Jones & Babson, Inc.
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
March 13, 1996
Securities and Exchange Commission
450 5th Street N.W.
Washington, D. C. 20549
Re: Babson Enterprise Fund II, Inc.
File No. 33-39321
File No. 811-6252
Post-Effective Amendment No. 7
and Amendment No 8 to
Registration Statement on Form N-1A
-----------------------------------
Ladies & Gentlemen:
Enclosed herewith is Post-Effective Amendment No. 7 on Form N-1A
pursuant to paragraph (b) of Rule 485.
The purpose of this filing is to update the prospectus and SAI
with current financial information.
Thank you very much for your consideration in this matter.
Sincerely,
Jphn G. Dyer
John G. Dyer
Attorney
JGD:com
Encl.
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. 7 File No. 33-39321 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 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, 1996
It is proposed that this filing become effective:
X On March 31, 1996 pursuant to paragraph (b) 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, 1996, by
January 30, 1997.
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
<PAGE>
BABSON ENTERPRISE FUND II, INC.
CROSS REFERENCE SHEET
Form N-1A Item Number Location in Prospectus
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
<PAGE>
BABSON ENTERPRISE FUND II, INC.
CROSS REFERENCE SHEET (Continued)
Location in Statement
of Additional
Form N-1A Item Number Information
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
<PAGE>
PROSPECTUS
March 31, 1996
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.
<PAGE>
TABLE OF CONTENTS
Page
Fund Expenses 3
Financial Highlights 4
Investment Objective and Portfolio Management Policy 5
Repurchase Agreements 5
Risk Factors 6
Investment Restrictions 6
Performance Measures 7
How to Purchase Shares 8
Initial Investments 8
Investments Subsequent to Initial Investment 9
Telephone Investment Service 9
Automatic Monthly Investment Plan 9
How to Redeem Shares 10
Systematic Redemption Plan 12
How to Exchange Shares Between Babson Funds 12
How Share Price is Determined 13
Officers and Directors 14
Management and Investment Counsel 14
General Information and History 15
Dividends, Distributions and Their Taxation 16
Shareholder Services 17
Shareholder Inquiries 18
<PAGE>
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 1.39%
12b-1 fees None
Other expenses .06%
Total Fund operating expenses 1.45%
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 $46 $79 $174
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, 1995.
The example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than
those shown.
<PAGE>
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 four years in the period ended November 30, 1995 have
been derived from audited financial statements of Babson
Enterprise Fund II, Inc. Such information for the period ended
November 30, 1991 and the four years in the period ended November
30, 1995 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, 1995 Annual
Report to Shareholders which is incorporated by reference in this
prospectus.
<TABLE>
<S> <C> <C> <C> <C> <C>
For Period From
August 5, 1991
1995 1994 1993 1992 to November 30, 1991*
Net asset value,
beginning of
period $16.22 $16.92 $14.47 $12.07 $12.19
Income from investment
operations:
Net investment
income (loss) .053 .020 (.019) (.020) .052
Net gains or losses on
securities (both realized
and unrealized) 3.024 (.392) 2.501 2.455 (.172)
Total from
investment operations 3.077 (.372) 2.482 2.435 (.120)
Less distributions:
Dividends from
net investment
income (.022) --- --- (.035) ---
Distributions from
capital gains (.085) (.328) (.032) --- ---
Total Distributions (.107) (.328) (.032) (.035) ---
Net asset value,
end of period $19.19 $16.22 $16.92 $14.47 $12.07
Total Return 19% (2)% 17% 20% (1)%
Ratios/Supplemental Data
Net assets, end of year
(in millions) $40 $36 $29 $11 $3
Ratio of expenses to
average net
assets 1.45% 1.50% 1.60% 1.83% 1.49%
Ratio of net investment
income (loss) to average
net assets .30% .14% (.14)% (.11)% .76%
Portfolio turnover
rate 15% 9% 18% 14% 13%
<FN>
<F1>* The Fund was capitalized on April 17, 1991 with $366,705,
representing 30,000 shares at a net asset value of $12.22
per share. Initial public offering was made on August 5,
1991, at which time net asset value was $12.19 per share.
Ratios for this initial period of operation are annualized.
</FN>
</TABLE>
<PAGE>
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 advisor 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 bookvalue.
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 entrepreneur-
ial 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."
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, 1995, 1994 and 1993,
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
1995 $24,631 15%
1994 $29,972 9%
1993 $51,953 18%
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
<PAGE>
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 de-
signed 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 securi-
ties 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 ac-
knowledges 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 pur-
<PAGE>
chase 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 perfor-
mance 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, Morningstar Mutual Funds, Investor's Business
Daily, 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 Stanger'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.
<PAGE>
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
<PAGE>
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. Payment of redemption proceeds will be
delayed until the completed application is received by the
Fund.
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 authoriza-
<PAGE>
tion 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.")
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 (see Signature
Guarantees); and
(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
<PAGE>
per share) next computed after receipt of a redemption request in
"good order." (See "How Share Price is Determined.")
The Fund will endeavor to transmit redemption pro-
ceeds 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
third business 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 in 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 three-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 such
shareholder account is mailed and 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 Com-
<PAGE>
pany 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 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 as-
sumes 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
<PAGE>
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 redemp-
tion 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.
<PAGE>
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 "State-
ment 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 there-
fore 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 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 E. 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 27
years of investment management experience. Mr. James joined the
Babson organization in 1986 and has 17 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
<PAGE>
of the Fund for the fiscal year ended November 30, 1995 amounted
to 145/100 of one percent (1.45%) 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 wholly-owned subsidiary of
Massachusetts Mutual Life Insurance Company headquartered
in Springfield, Massachusetts. Massachusetts Mutual Life
Insurance Company is an insurance organization founded in
1851 and is considered to be a controlling person of David
L. Babson & Co. Inc., under the Investment Company Act of 1940.
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, 1996, 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 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.
<PAGE>
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 auto-
matically 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
<PAGE>
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 except
Babson Enterprise Fund, Inc. 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.
<PAGE>
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
<PAGE>
PART B
BABSON ENTERPRISE FUND II,
INC.
STATEMENT OF ADDITIONAL
INFORMATION
March 31, 1996
This Statement is not a prospectus but should be
read in conjunction with the Fund's current Prospectus
dated March 31, 1996. 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
<PAGE>
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 sec-
urities, 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 coun-
sel 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 commission, 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 12/1/94-11/30/95 19.11%
From commencement of
operation to 11/30/95* 11.86%
____________________________________________
*The Fund commenced operation August 5, 1991.
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, 1996, 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., Scout Stock Fund, Inc., Scout
Bond Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc.,
Scout Balanced Fund, Inc., Buffalo Balanced Fund,
Inc., Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc. and Buffalo USA Global 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 three-
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 as a private
investment research and counseling organization. On
June 30, 1995, David L. Babson & Co. Inc. became a
wholly-owned subsidiary of Massachusetts Mutual Life
Insurance Company. David L. Babson & Co. Inc.
serves individual, corporate and other institutional
clients. It participates with Jones & Babson in the
management of nine Babson no-load mutual funds, in
addition to Scout Money Market Fund and Scout Tax-
Free Money Market Fund.
The aggregate management fees paid to Jones &
Babson, Inc. during the most recent fiscal year ended
November 30, 1995, and from which Jones & Babson,
Inc. paid all the Fund's expenses except those payable
directly by the Fund, were $528,499. 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, 1995, Jones & Babson, Inc. paid David
L. Babson & Co. Inc. fees amounting to $249,249.
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; Scout Stock
Fund, Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money Market
Fund, Inc., Scout Regional Fund, Inc., Scout
WorldWide Fund, Inc., Scout Balanced Fund, Inc.;
Buffalo Balanced Fund, Inc., Buffalo Equity Fund,
Inc., Buffalo High Yield Fund, Inc., Buffalo USA
Global 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., Buffalo Equity Fund,
Inc., Buffalo High Yield Fund, Inc., Buffalo USA
Global 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., Buffalo Equity Fund, Inc.,
Buffalo High Yield Fund, Inc., Buffalo USA Global
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., Buffalo Equity Fund, Inc.,
Buffalo High Yield Fund, Inc., Buffalo USA Global
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; Scout Stock Fund, Inc., Scout
Bond Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc.,
Scout Balanced Fund, Inc; Buffalo Balanced Fund,
Inc., Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc., Buffalo USA Global 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, Scout Stock Fund, Inc., Scout Bond Fund,
Inc., Scout Money Market Fund, Inc., Scout Tax-Free
Money Market Fund, Inc., Scout Regional Fund, Inc.,
Scout WorldWide Fund, Inc, Scout Balanced Fund,
Inc; Buffalo Balanced Fund, Inc., Buffalo Equity Fund,
Inc., Buffalo High Yield Fund, Inc., Buffalo USA
Global 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; Scout Stock Fund, Inc., Scout
Bond Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc.,
Scout Balanced Fund, Inc; Buffalo Balanced Fund,
Inc., Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc., Buffalo USA Global 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. Money market funds are neither
insured nor guaranteed by the U.S. Government and
there is no assurance that the funds will maintain a
stable net asset value.
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.
Income from the Tax-Free Money Market portfolio
may be subject to state and local taxes as well as the
Alternative Minimum Tax.
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 seven mutual
funds which especially seek to provide services to
customers of affiliate banks of UMB Financial
Corporation. They are Scout Stock Fund, Inc., Scout
Bond Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc., and
Scout Balanced Fund, Inc.
Jones & Babson, Inc. also sponsors and manages the
Buffalo Group of Mutual Funds. They are: Buffalo
Balanced Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo High Yield Fund, Inc., Buffalo USA Global
Fund, Inc.
FINANCIAL STATEMENTS
The audited financial statements of the Fund which
are contained in the November 30, 1995 Annual
Report to Shareholders are incorporated herein by
reference.
<PAGE>
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,
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 8, 1996, is
as follows:
(1) (2)
Title of class Number of Record Holders
Common Stock
$1.00 par value 2,931
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:
Name and Principal Position and Offices Positions and Offices
_Business Address_ __with Underwriter__ ___with Registrant___
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
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
Martin A. Cramer Vice President Vice President
Three Crown Center and Secretary and Secretary
2440 Pershing Road, G-15
Kanasas City, Missouri 64108
(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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
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 13th day of March, 1996.
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 #7 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 13, 1996
Larry D. Armel Principal Executive
Officer, and Director
H. David Rybolt Director March 13, 1996
H. David Rybolt*
William H. Russell Director March 13, 1996
William H. Russell*
Francis C. Rood Director March 13, 1996
Francis C. Rood*
P. Bradley Adams Treasurer and March 13, 1996
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 13, 1996
John G. Dyer
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 December 28,
1995 in this post-effective amendment to the Registration
Statement (Form N-1A) and related Prospectus of Babson
Enterprise Fund II, Inc. filed with the Securities and
Exchange Commission under the Securities Act of 1933.
Ernst & Young LLP
Ernst & Young LLP
Kansas City, Missouri
March 13. 1996
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