BABSON
VALUE
FUND
Annual Report
November 30, 1996
JONES & BABSON
MUTUAL FUNDS
MESSAGE
TO OUR SHAREHOLDERS
Babson Value Fund completed its twelfth full fiscal year on November 30, 1996.
In fiscal 1996, the Fund's total return (price change and reinvested
distributions) was 24.91%. This compared favorably with the 23.79% return for
our "growth and income" peer group in Lipper's Mutual Fund Performance
Analysis. The stock market, buoyed by earnings that were stronger than
generally anticipated and a relatively sanguine interest rate and inflation
environment, confounded most prognosticators. This increase was driven by
strength in large capitalization growth stocks.
Longer term comparisons with our peers in the Lipper and Morningstar databases
are included in the summaries below. The table shows the consistency of the
longer term record of the Fund. For the three, five and ten-year periods the
Fund's total returns placed it in the top quartile of its peer group in both
databases. The five-year record was particularly strong...well within the top
5%. For the fiscal year the "growth style" remained in vogue, extending its
period of dominance to over three years. Although we were not in the favored
style, our one year rank against our peers was in the top half.
Babson Value Fund
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
Comparison with all 11/30/95 11/30/93 11/30/91 11/30/86 12/31/95 12/31/93 12/31/91 12/31/86
Lipper Growth & Income Funds to to to to to to to to
11/30/96 11/30/96 11/30/96 11/30/96 12/31/96 12/31/96 12/31/96 12/31/96
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Babson Value Fund Total Return 24.91% 19.91% 20.82% 14.31% 22.74% 18.34% 18.64% 14.56%
Lipper Growth & Income Funds
Average Total Return 23.79% 17.52% 16.33% 13.12% 20.78% 16.21% 13.99% 13.24%
BVF Rank among Lipper
Growth & Income Funds 213 51 6 27 148 64 9 25
# of Lipper Growth & Income Funds 515 315 210 122 522 329 212 123
Babson Value Fund Percentile, Top 41% 16% 3% 22% 28% 19% 4% 20%
</TABLE>
Source: Lipper Analytical Securities Corporation
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
Comparison with all 11/30/95 11/30/93 11/30/91 11/30/86 12/31/95 12/31/93 12/31/91 12/31/86
Morningstar Growth & Income Funds to to to to to to to to
11/30/96 11/30/96 11/30/96 11/30/96 12/31/96 12/31/96 12/31/96 12/31/96
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Babson Value Fund Total Return 24.91% 19.91% 20.82% 14.31% 22.74% 18.34% 18.64% 14.56%
Morningstar Growth & Income Funds
Average Total Return 24.32% 17.62% 16.03% 12.56% 20.96% 16.39% 13.58% 12.65%
BVF Rank among Morningstar
Growth & Income Funds 235 79 5 26 118 94 8 24
# of Morningstar Growth & Income Funds 501 325 205 117 504 331 209 121
Babson Value Fund Percentile, Top 47% 24% 2% 22% 23% 28% 4% 20%
</TABLE>
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 for index funds.
The strong long-term record has continued to attract more investors. The
number of shareholders (outside those whose shares are held in brokerage
accounts) has increased to over 25,000, while net assets have surged from
$293.4 million a year ago to $764.0 million as of the end of our fiscal year,
an increase of 160%.
In the latest fiscal year, per share net asset value increased from $31.78 to
$38.65. In December 1995, the Fund paid an ordinary income dividend
distribution of $0.1671 and a long-term capital gain distribution of $0.3395,
followed by quarterly income dividends of $0.12 in March, $0.12 in June and
$0.13 in September. Total distributions in the fiscal year amounted to $0.8766
per share. Net investment income was 1.63% of average net assets for the year.
The growth in assets resulted in a slight reduction in our expense ratio to
0.96% of average net assets. The average expense ratio for the growth and
income category as reported in Morningstar Mutual Funds increased slightly to
1.26%. In addition to that, the average 12b-1 charge is 0.34% and, of course
many of the other funds in the category have some form of sales charges or
"loads." Babson Value Fund has neither 12b-1 or sales charges.
In December 1996, the Fund made its final distributions of the calendar year.
An ordinary income dividend of $0.298, and long-term capital gain of $0.436
per share, totaled $0.734. Those shareholders who elected to reinvest their
distributions received their additional shares at a price of $38.04 per share.
For corporate shareholders, 69.08% of ordinary income distributions qualify
for the corporate dividends received deduction.
We welcome the new investors who have joined us in the past year, and we look
forward to continuing our efforts to provide all our shareholders with
consistent, favorable returns in the future.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
PORTFOLIO REVIEW
Babson Value Fund is a no-load mutual fund which 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. The Fund may be considered "contrarian" in nature in that the
portfolio will typically include shares of companies that are relatively
unpopular and out-of-favor with general investors.
We opened last year's annual report with a discussion of the market's style
preferences between "value" and "growth." We observed that the growth style
had been favored by the market for the prior two years. The bad news is that
the style preference continued (among large capitalization stocks) for a third
consecutive year through the end of September, 1996. The good news is that
three years is the longest time that one style has remained in favor without
significant interruption since the start of these indices at the beginning of
1975, and that the last calendar quarter of 1996 saw three consecutive months
favoring value. The chart to the right shows the ebbs and flows of the two
styles since the prior trough for the value style in December of 1991. A
rising line indicates that value was in style, while a falling line shows
periods when investors preferred growth.
No one can reliably predict when the market's preference will shift back to
value for a sustained period, but there are factors that may indicate it is
time for a change. The high absolute level of the market, and the length of
time since the last significant correction may rekindle investors'
appreciation of the lower risk or volatility that is a characteristic of the
value style. In 1996, the continued preference for stocks with growth
characteristics was focused on large capitalization issues while value was
favored among small-and mid-cap stocks last year. The market's fascination
with high quality growth issues has driven shares of Coca Cola and Gillette to
price/earnings ratios of 42 and 39 on trailing earnings, respectively. These
multiples appear quite full relative to the consensus estimates of their long
term rate of earnings growth in the future. The valuation gulf between these
market leaders and the average P/E multiple of the companies in the Fund,
currently 16, has grown too wide in our opinion.
The chart to the right shows the economic sectors sorted from top to bottom in
the order of their returns (shown by the top bar) for the year. The weights of
each sector in the S&P 500 and in the Value Fund portfolio are shown by the
middle and bottom bar in each sector. The portfolio benefitted by being
significantly overweight in financial stocks relative to the market. This
helped to offset the negative impact of the holdings in basic materials,
retail and consumer cyclical companies. Although we were only slightly under
the S&P weight in technology, the sector with the highest returns for our
fiscal year, we were not invested in the "high-tech" chip, networking and
internet stocks that produced most of the fireworks in a powerful rebound from
the correction they experienced in the second half of 1995.
Portfolio turnover was low at 11% during the year. Part of the reason for this
was the continued strong flow of new capital into the Fund. Our policy is to
keep portfolio holdings equally weighted. When cash flow is static, this
results in sales of portions of holdings that run up in size to provide funds
to purchase more shares of the holdings that are temporarily lagging. With
strong cash flow most of the rebalancing is accomplished by putting the new
money in the smallest holdings. The other reason is that the market was strong
for the whole year and portfolio holdings that moved up in valuation
maintained their relative strength compared to the S&P 500. Our policy is to
continue to hold fully valued stocks as long as their relative strength is
intact.
As has usually been the case, we again benefitted from a merger announcement.
PHH, a company we first acquired at prices in the high teens in 1994, became
the subject of an offer from HFS, Inc. at $49.50. IBM and Chase Manhattan
continued to produce handsome returns for us with gains of 66% and 59%,
respectively. Six other holdings chipped in with returns of 40-50%. They were
Allstate, National City, Reebok, duPont, First Bank System and last year's
loser, K mart.
Apple Computer headed the list of disappointments for 1996, joined by KLM
Royal Dutch Airlines, Overseas Shipholding and Hanson PLC. Each is selling
below, or just above book value. Apple continues to have production and
marketing problems which the new management is hard at work to diagnose and
cure. They have announced a merger with Next, a company founded by Steve Jobs,
an original Apple founder, who is coming back to help improve the operating
system, which even now is considered by many to be superior to Microsoft's
Windows. Although the company still has significant problems to work out, it
appears to be in decent financial shape with $1.8 billion in cash. Hanson and
KLM are selling at very low multiples of earnings. Hanson is in the midst of
breaking itself into four companies. The spin-offs of Millennium Chemicals and
Imperial Tobacco have already occurred, and the last piece is expected to
occur in February when the energy company is separated from the building
operations. We have sold the Imperial Tobacco, and expect to retain the other
pieces for a while in order to realize their expected higher values.
Companies which were eliminated from the portfolio this year were Guidant, Eli
Lilly, Shared Medical Systems, Imperial Tobacco and Huffy. The first three
were successful investments which we sold at substantial profits. Imperial
Tobacco produced a loss, but we did not think holding the shares was likely to
prove rewarding after the spin-off from Hanson. Huffy had been depressed
because of competition from China with its low labor costs. The stock
rebounded so we were able to sell at a small gain, and we were not able to
maintain the company in the portfolio at full size because of its small market
capitalization, our growing size and our policy of not owning more than 5% of
a company's shares.
The portfolio continues to have very attractive valuation characteristics.
Based on estimated earnings for 1997, the average P/E ratio was 13.6 at our
year end, and the average price to book value ratio was 2.0. These values
compare favorably with ratios of 17.6 and 3.3, respectively for the S&P 500
stock index. Before expenses, the gross yield of the portfolio is slightly
higher than the market index. We have continued to produce higher returns than
average for our peer group of growth and income funds with lower risk. Our low
turnover and asset growth, combined with our attention to the tax consequences
to our taxable shareholders of investment changes, have combined to result in
high marks from outside reviewers for tax efficiency. Lastly, our expense
ratio of 0.96% continues to be lower than the average expense ratio of 1.28%
for the growth and income category as reported in Morningstar, Inc. and we
have no loads of any kind, and no 12b-1 charge.
David L. Babson & Co. Inc.
GRAPH -- Value Style vs. Growth Style of Investing
S&P/BARRA Value Index divided
by S&P/BARRA Growth Index
GRAPH -- Sector Weights and Returns
11/30/95 - 11/30/96
PORTFOLIO REVIEW
GRAPH -- Babson Value Fund versus S&P 500
Babson Value Fund's average annual compounded total returns for one, five and
ten year periods as of November 30, 1996, were 24.91%, 20.82% and 14.31%,
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.
STATEMENT OF NET ASSETS
November 30, 1996
<TABLE>
<CAPTION>
S&P MARKET VALUE
RANKING** SHARES COMPANY COST (NOTE 1-A)
</CAPTION>
<S> <C> <C>
COMMON STOCKS - 93.12%
AEROSPACE - 4.31%
B+ 192,000 Boeing Co. $ 12,893,195 $ 19,080,000
NR 152,886 Lockheed Martin Corp. 9,466,554 13,855,294
22,359,749 32,935,294
AIRLINES - 2.38%
NR 695,000 KLM Royal Dutch Airlines 19,917,939 18,156,875
BANKS - 9.67%
B 192,000 Chase Manhattan Corp. 8,954,805 18,144,000
B 261,000 First Bank System, Inc. 12,089,779 19,020,375
A- 398,000 National City Corp. 12,204,569 18,457,250
B+ 64,033 Wells Fargo & Co. 10,841,399 18,225,393
44,090,552 73,847,018
CHEMICALS - 2.36%
B+ 191,000 duPont (E.I.) deNemours & Co. 13,208,929 18,001,750
COMPUTER SOFTWARE - 2.40%
B 425,000 United Healthcare Corp. 14,537,584 18,328,125
COMPUTER SYSTEMS - 4.79%
B 689,900 Apple Computer Inc. 18,103,675 16,643,837
B- 125,000 International Business Machines Corp. 11,198,700 19,921,875
29,302,375 36,565,712
CONSUMER PRODUCTS - 4.68%
NR 539,428 Grand Metropolitan PLC, ADR 14,589,095 17,194,267
B+ 489,000 Reebok International Ltd. 15,004,454 18,582,000
29,593,549 35,776,267
DIVERSIFIED - 4.48%
B 547,500 Dana Corp. $ 16,566,226 $ 17,040,938
NR 1,286,000 Hanson PLC, ADR 3,875,073 8,680,500
NR 281,500 Imperial Tobacco Group PLC* 5,212,062 3,580,596
NR 137,418 Martin Marietta Materials, Inc. 1,681,761 3,229,323
NR 80,427 Millennium Chemicals, Inc.* 9,372,386 1,658,807
36,707,508 34,190,164
ENVIROMENTAL CONTROL - 2.23%
B+ 1,074,600 Safety-Kleen Corp. 16,591,278 17,059,275
FINANCIAL SERVICES - 12.15%
B 351,000 American Express Co. 13,442,036 18,339,750
B+ 392,000 Salomon Inc. 15,537,630 17,885,000
NR 455,900 Student Loan Corp. 13,281,783 17,609,138
A 211,900 Student Loan Marketing Assn. 11,589,551 20,368,887
B 235,000 Transamerica Corp. 15,020,767 18,653,125
68,871,767 92,855,900
FOREST PRODUCTS AND PAPER - 6.98%
B+ 391,000 Potlatch Corp. 15,918,761 17,301,750
B+ 395,000 Weyerhaeuser Co. 17,172,758 18,170,000
B+ 263,000 Willamette Industries, Inc. 14,286,430 17,884,000
47,377,949 53,355,750
HEALTH - 2.35%
B- 803,300 Tenet Healthcare* 14,582,560 17,973,837
INSURANCE - 7.24%
B- 255,000 Aetna Inc. 15,831,915 18,391,875
NR 319,000 Allstate Corp. 10,819,175 19,219,750
A 105,000 General Re Corp. 14,028,757 17,718,750
40,679,847 55,330,375
OFFICE EQUIPMENT AND SUPPLIES - 4.96%
A 560,000 Wallace Computer Services, Inc. $ 12,814,900 $ 19,600,000
B- 372,000 Xerox Corp. 15,364,129 18,274,500
28,179,029 37,874,500
PETROLEUM - 4.93%
B+ 135,000 Atlantic Richfield Co. 15,496,741 18,781,875
A 111,000 Royal Dutch Petroleum Co. 14,599,948 18,856,125
30,096,689 37,638,000
PROFESSIONAL SERVICES - 4.33%
A 944,100 ABM Industries, Inc. 12,808,897 16,285,725
A 375,000 PHH Corp. 9,215,827 16,828,125
22,024,724 33,113,850
RETAIL - 8.57%
B+ 337,000 Harcourt General, Inc. 13,891,138 18,408,625
B+ 1,068,200 K mart Corp. 9,710,117 11,883,725
B+ 324,258 Penney (J.C.) Co., Inc. 15,527,237 17,428,867
B 356,000 Sears, Roebuck & Co. 13,465,427 17,711,000
52,593,919 65,432,217
TRANSPORTATION - 2.12%
B- 1,013,000 Overseas Shipholding Group, Inc. 18,538,399 16,208,000
UTILITIES - 2.19%
B 424,000 Texas Utilities Co. 15,712,150 16,748,000
TOTAL COMMON STOCKS - 93.12% 564,966,496 711,390,909
CONVERTIBLE PREFERRED STOCK - 0.62%
94,300 K mart Financing,
7.750% trust cv. pfd. 4,476,570 4,750,363
</TABEL>
</TABLE>
<TABLE>
<CAPTION> MARKET VALUE
FACE AMOUNT DESCRIPTION COST (NOTE 1-A)
</CAPTION>
<S> <C> <C>
SHORT-TERM CORPORATE NOTES - 5.63%
$ 2,000,000 Ford Motor Credit Co.,
5.25%, due December 4, 1996 $ 2,000,000 $ 2,000,000
8,000,000 Ford Motor Credit Co.,
5.26%, due December 11, 1996 8,000,000 8,000,000
2,000,000 General Electric Credit Corp.,
5.33%, due December 11, 1996 2,000,000 2,000,000
5,000,000 General Electric Credit Corp.,
5.25%, due December 18, 1996 5,000,000 5,000,000
3,000,000 General Electric Credit Corp.,
5.26%, due December 31, 1996 3,000,000 3,000,000
10,000,000 General Motors Acceptance Corp.,
5.31%, due December 23, 1996 10,000,000 10,000,000
8,000,000 Sears Roebuck Acceptance Corp.,
5.27%, due December 4, 1996 8,000,000 8,000,000
5,000,000 Sears Roebuck Acceptance Corp.,
5.30%, due December 18, 1996 5,000,000 5,000,000
TOTAL SHORT-TERM CORPORATE NOTES - 5.63% 43,000,000 43,000,000
REPURCHASE AGREEMENT - 0.47%
3,620,000 UMB Bank, n.a., 5.30%, due December 2, 1996
(Collateralized by $3,462,577 U.S. Treasury Notes,
7.75%, due January 13, 2000) 3,620,000 3,620,000
TOTAL INVESTMENTS - 99.84% $ 616,063,066 762,761,272
Other assets less liabilities - 0.16% 1,229,368
TOTAL NET ASSETS - 100.00%
(equivalent to $38.65 per share; 50,000,000 shares of $1.00 par
value capital shares authorized; 19,768,062 shares outstanding) $ 763,990,640
</TABLE>
For federal income tax purposes, the identified cost of investments owned at
November 30, 1996, was $617,069,807.
Net unrealized appreciation for federal income tax purposes was $145,691,465,
which is comprised of unrealized appreciation of $161,399,080 and unrealized
depreciation of $15,707,615.
*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, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities:
Common stocks, at market value (identified cost $564,966,496) $ 711,390,909
Convertible preferred stock, at market value (identified cost $4,476,570) 4,750,363
Short-term corporate notes, at cost - approximates market value 43,000,000
Repurchase agreement, at cost - approximates market value 3,620,000
Total investments 762,761,272
Dividends receivable 1,486,020
Interest receivable 46,679
Total assets 764,293,971
LIABILITIES AND NET ASSETS:
Cash overdraft 303,331
Total liabilities 303,331
NET ASSETS $ 763,990,640
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 595,702,930
Accumulated undistributed income:
Undistributed net investment income 10,210,066
Undistributed net realized gain on investment transactions 11,379,438
Net unrealized appreciation in value of investments 146,698,206
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 763,990,640
Capital shares, $1.00 par value
Authorized 50,000,000
Outstanding 19,768,062
NET ASSET VALUE PER SHARE $ 38.65
See accompanying Notes to Financial Statements.
</TABLE>
STATEMENT OF OPERATIONS
Year Ended November 30, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends $ 10,874,813
Interest 1,712,888
12,587,701
Expenses (Note 2):
Management fees 4,586,127
Registration fees and expenses 73,550
4,659,677
Net investment income (Note 1-B) 7,928,024
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 48,808,308
Cost of investments sold 37,395,163
Net realized gain from investment transactions 11,413,145
Unrealized appreciation of investments:
Beginning of year 49,773,134
End of year 146,698,206
Unrealized appreciation of investments during the year 96,925,072
Net gain on investments 108,338,217
Increase in net assets resulting from operations $ 116,266,241
See accompanying Notes to Financial Statements.
</TABLE>
STATEMENTS OF CHANGES
IN NET ASSETS
For The Two Years Ended November 30, 1996
<TABLE>
<CAPTION>
1996 1995
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 7,928,024 $ 4,230,069
Net realized gain from investment transactions 11,413,145 3,229,264
Unrealized appreciation of investments during the year 96,925,072 45,123,545
Net increase in net assets resulting from operations 116,266,241 52,582,878
Net equalization included in the price of
shares issued and redeemed 4,618,188 1,782,297
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income 6,907,769) (3,843,830)
Net realized gain from investment transactions (3,264,428) (2,881,610)
Total distributions to shareholders (10,172,197) (6,725,440)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 454,682,447 160,790,293
Net asset value of shares issued for
reinvestment of distributions 7,433,742 5,928,779
462,116,189 166,719,072
Cost of shares repurchased (102,196,414) (40,566,129)
Net increase from capital share transactions 359,919,775 126,152,943
Total increase in net assets 470,632,007 173,792,678
NET ASSETS:
Beginning of year 293,358,633 119,565,955
End of year (including undistributed net
investment income of $10,210,066 in 1996
and $4,571,623 in 1995) $ 763,990,640 $ 293,358,633
*Shares issued and repurchased:
Number of shares sold 13,320,263 5,705,141
Number of shares issued for reinvestment
of distributions 225,544 225,453
13,545,807 5,930,594
Number of shares repurchased (3,008,074) (1,446,569)
Net increase 10,537,733 4,484,025
**Distributions to shareholders:
Income dividends per share $ .532 $ .60
Capital gains distribution per share $ .3446 $ .6036
</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 - 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. The Fund has
designated $3,216,098 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 .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 year ended November 30, 1996 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Purchases $ 380,213,773
Proceeds from sales 48,808,308
FINANCIAL HIGHLIGHTS
Condensed data for a share of capital stock outstanding throughout each year.
<TABLE>
<CAPTION>
Years Ended November 30,
1996 1995 1994 1993 1992
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 31.78 $ 25.19 $ 25.36 $ 22.24 $ 18.74
Income from investment operations:
Net investment income .553 .589 .562 .543 .649
Net gains or losses on securities
(both realized and unrealized) 7.194 7.205 .577 3.932 3.565
Total from investment operations 7.747 7.794 1.139 4.475 4.214
Less distributions:
Dividends from net investment income (.532) (.60) (.398) (1.030) (.714)
Distributions from capital gains (.345) (.604) (.911) (.325) -
Total distributions (.877) (1.204) (1.309) (1.355) (.714)
Net asset value, end of year $ 38.65 $ 31.78 $ 25.19 $ 25.36 $ 22.24
Total return 24.91% 32.07% 4.51% 21.13% 23.29%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 764 $ 293 $ 120 $ 42 $ 34
Ratio of expenses to average net assets .96% .98% .99% 1.00% 1.01%
Ratio of net investment income to average net assets 1.63% 2.12% 2.32% 2.34% 3.10%
Portfolio turnover rate 11% 6% 14% 26% 17%
*Average commission paid per equity share traded $ .0548 - - - -
*Disclosure required for fiscal years beginning after September 1, 1995.
See accompanying Notes to Financial Statements.
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
The Board of Directors and Shareholders of Babson Value Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the statement of net assets, of Babson Value Fund, Inc., as of
November 30, 1996, the related statements of operations for the year then
ended, 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, 1996, 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 Value Fund, Inc. at November 30, 1996, 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.
/s/Ernst & Young LLP
Kansas City, Missouri
December 27, 1996
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.
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
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