Babson
Value
Fund
Semiannual Report
May 31, 1995
MESSAGE
To Our Shareholders
The close of the second fiscal quarter of 1995 marked the attainment of a
significant milestone in Babson Value Fund's history. For the first time net
assets of the Fund rose above $200 million, a substantial increase from the
level of $147 million at the end of the prior quarter, and $60 million a year
ago. As this letter is being written, assets are north of $214 million and the
net asset value per share is over $29 for the first time in history.
Total return (price change and reinvested distributions) for the quarter ended
May 31, 1995, was 8.42%. This experience was in line with the 8.47% average
total return of the 430 growth and income funds tracked by Lipper Mutual Fund
Performance Analysis, but it trailed the 10.20% return of the unmanaged
Standard & Poor's 500 stock index which is dominated by large capitalization
companies with significant international earnings. The foreign earnings of
these companies benefited greatly from the effect of the weak dollar as a
result of stronger sales and currency translation. The favorable longer term
comparisons of the Fund with its peers for three, five and ten years are
intact as shown in the tables on the previous page.
Average annual compounded total returns for one, five and ten year periods,
as of March 31, 1995, were 12.83%, 13.34% and 14.26%, 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.
Net asset value per share rose from $26.49 on February 28, 1995, to $28.57 at
the end of May. In March an ordinary income dividend of $0.14 was distributed.
For shareholders who elected reinvestment, the distribution was reinvested at
a price of $26.63 per share on March 24, 1995.
One new company was added to the portfolio this quarter. Apple Computer is a
leading manufacturer of personal computers. At the time of purchase, Apple
was selling at only nine times estimated 1995 and eight times 1996 earnings.
The shares were depressed because the market was focused on the imminent
introduction of Microsoft's new Windows 95 operating
system which will operate on IBM and clone personal computers that use Intel
and similar microprocessors. The widely held feeling is that Windows 95 will
be so successful that Apple will lose market share to the IBM compatibles.
In our opinion, this view ignores the positive aspects of Apple and its
products. Apple shares have performed well since purchase. Apple replaced the
small convertible bond holdings of Chock Full o' Nuts and Trans-Lux Corp.
that were sold during the quarter.
The Fund continues to have attractive valuation characteristics. The average
price/earnings ratio based on estimated earnings for 1995 for the companies
in the Fund is only 11.7, compared with 15.0 times for the S&P 500 companies.
The average price to book value of the Fund's companies is 2.0, compared to
2.8 for the S&P 500 companies, and the current yield (gross, before expenses)
is higher.
The stock market's strength is a reflection of the sharply declining interest
rate environment so far this year. The decline in rates is, in turn, a
reflection of the relatively low inflation and the prospect that it will
remain under control for the balance of the year. While the domestic stock
markets are selling at all time highs, these price levels are supported by
the combination of good underlying earnings, and lower interest rates. The
focus of recent strength has continued to be on technology stocks and larger
rather than smaller companies as we observed in our last report. Sooner or
later the market will turn its attention elsewhere, and the kinds of companies
in the Fund's portfolio could benefit. The reasonable valuations of our stocks
should continue to offer good relative potential.
We appreciate your use of Babson Value Fund in your investment program.
Sincerely,
Larry D. Armel
President
<PAGE>
Babson Value Fund
Comparison with all
Lipper Growth & Income Funds
1 Year 3 Years 5 Years 10 Years
05/31/94 to 05/31/92 to 05/31/90 to 05/31/85 to
05/31/95 05/31/95 05/31/95 05/31/95
Babson Value Fund
Total Return 14.81% 15.28% 13.74% 14.03%
Lipper Growth & Income
Funds Average Total Return 14.47% 10.40% 10.66% 12.51%
BVF Rank among Lipper Growth
& Income Funds 193 12 17 21
# of Lipper Growth & Income
Funds 372 233 186 110
Babson Value Fund Percentile,
Top 52% 5% 9% 19%
Source: Lipper Analytical Securities Corporation
1 Year 3 Years 5 Years 10 Years
05/31/94 to 05/31/92 to 05/31/90 to 05/31/85 to
05/31/95 05/31/95 05/31/95 05/31/95
Comparison with all
Morningstar Growth & Income Funds
Babson Value Fund Total Return 14.81% 15.28% 13.74% 14.03%
Morningstar Growth & Income Funds
Average Total Return 14.66% 10.06% 10.13% 11.91%
BVF Rank among Morningstar Growth
& Income Funds 212 9 14 21
# of Morningstar Growth &
Income Funds 369 240 186 110
Babson Value Fund Percentile,
Top 58% 4% 8% 19%
Source: Morningstar, Inc.
Note: All returns for periods of longer than one year are compound annual
rates.
All returns for Babson Value Fund are net of all fees and expenses.
Returns for the growth and income averages are net of fees and
expenses, but do not include the impact of sales charges.
Morningstar includes S&P 500 index funds in its Growth & Income Fund
category, while Lipper has a separate category.
<PAGE>
STATEMENT OF NET ASSETS
May 31, 1995 (unaudited)
MARKET VALUE
SHARES COMPANY (NOTE 1-A)
COMMON STOCKS - 94.23%
AEROSPACE - 4.75%
86,000 Boeing Co. $ 5,063,250
76,610 Lockheed Martin Corp. 4,558,295
9,621,545
AIRLINES - 2.29%
148,000 KLM Royal Dutch Airlines 4,643,500
BANKS - 9.48%
100,000 Chase Manhattan Corp. 4,625,000
118,000 First Bank System, Inc. 4,956,000
58,000 First Interstate Bancorp 4,872,000
156,000 National City Corp. 4,738,500
19,191,500
CHEMICALS - 2.31%
69,000 duPont (E.I.) deNemours & Co. 4,683,375
COMPUTER SOFTWARE - 2.39%
145,000 Shared Medical Systems Corp. 4,839,375
COMPUTER SYSTEMS - 4.52%
108,000 Apple Computer Inc. 4,488,750
50,000 International Business
Machines Corp. 4,662,500
9,151,250
CONSUMER PRODUCTS - 7.14%
192,000 Grand Metropolitan PLC, ADR 4,848,000
339,000 Huffy Corp. 4,788,375
144,000 Reebok International Ltd. 4,824,000
14,460,375
DIVERSIFIED - 2.46%
262,000 Hanson PLC, ADR 4,978,000
ENVIRONMENTAL CONTROL - 2.45%
292,000 Safety-Kleen Corp. 4,964,000
FINANCIAL SERVICES - 11.60%
128,000 American Express Co. 4,560,000
119,000 Salomon Inc. 4,879,000
178,100 Student Loan Corp. 4,608,338
98,000 Student Loan Marketing Assn. 4,655,000
80,000 Transamerica Corp. 4,780,000
23,482,338
FOREST PRODUCTS AND PAPER - 7.04%
110,000 Potlatch Corp. 4,716,250
112,000 Weyerhaeuser Co. 4,914,000
92,000 Willamette Industries, Inc. 4,623,000
14,253,250
HEALTH - 4.77%
67,000 Lilly (Eli) & Co. 4,999,875
280,000 Tenet Healthcare 4,655,000
9,654,875
INSURANCE - 4.61%
77,000 Aetna Life & Casualty Co. 4,591,125
35,000 General Re Corp. 4,738,125
9,329,250
OFFICE EQUIPMENT AND SUPPLIES - 4.86%
137,000 Wallace Computer Services, Inc. 4,966,250
43,000 Xerox Corp. 4,875,125
9,841,375
PETROLEUM - 4.85%
42,000 Atlantic Richfield Co. 4,877,250
39,000 Royal Dutch Petroleum Co. 4,943,250
9,820,500
RETAIL - 9.54%
113,000 Harcourt General, Inc. 4,760,125
379,000 Kmart Corp. 4,832,250
107,000 Penney (J.C.) Co., Inc. 5,042,375
83,000 Sears, Roebuck & Co. 4,679,125
19,313,875
PROFESSIONAL SERVICES - 4.46%
194,000 ABM Industries 4,413,500
110,000 PHH Corp. 4,620,000
9,033,500
TRANSPORTATION - 2.17%
231,000 Overseas Shipholding Group, Inc. 4,389,000
UTILITIES - 2.54%
142,000 Texas Utilities Co. 5,129,750
TOTAL COMMON STOCKS - 94.23% 190,780,633
MARKET VALUE
FACE AMOUNT DESCRIPTION (NOTE 1-A)
SHORT-TERM CORPORATE NOTES - 4.44%
$3,000,000 Ford Motor Credit Co.,
5.95%, due June 14, 1995 3,000,000
3,000,000 General Motors Acceptance Corp.,
5.95%, due June 7, 1995 3,000,000
3,000,000 Sears Roebuck Acceptance Corp.,
6.00%, due June 21, 1995 3,000,000
TOTAL SHORT-TERM
CORPORATE NOTES - 4.44% 9,000,000
REPURCHASE AGREEMENT - 3.05%
6,175,000 UMB Bank, n.a.,
5.60%, due June 1, 1995
(Collateralized by U.S.
Treasury Notes, 7.50%,
due February 29, 1996) 6,175,000
TOTAL INVESTMENTS - 101.72% $ 205,955,633
Other assets less liabilities - (1.72%) (3,490,913)
TOTAL NET ASSETS - 100.00%
(equivalent to $28.57 per share;
10,000,000 shares of $1.00 par
value capital shares authorized;
7,085,827 shares outstanding) $ 202,464,720
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
May 31, 1995 (unaudited)
ASSETS:
Investments in securities:
Common stocks, at market value (identified cost $163,290,202) $ 190,780,633
Short-Term corporate notes, at cost - approximates market value 9,000,000
Repurchase agreement, at cost - approximates market value 6,175,000
Total investments 205,955,633
Cash 300,730
Dividends receivable 475,067
Interest receivable 19,170
Total assets 206,750,600
LIABILITIES AND NET ASSETS:
Payable for investments purchased 4,285,880
Total liabilities 4,285,880
NET ASSETS $ 202,464,720
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 171,367,226
Accumulated undistributed income:
Undistributed net investment income 3,155,142
Undistributed net realized gain on investment transactions 451,921
Net unrealized appreciation in value of investments 27,490,431
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 202,464,720
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 7,085,827
NET ASSET VALUE PER SHARE $ 28.57
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1995 (unaudited)
INVESTMENT INCOME:
Income:
Dividends $ 2,094,018
Interest 376,924
2,470,942
Expenses (Note 2):
Management fees 716,157
Registration fees and expenses 47,502
763,659
Net investment income (Note 1-B) 1,707,283
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 4,670,670
Cost of investments sold 4,220,206
Net realized gain from investment transactions 450,464
Unrealized appreciation of investments:
Beginning of period 4,649,589
End of period 27,490,431
Unrealized appreciation of investments during the period 22,840,842
Net gain on investments 23,291,306
Increase in net assets resulting from operations $ 24,998,589
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
Six Months
Ended Year Ended
May 31, 1995 November 30,
unaudited) 1994
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,707,283 $ 1,749,234
Net realized gain from investment transactions 450,464 2,907,083
Unrealized appreciation (depreciation) of investments
during the period 22,840,842 (4,771,718)
Net increase (decrease) in net assets resulting
from operations 24,998,589 (115,401)
Net equalization included in the price of shares
issued and redeemed 830,772 1,101,452
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (1,786,000) (1,016,285)
Net realized gain from investment transactions (2,881,610) (1,551,963)
Total distributions to shareholders (4,667,610) (2,568,248)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 74,965,136 105,398,105
Net asset value of shares issued for reinvestment
of distributions 4,276,258 2,436,145
79,241,394 107,834,250
Cost of shares repurchased (17,504,380) (28,885,735)
Net increase from capital share transactions 61,737,014 78,948,515
Total increase in net assets 82,898,765 77,366,318
NET ASSETS:
Beginning of period 119,565,955 42,199,637
End of period (including undistributed net
investment income
of $3,155,422 and $2,403,087, respectively) $202,464,720 $119,565,955
Shares issued and repurchased:
Number of shares sold 2,840,673 4,126,746
Number of shares issued for reinvestment of
distributions 170,490 96,021
3,011,163 4,222,767
Number of shares repurchased (671,640) (1,140,429)
Net increase 2,339,523 3,082,338
Distributions to shareholders:
Income dividends per share $ .34 $ .3982
Capital gains distribution per share $ .6036 $ .9109
See accompanying Notes to Financial Statements.
<PAGE>
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 - Corporate stocks and bonds 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.
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.
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 - As is common in the industry, 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 .95 of 1% per annum of the average daily net asset value of the Fund
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, 1995 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Purchases $ 59,018,028
Proceeds from sales 4,670,670
This report has been prepared for the information of the Shareholders of
Babson Value 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.
<PAGE>
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
Ruth Evans
Vice President
David G. Kirk
Vice President
Roland W. Whitridge
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
THE BABSON FUNDS
Equities
Shadow Stock Fund - designed to achieve long-term growth of capital by
investing in common stocks of small, established, profitable companies
presently neglected by analysts and institutional investors.
David L. Babson Growth Fund - invested in common stocks selected for their
long-term possibilities of both capital and income growth.
Babson Enterprise Fund - closed to new investors as of January 31, 1992.
Babson Enterprise Fund II - designed to achieve growth with greater price
stability than many small stock funds by investing in undervalued small
companies with higher market capitalizations. A good choice for long-term
growth, Enterprise II seeks out profitable, established small companies that
are dominant in their industries.
Babson Value Fund - seeks long-term growth of capital and income by investing
in a diversified portfolio of common stocks which are considered to be
undervalued in relation to earnings, dividends and/or assets.
Babson-Stewart Ivory International Fund - for investors seeking international
diversification and favorable total return, this Fund includes equities of
various developed investment markets in the free world, principally Western
Europe and certain areas of the Pacific Basin.
Fixed Income
D.L. Babson Bond Trust - emphasizes current income return and relative
stability of principal by investing in corporate bonds, U.S. government
issues and other fixed-income securities of high quality. The Fund offers
two portfolios: Portfolio S with average maturities of less than 5 years,
and Portfolio L with average maturities of more than 5 years.
D.L. Babson Money Market Fund - provides investors the opportunity to manage
their money over the short-term by investing in high-quality, domestic,
short-term debt instruments for the purpose of maximizing income to the
extent consistent with safety of principal and maintenance of liquidity.
It offers two portfolios, Prime and Federal.
D.L. Babson Tax-Free Income Fund - invests principally in quality municipal
securities, the income from which is judged exempt from federal income tax.
The Fund offers a choice among three separate portfolios of investment-grade
securities, differing only in average length of maturity - Longer Term
(Portfolio L), Shorter Term (Portfolio S) and Money Market (Portfolio MM).
For a free prospectus kit, which contains more complete information, including
all charges and expenses, write or call Jones & Babson at 1-800-4-BABSON.
Please read the prospectus carefully before you invest or send money. Money
market funds are neither insured nor guaranteed by the U.S. Government and
there is no assurance that the funds will maintain a stable net asset value.
