BABSON
ENTERPISE
FUND
Annual Report
November 30, 1997
JONES & BABSON
MUTUAL FUNDS
MESSAGE
To Our Shareholders
As investors are well aware, the markets have been surprisingly strong
again in 1997. Babson Enterprise Fund finished its fiscal year with a
total return (price change and reinvested distributions) of 33.5% for
the 12 months ended November 30, 1997. This solidly outpaced the returns
of both the unmanaged Russell 2000 and the unmanaged Standard & Poor's
500 indexes. The small capitalization stocks comprising the Russell 2000
had a total return of 23.4% while the larger capitalization stocks
making up the S&P's 500 index achieved a total return of 28.5% for the
same period.
We are very pleased that the small stocks in your portfolio performed so
well, especially in a year where large capitalization stocks, in
general, outperformed small capitalization stocks. Three very strong
months for small cap stocks (May, August, and September) were not enough
to break the trend of the last two years of large cap stocks
outperforming.
Going forward we continue to believe that small cap stocks are well
positioned relative to large cap stocks. Valuation statistics show that
small capitalization stocks are at low historic levels of
price/earnings, price/sales, and price/cash flow ratios relative to
large capitalization stocks. And, the primary macroeconomic trends are
more positive for the small cap sector.
Positive earnings comparisons in the more economically sensitive smaller
companies should be sustained by a healthy domestic economy. In
addition, the strong dollar should favor small companies since small
companies have less exposure internationally (a recent analysis by
Prudential Securities showed that only 6.8% of small cap company's sales
are overseas while 21.5% of large caps are). The strong dollar means a
more difficult competitive environment for large companies, and a
negative swing from translating foreign earnings to U.S. dollars. Also,
the financial crisis in Asia and Latin America that has roiled world
markets should disadvantage the heavy domestic exposure of small caps
much less than it disadvantages large caps. The final factor favoring
small cap stocks is the recent reduction in the capital gains tax rate.
This should be positive for smaller caps because they are traditionally
bought for capital appreciation.
A discussion of small cap funds as well as the analytical process of
managing small and micro cap funds follows in the Portfolio Review.
The following companies were added to the portfolio in the Fund's fiscal
second half: Capital Corp. of the West (bank holding company operating
in California's Central Valley), Defiance (provides high precision
machined
components and tooling and testing services to the auto industry), Ennis
Business Forms (manufactures custom business forms for small
businesses), E'town (distributes water to domestic, commercial, and
industrial customers), Optek Technology (manufactures custom
optoelectronic and magnetic sensors), Pulaski Furniture (produces and
sells furniture products), Schawk (provides digital imaging pre-press
services for the consumer products industry), Spectrum Control
(manufactures electromagnetic filters that reduce interference for
electronic devices), Titan (develops communications software for
satellite communication systems), TransTechnology (manufactures highly
engineered fasteners and rescue hoists).
On December 26, 1997, the Fund distributed an ordinary income dividend
of $0.21 per share and long-term capital gains of $2.27. For corporate
shareholders, 100% 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.
With the incredible proliferation of mutual fund
products, and the confusion engendered by the increasing division of
those funds by market capitalization, and by style, we thought it might
be helpful to step back a bit and talk about some of the unusual
challenges in micro and small cap investing as it is embodied in
Enterprise Fund and Enterprise Fund II.
One of the more difficult issues relating to small and micro cap
investing is determining what size companies fit into these categories.
Over the years, this has proved to be a moving target.
When we launched Babson Enterprise Fund at the end of 1983, it was one
of twenty-three funds categorized by Lipper Analytical Services as a
"Small Company Fund."
It is now widely defined as a "Micro Cap Fund" even though the average
size of the companies in the Fund has actually increased, from
approximately $110 million in market capitalization to $189 million.
What happened during the period is that the size and parameters of the
investment world around us increased substantially faster.
As shown below the market capitalization of the Russell 2000 (the most
widely used index of small companies) and that of the average small cap
fund monitored by Morningstar, Inc. has increased rapidly in the last
seven years.
Average Small Cap Market Capitalization
(in millions)
6/97 6/96 6/95 6/94 6/93 6/92 6/91 6/90
Russell 2000 Weighted
Median Market Cap $ 620 500 390 330 290 210 180 180
Small Cap Mutual Fund
Weighted Median
Market Cap $ 764 688 526 461 535 442 453 373
Number of Small
Cap Funds 539 408 312 206 135 85 66 65
Source: Frank Russell, Morningstar
The average company in Enterprise Fund II is slightly over $600 million
which puts it comfortably into the "small cap" category.
Defining small and micro cap is one thing, but finding investment ideas
and putting a portfolio together is much more important. Idea generation
is the lifeblood of
our Funds, and, as shown below, is very different for
different company sizes.
Idea Generation
LARGE CAP SMALL CAP MICRO CAP
Wall Street Big Help Moderate Help Very Little Help
Database Coverage All Companies Most Companies Few Companies
Universe Size Limited Moderate Huge
Universe Turnover Limited Substantial Substantial
You will find a major difference in the time and effort allocated to
come up with small and micro cap ideas in comparison with generating
large cap ideas. There are very few large companies that haven't been
researched closely by Wall Street analysts, so that one's job as
a large cap portfolio manager is largely taking the
comments of all these researchers and analyzing them. At the other
extreme, very few analysts look at micro cap companies so a lot of time
is spent getting basic information - sometimes just getting annual
reports can be a challenge.
CHART
Number of Analysts' Estimates/Companies by Market Capitalization
The chart graphically illustrates this. The largest
companies - those over $4 billion in market cap - have, on average, 17
analysts covering each of them, while those companies less than $100
million in size have, on average, less than one analyst following them.
Obviously, this means that a substantial portion of these companies have
no analysts following them at all.
Similarly, computer accessible databases include all large companies,
and even most small companies, but many fewer companies as you progress
into the micro cap arena. Another issue is the number of companies in
each category. Take a second look at the chart above, and one sees there
are less than 500 companies in the large cap - above $4 billion -
sector, but there are over 1,500 in the $200 million to $800 million
range -basically small cap, and almost 5,500 in the micro cap - less
than $200 million - group.
To make things worse for small and micro cap
managers, the universe of companies is not only huge, but it turns over
rapidly as new companies come public and older companies move up in
market cap, while
others are acquired or run into trouble and disappear.
By contrast, small and micro cap managers, unless they are passive or
index managers where the computer does most of the work, need a lot of
people to help with the research and analysis.
Not only do they need a lot of people, but they often need a different
kind of person. They need people willing to be investigative reporters
- - to dig into barely touched territories to get information.
These people also need to be able to analyze companies that operate in a
more dynamic, high risk environment. Smaller companies face a whole raft
of risks that tend to be muted in larger companies.
They are often single product companies, with a
narrow list of customers, more limited financial resources, and more
difficult management challenges, such as handling the transition from
entrepreneurial to professional management, and succession hurdles in
closely held companies.
Finally, people analyzing such smaller companies have to constantly
fight to maintain an emotional
distance from the company and its management. When you find a great
little company that no other institutional money manager has ever owned,
it's hard not to almost get a sense of psychological ownership in that
company.
Large companies usually have a professional investor relations
department, but at small companies your
contact is very often the Chief Executive Officer. You get to know that
person, that person's family, and his or her dreams and ideals. In
short, you can easily get
personally involved so that selling your position in the company becomes
more difficult. It's always been a
cardinal rule in investing to "never fall in love with a company." It's
so much harder to resist the temptation in small companies.
In sum, managing micro and small cap portfolios
presents a lot of unusual challenges and can consume a lot of resources.
However, for those of us who love to find and analyze companies that
very few investors have taken an in-depth look at, and thus can be very
attractive investments, it is the most satisfying job in the business.
David L. Babson & Co. Inc.
PORTFOLIO REVIEW
CHART
Babson Enterprise Fund versus Russell 2000
*Unmanaged stock index
Babson Enterprise Fund's average annual compounded return for one, five and
ten year periods as of November 30, 1997, were 33.49%, 17.82% and 19.10%,
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 flucuate, and redemption value may be more or
less than original cost.
STATEMENT OF NET ASSETS
November 30, 1997
<TABLE>
<CAPTION>
S&P MARKET VALUE
RANKING** SHARES COMPANY COST (NOTE 1-A)
</CAPTION>
<S>
COMMON STOCKS - 97.57% <C> <C>
BASIC MATERIALS - 8.71%
NR 129,900 Brady (W.H.) Co. Cl. A
(Identification and labeling systems) $ 1,110,684 $ 3,994,425
B 112,600 Furon Co.
(Polymer based products) 1,493,443 4,447,700
B 180,300 Material Sciences Corp.*
(Coatings and laminates) 1,599,023 2,648,156
C 288,050 Nord Resources Corp.*
(Rutile and kaolin production) 1,891,266 504,088
NR 114,350 PENWEST Ltd.
(Specialty starch based products) 2,269,171 4,202,362
B 208,600 Tab Products Co.
(Color-coded filing systems) 2,451,521 3,024,700
10,815,108 18,821,431
CAPITAL GOODS - 29.45%
B+ 152,300 American Precision Industries Inc.
(Heat exchangers) 2,192,943 3,331,563
B 117,200 Apogee Enterprises, Inc.
(Commercial window systems) 456,473 2,593,050
NR 152,426 Athey Products Corp.*
(Street sweepers) 1,475,747 652,566
NR 123,200 Atkinson (Guy F.) Co.*
(Construction) 915,461 450,444
B- 392,100 Brown & Sharpe Manufacturing Co. Cl. A*
(High tolerance measuring tools) 4,819,370 4,019,025
NR 283,800 Congoleum Corp. New Cl. A*
(Vinyl flooring) 3,175,908 2,891,213
NR 228,900 Corrpro Companies, Inc.*
(Corrosion control services) 1,919,080 3,233,212
B- 233,404 Daniel Industries, Inc.
(Metering devices and valves) 2,682,492 4,332,562
NR 248,300 Farrell Corp. New (Rubber and plastic processing
equipment) 1,655,638 884,569
NR 132,500 Flir Systems, Inc.*
(Night vision systems) 1,960,041 2,616,875
NR 87,400 Industrial Acoustics Company, Inc.
(Noise control products) 1,320,575 972,325
B+ 201,200 Instron Corp.
(Materials testing instruments) 2,564,522 3,420,400
NR 163,900 Kaman Corp. Cl. A
(Industrial distribution/aerospace
products) 2,447,207 3,032,150
C 117,700 K-Tron International, Inc.*
(Industrial feeders and blenders) 1,428,991 2,118,600
B 113,418 Kuhlman Corp.
(Electrical transformers) 717,213 4,005,073
B- 478,700 Lamson & Sessions Co.*
(Electrical equipment supplier) 3,754,951 3,111,550
B- 105,800 Moog, Inc. Cl. A*
(High performance control systems) 1,222,233 3,848,475
B 186,165 Newcor, Inc.
(Automobile assembly systems) 1,659,736 1,605,673
B 138,700 Pacific Scientific Co.
(Aerospace and industrial products) 909,883 2,201,862
B- 116,100 Schawk, Inc. Cl. A
(Pre-press services) 931,200 1,320,637
B- 45,800 SPS Technologies, Inc.*
(Aerospace fasteners) 475,712 2,003,750
B+ 152,600 Starrett (L.S.) Co. Cl. A
(Tools and precision instruments) 3,749,118 5,875,100
C 155,400 Terex Corp. New*
(Heavy-duty off-highway trucks and
cranes) 1,545,286 3,185,700
B 72,800 TransTechnology Corp.
(Highly engineered fasteners) 2,002,047 1,965,600
45,981,827 63,671,974
CONSUMER CYCLICAL - 15.15%
B- 109,900 Baldwin Piano & Organ Co.*
(Keyboard instruments) 1,525,335 1,813,350
B- 39,200 Defiance, Inc.
(Auto supplier) 296,232 311,150
B+ 83,800 Fab Industries, Inc.
(Textile fabrics) 2,286,872 2,493,050
B+ 291,370 Falcon Products, Inc.
(Table pedestals) 2,580,689 4,479,814
C 203,100 Gottschalks, Inc.*
(Specialty-apparel stores) 1,547,158 1,739,044
B 194,800 Helen of Troy Ltd.*
(Hair care appliances) 524,269 2,775,900
C 202,800 Jacobson Stores, Inc.*
(Upscale department store chain) 2,645,133 2,180,100
B+ 133,900 Oneida Ltd.
(Stainless steel flatware) 1,858,284 5,029,619
C 371,300 Pentech International, Inc.*
(Writing instuments) 1,150,869 1,067,488
B 6,400 Pulaski Furniture Corp.
(Furniture) 122,802 124,800
B 269,500 Shelby Williams Industries, Inc.
(Contract seating) 2,842,937 4,379,375
NR 318,100 Spartan Motors, Inc.
(Chassis for RV's, buses and
firetrucks) 2,415,689 1,809,194
B- 184,000 Swiss Army Brands, Inc.*
(Swiss Army knives) 1,707,357 1,863,000
NR 184,000 Walbro Corp.
(Auto fuel injection systems) 2,847,747 2,679,500
24,351,373 32,745,384
CONSUMER STAPLES - 6.37%
B 50,100 Genesee Corp. Cl. B
(Regional brewer) 2,043,046 2,248,237
B 271,300 J&J Snack Foods Corp.*
(Soft pretzels and other snack
foods) 3,031,424 4,510,362
A 24,300 Marsh Supermarkets, Inc. Cl. A
(Indiana-Ohio supermarkets) 368,877 367,538
A 42,000 Marsh Supermarkets, Inc. Cl. B
(Indiana-Ohio supermarkets) 585,321 619,500
B 209,800 Northland Cranberries, Inc. Cl. A
(Cranberry grower) 2,154,937 2,950,312
B- 22,700 Rykoff-Sexton, Inc.
(Foodservice product distribution) 335,695 509,331
NR 211,450 Sanderson Farms, Inc.
(Chickens) 2,169,590 2,563,831
10,688,890 13,769,111
ENERGY - 6.39%
NR 202,800 American Oilfield Divers, Inc.*
(Undersea construction and
maintenance) 2,129,712 2,636,400
NR 333,300 Matrix Service Co.*
(Petroleum refining maintenance) 1,556,229 2,645,569
NR 96,500 Petroleum Helicopters, Inc.
(non-voting) (Gulf of Mexico
helicopter transportation) 1,009,845 2,002,375
NR 78,700 Petroleum Helicopters, Inc.
(voting) (Gulf of Mexico
helicopter transportation) 928,534 1,701,888
C 257,000 Tokheim Corp.*
(Petroleum dispensing systems) 2,670,020 4,834,813
8,294,340 13,821,045
FINANCIAL - 3.88%
NR 53,600 Capital Corp. of the West
(California bank holding company) 643,588 743,700
NR 60,700 Cass Commercial Corp.
(Freight payment services) 1,520,075 1,525,087
NR 63,900 Trans Financial, Inc.
(Kentucky and Tennessee bank) 1,236,993 2,196,563
NR 141,600 Vermont Financial Services Corp.
(Vermont bank holding company) 1,518,413 3,929,400
4,919,069 8,394,750
HEALTH CARE - 2.60%
NR 191,800 Morrison Health Care, Inc.
(Hospital food and nutrition) 2,426,072 3,428,425
NR 61,960 Schein (Henry), Inc.*
(Healthcare products distributor) 852,547 2,184,090
3,278,619 5,612,515
MISCELLANEOUS - 5.47%
NR 141,100 Alltrista Corp.*
(Consumer and industrial products) 2,028,456 4,127,175
B+ 386,483 Jason Inc.*
(Nonwoven auto padding) 558,317 3,043,554
B 137,000 Sea Containers Ltd. Cl. A
(Marine container leasing) 2,551,199 4,289,813
B 12,000 Sea Containers Ltd. Cl. B
(Marine container leasing) 218,970 372,750
5,356,942 11,833,292
TECHNOLOGY - 16.13%
NR 190,800 CATS Software, Inc.*
(Financial risk management software) 1,020,003 1,085,175
B 148,900 CEM Corp.*
(Laboratory microwave ovens) 1,588,770 1,609,981
B- 77,800 CSP Inc.*
(Special purpose computers) 737,776 612,675
A- 167,100 Ennis Business Forms, Inc.
(Custom business forms) 1,767,262 1,586,598
NR 290,500 ESCO Electronics Corp.*
(Defense products and systems) 2,365,263 4,756,937
B+ 141,500 Landauer Inc.
(Personal radiation exposure
monitoring) 2,549,181 3,785,125
B- 354,900 MacNeal Schwendler Corp.*
(Engineering software products) 3,699,969 3,615,544
B+ 126,200 New England Business Service, Inc.
(Business forms) 2,238,301 3,998,962
NR 162,600 Nichols Research Corp.*
(Technical and engineering services) 1,709,124 3,821,100
B 212,500 Norstan, Inc.*
(Telecommunications equipment) 1,133,380 5,259,375
NR 19,200 Optek Technology, Inc.*
(Optoelectronic and magnetic sensors) 241,838 369,600
NR 48,500 Spectrum Control, Inc.*
(Electronic components) 279,045 257,656
C 348,700 Titan Corp.*
(Communications software for
satellites) 2,061,550 2,244,756
NR 70,400 Viewlogic Systems Inc.*
(Computer-aided engineering software) 725,449 1,874,400
22,116,911 34,877,884
TRANSPORTATION & SERVICES - 3.26%
A 162,800 ABM Industries, Inc.
(Building maintenance services) 1,156,505 4,538,050
B+ 139,500 International Shipholding Corp.
(Ocean and river freight
transportation) 1,914,838 2,502,281
3,071,343 7,040,331
UTILITIES - 0.15%
B+ 9,100 E'town Corp.
(Water company) 309,573 321,344
TOTAL COMMON STOCKS - 97.56% 139,183,995 210,909,061
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
FACE AMOUNT DESCRIPTION COST (NOTE 1-A)
</CAPTION>
<S> <C> <C>
REPURCHASE AGREEMENT - 2.22%
$4,810,000 UMB Bank, n.a.,
5.00%, due December 1, 1997
(Collateralized by $4,625,000
U.S.Treasury Notes,
8.875%, due February 15, 1999) $ 4,810,000 $ 4,810,000
TOTAL INVESTMENTS - 99.78% $ 143,993,995 215,719,061
Other assets less liabilities - 0.22% 475,168
TOTAL NET ASSETS - 100.00%
(equivalent to $21.22 per share; 20,000,000 shares of
$1.00 par value capital shares authorized;
10,186,711 shares outstanding) $ 216,194,229
</TABLE>
For federal income tax purposes, the identified cost of
investments owned at November 30, 1997, was $144,137,518.
Net unrealized appreciation for federal income tax purposes
was $71,581,543, which is comprised of unrealized
appreciation of $79,073,916 and unrealized depreciation
of $7,492,373.
*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, 1997
ASSETS:
Investments in securities:
Common stocks, at market value
(identified cost $139,183,995) $ 210,909,061
Repurchase agreement, at cost - approximates
market value 4,810,000
Total investments 215,719,061
Dividends receivable 27,087
Receivable for investments sold 492,856
Total assets 216,239,004
LIABILITIES AND NET ASSETS:
Cash overdraft 44,775
Total liabilities 44,775
NET ASSETS $ 216,194,229
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 114,014,685
Accumulated undistributed income:
Undistributed net investment income 1,547,951
Undistributed net realized gain on investment transactions 28,906,527
Net unrealized appreciation in value of investments 71,725,066
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 216,194,229
Capital shares, $1.00 par value
Authorized 20,000,000
Outstanding 10,186,711
NET ASSET VALUE PER SHARE $ 21.22
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year Ended November 30, 1997
INVESTMENT INCOME:
Income:
Dividends $ 2,314,301
Interest 500,104
2,814,405
Expenses (Note 2):
Management fees 2,176,042
Registration fees and expenses 23,317
2,199,359
Net investment income (Note 1-B) 615,046
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 76,953,173
Cost of investments sold 52,497,539
Net realized gain from investment transactions 4,455,634
Unrealized appreciation of investments:
Beginning of year 38,466,662
End of year 71,725,066
Unrealized appreciation of investments during the year 33,258,404
Net gain on investments 57,714,038
Increase in net assets resulting from operations $ 58,329,084
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
For The Two Years Ended November 30, 1997
<TABLE>
<CAPTION>
1997 1996
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 615,046 $ 742,501
Net realized gain from investment transactions 24,455,634 31,521,775
Unrealized appreciation of investments during the year 33,258,404 5,782,109
Net increase in net assets resulting from operations 58,329,084 38,046,385
Net equalization included in the price of shares issued and
redeemed (96,565) (157,879)
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income - (1,319,193)
Net realized gain from investment transactions (27,062,211) (21,392,199)
Total distributions to shareholders (27,062,211) (22,711,392)
DECREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 9,795,696 13,034,598
Net asset value of shares issued for reinvestment of
distributions 25,690,076 21,744,139
35,485,772 34,778,737
Cost of shares repurchased (52,241,446) (50,016,203)
Net decrease from capital share transactions (16,755,674) (15,237,466)
Total increase (decrease) in net assets 14,414,634 (60,352)
NET ASSETS:
Beginning of year 201,779,595 201,839,947
End of year (including undistributed net investment income
of $1,547,951 in 1997 and $1,029,470 in 1996) $ 216,194,229 $ 201,779,595
*Shares issued and repurchased:
Number of shares sold 551,597 759,602
Number of shares issued for reinvestment of distributions 1,587,767 1,403,753
2,139,364 2,163,355
Number of shares repurchased (2,853,445) (2,898,376)
Net decrease (714,081) (735,021)
**Distributions to shareholders:
Income dividends per share $ - $ .1137
Capital gains distribution per share $ 2.66 $ 1.8433
</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. The Fund has
designated $27,062,211 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, 1997 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Purchases $ 43,314,578
Proceeds from sales 76,953,173
FINANCIAL HIGHLIGHTS
Condensed data for a share of capital
stock outstanding throughout each year.
<TABLE>
<CAPTION>
Years Ended November 30,
1997 1996 1995 1994 1993
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 18.51 $ 17.35 $ 16.64 $ 17.20 $ 17.04
Income from investment operations:
Net investment income .058 .057 .101 .032 .057
Net gains or losses on securities
(both realized and unrealized) 5.312 3.060 2.342 .569 2.520
Total from investment operations 5.370 3.117 2.443 .601 2.577
Less distributions:
Dividends from net investment income - (.114) (.038) (.054) (.087)
Distributions from capital gains (2.660) (1.843) (1.695) (1.107) (2.330)
Total distributions (2.660) (1.957) (1.733) (1.161) (2.417)
Net asset value, end of year $ 21.22 $ 18.51 $ 17.35 $ 16.64 $ 17.20
Total return 33.49% 20.17% 16.42% 3.70% 17.25%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 216 $ 202 $ 202 $ 188 $ 217
Ratio of expenses to average net assets 1.08% 1.08% 1.09% 1.08% 1.09%
Ratio of net investment income to average net assets .30% .35% .67% .22% .33%
Portfolio turnover rate 22% 24% 13% 15% 17%
*Average commission paid per equity share traded $ .0449 $ .0419 - - -
*Disclosure required for fiscal years beginning
after September 1, 1995.
</TABLE>
See accompanying Notes to Financial Statements.
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, 1997, the related statements of operations for the year then
ended and 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, 1997, 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, 1997, 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.
Ernst & Young LLP
Kansas City, Missouri
December 29, 1997
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
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
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
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