BABSON
VALUE
FUND
Annual Report
November 30, 1997
JONES & BABSON
MUTUAL FUNDS
MESSAGE
To Our Shareholders
Babson Value Fund completed its thirteenth full fiscal year on November
30, 1997. In fiscal year 1997, the Fund's total return (price change and
reinvested distributions) was 26.9%. This compared favorably with the
23.5% return for our "growth and income" peer group in Lipper's Mutual
Fund Performance Analysis, and the 23.4% average return among the large
capitalization value category in Morningstar, Inc. The stock market was
again buoyed by earnings that were stronger than generally anticipated,
declining long-term interest rates, lower inflation and a more stable
political and financial environment than existed in most of the rest of
the world. Thus the market confounded most prognosticators by surging
28.5% as measured by the unmanaged Standard & Poor's 500 index. This
capitalization-weighted index was driven by continued strength in a
concentrated group of 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 one, three,
five and ten-year periods the Fund's total returns for the fiscal year
placed it in the top third of its peer group in both databases. The
five-year record was particularly strong...well within the top 10%. For
the fiscal year 1997 the "growth style" remained in vogue, extending its
period of dominance to over four years. Although we were not in the
favored style, our one year rank against our peers was in the top
quartile. This record was achieved with lower than average risk. Our
Morningstar five-year risk rating is 0.70, meaning that the Fund was 30%
less risky than average for equity funds for the period.
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 by nearly 10,000 to 34,800, while net assets
have surged from $764 million a year ago to $1,419 million as of the end
of our fiscal year, an increase of over 85%.
In the latest fiscal year, per share net asset value increased from
$38.65 to $47.73. In December 1996, the Fund paid an ordinary income
dividend distribution of $0.298 and a long-term capital gain
distribution of $0.436, followed by quarterly income dividends of $0.12
in March, $0.10 in June and $0.13 in September. Total distributions in
the fiscal year amounted to $1.084 per share. Net investment income was
1.22% of average net assets for the year.
The Funds expense ratio was 0.97% of average net assets. The average
expense ratio for the growth and income category as reported in
Morningstar was 1.24%, 27% higher than Babson Value Fund. The average
for large capitalization value funds was 1.35%, 39% higher. 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 nor sales charges.
In December 1997, the Fund made its final distributions of the calendar
year. An ordinary income dividend of $0.45, and long-term capital gains
of $1.15 per share, totaled $1.60. Those shareholders who elected to
reinvest their
distributions received their additional shares at a price of $44.28 per
share. For corporate shareholders, 72.70% of ordinary income
distributions qualify for the corporate
dividends received deduction.
We are particularly pleased that the Fund continues to receive favorable
mention in leading financial publications. In the year-end 1998
Investor's Guide issue of Fortune dated December 29, 1997, Babson Value
Fund was listed favorably among "growth and income" funds (based on the
five year average annual return after taxes and loads).
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
Babson Value Fund
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
11/30/96 11/30/94 11/30/92 11/30/87 12/31/96 12/31/94 12/31/92 12/31/86
Comparison with all to to to to to to to to
Lipper Growth & Income Funds 11/30/97 11/30/97 11/30/97 11/30/97 12/31/97 12/31/97 12/31/97 12/31/96
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Babson Value Fund Total Return 26.89% 27.92% 21.52% 17.71% 26.51% 26.94% 20.84% 16.93%
Lipper Growth & Income Funds
Average Total Return 23.50% 26.28% 17.52% 16.38% 26.99% 26.58% 17.63% 15.87%
BVF Rank among Lipper
Growth & Income Funds 147 121 4 26 344 188 13 34
# of Lipper Growth & Income Funds 608 388 235 132 624 402 241 137
Babson Value Fund Percentile, Top 24% 31% 2% 20% 55% 47% 5% 25%
Source: Lipper Analytical
Securities Corporation
</TABLE>
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
11/30/96 11/30/94 11/30/92 11/30/87 12/31/96 12/31/94 12/31/92 12/31/86
Comparison with all Morningstar to to to to to to to to
Large Capitalization Value Funds 11/30/97 11/30/97 11/30/97 11/30/97 12/31/97 12/31/97 12/31/97 12/31/96
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Babson Value Fund Total Return 26.89% 27.92% 21.52% 17.71% 26.51% 26.94% 20.84% 16.93%
Morningstar Large Cap. Value Funds
Average Total Return 23.35% 25.77% 17.41% 15.63% 26.60% 26.25% 17.77% 15.79%
BVF Rank among Morningstar
Large Cap. Value Funds 57 56 10 18 199 111 12 24
# of Morningstar Large Cap. Value Funds 321 218 137 60 380 261 158 77
Babson Value Fund Percentile, Top 18% 26% 7% 30% 52% 43% 8% 31%
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 averages are net of fees and expenses, but do not
include the impact of sales charges.
PORTFOLIO REVIEW
Babson Value Fund is a no-load mutual fund which seeks long-term growth
of capital and income by investing in a diversi-
fied 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.
At the risk of sounding like a broken record, we opened last year's
annual report with a discussion of the market's style preferences
between "value" and "growth." We observed that the market had favored
the growth style for the prior three years, and that it might be time
for a change. The same observations we made a year ago apply today... in
spades. The bad news is that the style preference continued (among large
capitalization stocks) for a fourth consecutive year through the end of
December, 1997. The good news is that four years is the longest time
that one style has remained in favor without significant interruption
since the inception of these indices at the beginning of 1975.
Although there was a brief shift to value during the third quarter, the
problems in East Asia caused a knee-jerk return to the security of the
high quality growth companies that had finally weakened in the third
quarter after dominating the market for so long.
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. The beginning of the third quarter may
yet prove to be the turning point, but it is clearly too early to tell.
Investors' concerns about the level of the stock market and the more
defensive nature of the large capitalization value style may combine to
shift the market preference our way.
CHART
Value Style vs. Growth Style of Investing
S&P/BARRA Value Index divided
by S&P/BARRA Growth Index
Source: BARRA Global Investment Technology
The degree to which the market performance was concentrated in a few
favorites is illustrated by the following facts. The fifty firms (10% of
the companies) contributing most to the S&P 500 return for the fiscal
year accounted for 42% of the weight of the index at the beginning of
the year, and provided 65% of the S&P 500's return. The average impact
of the favorite fifty on the index return was over sixteen times that of
the other 450. Although we owned seven of these powerful fifty, all
seven had P/E ratios under the average for the index.
We did not own Microsoft at 54 times earnings, or Warner Lambert, Pfizer
and Cisco with P/E's over forty times earnings, or any of the twelve
companies selling over thirty times earnings. Among this group we find
MCI, Lucent and Dell, more pharmaceuticals, Disney, Home Depot and
Schlumberger, and leading consumer staples such as Coca Cola, Gillette,
Pepsi and Procter & Gamble. Many of these chips are so blue, they're
indigo. In the words of one of our old finance professors, the market is
discounting their future cash flows into the hereafter. While these
companies surely deserve to sell at a premium, multiples this high
constitute a risk we would prefer not to take. So long as these market
leaders continue to outperform, index funds will do well. When the P/E
premium narrows to more normal levels, index funds will lag. We are not
privileged to know exactly (or even approximately) when this will
happen, but it will happen.
In the meantime, some of our companies have experienced problems and
have disappointed us temporarily. Some of the problems are real and some
are only perceived or anticipated. We continue to view them as
temporary, and we continue to hold and add to our holdings. If the
market provides us with an opportunity to add to companies we like at
lower prices we are happy to take advantage of the opportunity. Apple
Computer's travails continued to put pressure on the stock, but a
recently announced profitable quarter surprised investors, and the stock
rebounded 40%. The East Asian difficulties have slowed all kinds of
deliveries from sneakers to logs to 777's, and Reebok, Weyerhaeuser and
Boeing's share prices have suffered. Sears was overzealous in convincing
customers that had declared bankruptcy to make good on their court
forgiven debts, and failed to properly file the agreements. The
resulting public relations black eye and substantial financial penalty
led investors to wonder if other creditors might start putting Sears'
bills on the bottom of their piles.
Aetna's efforts to cut costs by reducing head count caused it to get
behind in processing claims. Consequently it negotiated new contracts
with out of date cost information while health care costs were
rebounding. This will lead to a period of reduced profitability. While
all of these developments cloud the near term for these companies they
appear to us to be sound values given our much longer term perspective.
On the brighter side, PHH was acquired last spring by HFS. This was
discussed in our semiannual report. Safety-Kleen decided to enhance
shareholder value by entertaining the possible sale of the company. This
resulted in a contest by two suitors, one regarded as friendly and one
not so friendly. The contest hasn't been decided yet, but it created a
total return of 78% for the Fund. We first bought the stock at $15 in
1994, and we have sold most of the holding for more than $27, the level
of the friendly cash offer. Travelers acquired Salomon in another merger
that provided an even better return. While the merger was completed on
the last day of our fiscal year, the terms had been known for a while
before that. The share exchange produced a 90% return. Although
Travelers is not depressed and deeply undervalued, we consider it a
keeper. Chairman Sandy Weill has an exceptional record of revenue and
income growth, and the stock has had relative price strength for the
last seven years except for a brief period from mid-1993 to mid-1994.
Other holdings producing returns of more than 50% for the year were
Xerox, Overseas Shipholding, Dana, American Express, U.S. Bancorp and
Martin Marietta Materials.
The portfolio continues to have very attractive valuation
characteristics. Based on estimated earnings for 1998, the average P/E
ratio was 15.9 at our year end, and the average price to book value
ratio was 2.8. These values compare favorably with ratios of 19.7 and
3.8, 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, 17%
this year, 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.
We look forward to another year of challenge and opportunity. Following
three years of returns over 20%, we are not expecting a repeat. Whatever
the market throws at us we will continue to follow our discipline... a
discipline that has produced a very solid long-term record.
David L. Babson & Co. Inc.
PORTFOLIO REVIEW
CHART
Babson Value Fund versus S&P 500*
*Unmanaged stock index
Babson Value Fund's average annual compounded return for one, five and
ten year periods as of November 30, 1997, were 26.89%, 21.52% and 17.71%
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 flucuate, and redemption value may be more or
less than original cost.
STATEMENT OF NET ASSETS
November 30, 1997
<TABLE>
<CAPTION>
S&P MARKET VALUE
RANKING** SHARES COMPANY COST (NOTE 1-A)
</CAPTION>
<S> <C> <C>
COMMON STOCKS - 95.66%
AEROSPACE - 4.38%
B+ 667,700 Boeing Co. $ 27,396,924 $ 35,471,563
NR 274,000 Lockheed Martin Corp. 21,103,017 26,732,125
48,499,941 62,203,688
AIRLINES - 2.28%
NR 899,482 KLM Royal Dutch Airlines 25,789,379 32,381,352
BANKS - 9.72%
B 284,000 Chase Manhattan Corp. 17,617,106 30,849,500
A- 526,700 National City Corp. 18,492,880 35,157,225
B 327,900 U.S. Bancorp. 18,069,396 35,269,744
B+ 119,233 Wells Fargo & Co. 26,026,542 36,634,339
80,205,924 137,910,808
CHEMICALS - 2.36%
B+ 552,100 duPont (E.I.) deNemours & Co. 23,050,457 33,436,556
COMPUTER SOFTWARE - 2.42%
B+ 658,600 United Healthcare Corp. 26,388,312 34,288,362
COMPUTER SYSTEMS - 4.80%
B- 1,936,200 Apple Computer, Inc.* 33,160,716 34,367,550
B- 308,400 International Business Machines Corp. 16,351,762 33,789,075
49,512,478 68,156,625
CONSUMER PRODUCTS - 6.82%
NR 865,955 Grand Metropolitan PLC, ADR 25,582,266 32,256,824
A 1,406,100 Limited, Inc. 25,708,342 33,834,281
B+ 781,600 Reebok International Ltd.* 28,332,947 30,726,650
79,623,555 96,817,755
DIVERSIFIED - 8.20%
B 754,500 Dana Corp. 24,298,150 35,272,875
NR 276,000 Energy Group PLC 10,725,624 11,799,000
NR 487,000 Hanson PLC, ADR 12,264,407 12,662,000
B 1,563,100 Illinova Corp. 35,006,232 37,807,481
NR 213,400 Martin Marietta Materials, Inc. 5,893,143 7,388,975
NR 494,000 Millennium Chemicals, Inc. 9,396,666 11,362,000
97,584,222 116,292,331
ENVIRONMENTAL CONTROL - 2.39%
B+ 1,223,000 Safety-Kleen Corp. 18,904,104 33,938,250
FINANCIAL SERVICES - 12.15%
B+ 397,100 American Express Co. 16,238,369 31,321,262
A 267,100 SLM Holding Corp. 20,137,152 34,489,287
NR 716,200 Student Loan Corp. 22,842,353 35,720,475
B+ 316,600 Transamerica Corp. 22,217,006 34,370,887
A 718,680 Travelers Group, Inc. 18,159,575 36,572,002
99,594,455 172,473,913
FOREST PRODUCTS AND PAPER - 6.84%
B 650,400 Potlatch Corp. 27,151,860 31,625,700
B+ 639,800 Weyerhaeuser Co. 29,293,744 33,789,437
B+ 901,500 Willamette Industries, Inc. 27,330,734 31,665,188
83,776,338 97,080,325
HEALTH - 2.71%
B- 1,215,000 Tenet Healthcare* 27,864,000 38,500,313
INSURANCE - 7.28%
B- 441,100 Aetna, Inc. 31,717,434 33,247,913
NR 425,400 Allstate Corp. 18,983,937 36,531,225
A 168,500 General Re Corp. 24,819,943 33,447,250
75,521,314 103,226,388
OFFICE EQUIPMENT AND SUPPLIES - 4.77%
A 906,600 Wallace Computer Services, Inc. 23,324,167 31,561,013
B- 465,400 Xerox Corp. 23,187,538 36,155,763
46,511,705 67,716,776
PETROLEUM - 4.75%
B+ 409,300 Atlantic Richfield Co. 24,831,621 33,357,950
A 645,000 Royal Dutch Petroleum Co. 24,206,590 33,983,438
49,038,211 67,341,388
RETAIL - 9.00%
B+ 682,300 Harcourt General, Inc. 29,905,805 37,355,925
B+ 1,815,000 K mart Corp. 19,641,467 22,800,937
B+ 516,158 Penney (J.C.) Co., Inc. 24,773,819 33,163,151
B 751,500 Sears, Roebuck & Co. 32,859,713 34,428,094
107,180,804 127,748,107
TRANSPORTATION - 2.32%
B- 1,347,400 Overseas Shipholding Group, Inc. 24,170,131 32,927,088
UTILITIES - 2.47%
B 876,800 Texas Utilities Co. 32,205,920 35,072,000
TOTAL COMMON STOCKS - 95.66% 995,421,250 1,357,512,025
CONVERTIBLE PREFERRED STOCK - 0.76%
195,400 K mart Financing,
7.750% trust cv. pfd. 10,631,207 10,820,275
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
FACE AMOUNT DESCRIPTION COST (NOTE 1-A)
</CAPTION>
<S> <C> <C>
SHORT-TERM CORPORATE NOTES - 2.82%
$ 6,000,000 Ford Motor Credit Co.,
5.52%, due December 3, 1997 $ 6,000,000 $ 6,000,000
4,000,000 Ford Motor Credit Co.,
5.55%, due December 3, 1997 4,000,000 4,000,000
10,000,000 General Electric Credit Corp.,
5.52%, due December 10, 1997 10,000,000 10,000,000
10,000,000 General Motors Acceptance Corp.,
5.60%, due December 17, 1997 10,000,000 10,000,000
10,000,000 Sears Roebuck Acceptance Corp.,
5.50%, due December 24, 1997 10,000,000 10,000,000
TOTAL SHORT-TERM CORPORATE NOTES - 2.82% 40,000,000 40,000,000
REPURCHASE AGREEMENT - 0.42%
6,000,000 UMB Bank, n.a.,
5.00%, due December 1, 1997
(Collateralized by $5,769,000
U.S. Treasury Notes,
8.875%, due February 15, 1999) 6,000,000 6,000,000
TOTAL INVESTMENTS - 99.66% $1,052,052,457 1,414,332,300
Other assets less liabilities - 0.34% 4,844,390
TOTAL NET ASSETS - 100.00%
(equivalent to $47.73 per share; 50,000,000 shares of
$1.00 par value capital shares authorized;
29,736,424 shares outstanding) $1,419,176,690
</TABLE>
For federal income tax purposes, the identified cost of investments
owned at November 30, 1997, was $1,053,217,686.
Net unrealized appreciation for federal income tax purposes was
$361,114,614, which is comprised of unrealized
appreciation of $361,114,614 and unrealized depreciation of $0.
*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, 1997
ASSETS:
Investments in securities:
Common stocks, at market value
(identified cost $995,421,250) $1,357,512,025
Convertible preferred stock, at market value
(identified cost $10,631,207) 10,820,275
Short-term corporate notes, at cost -
approximates market value 40,000,000
Repurchase agreement, at cost -
approximates market value 6,000,000
Total investments 1,414,332,300
Cash 910,931
Dividends receivable 2,318,070
Interest receivable 96,036
Receivable for investments sold 4,138,374
Total assets 1,421,795,711
LIABILITIES AND NET ASSETS:
Payable for investments purchased 2,619,021
Total liabilities 2,619,021
NET ASSETS $1,419,176,690
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 997,584,166
Accumulated undistributed income:
Undistributed net investment income 16,435,004
Undistributed net realized gain on investment transactions 42,877,677
Net unrealized appreciation in value of investments 362,279,843
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $1,419,176,690
Capital shares, $1.00 par value
Authorized 50,000,000
Outstanding 29,736,424
NET ASSET VALUE PER SHARE $ 47.73
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year Ended November 30, 1997
INVESTMENT INCOME:
Income:
Dividends $ 20,835,098
Interest 3,657,715
24,492,813
Expenses (Note 2):
Management fees 10,674,266
Registration fees and expenses 187,021
10,861,287
Net investment income (Note 1-B) 13,631,526
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 174,740,103
Cost of investments sold 130,899,528
Net realized gain from investment transactions 43,840,575
Unrealized appreciation of investments:
Beginning of year 146,698,206
End of year 362,279,843
Unrealized appreciation of investments during the year 215,581,637
Net gain on investments 259,422,212
Increase in net assets resulting from operations $ 273,053,738
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
For The Two Years Ended November 30, 1997
<TABLE>
<CAPTION>
1997 1996
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 13,631,526 $ 7,928,024
Net realized gain from investment transactions 43,840,575 11,413,145
Unrealized appreciation of investments during the year 215,581,637 96,925,072
Net increase in net assets resulting from operations 273,053,738 116,266,241
Net equalization included in the price of shares issued and
redeemed 4,673,336 4,618,188
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (12,079,924) (6,907,769)
Net realized gain from investment transactions (12,342,336) (3,264,428)
Total distributions to shareholders (24,422,260) (10,172,197)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 676,853,774 454,682,447
Net asset value of shares issued for reinvestment of
distributions 18,924,658 7,433,742
695,778,432 462,116,189
Cost of shares repurchased (293,897,196) (102,196,414)
Net increase from capital share transactions 401,881,236 359,919,775
Total increase in net assets 655,186,050 470,632,007
NET ASSETS:
Beginning of year 763,990,640 293,358,633
End of year (including undistributed net
investment income of $16,435,004 in 1997
and $10,210,066 in 1996) $1,419,176,690 $ 763,990,640
*Shares issued and repurchased:
Number of shares sold 16,489,404 13,320,263
Number of shares issued for reinvestment of
distributions 470,074 225,544
16,959,478 13,545,807
Number of shares repurchased (6,991,116) (3,008,074)
Net increase 9,968,362 10,537,733
**Distributions to shareholders:
Income dividends per share $ .4753 $ .532
Capital gains distribution per share $ .6087 $ .3446
</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 $8,843,061 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, 1997 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Purchases $ 566,700,499
Proceeds from sales 174,740,103
FINANCIAL HIGHLIGHTS
Condensed data for a share of capital
stock outstanding throughout each year.
<TABLE>
<CAPTION>
Years Ended November 30,
1997 1996 1995 1994 1993
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 38.65 $ 31.78 $ 25.19 $ 25.36 $ 22.24
Income from investment operations:
Net investment income .511 .553 .589 .562 .543
Net gains or losses on securities
(both realized and unrealized) 9.653 7.194 7.205 .577 3.932
Total from investment operations 10.164 7.747 7.794 1.139 4.475
Less distributions:
Dividends from net investment income (.475) (.532) (.60) (.398) (1.030)
Distributions from capital gains (.609) (.345) (.604) (.911) (.325)
Total distributions (1.084) (.877) (1.204) (1.309) (1.355)
Net asset value, end of year $ 47.73 $ 38.65 $ 31.78 $ 25.19 $ 25.36
Total return 26.89% 24.91% 32.07% 4.51% 21.13%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 1,419 $ 764 $ 293 $ 120 $ 42
Ratio of expenses to average net assets .97% .96% .98% .99% 1.00%
Ratio of net investment income to average net assets 1.22% 1.63% 2.12% 2.32% 2.34%
Portfolio turnover rate 17% 11% 6% 14% 26%
Average commission paid per equity share traded $ .0562 $ .0548 - - -
</TABLE>
*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, 1997, the related statements of operations for the year then
ended and 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, 1997, 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, 1997, 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.
Ernst & Young LLP
Kansas City, Missouri
December 29, 1997
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
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
816-751-5900
1-800-4-BABSON
(1-800-422-2766)
http://www.jbfunds.com
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