BABSON
ENTERPRISE
FUND
Annual Report
November 30, 1996
JONES & BABSON
MUTUAL FUNDS
MESSAGE
TO OUR SHAREHOLDERS
As investors well know, the upsurge in the stock market continued through
1996. Babson Enterprise Fund finished its fiscal year with a total return
(price change and reinvested distributions) of 20.2% for the 12 months ended
November 30, 1996. This compares quite favorably to the 16.5% total return of
the unmanaged Russell 2000 index of small capitalization stocks. The larger
capitalization stocks making up the unmanaged Standard & Poor's 500 index
gained 27.8% for the same period.
Similar to 1995, it clearly was a year when the large cap universe of stocks
outperformed. Small capitalization stocks did turn in a superior performance
from mid February through May; however, they were overshadowed by a narrowly
defined group of larger cap stocks throughout much of the rest of the year. In
the second half, investors sought the safety of well known, less economically
sensitive companies as their views of the economy's future shifted back and
forth between strength and weakness.
As will be discussed in more detail in the Portfolio Review that follows, the
shortfall in the performance of small cap versus large cap stocks over the
last two years, coupled with low risk approach, bodes well for the future
performance of the small cap stocks in your portfolio.
A number of portfolio changes were made in the latest six month period. The
Fund bought shares of the following companies:
Brown & Sharpe Manufacturing - manufactures high tolerance measuring tools;
CATS Software - supplies financial risk management software;
FLIR Systems - builds night vision systems;
Morrison Health Care - provides food and nutrition services to hospitals;
Schuler Homes - develops affordable housing in Hawaii;
Spartan Motors - makes chassis for RV's, busses and fire trucks;
Trans Financial - a bank holding company with branches in Kentucky and
Tennessee.
Three of our holdings were acquired by other companies in the second half of
the Fund's fiscal year. Brenco was bought by Varian, SKI Limited was taken
over by American Skiing Co. (formerly known as LBO Resort Enterprises); and
Summit Family Restaurants was acquired by CKE Restaurants. Positions
liquidated during this period were the following: ADAC Laboratories, Aviall,
Devon Energy, Gander Mountain, Interface, Oregon Metallurgical, Stevens
Graphics, Technitrol, and Tennant.
On December 27, 1996, the Fund made a distribution to shareholders of $2.66.
There were no short-term capital gains or ordinary income dividends as in
other years. For corporate shareholders, 60.66% of ordinary income
distributions qualify for the corporate dividends received deduction.
Thank you for your interest and participation in Babson Enterprise Fund. We
welcome your comments and questions.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
PORTFOLIO REVIEW
Babson Enterprise Fund is a no-load mutual fund invested in common stocks of
smaller, faster growing companies which at the time of purchase are considered
to be realistically valued in the smaller company sector of the market.
This past year's stock market performance surprised most observers. After
1995's 37.4% advance in the Standard & Poor's 500, few investors expected
another big year in 1996. Yet the S&P finished the calendar year up 23.0%,
which resulted in a two-year gain that has rarely been seen. One has to go
back 20 years for the last similar gain, and since 1925 there have only been
three other two-year periods in the history of the S&P that have surpassed
1995-1996.
Two-Year S&P 500
Period Total Return
1995-1996 69.1%
1975-1976 69.9%
1954-1955 100.8%
1935-1936 97.8%
1927-1928 97.5%
Source: Ibbotson Associates
Small capitalization stocks, while exhibiting well above average performance
in the last two years, lagged the gains for large capitalization stocks. For
example, the Russell 2000, which is the most widely used index of small cap
stocks, was up 49.6% during the two-year period.
All of the shortfall in 1996 - the Russell 2000 was up 16.5% versus a gain of
23.0% for the S&P - occurred in the second half of the year as concerns about
the direction of economic growth increased. In the first half, economic growth
was surprisingly strong, which historically has been good for small companies
since they tend to be more economically sensitive. However, as we progressed
toward the end of the year, economic growth began to look more
vulnerable, and it now appears that the Christmas season was disappointing in
terms of sales growth. In fact, there has been increased discussion about a
potential recession in 1997.
Under these circumstances it is not at all unusual that investors focused on
the larger, less economically sensitive stocks. Even within the Russell 2000
index of small company stocks, there was a marked shift away from economically
cyclical sectors such as Consumer Discretionary, Autos and Transportation, to
Energy, Financial Services, and Consumer Staples.
From our perspective the shortfall in small capitalization stock performance
versus large capitalization stocks over the past two years puts these stocks
in a relatively stronger position going forward. History has shown that the
S&P has had a difficult time in the years immediately following such large two
year gains.
Two-Year Subsequent Two-
Performance Year Performance
1995-1996 69.1% ??
1975-1976 69.9% -1.1%
1954-1955 100.8% -4.9%
1935-1936 97.8% -14.8%
1927-1928 97.5% -31.2%
Source: Ibbotson Associates
That is not the case for small capitalization stocks. Although the Russell
2000 only goes back to 1979, Ibbotson Associates publishes data on small
company stocks that goes back to 1925. Reviewing this data shows that there
have been 27 two-year periods in which small company stocks have performed as
well or better than the 1995-1996 period. In only seven of these instances, or
approximately one-quarter of the time, has the subsequent two-year performance
been negative.
However, these comparisons do illustrate the difficulty the market has had in
sustaining exceptional performance without a correction. Investors must
remember that the balance between reward and risk can shift. In recent years,
taking high investment risks has been rewarded, but under present
circumstances it would appear that a somewhat lower risk profile might be
appropriate.
People define risk in a variety of ways. Academics tend to define it as
volatility. One way we can assess risk is to measure the volatility of returns
relative to the longer term average return of a specific portfolio ("standard
deviation"), or one can compare the volatility of return of a portfolio to the
volatility of a benchmarket portfolio (`beta").
To most of us, these risk measuring techniques are a little esoteric. Of more
significance is the risk of actually losing money. The Investment Company
Institute did a survey in 1996, and the preferred concept of risk was "the
chance of losing some of an original investment." Fifty-seven percent of the
respondents chose this definition, while only 15% favored "standard deviation"
as a measure of risk, and only 13% selected "beta."
Morningstar, Inc., the publication that monitors mutual funds, uses this
concept of losing money in calculating its risk rating. It measures both the
frequency and the severity of loss, and then ranks each fund by its risk
measure.
Enterprise Fund has always been managed with a careful eye to its risk
profile. Small capitalization stocks are generally more risky than large cap
stocks - however you define risk. Statistically, such stocks display higher
risk, which makes sense because fundamentally their operations have higher
risks. Small companies tend to have less product depth and breadth, making
them more vulnerable to obsolescence or a competitive onslaught. They often
sell to a narrow list of buyers so that their prosperity may depend on the
fortunes of just one or two customers. They do not always have the financial
resources that a large company does, and many of them have a lean management
team, which can be good when things are going well but sometimes prove life
threatening when things go badly. Finally, the stocks of these companies can
be very illiquid, which makes buying and selling them more difficult, and can
cause the stocks' prices to fluctuate considerably more than large company
stocks.
Despite the higher risks in each individual situation, a portfolio can be
structured to mitigate these risks. By doing so, the volatility of the entire
portfolio can be minimized, and the incidence of loss can be very low.
In fact, according to Morningstar's most recent calculation published in its
analysis (September 27, 1996), Enterprise Fund ".has been one of the least
volatile small-company funds around." It also has a well below average
standard deviation and beta.
We are pleased that we outperformed the Russell 2000 in fiscal 1996 even with
the Fund's low risk profile. However, we believe that profile will become even
more important as we go forward in a market that may not reward risk taking as
much as it has recently.
David L. Babson & Co. Inc.
PORTFOLIO REVIEW
GRAPH -- Babson Enterprise Fund versus Russell 2000
Babson Enterprise Fund's average annual compounded total returns for one, five
and ten year periods as of November 30, 1996, were 20.17%, 17.20% and 13.57%,
respectively. Performance data contained in this report is for past periods
only. Past performance is not predictive of future performance. Investment
return and share value will fluctuate, and redemption value may be more or
less than original cost.
STATEMENT OF NET ASSETS
November 30, 1996
<TABLE>
<CAPTION>
S&P MARKET VALUE
RANKING** SHARES COMPANY COST (NOTE 1-A)
</CAPTION>
<S> <C> <C>
COMMON STOCKS - 92.59%
BASIC MATERIALS - 8.75%
A- 156,700 Brady (W.H.) Co. Cl. A
(Identification and labeling systems) $ 1,273,721 $ 3,427,812
B+ 177,600 Furon Co.
(Polymer based products) 2,421,082 3,618,600
C 130,900 Intermet Corp.
(Auto and industrial iron castings) 832,131 1,750,788
B 169,500 Material Sciences Corp.*
(Coatings and laminates) 1,142,472 2,817,937
C 288,050 Nord Resources Corp.*
(Rutile and kaolin production) 1,891,266 1,224,212
NR 182,600 PENWEST Ltd.
(Specialty starch based products) 3,769,999 3,195,500
B- 208,600 Tab Products Co.
(Color-coded filing systems) 2,451,521 1,616,650
13,782,192 17,651,499
CAPITAL GOODS - 23.86%
B+ 110,700 American Precision Industries Inc.
(Heat exchangers) 1,129,024 2,020,275
B 66,500 Apogee Enterprises, Inc.
(Commercial window systems) 518,687 2,942,625
C 152,426 Athey Products Corp.*
(Street sweepers) 1,475,747 681,146
NR 185,800 Atkinson (Guy F.) Co.*
(Construction) 1,731,503 1,892,837
NR 223,800 Bettis Corp.*
(Actuators) 1,075,589 1,776,413
C 157,400 Brown & Sharpe Manufacturing Co. Cl. A*
(High tolerance measuring tools) 1,715,884 2,262,625
NR 220,100 Congoleum Corp. New Cl. A*
(Vinyl flooring) 2,310,888 2,806,275
NR 212,700 Corrpro Companies, Inc.*
(Corrosion control services) $ 1,766,321 $ 1,701,600
NR 248,300 Farrell Corp. New
(Rubber and plastic processing equipment) 1,655,638 713,862
NR 50,900 Flir Systems, Inc.*
(Night vision systems) 678,901 693,513
NR 85,400 Industrial Acoustics Company, Inc.
(Noise control products) 1,303,450 864,675
B+ 215,700 Instron Corp.
(Materials testing instruments) 2,694,709 2,804,100
C 133,600 K-Tron International, Inc.*
(Industrial feeders and blenders) 1,627,741 1,427,850
B- 175,018 Kuhlman Corp.
(Electrical transformers) 1,175,950 3,084,692
B- 356,000 Lamson & Sessions Co.*
(Electrical equipment supplier) 2,737,114 2,670,000
B- 162,400 Moog Inc. Cl. A*
(High performance control systems) 1,878,078 3,897,600
B 201,200 Newcor, Inc.
(Automobile assembly systems) 1,857,354 1,785,650
B 138,700 Pacific Scientific Co.
(Aerospace and industrial products) 909,883 1,595,050
NR 157,110 Raymond Corp.
(Narrow-aisle lift trucks) 1,183,880 2,827,980
NR 362,900 Schuler Homes, Inc.*
(Hawaii homebuilder) 2,330,301 2,177,400
B- 40,100 SPS Technologies, Inc.*
(Aerospace fasteners) 841,208 2,516,275
B+ 180,200 Starrett (L.S.) Co. Cl. A
(Tools and precision instruments) 4,549,292 5,000,550
37,147,142 48,142,993
CONSUMER CYCLICAL - 16.56%
B+ 213,100 American Recreation Centers, Inc.
(Bowling centers) $ 1,381,532 $ 1,078,819
B- 113,000 Baldwin Piano & Organ Co.*
(Keyboard instruments) 1,607,704 1,469,000
NR 15,208 Dixie Yarns, Inc.*
(Yarns and industrial thread) 72,018 100,753
B+ 73,100 Fab Industries, Inc.
(Textile fabrics) 1,974,577 1,955,425
B+ 214,070 Falcon Products, Inc.
(Table pedestals) 1,502,933 3,104,015
NR 211,000 Forstmann & Company, Inc.*
(Woolen fabrics) 2,290,108 69,229
C 236,300 Gottschalks Inc.*
(Specialty-apparel stores) 2,009,652 1,595,025
B 194,200 Helen of Troy Ltd.*
(Hair care appliances) 1,062,146 4,175,300
B- 204,700 Jacobson Stores Inc.
(Upscale department store chain) 2,846,270 1,944,650
NR 199,800 Jay Jacobs, Inc.*
(Specialty-apparel stores) 1,196,765 99,900
NR 220,863 Leslie's Poolmart*
(Specialty swimming pool stores) 2,600,169 2,898,827
B+ 227,300 Oneida Ltd.
(Stainless steel flatware) 3,442,031 3,864,100
B 371,300 Pentech International, Inc.*
(Writing instruments) 1,150,869 266,853
B 269,500 Shelby Williams Industries, Inc.
(Contract seating) 2,842,937 3,469,813
NR 236,200 Spartan Motors, Inc.*
(Chassis for RV's, buses and firetrucks) 1,780,104 1,476,250
B 184,000 Swiss Army Brands, Inc.*
(Swiss Army knives) 1,707,357 2,576,000
B 29,400 Tranzonic Cos. Cl. A
(Industrial textiles) 166,063 510,825
NR 140,000 Walbro Corp.
(Auto fuel injection systems) 1,899,815 2,765,000
31,533,050 33,419,784
CONSUMER STAPLES - 9.54%
B 52,900 Genesee Corp. Cl. B
(Regional brewer) $ 2,183,074 $ 2,248,250
B 271,300 J & J Snack Foods Corp.*
(Soft pretzels and other snack foods) 3,031,424 2,984,300
B 169,600 Northland Cranberries, Inc. Cl. A
(Cranberry grower) 919,220 3,773,600
B- 192,925 Rykoff-Sexton, Inc.
(Foodservice product distribution) 3,020,587 2,797,412
NR 250,450 Sanderson Farms, Inc.
(Chickens) 2,561,070 3,975,894
NR 392,500 Stokely USA Inc.*
(Canned and frozen vegetables) 2,183,117 760,469
NR 163,600 U.S. Can Corp.
(Metal containers) 2,670,036 2,719,850
16,568,528 19,259,775
ENERGY - 6.26%
NR 165,200 American Oilfield Divers Inc.*
(Undersea construction and maintenance) 1,470,766 2,147,600
NR 383,700 Matrix Service Co.*
(Petroleum refining maintenance) 1,787,208 2,254,238
B- 204,500 McFarland Energy, Inc.*
(Oil exploration) 1,651,364 2,249,500
NR 96,500 Petroleum Helicopters, Inc.
(non-voting) (Gulf of Mexico helicopter
transportation) 1,009,845 1,604,313
NR 78,700 Petroleum Helicopters, Inc.
(voting) (Gulf of Mexico helicopter
transportation) 928,534 1,455,950
B+ 152,800 World Fuel Services Corp.
(Aviation fueling services) 1,399,993 2,922,300
8,247,710 12,633,901
FINANCIAL - 6.25%
B 195,300 AVEMCO Corp.
(Private aircraft insurance) 3,364,559 3,027,150
A- 76,500 Gallagher (Arthur J.) & Co.
(Insurance brokerage and risk management) 1,551,378 2,352,375
B 188,200 NYMAGIC, Inc.
(Ocean and inland marine insurance) $ 3,853,010 $ 3,387,600
NR 63,900 Trans Financial, Inc.
(Kentucky and Tennessee bank) 1,236,992 1,365,863
NR 70,800 Vermont Financial Services Corp.
(Vermont bank holding company) 1,518,412 2,495,700
11,524,351 12,628,688
HEALTH CARE - 2.79%
NR 159,700 Morrison Health Care, Inc.
(Hospital food and nutrition) 1,906,738 2,275,725
NR 254,900 Sullivan Dental Products, Inc.
(Dental supply distributor) 2,690,646 3,345,562
4,597,384 5,621,287
MISCELLANEOUS - 3.45%
NR 166,300 Alltrista Corp.*
(Consumer and industrial products) 2,489,299 4,199,075
B+ 386,483 Jason Inc.*
(Nonwoven auto padding) 558,317 2,753,691
3,047,616 6,952,766
TECHNOLOGY - 11.20%
NR 127,800 CATS Software, Inc.*
(Financial risk management software) 702,292 591,075
B+ 148,900 CEM Corp.*
(Laboratory microwave ovens) 1,588,770 1,265,650
B 77,800 CSP Inc.*
(Special purpose computers) 737,776 671,025
NR 159,700 ESCO Electronics Corp.
(Defense products and systems) 871,318 1,557,075
B 57,300 Fluke Corp.
(Electronic test and measurement equipment) 1,405,451 2,471,062
B+ 129,500 Landauer Inc.
(Personal radiation exposure monitoring) $ 2,150,388 $ 2,703,313
B+ 171,900 New England Business Service, Inc.
(Business forms) 3,111,436 3,330,563
NR 131,200 Nichols Research Corp.*
(Technical and engineering services) 1,040,458 3,214,400
B 281,700 Norstan, Inc.*
(Telecommunications equipment) 1,692,189 4,507,200
NR 231,800 Viewlogic Systems Inc.*
(Computer-aided engineering software) 2,619,552 2,289,025
15,919,630 22,600,388
TRANSPORTATION & SERVICES - 3.93%
A 182,600 ABM Industries, Inc.
(Building maintenance services) 1,314,346 3,149,850
B+ 139,500 International Shipholding Corp.
(Ocean and river freight transportation) 1,914,838 2,458,687
B+ 137,000 Sea Containers Ltd. Cl. A
(Marine container leasing) 2,551,199 2,123,500
B+ 12,000 Sea Containers Ltd. Cl. B
(Marine container leasing) 218,970 190,500
5,999,353 7,922,537
TOTAL COMMON STOCKS - 92.59% 148,366,956 186,833,618
</TABLE>
<TABLE>
<CAPTION> MARKET VALUE
FACE AMOUNT DESCRIPTION COST (NOTE 1-A)
</CAPTION>
<S> <C> <C>
SHORT-TERM CORPORATE NOTE - 0.99%
$2,000,000 Sears Roebuck Acceptance Corp.,
5.28%, due December 4, 1996 $ 2,000,000 $ 2,000,000
REPURCHASE AGREEMENT - 2.87%
5,790,000 UMB Bank, n.a.,
5.30%, due December 2, 1996
(Collateralized by
$5,708,737 U.S. Treasury Notes,
5.125%, due June 30, 1998) 5,790,000 5,790,000
TOTAL INVESTMENTS - 96.45% $156,156,956 $194,623,618
Other assets less liabilities - 3.55% 7,155,977
TOTAL NET ASSETS - 100.00%
(equivalent to $18.51 per share; 20,000,000 shares of
$1.00 par value capital shares authorized;
10,900,792 shares outstanding) $201,779,595
</TABLE>
For federal income tax purposes, the identified cost of investments owned at
November 30, 1996, was $156,156,956.
Net unrealized appreciation for federal income tax purposes was $38,466,662,
which is comprised of unrealized appreciation of $53,340,549 and
unrealized depreciation of $14,873,887.
*Securities on which no cash dividends were paid during the preceding year.
**Standard & Poor's rankings are derived from statistical measurements of past
earnings and dividend stability and growth.
NR - indicates no ranking is available. Rankings are not covered by the
report of independent auditors.
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
November 30, 1996
ASSETS:
Investments in securities:
Common stocks, at market value (identified cost $148,366,956) $186,833,618
Short-term corporate note, at cost - approximates market value 2,000,000
Repurchase agreement, at cost - approximates market value 5,790,000
Total investments 194,623,618
Cash 2,319,789
Dividends receivable 43,780
Interest receivable 5,002
Receivable for investments sold 4,787,406
Total assets 201,779,595
NET ASSETS $201,779,595
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $130,770,359
Accumulated undistributed income:
Undistributed net investment income 1,029,470
Undistributed net realized gain on investment transactions 31,513,104
Net unrealized appreciation in value of investments 38,466,662
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $201,779,595
Capital shares, $1.00 par value
Authorized 20,000,000
Outstanding 10,900,792
NET ASSET VALUE PER SHARE $ 18.51
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year Ended November 30, 1996
INVESTMENT INCOME:
Income:
Dividends $ 2,589,581
Interest 424,708
3,014,289
Expenses (Note 2):
Management fees 2,248,503
Registration fees and expenses 23,285
2,271,788
Net investment income (Note 1-B) 742,501
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain from investment transactions (excluding
maturities of short-term commercial notes and
repurchase agreements):
Proceeds from sales of investments 90,546,824
Cost of investments sold 59,025,049
Net realized gain from investment transactions 31,521,775
Unrealized appreciation of investments:
Beginning of year 32,684,553
End of year 38,466,662
Unrealized appreciation of investments during the year 5,782,109
Net gain on investments 37,303,884
Increase in net assets resulting from operations $ 38,046,385
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
For The Two Years Ended November 30, 1996
<TABLE>
<CAPTION>
1996 1995
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 742,501 $ 1,325,452
Net realized gain from investment transactions 31,521,775 21,395,854
Unrealized appreciation of investments during the year 5,782,109 7,252,838
Net increase in net assets resulting from operations 38,046,385 29,974,144
Net equalization included in the price of shares issued
and redeemed (157,879) (138,066)
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (1,319,193) (425,295)
Net realized gain from investment transactions (21,392,199) (19,094,377)
Total distributions to shareholders (22,711,392) (19,519,672)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 13,034,598 11,779,300
Net asset value of shares issued for
reinvestment of distributions 21,744,139 18,718,813
34,778,737 30,498,113
Cost of shares repurchased (50,016,203) (27,335,768)
Net increase (decrease) from
capital share transactions (15,237,466) 3,162,345
Total increase (decrease) in net assets (60,352) 13,478,751
NET ASSETS:
Beginning of year 201,839,947 188,361,196
End of year (including undistributed net investment income
of $1,029,470 in 1996 and $1,770,193 in 1995) $201,779,595 $201,839,947
*Shares issued and repurchased:
Number of shares sold 759,602 739,581
Number of shares issued for reinvestment of distributions 1,403,753 1,258,831
2,163,355 1,998,412
Number of shares repurchased (2,898,376) (1,683,462)
Net increase (decrease) (735,021) 314,950
**Distributions to shareholders:
Income dividends per share $ .1137 $ .0377
Capital gains distribution per share $ 1.8433 $ 1.6949
See accompanying Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund
in the preparation of its financial statements.
A. Security Valuation - Common stocks traded on a national securities
exchange are valued at the latest sales price, or if no sale was reported on
that date, the mean between the closing bid and asked price is used. Common
stocks traded over-the-counter are valued at the average of the last reported
bid and asked prices.
B. Federal and State Taxes - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no provision for federal or state tax is required. The Fund has
designated $17,509,328 as capital gain dividends.
C. Equalization - The Fund uses the accounting practice of equalization, by
which a portion of the proceeds from sales and costs of redemption of capital
shares, equivalent on a per share basis to the amount of undistributed net
investment income on the date of the transactions, is credited or charged to
undistributed income. As a result, undistributed net investment income per
share is unaffected by sales or redemptions of capital shares.
D. Other - Security transactions are accounted for on the date the securities
are purchased or sold. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Realized gains and losses from investment
transactions and unrealized appreciation and depreciation of investments are
reported on the identified cost basis.
2. MANAGEMENT FEES:
Management fees were paid to Jones & Babson, Inc. at the rate of 1.5% per
annum of the average daily net asset value of the Fund up to $30,000,000 and
1% per annum of net assets in excess of that amount. Such fees are paid for
services which include administration, and all other operating expenses of the
Fund except the cost of acquiring and disposing of portfolio securities, the
taxes, if any, imposed directly on the Fund and its shares and the cost of
qualifying the Fund's shares for sale in any jurisdiction. Certain officers
and/or directors of the Fund are also officers and/or directors of Jones &
Babson, Inc.
3. INVESTMENT TRANSACTIONS:
Investment transactions for the year ended November 30, 1996 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Purchases $ 47,931,962
Proceeds from sales 90,546,824
FINANCIAL HIGHLIGHTS
Condensed data for a share of capital stock outstanding throughout each year.
<TABLE>
<CATPION>
Years Ended November 30,
</CATPION> 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 17.35 $ 16.64 $ 17.20 $ 17.04 $ 13.94
Income from investment operations:
Net investment income .057 .101 .032 .057 .081
Net gains or losses on securities
(both realized and unrealized) 3.060 2.342 .569 2.520 3.862
Total from investment operations 3.117 2.443 .601 2.577 3.943
Less distributions:
Dividends from net investment income (.114) (.038) (.054) (.087) (.079)
Distributions from capital gains (1.843) (1.695) (1.107) (2.330) (.764)
Total distributions (1.957) (1.733) (1.161) (2.417) (.843)
Net asset value, end of year $ 18.51 $ 17.35 $ 16.64 $ 17.20 $ 17.04
Total return 20.17% 16.42% 3.70% 17.25% 29.85%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 202 $ 202 $ 188 $ 217 $ 178
Ratio of expenses to average net assets 1.08% 1.09% 1.08% 1.09% 1.11%
Ratio of net investment income to average net assets .35% .67% .22% .33% .57%
Portfolio turnover rate 24% 13% 15% 17% 28%
*Average commission paid per equity share traded $ .0419 - - - -
*Disclosure required for fiscal years beginning
after September 1, 1995.
See accompanying Notes to Financial Statements.
</TABLE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
The Board of Directors and Shareholders of Babson Enterprise Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the statement of net assets, of Babson Enterprise Fund, Inc., as of
November 30, 1996, the related statements of operations for the year then
ended, changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of November 30, 1996, by correspondence with the custodian. As to
securities relating to uncompleted transactions, we performed other auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Babson Enterprise Fund, Inc. at November 30, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended in conformity with generally
accepted accounting principles.
/s/Ernst & Young LLP
Kansas City, Missouri
December 27, 1996
This report has been prepared for the information of the Shareholders of
Babson Enterprise Fund, Inc. and is not to be construed as an offering of the
shares of the Fund. Shares of this Fund and of the other Babson Funds are
offered only by the Prospectus, a copy of which may be obtained from Jones &
Babson, Inc.
BOARD OF DIRECTORS
Larry D. Armel
Francis C. Rood
William H. Russell
H. David Rybolt
OFFICERS
Larry D. Armel
President
P. Bradley Adams
Vice President & Treasurer
Elizabeth L. Allwood
Vice President
Michael A. Brummel
Vice President
Martin A. Cramer
Vice President & Secretary
Constance E. Martin
Vice President
Peter C. Schliemann
Vice President - Portfolio
INVESTMENT COUNSEL
David L. Babson & Co. Inc.
Cambridge, Massachusetts
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
EQUITIES
Growth Fund
Enterprise Fund*
Enterprise Fund II
Value Fund
Shadow Stock Fund
International Fund
FIXED INCOME
Bond Trust
Money Market Fund
Tax-Free Income Fund
* Closed to new investors.
JONES & BABSON
MUTUAL FUNDS
2440 Pershing Road
Kansas City, MO 64108-2561
816-471-5200
1-800-4-BABSON
(1-800-422-2766)
http://www.jbfunds.com
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