BABSON
VALUE
FUND
Semiannual Report
May 31, 1997
JONES & BABSON
MUTUAL FUNDS
MESSAGE
TO OUR SHAREHOLDERS
At the close of the first half of our 1997 fiscal year net assets of Babson
Value Fund had reached $1.12 billion, up sharply from $764 million at the
end of the fiscal year ended November 30, 1996, and $493 million a year ago.
Net assets crossed the $1 billion mark at the end of April, and $1.2 billion
in mid-June. Thus, your Fund has continued to participate nicely in the strong
inflow of money into equity mutual funds that began in November, 1994, which
was the start of the sustained upward move in stock prices that we have
enjoyed since then.
Total return (price change and reinvested distributions), was 9.8% for the six
months ended May 31, 1997. For the same period the return of the unmanaged
Standard & Poor's 500 stock index of larger company stocks was 13.2%. On an
unweighted basis the returns of the 500 S&P companies averaged only 10.2% for
the last six months. This market capitalization weighted index was dominated
by strong performance of the largest companies. Many of these are consumer
staple growth companies such as Coca-Cola, Gillette, Procter & Gamble and Eli
Lilly which trade at multiples of 29 to 42 times 1997 estimated earnings, or
technology growth companies such as Microsoft, Oracle and Cisco which trade at
multiples of 47, 37 and 33 times estimated 1997 earnings, respectively.
The fifty companies with the highest market capitalizations in the S&P 500 had
average total returns of 16.1% for the six months, while the other 450
companies had average returns of only 9.5%. The biggest fifty, which are 10%
of the total number of companies, carry 49% of the weight in the index. This
helps to explain why mutual funds have had a hard time outperforming the S&P
500 recently, causing a surge of interest in index funds. The popularity of
the new "nifty fifty" of the nineties has produced a wide spread in P/E's...
wider, perhaps than is justified by quality or growth prospects. We don't know
if the spread will narrow by the multiples of the nifty fifty coming back
toward the pack, or by generally increasing multiples among the rest of the
companies. Either way, a period of underperformance by the S&P 500 would be
the result.
The longer term comparisons of the Fund with its peers for five and ten years
are intact as shown in the table on the previous page. We are particularly
pleased with our very favorable return ranking against our peers over the last
five years since it occurred while the growth style of investing was favored
for most of the period. Also, our returns were achieved with a risk level that
was more than 31% lower than the average equity fund as calculated by
Morningstar.
Net asset value per share rose from $38.65 on November 30, 1996, to $41.50 at
the end of May. In March an ordinary income dividend of $0.12 was distributed.
For shareholders who elected reinvestment, the distribution was reinvested at
a price of $39.50 per share on March 21,1997. In addition, the year-end
distributions of $0.298 of ordinary income and $0.436 in long term capital
gains were reinvested on December 27, 1996 at a price of $38.04 per share.
Turnover has remained low reflecting the continued emphasis on companies with
price momentum in the stock market. In the latest period, the only company
eliminated was our holding of PHH. This company was acquired by HFS, a leading
franchiser of hotels, motels, and real estate brokerage businesses. HFS had
been expanding rapidly by acquisition, and its stock traded at a lofty P/E of
over 40 times earnings. The merger involved an exchange of stock, and since we
did not want to hold the stock of the acquirer, we sold our PHH shares. Over
the three-year holding period for PHH the stock appreciated 150% from initial
purchase to average sale price. The proceeds were invested in The Limited, a
leading specialty retailer based in Columbus, Ohio. The company is rebounding
from an earnings disappointment in fiscal 1996, and its shares sell at 16
times estimated 1997 earnings, and only 14 times the 1998 estimate.
The Fund continues to have attractive valuation characteristics. The average
price/earnings ratio based on estimated earnings for 1997 for the companies in
the Fund is only 16.4, compared with 19.1 times for the S&P 500 companies.
The average price to book value of the Fund's companies is 2.0, compared to
3.3 for the S&P 500 companies, and their current yield is higher.
We appreciate your continued use of Babson Value Fund in your investment
program.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
Babson Value Fund
<TABLE>
<CAPTION>
Comparison with all
Lipper Growth & Income Funds
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
5/31/96 5/31/94 5/31/92 5/31/87 06/30/96 06/30/94 06/30/92 06/30/87
5/31/97 5/31/97 5/31/97 5/31/97 06/30/97 06/30/97 06/30/97 06/30/97
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Babson Value Fund Total Return 21.43% 20.88% 18.71% 13.40% 26.76% 23.41% 19.72% 13.34%
Lipper Growth & Income Funds
Average Total Return 20.83% 21.04% 15.96% 12.73% 28.07% 23.62% 17.35% 12.77%
BVF Rank among Lipper
Growth & Income Funds 392 202 15 41 369 205 27 42
# of Lipper Growth & Income Fund 549 345 216 129 547 343 216 127
Babson Value Fund Percentile, Top 71% 59% 7% 32% 67% 60% 13% 33%
Source: Lipper Analytical
Securities Corporation
</TABLE>
Comparison with all
Morningstar Growth & Income Funds
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
5/31/96 5/31/94 5/31/92 5/31/87 06/30/96 06/30/94 06/30/92 06/30/87
5/31/97 5/31/97 5/31/97 5/31/97 06/30/97 06/30/97 06/30/97 06/30/97
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Babson Value Fund Total Return 21.43% 20.88% 18.71% 13.40% 26.76% 23.41% 19.72% 13.34%
Morningstar Growth & Income Funds
Average Total Return 23.72% 21.44% 15.85% 12.16% 28.94% 24.02% 17.24% 12.15%
BVF Rank among Morningstar
Growth & Income Funds 394 227 16 40 387 228 28 41
# of Morningstar Growth &
Income Fund 524 349 222 127 535 348 223 125
Babson Value Fund Percentile, Top 75% 65% 7% 31% 72% 66% 13% 33%
Source: Morningstar, Inc.
</TABLE>
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.
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.
STATEMENT OF NET ASSETS
May 31, 1997 (unaudited)
MARKET VALUE
SHARES COMPANY (NOTE 1-A)
COMMON STOCKS - 94.24%
AEROSPACE - 4.35%
261,000 Boeing Co. $ 27,470,25
227,986 Lockheed Martin Corp. 21,345,189
48,815,439
AIRLINES - 2.32
888,000 KLM Royal Dutch Airlines 26,085,000
AUTOMOTIVE - 2.40%
747,000 Dana Corp. 26,985,375
BANKS - 9.66%
284,000 Chase Manhattan Corp. 26,838,000
332,500 First Bank System, Inc. 27,265,000
524,000 National City Corp. 26,986,000
104,033 Wells Fargo & Co. 27,412,695
108,501,695
CHEMICALS - 3.21%
239,000 duPont (E.I.) deNemours & Co. 26,021,125
520,927 Millennium Chemicals, Inc. 10,027,845
36,048,970
COMPUTER SOFTWARE - 2.64%
524,000 Shared Medical Systems Corp. 29,606,000
COMPUTER SYSTEMS - 4.67%
1,552,000 Apple Computer Inc. 25,802,000
308,000 International Business Machines Corp. 26,642,000
52,444,000
CONSTRUCTION - 1.69%
345,825 Hanson PLC, ADR 8,861,766
351,305 Martin Marietta Materials, Inc. 10,100,019
18,961,785
CONSUMER PRODUCTS - 7.52%
728,482 Grand Metropolitan PLC, ADR 27,227,015
1,401,000 Limited, Inc. 28,370,250
702,000 Reebok International Ltd. 28,782,000
84,379,265
DIVERSIFIED - 0.83%
260,025 Energy Group PLC 9,295,894
ENVIRONMENTAL CONTROL - 2.32%
1,666,000 Safety-Kleen Corp. 26,031,250
FINANCIAL SERVICES - 11.98%
396,600 American Express Co. 27,563,700
468,800 Salomon Inc. 25,139,400
716,100 Student Loan Corp. 27,390,825
228,000 Student Loan Marketing Assn. 27,730,500
294,000 Transamerica Corp. 26,717,250
134,541,675
FOREST PRODUCTS AND PAPER - 7.09%
594,000 Potlatch Corp. 25,467,750
536,400 Weyerhaeuser Co. 26,752,950
368,000 Willamette Industries, Inc. 27,416,000
79,636,700
HEALTH - 2.42%
990,000 Tenet Healthcare 27,225,000
INSURANCE - 7.19%
279,000 Aetna Inc. 28,179,000
356,000 Allstate Corp. 26,210,500
150,300 General Re Corp. 26,340,075
80,729,575
OFFICE EQUIPMENT AND SUPPLIES - 4.82%
921,000 Wallace Computer Services, Inc. 25,788,000
417,700 Xerox Corp. 28,299,175
54,087,175
PETROLEUM - 4.89%
184,000 Atlantic Richfield Co. 26,772,000
144,000 Royal Dutch Petroleum Co. 28,116,000
54,888,000
PROFESSIONAL SERVICES - 0.36%
206,300 ABM Industries, Inc. 3,997,062
RETAIL - 9.13%
585,000 Harcourt General, Inc. 27,714,375
1,548,800 K mart Corp. 21,683,200
524,958 Penney (J.C.) Co., Inc. 27,035,337
530,000 Sears, Roebuck & Co. 26,036,250
102,469,162
TRANSPORTATION - 2.31%
1,371,700 Overseas Shipholding Group, Inc. 25,890,837
UTILITIES - 2.44%
796,000 Texas Utilities Co. 27,362,500
TOTAL COMMON STOCKS - 94.24% 1,057,982,359
CONVERTIBLE PREFERRED STOCK - 0.49%
94,300 K mart Financing,
7.750% trust cv. pfd. 5,563,700
MARKET VALUE
FACE AMOUNT DESCRIPTION (NOTE 1-A)
SHORT-TERM CORPORATE NOTES - 5.17%
$5,000,000 Ford Motor Credit Co.,
5.52%, due June 18, 1997 5,000,000
5,000,000 Ford Motor Credit Co.,
5.48%, due July 2, 1997 5,000,000
10,000,000 General Electric Credit Corp.,
5.47%, due June 4, 1997 10,000,000
7,000,000 General Electric Credit Corp.,
5.54%, due June 11, 1997 7,000,000
5,000,000 General Electric Credit Corp.,
5.56%, due July 2, 1997 5,000,000
5,000,000 General Motors Acceptance Corp.,
5.49%, due June 4, 1997 5,000,000
6,000,000 General Motors Acceptance Corp.,
5.57%, due June 11, 1997 6,000,000
5,000,000 Sears Roebuck Acceptance Corp.,
5.53%, due June 25, 1997 5,000,000
10,000,000 Sears Roebuck Acceptance Corp.,
5.55%, due July 9, 1997 10,000,000
TOTAL SHORT-TERM
CORPORATE NOTES - 5.17% 58,000,000
TOTAL INVESTMENTS - 99.90% $ 1,121,546,059
Other assets less liabilities - 0.10% 1,095,679
TOTAL NET ASSETS - 100.00%
(equivalent to $41.50 per share;
50,000,000 shares of $1.00 par
value capital shares authorized;
27,048,981 shares outstanding) $ 1,122,641,738
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
May 31, 1997 (unaudited)
ASSETS:
Investments in securities:
Common stocks, at market value
(identified cost $839,750,328) $ 1,057,982,359
Convertible preferred stock,
at market value (identified cost $4,476,570) 5,563,700
Short-Term corporate notes,
at cost - approximates market value 58,000,000
Total investments 1,121,546,059
Dividends receivable 2,596,582
Interest receivable 182,452
Receivable for investments sold 659,655
Total assets 1,124,984,748
LIABILITIES AND NET ASSETS:
Cash overdraft 56,143
Payable for investments purchased 2,286,867
Total liabilities 2,343,010
NET ASSETS $ 1,122,641,738
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 878,430,629
Accumulated undistributed income:
Undistributed net investment income 13,959,608
Undistributed net realized gain on
investment transactions 10,932,340
Net unrealized appreciation in value of investments 219,319,161
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 1,122,641,738
Capital shares, $1.00 par value
Authorized 50,000,000
Outstanding 27,048,981
NET ASSET VALUE PER SHARE $ 41.50
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1997 (unaudited)
INVESTMENT INCOME:
Income:
Dividends $ 8,671,693
Interest 1,810,548
10,482,241
Expenses (Note 2):
Management fees 4,374,844
Registration fees and expenses 168,601
4,543,445
Net investment income (Note 1-B) 5,938,796
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 56,986,112
Cost of investments sold 45,090,874
Net realized gain from investment transactions 11,895,238
Unrealized appreciation of investments:
Beginning of period 146,698,206
End of period 219,319,161
Unrealized appreciation of investments
during the period 72,620,955
Net gain on investments 84,516,193
Increase in net assets resulting from operations $ 90,454,989
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
May 31, 1997 November 30,
(unaudited) 1996
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 5,938,796 $ 7,928,024
Net realized gain from investment transactions 11,895,238 11,413,145
Unrealized appreciation of investments
during the period 72,620,955 96,925,072
Net increase in net assets resulting from operations 90,454,989 116,266,241
Net equalization included in the price
of shares issued and redeemed 3,331,943 4,618,188
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (5,521,197) (6,907,769)
Net realized gain from investment transactions (12,342,336) (3,264,428)
Total distributions to shareholders (17,863,533) (10,172,197)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 402,786,027 454,682,447
Net asset value of shares issued for
reinvestment of distributions 13,285,372 7,433,742
416,071,399 462,116,189
Cost of shares repurchased (133,343,700) (102,196,414)
Net increase from capital share transactions 282,727,699 359,919,775
Total increase in net assets 358,651,098 470,632,007
NET ASSETS:
Beginning of period 763,990,640 293,358,633
End of period (including undistributed net investment
income of $13,959,608 and $10,210,066, respectively) $ 1,122,641,738 $ 763,990,640
*Shares issued and repurchased:
Number of shares sold 10,382,631 13,320,263
Number of shares issued for reinvestment
of distributions 347,016 225,544
10,729,647 13,545,807
Number of shares repurchased (3,448,728) (3,008,074)
Net increase 7,280,919 10,537,733
**Distributions to shareholders:
Income dividends per share $ .2453 $ .532
Capital gains distribution per share $ .6087 $ .3446
See accompanying Notes to Financial Statements.
</TABLE>
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, 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 - 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, 1997 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Purchases $ 319,430,951
Proceeds from sales 56,986,112
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.
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
Elizabeth L. Allwood
Vice President
Michael A. Brummel
Vice President
Martin A. Cramer
Vice President & Secretary
Constance E. Martin
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
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 64108-2561
816-471-5200
1-800-4-BABSON
(1-800-422-2766)
http://www.jbfunds.com
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 902226898
<INVESTMENTS-AT-VALUE> 1121546059
<RECEIVABLES> 3438689
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1124984748
<PAYABLE-FOR-SECURITIES> 2286867
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<DIVIDEND-INCOME> 8671693
<INTEREST-INCOME> 1810548
<OTHER-INCOME> 0
<EXPENSES-NET> 4543445
<NET-INVESTMENT-INCOME> 5938796
<REALIZED-GAINS-CURRENT> 11895238
<APPREC-INCREASE-CURRENT> 72620955
<NET-CHANGE-FROM-OPS> 90454989
<EQUALIZATION> 3331943
<DISTRIBUTIONS-OF-INCOME> 5521197
<DISTRIBUTIONS-OF-GAINS> 12342336
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<NUMBER-OF-SHARES-SOLD> 10382631
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<PER-SHARE-DIVIDEND> .245
<PER-SHARE-DISTRIBUTIONS> .609
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<PER-SHARE-NAV-END> 41.50
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
