Babson
Value
Fund
Annual Report
November 30, 1998
MESSAGE
To Our Shareholders
Babson Value Fund completed its fourteenth full fiscal year on November 30,
1998. In fiscal year 1998, the Fund's total return (price change and reinvested
distributions) was 3.85%. This compared with the 12.35% return for our "growth
and income" peer group in Lipper's Mutual Fund Performance Analysis, and the
10.45% 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 financial environment than existed in most of the
rest of the world. Thus the market again confounded most prognosticators by
surging 23.66% as measured
by the unmanaged Standard & Poor's 500 index. This capitalization-weighted index
continued to be driven by
extraordinary strength in a very concentrated group of large capitalization
growth stocks with very high valuations. Such stocks are not usually found in
OvalueO portfolios that stick to their style in a disciplined way.
Longer term comparisons with our peers in the Lipper and Morningstar databases
are included in the summaries on the previous page. Last year's annual report
showed the Fund in the top third of its peer groups in both databases, with the
five year return well within the top 10%. The weak relative showing this year
dropped our ranks significantly for all the longer periods. For the fiscal year
1998 the Ogrowth styleO remained in vogue, extending its period of dominance to
over five years, far longer than usual in
historical context. The extreme nature of the valuation gulf that has developed
between the market's favorites and the rest of the market (where we invest)
suggests that a shift back toward more normal premiums for the favorites could
happen.
The disappointing relative results for the past year were reflected in asset
growth, and in the number of shareholders. The number of shareholders (outside
those whose shares are held in brokerage accounts) has increased only slightly
from 34,800 to 35,212, while net assets edged up from $1,419 million last year
to $1,494 million as of the end of our fiscal year, an increase of 5.3%,
slightly more than our investment return.
In the latest fiscal year, per share net asset value eased slightly from $47.73
to $47.42. In December 1997, the Fund paid an ordinary income dividend
distribution of $0.45 and a long-term capital gain distribution of $1.15,
followed by quarterly income dividends of $0.12 in March, $0.14 in June and
$0.16 in September. Total distributions in the fiscal year amounted to $2.02 per
share. Net investment income was 1.28% of average net assets for the year.
The Funds expense ratio was 0.98% of average net assets. The average expense
ratio for the growth and income category as reported in Morningstar was 1.25%,
27% higher than Babson Value Fund. The Morningstar average for large
capitalization value funds was 1.31%, 33% 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 Oloads.O Babson Value Fund has
neither 12b-1 nor sales charges.
In December 1998, the Fund made its final distributions of the calendar year.
An ordinary income dividend of $0.15, and long-term capital gains of $1.97 per
share, totaled $2.12. Those shareholders who elected to reinvest their
distributions received their additional shares at a price of $44.68 per share.
For corporate shareholders, 100% of ordinary income distributions qualify for
the corporate
dividends received deduction.
We are particularly pleased that the Fund continued to receive attention in
leading financial publications. Babson Value Fund was included in Fortune,
Forbes, Business Week, USA Today, Money (the Money 100, June 1998), and most
recently in SmartMoney, September 1998, in the cover story, OThe 20 Best Mutual
Funds.O With over 3,400 diversified domestic equity funds to choose from, we
believe this recognition is noteworthy.
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
CHART
Babson Value Fund
Comparison with all
Lipper Growth & Income Funds
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
11/30/97 11/30/95 11/30/93 11/30/88 12/31/97 12/31/95 12/31/93 12/31/88
to to to to to to to to
11/30/98 11/30/98 11/30/98 11/30/98 12/31/98 12/31/98 12/31/98 12/31/98
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Babson Value Fund Total Return 3.85% 18.07% 17.84% 15.62% 6.07% 18.09% 17.33% 15.59%
Lipper Growth & Income Funds
Average Total Return 12.35% 20.29% 17.98% 15.50% 15.61% 21.25% 18.35% 15.53%
BVF Rank among Lipper
Growth & Income Funds 639 341 168 76 645 370 212 82
# of Lipper Growth & Income Funds 746 460 299 147 768 471 310 148
Babson Value Fund Percentile, Top 86% 74% 56% 52% 84% 79% 69% 56%
Source: Lipper Analytical
Securities Corporation
Comparison with all Morningstar
Large Capitalization Value Funds
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
11/30/97 11/30/95 11/30/93 11/30/88 12/31/97 12/31/95 12/31/93 12/31/88
to to to to to to to to
11/30/98 11/30/98 11/30/98 11/30/98 12/31/98 12/31/98 12/31/98 12/31/98
Babson Value Fund Total Return 3.85% 18.07% 17.84% 15.62% 6.07% 18.09% 17.33% 15.59%
Morningstar Large Cap. Value Funds
Average Total Return 10.45% 19.09% 17.49% 15.18% 12.34% 19.74% 17.88% 15.53%
BVF Rank among Morningstar
Large Cap. Value Funds 414 209 107 42 414 230 130 49
# of Morningstar Large Cap. Value Funds 466 318 205 105 480 327 208 104
Babson Value Fund Percentile, Top 89% 66% 52% 40% 86% 70% 63% 47%
Source: Morningstar, Inc.
</TABLE>
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.
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
OcontrarianO 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 again, we opened last year's 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 four years, and that it might
be time for a change. With benefit of hindsight we were wrong. The market
continued in its headlong pursuit of a narrow group of big, high quality growth
companies, ignoring their already high valuations, and driving them even higher.
The same observations we made a year and two years ago still apply today, only
more so.
The style preference for growth has continued now for over five years. Until now
three years was the longest time that one style remained in favor without
significant interruption since the inception of these indices at the beginning
of 1975. But we said that last year.
The chart above 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 the favored style, while a falling line shows periods when investors
preferred growth. The sharp drop in the line starting in the last six months of
our fiscal year dramatically shows the acceleration of the recent extreme focus
on growth.
The 23.66% return for the Standard & Poor's 500 stock index was driven by a few
large companies concentrated
in technology and drug industries. Returns for the largest
50 companies in the index averaged 41.7%, while the other
450 companies returned an average of only 8.7%. While this begins to tell the
story of 1998, it only scratches the surface. Among the largest 50 companies in
the S&P 500, those 29 that had current yields (dividend divided by price) lower
than the S&P 500 had returns that averaged 51.8%. Among the other 450 companies,
the 232 that had current yields equaling or higher than the S&P's 1.5% managed
to produce an average return of only 0.8%! Thus the gap between the favored few
that we call the OTitanic 29O and the OForgotten 232O was an enormous 51
percentage points.
The Titanic 29 consists of the following:
# of Avg. P/E on 1998
Sector Companies Estimated Earnings
Technology & Communications 11 50
Drugs 8 41
Consumer 8 38
Financial 2 25
While these companies surely deserve to sell at premiums, multiples as high as
these constitute a risk our discipline does not allow us to take. So long as
these market leaders continue to outperform, index funds will do well. They are
less than 6% of the companies in the S&P 500, but they represent 36% of the
capitalization of the index and provided 58% of the index's return during our
fiscal year. 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. The bulls on these stocks and the even
more outrageously valued Internet stocks justify these extreme valuations with
the observation that we are in a new era, it is different this time and the old
rules donOt apply. Every time that rationale has been used in the past it has
been proven wrong.
Most of the underperformance of the Fund can be attributed to three factors.
First, and most importantly, we had no participation in the Communication
Services sector, which was 9% of the benchmark portfolio (the S&P/BARRA Value
Index) and was the strongest sector by far, dominated by MCI Worldcom which
returned 84.4%. Second, the Fund was overweight in Consumer Cyclicals, and
results there lagged the benchmark, primarily because of weak performance in our
retail and retail related stocks. Third, the Fund was underweight relative to
the benchmark in the second strongest sector, Consumer Staples.
The stocks that comprise the benchmark's Communications Services sector possess
characteristics that eliminate them from consideration as purchase candidates
for the Fund. For example, MCI Worldcom currently had a price/earnings ratio of
80 times estimated 1998 earnings at the end of our fiscal year. It also had a
price/cash flow ratio of 47, a price/sales ratio of 9.8, and no yield. But the
stock does have a price/book ratio of 4.2, a characteristic that included it in
the S&P/BARRA Value Index. Its other valuation characteristics, however,
prevented its inclusion in the Fund. In fact it has been switched from the
S&P/BARRA Value Index to the S&P/BARRA Growth Index as of the end of the
calendar year.
Two of our technology stocks, Apple Computer (+80%) and IBM (+52%) were the best
performers for the year. Apple
continued its phoenix-like recovery throughout 1998 and shareholders were
rewarded accordingly. IBM continued to fire on
all cylinders, and increasing numbers of investors began to appreciate the very
profitable and annuity-like nature of its maintenance and software services
operations.
Reebok International (-60%) and Boeing (-23%) were among the weakest performers
for the year. We remain hopeful that new management at Reebok will help the
company turn the corner in 1999. At Boeing, the indigestion caused by too many
orders and not enough parts should be eased in 1999, and we are optimistic that
management will find creative ways to enhance shareholder value with the very
strong cash flows provided by operations.
As the end of the fiscal year approached it became apparent that the
rebalancing
that we had done during the year had realized significant capital gains. This
was particularly true for our holding of Apple Computer which rebounded from
being the weakest holding in the prior year to being the strongest holding in
the year just ended. The estimated capital gain distribution was well over
$4.00
per share. In order to minimize the distribution and the resulting tax
consequences for our taxable
shareholders, we selectively sold high cost lots of a number of our
investments,
and our entire commitments in Reebok and CSX, which were among our weakest
holdings this year. After waiting 31 days to avoid the wash sale rule, we
intend
to restore these holdings to the portfolio. As a result of these transactions
the year-end capital gain distribution was reduced to $1.97, less than half of
what it would have been. While these transactions increased our turnover ratio
this year to an above normal 42%, the benefits of reducing the distribution
made
that worthwhile. We have a reputation as a tax-efficient fund, and we plan to
manage the Fund to maintain that reputation.
The Fund continues to have attractive valuation characteristics. The average
price/earnings ratio based on estimated earnings for 1999 for the companies
held is 16.1 compared to
24.5 times for the S&P 500. The average price/book ratio is 2.7 compared to 4.3
for the S&P 500. Also, the Fund's gross yield continues to be higher and its
volatility remains lower than
corresponding figures for the market. We continue to believe that the market's
focus will ultimately shift from growth stocks that have led the market for so
long to investments with more reasonable valuations of earnings and assets such
as those that characterize our Value strategy. When that occurs, the Fund
should provide more satisfying positive returns in absolute and relative terms.
David L. Babson & Co. Inc.
CHART D Value Style vs. Growth Style of Investing
S&P/BARRA Value Index divided
by S&P/BARRA Growth Index
CHART D Babson Value Fund versus S&P 500
Babson Value Fund's average annual compounded return for one, five and
ten year periods as of November 30, 1998, were 6.07%, 17.33% and 15.59%
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, 1998
MARKET VALUE
SHARES COMPANY (NOTE 1-A)
COMMON STOCKS - 90.40%
AEROSPACE - 3.47%
495,700 Boeing Co. $ 20,137,813
305,000 Lockheed Martin Corp. 31,643,750
51,781,563
AIRLINES - 2.13%
1,124,382 KLM Royal Dutch Airlines 31,763,791
BANKS - 13.22%
696,000 Chase Manhattan Corp. 44,152,500
950,000 Diageo PLC, ADR 43,403,125
526,700 National City Corp. 35,420,575
1,062,700 U.S. Bancorp. 39,120,644
982,330 Wells Fargo & Co. 35,363,880
197,460,724
CHEMICALS - 2.33%
593,100 duPont (E.I.) deNemours & Co. 34,844,625
COMPUTER SOFTWARE - 2.83%
936,600 United Healthcare Corp.* 42,264,075
COMPUTER SYSTEMS - 5.19%
1,150,200 Apple Computer, Inc.* 36,734,512
247,400 International Business
Machines Corp. 40,821,000
77,555,512
CONSUMER PRODUCTS - 2.67%
1,378,100 Limited, Inc. 39,878,769
DIVERSIFIED - 12.23%
778,680 Citigroup, Inc. 39,080,002
820,200 Dana Corp. 31,987,800
562,100 Hanson PLC, ADR 20,867,963
1,528,800 Illinova Corp. 41,373,150
169,400 Martin Marietta Materials, Inc. 8,215,900
786,000 Millennium Chemicals, Inc. 18,765,750
918,000 USX-U.S. Steel Group 22,433,625
182,724,190
FINANCIAL SERVICES - 9.56%
396,100 American Express Co. 39,634,756
937,850 SLM Holding Corp. 41,265,400
628,200 Student Loan Corp. 28,504,575
314,600 Transamerica Corp. 33,426,250
142,830,981
FOREST PRODUCTS AND PAPER - 7.81%
985,100 Potlatch Corp. 37,249,094
750,800 Weyerhaeuser Co. 37,633,850
1,193,300 Willamette Industries, Inc. 41,690,919
116,573,863
HEALTH - 1.68%
848,000 Tenet Healthcare* 25,069,000
INSURANCE - 7.95%
512,100 Aetna, Inc. 39,591,731
941,800 Allstate Corp. 38,378,350
174,500 General Re Corp. 40,745,750
118,715,831
OFFICE EQUIPMENT AND SUPPLIES - 5.09%
1,530,900 Wallace Computer Services, Inc. 34,349,569
387,400 Xerox Corp. 41,645,500
75,995,069
PETROLEUM - 3.20%
376,300 Atlantic Richfield Co. 25,023,950
485,500 Royal Dutch Petroleum Co. 22,818,500
47,842,450
RETAIL - 7.58%
746,800 Harcourt General, Inc. 38,646,900
1,419,000 Kmart Corp. 21,639,750
471,158 Penney (J.C.) Co., Inc. 25,913,690
570,500 Sears, Roebuck & Co. 27,063,094
113,263,434
TRANSPORTATION - 0.81%
766,090 Overseas Shipholding Group, Inc. 12,113,798
UTILITIES - 2.65%
888,200 Texas Utilities Co. 39,580,412
TOTAL COMMON STOCKS - 90.40% 1,350,258,087
(COST $1,041,418,332)
CONVERTIBLE PREFERRED STOCK - 0.96%
245,400 Kmart Financing,
7.750% trust cv. pfd. 14,401,913
(COST $16,278,152)
FACE MARKET VALUE
AMOUNT DESCRIPTION (NOTE 1-A)
SHORT-TERM CORPORATE NOTES - 4.69%
$ 20,000,000 Ford Motor Credit Co.,
4.90%, due 12/2/98 $ 20,000,000
10,000,000 General Electric Credit Corp.,
4.92%, due 12/9/98 10,000,000
10,000,000 General Motors Acceptance Corp.,
4.83%, due 12/16/98 10,000,000
10,000,000 Sears Roebuck Acceptance Corp.,
4.70%, due 12/2/98 10,000,000
20,000,000 Sears Roebuck Acceptance Corp.,
4.75%, due 12/9/98 20,000,000
TOTAL SHORT-TERM
CORPORATE NOTES - 4.69% 70,000,000
(COST $70,000,000)
TOTAL INVESTMENTS - 96.05% 1,434,660,000
(COST $1,127,696,484)
Other assets less liabilities - 3.95% 58,935,761
TOTAL NET ASSETS - 100.00%
(equivalent to $47.42 per share;
50,000,000 shares of $1.00 par
value capital shares authorized;
31,497,616 shares outstanding) $ 1,493,595,761
For federal income tax purposes, the identified cost of investments owned at
November 30, 1998, was $1,129,400,704.
Net unrealized appreciation for federal income tax purposes was $305,259,296,
which is comprised of unrealized appreciation of $320,926,072 and unrealized
depreciation of $15,666,776.
* Non-income producing security
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
November 30, 1998
ASSETS:
Investments in securities:
Common stocks, at market value
(identified cost $1,041,418,332) $ 1,350,258,087
Convertible preferred stock, at market value
(identified cost $16,278,152) 14,401,913
Short-term corporate notes, at cost -
approximates market value 70,000,000
Total investments 1,434,660,000
Cash 53,431,585
Dividends receivable 4,055,868
Interest receivable 65,713
Receivable forinvestments sold 1,382,595
Total assets 1,493,595,761
NET ASSETS $ 1,493,595,761
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 1,117,951,527
Accumulated undistributed income:
Undistributed net investment income 17,971,173
Undistributed net realized gain on investment transactions 50,709,545
Net unrealized appreciation in value of investments 306,963,516
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 1,493,595,761
Capital shares, $1.00 par value:
Authorized 50,000,000
Outstanding 31,497,616
NET ASSET VALUE PER SHARE $ 47.42
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year Ended November 30, 1998
INVESTMENT INCOME:
Income:
Dividends $ 31,990,298
Interest 2,871,616
34,861,914
Expenses (Note 2):
Management fees 14,844,242
Registration fees and expenses 203,596
15,047,838
Net investment income (Note 1-B) 19,814,076
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain from investment transactions
(excluding maturities of short-term commercial notes and
repurchase agreements):
Proceeds from sales of investments 646,284,901
Cost of investments sold 571,010,774
Net realized gain from investment transactions 75,274,127
Unrealized appreciation (depreciation) of investments:
Beginning of year 362,279,843
End of year 306,963,516
Unrealized depreciation of investments during the year (55,316,327)
Net gain on investments 19,957,800
Increase in net assets resulting from operations $ 39,771,876
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
For Each Of The Two Years In The Period Ended November 30, 1998
<TABLE>
<CAPTION>
1998 1997
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 19,814,076 $ 13,631,526
Net realized gain from investment transactions 75,274,127 43,840,575
Unrealized appreciation (depreciation) of investments during the year (55,316,327) 215,581,637
Net increase in net assets resulting from operations 39,771,876 273,053,738
Net equalization included in the price of shares issued and redeemed 1,006,045 4,673,336
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (17,864,102) (12,079,924)
Net realized gain from investment transactions (43,880,177) (12,342,336)
Total distributions to shareholders (61,744,279) (24,422,260)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 513,525,592 676,853,774
Net asset value of shares issued for reinvestment of distributions 49,896,402 18,924,658
563,421,994 695,778,432
Cost of shares repurchased (468,036,565) (293,897,196)
Net increase from capital share transactions 95,385,429 401,881,236
Total increase in net assets 74,419,071 655,186,050
NET ASSETS:
Beginning of year 1,419,176,690 763,990,640
End of year (including undistributed net investment income
of $17,971,173 in 1998 and $16,435,004 in 1997) $ 1,493,595,761 $ 1,419,176,690
*Shares issued and repurchased:
Number of shares sold 10,704,578 16,489,404
Number of shares issued for reinvestment of distributions 1,109,576 470,074
11,814,154 16,959,478
Number of shares repurchased (10,052,962) (6,991,116)
Net increase 1,761,192 9,968,362
**Distributions to shareholders:
Income dividends per share $ .5550 $ .4753
Capital gains distribution per share $ 1.4650 $ .6087
</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. Securities with maturities of 60
days or less when acquired or subsequently within 60 days of maturity are
valued at amortized cost, which approximates market value.
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 $57,889,522 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. Distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
amounts related to redemptions of shares as a part of the deduction for
dividends paid for income tax purposes. 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, 1998 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Purchases $ 622,654,801
Proceeds from sales 646,284,901
FINANCIAL HIGHLIGHTS
Condensed data for a share of capital stock outstanding throughout each year.
<TABLE>
<CAPTION>
Years Ended November 30,
1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 47.73 $ 38.65 $ 31.78 $ 25.19 $ 25.36
Income from investment operations:
Net investment income .618 .511 .553 .589 .562
Net gains or losses on securities
(both realized and unrealized) 1.092 9.653 7.194 7.205 .577
Total from investment operations 1.710 10.164 7.747 7.794 1.139
Less distributions:
Dividends from net investment income (.555) (.475) (.532) (.600) (.398)
Distributions from capital gains (1.465) (.609) (.345) (.604) (.911)
Total distributions (2.020) (1.084) (.877) (1.204) (1.309)
Net asset value, end of year $ 47.42 $ 47.73 $ 38.65 $ 31.78 $ 25.19
Total return 3.85% 26.89% 24.91% 32.07% 4.51%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 1,494 $ 1,419 $ 764 $ 293 $ 120
Ratio of expenses to average net assets .98% .97% .96% .98% .99%
Ratio of net investment income to average net assets 1.28% 1.22% 1.63% 2.12% 2.32%
Portfolio turnover rate 42% 17% 11% 6% 14%
</TABLE>
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. (the Fund) as of
November 30, 1998, 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 and financial highlights. Our procedures included confirmation of
investments owned as of November 30, 1998, by correspondence with the
custodian.
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 the
Fund at November 30, 1998, 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.
Enrst & Young LLP
Kansas City, Missouri
December 30, 1998
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.
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
816-751-5900
1-800-4-BABSON
(1-800-422-2766)
www.babsonfunds.com
JB4C-2 1/99
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