BABSON
Enterprise
Fund
Semiannual Report
May 31, 1998
MESSAGE
To Our Shareholders
Babson Enterprise Fund finished its fiscal quarter ended May 31, 1998 with a
total return (price change and reinvested distributions) of 2.4%. The
unmanaged Russell 2000 index of small capitalization stocks declined 0.9% for
the same period and the unmanaged Standard & Poor's 500 index of larger
capitalization stocks rose 4.3%. For the six and twelve month periods the Fund
achieved total returns of 4.7% and 26.6% which compares with the Russell 2000
return of 6.5% and 21.2% and the S&P's 500 return of 15.1% and 30.7%,
respectively.
The Fund outperformed the Russell 2000 in the last three months, but
underperformed in the first three months when the market was exceptionally
strong in February and March. The market's surge was largely due to a run up
in the technology sector. As we have pointed out in the past, the Fund usually
underperforms when the technology sector is strong due to our intentional
underweighting in this sector.
Average annual compounded total returns for one, five and ten year periods as
of June 30, 1998, were 16.9%, 16.8% and 15.6%, 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.
With investors' increased concerns about Asia and its effect on earnings,
there has been a flight to more liquid large cap stocks since last Fall. How-
ever, with significantly less Asian exposure (except for technology stocks),
small cap earnings should not be affected as much. Additionally, small cap
stocks are cheaper than large caps by a number of measures and are close to
their 1990 recession lows.
A number of changes were made to the portfolio in the Fund's fiscal first
half. We initiated positions in the following companies:
ABC Rail Products Corp. - provider of products and services for freight
railroads.
Andersons, Inc. - provides agricultural services and products to Mid-Western
farmers.
Arctic Cat, Inc. - manufactures snowmobiles, all-terrain vehicles, and
personal watercraft.
Chicago Bridge & Iron Co. - produces above ground storage tanks used
primarily in the refining, petrochemical, and chemical industries.
EDO Corp. - manufactures bomb release units, mine detection equipment,
satellite sensors, and composite storage tanks for defense and commercial end
markets.
INSO Corp. - develops web site software. Kaneb Services, Inc. - provides
specialized industrial services to process plants.
MDC Corp. - provider of specialty printing, communications, and marketing
services.
Nashua Corp. - provides specialty imaging products and services to industrial
and commercial customers.
Railtex, Inc. - operates short line freight railroads.
Positions sold in the last six months were thefollowing: Apogee Enterprises,
Guy F. Atkinson, Kuhlman, Material Sciences, Nord Resources, and Optek
Technology. Three holdings were bought by other companies: Pacific Scientific,
Rykoff-Sexton, and Viewlogic Systems. Finally, Penwest Ltd. changed its name
to Penford Corp.
Despite the euphoria in the markets today, we have not changed our long-term
investment strategy. We continue to search for neglected underfollowed
companies with better than average growth prospects, and we often hold our
positions until other investors recognize their prospects.
Thank you for your continuing interest and participation in Babson Enterprise
Fund.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
STATEMENT OF NET ASSETS
May 31, 1998 (unaudited)
MARKET VALUE
SHARES COMPANY (NOTE 1-A)
COMMON STOCKS - 99.86%
BASIC MATERIALS - 5.87%
105,000 Brady (W.H.) Co. Cl. A
(Identification and labeling
systems) $ 3,045,000
211,900 Furon Co.
(Polymer based products) 3,377,156
112,950 Penford Corp.
(Specialty starch based
products) 3,487,331
206,600 Tab Products Co.
(Color-coded filing systems) 3,021,525
12,931,012
CAPITAL GOODS - 29.30%
130,600 ABC Rail Products Corp.
(Railroad products
and services) 2,481,400
196,300 American Precision Industries Inc.
(Heat exchangers) 3,729,700
152,426 Athey Products Corp.
(Street sweepers) 743,077
371,000 Brown & Sharpe
Manufacturing Co. Cl. A
(High tolerance
measuring tools) 4,915,750
27,400 Chicago Bridge & Iron Co.
(Above ground storage tanks) 467,513
279,800 Congoleum Corp. New Cl. A
(Vinyl flooring) 2,815,487
197,900 Corrpro Companies, Inc.
(Corrosion control services) 3,042,713
212,504 Daniel Industries, Inc.
(Metering devices and valves) 4,316,487
5,000 EDO Corp.
(Defense contractor) 46,563
248,300 Farrell Corp. New
(Rubber and plastic
processing equipment) 838,012
130,900 Flir Systems, Inc.
(Night vision systems) 2,454,375
86,000 Industrial Acoustics Company, Inc.
(Noise control products) 838,500
198,800 Instron Corp.
(Materials testing instruments) 3,976,000
240,600 Kaman Corp. Cl. A
(Industrial distribution/aerospace
products) 4,421,025
419,300 Kaneb Services, Inc.
(Specialized industrial services) 2,489,594
116,400 K-Tron International, Inc.
(Industrial feeders
and blenders) 2,211,600
471,900 Lamson & Sessions Co.
(Electrical equipment supplier) 3,244,313
62,000 Moog, Inc. Cl. A
(High performance
control systems) 2,425,750
186,165 Newcor, Inc.
(Automobile assembly
systems) 1,722,026
258,300 Schawk, Inc. Cl. A
(Pre-press services) 3,874,500
28,900 SPS Technologies, Inc.
(Aerospace fasteners) 1,694,262
131,900 Starrett (L.S.) Co. Cl. A
(Tools and precision
instruments) 5,102,881
153,400 Terex Corp. New
(Heavy-duty off-highway
trucks and cranes) 4,726,638
72,800 TransTechnology Corp.
(Highly engineered fasteners) 1,965,600
64,543,766
CONSUMER CYCLICAL - 17.70%
256,800 Arctic Cat, Inc.
(Snowmobiles) 2,343,300
108,500 Baldwin Piano & Organ Co.
(Keyboard instruments) 1,681,750
123,700 Defiance, Inc.
(Auto supplier) 1,082,375
102,800 Fab Industries, Inc.
(Textile fabrics) 2,788,450
287,370 Falcon Products, Inc.
(Table pedestals) 3,735,810
200,800 Gottschalks, Inc.
(Specialty-apparel stores) 1,669,150
194,800 Helen of Troy Ltd.
(Hair care appliances) 3,725,550
199,800 Jacobson Stores, Inc.
(Upscale department
store chain) 2,797,200
358,400 MDC Corp. Cl. A
(Specialty printer) 4,032,000
126,350 Oneida Ltd.
(Stainless steel flatware) 3,529,903
371,300 Pentech International, Inc.
(Writing instruments) 696,188
26,900 Pulaski Furniture Corp.
(Furniture) 706,125
246,200 Shelby Williams Industries, Inc.
(Contract seating) 3,754,550
337,500 Spartan Motors, Inc.
(Chassis for RV's, buses
and firetrucks) 2,467,969
181,200 Swiss Army Brands, Inc.
(Swiss Army knives) 2,095,125
181,700 Walbro Corp.
(Auto fuel injection systems) 1,873,781
38,979,226
CONSUMER STAPLES - 6.23%
56,400 Genesee Corp. Cl. B
(Regional brewer) 1,843,575
240,300 J & J Snack Foods Corp.
(Soft pretzels and other
snack foods) 4,640,794
38,500 Marsh Supermarkets, Inc. Cl. A
(Indiana-Ohio supermarkets) 529,375
88,100 Marsh Supermarkets, Inc. Cl. B
(Indiana-Ohio supermarkets) 1,222,387
207,200 Northland Cranberries, Inc. Cl. A
(Cranberry grower) 3,276,350
189,600 Sanderson Farms, Inc.
(Chickens) 2,204,100
13,716,581
ENERGY - 5.96%
200,200 American Oilfield Divers Inc.
(Undersea construction and
maintenance) 2,965,463
330,300 Matrix Service Co.
(Petroleum refining
maintenance) 2,518,537
94,600 Petroleum Helicopters, Inc.
(non-voting) (Gulf of Mexico
helicopter transportation) 1,951,125
78,700 Petroleum Helicopters, Inc.
(voting) (Gulf of Mexico
helicopter transportation) 1,652,700
253,100 Tokheim Corp.
(Petroleum dispensing
systems) 4,033,781
13,121,606
FINANCIAL - 4.66%
72,600 Capital Corp. of the West
(California bank holding
company) 1,061,775
63,300 Cass Commercial Corp.
(Freight payment services) 1,914,825
62,700 Trans Financial, Inc.
(Kentucky and Tennessee
bank) 3,346,613
139,500 Vermont Financial Services Corp.
(Vermont bank holding
company) 3,949,594
10,272,807
HEALTH CARE - 1.47%
189,200 Morrison Health Care, Inc.
(Hospital food and nutrition) 3,240,050
MISCELLANEOUS - 5.84%
139,300 Alltrista Corp.
(Consumer and industrial
products) 3,552,150
1,400 Andersons, Inc.
(Grain handler) 14,437
356,283 Jason Inc.
(Nonwoven auto padding) 3,340,153
135,200 Sea Containers Ltd. Cl. A
(Marine container leasing) 5,467,150
12,000 Sea Containers Ltd. Cl. B
(Marine container leasing) 483,000
12,856,890
TECHNOLOGY - 17.59%
195,800 CATS Software, Inc.
(Financial risk management
software) 1,125,850
146,700 CEM Corp.
(Laboratory microwave ovens) 1,962,112
73,000 CSP Inc.
(Special purpose computers) 741,403
314,100 Ennis Business Forms, Inc.
(Custom business forms) 2,982,348
248,100 ESCO Electronics Corp.
(Defense products
and systems) 4,450,294
155,400 INSO Corp.
(Web site management) 2,117,325
142,600 Landauer Inc.
(Personal radiation exposure
monitoring) 4,064,100
350,000 MacNeal Schwendler Corp.
(Engineering software
products) 3,696,875
66,400 Nashua Corp.
(Specialty imaging products) 1,049,950
97,400 New England Business Service, Inc.
(Business forms) 3,171,587
159,900 Nichols Research Corp.
(Technical and engineering
services) 3,837,600
175,900 Norstan, Inc.
(Telecommunications
equipment) 4,353,525
349,100 Spectrum Control, Inc.
(Electronic components) 2,116,419
483,600 Titan Corp.
(Communications software for
satellites) 3,082,950
38,752,338
TRANSPORTATION & SERVICES - 4.24%
140,300 ABM Industries, Inc.
(Building maintenance
services) 3,884,556
137,900 International Shipholding Corp.
(Ocean and river freight
transportation) 2,275,350
207,400 Railtex, Inc.
(Short line railroads) 3,175,813
9,335,719
UTILITIES - 1.00%
64,200 E'town Corp.
(Water company) 2,214,900
TOTAL COMMON STOCKS - 99.86% 219,964,895
REPURCHASE AGREEMENT - 0.59%
$1,290,000 UMB Bank, n.a.,
4.97%, due June 1, 1998
(Collateralized by U.S.
Treasury Notes, 7.125%,
due February 29, 2000) 1,290,000
TOTAL INVESTMENTS - 100.45% $ 221,254,895
Other assets less liabilities - (0.45%) (983,911)
TOTAL NET ASSETS - 100.00%
(equivalent to $19.58 per share;
20,000,000 shares of $1.00 par
value capital shares authorized;
11,247,170 shares outstanding) $ 220,270,984
REPURCHASE AGREEMENT - 0.59%
$1,290,000 UMB Bank, n.a.,
4.97%, due June 1, 1998
(Collateralized by U.S.
Treasury Notes, 7.125%,
due February 29, 2000) 1,290,000
TOTAL INVESTMENTS - 100.45% $ 221,254,895
Other assets less liabilities - (0.45%) (983,911)
TOTAL NET ASSETS - 100.00%
(equivalent to $19.58 per share;
20,000,000 shares of $1.00 par
value capital shares authorized;
11,247,170 shares outstanding) $ 220,270,984
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
May 31, 1998 (unaudited)
ASSETS:
Investments in securities:
Common stocks, at market value
(identified cost $153,807,401) $ 219,964,895
Repurchase agreement, at cost -
approximates market value 1,290,000
Total investments 221,254,895
Dividends receivable 141,797
Total assets 221,396,692
LIABILITIES AND NET ASSETS:
Cash overdraft 110,135
Payable for investments purchased 1,015,573
Total liabilities 1,125,708
NET ASSETS $ 220,270,984
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 133,144,392
Accumulated undistributed income:
Undistributed net investment income 1,290,731
Undistributed net realized gain on investment transactions 19,678,367
Net unrealized appreciation in value of investments 66,157,494
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 220,270,984
Capital shares, $1.00 par value
Authorized 20,000,000
Outstanding 11,247,170
NET ASSET VALUE PER SHARE $ 19.58
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1998 (unaudited)
INVESTMENT INCOME:
Income:
Dividends $ 1,378,889
Interest 183,665
1,562,554
Expenses (Note 2):
Management fees 1,168,288
Registration fees and expenses 18,635
1,186,923
Net investment income (Note 1-B) 375,631
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 31,419,190
Cost of investments sold 16,081,219
Net realized gain from investment transactions 15,337,971
Unrealized appreciation of investments:
Beginning of period 71,725,066
End of period 66,157,494
Unrealized depreciation of investments during
the period (5,567,572)
Net gain on investments 9,770,399
Increase in net assets resulting from operations $ 10,146,030
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
May 31, 1998 November 30,
(unaudited) 1997
</CAPTION>
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INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 375,631 $ 615,046
Net realized gain from investment transactions 15,337,971 24,455,634
Unrealized appreciation (depreciation)
of investments during the period (5,567,572) 33,258,404
Net increase in net assets resulting from operations 10,146,030 58,329,084
Net equalization included in the price of shares issued
and redeemed (25,670) (96,565)
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (607,181) -
Net realized gain from investment transactions (24,566,131) (27,062,211)
Total distributions to shareholders (25,173,312) (27,062,211)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 4,459,426 9,795,696
Net asset value of shares issued for reinvestment of
distributions 23,501,027 25,690,076
27,960,453 35,485,772
Cost of shares repurchased (8,830,746) (52,241,446)
Net increase (decrease) from capital share transactions 19,129,707 (16,755,674)
Total increase in net assets 4,076,755 14,414,634
NET ASSETS:
Beginning of period 216,194,229 201,779,595
End of period (including undistributed net investment income
of $1,290,731 and $1,547,951, respectively) $ 220,270,984 $ 216,194,229
*Shares issued and repurchased:
Number of shares sold 231,370 551,597
Number of shares issued for reinvestment of distributions 1,279,316 1,587,767
1,510,686 2,139,364
Number of shares repurchased (450,227) (2,853,445)
Net increase (decrease) 1,060,459 (714,081)
**Distributions to shareholders:
Income dividends per share $ .0598 $ -
Capital gains distribution per share $ 2.4202 $ 2.66
</TABLE>
See accompanying Notes to Financial Statements.
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.
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 are 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 period ended May 31, 1998 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Purchases $ 30,619,045
Proceeds from sales 31,419,190
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.
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.
BABSON FUNDS
JONES & BABSON DISTRIBUTORS
A member of the Generali Group
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
816-751-5900
1-800-4-BABSON
(1-800-422-2766)
http://www.jbfunds.com
JB18C-1 7/98
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