BABSON
ENTERPRISE
FUND II
Semiannual Report
May 31, 1996
JONES & BABSON
MUTUAL FUNDS
MESSAGE
To Our Shareholders
Babson Enterprise Fund II had a favorable performance in the first half
of fiscal year 1996. For the six month period ended May 31, 1996, the
total return (price change and reinvested distributions) of the Fund was
21.6%. This performance was better than the 18.1% return of the
unmanaged Russell 2000 index of small company stocks and the 11.7%
return of the unmanaged Standard & Poor's 500 index of larger company
stocks.
These favorable returns have been achieved in a market environment which
has generally favored more speculative, high growth technology issues
rather than the more attractively valued issues in which the Fund
concentrates. The Fund's strong results in this environment can be
attributed to an overweighting relative to the indices in economically
sensitive industries such as retailing, basic materials, recreation
products, and energy, which performed well during the period.
Average annual compounded total returns for one year and the life of the
Fund (inception August 5, 1991) as of June 30, 1996,were 27.60% and
14.21%, 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.
Thirteen new holdings in a variety of industries have been added to the
Babson Enterprise Fund II portfolio in the first six months of fiscal
1996. BW/IP, Inc. (industrial pumps and valves), Calmat Co. (concrete,
asphalt, aggregates), Central Newspapers, Inc. (newspaper publishing),
Charming Shoppes Inc. (women's apparel retailer), Glendale Federal Bank
(California Savings & Loan), Harper Group Inc. (freight forwarding and
logistics), New England Business Service, Inc. (business forms), Quaker
State Corp. (motor oil and lubricants), Sea Containers Ltd. (cargo
containers, ferry services), SPX Corp. (specialty service tools for
motor vehicles), Stanhome Inc. (giftware, collectibles, personal care
products), True North Communications, Inc. (worldwide marketing
communications agency), U.S. Can Corp. (aerosol, round, and specialty
steel containers).
Five positions were liquidated during the period. Commerce Clearing
House was sold at a substantial gain as it was acquired by a Dutch
communications company. Helene Curtis was sold after it had doubled in
less than a one month period on buy-out speculation. FirsTier Financial
was acquired by First Bank Systems in a stock deal at a sizable gain to
the portfolio. The First Bank Systems stock was subsequently liquidated
given its large market capitalization. Arvin Industries and Modine
Manufacturing were sold due to fundamental concerns about their portions
of the auto supply market.
We continue to believe that the prospects for economically sensitive
sectors remain quite positive, despite their strong performance in the
first half of fiscal 1996. Conversely, high technology stocks appear to
be generally overvalued, trading more on speculative hopes than on
genuine fundamentals. As a result, the Fund is significantly
underweighted in this risky area.
Thank you for your interest and participation in Babson Enterprise Fund
II. We welcome your questions and comments.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
STATEMENT OF NET ASSETS
May 31, 1996 (unaudited)
MARKET VALUE
SHARES COMPANY (NOTE 1-A)
COMMON STOCKS - 98.29%
BASIC MATERIALS - 11.40%
25,100 Brush Wellman Inc.
(Supplier of beryllium) $ 470,625
42,600 Calmat Co.
(Concrete, asphalt and
aggregates) 782,775
35,000 Hanna (M.A.) Co.
(Polymers and specialty
chemical) 1,203,125
16,300 Kennametal Inc.
(Metal working products) 605,137
33,332 Mosinee Paper Corp.
(Paper and paper products) 874,965
49,700 Southdown, Inc.
(Cement, concrete and
environmental service) 1,149,313
27,500 U.S. Can Corp.
(Aerosol, round, and specialty
steel containers) 470,937
5,556,877
CAPITAL GOODS - 20.16%
23,430 Baldor Electric Co
(Industrial electric motors) 518,389
35,000 BW/IP, Inc.
(Industrial pumps, valves
and seals) 691,250
26,800 Carlisle Companies Inc.
(Automotive/industrial products
and construction materials) 1,396,950
64,400 Gerber Scientific, Inc.
(Computer aided design/
manufacturing systems) 1,118,950
51,200 Juno Lighting, Inc.
(Recessed and track lighting) 780,800
55,000 MagneTek, Inc.
(Lighting products, electric
motors and generators) 536,250
27,500 Precision Castparts Corp.
(Complex investment castings) 1,175,625
28,600 Sealright Co.
(Packaging products) 377,163
11,200 SPX Corp.
(Specialty service tools for
motor vehicles) 299,600
28,200 Standard Products Co.
(Rubber and plastic products) 768,450
38,000 TriMas Corp.
(Specialty fastners/containers) 902,500
36,500 Trinity Industries, Inc.
(Railcars, containers, boats) 1,263,813
9,829,740
CONSUMER CYCLICAL - 30.11%
38,000 Armor All Products Corp.
(Car care products) 589,000
20,000 Central Newspapers, Inc. Cl. A
(Newspaper publishing) 740,000
88,100 Charming Shoppes Inc.
(Women's specialty apparel
stores) 704,800
33,000 Consolidated Stores Corp.
(Close-out merchandise retailer) 1,249,875
45,000 Duty Free International, Inc.
(Duty free retailer) 675,000
50,200 Fingerhut Companies, Inc.
(Direct mail marketer) 771,825
49,100 Huffy Corp.
(Recreational products
manufacturer) 668,988
19,050 King World Productions, Inc.
(Distribution and syndication
of TV programs) 795,338
23,500 La-Z Boy Chair Co.
(Furniture manufacturer) 766,687
35,900 Lee Enterprises, Inc.
(Newspaper publishing:
radio, TV) 839,162
33,000 Miller (Herman), Inc.
(Office furniture systems) 1,018,875
17,000 National Presto Industries, Inc.
(Electrical appliances and
housewares) 688,500
CONSUMER CYCLICAL (Continued)
16,800 New England Business Service, Inc.
(Business forms supplier) 308,700
18,000 Stanhome Inc.
(Giftware, collectibles, personal
care products) 522,000
35,000 Sturm, Ruger & Company, Inc.
(Firearms manufacturer) 1,736,875
24,700 True North Communications, Inc.
(Advertising) 636,025
64,000 Waban Inc.
(Warehouse club retailer) 1,712,000
24,000 Wolohan Lumber Co.
(Building materials supply
centers) 259,500
14,683,150
CONSUMER STAPLES - 10.11%
23,000 Alberto-Culver Co. Cl. A
(Manufacturer and retailer of
cosmetics and household
products) 796,375
54,900 DiMon Inc.
(Tobacco processor/fresh cut
flowers distributor) 988,200
47,000 First Brands Corp.
(Branded and private label
consumer products) 1,163,250
25,000 Hannaford Brothers Co.
(Supermarket retailer) 790,625
26,100 Paragon Trade Brands, Inc.
(Private label disposable
diapers) 642,712
15,000 Vons Companies, Inc.
(Supermarket retailer) 547,500
4,928,662
ENERGY - 7.96%
24,000 Cabot Oil & Gas Corp. Cl. A
(Oil & gas developer/producer) 408,000
60,800 Calenergy, Inc.
(Geothermal energy power) 1,626,400
80,000 Nabors Industries, Inc.
(Oil and gas drilling) 1,230,000
40,000 Quaker State Corp.
(Motor oil and lubricants) 615,000
3,879,400
FINANCIAL - 5.45%
129,200 Cash America International, Inc.
(Pawn shop operator) 742,900
39,322 First Commercial Corp.
(Arkansas bank holding
company) 1,199,321
40,000 Glendale Federal Bank Federal
Savings Bank California
(Savings and loan) 715,000
2,657,221
HEALTH CARE - 0.60%
18,000 ADAC Laboratories
(Medical imaging systems) 294,750
MISCELLANEOUS - 3.72%
58,000 Global Industrial Technologies, Inc.
(Refractory products, mining
equipment, specialty tools) 1,073,000
21,000 Primark Corp.
(Information services for
gov't., financial and
weather markets) 740,250
1,813,250
TECHNOLOGY - 5.79%
39,400 Octel Communications Corp.
(Voice information processing
equipment) 965,300
50,000 Scitex Corp.
(Computerized imaging
systems) 981,250
56,100 Viewlogic Systems Inc.
(Computer-aided engineering
software) 876,562
2,823,112
TRANSPORTATION & SERVICES - 2.99%
10,200 Harper Group Inc.
(Freight forwarding and
logistics services) 209,100
31,000 Overseas Shipholding Group, Inc.
(International ship operator) 581,250
31,800 Sea Containers Ltd. Cl. A
(Cargo containers, ferry
services, port operations) 608,175
3,200 Sea Containers Ltd. Cl. B
(Cargo containers, ferry
services, port operations) 60,400
1,458,925
TOTAL COMMON STOCKS - 98.29% 47,925,087
MARKET VALUE
FACE AMOUNT DESCRIPTION (NOTE 1-A)
REPURCHASE AGREEMENT - 2.05%
$ 1,000,000 UMB Bank, n.a.,
4.75%, due June 3, 1996
(Collateralized by U.S.
Treasury Notes, 7.50%,
due December 31, 1996) 1,000,000
TOTAL INVESTMENTS - 100.34% $ 48,925,087
Other assets less liabilities - (0.34%) (164,412)
TOTAL NET ASSETS - 100.00%
(equivalent to $22.12 per share;
10,000,000 shares of $1.00 par
value capital shares authorized;
2,204,591 shares outstanding) $ 48,760,675
STATEMENT OF ASSETS
AND LIABILITIES
May 31, 1996 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities:
Common stocks, at market value (identified cost $36,576,443) $ 47,925,087
Repurchase agreement, at cost - approximates market value 1,000,000
Total investments 48,925,087
Dividends receivable 74,245
Receivable for investments sold 69,658
Total assets 49,068,990
LIABILITIES AND NET ASSETS:
Cash overdraft 53,819
Payable for investments purchased 254,496
Total liabilities 308,315
NET ASSETS $ 48,760,675
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 33,165,026
Accumulated undistributed income:
Undistributed net investment income 238,868
Undistributed net realized gain on investment transactions 4,008,137
Net unrealized appreciation in value of investments 11,348,644
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 48,760,675
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 2,204,591
NET ASSET VALUE PER SHARE $ 22.12
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1996 (unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends $ 360,010
Interest 78,647
438,657
Expenses (Note 2):
Management fees 297,209
Registration fees and expenses 10,475
307,684
Net investment income (Note 1-B) 130,973
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 8,867,607
Cost of investments sold 4,896,305
Net realized gain from investment transactions 3,971,302
Unrealized appreciation of investments:
Beginning of period 6,744,804
End of period 11,348,644
Unrealized appreciation of investments during the period 4,603,840
Net gain on investments 8,575,142
Increase in net assets resulting from operations $ 8,706,115
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
May 31, 1996 November 30,
(unaudited) 1995
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 130,973 $ 114,151
Net realized gain from investment transactions 3,971,302 1,942,335
Unrealized appreciation of investments during the period 4,603,840 4,590,907
Net increase in net assets resulting from operations 8,706,115 6,647,393
Net equalization included in the price of shares issued and redeemed 1,268 (7,266)
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (112,539) (48,739)
Net realized gain from investment transactions (1,939,754) (189,170)
Total distributions to shareholders (2,052,293) (237,909)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 20,389,827 11,197,619
Net asset value of shares issued for reinvestment of distributions 1,979,884 227,612
22,369,711 11,425,231
Cost of shares repurchased (20,706,722) (13,313,350)
Net increase (decrease) from capital share transactions 1,662,989 (1,888,119)
Total increase in net assets 8,318,079 4,514,099
NET ASSETS:
Beginning of period 40,442,596 35,928,497
End of period (including undistributed net investment income
of $238,868 and $219,166, respectively) $ 48,760,675 $ 40,442,596
*Shares issued and repurchased:
Number of shares sold 1,022,046 651,909
Number of shares issued for reinvestment of distributions 108,012 14,388
1,130,058 666,297
Number of shares repurchased (1,032,915) (773,550)
Net increase (decrease) 97,143 (107,253)
**Distributions to shareholders:
Income dividends per share $ .055 $ .0219
Capital gains distribution per share $ .948 $ .085
</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, 1996 (excluding
maturities of short-term commercial notes and repurchase agreements) are
as follows:
Purchases $ 9,893,524
Proceeds from sales 8,867,607
This report has been prepared for the information of the Shareholders of
Babson Enterprise Fund II, 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
David G. Kirk
Vice President
Lance F. James
Vice President - Portfolio
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 64108-2518
816-471-5200
1-800-4-BABSON
(1-800-422-2766)
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 37576443
<INVESTMENTS-AT-VALUE> 48925087
<RECEIVABLES> 143903
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 49068990
<PAYABLE-FOR-SECURITIES> 254496
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53819
<TOTAL-LIABILITIES> 308315
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33165026
<SHARES-COMMON-STOCK> 2204591
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 238868
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4008137
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11348644
<NET-ASSETS> 48760675
<DIVIDEND-INCOME> 360010
<INTEREST-INCOME> 78647
<OTHER-INCOME> 0
<EXPENSES-NET> 307684
<NET-INVESTMENT-INCOME> 130973
<REALIZED-GAINS-CURRENT> 3971302
<APPREC-INCREASE-CURRENT> 4603840
<NET-CHANGE-FROM-OPS> 8706115
<EQUALIZATION> 1268
<DISTRIBUTIONS-OF-INCOME> 112539
<DISTRIBUTIONS-OF-GAINS> 1939754
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1022046
<NUMBER-OF-SHARES-REDEEMED> 1032915
<SHARES-REINVESTED> 108012
<NET-CHANGE-IN-ASSETS> 8318079
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 297209
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 307684
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> .055
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .055
<PER-SHARE-DISTRIBUTIONS> .948
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
