SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ______ [ ]
Post-Effective Amendment No. 6 File No. 33-39321 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 7 File No. 811-6252 [X]
BABSON ENTERPRISE FUND II, INC.
(Exact Name of Registrant as Specified in Charter)
2440 Pershing Road, G-15, Kansas City, MO 64108
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code (816) 471-5200
Larry D. Armel, President, BABSON ENTERPRISE FUND II, INC.
2440 Pershing Road, G-15, Kansas City, Missouri 64108
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering March 31, 1995
It is proposed that this filing become effective:
X On March 31, 1994 pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite number or amount of securities
under the Securities Act of 1933 pursuant to Rule 24f-2 of the
Investment Company Act of 1940, and will file its required Rule 24f-2
Notice for the Registrant's fiscal year ended November 30, 1995, by
January 30, 1996.
Please address inquiries and a carbon copy of all
and communications to: communications to:
John G. Dyer, Esq. Mark H. Plafker, Esq.
Babson Enterprise Fund II, Inc. Stradley, Ronon, Stevens & Young
2440 Pershing Road, G-15 2600 One Commerce Square
Kansas City, MO 64108 Philadelphia, PA 19103-7098
Telephone: (816) 471-5200 Telephone: (215) 564-8024
BABSON ENTERPRISE FUND II, INC.
CROSS REFERENCE SHEET
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Form N-1A Item Number Location in Prospectus
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Item 1. Cover Page . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . Not Applicable
Item 3. Condensed Financial Information . . Per Share Capital and
Income Changes
Item 4. General Description of Registrant. . Investment Objective
and Portfolio
Management Policy
Item 5. Management of the Fund . . . . . . . Officers and Directors;
Management and
Investment Counsel
Item 6. Capital Stock and Other Securities . How to Purchase Shares;
How to Redeem Shares;
How Share Price is
Determined; General
Information and
History; Dividends,
Distributions and
their Taxation
Item 7. Purchase of Securities . . . . . . . Cover Page; How to
being Offered Purchase Shares;
Shareholder Services
Item 8. Redemption or Repurcdhase . . . . . How to Redeem Shares
Item 9. Pending Legal Proceedings . . . . . Not Applicable
</TABLE>
<TABLE>
<CAPTION>
Location in Statement
Form N-1A Item Number of Additional Information
<S> <S> <S>
Item 10. Cover Page . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . . Cover Page
Item 12. General Information and History . . Investment Objectives
and Policies;
Management and
Investment Counsel
Item 13. Investment Objectives and Policies . Investment Objectives
and Policies;
Investment Restrictions
Item 14. Management of the Fund . . . . . . . Management and
Investment Counsel
Item 15. Control Persons and Principal . . . Management and
Holders of Securities Investment Counsel;
Officers and Directors
Item 16. Investment Advisory and other . . . Management and
Services Investment Counsel
Item 17. Brokerage Allocation . . . . . . . . Portfolio Transactions
Item 18. Capital Stock and Other Securities . General Information and
History (Prospectus);
Financial Statements
Item 19. Purchase, Redemption and Pricing . . How Share Purchases
of Securities Being Offered are Handled; Redemption
of Shares
Financial Statements
Item 20. Tax Status . . . . . . . . . . . . . Dividends,
Distributions and their
Taxation (Prospectus)
Item 21. Underwriters . . . . . . . . . . . . How the Fund's Shares
are Distributed
Item 22. Calculation of Yield Quotations . . Not Applicable
of Money Market Fund
Item 23. Financial Statements . . . . . . . . Financial Statements
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PROSPECTUS
March 31, 1995
BABSON ENTERPRISE FUND II, INC.
Managed and Distributed By:
JONES & BABSON, INC.
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
Toll-Free 1-800-4-BABSON
(1-800-422-2766)
In the Kansas City area 471-5200
Investment Counsel:
DAVID L. BABSON & CO. INC.
Cambridge, Massachusetts
INVESTMENT OBJECTIVE
A no-load mutual fund that seeks long-term growth of capital by
investing in a diversified portfolio of common stocks of smaller,
faster-growing companies which at the time of purchase are considered
by the Investment Adviser to be realistically valued in the smaller
company sector of the market. The Fund is intended to be an investment
vehicle for that part of an investor's capital which can appropriately
be exposed to above-average risk in anticipation of greater rewards.
There is no guarantee that the Fund's objective will be achieved.
This Fund is not intended to be a complete investment program. (For a
discussion of risk factors see page 6 of this prospectus.)
PURCHASE INFORMATION
Minimum Investment
Initial Purchase $ 1,000
Initial IRA and Uniform Transfers (Gifts)
to Minors Purchases $ 250
Subsequent Purchase:
By Mail $ 100
By Telephone or Wire $ 1,000
All Automatic Purchases $ 100
Shares are purchased and redeemed at net asset value. There are no
sales, redemption or Rule 12b-1 distribution charges. If you need
further information, please call the Fund at the telephone numbers
indicated.
ADDITIONAL INFORMATION
This prospectus should be read and retained for future reference. It
contains the information that you should know before you invest. A
"Statement of Additional Information" of the same date as this
prospectus has been filed with the Securities and Exchange Commission
and is incorporated by reference. Investors desiring additional
information about the Fund may obtain a copy without charge by writing
or calling the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS Page
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Fund Expenses 3
Financial Highlights 4
Investment Objective and Portfolio Management Policy 5
Repurchase Agreements 6
Risk Factors 6
Investment Restrictions 7
Performance Measures 7
How to Purchase Shares 8
Initial Investments 9
Investments Subsequent to Initial Investment 9
Telephone Investment Service 9
Automatic Monthly Investment Plan 10
How to Redeem Shares 10
Systematic Redemption Plan 12
How to Exchange Shares Between Babson Funds 13
How Share Price is Determined 14
Officers and Directors 14
Management and Investment Counsel 14
General Information and History 16
Dividends, Distributions and Their Taxation 17
Shareholder Services 18
Shareholder Inquiries 19
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BABSON ENTERPRISE FUND II, INC.
FUND EXPENSES
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees 1.43%
12b-1 fees None
Other expenses .07%
Total Fund operating expenses 1.50%
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Year 5 Year 10 Year
$15 $48 $82 $179
The above information is provided in order to assist you in
understanding the various costs and expenses that a shareholder of the
Fund will bear directly or indirectly. The expenses set forth above
are for the fiscal year ended November 30, 1994. The example should
not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following financial highlights for the period from August 5, 1991
(date of initial public offering) to November 30, 1991, and each of
the three years in the period ended November 30, 1994, have been derived
from audited financial statements of Babson Enterprise Fund II, Inc.
Such information for the period ended November 30, 1991 and the three
years in the period ended November 30, 1994 should be read in
conjunction with the financial statements of the Fund and the report
of Ernst & Young LLP, independent auditors, appearing in the November 30,
1994 annual report to shareholders which is incorporated by reference
in this prospectus.
See Financial Data Schedule - Exhibit 27
INVESTMENT OBJECTIVE and PORTFOLIO MANAGEMENT POLICY
Babson Enterprise Fund II's investment objective is to seek long-term
growth of capital by investing principally in a diversified portfolio
of common stocks of smaller, faster-growing companies whose securities
at the time of purchase are considered by the investment adviser to be
realistically valued in the smaller company sector of the market. A
stock will be considered to be realistically valued if it is trading
at a price which the investment adviser believes is reasonable
relative to its own past valuation history as well as compared to a
large universe of stocks as selected by the investment adviser, based
on one or more of the following comparisons:
1. price relative to earnings,
2. price relative to sales,
3. price relative to assets as measured by book value.
The Fund is a diversified
investment company and generally intends to invest at least 65% of its
total assets in stocks of smaller companies with market capitalization
of $250 million to $1 billion at the time of purchase and which are
listed on a national or regional exchange or over-the-counter with
prices quoted daily in the financial press. The Fund's management
believes, however, that there may be times when the shareholders'
interests are best served by investing temporarily in preferred
stocks, bonds or other defensive issues. Normally, however, the Fund
will maintain at least 80% of the portfolio in common stocks. There
are no restrictions or guidelines regarding the investment of Fund
assets in shares listed on an exchange or traded
over-the-counter.
Smaller companies are typically in an early phase of
their development. They are in or nearer the entrepreneurial stage
than the institutionalized, professional management status of larger
companies. Generally, smaller companies offer the possibility of more
rapid sales and profit expansion--if they are successful--than larger,
older and more mature businesses. At the same time, smaller,
less-seasoned firms are generally subject to greater business risk.
(See "Risk Factors.")
The Fund's investment objective and policy as
described in this section will not be changed without approval of a
majority of the Fund's outstanding shares.
The Fund may also invest in
issues of the United States Treasury or a United States government
agency subject to repurchase agreements. The use of repurchase
agreements by the Fund involves certain risks. For a discussion of
these risks, see "Risk Factors Applicable to Repurchase Agreements" on
page 6.
There is no assurance that the Fund's objective of long-term
growth of capital can be achieved. Portfolio turnover will be no more
than is necessary to meet the Fund's objectives. Under normal
circumstances, it is anticipated that it will not exceed 100%. For the
fiscal years ended November 30, 1994, November 30, 1993 and the
fiscal period ended November 30, 1992, the total dollar amount of
brokerage commissions paid by the Fund and the annual portfolio
turnover rate were as follows:
Portfolio
Fiscal Brokerage Turnover
Period Commissions Rate
1994 $29,972 9%
1993 $51,953 18%
1992 $10,810 14%
REPURCHASE AGREEMENTS
A repurchase agreement involves the sale of securities to the Fund
with the concurrent agreement by the seller to repurchase the
securities at the Fund's cost plus interest at an agreed rate upon
demand or within a specified time, thereby determining the yield
during the purchaser's period of ownership. The result is a fixed rate
of return insulated from market fluctuations during such period. Under
the Investment Company Act of 1940, repurchase agreements are
considered loans by the Fund.
The Fund will enter into such repurchase
agreements only with United States banks having assets in excess of $1
billion which are members of the Federal Deposit Insurance
Corporation, and with certain securities dealers who meet the
qualifications set from time to time by the Board of Directors of the
Fund. The term to maturity of a repurchase agreement normally will be
no longer than a few days. Repurchase agreements maturing in more than
seven days and other illiquid securities will not exceed 10% of the
total assets of the Fund.
RISK FACTORS
The Fund is intended to be an
investment vehicle for that part of an individual or institutional
investor's capital which can appropriately be exposed to above-average
risk in anticipation of greater rewards. The Fund is not designed to
offer a complete or balanced investment program suitable for all
investors.
While smaller companies generally have potential for rapid
growth, they often involve higher risk because they may lack the
management experience, financial resources, product diversification
and competitive strengths of larger corporations. While management
cannot eliminate this risk, it will seek to minimize it by
diversifying its investments among a broad list of companies.
In many instances, the securities of smaller companies are traded only
over-the-counter or on a regional securities exchange, and the
frequency and volume of their trading is substantially less than is
typical of larger companies. Therefore, the securities of smaller
companies may be subject to wider price fluctuations. When making
larger sales, the Fund may have to sell portfolio holdings at
discounts from quoted prices or may have to make a series of small
sales over an extended period of time. The Fund does not intend to
invest in any security which, at the time of purchase, is not readily
marketable.
Risk Factors Applicable To Repurchase Agreements
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the
underlying securities at a time when the value of these securities has
declined, the Fund may incur a loss upon disposition of them. If the
seller of the agreement becomes insolvent and subject to liquidation
or reorganization under the Bankruptcy Code or other laws, disposition
of the underlying securities may be delayed pending court proceedings.
Finally, it is possible that the Fund may not be able to perfect its
interest in the underlying securities. While the Fund's management
acknowledges these risks, it is expected that they can be controlled
through stringent security selection criteria and careful monitoring
procedures.
INVESTMENT RESTRICTIONS
In addition to the investment objective and portfolio management
policies set forth under the caption "Investment Objective and
Portfolio Management Policy," the Fund is subject to certain other
restrictions which may not be changed without approval of the lesser
of: (1) at least 67% of the voting securities present at a meeting if
the holders of more than 50% of the outstanding securities of the Fund
are present or represented by proxy, or (2) more than 50% of the
outstanding voting securities of the Fund. Among these restrictions,
the more important ones are that the Fund will not purchase the
securities of any issuer if more than 5% of the Fund's total assets
would be invested in the securities of such issuer, or the Fund would
hold more than 10% of any class of securities of such issuer; the Fund
will not make any loan (the purchase of a security subject to a
repurchase agreement or the purchase of a portion of an issue of
publicly distributed debt securities is not considered the making of
a loan); and the Fund will not borrow or pledge its credit under
normal circumstances, except up to 10% of its total assets (computed
at the lower of fair market value or cost) for temporary or emergency
purposes, and not for the purpose of leveraging its investments; and
provided further that any borrowings shall have asset coverage of at
least 3 to 1. The Fund will not buy securities while borrowings are
outstanding. The full text of these restrictions are set forth in the
"Statement of Additional Information."
PERFORMANCE MEASURES
From time to time, the Fund may advertise its performance in various
ways, as summarized below. Further discussion of these matters also
appears in the "Statement of Additional Information." A discussion of Fund
performance is included in the Fund's Annual Report to Shareholders
which is available from the Fund upon request at no charge.
Total Return
The Fund may advertise "average annual total return" over
various periods of time. Such total return figures show the average
percentage change in value of an investment in the Fund from the
beginning date of the measuring period to the end of the measuring
period. These figures reflect changes in the price of the Fund's
shares and assume that any income dividends and/or capital gains
distributions made by the Fund during the period were reinvested in
shares of the Fund. Figures will be given for recent one-, five- and
ten-year periods (if applicable), and may be given for other periods
as well (such as from commencement of the Fund's operations, or on a
year-by-year basis). When considering "average" total return figures
for periods longer than one year, it is important to note that a
Fund's annual total return for any one year in the period might have
been greater or less than the average for the entire
period.
Performance Comparisons
In advertisements or in reports to
shareholders, the Fund may compare its performance to that of other
mutual funds with similar investment objectives and to stock or other
relevant indices. For example, it may compare its performance to
rankings prepared by Lipper Analytical Services, Inc. (Lipper), a
widely recognized independent service which monitors the performance
of mutual funds. The Fund may compare its performance to the Standard
& Poor's 500 Stock Index (S&P 500), an index of unmanaged groups of
common stocks, the Dow Jones Industrial Average, a recognized
unmanaged index of common stocks of 30 industrial companies listed on
the NYSE, the Russell 2000 Index, a small company stock index, or the
Consumer Price Index. Performance information rankings, ratings,
published editorial comments and listings as reported in national
financial publications such as Kiplinger's Personal Finance Magazine,
Business Week, Institutional Investor, The Wall Street Journal, Mutual
Fund Forecaster, No Load Investor, Money, Forbes, Fortune and Barron's
may also be used in comparing performance of the Fund. Performance
comparisons should not be considered as representative of the future
performance of any Fund. Further information regarding the performance
of the Fund is contained in the "Statement of Additional
Information."
Performance rankings, recommendations, published
editorial comments and listings reported in Money, Barron's,
Kiplinger's Personal Finance Magazine, Financial World, Forbes, U.S.
News & World Report, Business Week, The Wall Street Journal, Investors
Business Daily, USA Today, Fortune and Stangers's may also be cited
(if the Fund is listed in any such publication) or used for
comparison, as well as performance listings and rankings from
Morningstar Mutual Funds, Personal Finance, Income and Safety, The
Mutual Fund Letter, No-Load Fund Investor, United Mutual Fund
Selector, No-Load Fund Analyst, No Load Fund X, Louis Rukeyser's Wall
Street newsletter, Donoghue's Money Letter, CDA Investment
Technologies, Inc., Wiesenberger Investment Companies Service, and
Donoghue's Mutual Fund Almanac.
HOW TO PURCHASE SHARES
Shares are purchased at net asset value (no sales charge) from the Fund
through its agent, Jones & Babson, Inc., Three Crown Center, 2440 Pershing
Road, Suite G-15, Kansas City, MO 64108. For information call toll
free 1-800-4-BABSON (1-800-422-2766), or in the Kansas City area
471-5200. If an investor wishes to engage the services of any other
broker to purchase (or redeem) shares of the Fund, a fee may be
charged by such broker. The Fund will not be responsible for the
consequences of delays including delays in the banking or Federal
Reserve wire systems.
You do not pay a sales commission when you buy
shares of the Fund. Shares are purchased at the Fund's net asset value
(price) per share next effective after a purchase order and payment
have been received by the Fund. In the case of certain institutions
which have made satisfactory payment arrangements with the Fund,
orders may be processed at the net asset value per share next
effective after a purchase order has been received by the Fund.
The Fund may accept investments in kind of stocks on the Fund's buy list
for purchase of the Fund's shares. Acceptance of such stocks will be
at the discretion of the Manager and Investment Counsel based on
judgments as to whether, in each case, acceptance of stock will allow
the Fund to acquire the stock at no more than the net cost of
acquiring it through normal channels, and whether the stock has
restrictions on its sale by the Fund under the Securities Act of 1933.
Fund shares purchased in exchange for stocks are issued at net asset
value.
The Fund reserves the right in its sole discretion to withdraw
all or any part of the offering made by this prospectus or to reject
purchase orders when, in the judgment of management, such withdrawal
or rejection is in the best interest of the Fund and its shareholders.
The Fund also reserves the right at any time to waive or increase the
minimum requirements applicable to initial or subsequent investments
with respect to any person or class of persons, which include
shareholders of the Fund's special investment programs. The Fund
reserves the right to refuse to accept orders for fund shares unless
accompanied by payment, except when a responsible person has
indemnified the Fund against losses resulting from the failure of
investors to make payment. In the event that the Fund sustains a loss
as the result of failure by a purchaser to make payment, the Fund's
underwriter, Jones & Babson, Inc. will cover the loss.
INITIAL INVESTMENTS
Initial investments - By mail. You may open an account and make an
investment by completing and signing the application which accompanies
this prospectus. Make your check ($1,000 minimum unless your purchase
is pursuant to an IRA or the Uniform Transfers (Gifts) to Minors Act
in which case the minimum initial purchase is $250) payable to UMB
Bank, n.a. Mail your application and check to:
Babson Enterprise Fund II, Inc.
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
Initial investments - By wire. You may purchase shares of the Fund by
wiring funds ($1,000 minimum) through the Federal Reserve Bank to the
custodian, UMB Bank, n.a. Prior to sending your money, you
must call the Fund toll free 1-800-4-BABSON (1-800-422-2766), or in
the Kansas City area 471-5200 and provide it with the identity of the
registered account owner, the registered address, the Social Security
or Taxpayer Identification Number of the registered owner, the amount
being wired, the name and telephone number of the wiring bank and the
person to be contacted in connection with the order. You will then be
provided a Fund account number, after which you should instruct your
bank to wire the specified amount, along with the account number and
the account registration to:
UMB Bank, n.a.
Kansas City, Missouri, ABA #101000695
For Babson Enterprise Fund II, Inc./
AC=987036-6517 OBI=(Assigned Fund number and name in which registered.)
A completed application must be sent to the Fund as soon as possible
so the necessary remaining information can be recorded in your
account. No redemptions can occur until this is done.
INVESTMENTS SUBSEQUENT TO INITIAL INVESTMENT
You may add to your Fund account at any time in amounts of $100 or
more if purchases are made by mail, or $1,000 or more if purchases are
made by wire or telephone. Automatic monthly investments must be in
amounts of $100 or more.
Checks should be mailed to the Fund at its
address, but make them payable to UMB Bank, n.a. Always
identify your account number or include the detachable reminder stub
which accompanies each confirmation.
Wire share purchases should
include your account registration, your account number and the Babson
Fund in which you are purchasing shares. It also is advisable to
notify the Fund by telephone that you have sent a wire purchase order
to the bank.
TELEPHONE INVESTMENT SERVICE
To use the Telephone Investment Service, you must first establish your
Fund account and authorize telephone orders in the application form,
or, subsequently, on a special authorization form provided upon
request. If you elect the Telephone Investment Service, you may
purchase Fund shares by telephone and authorize the Fund to draft your
checking account for the cost of the shares so purchased. You will
receive the next available price after the Fund has received your
telephone call. Availability and continuance of this privilege is
subject to acceptance and approval by the Fund and all participating
banks. During periods of increased market activity, you may have
difficulty reaching the Fund by telephone, in which case you should
contact the Fund by mail or telegraph. The Fund will not be
responsible for the consequences of delays including delays in the
banking or Federal Reserve wire systems.
The Fund will employ
reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if such procedures are not followed, the
Fund may be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, but are not limited to
requiring personal identification prior to acting upon instructions
received by telephone, providing written confirmations of such
transactions, and/or tape recording of telephone instructions.
The Fund reserves the right to initiate a charge for this service and to
terminate or modify any or all of the privileges in connection with
this service at any time upon 15 days written notice to shareholders,
and to terminate or modify the privileges without prior notice in any
circumstances where such termination or modification is in the best
interest of the Fund and its investors.
AUTOMATIC MONTHLY INVESTMENT PLAN
You may elect to make monthly investments in a constant dollar amount
from your checking account ($100 minimum). The Fund will draft your
checking account on the same day each month in the amount you
authorize in your application, or, subsequently, on a special
authorization form provided upon request. Availability and continuance
of this privilege is subject to acceptance and approval by the Fund
and all participating banks. If the date selected falls on a day upon
which the Fund shares are not priced, investment will be made on the
first date thereafter upon which Fund shares are priced. The Fund will
not be responsible for the consequences of delays including delays in
the banking or Federal Reserve wire systems.
The Fund reserves the
right to initiate a charge for this service and to terminate or modify
any or all of the privileges in connection with this service at any
time upon 15 days written notice to shareholders, and to terminate or
modify the privileges without prior notice in any circumstances where
such termination or modification is in the best interest of the Fund
and its investors.
HOW TO REDEEM SHARES
The Fund will redeem shares at the price (net asset value per share)
next computed after receipt of a redemption request in "good order."
(See "How Share Price is Determined," page 14.)
A written request for
redemption, together with an endorsed share certificate where a
certificate has been issued, must be received by the Fund in order to
constitute a valid tender for redemption. For authorization of
redemptions by a corporation, it will also be necessary to have an
appropriate certified copy of resolutions on file with the Fund before
a redemption request will be considered in "good order." In the case
of certain institutions which have made satisfactory redemption
arrangements with the Fund, redemption orders may be processed by
facsimile or telephone transmission at net asset value per share next
effective after receipt by the Fund. If an investor wishes to engage
the services of any other broker to redeem (or purchase) shares of the
Fund, a fee may be charged by such broker.
To be in "good order" the request must include the following:
(1) A written redemption
request or stock assignment (stock power) containing the genuine
signature of each registered owner exactly as the shares are
registered, with clear identification of the account by registered
name(s) and account number and the number of shares or the dollar
amount to be redeemed;
(2) any outstanding stock certificates representing shares to be
redeemed;
(3) signature guarantees as required; and (See Signature Guarantees.)
(4) any additional documentation which the Fund may deem necessary to
insure a genuine redemption.
Where additional documentation is normally required
to support redemptions as in the case of corporations, fiduciaries,
and others who hold shares in a representative or nominee capacity
such as certified copies of corporate resolutions, or certificates of
incumbency, or such other documentation as may be required under the
Uniform Commercial Code or other applicable laws or regulations, it is
the responsibility of the shareholder to maintain such documentation
on file and in a current status. A failure to do so will delay the
redemption. If you have questions concerning redemption requirements,
please write or telephone the Fund well ahead of an anticipated
redemption in order to avoid any possible delay.
Requests which are
subject to special conditions or which specify an effective date other
than as provided herein cannot be accepted. All redemption requests
must be transmitted to the Fund at Three Crown Center, 2440 Pershing
Road, Suite G-15, Kansas City, Missouri 64108. The Fund will redeem
shares at the price (net asset value per share) next computed after
receipt of a redemption request in "good order." (See "How Share
Price is Determined," page 14.)
The Fund will endeavor to transmit
redemption proceeds to the proper party, as instructed, as soon as
practicable after a redemption request has been received in "good
order" and accepted, but in no event later than the seventh day
thereafter. Transmissions are made by mail unless an expedited method
has been authorized and specified in the redemption request. The Fund
will not be responsible for the consequences of delays including
delays in the banking or Federal Reserve wire systems.
Redemptions will not become effective until all documents in the form
required have been received. In the case of redemption requests made within
15 days of the date of purchase, the Fund will delay transmission of proceeds
until such time as it is certain that unconditional payment in federal
funds has been collected for the purchase of shares being redeemed or 15
days from the date of purchase. You can avoid the
possibility of delay by paying for all of your purchases with a
transfer of federal funds.
Signature Guarantees are required in
connection with all redemptions by mail, or changes in share
registration, except as hereinafter provided. These requirements may
be waived by the Fund in certain instances where it appears reasonable
to do so and will not unduly affect the interests of other
shareholders. Signature(s) must be guaranteed by an "eligible
Guarantor institution" as defined under Rule 17Ad-15 under the
Securities Exchange Act of 1934. Eligible guarantor institutions
include: (1) national or state banks, savings associations, savings
and loan associations, trust companies, savings banks, industrial loan
companies and credit unions; (2) national securities exchanges,
registered securities associations and clearing agencies; or (3)
securities broker/dealers which are members of a national securities
exchange or clearing agency or which have a minimum net capital of
$100,000. A notarized signature will not be sufficient for the request
to be in proper form.
Signature guarantees will be waived for mail
redemptions of $10,000 or less, but they will be required if the
checks are to be payable to someone other than the registered
owner(s), or are to be mailed to an address different from the
registered address of the shareholder(s), or where there appears to be
a pattern of redemptions designed to circumvent the signature
guarantee requirement, or where the Fund has other reason to believe
that this requirement would be in the best interests of the Fund and
its shareholders.
The right of redemption may be suspended or the date
of payment postponed beyond the normal seven-day period when the New
York Stock Exchange is closed or under emergency circumstances as
determined by the Securities and Exchange Commission. Further, the
Fund reserves the right to redeem its shares in kind under certain
circumstances. If shares are redeemed in kind, the shareholder may
incur brokerage costs when converting into cash. Additional details
are set forth in the "Statement of Additional Information."
Due to the
high cost of maintaining smaller accounts, the Board of Directors has
authorized the Fund to close shareholder accounts where their value
falls below the current minimum initial investment requirement at the
time of initial purchase as a result of redemptions and not as the
result of market action, and remains below this level for 60 days
after each such shareholder account is mailed a notice of: (1) the
Fund's intention to close the account, (2) the minimum account size
requirement, and (3) the date on which the account will be closed if
the minimum size requirement is not met.
Further, the Fund reserves the
right to redeem its shares in kind under certain circumstances. The
Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940 pur-suant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the Fund's
net asset value during any 90-day period for any one shareholder.
Should redemptions by any shareholder exceed such limitation, the Fund
may redeem the excess in kind. If shares are redeemed in kind, the
redeeming shareholder may incur brokerage costs in converting the
assets into cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing
portfolio securities described under "How Share Price is Determined"
in the prospectus, and such valuation will be made as of the same time
the redemption price is determined. Additional details are set forth
in the "Statement of Additional Information."
SYSTEMATIC REDEMPTION PLAN
If you own shares in an open account valued at $10,000 or more,
and desire to make regular monthly or quarterly withdrawals without
the necessity and inconvenience of executing a separate redemption
request to initiate each withdrawal, you may enter into a
Systematic Withdrawal Plan by completing forms obtainable from the
Fund. For this service, the manager may charge you a fee not to exceed
$1.50 for each withdrawal. Currently the manager assumes the
additional expenses arising out of this type of plan, but it reserves
the right to initiate such a charge at any time in the future when it
deems it necessary. If such a charge is imposed, participants will be
provided 30 days notice.
Subject to a $50 minimum, you may withdraw
each period a specified dollar amount. Shares also may be redeemed at
a rate calculated to exhaust the account at the end of a specified
period of time.
Dividends and capital gains distributions must be
reinvested in additional shares. Under all withdrawal programs,
liquidation of shares in excess of dividends and distributions
reinvested will diminish and may exhaust your account, particularly
during a period of declining share values.
You may revoke or change
your plan or redeem all of your remaining shares at any time.
Withdrawal payments will be continued until the shares are exhausted
or until the Fund or you terminate the plan by written notice to the
other.
HOW TO EXCHANGE SHARES BETWEEN BABSON FUNDS
Shareholders may exchange their Fund shares, which have been held in
open account for 30 days or more, and for which good payment has been
received, for identically registered shares of any other Fund in the
Babson Fund Group which is legally registered for sale in the state of
residence of the investor, except Babson Enterprise Fund, Inc.,
provided that the minimum amount exchanged has a value of $1,000 or
more and meets the minimum investment requirement of the Fund or
Portfolio into which it is exchanged.
Effective at the close of business on January 31, 1992, the
Directors of the Babson Enterprise Fund, Inc. took action to limit the
offering of that Fund's shares. Babson Enterprise Fund, Inc. will not
accept any new accounts, including IRAs and other retirement plans,
until further notice, nor will Babson Enterprise Fund accept transfers
from shareholders of other Babson Funds, who were not shareholders of
record of Babson Enterprise Fund at the close of business on January
31, 1992.
To authorize the Telephone/Telegraph Exchange Privilege, all
registered owners must sign the appropriate section on the original
application, or the Fund must receive a special authorization form,
provided upon request. During periods of increased market activity,
you may have difficulty reaching the Fund by telephone, in which case
you should contact the Fund by mail or telegraph. The Fund reserves
the right to initiate a charge for this service and to terminate or
modify any or all of the privileges in connection with this service at
any time and without prior notice under any circumstances where
continuance of these privileges would be detrimental to the Fund or
its shareholders such as an emergency, or where the volume of such activity
threatens the ability of the Fund to conduct business, or under any
other circumstances, upon 60 days written notice to shareholders. The Fund
will not be responsible for the consequences of delays including delays
in the banking or Federal Reserve wire systems.
The Fund will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and
if such procedures are not followed, the Fund may be liable for losses
due to unauthorized or fraudulent instructions. Such procedures may
include, but are not limited to requiring personal identification
prior to acting upon instructions received by telephone, providing
written confirmations of such transactions, and/or tape recording of
telephone instructions.
Exchanges by mail may be accomplished by a
written request properly signed by all registered owners identifying
the account, the number of shares or dollar amount to be redeemed for
exchange, and the Babson Fund into which the account is being
transferred.
If you wish to exchange part or all of your shares in the
Fund for shares of another Fund or Portfolio in the Babson Fund Group,
you should review the prospectus of the Fund to be purchased, which
can be obtained from Jones & Babson, Inc. Any such exchange will be
based on the respective net asset values of the shares involved. Any
exchange between Funds involves the sale of an asset. Unless the
shareholder account is tax-deferred, this is a taxable event.
HOW SHARE PRICE IS DETERMINED
In order to determine the price at which new shares will be sold and
at which issued shares presented for redemption will be liquidated,
the net asset value per share is computed once daily, Monday through
Friday, at the specific time during the day that the Board of
Directors sets at least annually, except on days on which changes in
the value of portfolio securities will not materially affect the net
asset value, or days during which no security is tendered for
redemption and no order to purchase or sell such security is
received by the Fund, or customary holidays. For a list of the
holidays during which the Fund is not open for business, see "How
Share Price is Determined" in the "Statement of Additional
Information."
The price at which new shares of the Fund will be sold and at which
issued shares presented for redemption will be liquidated is computed
once daily at 4:00 P.M. (Eastern Time), except on those days when the
Fund is not open for business.
The per share calculation is made by
subtracting from the Fund's total assets any liabilities and then
dividing into this amount the total outstanding shares as of the date
of the calculation.
Each security listed on an Exchange is valued at
its last sale price on that Exchange on the date as of which assets
are valued. Where the security is listed on more than one Exchange,
the Fund will use the price of that Exchange which it generally
considers to be the principal Exchange on which the stock is traded.
Lacking sales, the security is valued at the mean between the last
current closing bid and asked prices. An unlisted security for which
over-the-counter market quotations are readily available is valued at
the mean between the last current bid and asked prices. When market
quotations are not readily available, any security or other asset is
valued at its fair value as determined in good faith by the Board of
Directors.
OFFICERS AND DIRECTORS
The officers of the Fund manage its day-to-day operations. The Fund's
manager and its officers are subject to the supervision and control of
the Board of Directors. A list of the officers and directors of the
Fund and a brief statement of their present positions and principal
occupations during the past five years is set forth in the "Statement
of Additional Information."
MANAGEMENT AND INVESTMENT COUNSEL
Jones & Babson, Inc. was founded in 1960. It organized the Fund in
1991, and acts as its manager and principal underwriter. Pursuant to
the current Management Agreement, Jones & Babson, Inc. provides or
pays the cost of all management, supervisory and administrative
services required in the normal operation of the Fund. This includes
investment management and supervision; fees of the custodian,
independent auditors and legal counsel; remuneration of officers,
directors and other personnel; rent; shareholder services, including
the maintenance of the shareholder accounting system and transfer
agency; and such other items as are incidental to corporate
administration.
Not considered normal operating expenses, and therefore payable by the
Fund, are taxes, interest, governmental charges and fees, including
registration of the Fund and its shares with the Securities and
Exchange Commission and the Securities Departments of the various
States, brokerage costs, dues, and all extraordinary costs and
expenses including but not limited to legal and accounting fees
incurred in anticipation of or arising out of litigation or
administrative proceedings to which the Fund, its officers or
directors may be subject or a party thereto.
As a part of the
Management Agreement, Jones & Babson, Inc. employs at its own expense
David L. Babson & Co. Inc. as its investment counsel to assist in the
investment advisory function. David L. Babson & Co. Inc. is an
independent investment counseling firm founded in 1940. It serves a
broad variety of individual, corporate and other institutional clients
by maintaining an extensive research and analytical staff. It has an
experienced investment analysis and research staff which eliminates
the need for Jones & Babson, Inc. and the Fund to maintain an
extensive duplicate staff, with the consequent increase in the cost of
investment advisory service. The cost of the services of David L.
Babson & Co. Inc. is included in the fee of Jones & Babson, Inc. The
Management Agreement limits the liability of the manager and its
investment counsel, as well as their officers, directors and
personnel, to acts or omissions involving willful malfeasance, bad
faith, gross negligence, or reckless disregard of their duties. Peter
C. Schliemann and Lance F. James have been the co-managers of Babson
Enterprise Fund II since its inception in 1991. Mr. Schliemann joined
David L. Babson & Co. in 1979 and has 26 years of investment
management experience. Mr. James joined the Babson organization in
1986 and has 16 years of investment management experience.
As compensation for all the foregoing services, the Fund pays Jones &
Babson, Inc. a fee at the annual rate of 150/100 of one percent
(1.50%) of the first $30 million and 1% of amounts in excess of $30
million of its average daily net assets.
The annual fee charged by Jones & Babson, Inc. is higher than the fees
of most other investment advisers whose charges cover only investment
advisory services with all remaining operational expenses absorbed
directly by the Fund. Yet it compares favorably with these other advisers
when all expenses to Fund shareholders are taken into account. Jones &
Babson, Inc. pays David L. Babson & Co. Inc. a fee of 70/100 of one
percent (.70%) of the first $30 million and 50/100 of 1% (.50%) of amounts
in excess of $30 million of average daily total net assets, which is
computed daily and paid semimonthly. The total expenses of the Fund for
the fiscal year ended November 30, 1994 amounted to 150/100 of one percent
(1.50%) of the average net assets.
Certain officers and directors of the Fund are
also officers or directors or both of other Babson Funds, Jones &
Babson, Inc. or David L. Babson & Co. Inc.
Jones & Babson, Inc. is a wholly-owned subsidiary of Business Men's
Assurance Company of America which is considered to be a controlling
person under the Investment Company Act of 1940. Assicurazioni Generali S.p.A.,
an insurance organization founded in 1831 based in Trieste, Italy, is
considered to be a controlling person and is the ultimate parent of
Business Men's Assurance Company of America. Mediobanca is a 5% owner
of Generali.
David L. Babson & Co. Inc. is a closely held corporation and has limitations
in the ownership of its stock designed to maintain control in those who are
active in management.
The current Management Agreement between the
Fund and Jones & Babson, Inc., which includes the Investment Counsel
Agreement between Jones & Babson, Inc. and David L. Babson & Co. Inc.,
will continue in effect until October 31, 1995, and will continue
automatically for successive annual periods ending each October 31 so
long as such continuance is specifically approved at least annually by
the Board of Directors of the Fund or by the vote of a majority of the
outstanding voting securities of the Fund, and, provided also that
such continuance is approved by the vote of a majority of the
directors who are not parties to the Agreements or interested persons
of any such party at a meeting held in person and called specifically
for the purpose of evaluating and voting on such approval. Both
Agreements provide that either party may terminate by giving the other
60 days written notice. The Agreements terminate automatically if
assigned by either party.
GENERAL INFORMATION AND HISTORY
The Fund, incorporated in Maryland on February 5, 1991, has a
present authorized capitalization of 10,000,000 shares of $1 par
value common stock. All shares are of the same class with like rights
and privileges. Each full and fractional share, when issued and
outstanding, has: (1) equal voting rights with respect to matters
which affect the Fund, and (2) equal dividend, distribution and
redemption rights to the assets of the Fund. Shares when issued are
fully paid and non-assessable. The Fund may create other series of
stock but will not issue any senior securities. Shareholders do not
have pre-emptive or conversion rights.
Non-cumulative voting -- These
shares have non-cumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of directors
can elect 100% of the directors, if they choose to do so, and in such
event, the holders of the remaining less than 50% of the shares voting
will not be able to elect any directors.
The Maryland Statutes permit
registered investment companies, such as the Fund, to operate without
an annual meeting of shareholders under specified circumstances if an
annual meeting is not required by the Investment Company Act of 1940.
There are procedures whereby the shareholders may remove directors.
These procedures are described in the "Statement of Additional
Information" under the caption "Officers and Directors." The Fund has
adopted the appropriate provisions in its By-Laws and may not, at its
discretion, hold annual meetings of shareholders for the following
purposes unless required to do so: (1) election of directors; (2)
approval of continuance of any investment advisory agreement; (3)
ratification of the selection of independent auditors; and (4)
approval of a distribution plan. As a result, the Fund does not intend
to hold annual meetings.
The Fund may use the name "Babson" in
its name so long as Jones & Babson, Inc. is continued as manager and
David L. Babson & Co. Inc. as its investment counsel. Complete details
with respect to the use of the name are set out in the Management
Agreement between the Fund and Jones & Babson, Inc.
This prospectus omits certain of the information contained in the registration
statement filed with the Securities and Exchange Commission,
Washington, D.C. These items may be inspected at the offices of the
Commission or obtained from the Commission upon payment of the fee
prescribed.
DIVIDENDS, DISTRIBUTIONS AND THEIR TAXATION
Distributions from net investment income and from capital gains
realized on the sale of securities, if any, will be declared annually
on or before December 31. Dividend and capital gains distributions
will be reinvested automatically in additional shares at the net asset
value per share next computed and effective at the close of business on
the day after the record date, unless the shareholder has elected on
the original application, or by written instructions filed with the Fund,
to have them paid in cash.
The Fund has qualified and intends to continue to qualify for taxation
as a "regulated investment company" under the Internal Revenue Code so
that the Fund will not be subject to federal income tax to the extent
that it distributes its income to its shareholders. Dividends, either
in cash or reinvested in shares, paid by the Fund from net investment
income will be taxable to shareholders as ordinary income, and will
generally qualify in part for the 70% dividends-received deduction for
corporations. The portion of the dividends so qualified depends on the
aggregate taxable qualifying dividend income received by the Fund from
domestic (U.S.) sources. The Fund will send to shareholders a
statement each year advising the amount of the dividend income which
qualifies for such treatment.
Whether paid in cash or additional shares
of the Fund, and regardless of the length of time Fund shares have
been owned by the shareholder, distributions from long-term capital
gains are taxable to shareholders as such, but are not eligible for
the dividends-received deduction for corporations. Shareholders are
notified annually by the Fund as to federal tax status of dividends
and distributions paid by the Fund. Such dividends and distributions
may also be subject to state and local taxes.
Exchange and redemption
of Fund shares are taxable events for federal income tax purposes.
Shareholders may also be subject to state and municipal taxes on such
exchanges and redemptions. You should consult your tax adviser with
respect to the tax status of distributions from the Fund in your state
and locality.
The Fund intends to declare and pay dividends and capital
gains distributions so as to avoid imposition of the federal excise
tax. To do so, the Fund expects to distribute during each calendar
year an amount equal to: (1) 98% of its calendar year ordinary
income; (2) 98% of its capital gains net income (the excess of short-
and long-term capital gain over short- and long-term capital loss) for
the one-year period ending each November 30; and (3) 100% of any
undistributed ordinary or capital gain net income from the prior
calendar year. Dividends declared in October, November or December and
made payable to shareholders of record in such a month are deemed to
have been paid by the Fund and received by shareholders on December 31
of such year, so long as the dividends are actually paid before
February 1 of the following year.
To comply with IRS regulations, the
Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions, and
redemptions) paid to shareholders who have not complied with IRS
regulations. In order to avoid this withholding requirement,
shareholders must certify on their Application, or on a separate form
supplied by the Fund, that their Social Security or Taxpayer
Identification Number provided is correct and that they are not
currently subject to backup withholding, or that they are exempt from
backup withholding.
The federal income tax status of all distributions
will be reported to shareholders each January as a part of the annual
statement of shareholder transactions. Shareholders not subject to tax
on their income will not be required to pay tax on amounts distributed
to them.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX
ADVISERS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT
IN THE FUND.
SHAREHOLDER SERVICES
The Fund and its manager offer shareholders a broad variety of
services described throughout this prospectus. In addition, the
following services are available:
Automatic Monthly Investment - You may elect to make monthly
investments in a constant dollar amount from your checking account
($100 minimum). The Fund will draft your checking account on the same
day each month in the amount you authorize in your application, or,
subsequently, on a special authorization form provided upon request.
Automatic Reinvestment - Dividends and capital gains distributions may
be reinvested automatically, or shareholders may elect to have
dividends paid in cash and capital gains reinvested, or to have both
paid in cash.
Telephone Investments - You may make investments of $1,000 or more by
telephone if you have authorized such investments in your application,
or, subsequently, on a special authorization form provided upon
request. See "Telephone Investment Service."
Automatic Exchange - You may exchange shares from your account ($100
minimum) in any of the Babson Funds to an identically registered account in
any other fund in the Babson Group according to your instructions. Monthly
exchanges will be continued until all shares have been exchanged or until
you terminate the Automatic Exchange authorization. A special authorization
form will be provided upon request.
Transfer of Ownership - A shareholder may transfer shares to another
shareholder account. The requirements which apply to redemptions apply
to transfers. A transfer to a new account must meet initial investment
requirements.
Systematic Redemption Plan - Shareholders who own shares in open
account valued at $10,000 or more may arrange to make regular
withdrawals without the necessity of executing a separate redemption
request to initiate each withdrawal.
Sub-Accounting - Keogh and corporate tax qualified retirement plans,
as well as certain other investors who must maintain separate
participant accounting records, may meet these needs through services
provided by the Fund's manager, Jones & Babson, Inc. Investment
minimums may be met by accumulating the separate accounts of the
group. Although there is currently no charge for sub-accounting, the
Fund and its manager reserve the right to make reasonable charges for
this service.
Prototype Retirement Plans - Jones & Babson, Inc. offers a defined
contribution prototype plan - The Universal Retirement Plan - which is
suitable for all who are self-employed, including sole proprietors,
partnerships, and corporations. The Universal Prototype includes both
money purchase pension and profit-sharing plan options.
Individual Retirement Accounts - Also available is an Individual
Retirement Account (IRA). The IRA uses the IRS model form of plan and
provides an excellent way to accumulate a retirement fund which will
earn tax-deferred dollars until withdrawn. An IRA may also be used to
defer taxes on certain distributions from employer-sponsored
retirement plans. You may contribute up to $2,000 of compensation each
year ($2,250 if a spousal IRA is established), some or all of which
may be deductible. Consult your tax adviser concerning the amount of
the tax deduction, if any.
Simplified Employee Pensions (SEPs) -- The
Jones & Babson IRA may be used with IRS Form 5305 - SEP to establish a
SEP-IRA, to which the self-employed individual may contribute up to
15% of net earned income or $30,000, whichever is less. A SEP-IRA
offers the employer the ability to make the same level of deductible
contributions as a Profit-Sharing Plan with greater ease of
administration, but less flexibility in plan coverage of employees.
SHAREHOLDER INQUIRIES
Telephone inquiries may be made toll free to the Fund, 1-800-4-BABSON
(1-800-422-2766), or in the Kansas City area 471-5200.
Shareholders may address written inquiries to the Fund at:
Babson Enterprise Fund II, Inc.
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, MO 64108
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
Kansas City, Missouri
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG
Philadelphia, Pennsylvania
JOHN G. DYER
Kansas City, Missouri
CUSTODIAN
UMB BANK, n.a.
Kansas City, Missouri
TRANSFER AGENT
JONES & BABSON, INC.
Kansas City, Missouri
PART B
BABSON ENTERPRISE FUND II, INC.
STATEMENT OF ADDITIONAL INFORMATION
March 31, 1995
This Statement is not a prospectus but should be read in
conjunction with the Fund's current Prospectus dated March 31, 1995.
To obtain the Prospectus please call the Fund toll-free 1-800-4-BABSON
(1-800-422-2766), or in the Kansas City area 471-5200.
TABLE OF CONTENTS
Investment Objective and Policies
Portfolio Transactions
Investment Restrictions
Performance Measures
How the Fund's Shares are Distributed
How Share Purchases are Handled
Redemption of Shares
Signature Guarantees
Management and Investment Counsel
How Share Price is Determined
Officers and Directors
Custodian
Independent Auditors
Other Jones & Babson Funds
Financial Statements
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the Fund's investment objective and
policies set forth in the Prospectus.
All assets of the Fund will be invested in marketable securities
composed principally of common stocks and securities convertible into
common stock. Necessary reserves will be held in cash or high-quality
short-term debt obligations readily changeable to cash, such as
treasury bills, commercial paper or repurchase agreements. The Fund
retains the freedom to administer the portfolio of the Fund
accordingly when, in its judgment, economic and market conditions make
such a course desirable. Normally, however, the Fund will maintain at
least 80% of the portfolio in common stocks. There are no
restrictions or guidelines regarding the investment of Fund assets in
shares listed on an exchange or traded over-the-counter.
The overall income return on the Portfolio may be low because smaller
companies frequently need to retain all or most of their profits to
finance their growth. Thus, a number of the stocks held by the Fund
will have small dividend yields, or none. If the companies are
successful, this plow-back of earnings and internal financing of
growth without the need to issue additional shares ultimately should
enhance the companies' per share earnings and dividend capability and
make their shares more attractive in the marketplace.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Fund are made by Jones &
Babson, Inc. pursuant to recommendations by David L. Babson & Co. Inc.
Officers of the Fund and Jones & Babson, Inc. are generally
responsible for implementing or supervising these decisions, including
allocation of portfolio brokerage and principal business as well as
the negotiation of commissions and/or the price of the securities. In
instances where securities are purchased on a commission basis, the
Fund will seek competitive and reasonable commission rates based on
circumstances of the trade involved and to the extent that they do not
detract from the quality of the execution.
The Fund, in purchasing and selling portfolio securities, will seek
the best available combination of execution and overall price (which
shall include the cost of the transaction) consistent with the
circumstances which exist at the time. The Fund does not intend to
solicit competitive bids on each transaction.
The Fund believes it is in its best interest and that of its
shareholders to have a stable and continuous relationship with a
diverse group of financially strong and technically qualified
broker-dealers who will provide quality executions at competitive
rates. Broker-dealers meeting these qualifications also will be
selected for their demonstrated loyalty to the Fund, when acting on
its behalf, as well as for any research or other services provided to
the Fund. Substantially all of the portfolio transactions are through
brokerage firms which are members of the New York Stock Exchange which
is typically the most active market in the size of the Fund's
transactions and for the types of securities predominant in the Fund's
portfolio. When buying securities in the over-the-counter market, the
Fund will select a broker who maintains a primary market for the
security unless it appears that a better combination of price and
execution may be obtained elsewhere. The Fund normally will not pay a
higher commission rate to broker-dealers providing benefits or
services to it than it would pay to broker-dealers who do not provide
it such benefits or services. However, the Fund reserves the right to
do so within the principles set out in Section 28(e) of the Securities
Exchange Act of 1934 when it appears that this would be in the best
interests of the shareholders.
No commitment is made to any broker or dealer with regard to placing
of orders for the purchase or sale of Fund portfolio securities, and
no specific formula is used in placing such business. Allocation is
reviewed regularly by both the Board of Directors of the Fund and
Jones & Babson, Inc.
Since the Fund does not market its shares through intermediary brokers
or dealers, it is not the Fund's practice to allocate brokerage or
principal business on the basis of sales of its shares which may be
made through such firms. However, it may place portfolio orders with
qualified broker-dealers who recommend the Fund to other clients, or
who act as agents in the purchase of the Fund's shares for their
clients.
Research services furnished by broker-dealers may be useful to the
Fund manager and its investment counsel in serving other clients, as
well as the Fund. Conversely, the Fund may benefit from research
services obtained by the manager or its investment counsel from the
placement of portfolio brokerage of other clients.
When it appears to be in the best interests of its shareholders, the
Fund may join with other clients of the manager and its investment
counsel in acquiring or disposing of a portfolio holding. Securities
acquired or proceeds obtained will be equitably distributed between
the Fund and other clients participating in the transaction. In some
instances, this investment procedure may affect the price paid or
received by the Fund or the size of the position obtained by the Fund.
INVESTMENT RESTRICTIONS
In addition to the investment objective and portfolio management
policies set forth in the Prospectus under the caption "Investment
Objective and Portfolio Management Policy," the following restrictions
also may not be changed without approval of the "holders of a majority
of the outstanding shares" of the Fund.
The Fund will not: (1) purchase the securities of any one issuer,
except the United States Government, if immediately after and as a
result of such purchase (a) the value of the holdings of the Fund in
the securities of such issuer exceeds 5% of the value of the Fund's
total assets, or (b) the Fund owns more than 10% of the outstanding
voting securities, or any other class of securities, of such issuer;
(2) engage in the purchase or sale of real estate, commodities or
futures contracts; (3) underwrite the securities of other issuers; (4)
make loans to any of its officers, directors, or employees, or to its
manager, or general distributor, or officers or directors thereof; (5)
make loans to other persons, except by the purchase of debt
obligations which are permitted under its investment policy; (6)
invest in companies for the purpose of exercising control of
management; (7) purchase securities on margin, or sell securities
short; (8) purchase shares of other investment companies except in the
open market at ordinary broker's com-mission, but not in excess of 5%
of the Fund's assets, or pursuant to a plan of merger or
consolidation; (9) invest in the aggregate more than 5% of the value
of its gross assets in the securities of issuers (other than federal,
state, territorial, or local governments, or corporations, or
authorities established thereby), which, including predecessors, have
not had at least three years' continuous operations nor invest 25% or
more of the Fund's total assets in any one industry; (10) enter into
dealings with its officers or directors, its manager or underwriter,
or their officers or directors, or any organization in which such
persons have a financial interest except for transactions in the
Fund's own shares or other securities through brokerage practices
which are considered normal and generally accepted under circumstances
existing at the time; (11) purchase or retain securities of any
company in which any Fund officers or directors, or Fund manager, its
partner, officer, or director beneficially owns more than 1/2 of 1% of
said company's securities, if all such persons owning more than 1/2 of
1% of such company's securities, own in the aggregate more than 5% of
the outstanding securities of such company; (12) borrow or pledge its
credit under normal circumstances, except up to 10% of its gross
assets (computed at the lower of fair market value or cost) for
temporary or emergency purposes, and not for the purpose of leveraging
its investments, and provided further that any borrowing in excess of
5% of the total assets of the Fund shall have asset coverage of at
least 3 to 1; (13) make itself or its assets liable for the
indebtedness of others; (14) invest in securities which are assessable
or involve unlimited liability; or (15) issue senior securities except
for those investment procedures permissible under the Fund's other
restrictions.
In addition to the fundamental investment restrictions set out
above, in order to comply with the law or regulations of various
States, the Fund will not engage in the following practices: (1)
invest in securities which are not readily marketable or in securities
of foreign issuers which are not listed on a recognized domestic or
foreign securities exchange; (2) write put or call options; (3) invest
in oil, gas and other mineral leases or arbitrage transactions; (4)
purchase or sell real estate (including limited partnership interests,
but excluding readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest in
real estate); or (5) purchase securities of issuers which the company is
restricted from selling to the public without registration under the
Securities Act of 1933, including Rule 144(a) securities.
Certain States also require that the Fund's investments in warrants,
valued at the lower of cost or market, may not exceed 5% of the value
of the Fund's net assets. Included within that amount, but not to
exceed 2% of the value of the Fund's net assets may be warrants which
are not listed on the New York or American Stock Exchange. Warrants
acquired by the Fund in units or attached to securities may be deemed
to be without value for purposes of this limitation.
PERFORMANCE MEASURES
Total Return
The Fund's "average annual total return" figures described and shown
below are computed according to a formula prescribed by the Securities
and Exchange Commission. The formula can be expressed as follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1000 payment made
at the beginning of the 1, 5, or 10 year (or other) periods at the end
of the 1,5, or 10 year (or other) periods (or fractional portions
thereof);
The table below shows the average total return for the Fund for the
specified periods.
For the one year 12/1/93-11/30/94 (2.32)%
From commencement of
operation to 11/30/94* 9.76%
____________________________________________
*The Fund commenced operation August 5, 1991.
Studies based on historical data show that over extended periods,
common stocks of small companies have provided considerably higher
returns than the stocks of larger companies. However, small company
stocks have also experienced higher price volitility.
In the chart below all the stocks listed on the New York Stock
Exchange are separated into ten deciles of market capitalization
(market price times total number of shares outstanding) and they are
ranked from number 1, the largest to number 10, the smallest.
STOCK RISK VS. RETURN
Chart of risk as measured by annual standard deviation.
The stocks in deciles 9 and 10 produce the highest returns, but also
showed the greatest price fluctuation. Stocks in deciles 4-7 had
lower returns but significantly less price volatility (risk), while
outperforming the largest stocks by a substantial margin.
In order to seek the historically higher returns of investing in small
capitalization stocks while reducing the risks involved, the Fund's
management intends to concentrate its assets in common stocks in the
market capitalization range of deciles 4-7.
HOW THE FUND'S SHARES ARE DISTRIBUTED
Jones & Babson, Inc., as agent of the Fund, agrees to supply its best
efforts as sole distributor of the Fund's shares and, at its own
expense, pay all sales and distribution expenses in connection with
their offering other than registration fees and other government
charges.
Jones & Babson, Inc. does not receive any fee or other compensation
under the distribution agreement which continues in effect until
October 31, 1995, and which will continue automatically for successive
annual periods ending each October 31, if continued at least annually
by the Fund's Board of Directors, including a majority of those
Directors who are not parties to such Agreements or interested persons
of any such party. It terminates automatically if assigned by either
party or upon 60 days written notice by either party to the other.
Jones & Babson, Inc. also acts as sole distributor of the shares for
David L. Babson Growth Fund, Inc., D.L. Babson Bond Trust, D.L. Babson
Money Market Fund, Inc., D.L. Babson Tax-Free Income Fund, Inc.,
Babson Enterprise Fund, Inc., Babson Value Fund, Inc., Shadow Stock
Fund, Inc., Babson-Stewart Ivory International Fund, Inc., UMB Stock
Fund, Inc., UMB Bond Fund, Inc., UMB Money Market Fund, Inc., UMB
Tax-Free Money Market Fund, Inc., UMB Heartland Fund, Inc., UMB
WorldWide Fund, Inc. and Buffalo Balanced Fund, Inc.
HOW SHARE PURCHASES ARE HANDLED
Each order accepted will be fully invested in whole and fractional
shares, unless the purchase of a certain number of whole shares is
specified, at the net asset value per share next effective after the
order is received by the Fund.
Each investment is confirmed by a year-to-date statement which
provides the details of the immediate transaction, plus all prior
transactions in your account during the current year. This includes
the dollar amount invested, the number of shares purchased or
redeemed, the price per share, and the aggregate shares owned. A
transcript of all activity in your account during the previous year
will be furnished each January. By retaining each annual summary and
the last year-to-date statement, you have a complete detailed history
of your account which provides necessary tax information. A duplicate
copy of a past annual statement is available from Jones & Babson, Inc.
at its cost, subject to a minimum charge of $5 per account, per year
requested.
Normally, the shares which you purchase are held by the Fund in open
account, thereby relieving you of the responsibility of providing for
the safekeeping of a negotiable share certificate. Should you have a
special need for a certificate, one will be issued on request for all
or a portion of the whole shares in your account. There is no charge
for the first certificate issued. A charge of $3.50 will be made for
any replacement certificates issued. In order to protect the
interests of the other shareholders, share certificates will be sent
to those shareholders who request them only after the Fund has
determined that unconditional payment for the shares represented by
the certificate has been received by its custodian, UMB Bank, n.a.
If an order to purchase shares must be canceled due to non-payment,
the purchaser will be responsible for any loss incurred by the Fund
arising out of such cancellation. To recover any such loss, the Fund
reserves the right to redeem shares owned by any purchaser whose order
is canceled, and such purchaser may be prohibited or restricted in the
manner of placing further orders.
The Fund reserves the right in its sole discretion to withdraw all or
any part of the offering made by the prospectus or to reject purchase
orders when, in the judgment of management, such withdrawal or
rejection is in the best interest of the Fund and its shareholders.
The Fund also reserves the right at any time to waive or increase the
minimum requirements applicable to initial or subsequent investments
with respect to any person or class of persons, which include
shareholders of the Fund's special investment programs.
REDEMPTION OF SHARES
The right of redemption may be suspended, or the date of payment
postponed beyond the normal seven-day period by the Fund's Board of
Directors under the following conditions authorized by the Investment
Company Act of 1940: (1) for any period (a) during which the New York
Stock Exchange is closed, other than customary weekend and holiday
closing, or (b) during which trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a
result of which (a) disposal by the Fund of securities owned by it is
not reasonably practicable or (b) it is not reasonably practicable for
the Fund to determine the fair value of its net assets; or (3) for
such other periods as the Securities and Exchange Commission may by
order permit for the protection of the Fund's shareholders.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940 pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the Fund's
net asset value during any 90-day period for any one shareholder.
Should redemptions by any shareholder exceed such limitation, the Fund
may redeem the excess in kind. If shares are redeemed in kind, the
redeeming shareholder may incur brokerage costs in converting the
assets to cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing
portfolio securities described under "How Share Price is Determined"
in the Prospectus, and such valuation will be made as of the same time
the redemption price is determined.
SIGNATURE GUARANTEES
Signature guarantees normally reduce the possibility of forgery and
are required in connection with each redemption method to protect
shareholders from loss. Signature guarantees are required in
connection with all redemptions by mail or changes in share
registration, except as provided in the Prospectus.
Signature guarantees must appear together with the signature(s) of the
registered owner(s), on:
(1) a written request for redemption,
(2) a separate instrument of assignment, which should specify the
total number of shares to be redeemed (this "stock power" may be
obtained from the Fund or from most banks or stock brokers), or
(3) all stock certificates tendered for redemption.
MANAGEMENT AND INVESTMENT COUNSEL
As a part of the Management Agreement, Jones & Babson, Inc. employs at
its own expense David L. Babson & Co. Inc., as its investment counsel.
David L. Babson & Co. Inc. was founded in 1940. It is a private
investment research and counseling organization serving individual,
corporate and other institutional clients. It participates with Jones
& Babson in the management of nine Babson no-load mutual funds, in
addition to UMB Money Market Fund and UMB Tax-Free Money Market Fund.
The aggregate management fees paid to Jones & Babson, Inc. during the
most recent fiscal year ended November 30, 1994, and from which Jones
& Babson, Inc. paid all the Fund's expenses except those payable
directly by the Fund, were $500,462. The annual fee charged by Jones
& Babson, Inc. covers all normal operating costs of the Fund.
David L. Babson & Co. Inc. has an experienced investment analysis and
research staff which eliminates the need for Jones & Babson, Inc. and
the Fund to maintain an extensive duplicate staff, with the consequent
increase in the cost of investment advisory service. The cost of the
services of David L. Babson & Co. Inc., is included in the services of
Jones & Babson, Inc. During the most recent fiscal year ended
November 30, 1994, Jones & Babson, Inc. paid David L. Babson & Co.
Inc. fees amounting to $235,337.
HOW SHARE PRICE IS DETERMINED
The net asset value per share of the Fund portfolio is computed once
daily, Monday through Friday, at the specific time during the day that
the Board of Directors of the Fund sets at least annually, except on
days on which changes in the value of a Fund's portfolio securities
will not materially affect the net asset value, or days during which
no security is tendered for redemption and no order to purchase or
sell such security is received by the Fund, or the following holidays:
New Year's Day January 1
Presidents' Holiday Third Monday in February
Good Friday Friday before Easter
Memorial Day Last Monday in May
Independence Day July 4
Labor Day First Monday in September
Thanksgiving Day Fourth Thursday in November
Christmas Day December 25
OFFICERS AND DIRECTORS
The Fund is managed by Jones & Babson, Inc. subject to the supervision
and control of the Board of Directors. The following table lists the
Officers and Directors of the Fund. Unless noted otherwise, the
address of each Officer and Director is Three Crown Center, 2440
Pershing Road, Suite G-15, Kansas City, Missouri 64108. Except as
indicated, each has been an employee of Jones & Babson, Inc. for more
than five years.
* Larry D. Armel, President and Director.
President and Director, Jones & Babson, Inc., David L. Babson Growth
Fund, Inc., D.L. Babson Money Market Fund, Inc., D.L. Babson Tax-Free
Income Fund, Inc., Babson Enterprise Fund, Inc., Babson Value Fund,
Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory International
Fund, Inc; UMB Stock Fund, Inc., UMB Bond Fund, Inc., UMB Money Market
Fund, Inc., UMB Tax-Free Money Market Fund, Inc., UMB Heartland Fund,
Inc., UMB WorldWide Fund, Inc.; Buffalo Balanced Fund, Inc.; President
and Trustee of D.L. Babson Bond Trust.
Francis C. Rood, Director.
Retired, 6429 West 92nd Street, Overland Park, Kansas 66212.
Formerly, Group Vice President-Administration, Hallmark Cards, Inc.;
Director, David L. Babson Growth Fund, Inc., D.L. Babson Money Market
Fund, Inc., D.L. Babson Tax-Free Income Fund, Inc., Babson Enterprise
Fund, Inc., Babson Value Fund, Inc., Shadow Stock Fund, Inc.; Buffalo Balanced
Fund, Inc.; Trustee of D.L. Babson Bond Trust.
William H. Russell, Director.
Financial consultant, 645 West 67th Street, Kansas City, Missouri
64113; Director, David L. Babson Growth Fund, Inc., D.L. Babson Money
Market Fund, Inc., D.L. Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Value Fund, Inc., Shadow Stock Fund,
Inc., Babson-Stewart Ivory International Fund, Inc., Buffalo Balanced
Fund, Inc.; Trustee of D.L. Babson Bond Trust.
H. David Rybolt, Director.
Consultant, HDR Associates, P.O. Box 2468, Shawnee Mission, Kansas
66202; Director, David L. Babson Growth Fund, Inc., D.L. Babson Money
Market Fund, Inc., D.L. Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Value Fund, Inc., Shadow Stock Fund,
Inc.; Buffalo Balanced Fund, Inc.; Trustee of D.L. Babson Bond Trust.
________________________________
*Directors who are interested persons as that term is defined in the
Investment Company Act of 1940, as amended.
P. Bradley Adams, Vice President and Treasurer.
Vice President and Treasurer, Jones & Babson, Inc., David L. Babson
Growth Fund, Inc., D.L. Babson Money Market Fund, Inc., D.L. Babson
Tax-Free Income Fund, Inc., Babson Enterprise Fund, Inc., Babson Value
Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., D. L. Babson Bond Trust; UMB Stock Fund,
Inc., UMB Bond Fund, Inc., UMB Money Market Fund, Inc., UMB Tax-Free
Money Market Fund, Inc., UMB Heartland Fund, Inc., UMB WorldWide Fund,
Inc.; Bufflao Balanced Fund, Inc.
Michael A. Brummel, Vice President, Assistant Secretary and
Assistant Treasurer.
Vice President, Jones & Babson, Inc., David L. Babson Growth Fund,
Inc., D.L. Babson Money Market Fund, Inc., D.L. Babson Tax-Free Income
Fund, Inc., Babson Enterprise Fund, Inc., Babson Value Fund, Inc.,
Shadow Stock Fund, Inc., Babson-Stewart Ivory International Fund,
Inc., D.L. Babson Bond Trust; Vice President, Assistant Secretary and
Assistant Treasurer, UMB Stock Fund, Inc., UMB Bond Fund, Inc., UMB
Money Market Fund, Inc., UMB Tax-Free Money Market Fund, Inc., UMB
Heartland Fund, Inc., UMB WorldWide Fund, Inc.; Buffalo Balanced Fund, Inc.
Martin A. Cramer, Vice President and Secretary.
Vice President and Secretary, Jones & Babson, Inc., David L. Babson
Growth Fund, Inc., D.L. Babson Money Market Fund, Inc., D.L. Babson
Tax-Free Income Fund, Inc., Babson Enterprise Fund, Inc., Babson Value
Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., D.L. Babson Bond Trust; UMB Stock Fund,
Inc., UMB Bond Fund, Inc., UMB Money Market Fund, Inc., UMB Tax-Free
Money Market Fund, Inc., UMB Heartland Fund, Inc., UMB WorldWide Fund,
Inc.; Buffalo Balanced Fund, Inc.
Ruth Evans, Vice President.
Vice President, Jones & Babson, Inc., David L. Babson Growth Fund,
Inc., D.L. Babson Money Market Fund, Inc., D.L. Babson Tax-Free Income
Fund, Inc., Babson Enterprise Fund, Inc., Babson Value Fund, Inc.,
Shadow Stock Fund, Inc., Babson-Stewart Ivory International Fund,
Inc., D.L. Babson Bond Trust; UMB Stock Fund, Inc., UMB Bond Fund,
Inc., UMB Money Market Fund, Inc., UMB Tax-Free Money Market Fund,
Inc., UMB Heartland Fund, Inc., UMB WorldWide Fund, Inc.; Buffalo Balanced
Fund, Inc.
David G. Kirk, Vice President
Senior Vice President and Director, David L. Babson & Co. Inc., One
Memorial Drive, Cambridge, Massachusetts 02142. Vice
President-Portfolio, David L. Babson Growth Fund, Inc. Vice
President, Babson Enterprise Fund, Inc., Babson Value Fund, Inc.
Lance F. James, Vice President-Portfolio
Vice President, David L. Babson & Co. Inc., One Memorial Drive,
Cambridge, Massachusetts 02142.
Peter C. Schliemann, Vice President-Portfolio.
Senior Vice President and Director, David L. Babson & Co. Inc., One
Memorial Drive, Cambridge, Massachusetts 02142; Vice President -
Portfolio, Babson Enterprise Fund, Inc.
None of the officers or directors will be remunerated by the Fund for
their normal duties and services. Their compensation and expenses
arising out of normal operations will be paid by Jones & Babson, Inc.
under the provisions of the Management Agreement.
Messrs. Rood, Russell and Rybolt have no financial interest in,
nor are they affiliated with, either Jones & Babson, Inc. or David L.
Babson & Co. Inc.
The Audit Committee of the Board of Directors is composed of Messrs.
Rood, Russell and Rybolt.
The Officers and Directors of the Fund as a group own less than 1% of
the Fund.
The Fund will not hold annual meetings except as required by the
Investment Company Act of 1940 and other applicable laws. The Fund is
a Maryland corporation. Under Maryland law, a special meeting of
stockholders of the Fund must be held if the Fund receives the written
request for a meeting from the stockholders entitled to cast at least
25 percent of all the votes entitled to be cast at the meeting. The
Fund has undertaken that its Directors will call a meeting of
stockholders if such a meeting is requested in writing by the holders
of not less than 10% of the outstanding shares of the Fund. To the
extent required by the undertaking, the Fund will assist shareholder
communications in such matters.
CUSTODIAN
The Fund's assets are held for safekeeping by an independent
custodian, UMB Bank, n.a. This means the bank, rather than
the Fund, has possession of the Fund's cash and securities. The
custodian bank is not responsible for the Fund's investment management
or administration. But, as directed by the Fund's officers, it
delivers cash to those who have sold securities to the Fund in return
for such securities, and to those who have purchased portfolio
securities from the Fund, it delivers such securities in return for
their cash purchase price. It also collects income directly from
issuers of securities owned by the Fund and holds this for payment to
shareholders after deduction of the Fund's expenses. The custodian is
compensated for its services by the manager. There is no charge to
the Fund.
INDEPENDENT AUDITORS
The Fund's financial statements are audited annually by independent
auditors approved by the directors each year, and in years in which an
annual meeting is held the directors may submit their selection of
independent auditors to the shareholders for ratification. Ernst &
Young LLP, One Kansas City Place, 1200 Main Street, Suite 2000, Kansas
City, Missouri 64105, are the Fund's present independent auditors.
Reports to shareholders will be published at least semiannually.
OTHER JONES & BABSON FUNDS
The Fund is one of nine no-load funds comprising the Babson Mutual
Fund Group managed by Jones & Babson, Inc. in association with its
investment counsel, David L. Babson & Co. Inc. The other funds are:
EQUITY FUNDS
DAVID L. BABSON GROWTH FUND, INC. was organized in 1960 with the
objective of long-term growth of both capital and dividend income
through investment in the common stocks of well-managed companies
which have a record of long term above-average growth of both earnings
and dividends.
BABSON ENTERPRISE FUND, INC. was organized in 1983 with the objective
of long-term growth of capital by investing in a diversified portfolio
of common stocks of smaller, faster-growing companies with market
capital of $15 million to $300 million at the time of purchase. This
Fund is intended to be an investment vehicle for that part of an
investor's capital which can appropriately be exposed to above-average
risk in anticipation of greater rewards. This Fund is currently
closed to new shareholders.
BABSON VALUE FUND, INC. was organized in 1984 with the objective of
long-term growth of capital and income by investing in a diversified
portfolio of common stocks which are considered to be undervalued in
relation to earnings, dividends and/or assets.
SHADOW STOCK FUND, INC. was organized in 1987 with the objective of
long-term growth of capital that can be exposed to above-average risk
in anticipation of greater-than-average rewards. The Fund expects to
reach its objective by investing in small company stocks called
"Shadow Stocks," i.e., stocks that combine the characteristics of
"small stocks" (as ranked by market capitalization) and "neglected
stocks" (least held by institutions and least covered by analysts).
BABSON STEWART IVORY INTERNATIONAL FUND, INC. was organized in 1987
with the objective of seeking a favorable total return (from market
appreciation and income) by investing primarily in a diversified
portfolio of equity securities (common stocks and securities
convertible into common stocks) of established
companies whose primary business is carried on outside the United
States.
FIXED INCOME FUNDS
D.L. BABSON BOND TRUST was organized in 1944, and has been managed by
Jones & Babson, Inc. since 1972, with the objective of a high level of
current income and reasonable stability of principal. It offers two
portfolios - Portfolio L and Portfolio S.
D.L. BABSON MONEY MARKET FUND, INC. was organized in 1979 to provide
investors the opportunity to manage their money over the short term by
investing in high-quality short-term debt instruments for the purpose
of maximizing income to the extent consistent with safety of principal
and maintenance of liquidity. It offers two portfolios - Prime and
Federal.
D.L. BABSON TAX-FREE INCOME FUND, INC. was organized in 1979 to
provide shareholders the highest level of regular income exempt from
federal income taxes consistent with investing in quality municipal
securities. It offers three separate high-quality portfolios
(including a money market portfolio) which vary as to average length
of maturity.
A prospectus for any of the Funds may be obtained from Jones & Babson,
Inc., Three Crown Center, 2440 Pershing Road, Suite G-15, Kansas City,
Missouri 64108.
Jones & Babson, Inc. also sponsors and manages six mutual funds which
especially seek to provide services to customers of affiliate banks of
UMB Financial Corporation. They are UMB Stock Fund,
Inc., UMB Bond Fund, Inc., UMB Money Market Fund, Inc., UMB Tax-Free
Money Market Fund, Inc., UMB Heartland Fund, Inc. and UMB WorldWide
Fund, Inc.
Jones & Babson, Inc. also sponsors and manages the Buffalo
Balanced Fund, Inc.
FINANCIAL STATEMENTS
The audited financial statements of the Fund which are contained in
the November 30, 1994 Annual Report to Shareholders are incorporated
herein by reference.
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
Herewith are all financial statements and exhibits
filed as a part of this registration statement:
Included in Part A - Prospectus:
Per Share Capital and Income Changes
Included in Part B - Statement of Additional
Information:
The audited financial statements contained in the
most recent Annual Report to Shareholders of
Babson Enterprise Fund II, Inc., are incorporated by
reference into Part B. of this Registration
Statement.
Included in Part C - Other Information:
Consent of Independent Public Accountants
Annual Report to Shareholders of Babson Enterprise
Fund, Inc.
(b) *(1) Registrant's Articles of Incorporation
*(2) Registrant's By-laws
(3) Not applicable, because there is no voting trust
agreement
*(4) Specimen copy of each security to be issued by the
registrant
*(5) (a) Form of Management Agreement between Jones &
Babson, Inc. and the Registrant
(b) Form of Investment Counsel Agreement between
Jones & Babson, Inc. and David L. Babson &
Co. Inc.
*(6) Form of principal Underwriting Agreement between
Jones & Babson, Inc. and the Registrant
(7) Not applicable, because there are no pension,
bonus or other agreements for the benefit of
directors and officers
*(8) Form of Custodian Agreement between Registrant and
United Missouri Bank of Kansas City, N.A.
(9) There are no other material contracts not made in
the ordinary course of business between the
Registrant and others
(10) Opinion and consent of counsel as to the legality
of the registrant's securities being registered.
(To be supplied annually pursuant to Rule 24f-2 of
the Investment Company Act of 1940.)
(11) The consent of Ernst & Young LLP, Independent
Public Accountants.
(12) Not applicable.
*(13) Form of letter from contributors of initial
capital to the Registrant that purchase was made
for investment purposes without any present
intention of redeeming or selling.
(14) Not applicable.
(15) Not applicable.
*(16) Schedule for computation of performance
quotations.
*(17) Copies of Powers of Attorney pursuant to Rule
402(c).
* Previously filed on Form N-1A and herein
incorporated by reference
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL OF THE
REGISTRANT.
NONE
Item 26. NUMBER OF HOLDERS OF SECURITIES.
The number of record holders of each class of securities of
the Registrant as of March 10, 1995, is as follows:
(1) (2)
Title of class Number of Record Holders
Common Stock
$1.00 par value 3,243
Item 27. INDEMNIFICATION.
Under the terms of the Maryland General Corporation Law and
the company's By-laws, the company shall indemnify any
person who was or is a director, officer, or employee of the
company to the maximum extent permitted by the Maryland
General Corporation Law; provided however, that any such
indemnification (unless ordered by a court) shall
be made by the company only as authorized in the specific
case upon a determination that indemnification of such
persons is proper in the circumstances. Such determination
shall be made
(i) by the Board of Directors by a majority vote of a
quorum which consists of the directors who are neither
"interested persons" of the company as defined in Section
2(a)(19) of the 1940 Act, nor parties to the proceedings, or
(ii) if the required quorum is not obtainable or if a
quorum of such directors so directs, by
independent legal counsel in a written opinion.
No indemnification will be provided by the company to any
director or officer of the company for any liability to the
company or shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of duty.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
The principal business of Jones & Babson, Inc. is the
management of the Babson family of mutual funds. It also
has expertise in the tax and pension plan field. It
supervises a number of prototype and profit-sharing plan
programs sponsored by various organizations eligible to be
prototype plan sponsors.
The principal business of David L. Babson & Co., Inc. is to
provide investment counsel and advice to a wide variety of
clients. David L. Babson & Co. Inc. and its affiliates have
$4 billion under management, of which $2.4 billion is
securities and $1.6 billion is real estate.
Item 29. PRINCIPAL UNDERWRITERS.
(a) Jones & Babson, Inc., the only principal underwriter of
the Registrant, also acts as principal underwriter for
the David L. Babson Growth Fund, Inc., D.L. Babson
Money Market Fund, Inc., D.L. Babson Tax-Free Income
Fund, Inc., D.L. Babson Bond Trust, Babson Value Fund,
Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., UMB Stock Fund, Inc., UMB
Bond Fund, Inc., UMB Money Market Fund, Inc. and UMB
Tax-Free Money Market Fund, Inc. and UMB Qualified
Dividend Fund, Inc.
(b) Herewith is the information required by the following
table with respect to each director, officer or
partner of the only underwriter named in answer to Item
21 of Part B:
<TABLE>
<CAPTION>
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
<S> <C> <C>
Stephen S. Soden Chairman and Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Larry D. Armel President and Director President and
Three Crown Center Director
2440 Pershing Road
Kansas City, MO 64108
Giorgio Balzer Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
J. William Sayler Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Edward S. Ritter Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Robert N. Sawyer Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Vernon W. Voorhees Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Richard S. Graber Sr. Vice President - None
Three Crown Center Marketing and Director
2440 Pershing Road, G-15
Kanasas City, Missouri 64108
P. Bradley Adams Vice President Vice President
Three Crown Center and Treasurer and Treasurer
2440 Pershing Road, G-15
Kanasas City, Missouri 64108
Michael A Brummel Vice President Vice President
Three Crown Center
2440 Pershing Road, G-15
Kanasas City, Missouri 64108
Ruth Evans Vice President Vice President
Three Crown Center
2440 Pershing Road, G-15
Kanasas City, Missouri 64108
Martin A. Cramer Vice President Vice President
Three Crown Center and Secretary and Secretary
2440 Pershing Road, G-15
Kanasas City, Missouri 64108
</TABLE>
(c) The principal underwriter does not receive any
remuneration or compansation for the duties or services
rendered to the Registrant pursuant to the principal
underwriting Agreement.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
Each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules
(17 CFR 270.31a-1 to 31a-3) promulgated thereunder is in the
physical possession of Jones & Babson, Inc., at Three Crown
Center, 2440 Pershing Road, G-15, Kansas City, Missouri
64108.
Item 31. MANAGEMENT SERVICES.
All management services are covered in the management
agreement between the Registrant and Jones & Babson, Inc.,
which are discussed in Parts A and B.
Item 32. UNDERTAKINGS.
Registrant undertakes that, if requested to do so by the
holders of at least 10% of the registrant's outstanding
shares, to call a meeting of shareholders for the purpose of
voting upon the question of removal of a director or
directors and to assist in communications with other
shareholders as required by Section 16(c) of the Investment
Company Act of 1940, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused
this registration statement to be signed on its behalf by the
undersigned, thereunto authorized, in the City of Kansas City, and
State of Missouri on the 17th day of March, 1995.
BABSON ENTERPRISE FUND II, INC.
(Registrant)
By LARRY D. ARMEL
(Larry D. Armel, President)
Pursuant to the requirements of the Securities Act of 1933, this
Post-effective Amendment #5 to the Registration Statement has been
signed below by the following persons in the capacities and on the
date indicated.
LARRY D. ARMEL President, March 17, 1995
Larry D. Armel Principal Executive
Officer, and Director
H. DAVID RYBOLT Director March 17, 1995
H. David Rybolt*
WILLIAM H. RUSSELL Director March 17, 1995
William H. Russell*
FRANCIS C. ROOD Director March 17, 1995
Francis C. Rood*
P. BRADLEY ADAMS Treasurer and March 17, 1995
P. Bradley Adams Principal Financial
and Accounting Officer
*Signed pursuant to Power of Attorney
By LARRY D. ARMEL
Attorney-in Fact
REPRESENTATIONS OF COUNSEL
I assisted in the preparation of this Post Effective Amendment to the
Fund's Registration Statement filed under the Securities Act of 1933
and the Amendment to the Fund's Registration Statement filed under the
Investment Company Act of 1940. Based on my review it is my opinion
that this amendment does not contain disclosures which would render it
ineligible to become effective pursuant to paragraph (b) of Rule 485
under the Securities Act of 1933.
JOHN G. DYER Attorney March 17, 1995
John G. Dyer
<PAGE>
Exhibit (11)
Consent of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" and "Independent Auditors" and to the incorporation by reference
of our report dated January 6, 1995 in this post-effective amendment to the
Registration Statement (Form N-1A) and related Prospectus of Enterprise II
Fund, Inc. filed with the Securities and Exchange Commission under the
Securities Act of 1933.
Kansas City, Missouri
March 13, 1995
Ernst & Young LLP
Ernst & Young LLP
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> BABSON ENTERPRISE FUND II INC
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