BABSON FUNDS
ANNUAL REPORT
June 30, 1999
EQUITIES
Enterprise Fund
Enterprise Fund II
Growth Fund
Shadow Stock Fund
Value Fund
International Fund
FIXED INCOME
Bond Trust
Money Market Fund
Tax-Free Income Fund
BABSON FUNDS
Jones & Babson Distributors
A Member of the Generali Group
Table of
Contents
Economic Review 1
Babson Enterprise Fund 2
Babson Enterprise Fund II 5
Babson Growth Fund 8
Shadow Stock Fund 11
Babson Value Fund 16
Babson-Stewart Ivory
International Fund 19
Babson Bond Trust 23
Babson Bond Trust
Portfolio L 25
Babson Bond Trust
Portfolio S 29
Babson Money Market Fund 33
Babson Money Market Fund
Prime 34
Babson Money Market Fund
Federal 35
Babson Tax-Free Income Fund 36
Babson Tax-Free Income Fund
Portfolio L 37
Babson Tax-Free Income Fund
Portfolio S 39
Babson Tax-Free Income Fund
Portfolio MM 41
Statements of Assets
and Liabilities 44
Statements of Operations 46
Statements of Changes
in Net Assets 48
Notes to Financial Statements 52
Financial Highlights 56
Report of Ernst & Young LLP,
Independent Auditors 63
Message to our Shareholders
We are pleased to bring you the first combined annual statement
of the Babson Family of Funds, which includes fiscal year-end
reports for each of the Babson Funds. Previous annual reports
were printed individually, and were supplied only to shareholders
of each respective fund. We believe it will be beneficial for
fund
shareholders to receive reports on all of the Babson Funds, and
we expect the combined report to result in printing and mailing
efficiencies, and enhanced shareholder servicing.
The combined annual report was made possible by our recent
decision to standardize the fiscal year of the various Babson
Funds to June 30. This date was selected both because many of the
Babson Funds already used that fiscal year-end, and also because
it moved fiscal year-end audit work away from calendar year-end.
The common year-end should be beneficial for various reasons,
including the possibility of combined fund prospectuses and
standardized dates for fiscal year-end distributions.
Shareholders who have not had a chance to invest in Babson
Enterprise Fund in recent years can now take part. The Fund has
been temporarily reopended as of July 1, 1999.
These changes were made with our ultimate goal in mind - how can
we best serve our Babson shareholder base? We understand that
there are many other investment opportunities available, and we
are alert for enhancements that will make your experience with us
both profitable and pleasurable.
Thank you for your interest and participation in the Babson
Funds. We welcome your comments and questions.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
ECONOMIC REVIEW
The two year tug of war between strength at home and weakness
abroad may be coming to an end. The result could be more
moderate, but better balanced, growth for the U.S. economy.
Although the Asian economies' recovery will be a long and arduous
process, their freefall has stopped (as shown at right). This
improvement, from a sharply negative to a flat growth rate, means
that these countries' currencies are no longer imploding. The
weakness of the Asian currencies played havoc with U.S.
manufacturers over the past few years, causing demand for U.S.
exports to plummet while inexpensive imports flooded this
country. The stabilization of these currencies has led to the
beginning of a modest improvement in American manufacturing.
While the U.S. economy is no longer being weighted down by
foreign factors, strong domestic demand, a prime factor in the
current robust economic growth, may also be in the process of
being tempered. The Federal Reserve lowered short-term rates by
three-quarters of a percent last fall when the Asian crisis
threatened to pull down the U.S. economy. Lower rates caused a
surge in consumer spending as homeowners refinanced their
mortgages in droves, permanently lowering their monthly mortgage
payments and freeing up money for other outlays. With foreign
economies having stopped deteriorating, the Fed took away some of
last fall's stimulus by raising rates one-quarter of a percent on
June 30. More significantly, long-term interest rates, which are
determined by the market, rose a full percent during the first
half of 1999 in response to the strong U.S. economy and a better
overseas situation. Mortgage refinancings have plummeted in
response to higher rates, indicating that there will be less of a
"kick" to consumption in the coming months (as shown at right).
A modest slowdown in growth would be good for the economy. While
impressive productivity gains have held inflation in check, the
strength of demand has been outstripping the growth of the labor
force. If that trend continues, inflationary forces could build
to the point where the expansion would be threatened. By taking
some modest pre-emptive action, the Fed hopes that a little steam
will be let out of the economy, allowing growth to continue for a
much longer time than would otherwise be the case.
David L. Babson & Co. Inc.
CHART - JAPANESE GDP YEAR-TO-YEAR PERCENT CHANGE
CHART - MORTGAGE REFINANCINGS VERSUS RATES
BABSON ENTERPRISE FUND
Babson Enterprise Fund achieved a solid total return (price
change and reinvested distributions) of 18.9% in the most recent
fiscal quarter ended
June 30, 1999. During the same period, the small capitalization
stocks in the unmanaged Russell
2000 index rose 15.6% while the large capitalization stocks in
the unmanaged Standard & Poor's 500 index rose 7.1%. The Fund's
strong second quarter follows a period of disappointing relative
performance in the first fiscal quarter which brings the total
return year-to-date through June 30, 1999 to 3.2%. This compares
to 9.3% for the Russell 2000 and 12.4% for the S&P's 500.
The first quarter saw a continuation of last year's keen investor
focus on a narrow group of large cap stocks. This has propelled
not just the large cap S&P 500 index but also the small cap
Russell 2000 index, which contains a number of the largest
Internet stocks. These stocks have sky-rocketed well beyond small
cap status with E*Trade and CMGI being two of the largest, each
with a market cap of more than $8 billion!
The tide has begun to turn in the last few months. Many Internet
stocks are down significantly from their highs and small cap
stocks have outperformed since early April. Even more encouraging
is the recent performance of the very small cap names in Babson
Enterprise Fund. From April 26, 1999 to June 30, 1999, the Fund
rose 13%, far surpassing the Russell 2000's 5% return and the S&P
500's 1% return.
The outperformance of large cap stocks over the last few years
has resulted in a large valuation gap between the largest and
smallest stocks. These compelling valuations have not gone
unnoticed with six of the portfolio holdings receiving buyout
offers from other companies this year at significant premiums. We
believe the portfolio is currently well positioned with both
bargain-basement valuations and strong earnings prospects.
The following companies were added to the portfolio in the first
half of 1999:
Aavid Thermal Technologies - provides thermal management
solutions for electrical components.
Catherine's Stores - operates large-size women's apparel stores.
Cubic - designs and manufactures public transit revenue
collection systems.
Cuno - manufactures liquid and gas filtration products for the
healthcare and industrial fluid processing industries.
Dayton Superior - manufactures concrete forming systems.
Enesco Group - sells branded gifts and collectibles.
Haven Bancorp - New York-based Savings and Loan with most of its
branch offices in supermarkets.
Interface - manufactures carpet tile for the commercial and
institutional markets.
Petco Animal Supplies - operates pet supply stores.
Styling Technology - manufactures salon/spa personal care
products.
Zygo - designs high precision measurement tools.
Nine positions were liquidated during the quarter. CATS Software,
Daniel Industries, Defiance, Shelby Williams, Vermont Financial,
and Walbro were all buyout related sales or tenders. Shelby
Williams was acquired by another company in the portfolio, Falcon
Products, Arctic Cat, Brady, and Tab Products were liquidated
during the last six months due to adverse assessments of future
earnings prospects relative to existing market valuations.
CHART - BABSON ENTERPRISE FUND
VERSUS RUSSELL 2000
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON ENTERPRISE FUND
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 95.07%
BASIC MATERIALS - 3.34%
175,000 Furon Co. $ 3,325,000
114,250 Penford Corp. 1,856,562
CAPITAL GOODS - 24.63%
158,900 ABC-Naco, Inc.* 3,257,450
216,400 American Precision Industries, Inc.* 2,326,300
150,626 Athey Products Corp.* 320,080
357,500 Brown & Sharpe Manufacturing Co. Cl. A* 1,943,906
120,800 Channell Commercial Corp.* 1,208,000
197,700 Chicago Bridge & Iron Co. 2,755,444
231,900 Congoleum Corp. Cl. A* 1,666,781
219,425 Corrpro Companies, Inc.* 1,892,540
9,500 Cubic Corp.* 233,938
1,300 Cuno, Inc.* 24,862
108,400 Dayton Superior Corp.* 2,012,175
186,300 EDO Corp. 1,350,675
90,400 Engineered Support Systems, Inc. 1,067,850
46,300 Farrell Corp. 95,494
165,800 Flir Systems, Inc.* 2,507,725
131,900 Instron Corp. 2,670,975
96,200 K-Tron International, Inc.* 1,695,525
446,800 Lamson & Sessions Co.* 2,680,800
186,165 Newcor, Inc.* 907,554
196,200 Schawk, Inc. Cl. A 1,753,537
73,600 Starrett (L.S.) Co. Cl. A 1,978,000
49,200 Terex Corp.* 1,497,525
123,100 TransTechnology Corp. 2,423,531
38,270,667
CONSUMER CYCLICAL - 14.44%
108,500 Baldwin Piano & Organ Co.* 895,125
57,000 Catherine's Stores Corp.* 705,375
1,100 Enesco Group, Inc.* 25,438
99,200 Fab Industries, Inc. 1,531,400
241,870 Falcon Products, Inc. 2,464,051
206,800 Gottschalks, Inc.* 1,887,050
194,400 Helen of Troy Ltd.* 3,487,050
10,200 Interface, Inc.* 87,975
204,400 Jacobson Stores, Inc.* 1,481,900
239,900 MDC Corp. Cl. A* 2,908,788
51,550 Oneida Ltd. 1,449,844
82,200 Petco Animal Supplies, Inc.* 1,294,650
70,600 Pulaski Furniture Corp. 1,438,475
318,100 Spartan Motors, Inc. 1,829,075
106,200 Swiss Army Brands, Inc.* 942,525
22,428,721
CONSUMER STAPLES - 6.01%
54,500 Genesee Corp. Cl. B 1,444,250
119,300 J & J Snack Foods Corp.* 2,863,200
36,700 Marsh Supermarkets, Inc. Cl. A 532,150
84,700 Marsh Supermarkets, Inc. Cl. B 995,225
207,200 Northland Cranberries, Inc. Cl. A 1,748,250
51,800 Styling Technology Corp.* 673,400
93,600 Sylvan, Inc.* 1,088,100
9,344,575
ENERGY - 6.24%
588,500 Kaneb Services, Inc.* 2,501,125
317,900 Matrix Service Co.* 1,311,338
94,600 Petroleum Helicopters, Inc. (non-voting) 1,158,850
73,700 Petroleum Helicopters, Inc. (voting) 962,706
328,700 Tokheim Corp.* 3,759,506
9,693,525
FINANCIAL - 3.02%
107,775 Capital Corp. of the West* 1,347,188
65,400 Cass Commercial Corp. 1,602,300
2,100 Haven Bancorp, Inc.* 33,600
124,000 Sterling Financial Corp.* 1,712,750
4,695,838
HEALTH CARE - 0.90%
175,375 Penwest Pharmaceutical Co.* 1,403,000
MISCELLANEOUS - 9.11%
132,300 Alltrista Corp.* 4,365,900
98,900 Andersons, Inc. 1,260,975
342,383 Jason, Inc.* 2,739,064
208,800 Kaman Corp. Cl. A 3,275,550
63,000 Sea Containers Ltd. Cl. A 2,114,437
12,000 Sea Containers Ltd. Cl. B 403,500
14,159,426
TECHNOLOGY - 21.02%
18,000 Aavid Thermal Technologies* 407,250
146,700 CEM Corp.* 1,100,250
39,634 CSP, Inc.* 262,575
231,000 Cerprobe Corp. 2,310,000
300,400 Ennis Business Forms, Inc. 2,572,175
221,800 ESCO Electronics Corp.* 2,841,812
127,400 INSO Corp.* 684,775
87,400 Landauer, Inc. 2,578,300
219,000 MSC Software Corp.* 1,272,938
148,100 Nashua Corp.* 1,462,488
79,700 New England Business Service, Inc. 2,460,737
137,700 Nichols Research Corp.* 3,012,188
172,700 Norstan, Inc.* 2,147,956
368,800 Spectrum Control, Inc.* 2,696,850
465,600 Titan Corp.* 5,121,600
151,600 Zygo Corp.* 1,733,925
32,665,819
TRANSPORTATION & SERVICES - 4.84%
90,200 ABM Industries, Inc. 2,768,013
132,800 International Shipholding Corp. 1,909,000
204,600 Railtex, Inc.* 2,838,825
7,515,838
UTILITIES - 1.52%
51,600 E'town Corp. 2,360,700
TOTAL COMMON STOCKS 147,719,671
(Cost $133,854,150)
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 6.82%
$10,600,000 UMB Bank, n.a.,
4.29%, due July 1, 1999
(Collateralized by Federal National
Mortgage Association Discount Notes,
due July 19, 1999 with a value
of $7,413,464 and U.S. Treasury Notes,
6.25%, due August 31, 2000
with a value of $3,397,834)
(Cost $10,600,000) 10,600,000
TOTAL INVESTMENTS - 101.89% 158,319,671
(Cost $144,454,150)
Other assets less liabilities - (1.89%) (2,940,260)
TOTAL NET ASSETS - 100.00% $ 155,379,411
For federal income tax purposes, the identified cost of
investments owned at June 30, 1999 was $144,646,780.
Net unrealized appreciation for federal income tax purposes was
$13,672,891, which is comprised of unrealized appreciation of
$33,221,763 and unrealized depreciation of $19,548,872.
*Non-income producing security
See accompanying Notes to Financial Statements.
BABSON ENTERPRISE FUND II
Babson Enterprise Fund II completed the second quarter, 1999 with
a total return (price change and reinvested distributions) of
17.5%, compared to 15.6% for the unmanaged Russell 2000 index of
small company stocks. This followed a period of less favorable
relative performance in the first quarter so that the Fund's
total return for the first half of 1999 was 7.8% versus 9.3% for
the Russell 2000 index.
The Fund maintains a sizable advantage over the small cap
benchmark for the three years ended June 30, 1999 with an average
annual total return of 14.5% versus 11.2% for the Russell 2000.
This superior longer term performance is one of the factors which
led Standard & Poor's to recently select Babson Enterprise Fund
II as one of 19 mutual funds, out of a universe of 257 small-
capitalization value funds, to be awarded a Standard & Poor's
Select Fund designation (July 1999) for small cap value
investing. We are proud of this prestigious designation and will
continue to strive to merit it.
The second quarter, 1999 was especially important to small cap
investors because it marked the first time since the third
quarter of 1997 that small cap stocks outperformed large caps,
based on their benchmark indexes. In the second quarter, the
Russell 2000's 15.6% return compared favorably to the S&P 500's
7.1% performance. The small cap sector benefited during the
quarter from a rotation to cyclical stocks and to increased
merger and acquisition activity as larger companies are taking
advantage of the extremely attractive relative valuations of
smaller companies to buy growth cheaply. The increased buyout
activity has not only boosted the value of targeted small cap
stocks, but is refocusing investors' attention on the broader
market where other neglected small businesses possess a
compelling combination of earnings power and valuation. Even with
the resurgence of small cap stocks in the second quarter,
valuations relative to large caps remain near 25-year lows.
Five new holdings were added to the Babson Enterprise Fund II
portfolio in the six-month period. All five trade at attractive
valuations while possessing the potential for meaningful
earnings acceleration. Helen of Troy markets brand name hair care
appliances and other personal care products and has an
outstanding record for strong, consistent earnings growth. Metals
USA processes metals and manufactures components from processed
metals for a diverse client base. S.L. Green Realty is a real
estate investment trust focusing on Class B office property in
New York City. Stein Mart is an apparel and accessories retailer
offering current-season, brand name merchandise at prices 25% to
60% below traditional department stores. Titan is a high
technology defense contractor with exciting commercial
application potential for a number of its proprietary products.
Nine positions were liquidated in the first half of 1999.
Calmat, Elsag Bailey, and Life USA were objects of corporate
buyout offers at significant premiums to their public market
valuations. Calenergy, Charming Shoppes, Flowserve, Halter
Marine, PRI Automation, and Scitex were all sold due to concerns
about future earnings prospects relative to their stock
valuations.
Within the small cap sector, we believe the Fund's portfolio is
well positioned with a strong value orientation.
CHART - BABSON ENTERPRISE FUND II
VERSUS S&P 500 AND RUSSELL 2000
Standard & Poor's Select Funds is a ranking of mutual funds on a
semiannual basis which have demonstrated above-average absolute
and volatility-adjusted returns relative to funds with the same
investment style along with investment management attributes
which are consistent with the fund's investment style.
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON ENTERPRISE FUND II
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 99.25%
BASIC MATERIALS - 10.19%
108,500 Apogee Enterprises, Inc. $ 1,457,969
47,800 Brush Wellman, Inc. 866,375
223,400 Interface, Inc. Cl. A 1,926,825
61,200 Metals USA, Inc.* 780,300
60,700 New England Business Service, Inc. 1,874,113
54,198 Wausau-Mosinee Paper Corp. 975,564
7,881,146
CAPITAL GOODS - 16.90%
66,100 Commscope, Inc.* 2,032,575
114,100 Cuno, Inc.* 2,182,163
76,400 Foster Wheeler Corp. 1,079,150
113,400 Gerber Scientific, Inc. 2,501,887
110,400 Herman Miller, Inc. 2,318,400
152,300 MagneTek, Inc.* 1,608,669
41,900 Roper Industries, Inc. 1,340,800
13,063,644
CONSUMER CYCLICAL - 32.55%
60,000 AC Nielsen Corp.* 1,815,000
121,800 BJ's Wholesale Club, Inc.* 3,661,612
81,200 Central Newspapers, Inc. Cl. A 3,055,150
49,100 Enesco Group, Inc. 1,135,437
49,900 Exide Corp. 736,025
34,900 Helen of Troy Ltd.* 626,019
90,900 Huffy Corp. 1,272,600
105,300 La-Z Boy Chair Co. 2,421,900
35,700 Lee Enterprises, Inc. 1,088,850
28,000 Libbey, Inc. 812,000
135,200 Petco Animal Supplies, Inc.* 2,129,400
83,200 Stein Mart, Inc.* 780,000
147,100 Stride Rite Corp. 1,516,969
100,200 Sturm, Ruger & Company, Inc. 1,070,887
101,300 True North Communications, Inc. 3,039,000
25,160,849
CONSUMER STAPLES - 3.02%
40,000 Alberto-Culver Co. Cl. A 912,500
127,175 PSS World Medical, Inc.* 1,422,770
2,335,270
ENERGY - 3.25%
102,900 Nabors Industries, Inc.* 2,514,619
FINANCIAL - 12.00%
15,800 BancFirst Corp. 541,150
182,208 Cash America International, Inc. 2,345,928
56,631 Commerce Bancorp, Inc. 2,420,975
24,860 Community Trust Bancorporation, Inc. 581,103
98,600 Golden State Bancorp, Inc.* 2,169,200
30,200 Golden State Bancorp, Inc.
Litigation Tracking Warrants* 39,637
34,500 Haven Bancorp, Inc. 552,000
30,600 S.L. Green Realty Corp. 625,388
9,275,381
MISCELLANEOUS - 10.52%
72,000 Carlisle Companies, Inc. 3,465,000
110,500 Kaman Corp. Cl. A 1,733,469
84,300 Sea Containers Ltd. Cl. A 2,829,319
3,200 Sea Containers Ltd. Cl. B 107,600
8,135,388
TECHNOLOGY - 9.20%
84,500 Adaptive Broadband Corp.* 1,848,438
76,200 Exar Corp. Delaware* 1,885,950
116,500 Information Resources, Inc.* 1,019,375
27,500 Newport News Shipbuilding, Inc. 811,250
55,300 Titan Corp.* 608,300
31,300 Xircom, Inc.* 940,956
7,114,269
TRANSPORTATION & SERVICES - 1.62%
57,100 Circle International Group, Inc. 1,249,062
TOTAL COMMON STOCKS
(Cost $61,012,748) 76,729,628
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 0.94%
$725,000 UMB Bank, n.a.,
4.29%, due July 1, 1999
(Collateralized by Federal
National Mortgage Association
Discount Notes, due July 19, 1999
with a value of $740,050)
(Cost $725,000) 725,000
TOTAL INVESTMENTS - 100.19%
(Cost $61,737,748) 77,454,628
Other assets less liabilities - (0.19%) (145,592)
TOTAL NET ASSETS - 100.00% $ 77,309,036
For federal income tax purposes, the identified cost of
investments owned
at June 30, 1999 was $61,743,735.
Net unrealized appreciation for federal income tax purposes was
$15,710,893, which is comprised of unrealized appreciation of
$20,584,905 and unrealized depreciation of $4,874,012.
*Non-income producing security
See accompanying Notes to Financial Statements.
BABSON GROWTH FUND
Babson Growth Fund achieved a total return (price change and
reinvested distributions) of 3.0% in the second calendar quarter
ended June 30, 1999. During the same period, growth stocks in the
unmanaged Russell 1000 Growth index rose 3.9% and the average
growth fund (1,216 total) as measured by Lipper Analytical
Services increased by 7.1%. Over the past year Babson Growth Fund
increased by 17.0% on a total return basis, just below the 18.9%
return of the average growth fund tracked by Lipper.
Sector rotation was prolific and severe in the beginning of the
second calendar quarter. Stable, high quality growth stocks were
marked down considerably as investor sentiment turned on a dime
and shifted toward value-oriented cyclical stocks that have
underperformed the broader market for the past several years.
Growth stocks in the S&P 500 index increased by 3.8% in the
second quarter, while value-oriented stocks in the index advanced
10.8% during the same time period.
Business trends in many parts of the technology and
communications sectors have been very strong in 1999, following a
cyclical downturn in 1998. Semiconductor companies and
communication chip companies in particular have been big
contributors to returns in recent months. Four out of our top
five performing investments in the second quarter were in the
semiconductor industry: Analog Devices (analog semiconductors, up
69%), Microchip Technology (microcontrollers, up 37%), KLA-Tencor
(semiconductor manufacturing equipment, up 34%) and Vitesse
Semiconductor (high speed communications semiconductors, up 33%).
Other top performers Linear Technology and Maxim Integrated
Products were eliminated from the Fund during the quarter due to
lofty valuations.
Stocks in the healthcare sector, and the pharmaceutical industry
in particular, have underperformed the market so far this year by
15% as three factors came together in the second quarter: 1) an
improved profit outlook for cyclical industries, 2) rising
interest rates and 3) credible proposals for a Medicare drug
benefit. Most of our large investments in the healthcare sector
underperformed the market in the second quarter, including Pfizer
(pharmaceuticals, down 21%), Guidant (medical devices, down 16%)
and American Home Products (pharmaceuticals, down 12%). At the
end of the day it is quite clear to us that the pharmaceutical
industry is one of the most attractive businesses in America
today. Drug company products serve the general good, are
protected
from competing products with patents and are very research
intensive, thus providing steep barriers to entry. We feel very
confident in the prospects for the pharmaceutical industry longer
term.
FUND COMPOSITION
TOP TEN HOLDINGS: % OF TOTAL
Cardinal Health 5.03
Vitesse Semiconductor 4.62
Federal Home Loan Mortgage 4.07
Microchip Technology 3.66
MCI Worldcom 3.63
Boston Scientific 3.56
Guidant 3.58
Analog Devices 3.42
American Home Products 3.40
Safeway 3.10
Total 38.07%
Total Securities in Portfolio 40
As of June 30, 1999, statement of assets. Subject to change.
CHART - BABSON GROWTH FUND
VERSUS S&P 500 AND VALUE LINE
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON GROWTH FUND
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 99.56%
BASIC MATERIALS - 1.84%
229,000 Monsanto Co. $ 9,031,187
CAPITAL GOODS - 7.64%
105,000 General Electric Co. 11,865,000
569,900 Herman Miller, Inc. 11,967,900
1,327,600 MSC Industrial Direct, Inc. Cl. A* 13,607,900
37,440,800
CONSUMER CYCLICAL - 4.00%
240,200 CVS Corp. 12,190,150
336,000 Office Depot, Inc.* 7,413,000
19,603,150
CONSUMER STAPLES - 11.58%
71,900 Anheuser-Busch Cos., Inc. 5,100,406
199,800 Gillette Co. 8,191,800
236,000 PepsiCo, Inc. 9,130,250
256,600 Philip Morris Cos., Inc. 10,312,112
307,000 Safeway, Inc.* 15,196,500
370,100 Service Corp. International 7,124,425
19,400 Wrigley William Jr. Co. 1,746,000
56,801,493
ENERGY - 2.02%
100,000 Mobil Corp. 9,900,000
FINANCIAL - 13.88%
129,450 American International
Group, Inc. 15,153,741
110,000 BankAmerica Corp. 8,064,375
3,465 Berkshire Hathaway, Inc. Cl. B* 7,761,600
344,500 Federal Home Loan
Mortgage Corp. 19,981,000
234,000 Mellon Bank Corp. 8,511,750
269,812 Paychex, Inc. 8,600,257
68,072,723
HEALTH CARE - 24.88%
290,000 American Home Products Corp. 16,675,000
397,700 Boston Scientific Corp.* 17,473,944
169,800 Bristol-Myers Squibb Co. 11,960,287
384,250 Cardinal Health, Inc. 24,640,031
341,300 Guidant Corp.* 17,555,619
731,400 Health Management Associates,
Inc. Cl. A* 8,228,250
186,800 Pharmacia & UpJohn, Inc. 10,612,575
135,500 Pfizer, Inc. 14,871,125
122,016,831
MEDIA & ENTERTAINMENT - 4.37%
330,800 A T & T Corp.* 12,156,900
300,177 Walt Disney Co. 9,249,204
21,406,104
TECHNOLOGY - 29.35%
334,200 Analog Devices, Inc.* 16,772,663
215,200 Automatic Data Processing, Inc. 9,468,800
1,023,200 Cadence Design Systems, Inc.* 13,045,800
161,100 Cisco Systems, Inc.* 10,390,950
427,000 Etec Systems, Inc.* 14,197,750
282,500 KLA-Tencor Corp.* 18,327,188
206,100 MCI Worldcom, Inc.* 17,776,125
378,800 Microchip Technology, Inc.* 17,945,650
37,200 Microsoft Corp.* 3,354,975
336,000 Vitesse Semiconductor Corp.* 22,659,000
143,938,901
TOTAL COMMON STOCKS 488,211,189
(Cost $283,662,172)
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 1.80%
$8,820,000 UMB Bank, n.a.,
4.29%, due July 1, 1999
(Collateralized by U.S.
Treasury Notes, 6.25%
due 8/31/00 with a value
of $8,997,472)
(Cost $8,820,000) 8,820,000
TOTAL INVESTMENTS - 101.36% 497,031,189
(Cost $292,482,172)
Other assets less liabilities - (1.36%) (6,689,929)
TOTAL NET ASSETS - 100.00% $ 490,341,260
For federal income tax purposes, the identified cost of
investments owned at June 30, 1999 was $293,498,365.
Net unrealized appreciation for federal income tax purposes was
$203,532,824, which is comprised of unrealized appreciation of
$222,038,002 and unrealized depreciation of $18,505,178.
*Non-income producing security
See accompanying Notes to Financial Statements.
SHADOW STOCK FUND
Shadow Stock Fund achieved a total return (price change and
reinvested distributions) of 19.4% in the most recent quarter and
6.9% for the six months ended June 30, 1999. During the same
period, the small capitalization stocks in the unmanaged Russell
2000 index rose 15.6% and 9.3%, respectively.
In the first quarter of 1999 small capitalization stock
portfolios continued to be challenged by a difficult market
environment that disproportionately favored a select group of
large capitalization and highly liquid domestic equities. It was
this select group of "large cap" growth stocks that drove the
market to record highs in the quarter. Although small
capitalization stocks continued to be undervalued relative to
large caps, investors continued to embrace the liquidity of the
larger names. This disparity also existed in the first quarter
within the small cap arena. Because of their small size, the
companies in Shadow Stock Fund were more harshly penalized than
the overall small cap sector as measured by the unmanaged Russell
2000 Index: returns for the companies in the Russell 2000 that
exceeded our size limitation were more than 13 percentage points
greater than the returns of the remaining companies.
Compounding negative effect of the "size factor" was the fact
that Shadow Stock Fund had no participation in the strongest
Russell 2000 sector, communications services. One of our largest
weightings was in the utilities sector, which was the weakest
sector in the index.
In the second quarter Shadow Stock Fund participated nicely in
the rebound of the small cap sector and managed to outperform the
unmanaged Russell 2000. Our micro cap orientation benefited
greatly from the extreme reversal of style preference from growth
to value experienced in April. It took only a small percentage of
funds reallocated from the big favorites to the smaller companies
to result in a quick and dramatic price increase in the generally
less liquid, smaller stocks. More specifically, our strong
performance in the second quarter relative to the benchmark can
be attributed largely to our overweighting in the utilities
sector.
The valuation characteristics of Shadow Stock Fund continue to be
very attractive. Though recent performance has been strong, we
have seen only a small portion of the potential impact that
further normalization of the valuation gap between small caps and
large stocks can produce.
In late June, ordinary income dividends of $0.03 per share and
realized capital gains of $0.30 per share were distributed and
reinvested at $11.52 per share.
CHART - SHADOW STOCK FUND
VERSUS RUSSELL 2000
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
SHADOW STOCK FUND
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 95.14%
BASIC MATERIALS - 4.81%
14,101 Aceto Corp. $ 162,162
3,300 American Biltrite, Inc. 67,650
15,200 American Pacific Corp.* 128,250
4,500 Badger Paper Mills, Inc.* 32,625
4,480 Baltek Corp.* 43,680
40,600 Global Industrial Technologies, Inc.* 489,738
14,000 Mining Services International* 66,500
13,200 Pitt-Des Moines, Inc. 825,000
19,000 Roanoke Electric Steel Corp. 330,125
8,500 Stephan Co. 35,594
17,500 Tuscarora, Inc. 237,344
2,418,668
CAPITAL GOODS - 15.47%
8,900 AG Services of America* 153,525
7,200 American Technical Ceramics Corp.* 61,200
11,000 Autocam Corp. 148,500
3,600 Badger Meter, Inc. 125,100
15,000 Baker (Michael) Corp.* 113,438
14,000 Blonder Tongue Labs.* 87,500
23,900 Building Material Holding Corp.* 274,850
16,300 Cameron Ashley Building Products, Inc.* 170,131
21,000 Cascade Corp. 294,000
14,800 Ceradyne, Inc.* 67,525
29,200 Cherry Corp.* 408,800
3,000 Chicago Rivet & Machine Co. 66,000
17,000 Coastcast Corp.* 216,750
9,300 Diodes, Inc.* 77,888
7,315 Ecology and Environment, Inc. Cl. A. 50,291
19,100 Engle Homes, Inc. 262,625
14,800 Exponent, Inc.* 103,600
15,000 Farr Co.* 165,000
14,300 Fibermark, Inc.* 188,581
18,900 GP Strategies Corp.* 165,375
11,500 Gehl Co.* 232,875
3,150 Graham Corp.* 29,138
8,000 Heist (C.H.) Corp.* 53,000
23,006 Intermagnetics General Corp.* 178,296
13,100 JLM Industries* 68,775
7,600 Liberty Homes, Inc. Cl. A 72,437
15,100 M/I Schottenstein Homes, Inc. 278,406
16,800 Mestek, Inc.* 369,600
14,112 Met-Pro Corp. 176,400
16,000 Nanometrics, Inc.* 126,000
6,300 Noland Co. 127,575
12,000 Northwest Pipe Co.* 199,500
6,000 Oilgear Co. 54,000
28,800 O'sullivan Corp. 351,000
5,000 P & F Industries Cl. A* 48,281
3,200 Penn Engineering & Manufacturing
Corp. (voting) 72,000
11,900 Penn Engineering & Manufacturing
Corp. (non-voting) 267,750
10,200 Puerto Rican Cement Co., Inc. 338,513
5,727 Sames Corp.* 113,824
10,000 Selas Corp. of America 68,750
11,000 Sifco Industries 90,750
9,600 SL Industries, Inc. 123,600
9,426 Southwest Water Co. 163,777
26,900 Symmetricom, Inc.* 218,562
25,700 URS Corp.* 753,331
7,776,819
CONSUMER CYCLICAL - 15.60%
14,000 AC Moore Arts & Crafts, Inc.* 78,750
21,600 Amplicon, Inc. 302,400
15,000 Ben & Jerry's Homemade, Inc. Cl. A* 416,250
8,000 Black Hawk Gaming & Development* 61,000
28,200 Bon-Ton Stores, Inc.* 181,537
19,200 Carmike Cinemas, Inc. Cl. A* 306,000
9,000 Childtime Learning Centers, Inc.* 132,750
17,000 Conso Products Co.* 97,750
6,750 Decorator Industries, Inc. 48,938
20,900 Dixie Group, Inc. Cl. A 177,323
9,500 Duckwall-Alto Stores, Inc.* 99,750
12,400 Ellis (Perry) International, Inc.* 165,850
9,300 ELXSI Corp.* 105,788
12,750 Equinox Systems, Inc.* 137,859
2,700 Federal Screw Works 133,650
13,100 Gart Sports Co.* 73,688
8,400 Globe Business Resources, Inc.* 109,200
23,200 Gottschalks, Inc.* 211,700
16,700 Government Technology Services, Inc.* 68,888
10,530 Hampton Industries, Inc. 46,728
28,700 Inacom Corp.* 362,338
15,000 Kevco, Inc.* 122,813
10,916 Knape & Vogt Manufacturing Co. 192,395
15,000 Lacrosse Footwear, Inc.* 116,250
9,498 M/A/R/C, Inc. 137,721
18,000 Maxwell Shoe, Inc. Cl. A* 163,125
16,000 Mazel Stores, Inc.* 174,000
8,500 McRae Industries, Inc. Cl. A 49,938
12,000 Motorcar Parts & Accessories, Inc.* 64,500
23,000 Navigant International, Inc.* 181,125
12,000 Nobel Learning Communitys, Inc.* 60,000
11,000 OroAmerica, Inc.* 77,000
20,000 Piccadilly Cafeterias, Inc. 166,250
7,000 Pulaski Furniture Corp. 142,625
16,400 R & B, Inc.* 135,300
13,700 Reading Entertainment, Inc.* 104,463
14,000 Rex Stores Corp.* 417,375
17,000 Rock Bottom Restaurants, Inc.* 164,688
10,100 Rocky Shoes & Boots, Inc.* 83,956
35,200 RPC Energy Services, Inc. 308,000
8,400 S & K Famous Brands, Inc.* 80,063
8,600 Scheib (Earl), Inc.* 40,850
7,000 Somerset Group, Inc.* 140,000
21,285 Supreme Industries, Inc. Cl. A* 206,198
30,000 Syms Corp.* 243,750
39,500 TCBY Enterprises, Inc. 239,469
9,000 Weyco Group, Inc. 207,000
13,828 Wolohan Lumber Co. 169,393
23,500 Workflow Management, Inc.* 334,875
7,841,259
CONSUMER STAPLES - 5.88%
11,000 Bowl America, Inc. Cl. A 77,000
9,300 Cagle's, Inc. Cl. A 167,400
15,800 Chalone Wine Group Ltd.* 154,050
4,000 Foodarama Supermarkets, Inc.* 119,500
31,200 Frozen Food Express Industries, Inc. 237,900
3,200 Genesee Corp. Cl. B 84,800
38,200 Ingles Markets, Inc. Cl. A 582,550
7,325 Marsh Supermarkets, Inc. Cl. A 106,212
12,725 Marsh Supermarkets, Inc. Cl. B 149,519
9,000 Max & Erma's Restaurants* 69,750
22,800 Quaker Fabric Corp.* 95,475
8,800 Safety Components International, Inc.* 44,000
23,250 Sanderson Farms, Inc. 331,313
11,400 Seaway Food Town, Inc. 223,725
5,000 Span-America Medical Systems, Inc. 21,562
14,000 Swiss Army Brands, Inc.* 124,250
7,000 Triple S Plastics, Inc.* 29,750
12,900 Vallen Corp.* 206,400
10,800 Western Beef, Inc.* 66,825
8,100 Zaring National Corp.* 64,800
2,956,781
ENERGY - 2.38%
10,500 Adams Resources & Energy, Inc. 82,687
33,203 HS Resources, Inc.* 489,744
21,500 Key Production, Inc.* 197,531
9,100 Maynard Oil Co.* 93,275
10,200 Prima Energy Corp.* 230,775
5,000 Roanoke Gas Co. 103,750
1,197,762
FINANCIAL - 17.46%
7,370 Amwest Insurance Group, Inc. 68,173
10,500 BancInsurance Corp.* 55,125
50 B B & T Corp. 1,834
19,000 Capitol Transamerica Corp. 251,750
16,500 Chartwell Re Corp. 307,312
11,952 Cotton States Life and Health
Insurance Co. 146,412
6,000 DeWolfe Companies, Inc. 42,750
16,000 Donegal Group, Inc. 182,000
20,000 EMC Insurance Group, Inc. 235,000
8,000 First Cash, Inc.* 77,000
12,600 First Albany Companies, Inc. 201,600
11,000 First Investors Financial
Services Group, Inc.* 66,000
17,000 Guarantee Life Companies, Inc. 427,125
7,000 JW Genesis Financial Corp.* 98,875
15,000 Kaye Group, Inc. 118,125
6,000 KBK Capital Corp.* 38,250
12,300 Litchfield Financial Corp. 208,331
5,000 Merchants Group, Inc. 111,875
13,530 Meridian Insurance Group, Inc. 226,628
17,400 Midland Co.* 441,525
6,100 Minuteman International, Inc. 64,050
26,100 National Discount Brokers Group, Inc.*1,513,800
4,850 National Security Group, Inc. 56,987
6,000 National Western Life Insurance Co.* 577,500
15,400 Navigators Group, Inc.* 231,000
16,500 Penn-America Group, Inc. 171,188
14,000 Penn Treaty American Corp.* 336,875
14,300 Professionals Insurance Company
Management Group* 482,625
22,800 PXRE Corp. 413,250
27,000 Ragen MacKenzie Group, Inc.* 320,625
20,000 South Jersey Industries, Inc. 566,250
14,000 Standard Management Corp.* 91,875
26,800 Stewart Information Services Corp. 566,150
4,600 Ziegler (The) Companies, Inc. 80,787
8,778,652
HEALTH CARE - 0.33%
13,000 Advocat, Inc.* 25,188
13,700 Merit Medical Systems, Inc.* 68,286
16,300 Novametrix Medical Systems, Inc.* 72,331
165,805
MISCELLANEOUS - 3.09%
14,000 Andersons, Inc. 178,500
8,910 Astronics Corp.* 89,100
10,400 Edelbrock Corp.* 153,400
4,966 Enstar Group, Inc.* 47,177
2,250 FRM Nexus, Inc.* 4,781
21,750 Hardinge, Inc. 381,984
15,500 Hoenig Group, Inc.* 154,031
10,600 Primesource Corp. 64,925
4,500 Programming and Systems, Inc.* 4,500
2,600 Scope Industries 170,300
12,000 Sun Hydraulics Corp. 107,250
18,000 Todd-AO Corp. Cl. A 198,000
1,553,948
TECHNOLOGY - 10.81%
2,100 Allen Organ Co. Cl. B 76,913
12,400 Autologic Information
International, Inc.* 56,575
11,400 BEI Medical Systems Company, Inc.* 16,388
12,600 BEI Technologies, Inc. 126,000
17,320 Bell Industries, Inc. 76,858
15,100 Bell Microproducts, Inc.* 103,812
22,500 Brite Voice Systems, Inc.* 312,187
12,700 CPAC, Inc. 106,363
10,000 Data Research Associates, Inc. 103,750
9,200 Dataram Corp.* 90,850
13,200 Del Global Technologies Corp.* 128,700
11,400 DRS Technologies, Inc.* 120,412
7,800 Eastern (The) Co. 139,425
13,000 EDO Corp. 94,250
6,000 Equitrac Corp.* 113,250
14,700 Franklin Electronic Publishers, Inc.* 54,206
15,000 IFR Systems, Inc.* 71,250
16,000 Integrated Measurement System, Inc.* 206,000
14,000 Interphase Corp.* 322,000
6,000 IPC Information Systems* 409,500
8,500 Koss Corp.* 102,531
4,800 Moore Products Co. 110,100
16,400 Newport Corp. 254,200
23,600 Nichols Research Corp.* 516,250
18,200 Norstan, Inc.* 226,362
16,000 Powell Industries, Inc.* 148,000
8,900 Programmer's Paradise, Inc.* 109,025
4,300 Quipp, Inc. 55,900
8,000 Refac Technology Develop Corp.* 52,000
22,000 Semitool, Inc.* 211,750
20,200 Thermo Power Group* 235,456
28,300 Thermospectra Corp.* 449,263
12,000 TRM Copy Center Corp.* 78,750
11,400 Vertex Communications Corp.* 156,037
5,434,313
TRANSPORTATION & SERVICES - 2.93%
12,000 International Shipholding Corp. 172,500
4,000 Kenan Transport Co. 123,000
30,000 Kitty Hawk, Inc.* 236,250
8,066 KLLM Transport Services, Inc.* 46,379
12,000 Marten Transport Ltd.* 148,125
15,500 Old Dominion Freight Line, Inc.* 184,062
13,000 Pam Transportation Services* 128,375
5,000 Petroleum Helicopters, Inc. 65,313
12,000 Transport Corporation of America, Inc.* 154,500
17,000 USA Truck, Inc.* 155,656
5,250 VSE Corp. 55,945
1,470,105
UTILITIES - 16.38%
16,600 American States Water Co. 471,025
19,500 Aquarion Co. 677,625
6,600 Atrion Corp.* 61,875
16,100 Bangor Hydro-Electric Co. 259,612
7,000 Berkshire Gas Co. 157,500
18,900 Cascade Natural Gas Corp. 359,100
8,700 Chesapeake Utilities Corp. 161,494
15,150 Colonial Gas Co. 560,550
17,600 Connecticut Energy Corp. 678,700
7,800 Connecticut Water Service, Inc. 214,500
19,000 CTG Resources, Inc. 691,125
4,000 Delta Natural Gas Company, Inc. 66,500
3,300 Dominguez Services Corp. 101,887
14,400 E'town Corp. 658,800
6,000 EnergyNorth, Inc. 173,625
6,000 Florida Public Utilities Co. 113,250
9,700 Green Mountain Power Corp. 109,125
7,000 Maine Public Service Co. 124,250
7,600 Middlesex Water Co. 190,950
21,700 NUI Corp. 542,500
18,500 Pennsylvania Enterprises, Inc. 567,719
10,800 Providence Energy Corp. 288,225
6,100 SJW Corp. 485,712
14,000 St. Joseph Light & Power Co. 287,875
9,176 UNITIL Corp. 231,121
8,234,645
TOTAL COMMON STOCKS 47,828,757
(Cost $38,577,478)
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 4.48%
$2,255,000 UMB Bank, n.a.
4.29%, due July 1, 1999
(Collateralized by U.S.
Treasury Notes, 6.25%,
due August 31, 2000 with
a value of $2,300,531) 2,255,000
(Cost $2,255,000)
TOTAL INVESTMENTS - 99.62% 50,083,757
(Cost $40,832,478)
Other assets less liabilities - 0.38% 189,125
TOTAL NET ASSETS - 100.00% $ 50,272,882
For federal income tax purposes, the identified cost of
investments owned at June 30, 1999 was $41,208,213.
Net unrealized appreciation for federal income tax purposes was
$8,875,544, which is comprised of unrealized appreciation of
$13,249,721 and unrealized depreciation of $4,374,177.
*Non-income producing security
See accompanying Notes to Financial Statements.
BABSON VALUE FUND
Babson Value Fund achieved a total return (price change and
reinvested distributions) of 12.9% in the most recent quarter and
12.6% for the six months ended June 30, 1999. During the same
period the unmanaged Standard & Poor's 500 index rose 7.1% and
12.4%, respectively.
In the first quarter the S&P 500 continued to be dominated by a
small number of large "growth" stocks, which extended into a
sixth year their record run versus "value" stocks. Indeed, five
of the top ten highest returning stocks were either technology-
or communications-related, they accounted for over 50% of the
index's return in the quarter, and their valuations were "sky
high" - the kinds of companies our disciplines just don't allow
us to buy.
But what a difference a month makes! April marked a dramatic
turnaround in market sentiment from growth to value. During that
month we witnessed what was perhaps the most violent reversal of
style in the stock market in our experience. Most of the shift
occurred in six trading days from April 9 through April 19. At
the end of the first quarter, the year-to-date return of the
S&P/BARRA Growth Index exceeded the year-to-date return of the
S&P/BARRA Value Index by 4.1 percentage points. By the end of
April the Value Index year-to-date return exceeded the Growth
Index by 5.0 percentage points, a swing of 9.1 percentage points
in one month!
A number of value characteristics of the Fund - low absolute and
relative price-to-earnings and price-to-book, for example - were
exactly what investors were looking for when the shift from
growth to value occurred. Additionally, certain sectors (basic
materials, consumer cyclical, and financial) and the Fund's
overweight positions in those sectors contributed most to our
successful results in the second quarter. Furthermore, because
the market caps of many growth stocks are so large relative to
the market caps of most of the basic materials and cyclical
companies, it took only a small percentage of money flowing from
the big favorites into the less liquid value stocks to result a
sharp run-up in the prices of those value stocks in the April
turnaround period.
May was another good month for value stocks. Although the major
indices produced negative returns in May and Babson Value Fund
experienced a slight downturn as well, relative performance was
positive. Thus the positive return spread between the Fund and
the indexes that occurred in April widened in May. The last three
days of a very up-and-down June market were characterized by a
sharp rebound in the growth sector, as stocks rallied as concerns
regarding a series of interest rate hikes began to ease.
Nonetheless, the Babson Value Fund held its performance advantage
through this period.
The Babson Value Fund strategy continues to possess attractive
valuation characteristics even after the excellent performance of
value stocks in the second quarter. Even though recent
performance has been strong, there is plenty of room for further
normalization of the valuation gap between growth companies and
neglected value stocks.
CHART - BABSON VALUE FUND
VERSUS S&P 500
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON VALUE FUND
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 97.85%
BASIC MATERIALS - 14.75%
482,100 duPont (E.I.) deNemours & Co. $ 32,933,456
805,100 Potlatch Corp. 35,374,081
103,400 Martin Marietta Materials, Inc. 6,100,600
602,000 Millennium Chemicals, Inc. 14,184,625
1,156,000 USX-U.S. Steel Group 31,212,000
474,000 Weyerhaeuser Co. 32,587,500
675,300 Willamette Industries, Inc. 31,106,006
183,498,268
CAPITAL GOODS - 6.89%
716,000 Boeing Co. 31,638,250
689,200 Dana Corp. 31,746,275
601,000 Lockheed Martin Corp. 22,387,250
85,771,775
CONSUMER CYCLICAL - 14.34%
603,700 Harcourt General, Inc. 31,128,281
1,727,600 Kmart Corp.* 28,397,425
679,000 Limited, Inc. 30,809,625
610,158 Penney (J.C.) Co., Inc. 29,630,798
1,519,500 Reebok International Ltd.* 28,300,688
675,500 Sears, Roebuck & Co. 30,101,969
178,368,786
CONSUMER STAPLES - 2.17%
628,000 Diageo PLC, ADR 27,004,000
ENERGY - 5.30%
381,300 Atlantic Richfield Co. 31,862,381
564,500 Royal Dutch Petroleum Co. 34,011,125
65,873,506
FINANCIAL - 28.31%
372,100 Aetna, Inc. 33,279,694
837,000 Allstate Corp. 30,027,375
217,100 American Express Co. 28,250,137
12,322 Berkshire Hathaway, Inc. Cl. B* 27,601,280
345,000 Chase Manhattan Corp. 29,885,625
597,000 Citigroup, Inc. 28,357,500
394,000 National City Corp. 25,807,000
660,850 SLM Holding Corp. 30,275,191
628,200 Student Loan Corp. 27,954,900
415,200 Transamerica Corp. 31,140,000
802,700 U.S. Bancorp 27,291,800
756,330 Wells Fargo & Co. 32,333,107
352,203,609
HEALTH CARE - 4.33%
1,322,900 Tenet Healthcare* 24,556,331
468,000 United Healthcare Corp. 29,308,500
53,864,831
MISCELLANEOUS - 1.19%
333,100 Hanson PLC, ADR 14,781,313
TECHNOLOGY - 10.17%
670,200 Apple Computer, Inc.* 31,038,638
252,000 International Business Machines Corp.32,571,000
1,299,700 Wallace Computer Services, Inc. 32,492,500
514,000 Xerox Corp. 30,358,125
126,460,263
TRANSPORTATION - 5.73%
716,000 CSX Corp. 32,443,750
1,014,382 KLM Royal Dutch Airlines 28,973,286
766,090 Overseas Shipholding Group, Inc. 9,863,409
71,280,445
UTILITIES - 4.67%
1,122,000 Illinova Corp. 30,574,500
667,200 Texas Utilities Co. 27,522,000
58,096,500
TOTAL COMMON STOCKS 1,217,203,296
(Cost $825,560,185)
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 2.11%
$26,190,000 UMB Bank, n.a.,
4.29%, due July 1, 1999
(Collateralized by U.S.
Treasury Notes, 6.25%
due August 31, 2000 with
a value of $26,714,747) 26,190,000
(Cost $26,190,000)
TOTAL INVESTMENTS - 99.96% 1,243,393,296
(Cost $851,750,185)
Other assets less liabilities - 0.04% 536,911
TOTAL NET ASSETS - 100.00% $1,243,930,207
For federal income tax purposes, the identified cost of
investments owned
at June 30, 1999 was $861,447,793.
Net unrealized appreciation for federal income tax purposes was
$381,945,503, which is comprised of unrealized appreciation of
$395,565,090 and unrealized depreciation of $13,619,587.
*Non-income producing security
See accompanying Notes to Financial Statements.
BABSON-STEWART IVORY INTERNATIONAL FUND
At June 30, 1999, the net asset value of Babson-Stewart Ivory
International Fund was $19.48, representing a
total return (price change and reinvested distributions) of 3.73%
for the quarter, and 3.76% for the fiscal year. Comparisons
against the unmanaged Morgan Stanley Capital International (MSCI)
EAFE and other indices are as follows:
Investment Results - Total Return
Periods Ended 6/30/99
Second Quarter Previous Twelve
1999 Months
BSIIF 3.73% 3.76%
MSCI EAFE* Index** 2.60% 7.93%
MSCI World Index** 4.86% 16.08%
S&P 500 Index** 7.06% 22.77%
Lipper International Funds
(avg. funds 630 and
570, respectively) 5.55% 4.00%
*Europe, Australia, Far East
**unmanaged
The portfolio's overall performance for the last quarter was
ahead of the benchmark index, but behind for the year-to-date and
the fiscal year, when we did not keep pace with the market's
recovery from the depressed levels of last fall. In particular we
suffered in the first quarter of 1999 from the markets' shift
away from growth stocks, particularly in Europe, to more cyclical
sectors. This movement was less pronounced in the second quarter,
which also saw better relative performance by smaller companies.
Forecasts for U.S. economic growth this year have been raised to
4% following the strong start in 1999. Growth prospects in Europe
and Asia remain much more subdued, with forecasts of under 2% for
the major countries of the Euro-11 group, around 1% for the UK,
and with Japan still struggling to achieve any growth at all in
1999. The principal world economies are now at different stages
of the economic cycle, with the U.S. at a much more advanced
phase than other countries. In these circumstances it seems
unlikely that the current revival of economic growth outside the
U.S. will lead to any general overheating, thus avoiding further
rises in commodity prices and acceleration of inflation.
Having under-performed other markets so far this year, European
markets now seem reasonably valued, and the rotation into
cyclical stocks from the start of the year appears to have
slowed, as most such companies have insufficient pricing power to
sustain earnings recovery as the economy improves. The success of
Olivetti's hostile takeover bid for Telecom Italia represents an
important milestone for European stock markets, with shareholder
value now taking a more important role than before. The
development of an equity culture in continental Europe is still
at a relatively early stage, with pension plans and collective
investment funds creating new and more favorable supply/demand
conditions for
equities.
We would expect to continue to find opportunities in Japan and
Asia. After such a severe bear market, some of the very rapid
appreciation of the recent period may represent a recovery from
excessive pessimism and more progress is likely if economic
conditions continue to improve. Signs of a new commitment to
restructuring and to a more profit-oriented management
philosophy, particularly in Japan, should also encourage new
interest in investing in the region.
CHART - BABSON-STEWART IVORY INTERNATIONAL FUND
VERSUS MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON-STEWART IVORY INTERNATIONAL FUND
SHARES COMPANY AND DESCRIPTION MARKET VALUE
COMMON STOCKS - 90.83%
AUSTRALIA - 2.25%
42,000 Brambles
(Transport, plant services) $ 1,105,011
65,000 Lend Lease
(Real estate) 891,290
1,996,301
BELGIUM - 0.74%
1,000 Colruyt
(Food retailer) 657,682
CROATIA - 0.54%
32,000 Pliva
(Pharmaceuticals) 480,000
DENMARK - 1.33%
24,000 TeleDanmark
(Telecoms) 1,178,004
FINLAND - 0.59%
6,000 Nokia
(Telecom equipment) 525,734
FRANCE - 9.37%
8,000 AXA-UAP
(Insurance, financial services) 975,597
4,000 Danone
(Food products) 1,030,850
9,000 Lafarge
(Building materials, cement) 855,400
1,000 L' Oreal
(Cosmetics) 675,722
20,000 Sanofi*
(Pharmaceuticals) 848,390
13,000 Total
(Oil major) 1,676,472
13,000 Valeo
(Automotive components) 1,072,084
14,400 Vivendi
(Diversified utilities) 1,166,015
8,300,530
GERMANY - 3.66%
6,500 Fresenius
(Pharmaceuticals, medical equipment) 1,149,140
14,000 Mannesmann
(Telecoms and engineering) 2,088,296
3,237,436
GREECE - 0.58%
24,000 OTE
(Telecoms utility) 513,666
HONG KONG - 5.64%
330,000 Asia Satellite
(Satellite operator) 776,235
180,000 CLP Holdings
(Electric utility) 874,642
425,000 Gold Peak
(Batteries) 90,931
600,000 HK & China Gas
(Gas utility) 870,002
1,215,000 Shaw Bros.
(T.V. network, film production
and distribution) 829,982
1,100,000 Swire Pacific Cl. B
(Trading, airlines, real estate) 822,313
230,000 V-Tech
(Electronic learning aids) 730,738
4,994,843
HUNGARY - 0.66%
13,500 Gedeon Richter
(Pharmaceuticals) 587,250
IRELAND - 1.14%
17,595 Irish Life
(Insurance) 185,913
70,000 Kerry Group
(Food manufacturer) 827,531
1,013,444
ITALY - 2.04%
20,300 Banca Popolare Di Brescia
(Banking, financial services) 869,486
60,000 Luxottica
(Eyeglass frames) 933,750
1,803,236
JAPAN - 21.60%
29,000 Bridgestone
(Tires) 877,408
13,400 Circle K
(Convenience stores) 558,287
40,000 Credit Saison
(Credit card services) 836,571
12,000 Fuji Photo
(Film) 454,328
54,000 Hosiden
(Electronic components) 1,165,082
18,000 Hoya
(Opto-electronics) 1,016,285
13,000 Ito-Yokado
(Supermarket chain) 870,464
12,000 Matsushita Communication
(Industrial electronics) 858,064
8,800 Nintendo
(Video games) 1,237,398
65,000 Nippon Comsys
(Telecoms engineering) 1,055,840
80 NTT Mobile Communication*
(Cellular telecommunications) 1,073,985
88,000 Olympus Optical
(Precision instruments, cameras) 1,301,414
18,700 Promise
(Consumer lending) 1,105,274
12,000 Secom
(Security services) 1,249,897
11,000 Sony
(Consumer electronics) 1,186,658
53,000 Suzuki
(Cars, motorcycles) 843,391
60,000 Taiyo Yuden
(Electronic component manufacturer) 985,038
16,000 Takeda
(Pharmaceuticals, chemicals) 742,002
40,000 Terumo
(Medical equipment) 891,130
117,000 Toshiba
(Electronic equipment) 834,678
19,143,194
MALAYSIA - 0.53%
400,000 Perlis Plantations
(Trading, mining, agriculture) 467,368
NETHERLANDS - 7.33%
11,000 Aegon
(Insurance) 797,723
25,000 Ahold
(Supermarkets) 860,760
25,000 Getronics
(Support services) 961,268
20,000 ING Groep
(Financial services) 1,082,393
17,000 KPN
(Postal and telecom services) 797,363
30,000 VNU
(Publishing) 1,198,363
20,000 Wolters Kluwer
(Publisher) 795,816
6,493,686
POLAND - 0.57%
32,000 Bank Handlowy*
(Banking) 507,200
PORTUGAL - 1.09%
29,333 Jeronimo Martins
(Food distributors) 968,521
SINGAPORE - 1.04%
40,000 Overseas Union Bank
(Banking) 192,715
203,000 Overseas Union Enterprise
(Hotels, property investment) 644,066
46,000 Trans-Island Bus Services
(Bus transport) 82,703
919,484
SPAIN - 4.15%
40,000 Argentaria
(Banking services) 909,210
11,400 Banco Popular
(Banking) 819,681
26,000 Mapfre Vida Seguro
(Insurance) 742,418
24,969 Telefonica
(Telephone utility) 1,205,371
3,676,680
SWEDEN - 4.92%
33,200 Atlas-Copco
(Engineering) 891,695
40,000 Hennes & Mauritz
(Retailing) 989,516
31,500 L.M. Ericsson
(Telecom equipment) 1,011,162
125,000 Nordbanken Holding
(Swedish/Finnish banking) 731,829
49,050 Securitas
(Security/cleaning services) 733,814
4,358,016
SWITZERLAND - 2.03%
11,347 ABB
(Engineering) 1,068,957
500 Novartis
(Pharmaceuticals and chemicals) 729,857
1,798,814
UNITED KINGDOM - 19.03%
64,000 Bank of Scotland
(Banking) 855,967
120,000 Bowthorpe
(Electronics components, instruments) 1,048,837
95,000 Cable & Wireless Communications
(Telecommunications) 913,437
88,000 Capita Group
(Facilities management) 910,631
172,000 Cattles
(Consumer loans) 929,925
97,000 Electrocomponents
(Electronics) 714,026
40,000 Glaxo Wellcome
(Pharmaceuticals) 1,111,572
114,000 Hays
(Business services) 1,202,143
90,000 Kingfisher
(Diversified retailing) 1,050,223
103,000 Lloyds TSB
(Banking) 1,398,678
47,000 Logica
(Computer software) 494,361
420,000 Morrison Supermarkets
(Supermarkets) 946,696
118,000 Northern Rock
(Mortgage bank) 898,368
140,000 Shell
(Oil major) 1,050,413
90,000 SmithKline Beecham
(Pharmaceuticals) 1,170,366
55,000 Smiths Industries
(Instrumentation) 729,962
73,000 Vodafone AirTouch
(Cellular telephone network) 1,436,027
16,861,632
TOTAL COMMON STOCKS 80,482,721
(Cost $61,129,366)
FACE
AMOUNT DESCRIPTION MARKET VALUE
REPURCHASE AGREEMENT - 1.79%
$1,590,000 State Street Bank,
3.25%, due July 1, 1999
(Collateralized by U.S.
Treasury Bonds, 8.125%
due August 15, 2019 with
a value of $1,623,109) 1,590,000
(Cost $1,590,000)
TOTAL INVESTMENTS - 92.62% 82,072,721
(Cost $62,719,366)
Other assets less liabilities - 7.38% 6,537,410
TOTAL NET ASSETS - 100.00% $ 88,610,131
For federal income tax purposes, the identified cost of
investments owned at June 30, 1999 was $63,283,352.
Net unrealized appreciation for federal income tax purposes was
$18,789,369, which is comprised of unrealized appreciation of
$21,724,807 and unrealized depreciation of $2,935,438.
*Non-income producing security
See accompanying Notes to Financial Statements.
BABSON BOND TRUST
Absolute returns in the fixed income market for thefirst half of
the year were a disappointment, reflecting the rise in the
general level of interest rates since the beginning of 1999. At
the end of the second quarter the Federal Reserve raised short-
term rates as a pre-emptive measure to thwart the risk of an
increase in the level of inflation. Though the Fed acknowledges
that there are no signs of gathering inflation, it is worried
that the imbalance between strong demand outpacing productivity
gains coupled with a dwindling labor pool will lead to wage
pressures. This in turn could threaten the viability of the
current economic expansion. The net effect of this was to send
interest rates up a full percentage point since the end of last
year.
Normalcy returned to the credit markets after the financial
market turmoil dissipated during the fourth quarter of 1998.
Improved liquidity for spread sector securities, such as
corporates, mortgages and asset-backs helped to fuel record
corporate issuance and allowed quality spreads, during the first
quarter, to retrace a majority of the widening incurred last
summer and fall. However, in the second quarter continued heavy
supply and Y2K jitters caught up with the market and spreads
again widened.
For the six and twelve month periods ended June 30, 1999, total
investment returns (price change and reinvested distributions)
for Portfolio S were -0.22% and 3.22%, respectively. Dividends
for the previous twelve months amounted to $0.565 per share,
resulting in an income yield of 5.74% based on a beginning net
asset value of $9.85. During the same six and twelve month
periods, total investment returns for Portfolio L were -1.76% and
1.88%, respectively. Dividends for the previous twelve months
were $0.090 a share, producing an income yield of 5.71% based on
a beginning net asset value of $1.58.
Portfolio S is ranked in the top quarter of the Lipper Short-
Intermediate Investment Grade Bond fund grouping for the most
recent three-year period.1 Portfolio L remains ranked in the top
half of the Lipper A-Rated Bond Fund category for the most recent
one-year period.1
Our bias toward shorter maturity corporates, initiated during the
fourth quarter of 1998, remained in place over the past
six months. Breakeven analysis using a one year time horizon
still favored shorter maturity (i.e., 2-year) corporate bonds
over both intermediate (i.e., 5-year) and long maturity (i.e., 30-
year) securities. In light of this, and partially reflective of
our increased concerns over credit trends, we sold holdings of
Tosco and Dana Corp. maturing in 2006 and 2008, respectively.
Other corporate activity included selling positions in the GMAC
2000 notes and the Merrill Lynch 2001 notes at much narrower
spreads to Treasuries than when initially purchased during the
fourth quarter. In replacing these two issues, we purchased JB
Hunt Transportation and Service Corp. International, both
maturing in 2000. While these two issues are lower rated than the
GMAC and Merrill Lynch notes that were sold, both are solid
triple-B credits that carry very attractive yields.
Currently, the average maturity is 5 years for Portfolio S and
8.9 years for Portfolio L, after taking into consideration bonds
trading to their call dates and average life assumptions for
mortgage and asset-backed securities.
QUALITY RATINGS
PORTFOLIO L
Aaa 49.6%
Aa 6.5%
A 19.0%
Baa 24.9%
Total 100.0%
Source: Moody's
CHART - BABSON BOND TRUST - PORTFOLIO L
VERSUS LEHMAN BROTHERS
AGGREGATE BOND INDEX
QUALITY RATINGS
PORTFOLIO S
Aaa 51.2%
Aa 8.1%
A 16.5%
Baa 24.2%
Total 100.0%
Source: Moody's
CHART - BABSON BOND TRUST - PORTFOLIO S
VERSUS LEHMAN BROTHERS
INTERMEDIATE GOV'T./CORP. INDEX
1 Lipper Short-Intermediate Investment Grade Bond Fund ranking
for Portfolio S for one, three, five and ten year periods ended
June 30, 1999, were 63 of 101, 8 of 76, 7 of 54, and 4 of 11,
respectively.
Lipper A-Rated Bond Fund ranking for Portfolio L for one,
three, five and ten year periods ended June 30, 1999, were 54 of
158, 67 of 130, 53 of 89, and 26 of 42, respectively.
<PAGE>
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON BOND TRUST - PORTFOLIO L
PRINCIPAL MARKET
DESCRIPTION VALUE VALUE
CORPORATE BONDS - 48.54%
BANKS AND FINANCE - 13.42%
American Stores Company,
8.00%, due June 1, 2026 $ 1,650,000 $ 1,773,667
Associates Corporation North America,
5.80%, due April 20, 2004 4,500,000 4,336,605
Ford Capital B V,
10.125%, due November 15, 2000 2,500,000 2,623,750
Hellenic Republic,
6.95%, due March 4, 2008 1,300,000 1,301,430
Republic of Chile,
6.875%, due April 28, 2009 750,000 694,942
Southern Investments UK PLC,
6.375%, due November 15, 2001 1,300,000 1,285,648
SunTrust Banks, Inc.,
6.00%, due February 15, 2026 3,000,000 2,852,910
Wachovia Capital Trust II,
6.062%, due January 15, 2027 1,300,000 1,239,784
16,300,000 16,108,736
COMMUNICATIONS - 5.97%
A T & T Capital Corp.,
6.875%, due January 16, 2001 1,265,000 1,265,531
BellSouth Savings & Employee Stock
Ownership Trust,
9.19%, due July 1, 2003 823,452 882,840
Tele Communications, Inc.,
8.75%, due February 15, 2023 1,000,000 1,032,630
Time Warner Entertainment Company LP,
8.375%, due March 15, 2023 1,000,000 1,083,170
Time Warner, Inc.,
9.15%, due February 1, 2023 1,350,000 1,548,194
WorldCom, Inc.,
7.75%, due April 1, 2007 1,300,000 1,361,425
6,738,452 7,173,790
DIVERSIFIED - 2.68%
International Business Machines Corp.,
6.22%, due August 1, 2027 1,500,000 1,489,455
Lucent Technologies, Inc.,
6.90%, due July 15, 2001 1,700,000 1,728,696
3,200,000 3,218,151
INDUSTRIALS - 15.76%
Airgas, Inc.,
7.14%, due March 8, 2004 1,650,000 1,652,376
Cardinal Health, Inc.,
6.00%, due January 15, 2006 1,835,000 1,734,369
Comdisco, Inc.,
6.375%, due November 30, 2001 3,675,000 3,665,261
Georgia-Pacific Corp.,
9.625%, due March 15, 2022 1,500,000 1,605,120
Hydro Quebec,
8.05%, due July 7, 2024 2,900,000 3,142,817
Oslo Seismic Services, Inc.,
8.28%, due June 1, 2011 1,939,107 1,980,119
Petroleum Geo-Services A/S,
7.50%, due March 31, 2007 1,500,000 1,496,640
Philip Morris Companies, Inc.,
7.20%, due February 1, 2007 1,000,000 1,001,180
Philip Morris Companies, Inc.,
6.15%, due March 15, 2000 750,000 752,977
Raytheon Company,
6.15%, due November 1, 2008 2,000,000 1,888,180
18,749,107 18,919,039
TRANSPORTATION - 3.51%
CSX Corp.,
9.50%, due August 1, 2000 680,000 702,569
JB Hunt Transport Services, Inc.,
6.25%, due November 17, 2000 1,785,000 1,795,067
United Airlines Pass-Thru Trusts,
7.27%, due January 30, 2013 1,811,249 1,720,397
4,276,249 4,218,033
U.S. DOLLAR DENOMINATED CANADIAN SECURITIES - 4.04%
Canadian National Railway Company,
7.00%, due March 15, 2004 1,950,000 1,959,263
Newfoundland Province of Canada,
7.32%, due October 13, 2023 1,950,000 1,966,282
Ontario Province of Canada,
5.50%, due October 1, 2008 1,000,000 920,240
4,900,000 4,845,785
UTILITIES - 3.16%
Consolidated Edison Company NY, Inc.,
6.15%, due July 1, 2008 2,000,000 1,915,960
Illinois Power Special Purpose Trust, Cl. A-6,
5.54%, due June 25, 2009 2,000,000 1,873,120
4,000,000 3,789,080
TOTAL CORPORATE BONDS 58,163,808 58,272,614
(Cost $59,608,386)
ASSET-BACKED BONDS - 5.36%
California Infrastructure & Economic
Development Bank Special Purpose Trust,
6.42%, due September 25, 2008 2,500,000 2,486,200
California Infrastructure & Economic
Development Bank Special Purpose Trust,
6.22%, due March 25, 2004 1,000,000 997,500
Comed Transitional Funding Trust,
5.63%, due June 25, 2009 1,250,000 1,173,038
Green Tree Financial Corp.,
6.70%, due October 15, 2017 332,271 331,719
Green Tree Securitized Net Interest
Margin Trust,
7.25%, due July 15, 2005 526,242 516,375
MBNA Master Credit Card Trust II,
5.90%, due August 15, 2011 1,000,000 939,680
TOTAL ASSET-BACKED BONDS 6,608,513 6,444,512
(Cost $6,597,711)
COMMERCIAL MORTGAGE-BACKED BONDS - 5.55%
DLJ Commercial Mortgage Corp.,
6.11%, due December 10, 2007 2,348,308 2,286,665
JP Morgan Commercial Mortgage Financial Corp.,
6.507%, due
October 15, 2035 1,500,000 1,448,640
Nomura Asset Securities Corp.,
6.59%, due March 17, 2028 3,000,000 2,926,410
TOTAL COMMERCIAL MORTGAGE-BACKED BONDS 6,848,308 6,661,715
(Cost $6,906,259)
REVENUE BOND - 1.91%
New Jersey Economic Development Authority
State Pension Funding Revenue,
7.425%, due February 15, 2029 2,200,000 2,287,450
(Cost $2,237,298)
U.S. GOVERNMENTAL AGENCY,
U.S. GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES - 32.74%
U.S. GOVERNMENTAL AGENCY - 9.88%
Government National Mortgage Association
7.50%, due March 15, 2007 100,261 101,326
7.50%, due July 15, 2007 187,453 189,444
8.00%, due October 15, 2007 244,308 251,102
8.00%, due November 15, 2009 2,997,642 3,110,983
9.50%, due April 15, 2016 24,260 26,147
9.50%, due January 15, 2019 71,726 77,307
8.00%, due May 15, 2022 296,866 305,122
7.00%, due March 15, 2024 3,284,002 3,243,970
8.00%, due December 15, 2026 3,979,308 4,089,973
Small Business Administration guaranteed
developent participation certificates
9.80%, due July 1, 2008 147,657 158,165
10.05%, due August 1, 2008 133,520 142,609
10.05%, due April 1, 2009 152,849 164,186
11,619,852 11,860,334
U.S. GOVERNMENT SECURITIES - 9.01%
U.S. Treasury Notes
11.125%, due August 15, 2003 1,520,000 1,812,843
7.25%, due August 15, 2004 2,850,000 3,031,687
6.50%, due October 15, 2006 1,065,000 1,099,613
8.125%, due May 15, 2021 4,000,000 4,871,240
9,435,000 10,815,383
*GOVERNMENT SPONSORED ENTERPRISES - 13.85%
Federal Home Loan Mortgage Corporation
7.75%, due April 1, 2008 172,714 177,733
7.75%, due November 1, 2008 36,681 37,747
8.00%, due August 1, 2009 34,343 35,599
8.25%, due October 1, 2010 290,802 303,978
9.00%, due June 1, 2016 103,954 110,872
8.00%, due October 1, 2018 150,449 155,950
9.00%, due October 1, 2018 72,872 77,266
7.50%, due February 1, 2021 1,163,552 1,177,724
6.00%, due November 1, 2028 6,381,699 6,014,751
Federal National Mortgage Association
5.625%, due March 15, 2001 3,385,000 3,379,516
7.00%, due December 1, 2007 383,800 379,721
8.25%, due January 1, 2009 136,206 140,973
5.25%, due January 15, 2009 3,000,000 2,750,370
8.00%, due February 1, 2009 176,720 181,303
7.50%, due September 1, 2011 222,880 226,501
8.50%, due July 1, 2013 45,779 47,796
9.50%, due June 25, 2018 135,635 142,642
9.25%, due October 1, 2020 85,968 91,421
6.50%, due March 1, 2029 1,240,219 1,197,965
17,219,273 16,629,828
TOTAL U.S. GOVERNMENTAL AGENCY,
U.S. GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES 38,274,123 39,305,545
(Cost $39,727,306)
REPURCHASE AGREEMENT - 4.91%
UMB Bank, n.a., 4.29%, due July 1, 1999
(Collateralized by U.S. Treasury Notes,
6.25%, due August 31, 2000
with a value of $6,018,197) 5,900,000 5,900,000
(Cost $5,900,000)
TOTAL INVESTMENTS - 99.01%
118,871,836
(Cost $120,976,960)
Other assets less liabilities - 0.99% 1,191,990
TOTAL NET ASSETS - 100.00%
$ 120,063,826
The identified cost of investments owned at June 30, 1999 was the
same for financial statement and federal income tax purposes.
Net unrealized depreciation for federal income tax purposes was
$2,105,124, which is comprised of unrealized appreciation
of $735,416 and unrealized depreciation of $2,840,540.
*Mortgage-backed securities
See accompanying Notes to Financial Statements.
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON BOND TRUST - PORTFOLIO S
PRINCIPAL MARKET
DESCRIPTION VALUE VALUE
CORPORATE BONDS - 46.51%
BANKS AND FINANCE - 8.72%
Associates Corporation North America,
5.80%, due April 20, 2004 $ 750,000 $ 722,767
Chrysler Financial Corp.,
6.375%, due January 28, 2000 600,000 601,722
Hellenic Republic,
6.95%, due March 4, 2008 375,000 375,412
Republic of Chile,
6.875%, due April 28, 2009 200,000 185,318
Southern Investments UK PLC,
6.375%, due November 15, 2001 300,000 296,688
SunTrust Banks, Inc.,
6.00%, due February 15, 2026 700,000 665,679
Wachovia Capital Trust II,
6.062%, due January 15, 2027 375,000 357,630
3,300,000 3,233,848
COMMUNICATIONS - 5.10%
A T & T Capital Corp.,
6.875%, due January 16, 2001 350,000 350,147
BellSouth Savings & Employee
Stock Ownership Trust,
9.19%, due July 1, 2003 597,099 640,161
Time Warner Entertainment Company LP,
8.375%, due March 15, 2023 300,000 324,951
WorldCom, Inc.,
7.75%, due April 1, 2007 550,000 575,988
1,797,099 1,891,247
DIVERSIFIED - 2.10%
International Business Machines Corp.,
6.22%, due August 1, 2027 400,000 397,188
Lucent Technologies, Inc.,
6.90%, due July 15, 2001 375,000 381,330
775,000 778,518
INDUSTRIALS - 18.78%
Airgas, Inc.,
7.14%, due March 8, 2004 550,000 550,792
Cardinal Health, Inc.,
6.25%, due July 15, 2008 650,000 608,809
Comdisco, Inc.,
6.375%, due November 30, 2001 1,000,000 997,350
Ford Motor Credit Company,
5.75%, due February 23, 2004 1,600,000 1,544,080
Georgia Pacific Corp.,
9.125%, due July 1, 2022 375,000 390,679
Hydro-Quebec,
8.05%, due July 7, 2024 425,000 460,585
Oslo Seismic Services, Inc.,
8.28%, due June 1, 2011 484,777 495,030
Petroleum Geo-Services A/S,
7.50%, due March 31, 2007 500,000 498,880
Philip Morris Companies, Inc.,
7.20%, due February 1, 2007 200,000 200,236
Philip Morris Companies, Inc.,
6.15%, due March 15, 2000 250,000 250,993
Raytheon Company,
6.15%, due November 1, 2008 500,000 472,045
Service Corporation International,
6.375% notes, due October 1, 2000 500,000 497,285
7,034,777 6,966,764
TRANSPORTATION - 3.62%
Burlington Northern Santa Fe Corp.,
6.05%, due March 15, 2001 400,000 398,020
JB Hunt Transport Services, Inc.,
6.25%, due November 17, 2000 350,000 351,974
United Airlines Pass-Thru Trusts,
7.27%, due January 30, 2013 399,886 379,828
Wisconsin Central Transportation Corp.,
6.625%, due April 15, 2008 225,000 213,865
1,374,886 1,343,687
U.S. DOLLAR DENOMINATED CANADIAN SECURITIES - 4.46%
Canadian National Railway Company,
7.00%, due March 15, 2004 500,000 502,375
Ontario Province of Canada,
5.50%, due October 1, 2008 1,250,000 1,150,300
1,750,000 1,652,675
UTILITIES - 3.73%
Consolidated Edison Company NY, Inc.,
6.15%, due July 1, 2008 400,000 383,192
Long Island Lighting Company,
7.30%, due July 15, 1999 1,000,000 1,000,590
1,400,000 1,383,782
TOTAL CORPORATE BONDS 17,431,762 17,250,521
(Cost $17,550,026)
ASSET-BACKED BONDS - 7.41%
California Infrastructure & Economic
Development Bank Special Purpose Trust
6.14%, due March 25, 2002 305,111 306,512
6.22%, due March 25, 2004 300,000 299,250
6.42%, due September 25, 2008 150,000 149,172
Comed Transitional Funding Trust,
5.63%, due June 25, 2009 1,100,000 1,032,273
Green Tree Financial Corp.,
6.70%, due October 15, 2017 90,620 90,469
Green Tree Securitized Net
Interest Margin Trust,
6.90%, due February 15, 2004 120,223 119,922
MBNA Master Credit Card Trust II,
5.90%, due August 15, 2011 800,000 751,744
TOTAL ASSET-BACKED BONDS 2,865,954 2,749,342
(Cost $2,820,075)
COMMERCIAL MORTGAGE-BACKED BONDS - 4.65%
DLJ Commercial Mortgage Corp.,
6.11%, due December 10, 2007 751,459 731,732
JP Morgan Commercial Mortgage Financial Corp.,
6.507%, due October 15, 2035 250,000 241,440
Nomura Asset Securities Corporation,
6.59%, due March 17, 2028 800,000 780,376
TOTAL COMMERICAL MORTGAGE-BACKED BONDS 1,801,459 1,724,916
(Cost $1,815,427)
U.S. GOVERNMENTAL AGENCY,
U.S. GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES - 37.12%
U.S. GOVERNMENTAL AGENCY - 6.68%
Government National Mortgage Association
8.00%, due October 15, 2007 17,713 18,205
8.00%, due November 15, 2009 537,945 558,284
7.50%, due October 15, 2011 309,472 316,241
7.50%, due November 15, 2011 345,367 352,920
9.50%, due September 15, 2019 15,054 16,225
8.00%, due December 15, 2022 193,895 199,287
7.00%, due May 15, 2024 614,746 607,253
8.00%, due November 15, 2026 371,592 381,927
Small Business Administration
guaranteed development
participation certificates
9.80%, due July 1, 2008 24,609 26,361
2,430,393 2,476,703
U.S. GOVERNMENT SECURITIES - 6.00%
U.S. Treasury Bonds
11.125%, due August 15, 2003 700,000 834,862
U.S. Treasury Notes
7.25%, due August 15, 2004 250,000 265,938
5.625%, due February 15, 2006 250,000 246,250
6.50%, due October 15, 2006 850,000 877,625
2,050,000 2,224,675
*GOVERNMENT SPONSORED ENTERPRISES - 24.44%
Federal Home Loan Mortgage Corporation
8.25%, due July 1, 2008 20,239 20,745
8.00%, due January 1, 2012 471,656 486,098
9.00%, due June 1, 2016 83,963 89,551
8.00%, due May 1, 2017 40,919 42,414
9.00%, due May 15, 2021 105,463 109,516
6.00%, due November 1, 2028 1,963,599 1,850,693
Federal National Mortgage Association
5.625%, due March 15, 2001 4,425,000 4,417,832
7.00%, due December 1, 2007 71,277 70,520
5.25%, due January 15, 2009 800,000 733,432
8.25%, due January 1, 2009 14,188 14,683
7.50%, due September 1, 2011 222,879 226,501
9.25%, due October 1, 2020 45,246 48,116
6.50%, due March 1, 2029 992,175 958,372
9,256,604 9,068,473
TOTAL U.S. GOVERNMENTAL AGENCY,
U.S. GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES
13,736,997 13,769,851
(Cost $13,948,873)
REPURCHASE AGREEMENT - 4.04%
UMB Bank, n.a., 4.29%, due July 1, 1999
(Collateralized by U.S. Treasury Notes,
6.25%, due August 31, 2000
with a value of $1,530,259)
1,500,000 1,500,000
(Cost $1,500,000)
TOTAL INVESTMENTS - 99.73% 36,994,630
(Cost $37,634,401)
Other assets less liabilities - 0.27% 99,532
TOTAL NET ASSETS - 100.00% $ 37,094,162
The identified cost of investments owned at June 30, 1999 was the
same for financial statement and federal income tax purposes.
Net unrealized depreciation for federal income tax purposes was
$639,771, which is comprised of unrealized appreciation
of $112,951 and unrealized depreciation of $752,722.
*Mortgage-backed securities
See accompanying Notes to Financial Statements.
<PAGE>
BABSON MONEY MARKET FUND
The economic tug of war between strength at home and weakness
abroad produced a roller coaster ride for money market investors
in the twelve months ended in June.
The fiscal year began with most market participants convinced
that the Federal Reserve was about to begin a round of short-term
rate increases. GDP growth had been stronger than expected and
the weakness of the Asian economies, while dampening U.S.
manufacturing, had done little to slow the American economy.
The outlook for rate hikes turned on a dime last August. The
spreading of the "Asian flu" to Russia was the catalyst that
disrupted financial markets to such a point that the Federal
Reserve had to hurriedly ease three times to prevent an
unnecessary recession. This decline in interest rates did calm
financial markets, and also unleashed a flood of mortgage
refinancings by homeowners. By permanently lowering their monthly
mortgage payments, consumers were able to dramatically increase
their level of spending.
As calendar 1999 progressed, it became apparent that the
increased consumer spending was keeping the economy very strong
and market rates began a sustained rise. Intermediate- and long-
term rates rose by 1 percent and money market rates such as six-
month commercial paper rose more than one-half percent. These
increases did not slow the economy, so on June 30, the Fed hiked
the Federal Funds rate by one-quarter of a percent. No one knows
if this tightening of monetary policy will only be the first of a
series. It is clear that the Fed will keep tightening until the
economy shows some signs of slowing.
What investors should remember from the past year is that
sentiment and markets can turn on a dime. In money market
investing, investors should focus on quality and liquidity since
the rewards for riskier strategies are meager. This has been our
policy at the Babson Money Market Fund, and we feel that it will
continue to benefit our shareholders.
The seven-day yield for Babson Money Market Fund's Prime
Portfolio was 4.10% and the Federal Portfolio was 4.00%, as of
June 30, 1999.
Money market funds are neither insured nor guaranteed by the U.S.
Government. There is no assurance that the fund will maintain a
stable net asset value of one dollar per share.
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON MONEY MARKET FUND - PRIME
PRINCIPAL MARKET
DESCRIPTION AMOUNT VALUE
SHORT-TERM CORPORATE NOTES - 76.13%
Anheuser-Busch Companies, Inc.,
4.92%, due July 19, 1999 $1,800,000 $1,795,572
Caterpillar Financial Services,
4.83%, due August 9, 1999 1,600,000 1,591,628
Coca-Cola Company,
5.00%, due September 7, 1999 1,800,000 1,783,000
duPont (E.I.) deNemours & Company,
4.83%, due July 17, 1999 1,800,000 1,795,653
Ford Motor Credit Company,
4.79%, due September 7, 1999 2,000,000 1,981,904
Fortune Brands, Inc.,
5.02%, due August 9, 1999 1,800,000 1,790,211
General Electric Capital Company,
4.73%, due July 19, 1999 1,800,000 1,795,743
General Mills, Inc.,
4.84%, due July 7, 1999 1,800,000 1,798,548
General Motors Acceptance Corp.,
4.76%, due November 3, 1999 1,800,000 1,770,250
Grainger (W.W.), Inc.,
5.00%, due July 12, 1999 1,800,000 1,797,250
Heinz (H.J.) Company,
4.82%, due July 22, 1999 1,800,000 1,794,939
Lucent Technologies, Inc.,
4.83%, due July 15, 1999 1,000,000 998,122
McGraw-Hill Companies, Inc.,
4.75%, due August 3, 1999 1,900,000 1,891,727
Proctor & Gamble Company,
4.88%, due August 2, 1999 1,800,000 1,792,192
Sara Lee Corp.,
4.82%, due July 6, 1999 1,800,000 1,798,795
Shell Oil Company,
5.00%, due July 12, 1999 1,800,000 1,797,250
Xerox Corp.,
5.04%, due September 27, 1999 1,800,000 1,777,824
TOTAL SHORT-TERM CORPORATE NOTES 29,900,000 29,750,608
(Cost $29,750,608)
GOVERNMENT SPONSORED ENTERPRISES - 11.39%
Federal Home Loan Mortgage Corporation
Discount Notes,
4.69%, due October 18, 1999 2,500,000 2,464,499
Federal National Mortgage Association
Discount Notes,
5.21%, due July 16, 1999 1,000,000 997,829
Federal National Mortgage Association
Discount Notes,
4.63%, due September 20, 1999 1,000,000 989,583
TOTAL GOVERNMENT SPONSORED ENTERPRISES 4,500,000 4,451,911
(Cost $4,451,911)
REPURCHASE AGREEMENT - 13.12%
Morgan Guaranty Trust Company,
4.60%, due July 1, 1999
(Collateralized by U.S.
Treasury Bonds,
6.875%, due August 15, 2025
with a value of $5,228,541) 5,126,000 5,126,000
(Cost $5,126,000)
TOTAL INVESTMENTS - 100.64% 39,328,519
(Cost $39,328,519)
Other assets less liabilities - (0.64%) (252,251)
TOTAL NET ASSETS - 100.00% $39,076,268
The identified cost of investments owned at June 30, 1999 was the
same for financial statement and federal income tax purposes.
See accompanying Notes to Financial Statements.
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON MONEY MARKET FUND - FEDERAL
PRINCIPAL MARKET
DESCRIPTION AMOUNT VALUE
GOVERNMENT SPONSORED ENTERPRISES - 85.04%
Federal Farm Credit Banks Discount Notes,
4.70%, due August 5, 1999 $ 500,000 $ 497,715
Federal Home Loan Banks Discount Notes,
4.51%, due October 22, 1999 1,000,000 985,844
Federal Home Loan Mortgage Corporation
Discount Notes
4.83%, due July 9, 1999 3,000,000 2,996,780
4.73%, due August 2, 1999 1,000,000 995,796
4.67%, due August 26, 1999 1,000,000 992,736
Federal National Mortgage Association
Discount Notes
4.77%, due July 1, 1999 1,500,000 1,500,000
4.73%, due July 28, 1999 1,000,000 996,452
4.71%, due September 13, 1999 1,000,000 990,318
5.00%, due September 14, 1999 1,500,000 1,484,375
TOTAL GOVERNMENT SPONSORED ENTERPRISES 11,500,000 11,440,016
(Cost $11,440,016)
REPURCHASE AGREEMENT - 14.70%
Morgan Guaranty Trust Company,
4.60%, due July 1, 1999
(Collateralized by U.S.
Treasury Bonds,
6.875%, due August 15, 2025
with a value of $2,017,560) 1,978,000 1,978,000
(Cost $1,978,000)
TOTAL INVESTMENTS - 99.74% 13,418,016
(Cost $13,418,016)
Other assets less liabilities - 0.26% 34,931
TOTAL NET ASSETS - 100.00% $ 13,452,947
The identified cost of investments owned at June 30, 1999 was
the same for financial statement and federal income tax purposes.
See accompanying Notes to Financial Statements.
<PAGE>
Babson Tax-Free Income Fund
#For the fiscal year ended June 30, 1999 total investment returns
(price change and reinvested distributions) for the Tax-Free Long
and Short portfolios were 1.70% and 1.96%, respectively.
Portfolio MM's price remained at $1.00 and provided a return of
2.70% for the same period. The average maturities of Portfolios
L, S and MM were 13.8 years, 4.2 years and 42 days, respectively.
Tax-exempt interest rates increased during the past year as a
result of the overall weakness in the fixed income markets.
Interest rates have been on the rise due to inflationary fears
and speculation over whether the Federal Reserve Board would
raise the Federal Funds rate to slow down the economy. Most of
the increase in tax-exempt interest rates occurred during the
past four months, and therefore, 1999 year-to-date municipal
returns are negative. Coupon income was insufficient to offset
losses in principal. Shorter maturities had the best performance
and this explains why Portfolio L posted the lowest returns of
the three portfolios for the one-year period.
Currently, at two hundred basis points, the municipal yield curve
(the yield differential between one and thirty years) is twice as
steep as the Treasury curve. The front end of the curve is the
steepest and this enables investors to pick up almost one
percentage point in yield by moving from a one-year maturity to a
five-year maturity. In fact, investors can capture seventy-five
percent of the entire yield curve by investing in fifteen-year
maturities. Due to the higher level of interest rates and
reallocation of funds from over-weighted equity positions, retail
demand for municipal bonds has increased.
Over the past several years, issuance in the municipal market has
had a tremendous influence on the level of tax-exempt interest
rates. While issuance during 1998 was at near record levels, 1999
year-to-date issuance has declined considerably. Refunding
issuance declined the most because the back up in interest rates
caused many of these deals to be postponed or cancelled. This
decline in municipal issuance is in stark contrast to the
increase in corporate bond issuance during 1999. The tremendous
amount of corporate debt issuance caused corporate credit spreads
to widen out. Municipal bond quality spreads, on the other hand,
remain relatively narrow by historical standards.
Credit quality in the municipal market remains very strong. The
number of ratings upgrades continues to outnumber the number of
downgrades. A strong economy has certainly been the catalyst for
ratings upgrades, but increasingly diversified regional economies
and prudent financial management have also been key factors.
Because of the powerful national economy, state and local tax
governments are seeing greater than anticipated revenues. The tax-
backed sector continues to benefit from increasing personal and
corporate income taxes, property taxes and sales taxes.
QUALITY RATINGS
PORTFOLIO PORTFOLIO PORTFOLIO
L S MM
Aaa 51% 56% 79%
Aa 28 22 21
A 17 13 0
Lower 4 9 0
Total 100% 100% 100%
Source: Moody's
CHART - BABSON TAX-FREE INCOME FUND
PORTFOLIOS L & S VERSUS LIPPER GENERAL MUNICIPAL BOND FUNDS AND
LIPPER SHORT TERM MUNICIPAL BOND FUNDS
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON TAX-FREE INCOME FUND - PORTFOLIO L
PRINCIPAL MARKET
DESCRIPTION AMOUNT VALUE
ALABAMA
Jefferson County Sewer,
5.00%, due February 1, 2033 $ 1,000,000 $ 920,000
ARIZONA
Maricopa County Unified School District #48,
9.25%, due July 1, 2007 500,000 649,375
ARKANSAS
Arkansas, Series B,
0.00%, due June 1, 2010 1,000,000 582,500
University of Arkansas
(Athletic Facilities Fayetteville),
4.80%, due September 15, 2007 1,000,000 996,250
CALIFORNIA
Santa Rosa Water, Series B,
6.00%, due September 1, 2015 500,000 546,875
University of California, Series D,
5.75%, due July 1, 2013 1,000,000 1,050,000
COLORADO
Adams County School District #12,
6.20%, due December 15, 2010 500,000 527,500
DISTRICT OF COLUMBIA
District of Columbia, Series A,
5.75%, due June 1, 2003 35,000 36,400
District of Columbia, Series A,
5.75%, due June 1, 2003 465,000 484,762
FLORIDA
Dade County,
0.00%, due October 1, 2027 1,000,000 195,000
Florida State Public Board of Education,
Series A,
7.25%, due June 1, 2023 1,000,000 1,050,530
Miami-Dade County, Series A,
0.00%, due October 1, 2015 500,000 208,125
Palm Beach County Airport,
7.75%, due October 1, 2010 500,000 544,375
Tampa (Catholic Health Care East),
4.875%, due November 15, 2023 500,000 454,375
ILLINOIS
Chicago, Series B,
5.125%, due January 1, 2022 1,000,000 966,250
Lake County School District,
5.00%, due December 15, 2014 1,000,000 970,000
INDIANA
Indiana Bond Bank Special Program,
Series 94 A-1,
5.60%, due August 1, 2015 500,000 517,500
KANSAS
Johnson County Unified School District #229,
Series A,
4.90%, due October 1, 2011 1,000,000 985,000
LOUISIANA
St. Tammany Parish Hospital Service
District #2 (Slidell Memorial Hospital
& Medical Center),
6.125%, due October 1, 2011 500,000 535,000
MASSACHUSETTS
Massachusetts Health & Education, Series D,
5.75%, due July 1, 2014 500,000 513,750
Massachusetts Housing Finance Agency
Projects, Series A,
6.375%, due April 1, 2021 975,000 1,028,625
MICHIGAN
Michigan State Hospital Finance Authority
(Mercy Health Services), Series Q,
5.375%, due August 15, 2026 500,000 488,750
NEVADA
Clark County School District, Series A,
6.75%, due March 1, 2007 500,000 521,250
Nevada (Natural Resources), Series C,
5.375%, due May 15, 2017 500,000 499,375
NEW HAMPSHIRE
New Hampshire Higher Education &
Health Facility (Concord Hospital),
5.70%, due October 1, 2010 500,000 526,875
New Hampshire Higher Education &
Health Facility (Franklin Pierce Law Center),
5.50%, due July 1, 2018 500,000 476,875
NEW JERSEY
New Jersey Turnpike,
10.375%, due January 1, 2003 115,000 128,369
NEW YORK
Battery Park City, Series A,
5.00%, due November 1, 2004 1,000,000 1,021,250
New York City Municipal Water
Financing Authority, Series A,
6.80%, due June 15, 2004 1,000,000 1,056,250
New York Dormitory
(State University Education Facility),
Series B,
6.10%, due May 15, 2008 1,000,000 1,087,500
New York Environmental, Series B,
6.65%, due September 15, 2013 500,000 540,000
RHODE ISLAND
Rhode Island Depositors
Economic Protection Corp., Series B,
5.80%, due August 1, 2009 500,000 531,250
Rhode Island Industrial Facility Corp.,
9.125%, due October 1, 2000 40,000 40,158
TEXAS
San Antonio Electric & Gas,
5.75%, due February 1, 2011 295,000 303,481
San Antonio Electric & Gas,
5.75%, due February 1, 2011 205,000 214,225
Texas Public Finance, Series A,
6.00%, due February 1, 2008 500,000 533,750
VIRGINIA
Danville Industrial Development
(Danville Regional Medical Center),
6.375%, due October 1, 2014 500,000 547,500
Fairfax County Industrial Development,
5.50%, due August 15, 2009 500,000 513,750
Virginia State University,
5.75%, due May 1, 2021 500,000 513,750
WASHINGTON
Tacoma Conservation System Project
(Tacoma Public Utilities),
6.50%, due January 1, 2012 500,000 538,125
Washington, Series DD-13,
5.875%, due March 1, 2014 500,000 525,000
Washington Public Power Supply System
Nuclear Project #2, Series 94 A,
5.375%, due July 1, 2011 500,000 504,375
WISCONSIN
Wisconsin Public Power,
5.90%, due July 1, 2011 500,000 530,625
TOTAL INVESTMENTS - 98.08% 25,404,675
(Cost $24,551,804)
Other assets less liabilities - 1.92% 497,706
TOTAL NET ASSETS - 100.00% $ 25,902,381
The identified cost of investments owned at June 30, 1999 was the
same for financial statement and federal income tax purposes.
Net unrealized appreciation for federal income tax purposes was
$852,871, which is comprised of unrealized appreciation
of $1,029,154 and unrealized depreciation of $176,283.
See accompanying Notes to Financial Statements.
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON TAX-FREE INCOME FUND - PORTFOLIO S
PRINCIPAL MARKET
DESCRIPTION AMOUNT VALUE
ARIZONA
Chandler,
6.90%, due July 1, 2005 $ 1,000,000 $ 1,055,000
Maricopa County Unified School District #93,
6.40%, due July 1, 2005 500,000 542,500
ARKANSAS
University of Arkansas
(Athletic Facilities Fayetteville),
4.50%, due September 15, 2003 500,000 502,500
COLORADO
Jefferson County School District #R-001,
Series A,
6.00%, due December 15, 2006 500,000 542,500
DISTRICT OF COLUMBIA
District of Columbia, Series A,
5.75%, due June 1, 2003 465,000 484,763
District of Columbia, Series A,
5.75%, due June 1, 2003 35,000 36,400
GUAM
Guam Government Limited Obligation,
Series A,
5.75%, due May 1, 2001 500,000 515,000
ILLINOIS
Du Page & Will Counties Community
School District #204,
7.25%, due December 30, 2004 500,000 565,000
INDIANA
Kokomo-Center School Building Corp.,
6.75%, due July 15, 2007 250,000 281,563
MASSACHUSETTS
Massachusetts Health & Education
(Milford-Whitinsville Regional), Series C,
4.75%, due July 15, 2003 500,000 496,250
Massachusetts Housing Finance Agency Projects,
Series A, 5.35%, due April 1, 2003 500,000 516,250
MICHIGAN
Utica Community Schools,
5.375%, due May 1, 2005 500,000 520,000
MISSOURI
Jackson County Industrial Development
Authority (St. Joseph Health Center),
4.60%, due July 1, 2001 500,000 503,750
Sikeston Electric,
5.80%, due June 1, 2002 500,000 520,625
NEVADA
Washoe County Hospital, Series A,
5.25%, due June 1, 2001 500,000 510,000
Washoe County (Reno Sparks Bowling Facility),
Series A, 5.40%, due July 1, 2006 500,000 518,125
NEW MEXICO
Las Cruces School District,
6.125%, due August 1, 2000 500,000 512,585
NEW YORK
Battery Park City,
6.00%, due November 1, 2003 500,000 530,625
Metropolitan Transportation,
5.00%, due April 1, 2008 500,000 503,750
New York Medical Care Finance Agency, Series F,
6.00%, due August 15, 2002 500,000 523,125
New York Medical Care Finance Agency, Series A,
5.40%, due August 15, 2004 285,000 288,562
New York State Dormitory,
5.35%, due November 1, 2005 500,000 519,375
New York State,
5.00%, due April 1, 2009 500,000 501,250
NORTH CAROLINA
North Carolina Eastern Municipal Power Agency,
Series 93 B,
5.375%, due January 1, 2001 500,000 503,750
OHIO
Columbus City School District,
6.65%, due December 1, 2012 500,000 546,250
Ohio Special Obligation, Series A,
5.55%, due June 1, 2000 500,000 509,235
Ohio State Building Authority,
4.00%, due October 1, 2004 250,000 243,750
PENNSYLVANIA
North Hampton County,
4.20%, due August 15, 2008 500,000 475,625
TENNESSEE
Shelby County,
4.75%, due June 1, 2009 500,000 491,875
Tennessee Housing Development Agency,
Series A,
4.95%, due July 1, 2000 500,000 505,415
TEXAS
Fort Bend County,
4.55%, due October 1, 2011 500,000 500,980
Houston, Series C,
5.90%, due March 1, 2003 140,000 145,425
Houston, Series C,
5.90%, due March 1, 2003 360,000 373,950
San Antonio Water,
0.00%, due May 1, 2010 1,250,000 604,325
WASHINGTON
Washington Public Power Supply System
Nuclear Project #2, Series B,
5.10%, due July 1, 2004 500,000 513,750
Washington Public Power Supply System
Nuclear Project #2, Series B,
7.50%, due July 1, 2004 300,000 317,178
Washington, Series B,
5.00%, due January 1, 2008 500,000 502,500
WISCONSIN
Chippewa Valley Techonologies College
District, Series A,
4.75%, due April 1, 2007 500,000 498,125
Milwaukee County, Series A,
5.35%, due September 1, 2001 500,000 512,500
Milwaukee Metropolitan Sewer District, Series A,
7.00%, due September 1, 2000 500,000 518,750
TOTAL INVESTMENTS - 101.60% 19,252,881
(Cost $19,256,749)
Other assets less liabilities - (1.60%) (302,947)
TOTAL NET ASSETS - 100.00% $ 18,949,934
The identified cost of investments owned at June 30, 1999 was the
same for financial statement and federal income tax purposes.
Net unrealized depreciation for federal income tax purposes was
$3,868, which is comprised of unrealized appreciation
of $217,099 and unrealized depreciation of $220,967.
See accompanying Notes to Financial Statements.
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
BABSON TAX-FREE INCOME FUND - PORTFOLIO MM
PRINCIPAL MARKET
DESCRIPTION AMOUNT VALUE
ALABAMA
Montgomery Industrial,
3.30%, due July 7, 1999 $ 300,000 $ 300,000
ALASKA
Alaska Housing Finance Corp., Series C,
3.30%, due June 1, 2026* 500,000 500,000
COLORADO
Denver City & County,
7.00%, due October 1, 1999 200,000 201,945
CONNECTICUT
Connecticut, Series 97 B,
3.60%, due May 15, 2014* 200,000 200,000
Connecticut,
4.60%, due May 15, 2000 150,000 151,273
Connecticut,
3.38%, due July 1, 2000 200,000 200,000
Connecticut,
3.60%, due July 1, 1999 200,000 200,000
Redding,
5.85%, due April 15, 2000 175,000 178,092
FLORIDA
Dade County Water & Sewer System,
3.30%, due October 5, 2022* 400,000 400,000
Dade County (Florida Power & Light),
3.40%, due June 1, 2021 200,000 200,000
GEORGIA
Metro Atlanta Rapid Transit Authority,
5.50%, due July 1, 1999 175,000 175,000
Municipal Gas Authority, Series 97 B,
3.30%, due September 1, 2007 200,000 200,000
De Kalb Private Hospital Authority
(Egleston Childrens Hospital), Series A,
3.35%, due March 1, 2024* 300,000 300,000
ILLINOIS
Illinois Health Facilties
(Rush-Presbyterian, St. Lukes), Series B,
3.50%, due November 15, 2023* 200,000 200,000
Lake County Industrial,
3.00%, due December 15, 1999 190,000 190,000
Northbrook,
3.75%, due November 1, 1999 500,000 500,985
INDIANA
St. Joseph County Education Facilities
(University of Notre Dame),
3.60%, due March 1, 2033* 300,000 300,000
MICHIGAN
Michigan State Building Authority,
3.15%, due August 5, 1999 200,000 200,000
Michigan State Building Authority, Series I,
4.90%, due October 1, 1999 100,000 100,405
MISSISSIPPI
Jackson County, Series 92,
3.40%, due June 1, 2023* 200,000 200,000
MISSOURI
Missouri Health & Education Facilities
Authority (Washington University), Series B,
3.45%, due September 1, 2030* 200,000 200,000
MONTANA
Montana, Series C,
4.50%, due August 1, 1999 100,000 100,125
NEBRASKA
Omaha Public Power District,
4.30%, due February 1, 2000 100,000 100,569
NEW MEXICO
Albuquerque Airport, Series 95,
3.30%, due July 1, 2014* 200,000 200,000
Hurley (British Petroleum),
3.40%, due December 1, 2015* 200,000 200,000
NEW JERSEY
Bergen County,
6.35%, due January 15, 2000 180,000 182,943
NEW YORK
New York City Municipal Water
Finance Authority, Series G,
3.40%, due June 15, 2024* 200,000 200,000
Port Authority of New York/New Jersey,
3.40%, due June 1, 2020 100,000 100,000
NORTH CAROLINA
Charlotte Airport, Series 93 A,
3.30%, due July 1, 2016* 300,000 300,000
Raleigh Durham Airport Authority,
3.45%, due November 1, 2005 100,000 100,000
Winston-Salem Water & Sewer System,
3.35%, due June 1, 2014* 200,000 200,000
OHIO
Ohio Highway, 4.80%, due May 1, 2000 100,000 101,054
Ohio State University,
3.13%, due August 26, 1999 300,000 300,000
RHODE ISLAND
Rhode Island Correction Facility,
6.85%, due August 1, 1999 150,000 153,384
TENNESSEE
Tennessee, Series 98 C,
3.30%, due July 2, 2001* 200,000 200,000
TEXAS
Harris County, Series A,
3.25%, due July 14, 1999 100,000 100,000
Harris County, Series B,
3.05%, due July 19, 1999 200,000 200,000
Lone Star Airport Improvement Authority,
Series B-4, 3.85%, due
December 1, 2014* 100,000 100,000
Lower Neches Valley Authority
Industrial Development Corp.,
3.30%, due February 1, 2004* 500,000 500,000
Southwest Higher Education Authority, Series 85,
3.45%, due July 1, 2015* 300,000 300,000
UTAH
Utah Transit Authority,
3.65%, due May 1, 2028* 400,000 400,000
Intermountain Power Agency,
3.125%, due September 15, 1999 200,000 200,000
WASHINGTON
Seattle Municipal Light & Power,
3.30%, due November 1, 2018 200,000 200,000
Washington, Series 96 B,
3.40%, due June 1, 2020* 200,000 200,000
Washington Public Power Supply System
Nuclear Project #1, Series 1A-1,
3.40%, due July 1, 2017* 100,000 100,000
WISCONSIN
Oak Creek (Wisconsin Electric Power Co),
3.45%, due August 1, 2016 400,000 400,000
Sheboygan (Wisconsin Power & Light Co),
3.75%, due August 1, 2014* 300,000 300,000
Milwaukee County, Series A,
5.10%, due September 1, 1999 100,000 100,307
Wisconsin, Series 1,
4.80%, due November 1, 1999 100,000 100,526
WYOMING
Sublette County,
3.40%, due November 1, 2014 300,000 300,000
TOTAL INVESTMENTS - 105.18% 11,036,608
(Cost $11,036,608)
Other assets less liabilities - (5.18%) (543,478)
TOTAL NET ASSETS - 100.00% $ 10,493,130
The identified cost of investments owned at June 30, 1999 was the
same for financial statement and federal income tax purposes.
*Variable rate security
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1999
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BABSON BABSON BABSON SHADOW BABSON
ENTERPRISE ENTERPRISE II GROWTH STOCK VALUE
FUND FUND FUND FUND FUND
</CAPTION>
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at cost $144,454 $61,738 $292,482 $40,833 $851,750
Investments at value $158,320 $77,455 $497,031 $50,084$1,243,393
Cash denominated in foreign currencies
(cost $38) - - - - -
Cash 4 - - - -
Receivables:
Investments sold 573 110 - - 559
Dividends 197 80 280 62 1,211
Interest 1 - 1 - 3
Fund shares sold - 60 - 308 606
Foreign tax - - - - -
Other - - - - -
Prepaid registration fees - - - - -
Total assets 159,095 77,705 497,312 50,454 1,245,772
LIABILITIES AND NET ASSETS:
Cash overdraft - 22 2,027 142 855
Payables:
Management fees 137 73 312 31 987
Registration fees - - - - -
Dividends - - - - -
Investments purchased 3,579 301 4,632 - -
Fund share redemptions - - - - -
Foreign tax withholding - - - - -
Other - - - 8 -
Total liabilities 3,716 396 6,971 181 1,842
NET ASSETS $155,379 $77,309 $490,341 $50,273$1,243,930
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in
capital) $129,588 $59,700 $251,566 $39,681 $793,400
Undistributed net investment income 287 48 - 191 450
Undistributed net realized gain (loss)
from investment transactions and
foreign currency transactions 11,638 1,844 34,226 1,150 58,437
Net unrealized appreciation
(depreciation) of investments and
translation of assets and liabilities
in foreign currencies 13,866 15,717 204,549 9,251 391,643
NET ASSETS APPLICABLE TO
OUTSTANDING SHARES $155,379 $77,309 $490,341 $50,273$1,243,930
Capital shares, $1.00 par value
Authorized 20,000 10,000 100,000 10,000 50,000
Outstanding 10,556 3,158 24,508 4,168 24,219
NET ASSET VALUE PER SHARE $14.72 $24.48 $20.01 $12.06 $51.36
</TABLE>
See accompanying Notes to Financial Statements.
ASSETS:
<TABLE>
<CAPTION>
BABSON BABSON BABSON
BABSON- BABSON BABSON BABSON BABSON TAX-FREE TAX-FREE TAX-FREE
STEWART IVORY BOND TRUST BOND TRUST MONEY MARKETMONEY MARKET INCOME FUND INCOME FUND INCOME FUND
INTERNATIONAL PORTFOLIO L PORTFOLIO S FUND PRIMEFUND FEDERAL PORTFOLIO L PORTFOLIO S PORTFOLIO MM
FUND
</CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C>
$62,719 $120,977 $37,635 $39,329 $13,418 $4,552 $19,257 $11,037
$82,073 $118,872 $36,995 $39,329 $13,418 $25,405 $19,253 $11,037
38 - - - - - - -
- 855 425 - 79 201 - -
1,782 75 8 - - - - -
160 - - - - - - -
- 1,806 585 1 -417 308 66
4,633 27 - - - - - -
97 - - - - - - -
- 37 26 - - - - -
- - - 13 9 - - -
88,783 121,672 38,039 39,343 13,506 26,023 19,561 11,103
- - - 109 - - 532 377
69 90 19 28 10 20 15 5
- - - - - 6 5 2
- 573 178 130 43 95 59 26
- 935 748 - - - - 200
83 10 - - - - - -
18 - - - - - - -
3 - - - - - - -
173 1,608 945 267 53 121 611 610
$88,610 $120,064 $37,094 $39,076 $13,453 $25,902 $18,950 $10,493
$62,489 $125,477 $39,722 $39,083 $13,453 $24,893 $18,854 $10,493
(488) - - - - - 1 -
7,269 (3,308) (1,988) (7) - 156 99 -
19,340 (2,105) (640) - - 853 (4) -
$88,610 $120,064 $37,094 $39,076 $13,453 $25,902 $18,950 $10,493
10,000 Unlimited Unlimited 1,000,000 1,000,000 50,000 50,000 100,000
4,549 78,931 3,864 39,061 13,451 2,906 1,795 10,487
$19.48 $1.52 $9.60 $1.00 $1.00 $8.91 $10.56 $1.00
</TABLE>
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON BABSON BABSON SHADOW BABSON
ENTERPRISE ENTERPRISE II GROWTH STOCK VALUE
FUND FUND FUND FUND FUND
1999(1) 1998(2) 1999(1) 1998(2) 1999 1999 1999(1)
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $1,200 $2,545 $550 $1,141 $3,443 $876 $14,610
Interest 87 282 26 230 696 91 773
Foreign tax withheld - - - - - - (149)
1,287 2,827 576 1,371 4,139 967 15,234
EXPENSES:
Management fees 990 2,199 513 999 3,700 375 7,202
Registration fees 10 26 15 32 32 44 68
Custody and pricing service fees - - - - - 94 -
Total expenses before voluntary
reduction of management fees 1,000 2,225 528 1,031 3,732 513 7,270
Less: voluntary reduction
of management fees - - - - - - -
Net expenses 1,000 2,225 528 1,031 3,732 513 7,270
Net investment income 287 602 48 340 407 454 7,964
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions 11,805 28,111 1,859 4,678 78,657 3,419 68,640
Foreign currency transactions - - - - - - -
Net unrealized appreciation
(depreciation) during the period on:
Investments (6,426) (51,434) 5,370 (10,623) (2,914) (4,111) 84,680
Translation of assets and liabilities
in foreign currencies - - - - - - -
Net gain (loss) on investments
and foreign currency 5,379 (23,323) 7,229 (5,945) 75,743 (692) 153,320
Net increase (decrease) in net assets
resulting from operations $5,666 $(22,721) $7,277 $(5,605) $76,150 $(238) $161,284
</TABLE>
(1) For the seven month period ended June 30, 1999.
(2) For the fiscal year ended November 30, 1998.
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
Babson- Babson Babson Babson Babson Babson
Stewart Ivory Money Market Money MarketTax-Free Tax-Free Tax-Free
Babson International Babson Bond Trust Babson Bond Trust Fund Fund Income Fund Income Fund Income Fund
Value Fund Fund Portfolio Portfolio Portfolio Portfolio Prime Federal Portfolio Portfolio Portfolio
L L S S Portfolio Portfolio L S MM
1998(2) 1999 1999(1) 1998(2) 1999(1) 1998(2) 1999 1999 1999 1999 1999
</CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$31,990 $1,428 $- $- $- $- $-$ -$ -$ -$ -$
2,872 92 4,895 8,902 1,428 2,557 2,013 710 1,440 999 374
- (155) - - - - - - - - -
34,862 1,365 4,895 8,902 1,428 2,557 2,013 710 1,440 999 374
14,844 885 692 1,226 215 370 330 118 259 197 6
204 27 15 26 5 7 13 4 15 12 58
- 233 - - - - - - - -
15,048 1,145 707 1,252 220 377 343 122 274 209 64
- - - - (71) (117) - - - -
15,048 1,145 707 1,252 149 260 343 122 274 209 64
19,814 220 4,188 7,650 1,279 2,297 1,670 588 1,166 790 310
75,274 10,042 97 2,150 156 337 - - 157 107 -
- (925) - - - - - - - - -
(55,316) (4,705) (5,777) 394 (1,355) 155 - - (827) (472) -
- (14) - - - - - - - - -
19,958 4,398 (5,680) 2,544 (1,199) 492 - - (670) (365) -
$39,772 $4,618 $(1,492) $10,194 $80 $2,789 $1,670 $588 $496 $425 $310
</TABLE>
<PAGE>
Statements of Changes in Net Assets
FOR THE YEAR ENDED JUNE 30, EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON ENTERPRISE FUND BABSON ENTERPRISE FUND II
1999(1) 1998(2) 1997(3) 1999(1) 1998(2) 1997(3)
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $287 $602 $615 $48 $340 $165
Net realized gain from investment
and foreign currency transactions 11,805 28,111 24,456 1,859 4,678 6,574
Net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities in foreign currencies
during the period (6,426) (51,434) 33,258 5,370 (10,623) 11,080
Net increase (decrease) in net assets
resulting from operations 5,666 (22,721) 58,329 7,277 (5,605) 17,819
Net equalization included in the price
of shares issued and redeemed - (78) (97) - 72 147
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (531) (607) - (174) (154) (235)
Net realized gain from investment transactions (26,217) (24,566) (27,062) (3,718) (6,554) (6,251)
Total distributions to shareholders (26,748) (25,173) (27,062) (3,892) (6,708) (6,486)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 3,937 7,033 9,796 10,618 41,623 48,745
Reinvested distributions 25,039 23,501 25,690 3,737 6,442 6,306
28,976 30,534 35,486 14,355 48,065 55,051
Shares repurchased (31,806) (19,465) (52,241) (23,385) (34,570) (30,458)
Net increase (decrease) from capital
share transactions (2,830) 11,069 (16,755) (9,030) 13,495 24,593
Net increase (decrease) in net assets (23,912) (36,903) 14,415 (5,645) 1,254 36,073
NET ASSETS:
Beginning of period 179,291 216,194 201,779 82,954 81,700 45,627
End of period $155,379 $179,291 $216,194 $77,309 $82,954 $81,700
Undistributed net investment income at end
of period $287 $643 $1,548 $48 $480 $405
*Fund share transactions:
Shares sold 287 389 552 481 1,679 2,016
Reinvested distributions 1,817 1,279 1,588 174 265 311
2,104 1,668 2,140 655 1,944 2,327
Shares repurchased (2,329) (1,074) (2,854) (1,072) (1,428) (1,273)
Net increase (decrease) in fund shares (225) 594 (714) (417) 516 1,054
</TABLE>
(1) For the seven month period ended June 30, 1999.
(2) For the fiscal year ended November 30, 1998.
(3) For the fiscal year ended November 30, 1997.
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
BABSON-STEWARTIVORY
BABSON GROWTH SHADOW STOCK BABSON VALUE INTERNATIONAL FUND
FUND FUND FUND FUND
1999 1998 1999 1998 1999(1) 1998(2) 1997(3) 1999 1998
</CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$407 $1,251 $454 $288 $7,964 $19,814 $13,631 $220 $389
78,657 66,315 3,419 6,818 68,640 75,274 43,841 9,117 6,390
(2,914) 28,509 (4,111) 2,320 84,680 (55,316) 215,582 (4,719) (404)
76,150 96,075 (238) 9,426 161,284 39,772 273,054 4,618 6,375
- (15) - (12) - 1,006 4,673 - -
(435) (1,286) (283) (350) (11,954) (17,864) (12,080) (196) (347)
(89,064) (29,518) (3,971) (6,317) (60,876) (43,880) (12,342) (4,016) (5,120)
(89,499) (30,804) (4,254) (6,667) (72,830) (61,744) (24,422) (4,212) (5,467)
68,166 60,232 16,595 51,683 183,659 513,526 676,854 141,384 41,330
82,101 28,406 3,827 6,122 59,332 49,896 18,924 3,579 4,600
150,267 88,638 20,422 57,805 242,991 563,422 695,778 144,963 45,930
(97,578) (68,117) (17,176) (50,355) (581,111) (468,037) (293,897) (161,163) (53,066)
52,689 20,521 3,246 7,450 (338,120) 95,385 401,881 (16,200) (7,136)
39,340 85,777 (1,246) 10,197 (249,666) 74,419 655,186 (15,794) (6,228)
451,001 365,224 51,519 41,322 1,493,596 1,419,177 763,991 104,404 110,632
$490,341 $451,001 $50,273 $51,519$1,243,930$1,493,596$1,419,177 $88,610 $104,404
$- $49 $191 $34 $450 $17,971 $16,435 $(488) $183
3,360 3,112 1,433 3,766 3,842 10,705 16,489 7,620 2,161
4,205 1,617 340 490 1,320 1,109 470 194 262
7,565 4,729 1,773 4,256 5,162 11,814 16,959 7,814 2,423
(4,770) (3,537) (1,497) (3,652) (12,441) (10,053) (6,991) (8,579) (2,773)
2,795 1,192 276 604 (7,279) 1,761 9,968 (765) (350)
150,267 88,638 20,422 57,805 242,991 563,422 695,778 144,963 45,930
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED JUNE 30, EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON BOND TRUST - PORTFOLIO L BABSON BOND TRUST - PORTFOLIO S
1999(1) 1998(2) 1997(3) 1999(1) 1998(2) 1997(3)
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $4,188 $7,650 $8,568 $1,279 $2,297 $2,499
Net realized gain (loss) from
investment transactions 97 2,150 (546) 156 337 (443)
Net unrealized appreciation (depreciation)
on investments during the period (5,777) 394 876 (1,355) 155 569
Net increase (decrease) in net assets
resulting from operations (1,492) 10,194 8,898 80 2,789 2,625
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (4,188) (7,650) (8,568) (1,279) (2,297) (2,499)
Net realized gain from investment transactions - - - - - -
Total from distributions to shareholders (4,188) (7,650) (8,568) (1,279) (2,297) (2,499)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 20,367 23,231 19,321 6,269 6,842 14,583
Reinvested distributions 2,940 6,273 6,988 943 2,008 2,075
23,307 29,504 26,309 7,212 8,850 16,658
Shares repurchased (25,749) (36,335) (36,426) (7,377) (11,448) (10,395)
Net increase (decrease) from capital
share transactions (2,442) (6,831) (10,117) (165) (2,598) 6,263
Net increase (decrease) in net assets (8,122) (4,287) (9,787) (1,364) (2,106) 6,389
NET ASSETS:
Beginning of period 128,186 132,473 142,260 38,458 40,564 34,175
End of period $120,064 $128,186 $132,473 $37,094 $38,458 $40,564
Undistributed net investment income at end
of period $- $260 $260 $- $- $-
*Fund share transactions:
Shares sold 12,849 14,688 12,616 638 692 1,511
Reinvested distributions 1,880 3,973 4,566 96 203 215
14,729 18,661 17,182 734 895 1,726
Shares repurchased (16,326) (23,027) (23,793) (751) (1,161) (1,076)
Net increase (decrease) in fund shares (1,597) (4,366) (6,611) (17) (266) 650
</TABLE>
(1) For the seven month period ended June 30, 1999.
(2) For the fiscal year ended November 30, 1998.
(3) For the fiscal year ended November 30, 1997.
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
Babson Babson
Babson Money Market Babson Money Market Tax-Free Income Tax-Free Income Tax-Free Income
Fund Fund Fund Fund Fund
Prime Portfolio Federal Portfolio Portfolio L Portfolio S Portfolio MM
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
</CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,670 $1,769 $588 $586 $1,166 $1,223 $790 $897 $310 $334
- - - - 157 220 107 74 - -
- - - - (827) 635 (472) 80 - -
1,670 1,769 588 586 496 2,078 425 1,051 310 334
(1,670) (1,769) (588) (586) (1,166) (1,223) (790) (897) (310) (334)
- - - - (221) (66) (51) (63) - -
(1,670) (1,769) (588) (586) (1,387) (1,289) (841) (960) (310) (334)
41,648 35,310 13,595 11,233 1,283 1,816 737 1,145 10,230 16,715
1,563 1,678 566 561 757 714 574 599 277 262
43,211 36,988 14,161 11,794 2,040 2,530 1,311 1,744 10,507 16,977
(40,853) (38,544) (13,014) (12,688) (2,541) (3,268) (3,290) (3,426) (10,283) (16,158)
2,358 (1,556) 1,147 (894) (501) (738) (1,979) (1,682) 224 819
2,358 (1,556) 1,147 (894) (1,392) 51 (2,395) (1,591) 224 819
36,718 38,274 12,306 13,200 27,294 27,243 21,345 22,936 10,269 9,450
$39,076 $36,718 $13,453 $12,306 $25,902 $27,294 $18,950 $21,345 $10,493 $10,269
$- $- $- $- $- $- $1 $- $- $-
41,657 35,310 13,594 11,233 131 198 65 106 10,230 16,715
1,563 1,678 566 561 83 78 53 55 277 262
43,220 36,988 14,160 11,794 214 276 118 161 10,507 16,977
(39,081) (38,544) (12,997) (12,688) (269) (356) (302) (317) (10,283) (16,158)
4,139 (1,556) 1,163 (894) (55) (80) (184) (156) 224 819
</TABLE>
<PAGE>
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES:
The Babson Enterprise Fund, Babson Enterprise Fund II, David L. Babson Growth
Fund, Shadow Stock Fund, Babson Value Fund, Babson-Stewart Ivory International
Fund, D.L. Babson Bond Trust, D.L. Babson Money Market Fund and D.L. Babson Tax-
Free Income Fund (collectively referred to herein as the "Funds") are registered
under the Investment Company Act of 1940, as amended, as no-load open-end,
diversified management investment companies. The D.L. Babson Bond Trust
(comprising of Portfolio L and S), D.L. Babson Money Market Fund (comprising of
Prime and Federal Portfolios) and D.L. Babson Tax-Free Income Fund (comprising
of Portfolio L, S and MM) are of a series type. The Funds are required to
account for the assets of each Series separately and to allocate general
liabilities of a Fund to each Series based upon the net asset value of each
Series. The following is a summary of significant accounting policies
consistently followed by the Funds in preparation of their financial statements.
In 1999, the Funds' Board of Directors approved a change in the Babson
Enterprise Fund, Babson Enterprise Fund II, Babson Value Fund and D.L. Babson
Bond Trust fiscal year end from November 30 to June 30. As a result, this
financial report reflects the seven month period from December 1, 1998 through
June 30, 1999 for these Funds.
A. Investment Valuation - Securities are valued at the latest sales price for
securities traded on a principal exchange (U.S. or foreign) and on the NASDAQ
National Market. Securities traded on over-the-counter markets and listed
securities
for which no sales are reported are valued at the mean between the last reported
bid and asked prices. When market quotations are not readily available,
securities are valued at fair value as determined in good faith by the Board of
Directors. Short-term securities maturing within 60 days are valued at amortized
cost, which approximates market value. Foreign securities are converted to U.S.
dollars using exchange rates in London last quoted by a major bank. If such
quotations are not available as of 4:00 P.M. (Eastern Time), the rate of
exchange will be determined in good faith by the Board of Directors.
B. Investment Transactions and Investment Income - Security transactions are
accounted for on the date the securities are purchased or sold. Dividend income
less foreign taxes withheld (if any) is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis and includes accretion of
market discounts. Premiums on debt securities are not amortized, except for D.L.
Babson Tax-Free Income Fund which amortizes premiums. Realized gains and losses
from investment transactions and unrealized appreciation and depreciation of
investments are reported on the identified cost basis.
C. Foreign Currency Translation - All assets and liabilities expressed in
foreign currencies are converted into U.S. dollars based on exchange rates last
quoted by a major bank in London at the end of the period. The cost of portfolio
securities is translated at the rates of exchange prevailing when acquired.
Dividend income is translated at the rate of exchange on the ex-dividend date.
The effects of changes in foreign currency exchange rates on investments in
securities are included in net realized and unrealized gain (loss) on
investments in the Statement of Operations.
D. Forward Foreign Currency Contracts - The Babson-Stewart Ivory International
Fund may enter into forward foreign
currency contracts as a way of managing foreign exchange rate risk. The
portfolio may enter into these contracts to fix the U.S. dollar value of a
security that it has agreed to buy or sell for the period between the date the
trade was entered into and the date the security is delivered and paid for.
These
contracts may also be used to hedge the U.S. dollar value of securities owned
which are denominated in foreign currencies.
Forward foreign currency contracts are valued each day at the close of the New
York Stock Exchange at the forward rate, and are marked-to-market daily. The
change in market value is recorded as an unrealized gain or loss. When the
contract is closed, a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and closed is recorded.
he use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the securities, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit a potential gain that might result should the value of
the currency increase. These contracts involve market risk in excess of the
amount reflected in the Statement of Assets and Liabilities. The face or
contract amount in U.S. dollars reflects the total exposure the portfolio has in
that particular currency contract. In addition, there could be exposure to risks
(limited to the amount of unrealized gains) if the counterparties to the
contracts are unable to meet the terms of their contracts.
E. Federal and State Taxes - The Funds complied with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
therefore, no provision for federal or state tax is required. At June 30, 1999,
the D.L. Babson Money Market Prime Portfolio, D.L. Babson Bond Trust Portfolio L
and D.L. Babson Bond Trust Portfolio S have accumulated net realized losses on
sales of investments for federal income tax purposes of $7,368 (expiring $67 in
2000, $56 in 2001, $81 in 2002, $6,722 in 2003, $306 in 2005 and $136 in 2006),
$3,307,631 (expiring $970,985 in 2002, $423,327 in 2003, $1,367,653 in 2004 and
$545,666 in 2005) and $1,988,385 (expiring $579,476 in 2002, $388,485 in 2003,
$577,562 in 2004 and $442,862 in 2005), respectively, which are available to
offset future taxable gains.
For corporate shareholders, the following percentages of ordinary income
distributions qualify for the corporate dividends received deduction:
fund percentage
Enterprise 100%
Enterprise II 70%
Growth 19%
Shadow Stock 100%
Value 33%
The following percentages of ordinary income distributions are exempt-interest
dividends for federal income tax purposes:
fund percentage
Tax-Free Income - Portfolio L 100%
Tax-Free Income - Portfolio S 100%
Tax-Free Income - Portfolio MM 100%
For federal income tax purposes, the Funds designate capital gain dividends as
follows:
fund
Enterprise $26,217,600
Enterprise II 3,718,579
Growth 76,170,304
Shadow Stock 3,565,056
Value 60,875,853
Stewart Ivory International 2,877,019
Bond - Portfolio L -
Bond - Portfolio S -
Money Market - Prime -
Money Market - Federal -
Tax-Free Income - Portfolio L 215,463
Tax-Free Income - Portfolio S 42,689
Tax-Free Income - Portfolio MM -
F. Equalization - Prior to December 1, 1998, the Babson Enterprise Fund, Babson
Enterprise Fund II, David L. Babson Growth Fund, Shadow Stock Fund and Babson
Value Fund used equalization accounting, by which a portion of the proceeds from
sales and costs of redemption of fund shares is credited or charged to
undistributed net investment income so that income per share available for
distribution is not affected by the sales or redemption of fund shares. As of
December 1, 1998, these Funds discontinued using equalization. This change has
no effect on the Funds' net assets, net asset value per share or distributions
to shareholders. The cumulative effect of the discontinuance of equalization
accounting was to decrease undistributed net investment income and increase
paid-in-capital as of December 1, 1998 for the Babson Enterprise Fund, Babson
Enterprise Fund II, David L. Babson Growth Fund, Shadow Stock Fund, Babson Value
Fund by $111,919, $306,310, $4,345, $331 and $13,531,896, respectively.
G. Distributions to Shareholders - Distributions to shareholders are recorded on
ex-dividend date. Distributions are determined in accordance with federal tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles. These differences are primarily due to losses
deferred due to wash sales and foreign currency transactions.
H. Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from such estimates.
2. MANAGEMENT FEES:
Management fees are paid to Jones & Babson, Inc. in accordance with the advisory
agreement with the Funds. Management fees are paid for services which include
administration, and all other operating expenses of each Fund except the cost of
acquiring and disposing of portfolio securities, the taxes, if any, imposed
directly on each Fund and its shares and the cost of qualifying a Fund's shares
for sale in any jurisdiction. Certain officers and/or directors of the Funds are
also officers and/or directors of Jones & Babson, Inc. Each of the Funds was
subject to the following management fees:
Average Daily Net Annual Rate
Fund Assets of Fund Percentage
Enterprise and Up to $30 million 1.5%
Enterprise II Over $30 million 1.0%
Shadow Stock 1.0%
Growth Up to $250 million .85%
Over $250 million .70%
Value, Tax-Free Income
(Portfolio L and S), Bond
Trust (Portfolio L and S)
and Stewart Ivory
International .95%
Money Market
(Portfolio Prime and Federal) .85%
Tax-Free Income
(Portfolio MM) .50%
During the period from December 1, 1991 to March 31, 2000, fees for Bond Trust
(Portfolio S) have been voluntarily reduced to an annual rate of .65% of average
daily net assets of the portfolio.
3. INVESTMENT TRANSACTIONS:
Investment transactions for the period ended June 30, 1999 (excluding maturities
of short-term commercial notes and repurchase agreements) are as follows:
Babson Enterprise Fund:
Purchases $ 17,631,727
Proceeds from sales 48,335,601
Babson Enterprise Fund II:
Purchases $ 10,143,593
Proceeds from sales 19,215,576
Babson Growth Fund:
Purchases $ 181,619,056
Proceeds from sales 212,350,661
Shadow Stock Fund:
Purchases $ 10,111,186
Proceeds from sales 11,097,738
Babson Value Fund:
Purchases $ 160,497,590
Proceeds from sales 461,274,163
Babson-Stewart Ivory International Fund:
Purchases $ 45,175,287
Proceeds from sales 70,278,040
Babson Bond Trust - Portfolio L:
Purchases $ 47,053,756
Proceeds from sales 47,671,943
Babson Bond Trust - Portfolio S:
Purchases $ 20,807,198
Proceeds from sales 20,172,023
Babson Money Market Fund - Prime Portfolio:
Purchases $ 320,757,434
Proceeds from sales 325,352,848
Babson Money Market Fund - Federal Portfolio:
Purchases $ 157,499,169
Proceeds from sales 220,657,209
Babson Tax-Free Income Fund - Portfolio L:
Purchases $ 2,497,317
Proceeds from sales 3,579,522
Babson Tax-Free Income Fund - Portfolio S:
Purchases $ 4,480,088
Proceeds from sales 6,273,660
Babson Tax-Free Income Fund - Portfolio MM:
Purchases $ 32,447,294
Proceeds from sales 32,071,000
4. FORWARD FOREIGN CURRENCY CONTRACTS:
Following is a summary of forward foreign currency contracts that were
outstanding at June 30, 1999 for the Babson-Stewart Ivory International Fund:
Contracts to Sell Currency:
ForeignAmount To Be Net Unrealized
Settlement Currency Received In U.S. $ ValueAppreciation
Date To Be Delivered U.S.$ as of 6/30/99(depreciation)
European Euro 7/1/99 325 $ 334 $ 334 $ -
Japanese Yen 7/1/99 4,430,879 36,543 36,543 -
$ 36,877 $ 36,877 $ -
5. CHANGE IN ACCOUNTANTS (UNAUDITED):
On April 27, 1999, Arthur Andersen LLP (AA) resigned as independent accountants
for the David L. Babson Growth Fund, Inc., Shadow Stock Fund, Inc., Babson-
Stewart Ivory International Fund, Inc., D.L. Babson Money Market Fund, Inc., and
D.L. Babson Tax-Free Income Fund, Inc. (the Funds). AA's reports on the Funds'
financial statements for the past two years have not contained an adverse
opinion or a disclaimer of opinion, and have not been qualified as to
uncertainty, audit scope, or accounting principles. In addition, there have not
been any disagreements with AA during the Funds' two most recent fiscal years on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction of AA, would have caused it to make a reference to the subject
matter of the disagreement in connection with its reports. The Funds' Board of
Directors, upon the recommendation of the audit committee, appointed Ernst &
Young LLP as the independent accountants for the Funds for the fiscal year
ending June 30, 1999.
FINANCIAL HIGHLIGHTS
BABSON ENTERPRISE FUND
Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED Years Ended November 30,
JUNE 30, 1999 1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.63 $21.22 $18.51 $17.35 $16.64 $17.20
Income from investment operations:
Net investment income .03 .04 .06 .06 .10 .03
Net gains (losses) on securities
(both realized and unrealized) .58 (2.15) 5.31 3.06 2.34 .57
Total from investment operations .61 (2.11) 5.37 3.12 2.44 .60
Less distributions:
Dividends from net investment income (.05) (.06) - (.12) (.04) (.05)
Distributions from capital gains (2.47) (2.42) (2.66) (1.84) (1.69) (1.11)
Total distributions (2.52) (2.48) (2.66) (1.96) (1.73) (1.16)
Net asset value, end of period $14.72 $16.63 $21.22 $18.51 $17.35 $16.64
Total return* 4.70% (11.05%) 33.49% 20.17% 16.42% 3.70%
Ratios/Supplemental Data
Net assets, end of period (in millions) $155 $179 $216 $202 $202 $188
Ratio of expenses to average net assets** 1.11% 1.09% 1.08% 1.08% 1.09% 1.08%
Ratio of net investment income to average net assets** .32% .29% .30% .35% .67% .22%
Portfolio turnover rate 12% 22% 22% 24% 13% 15%
</TABLE>
BABSON ENTERPRISE FUND II
Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED Years Ended November 30,
JUNE 30, 1999 1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $23.20 $26.70 $22.75 $19.19 $16.22 $16.92
Income from investment operations:
Net investment income .03 .10 .08 .11 .05 .02
Net gains (losses) on securities
(both realized and unrealized) 2.37 (1.50) 6.97 4.45 3.03 (.39)
Total from investment operations 2.40 (1.40) 7.05 4.56 3.08 (.37)
Less distributions:
Dividends from net investment income (.05) (.05) (.11) (.05) (.02) -
Distributions from capital gains (1.07) (2.05) (2.99) (.95) (.09) (.33)
Total distributions (1.12) (2.10) (3.10) (1.00) (.11) (.33)
Net asset value, end of period $24.48 $23.20 $26.70 $22.75 $19.19 $16.22
Total return* 11.03% (5.61%) 35.29% 25.04% 19.11% (2.32%)
Ratios/Supplemental Data
Net assets, end of period (in millions) $77 $83 $82 $46 $40 $36
Ratio of expenses to average net assets** 1.23% 1.22% 1.28% 1.38% 1.45% 1.50%
Ratio of net investment income to average net assets** .11% .40% .27% .55% .30% .14%
Portfolio turnover rate 14% 25% 25% 30% 15% 9%
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
</TABLE>
See accompanying Notes to Financial Statements.
BABSON GROWTH FUND
Condensed data for a share of capital stock
outstanding throughout each year.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $20.77 $17.80 $14.42 $13.43 $11.78
Income from investment operations:
Net investment income .02 .06 .09 .12 .18
Net gains (losses) on securities
(both realized and unrealized) 3.25 4.41 4.16 2.91 2.18
Total from investment operations 3.27 4.47 4.25 3.03 2.36
Less distributions:
Dividends from net investment income (.02) (.06) (.09) (.13) (.18)
Distributions from capital gains (4.01) (1.44) (.78) (1.91) (.53)
Total distributions (4.03) (1.50) (.87) (2.04) (.71)
Net asset value, end of year $20.01 $20.77 $17.80 $14.42 $13.43
Total return 17.04% 26.73% 30.10% 22.99% 20.23%
Ratios/Supplemental Data
Net assets, end of year (in millions) $490 $451 $365 $280 $247
Ratio of expenses to average net assets .79% .80% .83% .85% .85%
Ratio of net investment income to average net assets .09% .30% .61% .82% 1.42%
Portfolio turnover rate 39% 35% 20% 33% 17%
</TABLE>
SHADOW STOCK FUND
Condensed data for a share of capital stock
outstanding throughout each year.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.24 $12.57 $11.31 $10.55 $9.67
Income from investment operations:
Net investment income .11 .08 .12 .09 .10
Net gains (losses) on securities
(both realized and unrealized) (.24) 2.54 2.44 1.67 1.42
Total from investment operations (.13) 2.62 2.56 1.76 1.52
Less distributions:
Dividends from net investment income (.07) (.10) (.09) (.10) (.10)
Distributions from capital gains (.98) (1.85) (1.21) (.90) (.54)
Total distributions (1.05) (1.95) (1.30) (1.00) (.64)
Net asset value, end of year $12.06 $13.24 $12.57 $11.31 $10.55
Total return (.25%) 21.98% 23.63% 17.13% 16.16%
Ratios/Supplemental Data
Net assets, end of year (in millions) $50 $52 $41 $39 $39
Ratio of expenses to average net assets 1.10% 1.16% 1.13% 1.14% 1.13%
Ratio of net investment income to average net assets .97% .56% 1.00% .79% 1.01%
Portfolio turnover rate 21% 43% 0% 25% 19%
</TABLE>
See accompanying Notes to Financial Statements.
BABSON VALUE FUND
Condensed data for a share of capital stock
outstanding throughout each year.
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED Years Ended November 30,
JUNE 30, 1999 1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $47.42 $47.73 $38.65 $31.78 $25.19 $25.36
Income from investment operations:
Net investment income .45 .62 .51 .55 .59 .56
Net gains (losses) on securities
(both realized and unrealized) 5.90 1.09 9.65 7.20 7.20 .58
Total from investment operations 6.35 1.71 10.16 7.75 7.79 1.14
Less distributions:
Dividends from net investment income (.44) (.56) (.47) (.53) (.60) (.40)
Distributions from capital gains (1.97) (1.46) (.61) (.35) (.60) (.91)
Total distributions (2.41) (2.02) (1.08) (.88) (1.20) (1.31)
Net asset value, end of period $51.36 $47.42 $47.73 $38.65 $31.78 $25.19
Total return* 14.14% 3.85% 26.89% 24.91% 32.07% 4.51%
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,244 $1,494 $1,419 $764 $293 $120
Ratio of expenses to average net assets** .96% .98% .97% .96% .98% .99%
Ratio of net investment income to average net assets** 1.05% 1.28% 1.22% 1.63% 2.12% 2.32%
Portfolio turnover rate 13% 42% 17% 11% 6% 14%
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
</TABLE>
BABSON-STEWART IVORY INTERNATIONAL FUND
Condensed data for a share of capital stock
outstanding throughout each year.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $19.65 $19.53 $18.04 $15.96 $16.41
Income from investment operations:
Net investment income .03 .08 .07 .07 .16
Net gains (losses) on securities
(both realized and unrealized) .66 1.07 1.70 2.85 .23
Total from investment operations .69 1.15 1.77 2.92 .39
Less distributions:
Dividends from net investment income (.04) (.07) (.05) (.08) (.17)
Distributions from capital gains (.82) (.96) (.23) (.65) (.67)
Distributions in excess of realized capital gains - - - (.11) -
Total distributions (.86) (1.03) (.28) (.84) (.84)
Net asset value, end of year $19.48 $19.65 $19.53 $18.04 $15.96
Total return 3.76% 6.48% 9.91% 18.66% 2.54%
Ratios/Supplemental Data
Net assets, end of year (in millions) $89 $104 $111 $80 $65
Ratio of expenses to average net assets 1.23% 1.16% 1.19% 1.26% 1.30%
Ratio of net investment income to average net assets .24% .37% .47% .44% 1.13%
Portfolio turnover rate 51% 48% 40% 33% 37%
</TABLE>
See accompanying Notes to Financial Statements.
BABSON BOND TRUST - PORTFOLIO L
Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED Years Ended November 30,
JUNE 30, 1999 1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.59 $1.56 $1.55 $1.58 $1.47 $1.67
Income from investment operations:
Net investment income .05 .09 .10 .11 .11 .11
Net gains (losses) on securities
(both realized and unrealized) (.07) .03 .01 (.03) .11 (.15)
Total from investment operations (.02) .12 .11 .08 .22 (.04)
Less distributions:
Dividends from net investment income (.05) (.09) (.10) (.11) (.11) (.11)
Distributions from capital gains - - - - - (.05)
Total distributions (.05) (.09) (.10) (.11) (.11) (.16)
Net asset value, end of period $1.52 $1.59 $1.56 $1.55 $1.58 $1.47
Total return* (1.16%) 8.13% 7.26% 5.17% 15.28% (2.71%)
Ratios/Supplemental Data
Net assets, end of period (in millions) $121 $128 $132 $142 $161 $140
Ratio of expenses to average net assets** .97% .97% .97% .97% .97% .97%
Ratio of net investment income to average net assets** 5.73% 5.93% 6.38% 6.96% 7.06% 6.95%
Portfolio turnover rate 38% 43% 59% 61% 50% 40%
</TABLE>
BABSON BOND TRUST - PORTFOLIO S
Condensed data for a share of capital stock
outstanding throughout each period.
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED Years Ended November 30,
JUNE 30, 1999 1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.91 $9.78 $9.77 $9.90 $9.43 $10.48
Income from investment operations:
Net investment income .33 .58 .62 .69 .73 .69
Net gains (losses) on securities
(both realized and unrealized) (.31) .13 .01 (.13) .47 (.90)
Total from investment operations .02 .71 .63 .56 1.20 (.21)
Less distributions:
Dividends from net investment income (.33) (.58) (.62) (.69) (.73) (.69)
Distributions from capital gains - - - - - (.15)
Total distributions (.33) (.58) (.62) (.69) (.73) (.84)
Net asset value, end of period $9.60 $9.91 $9.78 $9.77 $9.90 $9.43
Total return* 15% 7.47% 6.70% 5.96% 13.10% (2.06%)
Ratios/Supplemental Data
Net assets, end of period (in millions) $37 $38 $41 $34 $33 $30
Ratio of expenses to average net assets** .67% .67% .66% .66% .67% .67%
Ratio of net investment income to average net assets** 5.75% 5.90% 6.42% 7.10% 7.47% 7.02%
Ratio of expenses to average net assets before
voluntary reduction of management fee ** .97% .97% .97% .96% .97% .97%
Portfolio turnover rate 54% 60% 65% 48% 57% 42%
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
</TABLE>
See accompanying Notes to Financial Statements.
BABSON MONEY MARKET FUND - PRIME PORTFOLIO
Condensed data for a share of capital stock
outstanding throughout each year.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income .04 .05 .05 .05 .05
Less distributions:
Dividends from net investment income (.04) (.05) (.05) (.05) (.05)
Net asset value, end of year $1.00 $1.00 1.00 $1.00 $1.00
Total return 4.38% 4.82% 4.61% 4.83% 4.66%
Ratios/Supplemental Data
Net assets, end of year (in millions) $39 $37 $38 $36 $40
Ratio of expenses to average net assets .88% .91% .92% .92% .92%
Ratio of net investment income to average net assets 4.30% 4.73% 4.58% 4.75% 4.58%
</TABLE>
BABSON MONEY MARKET FUND - FEDERAL PORTFOLIO
Condensed data for a share of capital stock
outstanding throughout each year.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income .04 .05 .04 .05 .04
Less distributions:
Dividends from net investment income (.04) (.05) (.04) (.05) (.04)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
Total return 4.31% 4.75% 4.58% 4.77% 4.56%
Ratios/Supplemental Data
Net assets, end of year (in millions) $13 $12 $13 $10 $10
Ratio of expenses to average net assets .88% .91% .91% .91% .92%
Ratio of net investment income to average net assets 4.23% 4.65% 4.51% 4.67% 4.48%
</TABLE>
See accompanying Notes to Financial Statements.
BABSON TAX-FREE INCOME FUND - PORTFOLIO L
Condensed data for a share of capital stock
outstanding throughout each year.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $9.22 $8.96 $8.74 $8.67 $8.52
Income from investment operations:
Net investment income .40 .40 .42 .41 .42
Net gains (losses) on securities
(both realized and unrealized) (.24) .28 .24 .07 .17
Total from investment operations .16 .68 .66 .48 .59
Less distributions:
Dividends from net investment income (.40) (.40) (.42) (.41) (.42)
Distributions from capital gains (.07) (.02) (.02) - (.02)
Total distributions (.47) (.42) (.44) (.41) (.44)
Net asset value, end of year $8.91 $9.22 $8.96 $8.74 $8.67
Total return 1.70% 7.82% 7.69% 5.60% 7.21%
Ratios/Supplemental Data
Net assets, end of year (in millions) $26 $27 $27 $27 $28
Ratio of expenses to average net assets 1.03% 1.06% 1.01% 1.01% 1.02%
Ratio of net investment income to average net assets 4.36% 4.46% 4.71% 4.67% 4.98%
Portfolio turnover rate 9% 18% 21% 39% 34%
</TABLE>
BABSON TAX-FREE INCOME FUND - PORTFOLIO S
Condensed data for a share of capital stock
outstanding throughout each year.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.79 $10.74 $10.69 $10.71 $10.62
Income from investment operations:
Net investment income .42 .44 .44 .44 .45
Net gains (losses) on securities
(both realized and unrealized) (.20) .08 .10 .01 .10
Total from investment operations .22 .52 .54 .45 .55
Less distributions:
Dividends from net investment income (.42) (.44) (.44) (.44) (.45)
Distributions from capital gains (.03) (.03) (.05) (.03) (.01)
Total distributions (.45) (.47) (.49) (.47) (.46)
Net asset value, end of year $10.56 $10.79 $10.74 $10.69 $10.71
Total return 1.96% 4.84% 5.18% 4.25% 5.32%
Ratios/Supplemental Data
Net assets, end of year (in millions) $19 $21 $23 $25 $28
Ratio of expenses to average net assets 1.01% 1.06% 1.01% 1.01% 1.01%
Ratio of net investment income to average net assets 3.82% 4.00% 4.12% 4.13% 4.28%
Portfolio turnover rate 22% 21% 23% 41% 34%
</TABLE>
See accompanying Notes to Financial Statements.
BABSON TAX-FREE INCOME FUND - PORTFOLIO MM
Condensed data for a share of capital stock
outstanding throughout each year.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income .03 .03 .03 .03 .03
Less distributions:
Dividends from net investment income (.03) (.03) (.03) (.03) (.03)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
Total return 2.70% 3.06% 3.03% 3.15% 3.05%
Ratios/Supplemental Data
Net assets, end of year (in millions) $10 $10 $9 $8 $16
Ratio of expenses to average net assets .55% .61% .58% .58% .59%
Ratio of net investment income to average net assets 2.65% 3.06% 3.10% 3.15% 3.07%
</TABLE>
See accompanying Notes to Financial Statements.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders of Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., David L. Babson Growth Fund, Inc., Shadow Stock Fund,
Inc., Babson Value Fund, Inc., Babson-Stewart Ivory International Fund, Inc.,
D.L. Babson Bond Trust, D.L. Babson Money Market Fund, Inc., and D.L. Babson
Tax-Free Income Fund, Inc.
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Babson Enterprise Fund, Inc., Babson Enterprise
Fund II, Inc., Babson
Value Fund, Inc., and D.L. Babson Bond Trust (comprised of Portfolio L and
Portfolio S) as of June 30, 1999, and the related statements of operations,
changes in net assets, and financial highlights for the periods presented in the
corresponding financial statements and financial highlights and we have also
audited the accompanying statements of assets and
liabilities, including the schedules of investments, of David L.Babson Growth
Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory International Fund,
Inc., D.L. Babson Money Market Fund, Inc. (comprised of Portfolio Prime and
Portfolio Federal) and D.L. Babson Tax-Free Income Fund, Inc. (comprised of
Portfolio L, Portfolio S and Portfolio MM) as of June 30, 1999, and the related
statements of operations, changes in net assets and the financial highlights for
the
year then ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The statements of changes in net assets for the year ended June 30, 1998
and the financial highlights for each of the four years in the period then ended
for David L. Babson Growth Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart
Ivory International Fund, Inc., D.L. Babson Money Market Fund, Inc., and D.L.
Babson Tax-Free Income Fund, Inc. were audited by other auditors whose report
dated July 28, 1998, expressed an unqualified opinion.
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 June
30, 1999, by correspondence with the custodian and brokers. As to securities
relating to certain 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 the
Funds and each of the related portfolios at June 30, 1999, the results of their
operations, changes in their net assets and the financial highlights for the
periods indicated above in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Kansas City, Missouri
August 6, 1999
This report has been prepared for the information of the Shareholders of Babson
Enterprise Fund, Inc.,
Babson Enterprise Fund II, Inc., David L. Babson Growth Fund, Inc., Shadow Stock
Fund, Inc.,
Babson Value Fund, Inc., Babson-Stewart Ivory International Fund, Inc., D.L.
Babson Bond Trust,
D.L. Babson Money Market Fund, Inc., and D.L. Babson Tax-Free Income Fund, Inc.,
and is not to be construed as an offering of the shares of the Funds. Shares of
the Funds
are offered only by the Prospectus, a copy of which may be obtained from Jones &
Babson, Inc.
BABSON FUNDS
Jones & Babson Distributors
A Member of the Generali Group
P.O. Box 419757, Kansas City, MO 64141-6757
