) the Trust will
hold a shareholders' meeting for the election of Trustees at such time as less
than a majority of the Trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy in the Board of Trustees,
less than two-thirds of the Trustees holding office have been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders.
Upon written request by the holders of at least 10% of the outstanding shares
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a Trustee, the Trust has undertaken to provide a list of
shareholders or to disseminate appropriate materials (at the expense of the
requesting shareholders). In addition, shareholders of the Trust holding at
least 10% of the outstanding shares entitled to vote have the right to call a
meeting to elect or remove Trustees or to take other actions as provided in the
Declaration of Trust. Shareholders holding a majority of the outstanding shares
of the Trust may remove Trustees from office by votes cast in person or by proxy
at a meeting of shareholders or by written consent. Except as set forth above,
the Trustees shall continue to hold office and may appoint successor Trustees.
Voting rights are not cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust except (i)
to change the Trust's name or to cure technical problems in the Declaration of
Trust and (ii) to establish, designate or modify new and existing series or
sub-series or classes of Trust shares or other provisions relating to Trust
shares in response to applicable laws or regulations.
29
<PAGE>
SHAREHOLDER AND TRUSTEE LIABILITY
---------------------------------
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by the Trust
or the Trustees. The Declaration of Trust provides for indemnification out of
the property of the relevant Fund for all loss and expense of any shareholder of
that Fund held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote because it is limited to circumstances in which
the disclaimer is inoperative and the Fund of which he is or was a shareholder
would be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office. The By-laws of the Trust provide for indemnification by the Trust of
the Trustees and the officers of the Trust except with respect to any matter as
to which any such person did not act in good faith in the reasonable belief that
his action was in or not opposed to the best interests of the Trust. Such person
may not be indemnified against any liability to the Trust or the Trust's
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
It is anticipated that as of December 18, 2000, all shares of the Funds
will be owned by the Manager or its parent, MassMutual.
INVESTMENT PERFORMANCE
STANDARD PERFORMANCE MEASURES
-----------------------------
Each Fund may advertise its total return. Total Return with respect to
a Fund is a measure of the change in value of an investment in such Fund over
the period covered, which assumes any dividends or capital gains distributions
are reinvested immediately rather than paid to the investor in cash. The formula
for Total Return used herein includes four steps: (1) adding to the total number
of shares purchased by a hypothetical $1,000 investment in the Fund all
additional shares which would have been purchased if
30
<PAGE>
all dividends and distributions paid or distributed during the period had been
immediately reinvested; (2) calculating the value of the hypothetical initial
investment of $1,000 as of the end of the period by multiplying the total number
of shares owned at the end of the period by the net asset value per share on the
last trading day of the period; (3) assuming redemption at the end of the
period; and (4) dividing this account value for the hypothetical investor by the
initial $1,000 investment. Average Annual Total Return is the annual compounded
percentage change in the value of the amount invested in the Fund from the
beginning until the end of the stated period.
PERFORMANCE COMPARISONS
-----------------------
From time to time and only to the extent the comparison is appropriate
for the Funds, the Trust may quote the performance of the Funds in advertising
and other types of literature and may compare the performance of the Funds to
the performance of various indices and investments for which reliable
performance data is available. The performance of the Funds may be compared in
advertising and other literature to averages, performance rankings and other
information prepared by recognized mutual fund statistical services.
Performance information for the Funds may be compared, in reports and
promotional literature, to the S&P 500 Index, the Russell 1000 Index, the
Russell 2000 Index, the Russell 2000 Value Index, the Russell 1000 Growth Index,
the Russell 1000 Value Index, the S&P/ Barra Large Cap Value Index, or other
appropriate managed or unmanaged indices of the performance of various types of
investments, so that investors may compare a Fund's results with those of
indices widely regarded by investors as representative of the security markets
in general. Unmanaged indices may assume the reinvestment of dividends, but
generally do not reflect deductions for administrative and management costs and
expenses. Managed indices generally do reflect such deductions.
The Trust also may use the following information in advertisements and
other types of literature, but only to the extent the information is appropriate
for the Funds: (1) the Consumer Price Index may be used to assess the real rate
of return from an investment in a Fund; (2) other government statistics,
including, but not limited to, The Survey of Current Business, may be used to
illustrate investment attributes of a Fund or the general economic, business,
investment, or financial environment in which the Fund operates; (3) the effect
of tax-deferred compounding on the investment returns of a Fund, or on returns
in general, may be illustrated by graphs, charts, etc., where such graphs or
charts would compare, at various points in time, the return from an investment
in the Fund (or returns in general) on a tax-deferred basis (assuming
reinvestment of capital gains and dividends and assuming one or more tax rates)
with the return on a taxable basis; and (4) the sectors or industries in which a
Fund invests may be compared to relevant indices of stocks or surveys (e.g., S&P
Industry Surveys) to evaluate the Fund's
31
<PAGE>
historical performance or current or potential value with respect to the
particular industry or sector.
Each Fund's performance also may be compared to those of other mutual
funds having similar objectives. This comparative performance could be expressed
as a ranking prepared by Lipper Analytical Services, Inc. (for example, the
Lipper Large Cap Core Fund Average, the Lipper Large Cap Growth Fund Average,
the Lipper Large Cap Value Fund Average, the Lipper Small Cap Core Fund Average,
and the Lipper Small Cap Value Fund Average ) or Morningstar, Inc. (for example,
the Morningstar Large Cap Value, Large Cap Growth and Large Cap Blend Categories
and the Small Cap Blend and Small Cap Value Categories), which are independent
services that monitor the performance of mutual funds. Any such comparisons may
be useful to investors who wish to compare a Fund's past performance with that
of its competitors. Of course, past performance cannot be a guarantee of future
results.
OTHER ADVERTISING ITEMS
-----------------------
From time to time, articles about the Funds regarding performance,
rankings and other characteristics of the Funds may appear in national
publications, including but not limited to, the Wall Street Journal, Forbes,
Fortune, and Money magazine. In particular, some or all of these publications
may publish their own rankings or performance of mutual funds, including the
Funds. References to or reprints of such articles may be used in the Funds'
promotional literature. References to articles regarding personnel of the
Manager who have portfolio management responsibility may also be used in the
Funds' promotional literature.
The Trust may discuss in advertising and other types of literature that
a Fund has been assigned a rating by a nationally recognized statistical rating
organization ("NRSRO"), such as S&P. Such rating would assess the
creditworthiness of the investments held by such Fund. The assigned rating would
not be a recommendation to purchase, sell or hold the Fund's shares since the
rating would not comment on the market price of the Fund's shares or the
suitability of the Fund for a particular investor. In addition, the assigned
rating would be subject to change, suspension or withdrawal as a result of
changes in, or unavailability of, information relating to the Fund or its
investments. The Trust may compare a Fund's performance with other investments
that are assigned ratings by NRSROs. Any such comparisons may be useful to
investors who wish to compare a Fund's past performance with other rated
investments. Of course past performance cannot be a guarantee of future results.
General mutual fund statistics provided by the Investment Company Institute may
also be used.
32
<PAGE>
DETERMINATION OF NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each Fund share
is determined at 4:15 p.m., Eastern Time, on each day on which the New York
Stock Exchange is open for trading. The Trust expects that the days, other than
weekend days, on which the New York Stock Exchange will not be open are New
Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
33
<PAGE>
INVESTMENT MANAGER
David L. Babson & Company Inc.
One Memorial Drive
Cambridge, MA 02142
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
CUSTODIAN
Investors Bank & Trust Company
John Hancock Tower
200 Clarendon Street, 16th Floor
Boston, MA 02116
TRANSFER AGENT
Investors Bank & Trust Company
John Hancock Tower
200 Clarendon Street, 5th Floor
Boston, MA 02116
34
<PAGE>
THE DLB FUND GROUP
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Agreement and Declaration of Trust
(1) Agreement and Declaration of Trust*
(2) Amendment No. 1 to Agreement and Declaration of
Trust*
(3) Amendment No. 2 to Agreement and Declaration of
Trust**
(4) Amendment No. 3 to Agreement and Declaration of
Trust**
(5) Amendment No. 4 to Agreement and Declaration of
Trust***
(6) Amendment No. 5 to Agreement and Declaration of
Trust****
(7) Amendment No. 6 to Agreement and Declaration of
Trust*****
(8) Amendment No. 7 to Agreement and Declaration of
Trust******
(9) Amendment No. 8 to Agreement and Declaration of
Trust+
(10) Amendment No. 9 to Agreement and Declaration of
Trust^
(11) Amendment No. 10 to Agreement and Declaration of
Trust^^
(12) Amendment No. 11 to Agreement and Declaration of
Trust^^^
(b) By-Laws*
(c) Instruments Defining Rights of Security Holders - See Exhibits
(a) and (b)
(d) Forms of Management Contracts
(1) Management Contract between David L. Babson & Co.
Inc. (the "Manager") and The DLB Fund Group (the
"Trust") relating to the DLB Fixed Income Fund*
(2) Management Contract between the Trust and the Manager
relating to the DLB Global Small Capitalization Fund*
(3) Sub-Advisory Agreement between the Manager and
Babson-Stewart Ivory International ("BSII") relating
to the DLB Global Small Capitalization Fund*
(4) Management Contract between the Trust and the Manager
relating to the DLB Value Fund*
(5) Management Contract between the Trust and the Manager
relating to the DLB Mid Capitalization Fund*
(6) Management Contract between the Trust and the Manager
relating to the DLB Disciplined Growth Fund (formerly
known as the DLB Quantitative Equity Fund)++
(7) Management Contract between the Trust and the Manager
relating to the DLB Growth Fund**
(8) Management Contract between the Trust and the Manager
relating to the DLB Micro Capitalization Fund**
(9) Management Contract between the Trust and the Manager
relating to the DLB Stewart Ivory International
Fund******
(10) Management Contract between the Trust and the Manager
relating to the DLB Stewart Ivory Emerging Markets
Fund******
<PAGE>
(11) Sub-Advisory Agreement between the Manager and BSII
relating to the DLB Stewart Ivory International
Fund******
(12) Sub-Advisory Agreement between the Manager and BSII
relating to the DLB Stewart Ivory Emerging Markets
Fund******
(13) Interim Sub-Advisory Agreement between the Manager
and BSII relating to the DLB Global Small
Capitalization Fund++
(14) Interim Sub-Advisory Agreement between the Manager
and BSII relating to the DLB Stewart Ivory
International Fund++
(15) Interim Sub-Advisory Agreement between the Manager
and BSII relating to the DLB Stewart Ivory Emerging
Markets Fund++
(16) Management Contract between the Trust and the Manager
relating to the DLB High Yield Fund++
(17) Management Contract between the Trust and the Manager
relating to the DLB Technology Fund^
(18) Management Contract between the Trust and the Manager
relating to the DLB Enhanced Index Growth Fund^^^
(19) Management Contract between the Trust and the Manager
relating to the DLB Enhanced Index Value Fund^^^
(20) Management Contract between the Trust and the Manager
relating to the DLB Small Capitalization Value
Fund^^^
(e) Form of Principal Underwriter's Contract between the Trust and
Babson Securities Corporation******
(f) Bonus or Profit Sharing Contracts - Not Applicable
(g)(1) Form of Custodian Agreement between the Trust and Investors
Bank & Trust Company ("IBT")*
(g)(2) Form of Amendment to Custodian Agreement******
(g)(3) Form of Amendment to the Custodian Agreement relating to the
DLB High Yield Fund++
(g)(4) Form of Amendment to the Custodian Agreement relating to the
DLB Technology Fund^
(g)(5) Form of Amendment to the Custodian Agreement relating to the
DLB Enhanced Index Growth Fund, DLB Enhanced Index Value Fund
and DLB Small Capitalization Value Fund#
(h)(1) Form of Transfer Agency Agreement between the Trust and IBT**
(h)(2) Form of Amendment to Transfer Agency Agreement******
(h)(3) Fee Waiver and Expense Limitation Agreement******
(h)(4) Amendment to Fee Waiver and Expense Limitation Agreement++
(h)(5) Form of Agreement and Plan of Reorganization******
(h)(6) Form of Administration Agreement between the Trust and
IBT******
(h)(7) Form of Amendment to Administration Agreement******
(h)(8) Form of Amendment to Transfer Agency Agreement relating to the
DLB High Yield Fund++
(h)(9) Form of Amendment to Administration Agreement relating to the
DLB High Yield Fund++
(h)(10) Form of Amendment to Transfer Agency Agreement relating to the
DLB Technology Fund^
(h)(11) Form of Amendment to Administration Agreement relating to the
DLB Technology Fund^
(h)(12) Amended and Restated Fee and Expense Limitation Agreement^
(h)(13) Form of Amendment to Transfer Agency Agreement relating to the
DLB Enhanced Index Growth Fund, DLB Enhanced Index Value Fund
and DLB Small Capitalization Value Fund#
(h)(14) Form of Amendment to Administration Agreement relating to the
DLB Enhanced Index Growth Fund, DLB Enhanced Index Value Fund
and DLB Small Capitalization Value Fund#
(h)(15) Fee and Expense Limitation Agreement relating to the DLB
Enhanced Index Growth Fund, DLB Enhanced Index Value Fund and
DLB Small Capitalization Value Fund^^^
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<PAGE>
(i) Opinion and Consent of Ropes & Gray^^^
(j) Consent of Independent Auditors, Deloitte & Touche, LLP -
Not Applicable
(k) Omitted Financial Statements - Not Applicable
(l) Letter of Understanding relating to Initial Capital*
(m) Forms of Rule 12b-1 Plans
(1) Form of Rule 12b-1 Plan for the Fixed Income Fund***
(2) Form of Rule 12b-1 Plan for the Value Fund***
(3) Form of Rule 12b-1 Plan for the Growth Fund***
(4) Form of Rule 12b-1 Plan for the Disciplined Growth
Fund***
(5) Form of Rule 12b-1 Plan for the Mid Cap Fund***
(6) Form of Rule 12b-1 Plan for the Micro Cap Fund***
(7) Form of Rule 12b-1 Plan for the Global Small Cap
Fund***
(8) Form of Rule 12b-1 Plan for the DLB Stewart Ivory
International Fund******
(9) Form of Rule 12b-1 Plan for the DLB Stewart Ivory
Emerging Markets Fund******
(10) Form of Rule 12b-1 Plan for the DLB High Yield Fund++
(11) Form of Rule 12b-1 Plan for the DLB Technology
Fund^
(12) Form of Rule 12b-1 Plan for the DLB Enhanced Index
Growth Fund^^^
(13) Form of Rule 12b-1 Plan for the DLB Enhanced Index
Value Fund^^^
(14) Form of Rule 12b-1 Plan for the DLB Small
Capitalization Value Fund^^^
(n) Rule 18f-3 Plan - Not Applicable
(o) (1) Powers of Attorney for James W. MacAllen, Charles E.
Hugel, Richard A. Nenneman, Richard J. Phelps and DeAnne B.
Dupont, appointing James W. MacAllen, Frank L. Tarantino and
DeAnne B. Dupont as attorneys in fact***
(2) Power of Attorney for Kevin McClintock, appointing Frank
L. Tarantino and DeAnne B. Dupont as attorneys in fact++
(p)(1) Code of Ethics for the Trust, the Manager and Babson
Securities Corp.++
(p)(2) Code of Ethics for BSII+++
--------------------------
* Incorporated by reference to Registrant's Post-Effective Amendment No. 5
filed on February 19, 1997.
** Incorporated by reference to Registrant's Post-Effective Amendment No. 7
filed on April 30, 1998.
*** Incorporated by reference to Registrant's Post-Effective Amendment No.
10 filed on February 22, 1999.
**** Incorporated by reference to Registrant's Post-Effective Amendment No.
11 filed on April 22, 1999.
***** Incorporated by reference to Registrant's Post-Effective Amendment No.
12 filed on August 13, 1999.
****** Incorporated by reference to Registrant's Post-Effective Amendment No.
13 filed on October 29, 1999.
-3-
<PAGE>
+ Incorporated by reference to Registrant's Post-Effective Amendment No.
14 filed on January 14, 2000.
++ Incorporated by reference to Registrant's Post-Effective Amendment No.
16 filed on April 12, 2000.
+++ Incorporated by reference to Registrant's Post-Effective Amendment No.
17 filed on June 19, 2000.
^ Incorporated by reference to Registrant's Post-Effective Amendment
No. 18 filed on September 1, 2000.
^^ Incorporated by reference to Registrant's Post-Effective Amendment
No. 20 filed on October 19, 2000.
^^^ Filed herewith.
# To be filed by amendment.
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<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
At and as of the date of this Post-Effective Amendment, the Registrant
did not, directly or indirectly, control any Person. Massachusetts Mutual Life
Insurance Company ("MassMutual") currently owns more than 25% of the outstanding
shares of each Fund and therefore is deemed to "control" each such Fund within
the meaning of the Investment Company Act of 1940 (the "1940 Act").
The following entities are, or may be deemed to be, controlled by
MassMutual through the direct or indirect ownership of such entities' stock.
1. CM Assurance Company, a Connecticut corporation which operates
as a life and health insurance company, all the stock of which
is owned by MassMutual. This subsidiary is inactive.
2. CM Benefit Insurance Company, a Connecticut corporation which
operates as a life and health insurance company, all the stock
of which is owned by MassMutual. This subsidiary is inactive.
3. C.M. Life Insurance Company, a Connecticut corporation which
operates as a life and health insurance company, all the stock
of which is owned by MassMutual.
4. MML Bay State Life Insurance Company, a Connecticut
corporation which operates as a life and health insurance
company, all the stock of which is owned by MassMutual.
5. MML Distributors, LLC, a Connecticut limited liability company
which operates as a securities broker-dealer. MassMutual has a
99% ownership interest and G.R. Phelps & Co. has a 1%
ownership interest.
6. MassMutual Holding Company, a Delaware corporation which
operates as a holding company for certain MassMutual entities,
all the stock of which is owned by MassMutual.
7. MML Series Investment Fund (the "Trust"), a Massachusetts
business trust which operates as an open-end investment
company. All the shares issued by the Trust are owned by
MassMutual and certain of its affiliates.
8. MassMutual Institutional Funds, a Massachusetts business trust
which operates as an open-end investment company. MassMutual
owns a majority of the shares.
9. G.R. Phelps & Co., Inc., a Connecticut corporation which
formerly operated as a securities broker-dealer, all the stock
of which is owned by MassMutual Holding Company. This
subsidiary is inactive and expected to be dissolved.
-5-
<PAGE>
10. MassMutual Mortgage Finance, LLC, a Delaware limited liability
company and wholly-owned subsidiary of MassMutual which makes,
acquires, holds and sells mortgage loans.
11. MML Investors Services, Inc., a Massachusetts corporation
which operates as a securities broker-dealer. MassMutual
Holding Company owns 86% of the capital stock and G.R. Phelps
& Co., Inc. owns 14% of the capital stock of MML Investor
Services, Inc.
12. The MassMutual Trust Company, which is a federally chartered
stock savings bank. MassMutual owns 100% of the outstanding
shares of the company.
13. MassMutual Holding MSC, Inc., a Massachusetts corporation,
which acts as a holding company for MassMutual positions in
investment entities organized outside the United States.
MassMutual Holding Company owns all the outstanding shares of
MassMutual Holding MSC, Inc. This subsidiary qualifies as a
"Massachusetts Securities Corporation" under Chapter 63 of
Massachusetts General Laws.
14. MassMutual Holding Trust I, a Massachusetts business trust,
which operates as a holding company for separately staffed
MassMutual investment subsidiaries. MassMutual Holding Company
owns all the outstanding shares of MassMutual Holding Trust I.
15. MML Partners, LLC, a Delaware limited liability company which
operates as a securities broker-dealer.
16. MassMutual International, Inc., a Delaware corporation which
operates as a holding company for those entities constituting
MassMutual's international insurance operations, all the stock
of which is owned by MassMutual Holding Company.
17. MML Insurance Agency, Inc., a Massachusetts corporation which
operates as an insurance broker, all the stock of which is
owned by MML Investors Services, Inc.
18. MML Securities Corporation, a Massachusetts corporation which
operates as a "Massachusetts Securities Corporation" under
Section 63 of the Massachusetts General Laws, all the stock of
which is owned by MML Investors Services, Inc.
19. DISA Insurance Services of America, Inc., an Alabama
corporation which operates as an insurance broker. MML
Insurance Agency, Inc. owns all the shares of outstanding
stock.
20. Diversified Insurance Services of America, Inc., a Hawaii
corporation which operates as an insurance broker. MML
Insurance Agency, Inc. owns all the shares of outstanding
stock.
21. MML Insurance Agency of Mississippi, P.C., a Mississippi
corporation that operates as an insurance broker and is
controlled by MML Insurance Agency, Inc.
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22. MML Insurance Agency of Nevada, Inc., a Nevada corporation
that operates as an insurance broker, all the stock of which
is owned by MML Insurance Agency, Inc.
23. MML Insurance Agency of Ohio, Inc., an Ohio corporation which
operates as an insurance broker and is controlled by MML
Insurance Agency, Inc. through a voting trust agreement.
24. MML Insurance Agency of Texas, Inc., a Texas corporation which
operates as an insurance broker and is controlled by MML
Insurance Agency, Inc. through an irrevocable proxy
arrangement.
25. MassMutual Corporate Value Limited, 46.41% of the shares of
which are owned by MassMutual Holding MSC, Inc.
26. MassMutual Corporate Value Partners Limited, a Cayman Islands
corporation that operates as a high yield bond fund.
MassMutual Corporate Value Limited holds approximately an
88.3% ownership interest in this company, and MassMutual holds
approximately a 4.6% ownership interest in this company. David
L. Babson and Company Incorporated ("Babson") acts as
sub-adviser for this fund.
27. 9048-5434 Quebec, Inc., a Canadian corporation, which operates
as the owner of Hotel du Parc in Montreal, Quebec, Canada.
MassMutual Holding MSC, Inc. owns all the shares of 9048-5434
Quebec, Inc.
28. 1279342 Ontario Limited, a Canadian corporation, which
operates as the owner of Deerhurst Resort in Huntsville,
Ontario, Canada. MassMutual Holding MSC, Inc. owns all the
shares of 1279342 Ontario Limited.
29. Antares Capital Corporation, a Delaware corporation that
operates as a finance company. MassMutual Holding Trust I owns
approximately 99% of the capital stock of Antares Capital
Corporation.
30. Charter Oak Capital Management, Inc., a Delaware corporation
that operates as a manager of institutional investment
portfolios. David L. Babson and Company Incorporated
("Babson") owns 80% of the capital stock of Charter Oak
Capital Management, Inc.
31. Cornerstone Real Estate Advisers, Inc., a Massachusetts
corporation which operates as an investment adviser, all the
stock of which is owned by MassMutual Holding Trust I.
32. DLB Acquisition Corporation ("DLB"), a Delaware corporation,
which operates as a holding company of Babson. MassMutual
Holding Trust I owns approximately 98% of the outstanding
capital stock of DLB.
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33. Oppenheimer Acquisition Corporation ("OAC"), a Delaware
corporation, which operates as a holding company for the
Oppenheimer companies. MassMutual Holding Trust I owns 89% of
the capital stock of OAC.
34. David L. Babson and Company Incorporated ("Babson"), a
Massachusetts corporation that operates as an investment
adviser, all the stock of which is owned by DLB.
35. Babson Securities Corporation, a Massachusetts corporation
which operates as a securities broker-dealer, all the stock of
which is owned by Babson.
36. Babson-Stewart-Ivory International, a Massachusetts general
partnership, which operates as an investment adviser. Babson
holds a 50% ownership interest in the partnership.
37. Potomac Babson Incorporated, a Massachusetts corporation which
formerly operated as an investment adviser. Babson owns 99% of
the outstanding shares of Potomac Babson Incorporated.
38. OppenheimerFunds, Inc., a Colorado corporation which operates
as an investment adviser to the OppenheimerFunds, all the
stock of which is owned by OAC.
39. Centennial Asset Management Corporation, a Delaware
corporation that operates as the investment adviser and
general distributor of the Centennial Funds, all the stock of
which is owned by OppenheimerFunds, Inc.
40. HarbourView Asset Management Corporation, a New York
corporation, which operates as an investment adviser, all the
stock of which is owned by OppenheimerFunds, Inc.
41. OppenheimerFunds Distributor, Inc., a New York corporation,
which operates as a securities broker-dealer, all the stock of
which is owned by OppenheimerFunds, Inc.
42. Oppenheimer Partnership Holdings, Inc., a Delaware corporation
which operates as a holding company, all the stock of which is
owned by OppenheimerFunds, Inc.
43. Oppenheimer Real Asset Management, Inc., a Delaware
corporation which is the subadviser to a mutual fund investing
in the commodities markets, all the stock of which is owned by
OppenheimerFunds, Inc.
44. Shareholder Financial Services, Inc., a Colorado corporation
which operates as a transfer agent for mutual funds, all the
stock of which is owned by OppenheimerFunds, Inc.
45. Shareholder Services, Inc., a Colorado corporation which
operates as a transfer agent for various Oppenheimer and
MassMutual funds, all the stock of which is owned by
OppenheimerFunds, Inc.
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46. Centennial Capital Corporation, a Delaware corporation that
sponsored a unit investment trust, all the stock of which is
owned by Centennial Asset Management Corporation.
47. Cornerstone Office Management, LLC, a Delaware limited
liability company which serves as the general partner of
Cornerstone Suburban Office Investors, LP that is 50% owned by
Cornerstone Real Estate Advisers, Inc. and 50% owned by MML
Realty Management Corporation.
48. Cornerstone Suburban Office Investors, LP, a Delaware limited
partnership, which operates as a real estate operating
company. Cornerstone Office Management, LLC holds a 1% general
partnership interest in this fund and MassMutual holds a 99%
limited partnership interest.
49. CM Advantage, Inc., a Connecticut corporation that serves as a
general partner in real estate limited partnerships, all the
stock of which is owned by MassMutual Holding Trust II. This
subsidiary is largely inactive and will be dissolved in the
near future.
50. MassMutual Trust Company, a federally chartered stock savings
bank. MassMutual owns 100% of the outstanding shares.
51. CM Property Management, Inc., a Connecticut corporation which
serves as the General Partner of Westheimer 335 Suites Limited
Partnership, all the stock of which is owned by MassMutual
Holding Trust II.
52. HYP Management, Inc., a Delaware corporation which operates as
the manager of MassMutual High Yield Partners II LLC, a high
yield bond fund. MassMutual Holding Trust II owns all the
outstanding stock of HYP Management, Inc.
53. MMHC Investment, Inc., a Delaware corporation which is a
passive investor in MassMutual/Darby CBO IM, Inc.;
MassMutual/Darby CBO, LLC; Somers CDO, Limited; MassMutual
High Yield Partners II, LLC and other MassMutual investments.
MassMutual Holding Trust II owns all the outstanding stock of
MMHC Investment, Inc.
54. MassMutual High Yield Partners II LLC, a Delaware limited
liability company that operates as a high yield bond fund.
MassMutual holds approximately 2.49% of its shares, MMHC
Investment Inc. holds approximately 34.11%, and HYP
Management, Inc. holds approximately 6.82%, for an approximate
total ownership interest in this company of 43.42%.
55. MML Realty Management Corporation, a Massachusetts corporation
which formerly operated as a manager of properties owned by
MassMutual, all the stock of which is owned by MassMutual
Holding Trust II.
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56. MassMutual Benefits Management, Inc., (formerly Westheimer 335
Suites, Inc.) a Delaware Corporation which supports MassMutual
with benefit plan administration and planning services.
MassMutual Holding Trust II owns all of the outstanding stock.
57. Somers CDO, Limited, a Cayman Islands corporation that
operates as a fund investing in high yield debt securities of
primarily U.S. issuers. MMHC Investment, Inc. holds 38.10% of
the subordinated notes of this issue which are treated as
equity for tax purposes. Registrant is the collateral manager
of Somers CDO, Limited.
58. 505 Waterford Park Limited Partnership, a Delaware limited
partnership, which holds title to an office building in
Minneapolis, Minnesota. MML Realty Management Corporation
holds a 1% general partnership interest in this partnership
and MassMutual holds a 99% limited partnership interest.
59. MassMutual/Darby CBO IM Inc., a Delaware corporation which
operates as the manager of MassMutual/Darby CBO LLC, a
collateralized bond obligation fund. MMHC Investment, Inc.
owns 50% of the capital stock of this company.
60. MassMutual/Darby CBO LLC, a Delaware limited liability company
that operates as a fund investing in high yield debt
securities of U.S. and emerging market issuers. MassMutual
holds 1.79%, MMHC Investment Inc. holds 77.8% and MassMutual
High Yield Partners LLC holds 14.4% of the ownership interest
in this company.
61. Urban Properties, Inc., a Delaware corporation which serves as
a General Partner of real estate limited partnerships and as a
real estate holding company, all the stock of which is owned
by MassMutual Holding Trust II.
62. Westheimer 335 Suites Limited Partnership, a Texas limited
partnership of which MassMutual Benefits Management is the
general partner.
63. MassMutual Internacional (Argentina) S.A., a corporation
organized in the Argentine Republic, which operates as a
holding company. MassMutual International Inc. owns 99% of the
outstanding shares and MassMutual Holding Company owns the
remaining 1% of the shares.
64. MassMutual Internacional (Chile) S.A., a corporation organized
in the Republic of Chile, which operates as a holding company.
MassMutual International Inc. owns 99% of the outstanding
shares and MassMutual Holding Company owns the remaining 1% of
the shares.
65. MassMutual International (Bermuda) Ltd., a corporation
organized in Bermuda, which operates as a life insurance
company, all the stock of which is owned by MassMutual
International Inc.
66. MassMutual International (Luxembourg) S.A., a corporation
organized in the Grand Duchy of Luxembourg, which operates as
a life insurance company. MassMutual
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International Inc. owns 99% of the outstanding shares and
MassMutual Holding Company owns the remaining 1% of the
shares.
67. MassLife Seguros de Vida S.A., a corporation organized in the
Argentine Republic, which operates as a life insurance
company. MassMutual International Inc. owns 99.9% of the
outstanding capital stock of MassLife Seguros de Vida S.A.
68. MassMutual Services, S.A., a corporation organized in the
Argentine Republic which operates as a service company.
MassMutual Internacional (Argentina) S.A. owns 99% of the
outstanding shares and MassMutual International, Inc. owns 1%
of the shares.
69. Mass Seguros de Vida S.A., a corporation organized in the
Republic of Chile, which operates as a life insurance company.
MassMutual International (Chile) S.A. owns 33.5% of the
outstanding capital stock of Mass Seguros de Vida S.A.
70. Origen Inversiones S.A., a corporation organized in the
Republic of Chile which operates as a holding company.
MassMutual Internacional (Chile) S.A. holds a 33.5% ownership
interest in this corporation.
71. Compania de Seguros VidaCorp, S.A., a corporation organized
in the Republic of Chile, which operates as an insurance
company. Origen Inversiones S.A. owns 99% of the outstanding
shares of this company.
72. Oppenheimer Series Fund Inc., a Maryland corporation which
operates as an investment company, of which MassMutual and its
affiliates own a majority of certain series of shares issued
by the fund.
73. Panorama Series Fund, Inc., a Maryland corporation which
operates as an open end investment company. All shares issued
by the fund are owned by MassMutual and certain affiliates.
74. The DLB Fund Group, a Massachusetts business trust which
operates as an open-end investment company advised by Babson.
MassMutual owns at least 25% of each series of shares issued
by the DLB Fund Group, other than the DLB Stewart Ivory
International Fund and the DLB High Yield Fund.
75. Saar Holdings CDO, Limited, a Cayman Islands corporation that
operates as a collateralized debt obligation fund investing in
high yield debt securities of primarily U.S. issuers
including, to a limited extent, convertible high yield bonds.
MMHC Investment Inc. holds 40% of the mandatorily redeemable
preferred shares of this issuer. Such preferred shares are
treated as equity for tax purposes. MassMutual is the
collateral manager of Saar Holdings CDO, Limited. Babson acts
as sub-adviser.
76. Enhanced Mortgage-Backed Securities Fund Limited is a special
purpose company incorporated with limited liability in the
Cayman Islands, investing primarily in
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mortgage backed securities. Babson is the Investment Manager.
MassMutual holds all of the Class B notes and has covenanted
to hold at least 25% of the aggregate principal amount of the
Class C Certificates directly or through a wholly owned
affiliate.
77. Perseus CDO I, Limited is a Cayman Island Corporation that
operates as a collateralized debt obligation fund investing in
a diversified portfolio of assets including high yield bonds,
senior secured loans, a limited amount of equity securities
and certain other assets. MMHC Investment, Inc. holds 33.4% of
the Class D subordinated notes issued by Perseus CDO I
Limited. Such notes are treated as equity for tax purposes.
MassMutual is the portfolio manager and Perseus Advisors,
L.L.C. is the portfolio advisor of Perseus CDO I, Limited.
Babson acts as sub-adviser.
78. MassMutual Global CBO I Limited is a Cayman Island Corporation
that operates as a collateralized bond obligation fund
investing in emerging market securities and high yield bonds.
As of the closing date of this fund (June 16, 1999),
MassMutual and its indirect subsidiary, MMHC Investment, Inc.,
hold in the aggregate approximately 25.17% of the subordinated
notes that are treated as equity for tax purposes. MassMutual
is the Collateral Manager of MassMutual Global CBO I Limited.
Babson acts as sub-adviser.
79. Antares Funding L.P. is a Cayman Islands exempted limited
partnership that invests primarily in high yield bank loans
and public high yield bonds. Antares Capital Corporation, an
indirect subsidiary of MassMutual, is the collateral manager
of Antares Funding L.P. MassMutual manages the High Yield
Collateral Debt Securities and Babson acts as sub-adviser.
80. Maplewood (Cayman) Limited is an entity organized under the
laws of the Cayman Islands that invests primarily in bank
loans and high yield public debt. MassMutual is investment
adviser to this fund, and Babson acts as sub-adviser.
81. Simsbury CLO Limited is a Cayman Islands corporation that
operates as a collateralized bond obligations fund that
invests primarily in bank loans and high yield bonds.
MassMutual is investment adviser and Babson acts as
sub-adviser. MMHC owns 24.97% of the subordinated notes.
82. MassMutual Asia Limited, a corporation organized in Hong Kong
which operates as a life insurance company.
83. MassMutual Insurance Consultants Limited, a corporation
organized in Hong Kong which operates as a general insurance
agent.
84. MassMutual Trustees Limited, a corporation organized in Hong
Kong which operates as an approved trustee for the mandatory
provident funds. (Owned 60% by MassMutual Asia Limited and 20%
each by MassMutual Services Limited and MassMutual Guardian
Limited.
85. Protective Capital (International) Limited, a corporation
organized in Hong Kong which operates as a mandatory provident
funds intermediary.
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86. MassMutual Services Limited, a corporation organized in Hong
Kong which provided policyholders with estate planning
services. This company is now inactive.
87. MassMutual Guardian Limited, a corporation organized in Hong
Kong which provided policyholders with estate planning
services. This company is now inactive.
88. Jefferson Pilot Financial Seguros de Vida, S.A., an Argentine
corporation which operates as a life instance company.
(MassLife Seguros de Vida, S.A. - 99%, MassMutual
International, Inc. - 1%).
89. Jefferson Pilot Omega Seguros de Vida, S.A., a Uruguay
corporation which operates as a life insurance company (100%
owned).
90. Oppenheimer Trust Company, a corporation organized under the
laws of the State of New York which conducts the business of a
trust company.
91. MassMutual International (Bermuda) Ltd., a corporation
organized in Bermuda which operates as a life insurance
company.
92. MassMutual Funding LLC, a Delaware limited liability company
which issues commercial paper.
93. Persumma Financial LLC, a Delaware limited liability company
which offers online retirement service products.
94. MassMutual Assignment Company, a North Carolina corporation
which operates a structured settlement business.
95. Trinity Investment Management Corporation, a Pennsylvania
corporation and registered investment adviser which provides
portfolio management and equity research services primarily to
institutional clients.
MassMutual or one of its subsidiaries acts as the investment adviser of
the following investment companies, and as such may be deemed to control them.
1. MML Series Investment Fund, a Massachusetts business trust which
operates as an open-end investment company. All shares issued by MML Series
Investment Fund are owned by MassMutual and certain of its affiliates.
MassMutual acts as adviser for MML Series and Babson acts as sub-adviser to
certain series.
2. MassMutual Corporate Investors ("CI"), a Massachusetts business
trust which operates as a closed-end investment company. Babson is the
investment adviser to CI.
3. MassMutual Corporate Value Partners Limited, a Cayman Islands
corporation that operates as a high-yield bond fund. MassMutual Corporate Value
Limited holds an ownership interest in this company of approximately 88.3%.
MassMutual holds approximately 4.6% ownership interest in this company. Babson
acts as sub-adviser.
4. MassMutual High Yield Partners II LLC, a Delaware limited liability
company that operates as a high yield bond fund. MassMutual holds approximately
2.49%, MMHC Investment Inc. holds approximately 34.11%, and HYP Management, Inc.
holds approximately 6.82% for an approximate total of 43.42% of the ownership
interest in this company.
5. MassMutual Institutional Funds, a Massachusetts business trust which
operates as an open-end investment company. MassMutual acts as adviser for each
series, and Babson acts as sub-adviser to certain series.
6. MassMutual Participation Investors ("PI"), a Massachusetts business
trust which operates as a closed end investment company. Babson acts as the
investment adviser to PI.
7. MassMutual/Darby CBO, LLC, a Delaware limited liability company that
operates as a fund investing in high yield debt securities of U.S. and emerging
market issuers. MassMutual owns 1.79%, MMHC Investment, Inc. owns 44.91% and
MassMutual High Yield Partners LLC owns 2.39% of the ownership interest in this
company.
8. Somers CDO, Limited, a Cayman Islands corporation that operates as a
fund investing in high yield debt securities of primarily U.S. issuers. MMHC
Investment Inc. holds 37.04% of the subordinated notes of this issue which are
treated as equity for tax purposes. MassMutual is the collateral manager of
Somers CDO, Limited. Babson acts as sub-adviser.
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9. Enhanced Mortgage-Backed Securities Fund Limited is a special
purpose company incorporated with limited liability in the Cayman Islands,
investing primarily in mortgage backed securities. Babson is the investment
manager. MassMutual holds all of the Class B notes and has covenanted to hold at
least 25% of the aggregate principal amount of the Class C Certificates directly
or through a wholly owned affiliate.
10. Saar Holdings CDO, Limited, a Cayman Islands corporation that
operates as a collateralized debt obligation fund investing in high yield debt
securities of primarily U.S. issuers including, to a limited extent, convertible
high yield bonds. MMHC Investment Inc. holds 40% of the mandatorily redeemable
preferred shares of this issuer. Such preferred shares are treated as equity for
tax purposes. MassMutual is the collateral manager of Saar Holdings CDO,
Limited. Babson acts as sub-adviser.
11. Perseus CDO I, Limited is a Cayman Island Corporation that operates
as a collateralized debt obligation fund investing in a diversified portfolio of
assets including high yield bonds, senior secured loans, a limited amount of
equity securities and certain other assets. MMHC Investment, Inc. holds 33.4% of
the Class D subordinated notes issued by Perseus CDO I Limited. Such notes are
treated as equity for tax purposes. MassMutual is the portfolio manager and
Perseus Advisors, L.L.C. is the portfolio advisor of Perseus CDO I, Limited.
Babson is the sub-adviser.
12. MassMutual Global CDO I Limited is a Cayman Island Corporation that
operates as a collateralized bond obligation fund investing in emerging market
securities and high yield bonds. As of the closing date of this fund (June 16,
1999), MassMutual and its indirect subsidiary, MMHC Investment, Inc. hold in the
aggregate approximately 39.7% of the subordinated notes that are treated as
equity for tax purposes. MassMutual is the Collateral Manager of MassMutual
Global CDO I Limited. Babson acts as sub-adviser.
13. Antares Funding L.P. is a Cayman Islands exempted limited
partnership that invests primarily in high yield bank loans and public high
yield bonds. Antares Capital Corporation, an indirect subsidiary of MassMutual,
is the collateral manager of Antares Funding L.P. Antares Capital Corporation
manages the selection, acquisition and disposition of the Loan Collateral Debt
Securities. MassMutual manages the High Yield Collateral Debt Securities and
Babson acts a sub-adviser.
14. Maplewood (Cayman) Limited is an entity organized under the laws of
the Cayman Islands that invests primarily in bank loans and high yield public
debt. MassMutual is investment adviser to this fund, and Babson acts as
sub-adviser.
15. Simsbury CLO Limited is a Cayman Islands corporation that operates
as a collateralized bond obligations fund that invests primarily in bank loans
and high yield bonds. MassMutual is investment adviser and Babson acts as
sub-adviser. MassMutual and its affiliated subsidiaries own 34.35% of the
Junior Subordinated Notes.
16. Suffield CLO, Limited is a Cayman Islands Corporation that operates
as a collateralized loan obligations fund that invests primarily in domestic
bank loans and high yield bonds. Babson is the investment adviser. MassMutual
holds 23.13% of the preferred shares.
17. Wilbraham CBO Ltd., is a Cayman Islands limited liability company
that operates as collateralized bond obligations fund that invests primarily in
bank loans and high yield bonds. Babson is the investment manager. MassMutual
owns 33.99% of the preferred shares.
18. Enhanced Mortgage-Backed Securities Fund Limited II is a special
purpose company incorporated with limited liability in the Cayman Islands,
investing primarily in mortgage-backed securities. Babson is the investment
manager. MassMutual holds approximately 33% of the Class C Certificates.
19. Special Value Bond Fund II, LLC is a Delaware limited liability
company that operates as a high yield bond fund. Babson is co-manager of the
fund. MassMutual owns 20% of the subordinated notes.
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ITEM 25. INDEMNIFICATION.
Article VIII (Sections 1, 2 and 3) of Registrant's Agreement and Declaration of
Trust provides as follows with respect to indemnification of the Trustees and
officers of Registrant against liabilities which may be incurred by them in such
capacities:
Section 1. Trustees, Officers, Etc. The Trust shall indemnify each of its
Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise) (hereinafter referred to
as a "Covered Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person, except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding to be liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article, provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust shall be insured against losses arising from any such advance
payments or (c) either a majority of the disinterested Trustees acting on the
matter (provided that a majority of the disinterested Trustees then in office
act on the matter), or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
full trial type inquiry) that there is reason to believe that such Covered
Person will be found entitled to indemnification under this Article.
Section 2. Compromise Payment. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise) without an
adjudication by a court, or by any other body before which the proceeding was
brought, that such Covered Person is liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, indemnification
shall be provided if (a) approved, after notice that it involves such
indemnification, by at least a majority of the disinterested Trustees acting on
the matter (provided that a majority of the disinterested Trustees then in
office act on the matter) upon a determination, based upon a review of readily
available facts (as opposed to a full trial type inquiry), that such Covered
Person is not liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, or (b)
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there has been obtained an opinion in writing of independent legal counsel,
based upon a review of readily available facts (as opposed to a full trial type
inquiry), to the effect that such indemnification would not protect such Person
against any liability to the Trust to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office. Any approval
pursuant to this Section shall not prevent the recovery from any Covered Person
of any amount paid to such Covered Person in accordance with this Section as
indemnification if such Covered Person is subsequently adjudicated by a court of
competent jurisdiction to have been liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office.
Section 3. Indemnification Not Exclusive. The right of indemnification hereby
provided shall not be exclusive of or affect any other rights to which such
Covered Person may be entitled. As used in this Article VIII, the term "Covered
Person" shall include such person's heirs, executors and administrators and a
"disinterested Trustee" is a Trustee who is not an "interested person" of the
Trust as defined in Section 2(a)(19) of the 1940 Act (or who has been exempted
from being an "interested person" by any rule, regulation or order of the
Commission), and against whom none of such actions, suits or other proceedings
or another action, suit or other proceeding on the same or similar grounds is
then or has been pending. Nothing contained in this Article shall affect any
rights to indemnification to which personnel of the Trust, other than Trustees
or officers, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such person; provided, however, that the Trust shall not purchase
or maintain any such liability insurance in contravention of applicable law,
including without limitation the 1940 Act.
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ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.
(a) The directors and executive officers of David L. Babson & Company
Inc. ("Babson", or the "Manager"), which is located at One Memorial Drive,
Cambridge, Massachusetts 02142, their positions with Babson, and their other
principal business affiliations and business experience for the past two years
are as follows:
STUART H. REESE, Director, President and Chief Executive Officer
Director (since 2000), President and Chief Executive Officer (since 1999),
Babson; Executive Vice President and Chief Investment Officer (since 1999),
Chief Executive Director (1997-1999), Executive Director (1996-1997), Senior
Vice President (1993-1996), Massachusetts Mutual Life Insurance Company
("MassMutual") Mutual (insurance company and investment adviser), 1295 State
Street, Springfield, Massachusetts 01111.
KEVIN M. MCCLINTOCK, Director, Executive Vice President
Director (since 2000), Executive Vice President (since 1999), Babson; Managing
Director, Babson-Stewart Ivory International (registered investment adviser, of
which the Manager is a 50% general partner), One Memorial Drive, Cambridge,
Massachusetts (since 1999); Director (since 1999), the DLB Fund Group, One
Memorial Drive, Cambridge, Massachusetts (open-end investment company); Director
of Equities and Fixed Income (1995-1999), the Dreyfus Corporation (investment
manager), New York, New York.
FRANK L. TARANTINO, Director, Executive Vice President, Chief Financial Officer
and Chief Compliance Officer
Director, Executive Vice President, Chief Financial Officer and Chief Compliance
Officer (since 1999) and Clerk and Chief Operating Officer (since 1997), Babson;
President (since 1999), Vice President (1988 - 1999) and Clerk (1997-1998), The
DLB Fund Group, One Memorial Drive, Cambridge, Massachusetts (open-end
investment company); Director (since 1998), President (since 1999), Clerk (since
1997), Potomac Babson Inc. (inactive investment advisory subsidiary of the
Manager), 1290 Avenue of the Americas, New York, New York; Director, President,
Treasurer and Clerk, Babson Securities Corp,, One Memorial Drive, Cambridge,
Massachusetts (broker-dealer subsidiary of Babson); President (1993-1997)
Liberty Securities Corporation (broker-dealer), 600 Atlantic Avenue, Boston,
Massachusetts.
ROBERT LIGUORI, Director
Director (since 2000), Babson; Senior Vice President and Deputy General Counsel
(since 1999), MassMutual Life Insurance Company (insurance company and
investment adviser), 1295 State Street, Springfield, Massachusetts; Senior Vice
President and General Counsel (1997-1999), Vice President and General Counsel
(1996-1997), Vice President and Counsel (1992-1996), American International
Group, Inc., AIG Life Companies, 600 King Street, Wilmington, DE.
ROBERT E. JOYAL, Director and Executive Director
Director and Executive Director (since 2000), Babson; Executive Director
(1997-1999), Senior Managing Director (1996-1998), Vice President and Managing
Director (1990-1996), MassMutual; President (since 1999), Senior Vice President
(1989-1999), MassMutual Corporate Investors and MassMutual Participation
Investors (closed-end investment companies); Director, (since 1996), MassMutual
High Yield Partners II LLC (a Delaware limited liability company that operates
as a high yield bond fund).
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MARY WILSON-KIBBE, Executive Director and Executive Vice President
Executive Director and Executive Vice President (since 1999), Babson; Vice
President (since 1999), The DLB Fund Group, One Memorial Drive, Cambridge,
Massachusetts (open-end investment company); Executive Director (1997-1999),
Senior Managing Director (1997-1999), Vice President and Managing Director
(1991-1994), MassMutual (insurance company and investment adviser), 1295 State
Street, Springfield, Massachusetts 01111.
LANCE F. JAMES, Executive Vice President
Executive Vice President (since 1999), Director (1999-2000), Senior Vice
President (1996-1999), Portfolio Manager (since 1987), Babson; Vice President
(since 1999), The DLB Fund Group, One Memorial Drive, Cambridge, Massachusetts
(open-end investment company).
STEPHEN B. O'BRIEN, Executive Vice President
Executive Vice President (since 1999), Director (1999-2000), Senior Vice
President (1996-1999), Babson; Managing Director (since 1998), Babson-Stewart
Ivory International (registered investment adviser, of which the Manager is a
50% general partner), One Memorial Drive, Cambridge, Massachusetts.
KENNETH L. HARGREAVES, Executive Director
Executive Director (since 2000), Babson; Executive Director (1997-1999), Senior
Vice President (1991-1997), MassMutual.
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EFREM MARDER, Executive Director
Executive Director (since 2000), Babson; Executive Director (1998-1999), Senior
Managing Director (1996-1998), Vice President and Manager Director (1989-1996),
MassMutual (insurance company and investment adviser), 1295 State Street,
Springfield, Massachusetts.
JEANNE M. STAMANT, Executive Director
Executive Director (since 2000), Babson; Executive Director (1996-1999), Vice
President, Actuary and Executive Officer (1995-1996), Vice President and Actuary
(1987-1994), MassMutual (insurance company and investment adviser), 1295 State
Street, Springfield, Massachusetts.
STEPHEN L. KUHN, General Counsel and Clerk
General Counsel and Clerk (since 2000), Babson; Senior Vice President and Deputy
General Counsel (since 1998), Vice President and Associate General Counsel
(1992-1998), MassMutual (insurance company and investment adviser), 1295 State
Street, Springfield, Massachusetts; Vice President and Secretary, MassMutual
Participation Investors and MassMutual Corporate Investors (closed end
investment companies); Assistant Secretary (since 1996), Antares Capital
Corporation (finance company); Chief Legal Officer and Assistant Secretary
(since 1995), DLB Acquisition Corporation (holding company for investment
advisers); Assistant Secretary, Oppenheimer Acquisition Corporation (holding
company for investment advisers); Vice President and Secretary, MassMutual
Institutional Funds (open end investment company); Vice President and Secretary,
(1988-1999), MML Series.
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ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Effective October 20, 1999, Babson Securities Corp. ("BSC") became the
principal underwriter for the Trust. The eleven separate series of the Trust
are:
1) DLB Fixed Income Fund
2) DLB Value Fund
3) DLB Core Growth Fund
4) DLB Disciplined Growth Fund
5) DLB Enterprise III Fund
6) DLB Small Company Opportunities Fund
7) DLB Global Small Capitalization Fund
8) DLB Stewart Ivory International Fund
9) DLB Stewart Ivory Emerging Markets Fund
10) DLB High Yield Fund
11) DLB Technology Fund
(b) The following are the names and positions of the officers and directors
of BSC:
Frank L. Tarantino, Director, President, Clerk and Treasurer
John E. Deitelbaum, Assistant Clerk
The business address for both Mr. Tarantino and Mr. Deitelbaum is c/o
David L. Babson & Company Inc., One Memorial Drive, Cambridge, MA 02142. Mr.
Tarantino is President of the Trust, and Mr. Deitelbaum is Clerk of the Trust.
(c) Not Applicable
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ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
kept by the Registrant and David L. Babson and Company Incorporated ("Babson")
at their respective principal business offices at One Memorial Drive, Cambridge,
Massachusetts 02142, and 1295 State Street, Springfield, Massachusetts 01111,
and by IBT, the Registrant's Custodian and Transfer Agent, at its principal
business office at 200 Clarendon Street, Boston, Massachusetts 02116.
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ITEM 29. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Part
A or Part B.
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ITEM 30. UNDERTAKINGS.
Not Applicable.
NOTICE
A copy of the Agreement and Declaration of Trust of the Trust, as
amended, is on file with the Secretary of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the Trust
by an officer of the Trust as an officer and not individually and the
obligations of or arising out of this instrument are not binding upon any of the
Trustees or shareholders individually but are binding only upon the assets and
property of the relevant series of the Trust.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and the Investment Company Act of 1940, as amended, the
Trust certifies that it meets all of the requiements for effectiveness of this
Registration Statement under rule 485(b) of the Securities Act and has duly
caused this Post-Effective Amendment to its Registration Statement on Form N-1A
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Cambridge, The Commonwealth of Massachusetts, on the 23rd day of
October, 2000.
THE DLB FUND GROUP
By: /s/ Frank L. Tarantino
------------------------------
Name: Frank L. Tarantino
Title: President
Pursuant to the requirements of the Securities Act, this Post-Effective
Amendment to the Registration Statement of The DLB Fund Group has been signed
below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ FRANK L. TARANTINO President and October 23, 2000
----------------------- Principal Executive Officer
Frank L. Tarantino
/s/ DEANNE B. DUPONT Treasurer; Principal Financial October 23, 2000
----------------------- Officer; Principal Accounting
DeAnne B. Dupont Officer
CHARLES E. HUGEL* Trustee October 23, 2000
-----------------------
Charles E. Hugel
/s/ KEVIN M. MCCLINTOCK Trustee October 23, 2000
-----------------------
Kevin M. McClintock
RICHARD A. NENNEMAN* Trustee October 23, 2000
-----------------------
Richard A. Nenneman
RICHARD J. PHELPS* Trustee October 23, 2000
-----------------------
Richard J. Phelps
*By: /s/ FRANK L. TARANTINO
----------------------
Frank L. Tarantino
Attorney-In-Fact
October 23, 2000
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EXHIBIT INDEX
-------------
Exhibit No. Description of Exhibit
----------- ----------------------
(a)(12) Amendment No. 11 to Agreement and Declaration of Trust
(d)(18) Management Contract between the Trust and the Manager relating to
the DLB Enhanced Index Growth Fund
(d)(19) Management Contract between the Trust and the Manager relating to
the DLB Enhanced Index Value Fund
(d)(20) Management Contract between the Trust and the Manager relating to
the DLB Small Capitalization Value Fund
(h)(15) Fee and Expense Limitation Agreement relating to the DLB Enhanced
Index Growth Fund, DLB Enhanced Index Value Fund and DLB Small
Capitalization Value Fund
(i) Opinion of Ropes & Gray
(m)(12) Distribution and Services Plan between the Trust and the Manager
relating to the DLB Enhanced Index Growth Fund
(m)(13) Distribution and Services Plan between the Trust and the Manager
relating to the DLB Enhanced Index Value Fund
(m)(14) Distribution and Services Plan between the Trust and the Manager
relating to the DLB Small Capitalization Value Fund
