BABSON
ENTERPRISE FUND
Semiannual Report
May 31, 1999
A no-load mutual fund that invests in common
stocks of smaller, faster growing companies.
Babson Funds
Jones & Babson Distributors
A Member of the Generali Group
Message to our Shareholders
Babson Enterprise Fund achieved a total return (price change and
reinvested distributions) of 10.9% in the most recent fiscal
quarter ended May 31, 1999. During the same period, the small
capitalization stocks in the unmanaged Russell 2000 index rose
12.3% while the large capitalization stocks in the unmanaged
Standard & Poor's 500 index rose 5.5%. This follows a period of
disappointing relative performance in the Fund's first fiscal
quarter and brings the total return for the fiscal first half
ended May 31, 1999 to 0.2%. This compares to 11.5% for the
Russell 2000 and 12.6% for the S&P's 500.
Average annual compounded total returns for one, five and ten
year periods as of June 30, 1999, were -11.3%, 12.5% and 12.4%,
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.
The months of January, February, and March saw a continuation of
investors' keen focus on a narrow group of large cap stocks. This
has propelled not just the large cap S&P 500 index but also the
Russell 2000 index, which contains a number of the largest
Internet stocks. These stocks have sky-rocketed well beyond small
cap status with E*Trade and CMGI being two of the largest, each
with a market cap of more than $8 billion!
The tide has begun to turn in the last few months. Many Internet
stocks are down 50% from their highs and small cap stocks have
outperformed since early April with the Russell 2000 +10% and the
S&P 500 -3% for the period April 8, 1999 to May 31, 1999. Even
more encouraging is the performance of the very small cap names
in Babson Enterprise Fund. From April 26, 1999 to May 28, 1999,
the Fund rose 8%, far surpassing the Russell 2000's 1% return and
the S&P 500's -4% return.
The outperformance of large cap stocks over the last few years
has resulted in a large valuation gap between the largest and
smallest stocks. The stocks in Babson Enterprise Fund are selling
at one-half to two-thirds the valuation of the average Russell
2000 stock and one-third to one-half the valuation of the average
S&P's 500 stock (using price to earnings, price to book, and
price to sales). These compelling valuations have not gone
unnoticed with six of the portfolio holdings receiving buyout
offers from other companies this year at significant premiums. We
believe the portfolio is currently well positioned with both
bargain-basement valuations and strong earnings prospects.
The following companies were added to the portfolio in the Fund's
fiscal first half:
Aavid Thermal Technologies - provides thermal management
solutions for electrical components.
Catherine's Stores - operates large-size women's apparel stores.
Cerprobe - manufactures semiconductor-testing products.
Cubic - designs and manufactures public transit revenue
collection systems.
Dayton Superior - manufactures concrete forming systems.
Petco Animal Supplies - operates pet supply stores.
Sterling Financial - bank holding company.
Styling Technology - manufactures salon/spa personal care
products.
Zygo - designs high precision measurement tools.
Positions liquidated in the last six months were Arctic Cat,
Moog, Tab Products and Vermont Financial. In addition, two
companies were tendered in conjunction with buyout offers, CATS
Software and Defiance.
Thank you for your continuing interest and participation
in Babson Enterprise Fund.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
Schedule of Investments
May 31, 1999 (unaudited)
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 97.02%
BASIC MATERIALS - 3.74%
37,300 Brady (W.H.) Co. Cl. A
(Identification and labeling systems) $ 934,831
175,000 Furon Co.
(Polymer based products) 3,193,750
114,250 Penford Corp.
(Specialty starch based products) 1,503,102
5,631,683
CAPITAL GOODS - 26.27%
133,100 ABC-Naco, Inc.
(Railroad products and services) 1,929,950
187,700 American Precision Industries, Inc.
(Heat exchangers) 2,123,356
150,626 Athey Products Corp.
(Street sweepers) 357,737
357,500 Brown & Sharpe Manufacturing Co. Cl. A
(High tolerance measuring tools) 1,966,250
117,300 Channel Commercial Corp.
(Telecommunications equipment) 1,147,341
197,700 Chicago Bridge & Iron Co.
(Above ground storage tanks) 2,508,319
225,100 Congoleum Corp. Cl. A
(Vinyl flooring) 1,913,350
195,975 Corrpro Companies, Inc.
(Corrosion control services) 1,947,502
9,500 Cubic Corp.
(Public transit revenue collection systems) 229,187
156,704 Daniel Industries, Inc.
(Metering devices and valves) 3,290,784
85,500 Dayton Superior Corp.
(Concrete forming systems) 1,533,656
182,400 EDO Corp.
(Defense contractor) 1,254,000
90,400 Engineered Support Systems, Inc.
(Military ground support equipment) 1,220,400
50,000 Farrell Corp.
(Rubber and plastic processing
equipment) 112,500
129,900 Flir Systems, Inc.
(Night vision systems) 1,737,412
131,900 Instron Corp.
(Materials testing instruments) 2,621,513
96,200 K-Tron International, Inc.
(Industrial feeders and blenders) 1,683,500
446,800 Lamson & Sessions Co.
(Electrical equipment supplier) 2,624,950
186,165 Newcor, Inc.
(Automobile assembly systems) 884,284
191,100 Schawk, Inc. Cl. A
(Pre-press services) 2,281,256
85,300 Starrett (L.S.) Co. Cl. A
(Tools and precision instruments) 2,319,094
50,000 Terex Corp. New
(Heavy-duty off-highway trucks
and cranes) 1,546,875
121,900 TransTechnology Corp.
(Highly engineered fasteners) 2,377,050
39,610,266
CONSUMER CYCLICAL - 18.02%
108,500 Baldwin Piano & Organ Co.
(Keyboard instruments) 868,000
3,300 Catherine's Stores Corp.
(Large-size womens apparel) 36,300
99,200 Fab Industries, Inc.
(Textile fabrics) 1,550,000
234,870 Falcon Products, Inc.
(Table pedestals) 2,539,532
200,800 Gottschalks, Inc.
(Specialty-apparel stores) 1,656,600
194,400 Helen of Troy Ltd.
(Hair care appliances) 3,086,100
199,500 Jacobson Stores, Inc.
(Upscale department store chain) 1,446,375
239,900 MDC Corp. Cl. A
(Specialty printer) 3,148,687
96,350 Oneida Ltd.
(Stainless steel flatware) 2,474,991
74,800 Petco Animal Supplies, Inc.
(Pet supply retailer) 1,056,550
70,600 Pulaski Furniture Corp.
(Furniture) 1,526,725
195,400 Shelby Williams Industries, Inc.
(Contract seating) 3,199,675
318,100 Spartan Motors, Inc.
(Chassis for RV's, buses and firetrucks) 1,829,075
106,200 Swiss Army Brands, Inc.
(Swiss Army knives) 856,238
97,100 Walbro Corp.
(Auto fuel injection systems) 1,899,519
7,174,367
CONSUMER STAPLES - 5.69%
54,500 Genesee Corp. Cl. B
(Regional brewer) 1,267,125
118,900 J & J Snack Foods Corp.
(Soft pretzels and other snack foods) 2,467,175
36,700 Marsh Supermarkets, Inc. Cl. A
(Indiana-Ohio supermarkets) 541,325
84,700 Marsh Supermarkets, Inc. Cl. B
(Indiana-Ohio supermarkets) 1,037,575
207,200 Northland Cranberries, Inc. Cl. A
(Cranberry grower) 1,864,800
23,200 Styling Technology Corp.
(Salon/spa personal care products) 324,800
93,600 Sylvan, Inc.
(Mushroom spawn) 1,076,400
8,579,200
ENERGY - 6.30%
588,500 Kaneb Services, Inc.
(Specialized industrial services) 2,611,469
317,900 Matrix Service Co.
(Petroleum refining maintenance) 1,271,600
94,600 Petroleum Helicopters, Inc.
(non-voting) (Gulf of Mexico helicopter
transportation) 1,348,050
73,700 Petroleum Helicopters, Inc.
(voting) (Gulf of Mexico helicopter
transportation) 1,027,194
328,700 Tokheim Corp.
(Petroleum dispensing systems) 3,245,912
9,504,225
FINANCIAL - 2.80%
84,775 Capital Corp. of the West
(California bank holding company) 1,012,002
62,600 Cass Commercial Corp.
(Freight payment services) 1,541,525
109,200 Sterling Financial Corp.
(Bank holding company) 1,665,300
4,218,827
HEALTH CARE - 1.01%
175,375 Penwest Pharmaceutical Co.
(Drug delivery technologies) 1,518,090
MISCELLANEOUS - 8.65%
132,300 Alltrista Corp.
(Consumer and industrial products) 3,621,712
94,100 Andersons, Inc.
(Grain handler) 1,211,537
342,383 Jason, Inc.
(Nonwoven auto padding) 2,910,256
208,800 Kaman Corp. Cl. A
(Industrial distribution/aerospace
products) 2,766,600
63,000 Sea Containers Ltd. Cl. A
(Marine container leasing) 2,126,250
12,000 Sea Containers Ltd. Cl. B
(Marine container leasing) 408,000
13,044,355
TECHNOLOGY - 18.85%
18,000 Aavid Thermal Technologies
(Heat sinks) 360,000
146,700 CEM Corp.
(Laboratory microwave ovens) 1,159,847
39,634 CSP, Inc.
(Special purpose computers) 277,438
174,900 Cerprobe Corp.
(Semiconductor testing products) 1,617,825
300,400 Ennis Business Forms, Inc.
(Custom business forms) 2,590,950
221,800 ESCO Electronics Corp.
(Defense products and systems) 2,675,462
127,400 INSO Corp.
(Web site management) 875,875
83,900 Landauer, Inc.
(Personal radiation exposure
monitoring) 2,328,225
219,000 MacNeal Schwendler Corp.
(Engineering software products) 1,259,250
148,100 Nashua Corp.
(Specialty imaging products) 1,684,637
TECHNOLOGY (Continued)
79,700 New England Business Service, Inc.
(Business forms) 2,166,844
137,700 Nichols Research Corp.
(Technical and engineering services) 2,788,425
143,100 Norstan, Inc.
(Telecommunications equipment) 1,591,987
368,800 Spectrum Control, Inc.
(Electronic components) 2,258,900
465,600 Titan Corp.
(Communications software
for satellites) 3,695,700
140,100 Zygo Corp.
(High precision measuring
instruments) 1,085,775
28,417,140
TRANSPORTATION & SERVICES - 4.37%
75,400 ABM Industries, Inc.
(Building maintenance services) 2,059,362
132,800 International Shipholding Corp.
(Ocean and river freight transportation) 1,850,900
198,400 Railtex, Inc.
(Short line railroads) 2,678,400
6,588,662
UTILITIES - 1.32%
46,500 E'town Corp.
(Water company) 1,990,782
TOTAL COMMON STOCKS - 97.02% 146,277,597
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 2.32%
$3,500,000 UMB Bank, n.a.,
4.22%, due June 1, 1999
(Collateralized by Federal National
Mortgage Association Discount Notes,
due July 22, 1999 with a value of $3,570,457) $ 3,500,000
TOTAL INVESTMENTS - 99.34% 149,777,597
Other assets less liabilities - 0.66% 1,001,065
TOTAL NET ASSETS - 100.00% $ 150,778,662
The identified cost of investments owned at May 31, 1999, was the
same for federal income tax and book purposes.
Net unrealized appreciation for federal income tax purposes was
$12,921,266, which is comprised of unrealized appreciation of
$33,638,376 and unrealized depreciation of $20,717,110.
See accompanying Notes to Financial Statements.
Statement of Assets and Liabilities
May 31, 1999 (unaudited)
ASSETS:
Investments, at value (identified cost $136,856,331) $ 149,777,597
Cash 756,670
Receivables:
Investments sold 412,781
Dividends 64,245
Interest 404
Total assets 151,011,697
LIABILITIES AND NET ASSETS:
Payables:
Management fees 59,289
Investments purchased 173,746
Total liabilities 233,035
NET ASSETS $ 150,778,662
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 131,611,470
Undistributed net investment income 229,620
Undistributed net realized gain from investment transactions 6,016,306
Net unrealized appreciation of investments 12,921,266
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 150,778,662
Capital shares, $1.00 par value
Authorized 20,000,000
Outstanding 10,698,223
NET ASSET VALUE PER SHARE $ 14.09
See accompanying Notes to Financial Statements.
Statement of Operations
For the six months ended May 31, 1999 (unaudited)
INVESTMENT INCOME:
Dividends $ 1,015,268
Interest 63,912
1,079,180
EXPENSES:
Management fees 840,279
Registration fees 9,295
849,574
Net investment income 229,606
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions 6,191,059
Net unrealized depreciation on investments during the period (7,370,120)
Net loss on investments (1,179,061)
Net decrease in net assets resulting from operations $ (949,455)
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
For the six months ended May 31, 1999 (unaudited)
and the year ended november 30, 1998
<TABLE>
<CAPTION>
1999 1998
</CAPTION>
<S> <C> <C>
OPERATIONS:
Net investment income $ 229,606 $ 601,716
Net realized gain from investment transactions 6,191,059 28,111,378
Net unrealized depreciation on investments during the period (7,370,120) (51,433,680)
Net decrease in net assets resulting from operations (949,455) (22,720,586)
Net equalization included in the price of shares issued and redeemed - (78,485)
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (530,707) (607,184)
Net realized gain from investment transactions (26,216,938) (24,566,129)
Total distributions to shareholders (26,747,645) (25,173,313)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 3,710,552 7,032,832
Reinvested distributions 25,039,187 23,501,027
28,749,739 30,533,859
Shares repurchased (29,564,532) (19,465,149)
Net increase (decrease) from capital share transactions (814,793) 11,068,710
Net decrease in net assets (28,511,893) (36,903,674)
NET ASSETS:
Beginning of period 179,290,555 216,194,229
End of period $ 150,778,662 $ 179,290,555
Undistributed net investment income at end of period $ 229,620 $ 642,640
*Fund share transactions:
Shares sold 271,197 389,195
Reinvested distributions 1,817,067 1,279,316
2,088,264 1,668,511
Shares repurchased (2,171,229) (1,074,034)
Net increase (decrease) in fund shares (82,965) 594,477
</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 thereof,
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.
Securities which are traded over-the-counter are priced at the
mean between the latest bid and asked price. Securities not
currently traded are valued at fair value as determined by the
Board of Directors. Securities with maturities of 60 days or less
when acquired or subsequently within 60 days of
maturity are valued at amortized cost, which approximates market
value.
B. Federal and State Taxes - The Fund intends to distribute to
shareholders all taxable investment income and realized gains and
otherwise comply with the Internal Revenue Code applicable to
regulated investment companies. Therefore, no provision for
federal or state tax is required.
C. Equalization - Prior to December 1, 1998, the Fund used
equalization accounting, by which a portion of the proceeds from
sales and costs of redemption of fund shares is credited or
charged to undistributed net investment income so that income per
share available for distribution is not affected by sales or
redemption of fund shares. As of December 1, 1998, the Fund
discontinued using equalization. This change has no effect on the
Fund's net assets, net asset value per share or distributions to
shareholders. The cumulative effect of the discontinuance of
equalization accounting was to decrease undistributed net
investment income and increase paid-in-capital as of December 1,
1998 by $111,919.
D. Security Transactions and Investment Income - Security
transactions are accounted for on the date the securities are
purchased or sold. Dividend income less foreign taxes
withheld (if any) is recorded on the ex-dividend date. Interest
income is recognized on the accrual basis. Realized gains and
losses from investment transactions and unrealized appreciation
and depreciation of investments are reported on the identified
cost basis. Market discounts on debt securities are accreted;
premiums are not amortized.
E. Distributions to Shareholders - Distributions to shareholders
are recorded on ex-dividend date. Distributions are
determined in accordance with income tax regulations which may
differ from generally accepted accounting principles.
F. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ from such estimates.
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 six months ended May 31, 1999
(excluding maturities of short-term commercial notes and
repurchase agreements) are as follows:
Purchases $ 11,593,880
Proceeds from sales 37,183,253
Financial Highlights
Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED Years Ended November 30,
MAY 31, 1999 1998 1997 1996 1995 1994
(UNAUDITED)
Per Share Data
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.63 $ 21.22 $ 18.51 $ 17.35 $ 16.64 $ 17.20
Income from investment operations:
Net investment income .022 .044 .058 .057 .101 .032
Net gains (losses) on securities
(both realized and unrealized) (.042) (2.154) 5.312 3.060 2.342 .569
Total from investment operations (.020) (2.110) 5.370 3.117 2.443 .601
Less distributions:
Dividends from net investment income (.050) (.060) - (.114) (.038) (.054)
Distributions from capital gains (2.470) (2.420) (2.660) (1.843) (1.695) (1.107)
Total distributions (2.520) (2.480) (2.660) (1.957) (1.733) (1.161)
Net asset value, end of period $ 14.09 $ 16.63 $ 21.22 $ 18.51 $ 17.35 $ 16.64
Total return* .22% (11.05%) 33.49% 20.17% 16.42% 3.70%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 151 $ 179 $ 216 $ 202 $ 202 $ 188
Ratio of expenses to average net assets** 1.09% 1.09% 1.08% 1.08% 1.09% 1.08%
Ratio of net investment income
to average net assets** .30% .29% .30% .35% .67% .22%
Portfolio turnover rate 8% 22% 22% 24% 13% 15%
</TABLE>
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
See accompanying Notes to Financial Statements.
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.
BABSON FUNDS
EQUITIES
Enterprise Fund
Enterprise Fund II
Growth Fund
Shadow Stock Fund
Value Fund
International Fund
FIXED INCOME
Bond Trust
Money Market Fund
Tax-Free Income Fund
Babson Funds
Jones & Babson Distributors
A Member of the Generali Group
P.O. BOX 419757, KANSAS CITY MO 64141-6757
1-800-4-babson
(1-800-422-2766)
www.babsonfunds.com
JB18C-1 (7/99) 508507
