Babson Funds
Semiannual Report
December 31, 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 54
Message to our Shareholders
It is with a great deal of pride and
excitement, and a little sadness, that I am
retiring as President and CEO as of the end
of January. I'll be passing the torch to
Steve Soden, our Chairman since 1993.
I have been at the company for 16 years, and
have been President since 1985. During that
time assets have grown tenfold, we've added
new Funds and Fund families, extended services,
entered new marketplaces, and have
dramatically increased our use of technology.
It's been a very rewarding challenge, and a
real honor to bring the Funds into the 21st
century.
I was blessed with a group of great people to
work with, and we've all grown and achieved
together. We've been through a lot, with the
acquisition by BMA in 1993, our relocation to
new headquarters in 1997 and the transition
to our new shareholder processing systems in
1998. It's very satisfying to have had so
many loyal, long-term employees. Many of them
came to be like a second family.
I want to thank you, as shareholders, for
your loyal support. I enjoyed staying close
to you, talking to you, listening to you,
understanding your frustrations and
challenges and appreciating your praise for
our Portfolio Managers and staff. It is
important that we never lose touch with those
we are truly serving. You've stuck with us
through fads in the markets, corrections, and
some downright difficult times. My goal has
been that you be rewarded in the long-run,
for sticking with us.
Back in 1968, David L. Babson found himself
in the midst of a speculative market driven
by high-multiple sector stocks. Sounds
something like today's markets, doesn't it? I
believe his remarks are as pertinent now as
they were thirty-two years ago:
". . . there is a silver lining in every
cloud . . . performance seekers create
wonderful opportunities for those willing to
use a little courage and patience to work
against them."
"Remember, it is very easy to measure
your performance, but it isn't easy to
measure the risks you take in seeking that
performance. . . . When we seek spectacular
short-term profits by performance methods, we
run the risk of having disastrous long-term results."
Shortly thereafter Mr. Babson was vindicated
for his fundamental-driven approach. Since
then we've been vindicated numerous times,
simply by keeping the courage of our
convictions and staying with our fundamental,
bottom-up investment philosophy. I know we'll
be vindicated this time around too.
Again, thanks for so many years of loyalty,
support and investments. I am leaving with a
terrific management team in place. They know
the company well, and the transition should
be seamless. I've known Steve for many years,
as a friend and colleague, and through his
leadership, the best is yet to come.
See you on the golf course!
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
Economic Review
This past year will be remembered for its
surprising strength. At the beginning of 1999, some
economists were calling for a recession, and
most were expecting growth of only 2%.
Instead, real Gross Domestic Product advanced
at nearly twice this rate.
Part of the reason for this unexpected vigor
stems from the continued shift in the
nation's resources from the public to the
private sector. The swing in recent years in
the federal budget from a deficit to a
surplus has freed up $400 billion annually
for the more efficient private sector to
spend and invest.
Another important factor in last year's
strength was the decline in interest rates
during the last half of 1998. In response to
the Asian crisis that year, the Federal
Reserve lowered short-term rates by three-
quarters of a percent and long-term Treasury
yields plummeted. These declines energized
the interest sensitive sectors of the
economy.
The resulting robustness in consumer demand
has proven to be so strong and enduring that
the Fed reversed course and raised short-term
rates by three-quarters of a point during the
second half of 1999 in an attempt to lower
the economy's overall growth rate from 4%
down to 3%. Long-term rates also rose more
than one and one-half percent during the
year, but consumption showed no sign of
slowing. This may be because many consumers
refinanced their mortgages in the declining
interest rate environment of 1998. By doing
this, they locked in the low rates and
insulated themselves from the effects of
rising rates. Thus, the economy may now not
be as sensitive to rising interest rates as
many observers believe. Coming at a time when
inflationary pressures are rising, the Fed
may have to tighten numerous times to rein in
growth.
In fact, the economy may even accelerate its
pace of growth at the beginning of 2000.
First of all, some consumers withdrew extra
cash from their bank accounts in anticipation
of problems with the century date change.
Moreover, many companies reported that their
customers withheld some orders at the end of
1999 for the same reason. If the start of the
New Year sees the extra liquidity being spent
by consumers, along with extra factory
orders, the result could be even stronger
economic growth. The Fed, already worried by
the inflationary potential of historically
low unemployment, would almost certainly
follow with a string of rate hikes to cool
off demand.
A major reason why inflation is not rising
faster than it is now is that the private
sector has spent its additional resources
wisely and has been able to increase
productivity roughly in line with wage
growth. New technology has helped this
process tremendously, and the potential for
the Internet to revolutionize business-to-
business transactions promises to help keep
this trend going. Still, the Internet has not
repealed the laws of supply and demand, it
has only changed the balance between them.
Were it not for the Internet, inflation and
interest rates would both be higher than they
are now. However, should the economy's growth
accelerate further, even Internet generated
efficiency gains might not be able to
counteract the inflationary pressures posed
by a shortage of workers. If the Fed is able
to eventually bring growth down to a
sustainable level of around 3%, and if the
budget surplus and technology allow the
private sector to continue to improve
productivity, then the expansion could
continue for a long time.
David L. Babson & Co. Inc.
BABSON ENTERPRISE FUND
Babson Enterprise Fund's total return (price change and
reinvested distributions) was -10.16% for the six months, and -
7.26% for the year ended December 31, 1999, compared to 10.96%
and 21.26%, respectively, for the unmanaged Russell 2000 index,
and -6.41% and -1.49%, respectively, for the unmanaged Russell
2000 Value index.
Average annual compounded total returns for five and ten year
periods as of December 31, 1999, were 8.98% and 10.63%,
respectively. Performance data contained in this report is for
past periods only. Past performance is not predictive of future
performance. Investment return and share value will fluctuate,
and redemption value may be more or less than original cost.
The market factors affecting the Fund's performance last year
were the growth orientation of the small cap markets and
specifically the stellar run-up in the technology sector. The
unmanaged Russell 2000 Growth index soared to a double-digit gain
in 1999, along with the Russell 2000's technology sector, which
was up 65% in the fourth quarter. Meanwhile, the Russell 2000
Value index posted a loss.
We didn't invest in many high-tech companies, which hurt the
Fund's performance, but the unreasonably high prices of many of
these stocks simply do not fit the conservative, earnings-driven
value approach of Babson Enterprise Fund. We do, however, invest
in such companies as Spectrum Control, a technology stock that
is, paradoxically, a classic example of a Babson Enterprise Fund
holding. The stock traded at $5 with little institutional
interest when we began to purchase it in mid-1997. The company
manufactures filters and connectors that go into
telecommunications equipment. Spectrum has also completed several
acquisitions that should dramatically increase its long-term
earnings potential. Despite having increased by 150% from our
purchase price, the stock trades at only 17x its expected
earnings, which we expect to grow at 25% or more for the next
several years.
Our company specific research indicates that the U.S. economy
remains healthy. We are therefore overweighted in sectors such as
materials and processing, producer durables, and consumer
discretionary services. Retail holdings like Fred's and Petco are
reporting impressive gains in same-store sales and earning per
share, but trade at a sizable price/earnings discount to other
category-dominant retailers.
In the past, increased acquisition activity of smaller companies
has been an early sign of a turn in the attractiveness of small
cap investing. In 1999, Babson Enterprise Fund had almost a dozen
companies acquired or with acquisitions pending as of year-end.
Most of these involved a buyout by a larger corporation at a
significant price premium, implying that strategic buyers
perceive an opportunity in the current valuation gap between
small and large companies. Given the Fund's efforts to
concentrate its holdings among leaders in attractive markets, it
is no surprise that our holdings were so often the target of
external interest.
Another indicator of a turn toward small caps may be the Russell
2000's outperformance of the large cap S&P 500 for the first year
since 1993, even if it was by just a small amount. In late 1990
and 1991, the markets began to favor smaller capitalization
stocks after a prolonged period of large cap outperformance.
Small cap growth stocks led the shift then, just as they did in
1999, but small cap value stocks dominated performance for the
rest of that small cap cycle, with the Russell 2000 Value index
up 59.8% in the 1992-93 period versus 22.2% for the Russell 2000
Growth index. And while past performance is no indicator of
future returns, we would be well positioned to reap the rewards
should the market turn in that direction again.
Portfolio additions for the six month period:
Bank of the Ozarks - Arkansas community bank
Compx International - office furniture components
Fred's - Southeastern U.S. discount retailer of general
merchandise and pharmacy goods
Tetra Technologies - products and services for the oil and gas
industry
Young Innovations - manufacturer of products used by dentists and
dental hygienists
Three companies are no longer in the portfolio due to buyouts:
Furon, Instron, and Nichols Research. The following were
eliminated from the Fund due to fundamentals: Baldwin Piano, CSP,
Farrel, INSO, Athey Products, Anderson's, International
Shipholding, Newcor, and Tokheim.
Fund Composition
Top Ten Holdings: % of Total
Zygo Corp. 3.30
Titan Corp. 3.17
Spectrum Control, Inc. 2.82
J&J Snack Foods 2.11
Channell Commercial Corp. 2.10
Oneida Ltd. 2.09
Penford Corp. 2.09
Kaneb Services, Inc. 2.00
Chicago Bridge & Iron Co. 1.92
Alltrista Corp. 1.92
Total 23.52%
Total Securities in Portfolio 73
As of December 31, 1999, statement of assets. Subject to change.
Schedule of Investments
December 31, 1999 (unaudited)
BABSON ENTERPRISE FUND
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 95.54%
BASIC MATERIALS - 2.09%
140,450 Penford Corp. $ 2,422,763
CAPITAL GOODS - 25.90%
138,900 ABC-Naco, Inc.* 1,145,925
216,400 American Precision Industries, Inc. 1,866,450
357,500 Brown & Sharpe Manufacturing Co. Cl. A 759,687
213,300 Channell Commercial Corp.* 2,439,619
162,300 Chicago Bridge & Iron Co. 2,231,625
231,900 Congoleum Corp. Cl. A* 927,600
240,763 Corrpro Companies, Inc. 1,414,483
62,300 Cubic Corp. 1,362,812
50,100 Cuno, Inc.* 1,037,227
135,700 Dayton Superior Corp.* 2,205,125
186,300 EDO Corp. 1,094,512
160,400 Engineered Support Systems, Inc. 1,924,800
134,100 Flir Systems, Inc.* 2,179,125
88,200 K-Tron International, Inc. 1,190,700
446,800 Lamson & Sessions Co.* 2,178,150
185,300 Schawk, Inc. Cl. A 1,575,050
64,800 Starrett (L.S.) Co. Cl. A 1,453,950
49,200 Terex Corp. 1,365,300
154,300 TransTechnology Corp. 1,706,944
30,059,084
CONSUMER CYCLICAL - 15.95%
85,900 Enesco Group, Inc. 950,269
99,200 Fab Industries, Inc. 1,072,600
241,870 Falcon Products, Inc. 2,086,129
61,500 Fred's, Inc. 980,156
206,800 Gottschalks, Inc.* 1,538,075
194,400 Helen of Troy Ltd. 1,409,400
175,100 Interface, Inc. 1,006,825
204,400 Jacobson Stores, Inc. 1,200,850
102,000 MDC Corp. Cl. A 854,250
111,650 Oneida Ltd. 2,428,388
85,800 Petco Animal Supplies, Inc. 1,276,275
99,300 Pulaski Furniture Corp. 1,539,150
318,100 Spartan Motors, Inc. 1,391,687
108,200 Swiss Army Brands, Inc.* 770,925
18,504,979
CONSUMER STAPLES - 5.54%
53,300 Genesee Corp. Cl. B 1,135,956
119,300 J & J Snack Foods Corp.* 2,445,650
36,700 Marsh Supermarkets, Inc. Cl. A 509,213
84,700 Marsh Supermarkets, Inc. Cl. B 857,587
207,200 Northland Cranberries, Inc. Cl. A 1,243,200
76,800 Styling Technology Corp. 240,000
6,431,606
ENERGY - 4.47%
529,500 Kaneb Services, Inc.* 2,316,562
278,300 Matrix Service Co. 1,269,744
94,600 Petroleum Helicopters, Inc. (non-voting) 922,350
73,700 Petroleum Helicopters, Inc. (voting) 681,725
5,190,381
FINANCIAL - 5.57%
22,000 Bank of the Ozarks, Inc. 429,000
124,940 Capital Corp. of the West 1,218,165
86,200 Cass Commercial Corp. 1,745,550
91,800 Haven Bancorp, Inc. 1,417,162
143,900 Sterling Financial Corp. 1,654,850
6,464,727
HEALTH CARE - 2.77%
140,375 Penwest Pharmaceutical Co.* 2,140,719
73,300 Young Innovations, Inc.* 1,076,594
3,217,313
MISCELLANEOUS - 7.20%
100,800 Alltrista Corp.* 2,230,200
277,683 Jason, Inc. 2,013,202
164,300 Kaman Corp. Cl. A 2,115,362
63,000 Sea Containers Ltd. Cl. A 1,677,375
12,000 Sea Containers Ltd. Cl. B 317,250
8,353,389
TECHNOLOGY - 22.88%
5,700 Aavid Thermal Technologies* 140,006
146,700 CEM Corp.* 1,577,025
71,800 Compx International, Inc. 1,319,325
266,400 Ennis Business Forms 2,064,600
176,000 ESCO Electronics Corp. 2,046,000
87,400 Landauer, Inc. 1,911,875
134,900 MSC Software Corp. 1,365,863
148,100 Nashua Corp. 1,110,750
79,700 New England Business Service, Inc. 1,947,669
172,700 Norstan, Inc. 1,100,962
307,500 Spectrum Control, Inc.* 3,267,188
164,600 Tetra Technologies, Inc. 1,193,350
78,000 Titan Corp.* 3,675,750
190,300 Zygo Corp. 3,829,787
26,550,150
TRANSPORTATION & SERVICES - 2.19%
90,200 ABM Industries, Inc. 1,837,825
39,200 Railtex, Inc.* 700,700
2,538,525
UTILITIES - 0.98%
18,200 E'town Corp. 1,132,950
TOTAL COMMON STOCKS 110,865,867
(Cost $116,266,410)
FACE
AMOUNT COMPANY MARKET VALUE
REPURCHASE AGREEMENT - 4.52%
$ 5,250,000 UMB Bank, n.a.,
3.00%, due January 3, 2000
(Collateralized by Federal National
Mortgage Association Discount Notes,
due January 18, 2000 with a value
of $4,553,284 and U.S. Treasury Notes,
6.25%, due August 31, 2000
with a value of $802,736) 5,250,000
(Cost $5,250,000)
TOTAL INVESTMENTS - 100.06% 116,115,867
(Cost $121,516,410)
Other assets less liabilities - (0.06%) (68,376)
TOTAL NET ASSETS - 100.00% $ 116,047,491
The identified cost of investments owned at
December 31, 1999, was the same for federal
income tax and book purposes.
Net unrealized depreciation for federal
income tax purposes was $5,400,543, which is
comprised of unrealized appreciation of $20,843,104
and unrealized depreciation of $26,243,647.
*Non-income producing security
See accompanying Notes to Financial Statements.
Babson Enterprise Fund II
The total return (price change and reinvested
distributions) of Babson Enterprise Fund II
was -1.48% for the six months and 6.16% for
the year ended December 31, 1999. Our value-
oriented portfolio trailed the unmanaged
Russell 2000 small company index, by 10.96%
for the six months and 21.26% for the year
ended December 31, 1999, but outperformed the
unmanaged Russell 2000 Value index by -6.41%
and -1.49%, respectively, for the same
periods.
Average annual compounded total returns for
five years and the life of the Fund
(inception August 5, 1991) as of December 31,
1999, were 15.67% and 13.19%, respectively.
Performance data contained in this report is
for past periods only. Past performance is
not predictive of future performance.
Investment return and share value will
fluctuate, and redemption value may be more
or less than original cost.
The Russell 2000 index outperformed the
unmanaged large cap Standard & Poor's 500 in
the second half of the year as small caps
completed their first full calendar year of
superior performance since 1993. 1999 saw the
largest ever calendar year differential in
performance between the Russell 2000 Growth
index 43.1% and the Russell 2000 Value index
- -1.5%.
The exceptional performance of small cap
growth stocks was driven by the technology
sector which in 1999 rose more than 100% in
the Russell 2000 index. This surge in
technology stocks was the result of a rush by
investors to obtain exposure to the Internet
and other communications technology stocks,
practically without regard to valuations and
in the absence of reasonable future earnings
estimates. History demonstrates that while
speculative fervor ebbs and flows on Wall
Street, over the long run stock valuations
and underlying earnings are tightly
correlated. Therefore we maintain our
discipline of investing in undervalued
companies that have the potential to
significantly improve their earnings through
profit margin enhancement.
The Babson Enterprise Fund II portfolio is
underweighted relative to the Russell 2000
index in high technology, although certain
individual technology names in the portfolio
performed quite well in 1999. Our holdings in
Titan, Adaptive Broadband, Exar, and Xircom
were each up well over 100% in 1999. Titan
received USDA approval of its methodology to
irradiate ground beef and chicken to
eliminate illness-inducing pathogens.
Additionally, expectations grew that the
company would spin off a portion of its e-
business solutions software unit. Xircom and
Exar achieved sizable improvement in their
operating fundamentals, while Adaptive
Broadband advanced on more speculative
estimates of potential international growth
of wireless communications.
Some of the weaker performing stocks in the
portfolio for the six month period and for
the year were those of companies which
manufacture products to be sold to consumers
in the retail marketplace. Huffy announced
the closing of its domestic bicycle
manufacturing facility and attendant one-time
charges. Enesco is experiencing weakening
sales from its traditional gift and greeting
card retail distribution channel, but is
making inroads among mass merchandisers that
should sustain long-term growth.
We feel very bullish about the investment
return potential for small cap value stocks.
As with the last major turn in favor of
smaller capitalization stocks (late 1990 and
1991), the shift in 1999 was led by small cap
growth stocks. After the initial turn to
small cap growth stocks in 1991, though,
small cap value stocks dominated performance
for the rest of that small cap cycle, with
the Russell 2000 Value index up 59.8% in the
1992-93 period versus 22.2% for the Russell
2000 Growth index. We believe the Fund is
well positioned to profit from a return to
popularity of this sector based on its
attractive combination of valuation and
earnings fundamentals.
Portfolio additions for the six month period:
ADVO - direct mail marketing
Benchmark Electronics - electronics
manufacturing and design
CDI - staffing and outsourcing
Gardner Denver - air compressors and blowers
Penton Media - trade magazines, buyer's
guides, and trade shows
Rayovac - batteries
Stolt Comex Seaway - offshore oil and gas
underwater services contractors
Urban Shopping Centers - top-grade super-
regional malls and community shopping centers
REIT
Alberto-Culver and Zygo were liquidated from
the portfolio due to their valuations, Brush
Wellman, Libbey, and Sturm Ruger were
eliminated based on fundamentals.
Fund Composition
Top Ten Holdings: % of Total
BJ's Wholesale Club, Inc. 5.60
True North Communications, Inc. 4.77
Nabors Industries, Inc. 4.10
Carlisle Companies, Inc. 4.09
Gerber Scientific, Inc. 3.58
Sea Containers Ltd. Cl. A 3.55
Cuno, Inc. 3.40
Central Newspapers, Inc. Cl. A 3.35
Commerce Bancorp, Inc. 3.34
Miller Herman, Inc. 3.28
Total 39.06%
Total Securities in Portfolio 54
As of December 31, 1999, statement of assets. Subject to change.
Schedule of Investments
December 31, 1999 (unaudited)
BABSON ENTERPRISE FUND II
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 100.79%
BASIC MATERIALS - 6.28%
118,500 Apogee Enterprises, Inc. $ 599,906
223,400 Interface, Inc. Cl. A 1,284,550
106,000 Metals USA, Inc.* 901,000
32,700 New England Business Service, Inc. 799,106
33,498 Wausau-Mosinee Paper Corp. 391,508
3,976,070
CAPITAL GOODS - 17.81%
30,000 Commscope, Inc.* 1,209,375
104,100 Cuno, Inc.* 2,155,195
61,400 Foster Wheeler Corp. 544,925
103,400 Gerber Scientific, Inc. 2,268,337
90,400 Herman Miller, Inc. 2,079,200
88,900 MagneTek, Inc.* 683,419
41,900 Roper Industries, Inc. 1,584,344
67,900 Stolt Comex Seaway 751,144
11,275,939
CONSUMER CYCLICAL - 30.48%
40,000 AC Nielsen Corp.* 985,000
15,800 ADVO, Inc. 375,250
97,200 BJ's Wholesale Club, Inc. 3,547,800
53,800 Central Newspapers, Inc. Cl. A 2,118,375
49,100 Enesco Group, Inc. 543,169
83,300 Exide Corp. 692,431
81,400 Helen of Troy Ltd. 590,150
104,400 Huffy Corp. 548,100
110,300 La-Z Boy Chair Co. 1,854,419
35,700 Lee Enterprises, Inc. 1,140,169
35,600 Penton Media, Inc. 854,400
116,300 Petco Animal Supplies, Inc. 1,729,962
83,200 Stein Mart, Inc. 473,200
127,100 Stride Rite Corp. 826,150
67,600 True North Communications, Inc. 3,020,875
19,299,450
CONSUMER STAPLES - 3.24%
153,775 PSS World Medical, Inc. 1,451,252
31,700 Rayovac Corp.* 598,337
2,049,589
ENERGY - 4.10%
83,900 Nabors Industries, Inc.* 2,595,656
FINANCIAL - 13.92%
15,800 BancFirst Corp. 536,213
162,208 Cash America International, Inc. 1,581,528
52,231 Commerce Bancorp, Inc. 2,112,091
24,860 Community Trust Bancorporation, Inc. 497,200
98,600 Golden State Bancorp, Inc. 1,700,850
30,200 Golden State Bancorp, Inc.
Litigation Tracking Warrants* 26,425
34,500 Haven Bancorp, Inc. 532,594
48,600 S.L. Green Realty Corp. 1,057,050
28,400 Urban Shopping Centers 770,350
8,814,301
MISCELLANEOUS - 9.88%
72,000 Carlisle Companies, Inc. 2,592,000
4,800 CDI, Inc.* 115,800
3,100 Gardner Denver, Inc. 51,731
90,500 Kaman Corp. Cl. A 1,165,188
84,300 Sea Containers Ltd. Cl. A 2,244,487
3,200 Sea Containers Ltd. Cl. B 84,600
6,253,806
TECHNOLOGY - 13.43%
13,200 Adaptive Broadband Corp.* 974,325
27,100 Benchmark Electronics 621,606
34,600 Exar Corp. Delaware 2,037,075
112,000 Information Resources, Inc. 1,036,000
27,500 Newport News Shipbuilding, Inc. 756,250
34,600 Titan Corp.* 1,630,525
19,300 Xircom, Inc.* 1,447,500
8,503,281
TRANSPORTATION & SERVICES - 1.65%
47,100 Circle International Group, Inc. 1,047,975
TOTAL COMMON STOCKS 63,816,067
(Cost $52,642,592)
TOTAL INVESTMENTS - 100.79% 63,816,067
(Cost $52,642,592)
Other assets less liabilities - (0.79%) (502,278)
TOTAL NET ASSETS - 100.00% $ 63,313,789
The identified cost of investments owned at
December 31, 1999, was the same for federal
income tax and book purposes.
Net unrealized appreciation for federal
income tax purposes was $11,173,475, which is
comprised of unrealized appreciation of $20,949,210
and unrealized depreciation of $9,775,735.
*Non-income producing security
See accompanying Notes to Financial Statements.
Babson Growth Fund
While the unmanaged Standard & Poor's 500
index was up 12.39% in the first six months
of 1999, Babson Growth Fund's total return
(price change and reinvested distributions)
was only up 2.49%. Since that time the tables
have turned, and we've kept pace with or
exceeded the S&P 500. We ended up the year
with a total return of 12.57%, vs. the S&P
500 at 21.04%, with fourth quarter
performance of 17.97% for the Fund, vs.
14.88% for the S&P 500.
Average annual compounded total returns for
five and ten year periods as of December 31,
1999, were 24.99% and 15.34%, respectively.
Performance data contained in this report is
for past periods only. Past performance is
not predictive of future performance.
Investment return and share value will
fluctuate, and redemption value may be more
or less than original cost.
Although we use market indexes as benchmarks,
they have not been very true indicators of
what has been happening in the market this
year. Despite its positive return as a whole,
57% of the individual stocks in the S&P 500
actually declined in 1999.
In the short run, our performance will never
directly track the performance of the indexes
because of our highly focused portfolio. We
hold 40 companies and our top ten holdings
comprise 42% of total fund assets, so short-
term movements in any one of those holdings
can have a great impact on the performance of
the Fund. Longer term, we have shown that our
shareholders are rewarded by holding larger
positions in a smaller group of high-quality
companies.
Many of our top holdings, and our largest
sector weighting, are in technology. We
started 1999 with a technology weighting of
about 30%, and closed the year at 44%. For
comparison, 30% of the S&P 500 is made up of
technology stocks (up from only 13% just
three years ago), and 44% of the unmanaged
Russell 1000 Growth index is in technology,
reflecting the impact technology has on the
markets and the economy today. We're
investing in the companies that are building
out the Internet infrastructure rather than
investing directly in Internet stocks. We
invest in companies like Lucent Technology,
MCI Worldcom (over 1/2 of all the data on the
Internet is carried over their networks
globally) and EMC Corporation, the largest
manufacturer of network storage equipment.
Babson Growth Fund's overweighting in health
care (about 16% of the portfolio, compared to
11% of the S&P) and the negative trends
affecting this sector were a drag on
performance in 1999. Our strategy to combat
those trends is to own companies with
attractive valuations (American Home
Products), and to own the drug stocks with
deep, broad pipelines, such as Bristol-Myers,
Pharmacia & Upjohn and Pfizer. We will also
invest in companies like Cardinal Health
which benefit from generic competition, and
we continue to avoid the health care service
companies.
In the finance sector, we're still slightly
overweighted. It's been an anemic part of the
market to be investing in, primarily because
of rising interest rates. We continue to
scale back our finance holdings as we
selectively add to our technology holdings on
price weakness.
Overall we're very optimistic about the
growth prospects of the companies we have in
the portfolio. The stocks we hold are
primarily of mid- to large-cap growth
companies, with proven management teams and
market dominant positions in high-growth
industries. We have combed the markets to
find companies that have sustainable
competitive advantages such as patented
technology or product lines, economies of
scale or branding power to help support their
earnings growth throughout market and
economic cycles. These companies have the
ability to dominate their respective
industries and sustain earnings growth over
the coming years.
Portfolio additions for the six month period:
Comcast and Cox Communications - operators of cable television systems
Corning - manufacturer of fiber optic cable and equipment for
telecommunications
EMC - developer of network storage equipment and software
Flextronics - contract manufacturer of electronic equipment
Home Depot - building supply retailer
Lucent - manufacturer of telecommunications equipment
Nokia - manufacturer and marketer of wireless telecommunications handsets
Solectron - contract manufacturer of electronic equipment
The following positions were liquidated from the portfolio:
BancAmerica (margin pressure with rising
interest rates), Disney (continued slow
growth in core entertainment businesses),
Health Management Associates (declining
margins from reduced Medicare reimbursement
rates), Herman Miller (completion of recovery
in order growth and operating margins), MSC
Industrial (continued weakness in many
industrial end markets), Philip Morris
(increased tobacco litigation risk), Service
Corp. International (slowing death rate with
a negative impact on the funeral home
industry), and W.W. Wrigley (lack of expected
volume growth acceleration).
Fund Composition
Top Ten Holdings: % of Total
AT&T Corp. Liberty Media Group 5.45
Microsoft Corp. 4.90
Cisco Systems, Inc. 4.70
Vitesse Semiconductor Corp. 4.47
Analog Devices, Inc. 4.34
Lucent Technologies 3.94
MCI Worldcom, Inc. 3.91
EMC Corp. 3.72
American International Group, Inc.. 3.50
Federal Home Loan Mortgage Corp. 3.41
Total 42.34%
Total Securities in Portfolio 40
As of December 31, 1999, statement of assets. Subject to change.
Schedule of Investments
December 31, 1999 (unaudited)
BABSON GROWTH FUND
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 97.92%
BASIC MATERIALS - 1.44%
202,800 Monsanto Co. $ 7,224,750
CAPITAL GOODS - 3.25%
105,000 General Electric Co. 16,248,750
CONSUMER CYCLICAL - 6.44%
240,200 CVS Corp. 9,592,988
81,400 Corning, Inc. 10,495,512
177,000 Home Depot, Inc. 12,135,562
32,224,062
CONSUMER STAPLES - 5.30%
50,900 Anheuser-Busch Cos., Inc. 3,607,537
199,800 Gillette Co. 8,229,262
107,400 PepsiCo, Inc. 3,785,850
307,000 Safeway, Inc. 10,917,688
26,540,337
ENERGY - 1.38%
85,437 Exxon Mobil Corp. 6,883,018
FINANCIAL - 11.42%
161,812 American International Group, Inc. 17,495,923
1,665 Berkshire Hathaway, Inc. Cl. B* 3,046,950
362,200 Federal Home LoanMortgage Corp. 17,046,037
106,700 Mellon Financial Corp. 3,634,469
397,512 Paychex, Inc. 15,900,480
57,123,859
HEALTH CARE - 16.00%
218,300 American Home Products Corp. 8,609,206
551,400 Boston Scientific Corp. 12,061,875
141,200 Bristol-Myers Squibb Co. 9,063,275
296,650 Cardinal Health, Inc. 14,202,119
318,900 Guidant Corp. 14,988,300
157,800 Pharmacia & UpJohn, Inc. 7,101,000
432,100 Pfizer, Inc. 14,016,244
80,042,019
MEDIA & ENTERTAINMENT - 8.40%
480,400 A T & T Corp. Liberty Media Group 27,262,700
149,800 Comcast Corp. 7,171,675
147,900 Cox Communications, Inc. 7,616,850
42,051,225
TECHNOLOGY - 44.29%
233,400 Analog Devices, Inc. 21,706,200
148,600 Automatic Data Processing, Inc. 8,005,825
449,000 Cadence Design Systems, Inc. 10,776,000
219,500 Cisco Systems, Inc. 23,513,938
170,200 EMC Corp. 18,594,350
104,700 Etec Systems, Inc.* 4,698,412
56,900 Flextronics International Ltd. 2,617,400
94,200 KLA Instruments Corp. 10,491,525
263,200 Lucent Technologies 19,690,650
369,150 MCI Worldcom, Inc. 19,588,022
197,600 Microchip Technology, Inc. 13,523,250
210,200 Microsoft Corp. 24,540,850
59,200 Nokia Corp. 11,248,000
107,600 Solectron Corp. 10,235,450
426,500 Vitesse Semiconductor Corp. 22,364,594
221,594,466
TOTAL COMMON STOCKS 489,932,486
(Cost $271,322,037)
FACE
AMOUNT COMPANY MARKET VALUE
REPURCHASE AGREEMENT - 3.99%
$19,950,000 UMB Bank, n.a., 3.00%, due January 3, 2000
(Collateralized by U.S. Treasury Notes,
6.25 due 8/31/00 with a of $20,347,579) 19,950,000
(Cost $19,950,000)
TOTAL INVESTMENTS - 101.91% 509,882,486
(Cost $291,272,037)
Other assets less liabilities - (1.91%) (9,532,671)
TOTAL NET ASSETS - 100.00% $ 500,349,815
The identified cost of investments owned at
December 31, 1999, was the same for federal
income tax and book purposes.
Net unrealized appreciation for federal
income tax purposes was $218,610,450, which
is comprised of unrealized appreciation of $223,855,463
and unrealized depreciation of $5,245,013.
*Non-income producing security
See accompanying Notes to Financial Statements.
Shadow Stock Fund
Over the six months ended December 31, 1999,
Shadow Stock Fund's total return (price
change and reinvested distributions) was
- -1.92%, a very good relative performance vs.
the unmanaged Russell 2000 Value index, which
returned -6.41%.
Average annual compounded total returns for
one, five and ten year periods as of December
31, 1999, were 4.89%, 14.62% and 11.22%,
respectively. Performance data contained in
this report is for past periods only. Past
performance is not predictive of future
performance. Investment return and share
value will fluctuate, and redemption value
may be more or less than original cost.
Shadow Stock Fund invests in very small
companies that have a market capitalization
of less than $200 million and that have been
neglected by institutional shareholders. The
Fund's investment strategy is based on
academic research that has determined that
stocks with low price-to-book values, low
institutional ownership, and small market
caps outperform the market as a whole over
longer investment horizons. In addition to
these criteria, we screen the NYSE universe
for the stocks that have a price over $5 and
income greater than $1 million for each of
the previous three fiscal years.
Unfortunately, throughout the last year stock
market returns of smaller companies generally
paled in comparison to those of larger
companies. In an analysis we conducted of
companies in the Russell 2000 index, in which
we divided that universe between companies
with market capitalizations of less than $200
million (those that qualified for the Fund)
and those with larger market capitalizations,
the larger cap group on average outperformed
by 55% points.
Additionally, the widening gulf between value
and growth also affected the Fund. This was
dramatically reflected in the comparative
performances of the Russell 2000 Growth
index, which soared to a double-digit gain in
1999, and the Russell 2000 Value index, which
posted a loss. Thus the market's preference
for larger capitalization growth companies
presented significant challenges to our small
cap value strategy.
Our management style continues to be bottom
up and based on specific screening criteria.
We do not make buy or sell decisions based on
a company's inclusion in a particular sector
(our underweighting in heath care and
technology hurt performance in the last six
months) or because of stories or rumors. We
sell holdings once they have appreciated to
the point at which their price-to-book or
market cap exceeds two times an upper limit,
which is determined in our initial screening
process. We also sell holdings if they fall
below our price limitations in three
consecutive measurement periods. We have also
seen a wave of buyouts among our holdings,
and we expect that phenomenon to continue as
potential acquirers continue to appreciate
the values represented in Shadow Stock Fund
holdings.
In our view, both the long-term prospects of
our holdings and their present valuations
remain positive. Performance spreads between
the growth and value styles, and between
small and large companies, have become so
wide that any return to an historically
normal relationship will benefit small cap
value funds. We have also been encouraged by
the acquisition interest in several of our
holdings, which we think may indicate a small-
cap resurgence in 2000. When small value
investing returns to the forefront, Shadow
Stock Fund should do very well.
Portfolio additions for the six month period:
Aegis Realty - real estate investment trust
American Business Financial - financial
services company
Books-A-Million - book retailer
Detection Systems - makes security equipment
II-VI - makes optical laser components
Ontrack Data - computer data service provider
Palex - produces pallets
Prophet 21 - makes and sells business
software for wholesale distributors
Provantage Health - provide pharmacy benefit
management services
RWD Technologies - provides information
technology services
The following were received as a result of an
acquisition: Computer Sciences, Intervoice-
Brite, Southern Union, and Trenwick.
The following stocks are no longer in the
Fund because they were subjects of buyouts:
Colonial Gas, Equitra, Litchfield Financial,
M A R C, O'Sullivan, Rock Bottom Restaurants,
and Thermo Power.
The following stocks were eliminated because
their price fell below the Fund restrictions:
Advocat, Autologic Information, BEI Medical
Systems, Earl Scheib, Government Technology
Services, Hampton Industries, Kevco, IFR
Systems, Mining Services, Novametrix Medical
Systems, Safety Components, and Span-America
Medical Systems.
The following stocks were eliminated because
their market cap exceeded Fund limitations:
BB&T, Computer Sciences, Inacom, IPC
Communications and National Discount Brokers.
Fund Composition
Top Ten Holdings: % of Total
E'town Corp. 2.19
Newport Corp. 1.83
Aquarion Co. 1.76
Connecticut Energy Corp. 1.67
Workflow Management, Inc. 1.65
SJW Corp. 1.41
NUI Corp. 1.40
Southern Union Co. 1.38
URS Corp. 1.36
Todd-AO Corp. Cl. A 1.34
Total 15.99%
Total Securities in Portfolio 232
As of December 31, 1999, statement of assets. Subject to change.
Schedule of Investments
December 31, 1999 (unaudited)
SHADOW STOCK FUND
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 96.27%
BASIC MATERIALS - 4.64%
14,101 Aceto Corp. $ 155,111
3,300 American Biltrite, Inc. 47,025
15,200 American Pacific Corp. 129,200
4,500 Badger Paper Mills, Inc. 24,047
4,480 Baltek Corp. 35,000
40,600 Global Industrial Technologies, Inc.* 522,725
14,900 Palex, Inc.* 104,300
13,200 Pitt-Des Moines, Inc. 325,050
19,000 Roanoke Electric Steel Corp. 308,750
8,500 Stephan Co. 34,000
17,500 Tuscarora, Inc. 212,187
1,897,395
CAPITAL GOODS - 16.38%
8,900 AG Services of America 132,944
7,200 American Technical Ceramics Corp.* 115,200
11,000 Autocam Corp. 198,687
3,600 Badger Meter, Inc. 108,450
15,000 Baker (Michael) Corp. 99,375
14,000 Blonder Tongue Labs.* 70,000
23,900 Building Material Holding Corp. 244,975
16,300 Cameron Ashley Building Products, Inc.* 163,000
21,000 Cascade Corp. 192,938
14,800 Ceradyne, Inc.* 67,525
19,200 Cherry Corp. 204,000
1,800 Chicago Rivet & Machine Co. 41,287
14,000 Coastcast Corp.* 232,750
9,300 Diodes, Inc.* 199,950
7,315 Ecology and Environment, Inc. Cl. A 40,232
19,100 Engle Homes, Inc. 229,200
14,800 Exponent, Inc.* 98,050
15,000 Farr Co. 146,250
14,300 Fibermark, Inc. 168,025
18,900 GP Strategies Corp. 115,762
11,500 Gehl Co. 207,000
3,150 Graham Corp. 20,869
4,400 Heist (C.H.) Corp.* 25,850
23,006 Intermagnetics General Corp. 201,302
13,100 JLM Industries* 44,212
7,600 Liberty Homes, Inc. Cl. A 62,225
15,100 M/I Schottenstein Homes, Inc. 234,994
13,900 Mestek, Inc.* 281,475
14,112 Met-Pro Corp. 141,120
16,000 Nanometrics, Inc.* 322,000
6,300 Noland Co. 112,613
12,000 Northwest Pipe Co.* 168,000
3,000 Oilgear Co. 20,625
5,000 P & F Industries Cl. A* 32,188
3,200 Penn Engineering & Manufacturing Corp. (voting) 74,100
11,900 Penn Engineering & Manufacturing Corp. (non-voting) 275,559
8,400 Puerto Rican Cement Co., Inc. 285,600
5,727 Sames Corp. 88,411
10,000 Selas Corp. of America 66,875
11,000 Sifco Industries 76,313
9,600 SL Industries, Inc. 111,600
10,139 Southwest Water Co. 152,085
26,900 Symmetricom, Inc. 267,319
25,700 URS Corp. 557,369
6,698,304
CONSUMER CYCLICAL - 14.17%
14,000 AC Moore Arts & Crafts, Inc.* 81,375
21,600 Amplicon, Inc. 248,400
11,300 Ben & Jerry's Homemade, Inc. Cl. A 281,087
8,000 Black Hawk Gaming & Development* 47,000
28,200 Bon-Ton Stores, Inc.* 103,987
19,200 Carmike Cinemas, Inc. Cl. A* 150,000
9,000 Childtime Learning Centers, Inc.* 111,375
17,000 Conso Products Co. 146,625
6,750 Decorator Industries, Inc. 35,859
20,900 Dixie Group, Inc. Cl. A 154,137
9,500 Duckwall-Alto Stores, Inc. 72,438
12,400 Ellis (Perry) International, Inc. 144,150
9,300 ELXSI Corp. 118,866
9,750 Equinox Systems, Inc. 87,750
1,700 Federal Screw Works 71,400
13,100 Gart Sports Co.* 80,238
8,400 Globe Business Resources, Inc.* 108,150
23,200 Gottschalks, Inc.* 172,550
8,916 Knape & Vogt Manufacturing Co. 123,152
10,000 Lacrosse Footwear, Inc. 44,375
18,000 Maxwell Shoe, Inc. Cl. A* 144,000
16,000 Mazel Stores, Inc.* 148,000
4,500 McRae Industries, Inc. Cl. A 25,313
12,000 Motorcar Parts & Accessories, Inc.* 13,126
23,000 Navigant International, Inc.* 268,812
12,000 Nobel Learning Communitys, Inc. 87,000
11,000 OroAmerica, Inc.* 68,750
20,000 Piccadilly Cafeterias, Inc. 80,000
5,000 Pulaski Furniture Corp. 77,500
16,400 R & B, Inc.* 75,850
13,700 Reading Entertainment, Inc.* 78,775
14,000 Rex Stores Corp.* 490,000
10,100 Rocky Shoes & Boots, Inc.* 77,013
35,200 RPC Energy Services, Inc. 202,400
8,400 S & K Famous Brands, Inc. 49,875
5,000 Somerset Group, Inc. 95,781
23,466 Supreme Industries, Inc. Cl. A 145,196
30,000 Syms Corp. 150,000
39,500 TCBY Enterprises, Inc. 150,594
7,000 Weyco Group, Inc. 179,812
10,828 Wolohan Lumber Co. 131,290
23,500 Workflow Management, Inc.* 672,687
5,794,688
CONSUMER STAPLES - 5.06%
14,000 Books-A-Million, Inc. 116,375
11,000 Bowl America, Inc. Cl. A 77,000
9,300 Cagle's, Inc. Cl. A 105,788
15,800 Chalone Wine Group Ltd.* 137,263
1,700 Foodarama Supermarkets, Inc.* 33,787
31,200 Frozen Food Express Industries, Inc. 120,900
3,200 Genesee Corp. Cl. B 68,200
38,200 Ingles Markets, Inc. Cl. A 424,975
7,325 Marsh Supermarkets, Inc. Cl. A 101,634
12,725 Marsh Supermarkets, Inc. Cl. B 128,841
5,000 Max & Erma's Restaurants 37,188
22,800 Quaker Fabric Corp. 96,900
23,250 Sanderson Farms, Inc. 199,078
11,400 Seaway Food Town, Inc. 185,250
14,000 Swiss Army Brands, Inc.* 99,750
7,000 Triple S Plastics, Inc.* 97,125
8,100 Zaring National Corp.* 37,462
2,067,516
ENERGY - 2.59%
6,500 Adams Resources & Energy, Inc. 55,250
29,503 HS Resources, Inc.* 508,927
21,500 Key Production, Inc.* 158,563
9,100 Maynard Oil Co.* 91,000
10,200 Prima Energy Corp. 245,437
1,059,177
FINANCIAL - 14.30%
6,400 Aegis Realty, Inc. 56,400
2,900 American Business Financial Services 34,075
7,370 Amwest Insurance Group, Inc. 53,433
10,500 BancInsurance Corp. 55,125
19,000 Capitol Transamerica Corp. 191,187
11,952 Cotton States Life and Health
Insurance Co. 103,086
6,000 DeWolfe Companies, Inc. 40,500
16,000 Donegal Group, Inc. 102,000
20,000 EMC Insurance Group, Inc. 182,500
8,000 First Cash, Inc.* 66,000
13,230 First Albany Companies, Inc. 191,008
11,000 First Investors Financial
Services Group, Inc.* 59,125
14,500 Guarantee Life Companies, Inc. 463,547
7,000 JW Genesis Financial Corp. 207,375
15,000 Kaye Group, Inc. 125,625
6,000 KBK Capital Corp.* 20,250
5,000 Merchants Group, Inc. 97,500
14,883 Meridian Insurance Group, Inc. 211,153
17,400 Midland Co. 361,050
6,100 Minuteman International, Inc. 55,662
3,250 National Security Group, Inc. 40,016
6,000 National Western Life Insurance Co.* 411,750
15,400 Navigators Group, Inc. 154,000
16,500 Penn-America Group, Inc. 127,875
14,000 Penn Treaty American Corp. 220,500
15,730 Professionals Group, Inc. 368,672
22,800 PXRE Corp. 296,400
20,200 Ragen MacKenzie Group, Inc.* 363,600
17,200 South Jersey Industries, Inc. 489,125
14,000 Standard Management Corp. 66,500
25,000 Stewart Information Services Corp. 332,812
13,612 Trenwick Group, Inc. 230,553
4,600 Ziegler (The) Companies, Inc. 68,713
5,847,117
HEALTH CARE - 0.51%
13,700 Merit Medical Systems, Inc. 99,325
13,800 Provantage Health Services* 110,400
209,725
MISCELLANEOUS - 3.82%
14,000 Andersons, Inc. 115,500
8,910 Astronics Corp. 92,998
5,600 Detection Systems, Inc. 52,850
10,400 Edelbrock Corp. 124,800
2,250 FRM Nexus, Inc. 3,234
17,750 Hardinge, Inc. 231,859
15,500 Hoenig Group, Inc. 143,375
10,600 Primesource Corp. 50,350
4,500 Programming and Systems, Inc.* 4,500
3,800 Prophet 21, Inc.* 37,525
1,700 Scope Industries 76,925
12,000 Sun Hydraulics Corp. 78,000
18,000 Todd-AO Corp. Cl. A 549,000
1,560,916
TECHNOLOGY - 11.62%
2,100 Allen Organ Co. Cl. B 79,800
12,600 BEI Technologies, Inc. 192,150
17,320 Bell Industries, Inc. 128,818
15,100 Bell Microproducts, Inc.* 166,100
12,700 CPAC, Inc. 103,187
10,000 Data Research Associates, Inc. 80,000
13,800 Dataram Corp. 309,637
13,200 Del Global Technologies Corp. 102,300
11,400 DRS Technologies, Inc.* 111,150
7,800 Eastern (The) Co. 121,875
13,000 EDO Corp. 76,375
14,700 Franklin Electronic Publishers, Inc.* 87,281
14,000 Integrated Measurement System, Inc.* 197,750
11,000 Interphase Corp.* 232,375
21,535 Intervoice-Brite, Inc. 500,689
5,500 Koss Corp.* 78,719
4,800 Moore Products Co. 191,400
16,400 Newport Corp. 750,300
18,200 Norstan, Inc. 116,025
7,500 Ontrack Data International* 90,469
16,000 Powell Industries, Inc.* 110,000
8,900 Programmer's Paradise, Inc.* 67,862
2,900 Quipp, Inc. 44,950
8,000 Refac Technology Develop Corp. 31,000
11,300 RWD Technologies, Inc.* 117,238
22,000 Semitool, Inc. 330,000
12,000 TRM Copy Center Corp.* 73,500
8,000 Vertex Communications Corp.* 164,000
4,900 II-VI, Inc. 98,612
4,753,562
TRANSPORTATION & SERVICES - 3.16%
12,000 International Shipholding Corp. 139,500
4,000 Kenan Transport Co. 126,750
30,000 Kitty Hawk, Inc.* 206,250
8,066 KLLM Transport Services, Inc. 38,313
9,000 Marten Transport Ltd. 115,875
15,500 Old Dominion Freight Line, Inc.* 166,625
13,000 Pam Transportation Services* 142,594
5,000 Petroleum Helicopters, Inc. 46,250
12,000 Transport Corporation of America, Inc.* 149,250
17,000 USA Truck, Inc. 133,875
3,350 VSE Corp. 25,963
1,291,245
UTILITIES - 20.02%
14,100 American States Water Co. 507,600
19,500 Aquarion Co. 721,500
4,000 Atrion Corp. 42,500
13,100 Bangor Hydro-Electric Co. 213,694
5,000 Berkshire Gas Co. 175,000
18,900 Cascade Natural Gas Corp. 304,762
8,700 Chesapeake Utilities Corp. 159,863
17,600 Connecticut Energy Corp. 684,200
7,800 Connecticut Water Service, Inc. 249,600
14,000 CTG Resources, Inc. 486,500
4,000 Delta Natural Gas Company, Inc. 62,250
3,300 Dominguez Services Corp. 99,825
14,400 E'town Corp. 896,400
6,000 EnergyNorth, Inc. 330,375
6,000 Florida Public Utilities Co. 102,000
9,700 Green Mountain Power Corp. 72,144
2,500 Maine Public Service Co. 43,437
7,600 Middlesex Water Co. 243,200
21,700 NUI Corp. 572,338
10,800 Providence Energy Corp. 400,950
2,900 RGC Resources, Inc. 63,800
4,800 SJW Corp. 577,200
29,416 Southern Union Co. 562,581
14,000 St. Joseph Light & Power Co. 287,000
9,176 UNITIL Corp. 328,042
8,186,761
TOTAL COMMON STOCKS 39,366,406
(Cost $33,345,529)
FACE
AMOUNT COMPANY MARKET VALUE
REPURCHASE AGREEMENT - 3.40%
$1,390,000 UMB Bank, n.a., 3.00%, due January 3, 2000
(Collateralized by U.S. Treasury Notes,
6.25%, due August 31, 2000 with a value
of $1,418,338) 1,390,000
(Cost $1,390,000)
TOTAL INVESTMENTS - 99.67% 40,756,406
(Cost $34,735,529)
Other assets less liabilities - 0.33% 136,362
TOTAL NET ASSETS - 100.00% $ 40,892,768
The identified cost of investments owned at
December 31, 1999, was the same for federal
income tax and book purposes.
Net unrealized appreciation for federal
income tax purposes was $6,020,877, which is
comprised of unrealized appreciation of $11,907,037
and unrealized depreciation of $5,886,160.
*Non-income producing security
See accompanying Notes to Financial Statements.
Babson Value Fund
It has been a difficult market for value-
oriented investors, particularly those with a
deep-value, tax-efficient orientation such as ours.
For the six months ended December 31, 1999, Babson
Value Fund's total return (price change and
reinvested distributions) was -10.24%, versus the
unmanaged S&P/Barra Value index, which lost -1.08%
and the unmanaged Standard & Poor's 500,
which was up 7.71%.
Average annual compounded total returns for
one, five and ten year periods as of December
31, 1999, were 1.09%, 17.01% and 13.80%,
respectively. Performance data contained in
this report is for past periods only. Past
performance is not predictive of future
performance. Investment return and share
value will fluctuate, and redemption value
may be more or less than original cost.
The striking difference in returns of the
Babson Value Fund and value indexes, as
compared to the S&P 500 and other equity
markets in general, came down once again to
growth vs. value investment styles. In
comparing the Russell 2000 Value vs. Russell
2000 Growth over the last six months, there
were about 33.2 percentage points difference
in performance between those two indexes.
Looking at the larger companies over the same
time period, the Russell 1000 Value and the
Russell 1000 Growth returns had a spread of
25.5%, with the growth indexes' performance
being the most positive in each case.
This disparity has been driven by the
technology sector, the only sector in the S&P
500 that had a positive return in the third
quarter. This third quarter technology
phenomenon was responsible for our worst
quarter in 1999, but its effects extended
into the other quarters as well. While the
performance extremes of the technology sector
drove the markets to new highs, non-
technology stocks languished, and anyone who
was not heavily weighted in technology
suffered. Without its tech stocks, the S&P
500's performance for the calendar year of
1999 would have been 3.1% (vs. actual returns
of 21%). We will not compromise our strict
value discipline of investing in companies
with below-market price-to-earnings (P/E),
low price-to-book (P/B) ratios and above-
average current yields to chase a sector with
P/E ratios in the 100's. As a result, our
technology holdings have comprised only about
10% of the portfolio, while the S&P is made
up of about 30% technology stocks, up from
about 13% just three years ago.
One technology holding that has worked well
for Babson Value Fund is Apple Computer,
returning 126.9% over the last six months. We
have held Apple since 1995, and have been in
the position of having to explain our
reasoning for holding this stock more than a
few times. But our patience paid off. Our
average purchase price is $13.5 per share and
the stock closed on 12/31/99 at 102 13/16.
Even though it looks more like a growth stock
currently, we will continue to hold Apple
until its relative strength declines
meaningfully.
The period of preference that growth has seen
over value has been the longest in recent
history, accompanied by unprecedented
performance spreads. We believe that this
wide performance spread between growth and
value is unsustainable. Our philosophy has
always been to remain consistent "deep value"
investors, buying and holding companies with
valuation characteristics that pass our
intensive screening process. As we look at
the market's brief return to the value style
that we experienced in the second quarter, we
see that the market generously rewarded the
types of companies and sectors that dominate
our Fund. In that quarter, the market moved
toward favoring deep value stocks - low P/E,
low P/B stocks, and toward the basic
materials - with a bias toward companies with
slightly smaller market capitalizations. This
is how our portfolio is positioned. Our
belief is that when the market cycle turns
back toward the value style, we will be well
positioned to reap the rewards.
Portfolio additions for the six month period:
Albertson's - operates a retail food and drug chain
Neiman Marcus Cl. B - received as a spinoff
of Harcourt
Raytheon Cl. B - defense and commercial electronics
Too - received as a spinoff of the Limited
Travelers Property Casualty - property/casualty insurer
Four positions were liquidated during the
last six months: Aegon was received as a
result of Aegon's acquisition of
Transamerica, and liquidated in August,
Illinova was the target of a takeover by
Dynegy, and subsequently sold from our value
portfolios, Reebok was sold for tax loss
purposes, the position was not re-established
due to continuing poor fundamentals, and Too
was received as a spinoff of the Limited and
subsequently sold.
Fund Composition
Top Ten Holdings: % of Total
Student Loan Corp. 3.81
USX-U.S. Steel Group 2.88
Apple Computer, Inc. 2.87
United Healthcare Corp. 2.78
Weyerhaeuser Co. 2.74
Berkshire Hathaway, Inc. Cl. B 2.74
duPont (E.I.) deNemours & Co. 2.72
Tenet Healthcare 2.71
Harcourt General, Inc. 2.70
Atlantic Richfield Co. 2.69
Total 28.64%
Total Securities in Portfolio 43
As of December 31, 1999, statement of assets. Subject to change.
Schedule of Investments
December 31, 1999 (unaudited)
BABSON VALUE FUND
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 96.01%
BASIC MATERIALS - 15.09%
340,000 duPont (E.I.) deNemours & Co. $ 22,397,500
458,100 Potlatch Corp. 20,442,713
110,400 Martin Marietta Materials, Inc. 4,526,400
525,000 Millennium Chemicals, Inc. 10,368,750
718,000 USX-U.S. Steel Group 23,694,000
314,500 Weyerhaeuser Co. 22,585,031
436,300 Willamette Industries, Inc. 20,260,681
124,275,075
CAPITAL GOODS - 9.58%
486,000 Boeing Co. 20,199,375
271,100 Hanson PLC, ADR 10,962,606
379,772 Lockheed Martin Corp. 8,307,513
671,700 Raytheon Co. Cl. B 17,842,031
1,299,700 Wallace Computer Services, Inc. 21,607,513
78,919,038
CONSUMER CYCLICAL - 11.40%
689,200 Dana Corp. 20,632,925
551,700 Harcourt General, Inc. 22,205,925
897,000 Kmart Corp. 9,026,063
501,000 Limited, Inc. 21,699,562
46,000 Nieman Marcus Group Cl. B* 1,239,125
381,058 Penney (J.C.) Co., Inc. 7,597,344
375,500 Sears, Roebuck & Co. 11,429,281
93,830,225
CONSUMER STAPLES - 4.81%
603,700 Albertson's, Inc. 19,469,325
628,000 Diageo PLC, ADR 20,096,000
39,565,325
ENERGY - 5.27%
256,300 Atlantic Richfield Co. 22,169,950
350,500 Royal Dutch Petroleum Co. 21,183,344
43,353,294
FINANCIAL - 27.99%
758,000 Allstate Corp. 18,192,000
123,900 American Express Co. 20,598,375
12,322 Berkshire Hathaway, Inc. Cl. B* 22,549,260
262,000 Chase Manhattan Corp. 20,354,125
396,000 Citigroup, Inc. 22,002,750
915,000 National City Corp. 21,674,063
480,850 SLM Holding Corp. 20,315,912
628,200 Student Loan Corp. 31,331,475
417,000 Travelers Property Casualty Corp. 14,282,250
752,700 U.S. Bancorp 17,923,669
526,330 Wells Fargo & Co. 21,283,469
230,507,348
HEALTH CARE - 7.59%
310,000 Aetna, Inc. 17,301,875
947,900 Tenet Healthcare 22,275,650
431,000 United Healthcare Corp. 22,896,875
62,474,400
TECHNOLOGY - 7.09%
230,000 Apple Computer, Inc. 23,646,875
193,000 International Business Machines Corp. 20,844,000
614,000 Xerox Corp. 13,930,125
58,421,000
TRANSPORTATION - 4.71%
615,000 CSX Corp. 19,295,625
780,807 KLM Royal Dutch Airlines 19,471,374
38,766,999
UTILITIES - 2.48%
575,200 Texas Utilities Co. 20,455,550
TOTAL COMMON STOCKS 790,568,254
(Cost $611,717,083)
FACE
AMOUNT COMPANY MARKET VALUE
REPURCHASE AGREEMENT - 3.28%
$27,000,000 UMB Bank, n.a., 3.00%, due January 3, 2000
(Collateralized by U.S. Treasury Notes,
6.25%, due August 31, 2000 with a value
of $27,538,461) 27,000,000
(Cost $27,000,000)
TOTAL INVESTMENTS - 99.29% 817,568,254
(Cost $638,717,083)
Other assets less liabilities - 0.71% 5,849,780
TOTAL NET ASSETS - 100.00% $ 823,418,034
The identified cost of investments owned at
December 31, 1999, was the same for federal
income tax and book purposes.
Net unrealized appreciation for federal
income tax purposes was $178,851,171, which
is comprised of unrealized appreciation of $232,294,308
and unrealized depreciation of $53,443,137.
*Non-income producing security
See accompanying Notes to Financial Statements.
Babson-Stewart Ivory International Fund
Overall it's been a very good year. Our
performance has exceeded the EAFE benchmark's
for the second, third and fourth quarters of
1999. Babson-Stewart Ivory International Fund
finished the six months ended December 31,
1999, with a total return (price change and
reinvested distributions) of 28.57%, against
the EAFE benchmark of 22.27%, giving us a
particularly strong end of the year.
Comparisons against the unmanaged Morgan
Stanley Capital International (MSCI) EAFE and
other indices are as follows:
Investment Results - Total Return
Periods Ended 12/31/99
Fourth Quarter Previous Twelve
1999 Months
BSIIF 21.35% 31.06%
MSCI EAFE* Index** 17.05% 27.30%
MSCI World Index** 16.96% 25.34%
S&P 500 Index** 14.88% 21.04%
Lipper International Funds
(avg. funds 677 and
619, respectively) 24.73% 37.83%
*Europe, Australia, Far East
**unmanaged
Average annual compounded total returns for
five and ten year periods ended December 31,
1999, were 14.06% and 10.35%, respectively.
Performance data contained in this report is
for past periods only. Past performance is
not predictive of future performance.
Investment return and share value will
fluctuate, and redemption value may be more
or less than original cost.
In the early months of 1999 we saw the
markets temporarily favor value companies.
Being a growth-oriented Fund, this negatively
impacted our performance. However, in the
second half of the year against a backdrop of
low inflation and a shallow economic cycle,
investors sought out companies with
exceptional growth potential. As growth
companies found a new lease on life with new
products, the Internet, and new technology,
we saw a strong switch back to a growth-
oriented market.
Throughout the year the economic news got
better and better. Europe saw some growth,
with some recovery in Germany, and the UK saw
buoyant growth in parts of its economy. The
Japanese economy, which had been in recession
for a number of years, came out of recession
mid-year, and is now expecting a return to
real GDP growth. Asia and the emerging
markets are benefiting from the positive
moves in the world economies.
As of year-end the Fund had 59% of the
portfolio in Europe, 34% in Asia and the Far
East, 2% in other areas including emerging
markets, and 5% cash. Despite Europe's
generally positive economic climate,
investors suffered currency-based losses
there as the Euro (which was introduced at
the start of 1999) weakened appreciably
against the U.S. dollar. We moved money out
of continental Europe into Japan this year,
(total allocation in Japan currently is 25%)
which benefited us since both the Japanese
market and currency has been strong. As
always, the Fund's country and regional
allocations are largely a by-product of our
bottom-up decisions.
In our Japanese portfolio there are a number
of companies that are being called "New
Japan" companies - operating in service
industries which are fairly new to the
Japanese economy. An example is a company
called Secom, a security services company,
providing alarm systems and data services to
residences and businesses. After we added the
stock to our portfolio in 1999 it almost
tripled in value.
Looking forward, the global economy appears
to be in good shape, which should provide a
solid foundation for international investors.
We expect good economic growth for the year
2000, and there doesn't seem to be much
inflationary pressure around the world. Asian
economies should continue their recovery and
we anticipate European issues to provide a
more even contribution to the portfolio,
especially as the Euro stabilizes.
Portfolio additions for the six month period:
Australia - Broken Hill (restructuring resources group)
Brazil - Cemig Pref. (electric utility group)
France - Banque Nationale de Paris (beneficiary of banking
industry consolidation)
Pinault-Printemps-Redoute (fast-growing specialty retail)
Germany - DePfa (niche financial lender)
Porsche (specialist auto group)
Hong Kong - Cheung Kong (property and industrial holdings)
China Telecom (beneficiary of low cellular penetration rate)
Japan - Fuji Bank (leading banking group)
Japan Airport Terminal (airport operator, beneficiary of airport deregulation)
Nomura (leading brokerage group)
Sanwa Bank (leading banking group)
Netherlands - Buhrmann (office products distributor)
Sweden - Modern Times (free newspaper distributor)
UK - BBA (specialist in friction materials - aerospace, auto use)
Energis (business telecommunications)
SSL (healthcare products, manufacture & distribution)
The following positions were liquidated from
the portfolio: Valeo, Vivendi (France),
Hennes & Mauritz (Sweden), ABB (Switzerland),
Nintendo and Olympus Optical (Japan) all
achieved their price targets. Pliva (Croatia)
and OTE (Greece) were sold to rebalance our
European exposure, and Irish Life (Ireland)
to rebalance our financial holdings. Ahold,
Wolters Kluwer (Netherlands), Jeronimo
Martins (Portugal) and TeleDanmark (Denmark)
showed signs of slowing growth rates. Smiths
Industries (UK) and Suzuki (Japan)
experienced slowdowns in their industries, as
Danone (France) felt pricing pressure from
retailers. Other sales include Cable &
Wireless Communications (UK), subject of
corporate reorganization, Northern Rock (UK)
on earnings disappointment. In Belgium,
Dolmen Computer Applications was sold after
being received as part of a spin-off from
Colruyt. Bank Handlowy (Poland) and TIBS
Holdings (Singapore) were liquidated due to
delays or concerns with merger plans. In
Japan we also sold Circle K because of their
slow pace of restructuring, Taiyo Yuden due
to concern at order delays, and Toshiba on
valuation concerns. Liquidated positions in
Hong Kong included Gold Peak (lack of
earnings visibility) and V-Tech (short-term
earnings outlook dull). The relaxation of
exchange controls permitted our sale of
Perlis Plantations (Malaysia).
Schedule of Investments
December 31, 1999 (unaudited)
BABSON-STEWART IVORY INTERNATIONAL FUND
SHARES COMPANY MARKET VALUE
COMMON STOCKS - 94.65%
AUSTRALIA - 2.73%
27,000 Brambles
(Transport, plant services) $ 746,651
75,000 Broken Hill Proprietary
(Resources) 984,799
65,000 Lend Lease
(Real estate) 910,631
2,642,081
BELGIUM - 0.71%
12,000 Colruyt
(Food retailer) 689,027
BRAZIL - 0.65%
28,170,000 Cemig
(Electric utility) 631,544
FINLAND - 1.13%
6,000 Nokia
(Telecom equipment) 1,087,938
FRANCE - 8.47%
8,000 AXA-UAP
(Insurance, financial services) 1,115,338
12,000 Banque Nationale de Paris
(Banking) 1,107,279
9,000 Lafarge
(Building materials, cement) 1,048,047
1,000 L' Oreal
(Cosmetics) 802,354
5,900 Pinault-Printemps-Redoute
(Specialty retailing) 1,557,161
20,000 Sanofi
(Pharmaceuticals) 832,877
13,000 Total
(Oil major) 1,735,160
8,198,216
GERMANY - 4.99%
10,000 DePfa
(Mortgage banking) 747,453
6,500 Fresenius
(Pharmaceuticals, medical equipment) 1,191,695
8,000 Mannesmann
(Telecoms and engineering) 1,930,082
350 Porsche
(Auto manufacturing) 958,997
4,828,227
HONG KONG - 5.80%
330,000 Asia Satellite
(Satellite operator) 1,042,195
180,000 CLP Holdings
(Electric utility) 828,970
60,000 Cheung Kong
(Property and investment) 760,275
140,000 China Telecom*
(Telecom utility) 873,480
600,000 HK & China Gas
(Gas utility) 822,024
270,000 Shaw Bros.
(T.V. network, film production and distribution) 317,811
1,100,000 Swire Pacific Cl. B
(Trading, airlines, real estate) 962,244
5,606,999
HUNGARY - 0.91%
13,500 Gedeon Richter
(Pharmaceuticals) 882,214
IRELAND - 0.85%
70,000 Kerry Group
(Food manufacturer) 819,765
ITALY - 2.95%
20,300 Banca Popolare Di Brescia
(Banking, financial services) 1,796,462
60,000 Luxottica
(Eyeglass frames) 1,053,750
2,850,212
JAPAN - 24.56%
41,000 Bridgestone
(Tires) 902,907
41,100 Credit Saison
(Credit card services) 716,042
93,000 Fuji Bank
(Banking) 903,876
23,000 Fuji Photo
(Film) 839,679
38,000 Hosiden
(Electronic components) 2,439,855
19,000 Hoya
(Opto-electronics) 1,497,015
10,000 Ito-Yokado
(Supermarket chain) 1,086,425
79,000 Japan Airport Terminal
(Airport operator) 734,560
10,000 Matsushita Communication
(Industrial electronics) 2,642,654
40,000 Nippon Comsys
(Telecoms engineering) 829,989
75,000 Nomura
(Securities house) 1,354,360
55 NTT Mobile Communication
(Cellular telecommunications) 2,115,592
15,300 Promise
(Consumer lending) 778,702
68,000 Sanwa Bank
(Banking) 827,288
14,000 Secom
(Security services) 1,541,548
9,000 Sony
(Consumer electronics) 2,669,081
16,000 Takeda
(Pharmaceuticals, chemicals) 790,839
41,000 Terumo
(Medical equipment) 1,095,527
23,765,939
NETHERLANDS - 7.65%
9,000 Aegon
(Insurance) 869,443
40,000 Buhrmann
(Office products supplier) 602,395
15,000 Getronics
(Support services) 1,196,731
20,000 ING Groep
(Financial services) 1,207,611
20,000 KPN
(Postal and telecom services) 1,952,244
30,000 VNU
(Publishing) 1,576,905
7,405,329
PORTUGAL - 1.30%
115,000 Portugal Telecom
(Telecom utility) 1,261,554
SINGAPORE - 0.98%
45,680 Overseas Union Bank
(Banking) 267,415
203,000 Overseas Union Enterprise
(Hotels, property investment) 682,558
949,973
SPAIN - 4.45%
40,000 Argentaria
(Banking services) 940,059
11,400 Banco Popular
(Banking) 743,575
31,000 Mapfre Vida Seguro
(Insurance) 715,118
76,405 Telefonica*
(Telephone utility) 1,908,770
4,307,522
SWEDEN - 5.37%
37,942 Atlas-Copco
(Engineering) 1,079,089
25,000 L.M. Ericsson
(Telecom equipment) 1,607,122
15,000 Modern Times*
(Broadcasting, media) 743,918
125,000 Nordbanken Holding
(Swedish/Finnish banking) 734,516
57,000 Securitas
(Security/cleaning services) 1,031,614
5,196,259
SWITZERLAND - 1.06%
700 Novartis
(Pharmaceuticals and chemicals) 1,027,821
UNITED KINGDOM - 20.09%
84,000 Bank of Scotland
(Banking) 975,577
121,000 BBA Group
(Engineering) 1,002,665
76,000 Bowthorpe
(Electronics components, instruments) 1,335,659
70,000 Capita Group
(Facilities management) 1,272,049
209,000 Cattles
(Consumer loans) 1,103,945
97,000 Electrocomponents
(Electronics) 1,073,286
28,000 Energis*
(Telecoms) 1,345,545
34,000 Glaxo Wellcome
(Pharmaceuticals) 963,300
80,000 Hays
(Business services) 1,276,733
105,000 Kingfisher
(Diversified retailing) 1,165,197
76,000 Lloyds TSB
(Banking) 944,046
60,000 Logica
(Computer software) 1,550,688
350,000 Morrison Supermarkets
(Supermarkets) 751,922
148,000 Shell
(Oil major) 1,229,986
74,000 SSL International
(Healthcare and sporting goods) 937,431
90,000 SmithKline Beecham
(Pharmaceuticals) 1,141,210
275,000 Vodafone AirTouch
(Cellular telephone network) 1,370,780
19,440,019
TOTAL COMMON STOCKS 91,590,639
(Cost $57,787,440)
SHARES OR
FACE AMOUNT COMPANY MARKET VALUE
REPURCHASE AGREEMENT - 5.29%
$5,117,000 State Street Bank, 2.50%, due January 3, 2000
(Collateralized by U.S. Treasury Notes,
4.50%, due September 30, 2000 with a value
of $5,220,000) 5,117,000
(Cost $5,117,000)
TOTAL INVESTMENTS - 99.94% 96,707,639
(Cost $62,904,440)
Other assets less liabilities - 0.06% 59,839
TOTAL NET ASSETS - 100.00% $ 96,767,478
The identified cost of investments owned at
December 31, 1999, was the same for federal
income tax and book purposes.
Net unrealized appreciation for federal
income tax purposes was $33,803,285, which is
comprised of unrealized appreciation of $35,882,164
and unrealized depreciation of $2,078,879.
*Non-income producing security
See accompanying Notes to Financial Statements.
Babson Bond Trust
We closed out the calendar year of 1999 with
flat or slightly negative total returns, with
the income that the portfolios generated
being offset by the price depreciation we
saw. For the year ended December 31, 1999,
total investment returns (price change and
reinvested distributions) for Portfolio L and
S were -1.40% and 0.37%, respectively. These
compare to the Lehman Brothers Aggregate Bond
and Intermediate Gov't./Corp. indices which
returned -0.82% and 0.39% in 1999,
respectively.
Average annual compounded total returns for
Portfolio S for five and ten year periods as
of December 31, 1999, were 6.61% and 6.83%,
respectively. For Portfolio L, total returns
for five and ten year periods were 6.75% and
7.15%, respectively. Performance data
contained in this report is for past periods
only. Past performance is not predictive of
future performance. Investment return and
share value will fluctuate, and redemption
value may be more or less than original cost.
The bond market in general had a somewhat
difficult year, with interest rates rising
steadily throughout 1999, ending the year up
between 1.3% and 1.8%, depending on maturity.
The movement in interest rates is the primary
determinate of bond returns, and when
interest rates rise, bond prices fall.
We continue to be underweighted in Treasuries
and agencies (15 - 25% of the portfolio, vs.
75% of the Lehman Aggregate index) and
overweighted in corporates, mortgage-backed
issues and yankee bonds. These sectors
provide higher starting yields than
Treasuries, and give us the opportunity to
add value through good credit work, selecting
above-average issues and rotating between
sectors.
We focused on the mortgage- and asset-backed
areas in 1999. This type of bond issuance
(securitized), has seen tremendous growth
over the last few years. The bonds tend to be
AAA rated, with very strong support in terms
of cash flows and underlying collateral.
We're starting to introduce them to the
portfolio, focusing on very liquid, high
quality securities.
We also invest in commercial mortgage-backed
securities that are similar to GNMAs, but are
backed by large commercial loans, typically
on properties ranging from shopping malls to
multi-family housing. We're focusing only on
AAA bonds that are ERISA (Employee Retirement
and Investment Security Act) eligible.
Commercial mortgage-backed bonds have been
one of the best performing sectors of the
market in 1999, and we have about a 6%
weighting in our portfolios.
Yankee bonds are dollar-denominated bonds
issued in the U.S. by foreign banks and
corporations. Traditionally, we have only had
activity in Canadian Yankee bonds. We're
still heavily weighted in Canadian bonds, but
we are branching out into other country
issues (again, only those denominated in U.S.
dollars). They provide diversification, and
they're highly liquid. We feel that these are
an alternative investment to corporates,
providing a high-quality investment with a
good yield. In addition, they aren't as
highly correlated with corporates as some
other sectors, and may provide a buffer to
market volatility.
Looking forward, interest rates will be the
key issue in 2000. The Federal Reserve raised
rates in June, August and November of 1999 to
slow the economy down, apparently without
success. Everything that we look at would
lead us to believe that inflation is picking
up in the U.S., and even though it's not
showing up in the CPI numbers, it's a
possibility that the Fed will raise rates
again. However, if inflation stays down, and
the economy slows, there are some that say
interest rates will be much lower in the
2000. Although we favor the higher interest
rate scenario, our investment objective is to
bring expertise to the portfolios with our
credit work, issue selection and sector
rotation rather than positioning the
portfolios based on unpredictable interest
rate forecasts.
Additions and deletions within the portfolios:
Portfolio Long
Buys:
Lockheed Martin, 7.95%/2005 - turnaround
credit story, very cheap new issue
GMAC, 6.85%/2004 - solid credit, increasing
corporate bonds exposure
Quebec Province of Canada, 7.50%/2029 - good
credit, non-callable/puttable
FNMA, 7.50%/2029 - increasing exposure to
mortgage backed sector-attractive, new
production 30 year single family mortgages
Sells:
Hydro Quebec, 8.05%/2024 - sold this issue to
buy the noncallable Quebec issue above
Republic of Chile, 6.875%/2009 - taking
profits from recent strong performance in this name
Wachovia Capital Trust II, 6.062%/2027 -
reducing exposure to banks
Raytheon, 6.15%/2008 - sold this recent purchase
following management disclosure of problems
Portfolio Short
Buys:
Lockheed Martin, 7.95%/2005 - turnaround
credit story, very cheap new issue
GMAC, 6.85%/2004 - solid credit, increasing
corporate bonds exposure
Quebec Province of Canada, 7.50%/2029 - good
credit, non-callable/puttable
FNMA, 7.50%/2029 - increasing exposure to
mortgage backed sector-attractive, new
production 30 year single family mortgages
Ford Motor Credit, 7.375%/2009 - extending
maturity of Ford holdings
Ford Motor Credit, 6.70%/2004 - new issue by
Ford global, improved liquidity & yield
Sells:
Hydro Quebec, 8.05%/2024 - sold this issue to
buy the noncallable Quebec issue above
Republic of Chile, 6.875%/2009 - taking profits
from recent strong performance in this name
Wachovia Capital Trust II, 6.062%/2027 -
reducing exposure to banks
Raytheon, 6.15%/2008 - sold this recent purchase
following management disclosure of problems
Ford Motor Credit, 5.75%/2004
Cardinal Health, 6.25%/2008 - some concern over
mounting competitive pressure, recent negative news
Ford Motor Credit, 6.70%/2004
Currently, the average maturity is 9.3 years
for Portfolio S and 11.8 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 50.8%
Aa 5.4%
A 20.7%
Baa 23.1%
Total 100.0%
Source: Moody's
Quality Ratings
Portfolio S
Aaa 56.2%
Aa 7.2%
A 15.9%
Baa 20.7%
Total 100.0%
Source: Moody's
Schedule of Investments
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
BABSON BOND TRUST - PORTFOLIO L
PRINCIPAL
DESCRIPTION AMOUNT MARKET VALUE
<S> <C> <C>
CORPORATE BONDS - 51.46%
BANKS AND FINANCE - 15.01%
American Stores Company, 8.00%, due June 1, 2026 $ 1,650,000 $ 1,663,596
Associates Corporation North America, 5.80%, due April 20, 2004 4,500,000 4,263,705
Ford Capital B V, 10.125%, due November 15, 2000 2,500,000 2,568,175
GMAC, 6.85%, due June 17, 2004 2,415,000 2,380,079
Hellenic Republic, 6.95%, due March 4, 2008 1,300,000 1,251,796
Southern Investments UK PLC, 6.375%, due November 15, 2001 1,300,000 1,273,103
SunTrust Banks, Inc., 6.00%, due February 15, 2026 3,000,000 2,769,750
16,665,000 16,170,204
COMMUNICATIONS - 6.44%
A T & T Capital Corp., 6.875%, due January 16, 2001 1,265,000 1,264,760
BellSouth Savings & Employee Stock Ownership Trust,
9.19%, due July 1, 2003 767,055 801,703
Tele Communications, Inc., 8.75%, due February 15, 2023 1,000,000 1,000,430
Time Warner Entertainment Company LP, 8.375%, due March 15, 2023 1,000,000 1,039,730
Time Warner, Inc., 9.15%, due February 1, 2023 1,350,000 1,508,450
WorldCom, Inc., 7.75%, due April 1, 2007 1,300,000 1,325,727
6,682,055 6,940,800
DIVERSIFIED - 2.92%
International Business Machines Corp., 6.22%, due August 1, 2027 1,500,000 1,443,870
Lucent Technologies, Inc., 6.90%, due July 15, 2001 1,700,000 1,703,332
3,200,000 3,147,202
INDUSTRIALS - 13.14%
Airgas, Inc., 7.14%, due March 8, 2004 1,650,000 1,628,698
Cardinal Health, Inc., 6.00%, due January 15, 2006 1,835,000 1,704,165
Comdisco, Inc., 6.375%, due November 30, 2001 3,675,000 3,603,815
Georgia-Pacific Corp., 9.625%, due March 15, 2022 1,500,000 1,547,925
Lockheed Martin, 7.95%, due December 1, 2005 550,000 543,812
Oslo Seismic Services, Inc., 8.28%, due June 1, 2011 1,892,106 1,870,763
Petroleum Geo-Services A/S, 7.50%, due March 31, 2007 1,500,000 1,466,415
Philip Morris Companies, Inc., 7.20%, due February 1, 2007 1,000,000 936,270
Philip Morris Companies, Inc., 6.15%, due March 15, 2000 850,000 848,649
14,452,106 14,150,512
TRANSPORTATION - 3.80%
CSX Corp., 9.50%, due August 1, 2000 680,000 690,560
JB Hunt Transport Services, Inc., 6.25%, due November 17, 2000 1,785,000 1,781,519
United Airlines Pass-Thru Trusts, 7.27%, due January 30, 2013 1,811,249 1,621,612
4,276,249 4,093,691
U.S. DOLLAR DENOMINATED CANADIAN SECURITIES - 6.77%
Canadian National Railway Company, 7.00%, due March 15, 2004 1,950,000 1,910,454
Newfoundland Province of Canada, 7.32%, due October 13, 2023 1,950,000 1,829,958
Ontario Province of Canada, 5.50%, due October 1, 2008 1,000,000 885,770
Quebec Province of Canada, 7.50%, due September 15, 2029 2,750,000 2,665,768
7,650,000 7,291,950
UTILITIES - 3.38%
Consolidated Edison Company NY, Inc., 6.15%, due July 1, 2008 2,000,000 1,828,600
Illinois Power Special Purpose Trust, Cl. A-6,
5.54%, due June 25, 2009 2,000,000 1,813,740
4,000,000 3,642,340
TOTAL CORPORATE BONDS 56,925,410 55,436,699
(Cost $58,343,802)
ASSET-BACKED BONDS - 5.65%
California Infrastructure & Economic Development Bank
Special Purpose Trust, 6.22%, due March 25, 2004 1,000,000 988,120
California Infrastructure & Economic Development Bank
Special Purpose Trust, 6.42%, due September 25, 2008 2,500,000 2,419,800
Comed Transitional Funding Trust, 5.63%, due June 25, 2009 1,400,000 1,271,648
Green Tree Securitized Net Interest Margin Trust,
7.25%, due July 15, 2005 514,562 498,000
MBNA Master Credit Card Trust II,
5.90%, due August 15, 2011 1,000,000 905,880
TOTAL ASSET-BACKED BONDS 6,414,562 6,083,448
(Cost $6,396,776)
COMMERCIAL MORTGAGE-BACKED BONDS - 5.87%
DLJ Commercial Mortgage Corp., 6.11%, due December 10, 2007 2,269,316 2,146,160
JP Morgan Commercial Mortgage Financial Corp.,
6.507%, due October 15, 2035 1,500,000 1,389,060
Nomura Asset Securities Corp., 6.59%, due March 17, 2028 3,000,000 2,790,930
TOTAL COMMERCIAL MORTGAGE-BACKED BONDS 6,769,316 6,326,150
(Cost $6,827,254)
REVENUE BOND - 1.99%
New Jersey Economic Development Authority
State Pension Funding Revenue,
7.425%, due February 15, 2029 2,200,000 2,145,748
(Cost $2,237,298)
U.S. GOVERNMENTAL AGENCY, U.S. GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES - 37.01%
U.S. GOVERNMENTAL AGENCY - 9.57%
*Government National Mortgage Association
7.50%, due March 15, 2007 90,431 89,469
7.50%, due July 15, 2007 144,936 143,395
8.00%, due October 15, 2007 220,053 222,390
8.00%, due November 15, 2009 2,624,195 2,682,399
9.50%, due April 15, 2016 21,463 22,871
9.50%, due January 15, 2019 58,179 61,996
8.00%, due May 15, 2022 259,515 262,271
7.00%, due March 15, 2024 3,047,605 2,944,748
8.00%, due December 15, 2026 3,524,226 3,561,653
Small Business Administration guaranteed development
participation certificates
9.80%, due July 1, 2008 130,798 134,796
10.05%, due August 1, 2008 65,435 68,218
10.05%, due April 1, 2009 107,881 113,487
10,294,717 10,307,693
U.S. GOVERNMENT SECURITIES - 12.13%
U.S. Treasury Notes
11.125%, due August 15, 2003 1,520,000 1,742,300
7.25%, due August 15, 2004 2,850,000 2,939,063
6.50%, due October 15, 2006 3,815,000 3,804,852
8.125%, due May 15, 2021 4,000,000 4,585,000
12,185,000 13,071,215
*GOVERNMENT SPONSORED ENTERPRISES - 15.31%
Federal Home Loan Mortgage Corporation
7.75%, due April 12, 2008 150,545 152,097
7.75%, due November 1, 2008 29,896 30,204
8.00%, due August 1, 2009 28,488 29,058
8.25%, due October 1, 2010 271,029 278,734
9.00%, due June 1, 2016 90,717 95,054
8.00%, due October 1, 2018 132,168 134,811
9.00%, due October 1, 2018 61,314 63,863
7.50%, due February 1, 2021 959,499 950,499
6.00%, due November 1, 2028 6,184,724 5,668,671
Federal National Mortgage Association
5.625%, due March 15, 2001 3,385,000 3,354,027
7.00%, due December 1, 2007 330,815 319,958
8.25%, due January 1, 2009 126,988 129,131
5.25%, due January 15, 2009 1,250,000 1,102,250
8.00%, due February 1, 2009 161,267 162,577
7.50%, due September 1, 2011 201,176 202,558
8.50%, due July 1, 2013 39,231 40,236
9.50%, due June 25, 2018 110,271 114,435
9.25%, due October 1, 2020 76,923 80,744
6.50%, due March 1, 2029 1,216,116 1,146,566
7.50%, due September 1, 2029 2,466,267 2,440,050
17,272,434 16,495,523
TOTAL U.S. GOVERNMENTAL AGENCY, U.S. GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES 39,752,151 39,874,431
(Cost $41,313,055)
TOTAL INVESTMENTS - 101.98% 109,866,476
(Cost $115,118,185)
Other assets less liabilities - (1.98%) (2,129,102)
TOTAL NET ASSETS - 100.00% $107,737,374
The identified cost of investments owned at
December 31, 1999, was the same for financial
statement and federal income tax purposes.
Net unrealized depreciation for federal
income tax purposes was $5,251,709, which is
comprised of unrealized appreciation of $206,166
and unrealized depreciation of $5,457,875.
*Mortgage-backed securities
</TABLE>
See accompanying Notes to Financial Statements.
Schedule of Investments
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
BABSON BOND TRUST - PORTFOLIO S
PRINCIPAL
DESCRIPTION AMOUNT MARKET VALUE
</CAPTION>
<S> <C> <C>
CORPORATE BONDS - 43.54%
BANKS AND FINANCE - 9.93%
Associates Corporation North America, 5.80%, due April 20, 2004 $ 750,000 $ 710,618
Chrysler Financial Corp., 6.375%, due January 28, 2000 600,000 600,120
GMAC, 6.85%, due June 17, 2004 700,000 689,878
Hellenic Republic, 6.95%, due March 4, 2008 375,000 361,095
Southern Investments UK PLC, 6.375%, due November 15, 2001 300,000 293,793
SunTrust Banks, Inc., 6.00%, due February 15, 2026 700,000 646,275
3,425,000 3,301,779
COMMUNICATIONS - 5.42%
A T & T Capital Corp., 6.875%, due January 16, 2001 350,000 349,934
BellSouth Savings & Employee Stock Ownership Trust,
9.19%, due July 1, 2003 556,204 581,327
Time Warner Entertainment Company LP, 8.375%, due March 15, 2023 300,000 311,919
WorldCom, Inc., 7.75%, due April 1, 2007 550,000 560,885
1,756,204 1,804,065
DIVERSIFIED - 2.29%
International Business Machines Corp., 6.22%, due August 1, 2027 400,000 385,032
Lucent Technologies, Inc., 6.90%, due July 15, 2001 375,000 375,735
775,000 760,767
INDUSTRIALS - 14.83%
Airgas, Inc., 7.14%, due March 8, 2004 550,000 542,899
Comdisco, Inc., 6.375%, due November 30, 2001 1,000,000 980,630
Ford Motor Credit Company, 7.375%, due October 28, 2009 1,000,000 987,250
Georgia Pacific Corp., 9.125%, due July 1, 2022 375,000 376,328
Lockheed Martin, 7.95%, due December 1, 2005 175,000 173,031
Oslo Seismic Services, Inc., 8.28%, due June 1, 2011 473,027 467,691
Petroleum Geo-Services A/S, 7.50%, due March 31, 2007 500,000 488,805
Philip Morris Companies, Inc., 7.20%, due February 1, 2007 200,000 187,254
Philip Morris Companies, Inc., 6.15%, due March 15, 2000 250,000 249,603
Service Corporation International,
6.375% notes, due October 1, 2000 500,000 477,195
5,023,027 4,930,686
TRANSPORTATION - 3.93%
Burlington Northern Santa Fe Corp., 6.05%, due March 15, 2001 400,000 395,016
JB Hunt Transport Services, Inc., 6.25%, due November 17, 2000 350,000 349,318
United Airlines Pass-Thru Trusts, 7.27%, due January 30, 2013 399,886 358,018
Wisconsin Central Transportation Corp., 6.625%, due April 15, 2008 225,000 205,999
1,374,886 1,308,351
U.S. DOLLAR DENOMINATED CANADIAN SECURITIES - 6.04%
Canadian National Railway Company, 7.00%, due March 15, 2004 500,000 489,860
Ontario Province of Canada, 5.50%, due October 1, 2008 1,250,000 1,107,213
Quebec Province of Canada, 7.50%, due September 15, 2029 425,000 411,982
2,175,000 2,009,055
UTILITIES - 1.10%
Consolidated Edison Company NY, Inc., 6.15%, due July 1, 2008 400,000 365,720
TOTAL CORPORATE BONDS 14,929,117 14,480,423
(Cost $15,593,187)
ASSET-BACKED BONDS - 6.97%
California Infrastructure & Economic Development Bank
Special Purpose Trust
6.14%, due March 25, 2002 99,189 99,474
6.22%, due March 25, 2004 300,000 296,436
6.42%, due September 25, 2008 150,000 145,188
Comed Transitional Funding Trust, 5.63%, due June 25, 2009 1,100,000 999,152
Green Tree Securitized Net Interest Margin Trust,
6.90%, due February 15, 2004 53,066 52,702
MBNA Master Credit Card Trust II, 5.90%, due August 15, 2011 800,000 724,704
TOTAL ASSET-BACKED BONDS 2,502,255 2,317,656
(Cost $1,906,578)
COMMERCIAL MORTGAGE-BACKED BONDS - 5.00%
DLJ Commercial Mortgage Corp., 6.11%, due December 10, 2007 726,181 686,771
JP Morgan Commercial Mortgage Financial Corp.,
6.507%, due October 15, 2035 250,000 231,510
Nomura Asset Securities Corporation, 6.59%, due March 17, 2028 800,000 744,248
TOTAL COMMERICAL MORTGAGE-BACKED BONDS 1,776,181 1,662,529
(Cost $1,790,146)
U.S. GOVERNMENTAL AGENCY, U.S. GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES - 44.24%
U.S. GOVERNMENTAL AGENCY - 6.63%
*Government National Mortgage Association
8.00%, due October 15, 2007 15,954 16,123
8.00%, due November 15, 2009 470,927 481,372
7.50%, due October 15, 2011 266,902 269,152
7.50%, due November 15, 2011 323,807 326,537
9.50%, due September 15, 2019 13,412 14,292
8.00%, due December 15, 2022 179,394 181,299
7.00%, due May 15, 2024 566,814 547,684
8.00%, due November 15, 2026 342,385 346,021
Small Business Administration guaranteed
development participation certificates
9.80%, due July 1, 2008 21,800 22,466
2,201,395 2,204,946
U.S. GOVERNMENT SECURITIES - 7.51%
U.S. Treasury Bonds
11.125%, due August 15, 2003 700,000 802,375
U.S. Treasury Notes
7.25%, due August 15, 2004 250,000 257,813
5.625%, due February 15, 2006 250,000 239,180
6.50%, due October 15, 2006 1,200,000 1,196,808
2,400,000 2,496,176
*GOVERNMENT SPONSORED ENTERPRISES - 30.10%
Federal Home Loan Mortgage Corporation
8.25%, due July 1, 2008 17,318 17,615
8.00%, due January 1, 2012 400,916 409,183
9.00%, due June 1, 2016 73,271 76,774
8.00%, due May 1, 2017 40,429 41,237
9.00%, due May 15, 2021 87,601 90,174
6.00%, due November 1, 2028 1,902,992 1,744,206
Federal National Mortgage Association
5.625%, due March 15, 2001 4,425,000 4,384,511
7.00%, due December 1, 2007 61,437 59,421
5.25%, due January 15, 2009 1,450,000 1,278,610
8.25%, due January 1, 2009 13,228 13,451
7.50%, due September 1, 2011 201,176 202,558
9.25%, due October 1, 2020 40,486 42,497
7.50%, due September 1, 2020 739,880 732,015
6.50%, due March 1, 2029 972,892 917,253
10,426,626 10,009,505
TOTAL U.S. GOVERNMENTAL AGENCY, U.S. GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES 15,028,021 14,710,627
(Cost $15,159,433)
TOTAL INVESTMENTS - 99.75% 33,171,235
(Cost $34,449,344)
Other assets less liabilities - 0.25% 83,829
TOTAL NET ASSETS - 100.00% $ 33,255,064
The identified cost of investments owned at
December 31, 1999, was the same for financial
statement and federal income tax purposes.
Net unrealized depreciation for federal
income tax purposes was $1,278,109, which is
comprised of unrealized appreciation of $34,946
and unrealized depreciation of $1,313,055.
</TABLE>
*Mortgage-backed securities
See accompanying Notes to Financial Statements.
Babson Money Market Fund
There was a tremendous divide in the market
for the last six months of 1999 due to Y2K
concerns. Money market issuers, seeking to
ensure funding into the year 2000, boosted
yields on securities that mature in the first
quarter of 2000 to entice money market
investors. At the same time that this helped
ensure adequate funding for the issuers,
money market investors had an opportunity to
receive additional yield by extending from
December 1999 maturities to January and
February of 2000. Although this happens to a
certain extent each year-end, this year it
started as early as July.
Because many dealers were trying to get their
inventory off the books for year end, January
and February commercial paper was trading at
much higher yields than later paper - to the
extent of .50 to .75%. We took advantage of
this wide commercial paper yield differential
(what we call the "Y2K cliff") for the Prime
Portfolio, which boosted our yields during
this report period. Of course, we had to keep
some December paper for liquidity purposes.
We did not see the "Y2K cliff" yield
differential to the same extent in the
Federal Portfolio. First, because there is
not as much credit risk in Federal Treasury
and Agency paper as commercial paper, and
secondly, agencies did a better job managing
their issuance. Still, there was a benefit to
holding January and February paper, and we
took advantage when we could, without
compromising liquidity.
The U.S. economy continues to grow much
faster than expected, and well above
potential. In addition, rising wages have
remained an inflationary threat, as have oil
prices, which doubled over the last twelve
months. These developments have pushed
interest rates 85-180 basis points higher
along the yield curve since the beginning of
the year. The three-month Treasury bill rose
from 4.45% to 5.30% over the course of 1999.
Given the economic fundamentals, the Federal
Reserve increased the Federal Funds rate
(5.50% at year end) by 25 basis points at
each of the June, August and November
meetings in an effort to offset potential
inflationary pressures. Despite these strong
economic fundamentals, inflation remains well
behaved. In fact the Consumer Price Index is
only running around 2%.
Looking toward the year 2000, there is
concern among Fed members regarding tight
employment, strong economic activity and
rising commodity prices. We anticipate a
heightened level of vigilance toward
inflationary pressures. Additional action by
the Fed is possible as we turn into the new
year, and consequently, short-term interest
rates are likely to rise at least through the
second quarter.
In money market investing, it is important
for investors to 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 5.03% and the
Federal Portfolio was 4.58%, as of December
31, 1999.
An investment in this Fund is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Although the Fund seeks to preserve the value
of your investment at $1.00 per share, it is
possible to lose money by investing in the
Fund.
Schedule of Investments
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
BABSON MONEY MARKET FUND - PRIME
PRINCIPAL
DESCRIPTION AMOUNT MARKET VALUE
</CAPTION>
<S> <C> <C>
SHORT-TERM CORPORATE NOTES - 93.44%
AIG Funding, Incorporated, 5.68%, due May 5, 2000 $ 1,500,000 $ 1,470,417
AT & T Corporation, 5.90%, due January 25, 2000 2,000,000 1,992,133
Associates Corporation, 5.90%, due January 27, 2000 2,000,000 1,991,478
Bell Atlantic Financial, 5.88%, due January 24, 2000 1,900,000 1,892,862
Caterpillar Financial Services, 5.72%, due January 28, 2000 2,000,000 1,991,420
Coca-Cola Company, 5.75%, due March 7, 2000 2,000,000 1,978,917
duPont (E.I.) deNemours & Company, 5.85%, due January 18, 2000 1,000,000 997,238
duPont (E.I.) deNemours & Company, 5.45%, due March 2, 2000 1,000,000 990,765
Emerson Electric Company, 5.95%, due January 31, 2000 1,000,000 995,042
Ford Motor Credit Company, 6.50%, due January 4, 2000 1,500,000 1,499,188
General Mills, Incorporated, 5.80%, due February 23, 2000 1,900,000 1,883,776
General Motors Acceptance Corporation, 5.70%, due March 6, 2000 2,000,000 1,979,417
Grainger (W.W.), Incorporated, 5.82%, due February 17, 2000 1,900,000 1,885,563
Heinz (H.J.) Company, 5.85%, due January 31, 2000 2,000,000 1,990,250
IBM Credit Corporation, 5.52%, due February 4, 2000 1,800,000 1,790,616
Lucent Technologies, Incorporated, 5.77%, due February 2, 2000 1,900,000 1,890,255
McGraw-Hill Companies, Incorporated, 6.20%, due January 21, 2000 2,000,000 1,993,111
Merck & Company, Incorporated, 5.30%, due February 4, 2000 1,800,000 1,790,990
Motorola, Incorporated, 6.55%, due January 28, 2000 1,100,000 1,094,596
Nicor, Incorporated, 5.89%, due January 18, 2000 2,000,000 1,994,437
Proctor & Gamble Company, 5.85%, due February 4, 2000 2,000,000 1,988,950
Sonoco Products Company, 5.75%, due March 14, 2000 1,000,000 988,340
TOTAL SHORT-TERM CORPORATE NOTES 37,300,000 37,069,761
(Cost $37,069,761)
GOVERNMENT SPONSORED ENTERPRISES - 4.98%
Federal Home Loan Mortgage Corporation Discount Notes,
5.20%, due March 31, 2000 1,000,000 987,000
Federal Home Loan Mortgage Corporation Discount Notes,
5.22%, due March 31, 2000 1,000,000 986,950
TOTAL GOVERNMENT SPONSORED ENTERPRISES 2,000,000 1,973,950
(Cost $1,973,950)
REPURCHASE AGREEMENT - 1.80%
Morgan Guaranty Trust Company, 2.25%, due January 3, 2000
(Collateralized by U.S. Treasury Notes,
6.75%, due August 15, 2026 with a value of $730,317) 716,000 716,000
(Cost $716,000)
TOTAL INVESTMENTS - 100.22% 39,759,711
(Cost $39,759,711)
Other assets less liabilities - (0.22%) (86,889)
TOTAL NET ASSETS - 100.00% $ 39,672,822
The identified cost of investments owned at
December 31, 1999, was the same for financial
statement and federal income tax purposes.
</TABLE>
See accompanying Notes to Financial Statements.
Schedule of Investments
December 31, 1999 (unaudited)
BABSON MONEY MARKET FUND - FEDERAL
<TABLE>
<CAPTION>
PRINCIPAL
DESCRIPTION AMOUNT MARKET VALUE
</CAPTION>
<S> <C> <C>
GOVERNMENT SPONSORED ENTERPRISES - 82.72%
Federal Farm Credit Banks Discount Notes,
5.50%, due March 27, 2000 $ 1,000,000 $ 986,861
Federal Home Loan Mortgage Corporation Discount Notes
5.75%, due January 24, 2000 1,500,000 1,494,490
5.51%, due March 8, 2000 500,000 494,873
5.49%, due February 2, 2000 1,000,000 995,120
5.73%, due March 30, 2000 1,000,000 985,834
Federal National Mortgage Association Discount Notes
5.53%, due February 2, 2000 2,250,000 2,238,940
5.57%, due March 1, 2000 750,000 743,037
TOTAL GOVERNMENT SPONSORED ENTERPRISES 8,000,000 7,939,155
(Cost $7,939,155)
REPURCHASE AGREEMENT - 17.75%
Morgan Guaranty Trust Company, 2.25%, due January 3, 2000
(Collateralized by U.S. Treasury Notes,
6.75%, due August 15, 2026 with a value of $1,738,076) 1,704,000 1,704,000
(Cost $1,704,000)
TOTAL INVESTMENTS - 100.46% 9,643,155
(Cost $9,643,155)
Other assets less liabilities - (0.46%) (44,324)
TOTAL NET ASSETS - 100.00% $ 9,598,831
The identified cost of investments owned at
December 31, 1999, was the same for financial
statement and federal income tax purposes.
</TABLE>
See accompanying Notes to Financial Statements.
Babson Tax-Free Income Fund
This was the worst year for fixed income
portfolios since 1994. Municipal rates rose a
full 1%, and when interest rates rise, bond
prices fall. The last six months of 1999
remained consistent with that story, with the
Tax-Free Short Portfolio's total investment
return
(price change and reinvested distributions)
of 0.86% and Long Portfolio returning -1.63%,
compared to the Lipper Short-Intermediate
Municipal Bond index return of 0.69% and the
Lipper General Municipal Bond index return of
- -5.75%. Portfolio MM's price remained at
$1.00 and provided a return of 1.42% for the
same period. Some income from the Fund may be
subject to the federal Alternative Minimum
Tax as well as state and local taxes. The
average maturities of Portfolio L, S and MM
were 13.7 years, 4.3 years and 35 days,
respectively.
Average annual compounded total returns for
one, five and ten year periods as of December
31, 1999, were -3.10%, 5.95% and 6.02% for
Portfolio L, 0.49%, 4.46% and 4.93% for
Portfolio S and 2.69%, 3.01% and 3.16% for
Portfolio MM, respectively. Performance data
contained in this report is for past periods
only. Past performance is not predictive of
future performance. Investment return and
share value will fluctuate, and redemption
value may be more or less than original cost.
In general, market returns for municipals
were negative for the one year period ending
December 31. Results, however, varied widely
across the yield curve, with the shortest
maturities posting the best performance and
maturities beyond seven years dipping into
sharply negative territory. One-year
municipals returned three percent, while
returns for maturities beyond twenty years
were down almost seven percent.
The Federal Reserve's interest rate hikes,
coupled with a decline in demand by mutual
funds, put upward pressure on municipal
rates. Tax loss selling (selling securities
that have depreciated in value to offset
gains) which began late in the third quarter,
continued unabated until the very end of the
year.
While 1999 was very disappointing in many
respects, municipal credit quality stood out.
As a result of the healthy economy, many
state and local governments report they are
in the best fiscal shape ever. Due to the
robust economy, and resultant increases in
income, property, business and sales tax
revenues, general obligation and tax-backed
bonds have been the best performers.
Restructuring in the health care and utility
sectors caused these sectors to weaken. We
have pared down our exposure in the hospital
sector due to continuing pressures and the
potential for further credit deterioration.
Over the last several years we've had a bias
towards purchasing high quality issues
because quality spreads have been narrow.
When quality spreads are narrow, investors
are not fully compensated with additional
yield for assuming more credit risk.
Portfolio L and S both have an average
quality rating of AA+, with 97% of Portfolio
L and 93% of Portfolio S in A, AA, or AAA
rated bonds.
As the new year begins, the market is
expecting the Federal Reserve Board to raise
interest rates in an effort to dampen
economic growth and combat inflation. Actions
by the Fed will impact the direction of
municipal rates as well. Additionally, being
an election year, there will likely be
discussions regarding the reduction of income
taxes. We will continue to look for
opportunities to add value to the portfolios
through the purchase of undervalued issues,
sectors and maturities. We expect our general
obligation and tax-backed bonds (which make
up 44% of Portfolio S, and 38% of Portfolio
L) to continue to be good performers.
We find that many of our investors are in
high tax brackets, which makes investing in a
tax-exempt vehicle that much more important.
Our Portfolios are managed for those
investors to be conservative, provide a good
total return, and to minimize tax
consequences. Our small size is a benefit,
because we can take advantage of smaller
pieces and smaller issues, and we can move in
and out of the market easily.
Quality Ratings
PORTFOLIO PORTFOLIO PORTFOLIO
L S MM
Aaa 56% 60% 89%
Aa 31 24 11
A 10 9 0
Lower 3 7 0
Total 100% 100% 100%
Source: Moody's
Schedule of Investments
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
BABSON TAX-FREE INCOME FUND - PORTFOLIO L
PRINCIPAL
DESCRIPTION AMOUNT MARKET VALUE
</CAPTION>
<S> <C> <C>
ALABAMA
Jefferson County Sewer, 5.00%, due February 1, 2033 $ 1,000,000 $ 822,500
ARIZONA
Maricopa County Unified School District #48,
9.25%, due July 1, 2007 500,000 631,875
ARKANSAS
Arkansas, Series B, 0.00%, due June 1, 2010 1,000,000 571,250
CALIFORNIA
California, 5.50%, due October 1, 2011 1,000,000 1,020,000
Santa Rosa Water, Series B, 6.00%, due September 1, 2015 500,000 521,875
University of California, Series D, 5.75%, due July 1, 2013 1,000,000 1,017,500
COLORADO
Adams County School District #12, 6.20%, due December 15, 2010 500,000 517,500
DISTRICT OF COLUMBIA
District of Columbia, Series A, 5.75%, due June 1, 2003 245,000 252,350
District of Columbia, Series A, 5.75%, due June 1, 2003 255,000 262,013
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 1,032,540
Miami-Dade County, Series A, 0.00%, due October 1, 2015 500,000 196,250
Palm Beach County Airport, 7.75%, due October 1, 2010 500,000 535,000
Tampa (Catholic Health Care East),
4.875%, due November 15, 2023 500,000 417,500
ILLINOIS
Chicago, Series B, 5.125%, due January 1, 2022 1,000,000 872,500
Lake County School District, 5.00%, due December 15, 2014 1,000,000 918,750
Metro Pier & Expo Tax Authority, 5.375%, due December 15, 2017 1,000,000 931,250
INDIANA
Indiana Bond Bank Special Program, Series 94 A-1,
5.60%, due August 1, 2015 500,000 495,625
KANSAS
Johnson County Unified School District #229, Series A,
4.90%, due October 1, 2011 1,000,000 958,750
LOUISIANA
St. Tammany Parish Hospital Service District #2
(Slidell Memorial Hospital & Medical Center),
6.125%, due October 1, 2011 500,000 521,875
MASSACHUSETTS
Massachusetts Health & Education, Series D,
5.75%, due July 1, 2014 500,000 501,250
Massachusetts Housing Finance Agency Projects, Series A,
6.375%, due April 1, 2021 975,000 987,187
Massachusetts State Consolidated Loan,
5.25%, due August 1, 2018 1,000,000 921,250
NEVADA
Clark County School District, Series A, 6.75%, due March 1, 2007 500,000 514,375
NEW HAMPSHIRE
New Hampshire Higher Education & Health Facility
(Concord Hospital),
5.70%, due October 1, 2010 500,000 513,750
New Hampshire Higher Education & Health Facility
(Franklin Pierce Law Center), 5.50%, due July 1, 2018 500,000 442,500
NEW JERSEY
New Jersey Turnpike, 10.375%, due January 1, 2003 115,000 125,781
NEW YORK
Long Island Power, 3.60%, due May 1, 2033 800,000 800,000
New York City Municipal Water Financing Authority, Series A,
6.80%, due June 15, 2004 1,000,000 1,041,250
New York Dormitory (State University Education Facility),
Series B, 6.10%, due May 15, 2008 1,000,000 1,067,500
New York Environmental, Series B, 6.65%, due September 15, 2013 500,000 527,500
RHODE ISLAND
Rhode Island Depositors Economic Protection Corp., Series B,
5.80%, due August 1, 2009 500,000 521,875
Rhode Island Industrial Facility Corp.,
9.125%, due October 1, 2000 20,000 20,015
TENNESSEE
Metro Nashville Airport, 5.00%, due October 1, 2012 200,000 200,000
TEXAS
San Antonio Electric & Gas, 5.75%, due February 1, 2011 295,000 298,319
San Antonio Electric & Gas, 5.75%, due February 1, 2011 205,000 211,406
VIRGINIA
Fairfax County Industrial Development,
5.50%, due August 15, 2009 500,000 499,375
WASHINGTON
Tacoma Conservation System Project (Tacoma Public Utilities),
6.50%, due January 1, 2012 500,000 526,250
Seattle Water System, 5.75%, due July 1, 2023 1,000,000 955,000
WISCONSIN
Wisconsin Public Power, 5.90%, due July 1, 2011 500,000 518,125
TOTAL INVESTMENTS - 98.68% 23,884,611
(Cost $24,073,865)
Other assets less liabilities - 1.32% 319,037
TOTAL NET ASSETS - 100.00% $ 24,203,648
The identified cost of investments owned at
December 31, 1999, was the same for financial
statement and federal income tax purposes.
Net unrealized depreciation for federal
income tax purposes was $189,253, which is
comprised of unrealized appreciation of $452,982
and unrealized depreciation of $642,235.
</TABLE>
See accompanying Notes to Financial Statements.
Schedule of Investments
December 31, 1999 (unaudited)
BABSON TAX-FREE INCOME FUND - PORTFOLIO S
<TABLE>
<CAPTION>
PRINCIPAL
DESCRIPTION AMOUNT MARKET VALUE
</CAPTION>
<S> <C> <C>
ARIZONA
Chandler, 6.90%, due July 1, 2005 $ 1,000,000 $ 1,097,137
Maricopa County Unified School District #93,
6.40%, due July 1, 2005 500,000 532,500
COLORADO
Jefferson County School District #R-001, Series A,
6.00%, due December 15, 2006 500,000 529,375
DISTRICT OF COLUMBIA
District of Columbia, Series A, 5.75%, due June 1, 2003 245,000 252,350
District of Columbia, Series A, 5.75%, due June 1, 2003 255,000 262,013
GUAM
Guam Government Limited Obligation, Series A,
5.75%, due May 1, 2001 500,000 508,750
HAWAII
Hawaii State, 5.50%, due September 1, 2006 500,000 513,750
ILLINOIS
Chicago Public Building, 5.375%, due February 1, 2005 250,000 255,313
Du Page & Will Counties Community School District #204,
7.25%, due December 30, 2004 500,000 551,250
INDIANA
Kokomo-Center School Building Corp., 6.75%, due July 15, 2007 250,000 275,625
MASSACHUSETTS
Massachusetts Health & Education (Milford-Whitinsville Regional),
Series C, 4.75%, due July 15, 2003 500,000 483,125
Massachusetts Housing Finance Agency Projects, Series A,
5.35%, due April 1, 2003 500,000 508,750
MICHIGAN
Utica Community Schools, 5.375%, due May 1, 2005 500,000 510,625
MISSOURI
Sikeston Electric, 5.80%, due June 1, 2002 500,000 515,000
NEVADA
Washoe County Hospital, Series A, 5.25%, due June 1, 2001 500,000 505,625
Washoe County (Reno Sparks Bowling Facility), Series A,
5.40%, due July 1, 2006 500,000 508,750
NEW YORK
Battery Park City, 6.00%, due November 1, 2003 500,000 518,750
Long Island Power, 3.60%, due May 1, 2033 400,000 400,000
Metropolitan Transportation, 5.00%, due April 1, 2008 500,000 494,375
New York Medical Care Finance Agency, Series F,
6.00%, due August 15, 2002 500,000 515,000
New York Medical Care Finance Agency, Series A,
5.40%, due August 15, 2004 235,000 237,693
New York State Dormitory, 5.35%, due November 1, 2005 500,000 511,250
New York State Thruway Authority Highway,
5.50%, due April 1, 2005 500,000 514,375
NORTH CAROLINA
North Carolina Eastern Municipal Power Agency, Series 93 B,
5.375%, due January 1, 2001 500,000 501,115
OHIO
Columbus City School District, 6.65%, due December 1, 2012 500,000 536,250
Ohio Major Infrastructure, 5.00%, due December 15, 2007 500,000 497,500
Ohio State Building Authority, 4.00%, due October 1, 2004 250,000 241,562
PENNSYLVANIA
North Hampton County, 4.20%, due August 15, 2008 500,000 464,375
TENNESSEE
McKinney Independent School, 5.25%, due February 15, 2006 500,000 508,125
Tennessee Housing Development Agency, Series A,
4.95%, due July 1, 2000 490,000 491,377
TEXAS
Houston, Series C, 5.90%, due March 1, 2003 140,000 143,675
Houston, Series C, 5.90%, due March 1, 2003 360,000 369,000
WASHINGTON
Washington Public Power Supply System Nuclear Project #2,
Series B, 5.10%, due July 1, 2004 500,000 504,375
Washington Public Power Supply System Nuclear Project #2,
Series B, 7.50%, due July 1, 2004 300,000 310,767
Washington, Series B, 5.00%, due January 1, 2008 500,000 495,625
WISCONSIN
Milwaukee County, Series A, 5.35%, due September 1, 2001 500,000 506,875
Milwaukee Metropolitan Sewer District, Series A,
7.00%, due September 1, 2000 500,000 509,280
TOTAL INVESTMENTS - 98.65% 17,081,282
(Cost $17,178,732)
Other assets less liabilities - 1.35% 234,052
TOTAL NET ASSETS - 100.00% $ 17,315,334
The identified cost of investments owned at
December 31, 1999, was the same for financial
statement and federal income tax purposes.
Net unrealized depreciation for federal
income tax purposes was $97,450, which is
comprised of unrealized appreciation of $136,701
and unrealized depreciation of $234,151.
</TABLE>
See accompanying Notes to Financial Statements.
Schedule of Investments
December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
BABSON TAX-FREE INCOME FUND - PORTFOLIO MM
PRINCIPAL
DESCRIPTION AMOUNT MARKET VALUE
</CAPTION>
<S> <C> <C>
ARIZONA
Maricopa County, 4.90%, due May 1, 2029* $ 200,000 $ 200,000
Salt River, Series 97 A, 3.40%, due February 11, 2000 250,000 250,000
CONNECTICUT
Connecticut, Series 97 B, 5.10%, due May 15, 2014* 200,000 200,000
Connecticut, 3.38%, due July 1, 2000 200,000 200,000
FLORIDA
Dade County (Florida Power & Light),
4.40%, due June 1, 2021* 200,000 200,000
GEORGIA
Burke County Development Authority, 4.90%, due July 1, 2024* 100,000 100,000
De Kalb Private Hospital Authority
(Egleston Childrens Hospital), Series A,
5.20%, due March 1, 2024* 300,000 300,000
ILLINOIS
Illinois Health Facilties (Rush-Presbyterian, St. Lukes),
Series B, 5.60%, due November 15, 2023* 100,000 100,000
Illinois Health Facilties (Rush-Presbyterian, St. Lukes),
5.35%, due August 15, 2022* 200,000 200,000
INDIANA
Indiana University, 3.75%, due August 1, 2000 100,000 100,337
St. Joseph County Education Facilities
(University of Notre Dame), 5.20%, due March 1, 2033* 300,000 300,000
LOUISIANA
St. Charles Parish, 4.85%, due October 1, 2022* 100,000 100,000
MICHIGAN
Michigan Municipal Bond Authority, 4.25%, due August 5, 2000 125,000 125,507
Michigan State Building Authority, 3.90%, due January 12, 2000 150,000 150,000
MINNESOTA
Rochester Health Facility (Mayo Foundation), Series 92,
3.75%, due March 8, 2000 300,000 300,000
MISSOURI
Missouri Health & Education Facilities Authority,
3.65%, due March 1, 2000 200,000 200,000
NEBRASKA
Omaha Public Power District, 4.30%, due February 1, 2000 100,000 100,082
NEVADA
Clark County, 5.15%, due July 1, 2025* 300,000 300,000
NEW MEXICO
Albuquerque Airport, Series 95, 5.15%, due July 1, 2014* 100,000 100,000
Hurley (British Petroleum), 4.85%, due December 1, 2015* 100,000 100,000
NEW JERSEY
Bergen County, 6.35%, due January 15, 2000 180,000 180,208
NEW YORK
Long Island Power, 4.75%, due May 1, 2033* 150,000 150,000
NORTH CAROLINA
Charlotte Airport, Series 93 A, 5.15%, due July 1, 2016* 300,000 300,000
Raleigh Durham Airport Authority, 4.95%, due November 1, 2015* 200,000 200,000
Winston-Salem Water & Sewer System, 5.20%, due June 1, 2014* 200,000 200,000
RHODE ISLAND
Rhode Island Correction Facility, 5.60%, due June 1, 2018 300,000 300,000
TEXAS
Dallas Rapid Transportation Sales, 3.85%, due February 11, 2000 250,000 250,000
Harris County, 3.75%, due January 24, 2000 345,000 345,000
Harris County, 3.70%, due March 9, 2000 100,000 100,000
Lone Star Airport Improvement Authority, Series B-4,
4.80%, due December 1, 2014* 100,000 100,000
San Antonio Water System, 3.65%, due March 10, 2000 300,000 300,000
Shelby County, 3.70%, due March 8, 2000 100,000 100,000
Texas State Tax & Revenue Anticipation Notes,
4.50%, due August 31, 2000 200,000 201,092
WASHINGTON
Seattle Municipal Light & Power, 5.55%, due November 1, 2018* 100,000 100,000
Washington, Series 96 B, 5.40%, due June 1, 2020* 200,000 200,000
Washington Public Power Supply System Nuclear Project #1,
Series 1A-1, 5.50%, due July 1, 2017* 100,000 100,000
WISCONSIN
Sheboygan (Wisconsin Power & Light Co),
5.00%, due August 1, 2014* 300,000 300,000
WYOMING
Lincoln County, Series D, 4.85%, due August 1, 2015* 200,000 200,000
Sublette County, 4.85%, due November 1, 2014 100,000 100,000
TOTAL INVESTMENTS - 98.73% 7,352,226
(Cost $7,352,226)
Other assets less liabilities - 1.27% 94,870
TOTAL NET ASSETS - 100.00% $ 7,447,096
The identified cost of investments owned at
December 31, 1999, was the same for financial
statement and federal income tax purposes.
*Variable rate security
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Assets and Liabilities
December 31, 1999
(in thousands except per share data)
<TABLE>
<CAPTION>
BABSON BABSON BABSON
ENTERPRISE FUND ENTERPRISE FUND II GROWTH FUND
</CAPTION>
<S> <C> <C> <C>
ASSETS:
Investments at cost $ 121,516 $ 52,643 $ 291,272
Investments at value $ 116,116 $ 63,816 $ 509,882
Cash denominated in foreign currencies (cost $2) - - -
Cash 14 - 1,068
Receivables:
Investments sold - - 2,554
Dividends 171 87 261
Interest - - 3
Fund shares sold 2 - 3
Foreign tax - - -
Other - - -
Prepaid registration fees - - -
Total assets 116,303 63,903 513,771
LIABILITIES AND NET ASSETS:
Cash overdraft - 524 -
Payables:
Management fees 110 65 320
Registration fees - - -
Dividends - - -
Investments purchased 146 - 13,101
Fund share redemptions - - -
Foreign tax withholding - - -
Other - - -
Total liabilities 256 589 13,421
NET ASSETS $ 116,047 $ 63,314 $ 500,350
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 115,758 $ 48,781 $ 243,987
Undistributed net investment income 199 42 (15)
Undistributed net realized gain (loss)
from investment transactions and
foreign currency transactions 5,490 3,317 37,767
Net unrealized appreciation (depreciation)
of investments and translation of assets
and liabilities in foreign currencies (5,400) 11,174 218,611
NET ASSETS APPLICABLE TO
OUTSTANDING SHARES $ 116,047 $ 63,314 $ 500,350
Capital shares, $1.00 par value
Authorized 20,000 10,000 100,000
Outstanding 9,579 2,684 24,158
NET ASSET VALUE PER SHARE $ 12.11 $ 23.59 $ 20.71
</TABLE>
See accompanying Notes to Financial Statements
Statements of Assets and Liabilities
December 31, 1999
(in thousands except per share data)
SHADOW BABSON
STOCK FUND VALUE FUND
ASSETS:
Investments at cost $ 34,736 $ 638,717
Investments at value $ 40,756 $ 817,568
Cash denominated in foreign currencies (cost $2) - -
Cash 106 -
Receivables:
Investments sold - 27,243
Dividends 60 852
Interest - 2
Fund shares sold 5 216
Foreign tax - -
Other - -
Prepaid registration fees - -
Total assets 40,927 845,881
LIABILITIES AND NET ASSETS:
Cash overdraft - 21,760
Payables:
Management fees 34 703
Registration fees - -
Dividends - -
Investments purchased - -
Fund share redemptions - -
Foreign tax withholding - -
Other - -
Total liabilities 34 22,463
NET ASSETS $ 40,893 $ 823,418
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 32,662 $ 530,582
Undistributed net investment income 149 6,709
Undistributed net realized gain (loss)
from investment transactions and
foreign currency transactions 2,061 107,276
Net unrealized appreciation (depreciation)
of investments and translation of assets
and liabilities in foreign currencies 6,021 178,851
NET ASSETS APPLICABLE TO
OUTSTANDING SHARES $ 40,893 $ 823,418
Capital shares, $1.00 par value
Authorized 10,000 50,000
Outstanding 3,568 18,610
NET ASSET VALUE PER SHARE $ 11.46 $ 44.25
See accompanying Notes to Financial Statements.
Statements of Assets and Liabilities
December 31, 1999
(in thousands except per share data)
<TABLE>
<CAPTION>
BABSON- BABSON BABSON
STEWART IVORY BOND TRUST BOND TRUST
INTERNATIONAL FUND PORTFOLIO L PORTFOLIO S
</CAPTION>
<S> <C> <C> <C>
ASSETS:
Investments at cost $ 62,904 $ 115,118 $ 34,449
Investments at value $ 96,708 $ 109,866 $ 33,171
Cash denominated in foreign currencies (cost $2) 3 - -
Cash 1 - -
Receivables:
Investments sold - - -
Dividends 61 - -
Interest - 1,796 537
Fund shares sold 18 - 7
Foreign tax 63 - -
Other - 153 56
Prepaid registration fees - 3 1
Total assets 96,854 111,818 33,772
LIABILITIES AND NET ASSETS:
Cash overdraft - 3,415 323
Payables:
Management fees 80 89 19
Registration fees - - -
Dividends - 577 175
Investments purchased - - -
Fund share redemptions - - -
Foreign tax withholding 7 - -
Other - - -
Total liabilities 87 4,081 517
NET ASSETS $ 96,767 $ 107,737 $ 33,255
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 49,268 $ 116,538 $ 36,729
Undistributed net investment income (674) - -
Undistributed net realized gain (loss)
from investment transactions and
foreign currency transactions 14,372 (3,549) (2,196)
Net unrealized appreciation (depreciation)
of investments and translation of assets
and liabilities in foreign currencies 33,801 (5,25) (1,278)
NET ASSETS APPLICABLE TO
OUTSTANDING SHARES $ 96,767 $ 107,737 $ 33,255
Capital shares, $1.00 par value
Authorized 10,000 Unlimited Unlimited
Outstanding 3,913 72,552 3,549
NET ASSET VALUE PER SHARE $ 24.73 $ 1.48 $ 9.37
</TABLE>
See accompanying Notes to Financial Statements
Statements of Assets and Liabilities
December 31, 1999
(in thousands except per share data)
<TABLE>
<CAPTION>
BABSON BABSON
MONEY MARKET FUND MONEY MARKET FUND
PRIME PORTFOLIO FEDERAL PORTFOLIO
</CAPTION>
<S> <C> <C>
ASSETS:
Investments at cost $ 39,760 $ 9,643
Investments at value $ 39,760 $ 9,643
Cash denominated in foreign currencies (cost $2) - -
Cash 88 -
Receivables:
Investments sold - -
Dividends - -
Interest - -
Fund shares sold - -
Foreign tax - -
Other - -
Prepaid registration fees 24 12
Total assets 39,872 9,655
LIABILITIES AND NET ASSETS:
Cash overdraft - 11
Payables:
Management fees 30 7
Registration fees - -
Dividends 169 38
Investments purchased - -
Fund share redemptions - -
Foreign tax withholding - -
Other - -
Total liabilities 199 56
NET ASSETS $ 39,673 $ 9,599
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 39,680 $ 9,599
Undistributed net investment income - -
Undistributed net realized gain (loss)
from investment transactions and
foreign currency transactions (7) -
Net unrealized appreciation (depreciation)
of investments and translation of assets
and liabilities in foreign currencies - -
NET ASSETS APPLICABLE TO
OUTSTANDING SHARES $ 39,673 $ 9,599
Capital shares, $1.00 par value
Authorized 1,000,000 1,000,000
Outstanding 39,677 9,598
NET ASSET VALUE PER SHARE $ 1.00 $ 1.00
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Assets and Liabilities
December 31, 1999
(in thousands except per share data)
<TABLE>
<CAPTION>
BABSON BABSON BABSON
TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
</CAPTION>
<S> <C> <C> <C>
ASSETS:
Investments at cost $ 24,074 $ 17,179 $ 7,352
Investments at value $ 23,885 $ 17,081 $ 7,352
Cash denominated in foreign currencies (cost $2) - - -
Cash 27 27 64
Receivables:
Investments sold - - -
Dividends - - -
Interest 376 278 55
Fund shares sold 28 - -
Foreign tax - - -
Other - - -
Prepaid registration fees - - -
Total assets 24,316 17,386 7,471
LIABILITIES AND NET ASSETS:
Cash overdraft - - -
Payables:
Management fees 20 14 4
Registration fees - 1 -
Dividends 92 56 20
Investments purchased - - -
Fund share redemptions - - -
Foreign tax withholding - - -
Other - - -
Total liabilities 112 71 24
NET ASSETS $ 24,204 $ 17,315 $ 7,447
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 24,427 $ 17,463 $ 7,450
Undistributed net investment income - 1 -
Undistributed net realized gain (loss)
from investment transactions and
foreign currency transactions (34) (52) (3)
Net unrealized appreciation (depreciation)
of investments and translation of assets
and liabilities in foreign currencies (189) (97) -
NET ASSETS APPLICABLE TO
OUTSTANDING SHARES $ 24,204 $ 17,315 $ 7,447
Capital shares, $1.00 par value
Authorized 50,000 50,000 100,000
Outstanding 2,852 1,663 7,444
NET ASSET VALUE PER SHARE $ 8.49 $ 10.41 $ 1.00
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Operations
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
(In Thousands)
<TABLE>
<CAPTION>
BABSON BABSON BABSON
ENTERPRISE FUND ENTERPRISE FUND II GROWTH FUND
</CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 750 $ 457 $ 1,462
Interest 52 23 395
Foreign tax withheld (3) - -
799 480 1,857
EXPENSES:
Management fees 741 422 1,848
Registration fees 13 13 24
Custody and pricing service fees - - -
Total expenses before voluntary reduction
of management fees 754 435 1,872
Less: voluntary reduction of management fees - - -
Net expenses 754 435 1,872
Net investment income 45 45 (15)
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions 3,172 2,786 31,175
Foreign currency transactions - - -
Net unrealized appreciation (depreciation)
during the period on:
Investments (19,266) (4,543) 14,062
Translation of assets and liabilities
in foreign currencies - - -
Net gain (loss) on investments
and foreign currency (16,094) (1,757) 45,237
Net increase (decrease) in net assets
resulting from operations $ (16,04) $ (1,712) $ 45,222
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Operations
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
(In Thousands)
SHADOW BABSON
STOCK FUND VALUE FUND
INVESTMENT INCOME:
Dividends $ 340 $ 19,124
Interest 34 653
Foreign tax withheld - (163)
374 19,614
EXPENSES:
Management fees 177 5,001
Registration fees 65 31
Custody and pricing service fees - -
Total expenses before voluntary reduction
of management fees 242 5,032
Less: voluntary reduction of management fees - -
Net expenses 242 5,032
Net investment income 132 14,582
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions 2,009 76,022
Foreign currency transactions - -
Net unrealized appreciation (depreciation)
during the period on:
Investments (3,230) (212,792)
Translation of assets and liabilities
in foreign currencies - -
Net gain (loss) on investments
and foreign currency (1,221) (136,770)
Net increase (decrease) in net assets
resulting from operations $ (1,089) $ (122,188)
See accompanying Notes to Financial Statements.
Statements of Operations
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
(In Thousands)
<TABLE>
<CAPTION>
BABSON- BABSON BABSON
STEWART IVORY BOND TRUST BOND TRUST
INTERNATIONAL FUND PORTFOLIO L PORTFOLIO S
</CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 369 $ - $ -
Interest 35 4,044 1,192
Foreign tax withheld (48) - -
356 4,044 1,192
EXPENSES:
Management fees 412 551 170
Registration fees 14 14 5
Custody and pricing service fees 116 - -
Total expenses before voluntary reduction
of management fees 542 565 175
Less: voluntary reduction of management fees - - (54)
Net expenses 542 565 121
Net investment income (186) 3,479 1,071
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions 8,263 (244) (200)
Foreign currency transactions (20) - -
Net unrealized appreciation (depreciation)
during the period on:
Investments 14,450 (3,147) (638)
Translation of assets and liabilities
in foreign currencies 11 - -
Net gain (loss) on investments
and foreign currency 22,704 (3,391) (838)
Net increase (decrease) in net assets
resulting from operations $ 22,518 $ 88 $ 233
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Operations
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
(In Thousands)
<TABLE>
<CAPTION>
BABSON BABSON
MONEY MARKET FUND MONEY MARKET FUND
PRIME PORTFOLIO FEDERAL PORTFOLIO
</CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ - $ -
Interest 1,098 305
Foreign tax withheld - -
1,098 305
EXPENSES:
Management fees 173 50
Registration fees 5 1
Custody and pricing service fees - -
Total expenses before voluntary reduction
of management fees 178 51
Less: voluntary reduction of management fees - -
Net expenses 178 51
Net investment income 920 254
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions - -
Foreign currency transactions - -
Net unrealized appreciation (depreciation)
during the period on:
Investments - -
Translation of assets and liabilities
in foreign currencies - -
Net gain (loss) on investments
and foreign currency - -
Net increase (decrease) in net assets
resulting from operations $ 920 $ 254
See accompanying Notes to Financial Statements.
</TABLE>
Statements of Operations
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
(In Thousands)
<TABLE>
<CAPTION>
BABSON BABSON BABSON
TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
</CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ - $ - $ -
Interest 694 437 180
Foreign tax withheld - - -
694 437 180
EXPENSES:
Management fees 120 87 27
Registration fees 8 6 4
Custody and pricing service fees - - -
Total expenses before voluntary reduction
of management fees 128 93 31
Less: voluntary reduction of management fees - - -
Net expenses 128 93 31
Net investment income 566 344 149
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions 38 (83) (2)
Foreign currency transactions - - -
Net unrealized appreciation (depreciation)
during the period on:
Investments (1,042) (93) -
Translation of assets and liabilities
in foreign currencies - - -
Net gain (loss) on investments
and foreign currency (1,004) (176) (2)
Net increase (decrease) in net assets
resulting from operations $ (438) $ 168 $ 147
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON ENTERPRISE FUND
1999 1999(1) 1998(2)
</CAPTION>
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 45 $ 287 $ 602
Net realized gain from investment
and foreign currency transactions 3,172 11,805 28,111
Net unrealized appreciation (depreciation)
on investments and translation of assets and
liabilities in foreign currencies during
the period (19,266) (6,426) (51,434)
Net increase (decrease) in net assets
resulting from operations (16,049) 5,666 (22,721)
Net equalization included in the price
of shares issued and redeemed - - (78)
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (133) (531) (607)
Net realized gain from investment transactions (9,320) (26,217) (24,566)
Total distributions to shareholders (9,453) (26,748) (25,173)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 7,216 3,937 7,033
Reinvested distributions 8,858 25,039 23,501
16,074 28,976 30,534
Shares repurchased (29,904) (31,806) (19,465)
Net increase (decrease) from capital
share transactions (13,830) (2,830) 11,069
Net increase (decrease) in net assets (39,332) (23,912) (36,903)
NET ASSETS:
Beginning of period 155,379 179,291 216,194
End of period $ 116,047 $ 155,379 $ 179,291
Undistributed net investment
income at end of period $ 199,333 $ 287 $ 643
*Fund share transactions:
Shares sold 557 287 389
Reinvested distributions 763 1,817 1,279
1,320 2,104 1,668
Shares repurchased (2,297) (2,329) (1,074)
Net increase (decrease) in fund shares (977) (225) 594
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON ENTERPRISE FUND II
1999 1999(1) 1998(2)
</CAPTION>
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 45 $ 48 $ 340
Net realized gain from investment
and foreign currency transactions 2,786 1,859 4,678
Net unrealized appreciation (depreciation)
on investments and translation of assets and
liabilities in foreign currencies during
the period (4,543) 5,370 (10,623)
Net increase (decrease) in net assets
resulting from operations (1,712) 7,277 (5,605)
Net equalization included in the price
of shares issued and redeemed - - 72
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (51) (174) (154)
Net realized gain from investment transactions (1,313) (3,718) (6,554)
Total distributions to shareholders (1,364) (3,892) (6,708)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 6,443 10,618 41,623
Reinvested distributions 1,298 3,737 6,442
7,741 14,355 48,065
Shares repurchased (18,660) (23,385) (34,570)
Net increase (decrease) from
capital share transactions (10,919) (9,030) 13,495
Net increase (decrease) in net assets (13,995) (5,645) 1,254
NET ASSETS:
Beginning of period 77,309 82,954 81,700
End of period $ 63,314 $ 77,309 $ 82,954
Undistributed net investment
income at end of period $ 42 $ 48 $ 480
*Fund share transactions:
Shares sold 272 481 1,679
Reinvested distributions 58 174 265
330 655 1,944
Shares repurchased (804) (1,072) (1,428)
Net increase (decrease) in fund shares (474) (417) 516
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON GROWTH FUND
1999 1999(3)
</CAPTION>
<S> <C> <C>
OPERATIONS:
Net investment income $ (15) $ 407
Net realized gain from investment
and foreign currency transactions 31,175 78,657
Net unrealized appreciation (depreciation)
on investments and translation of assets and
liabilities in foreign currencies during
the period 14,062 (2,914)
Net increase (decrease) in net assets
resulting from operations 45,222 76,150
Net equalization included in the price
of shares issued and redeemed - -
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - (435)
Net realized gain from investment transactions (27,634) (89,064)
Total distributions to shareholders (27,634) (89,499)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 14,244 68,166
Reinvested distributions 25,499 82,101
39,743 150,267
Shares repurchased (47,322) (97,578)
Net increase (decrease) from
capital share transactions (7,579) 52,689
Net increase (decrease) in net assets 10,009 39,340
NET ASSETS:
Beginning of period 490,341 451,001
End of period $ 500,350 $ 490,341
Undistributed net investment income at
end of period $ (15) $ -
*Fund share transactions:
Shares sold 717 3,360
Reinvested distributions 1,302 4,205
2,019 7,565
Shares repurchased (2,369) (4,770)
Net increase (decrease) in fund shares (350) 2,795
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
SHADOW STOCK FUND
1999 1999(3)
</CAPTION>
<S> <C> <C>
OPERATIONS:
Net investment income $ 132 $ 454
Net realized gain from investment
and foreign currency transactions 76,022 68,640
Net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities in foreign currencies during
the period (1,089) (238)
Net increase (decrease) in net assets
resulting from operations (1,089) (238)
Net equalization included in the price
of shares issued and redeemed - -
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (174) (283)
Net realized gain from investment transactions (1,098) (3,971)
Total distributions to shareholders (1,272) (4,254)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 4,848 16,595
Reinvested distributions 1,148 3,827
5,996 20,422
Shares repurchased (13,015) (17,176)
Net increase (decrease) from
capital share transactions (7,019) 3,246
Net increase (decrease) in net assets (9,380) (1,246)
NET ASSETS:
Beginning of period 50,273 51,519
End of period $ 40,893 $ 50,273
Undistributed net investment income at end
of period $ 150 $ 191
*Fund share transactions:
Shares sold 411 1,433
Reinvested distributions 103 340
514 1,773
Shares repurchased (1,114) (1,497)
Net increase (decrease) in fund shares (600) 276
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON VALUE FUND
1999 1999(1) 1999(2)
</CAPTION>
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 14,582 $ 7,964 $ 19,814
Net realized gain from investment
and foreign currency transactions 76,022 68,640 75,274
Net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities in foreign currencies during
the period (212,792) 84,680 (55,316)
Net increase (decrease) in net assets
resulting from operations (122,188) 161,284 39,772
Net equalization included in the price
of shares issued and redeemed - - 1,006
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (8,323) (11,954) (17,864)
Net realized gain from investment transactions (27,183) (60,876) (43,88)
Total distributions to shareholders (35,506) (72,830) (61,744)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 58,661 183,659 513,526
Reinvested distributions 30,217 59,332 49,896
88,878 242,991 563,422
Shares repurchased (351,696) (581,111) (468,037)
Net increase (decrease) from
capital share transactions (262,818) (338,120) 95,385
Net increase (decrease) in net assets (420,512) (249,666) 74,419
NET ASSETS:
Beginning of period 1,243,930 1,493,596 1,419,177
End of period $ 823,418 $ 1,243,930 $1,493,596
Undistributed net investment income at end
of period $ 6,708 $ 450 $ 17,971
*Fund share transactions:
Shares sold 1,232 3,842 10,705
Reinvested distributions 694 1,320 1,109
1,926 5,162 11,814
Shares repurchased (7,535) (12,441) (10,053)
Net increase (decrease) in fund shares (5,609) (7,279) 1,761
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON STEWART IVORY
INTERNATIONAL FUND
1999 1999(3)
</CAPTION>
<S> <C> <C>
OPERATIONS:
Net investment income $ (186) $ 220
Net realized gain from investment
and foreign currency transactions 8,243 9,117
Net unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities in foreign currencies during
the period 14,461 (4,719)
Net increase (decrease) in net assets resulting
from operations 22,518 4,618
Net equalization included in the price
of shares issued and redeemed - -
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - (196)
Net realized gain from investment transactions (1,140) (4,016)
Total distributions to shareholders (1,140) (4,212)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 60,800 141,384
Reinvested distributions 965 3,579
61,765 144,963
Shares repurchased (74,986) (161,163)
Net increase (decrease) from
capital share transactions (13,221) (16,200)
Net increase (decrease) in net assets 8,157 (15,794)
NET ASSETS:
Beginning of period 88,610 104,404
End of period $ 96,767 $ 88,610
Undistributed net investment income at end
of period $ (674) $ (488)
*Fund share transactions:
Shares sold 2,918 7,620
Reinvested distributions 42 194
2,960 7,814
Shares repurchased (3,596) (8,579)
Net increase (decrease) in fund shares (636) (765)
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON BOND TRUST - PORTFOLIO L
1999 1999(1) 1999(2)
</CAPTION>
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 3,479 $ 4,188 $ 7,650
Net realized gain (loss) from
investment transactions (244) 97 2,150
Net unrealized appreciation (depreciation)
on investments during the period (3,147) (5,777) 394
Net increase (decrease) in net assets
resulting from operations 88 (1,492) 10,194
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (3,479) (4,188) (7,650)
Net realized gain from investment transactions - - -
Total from distributions to shareholders (3,479) (4,188) (7,650)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 5,243 20,367 23,231
Reinvested distributions 2,883 2,940 6,273
8,126 23,307 29,504
Shares repurchased (17,065) (25,749) (36,335)
Net increase (decrease) from
capital share transactions (8,939) (2,442) (6,831)
Net increase (decrease) in net assets (12,330) (8,122) (4,287)
NET ASSETS:
Beginning of period 120,679 128,186 132,473
End of period $ 108,349 $ 120,064 $ 128,186
Undistributed net investment income at end
of period $ - $ - $ 260
Fund share transactions:
Shares sold 3,072 12,849 14,688
Reinvested distributions 1,920 1,880 3,973
4,992 14,729 18,661
Shares repurchased (11,371) (16,326) (23,027)
Net increase (decrease) in fund shares (6,379) (1,597) (4,366)
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON BOND TRUST - PORTFOLIO S
1999 1999(1) 1999(2)
</CAPTION>
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 1,071 $ 1,279 $ 2,297
Net realized gain (loss) from
investment transactions (200) 156 337
Net unrealized appreciation (depreciation)
on investments during the period (638) (1,355) 155
Net increase (decrease) in net assets
resulting from operations 233 80 2,789
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (1,071) (1,279) (2,297)
Net realized gain from investment transactions - - -
Total from distributions to shareholders (1,071) (1,279) (2,297)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 1,687 6,269 6,842
Reinvested distributions 929 943 2,008
2,616 7,212 8,850
Shares repurchased (5,609) (7,377) (11,448)
Net increase (decrease) from
capital share transactions (2,993) (165) (2,598)
Net increase (decrease) in net assets (3,831) (1,364) (2,106)
NET ASSETS:
Beginning of period 37,094 38,458 40,564
End of period $ 33,263 $ 37,094 $ 38,458
Undistributed net investment income at end
of period $ - $ - $ -
Fund share transactions:
Shares sold 177 638 692
Reinvested distributions 98 96 203
275 734 895
Shares repurchased (590) (751) (1,161)
Net increase (decrease) in fund shares (315) (17) (266)
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON MONEY MARKET FUND - PRIME PORTFOLIO
1999 1999(3)
</CAPTION>
<S> <C> <C>
OPERATIONS:
Net investment income $ 920 $ 1,670
Net realized gain (loss) from investment
transactions - -
Net unrealized appreciation (depreciation)
on investments during the period - -
Net increase (decrease) in net assets
resulting from operations 920 1,670
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (920) (1,670)
Net realized gain from investment transactions - -
Total from distributions to shareholders (920) (1,670)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 24,862 41,648
Reinvested distributions 838 1,563
25,700 43,211
Shares repurchased (25,103) (40,853)
Net increase (decrease) from
capital share transactions 597 2,358
Net increase (decrease) in net assets 597 2,358
NET ASSETS:
Beginning of period 39,076 36,718
End of period $ 39,673 $ 39,076
Undistributed net investment income at end
of period $ - $ -
Fund share transactions:
Shares sold 24,861 41,657
Reinvested distributions 838 1,563
25,699 43,220
Shares repurchased (25,103) (39,081)
Net increase (decrease) in fund shares 596 4,139
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON MONEY MARKET FUND - FEDERAL PORTFOLIO
1999 1999(3)
</CAPTION>
<S> <C> <C>
OPERATIONS:
Net investment income $ 254 $ 588
Net realized gain (loss) from investment
transactions - -
Net unrealized appreciation (depreciation)
on investments during the period - -
Net increase (decrease) in net assets
resulting from operations 254 588
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (254) (588)
Net realized gain from investment transactions - -
Total from distributions to shareholders (254) (588)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 3,181 13,595
Reinvested distributions (1,191) 566
1,990 14,161
Shares repurchased (5,844) (13,014)
Net increase (decrease) from
capital share transactions (3,854) 1,147
Net increase (decrease) in net assets (3,854) 1,147
NET ASSETS:
Beginning of period 13,453 12,306
End of period $ 9,599 $ 13,453
Undistributed net investment income at end
of period $ - $ -
Fund share transactions:
Shares sold 3,181 13,594
Reinvested distributions (1,191) 566
1,990 14,160
Shares repurchased (5,843) (12,997)
Net increase (decrease) in fund shares (3,853) 1,163
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON TAX-FREE INCOME FUND PORTFOLIO L
1999 1999(3)
</CAPTION>
<S> <C> <C>
OPERATIONS:
Net investment income $ 566 $ 1,166
Net realized gain (loss) from investment
transactions 38 157
Net unrealized appreciation (depreciation)
on investments during the period (1,042) (827)
Net increase (decrease) in net assets
resulting from operations (438) 496
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (566) (1,166)
Net realized gain from investment transactions (228) (221)
Total from distributions to shareholders (794) (1,387)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 272 1,283
Reinvested distributions 468 757
740 2,040
Shares repurchased (1,206) (2,541)
Net increase (decrease) from
capital share transactions (466) (501)
Net increase (decrease) in net assets (1,698) (1,392)
NET ASSETS:
Beginning of period 25,902 27,294
End of period $ 24,204 $ 25,902
Undistributed net investment income at end
of period $ - $ -
Fund share transactions:
Shares sold 31 131
Reinvested distributions 53 83
84 214
Shares repurchased (138) (269)
Net increase (decrease) in fund shares (54) (55)
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON TAX-FREE INCOME FUND PORTFOLIO S
1999 1999(3)
</CAPTION>
<S> <C> <C>
OPERATIONS:
Net investment income $ 344 $ 790
Net realized gain (loss) from investment
transactions (83) 107
Net unrealized appreciation (depreciation)
on investments during the period (93) (472)
Net increase (decrease) in net assets
resulting from operations 168 425
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (344) (790)
Net realized gain from investment transactions (68) (51)
Total from distributions to shareholders (412) (841)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 203 737
Reinvested distributions 287 574
490 1,311
Shares repurchased (1,881) (3,290)
Net increase (decrease) from
capital share transactions (1,391) (1,979)
Net increase (decrease) in net assets (1,635) (2,395)
NET ASSETS:
Beginning of period 18,950 21,345
End of period $ 17,315 $ 18,950
Undistributed net investment income at end
of period $ 1 $ 1
Fund share transactions:
Shares sold 23 65
Reinvested distributions 24 53
47 118
Shares repurchased (179) (302)
Net increase (decrease) in fund shares (132) (184)
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED), EXCEPT AS INDICATED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BABSON TAX-FREE INCOME FUND PORTFOLIO M
1999 1999(3)
</CAPTION>
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 149 $ 310
Net realized gain (loss) from investment
transactions (2) -
Net unrealized appreciation (depreciation)
on investments during the period - -
Net increase (decrease) in net assets
resulting from operations 147 310
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (150) (310)
Net realized gain from investment transactions - -
Total from distributions to shareholders (150) (310)
CAPITAL SHARE TRANSACTIONS:*
Shares sold 3,099 10,230
Reinvested distributions 141 277
3,240 10,507
Shares repurchased (6,283) (10,283)
Net increase (decrease) from
capital share transactions (3,043) 224
Net increase (decrease) in net assets (3,046) 224
NET ASSETS:
Beginning of period 10,493 10,269
End of period $ 7,447 $ 10,493
Undistributed net investment income at end
of period $ - $ -
Fund share transactions:
Shares sold 3,119 10,230
Reinvested distributions 120 277
3,239 10,507
Shares repurchased (6,282) (10,283)
Net increase (decrease) in fund shares (3,043) 224
(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 June 30, 1999.
</TABLE>
See accompanying Notes to Financial Statements.
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.
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.
The 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. There were no outstanding
forward foreign currency contracts for the
period ended December 31, 1999.
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 had 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.
F. 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.
G. 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, 2001, 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
December 31, 1999 (excluding maturities of
short-term commercial notes and repurchase
agreements) are as follows:
Babson Enterprise Fund:
Purchases $ 21,204,188
Proceeds from sales 38,791,928
Babson Enterprise Fund II:
Purchases $ 6,835,365
Proceeds from sales 15,205,521
Babson Growth Fund:
Purchases $ 133,687,179
Proceeds from sales 146,027,315
Shadow Stock Fund:
Purchases $ 795,063
Proceeds from sales 6,027,013
Babson Value Fund:
Purchases $ 121,258,743
Proceeds from sales 335,101,844
Babson-Stewart Ivory International Fund:
Purchases $ 20,239,559
Proceeds from sales 31,944,053
Babson Bond Trust - Portfolio L:
Purchases $ 11,218,005
Proceeds from sales 8,709,572
Babson Bond Trust - Portfolio S:
Purchases $ 6,570,906
Proceeds from sales 7,372,723
Babson Money Market Fund - Prime Portfolio:
Purchases $ 802,666,658
Proceeds from sales 803,195,000
Babson Money Market Fund - Federal Portfolio:
Purchases $ 321,609,793
Proceeds from sales 325,629,000
Babson Tax-Free Income Fund - Portfolio L:
Purchases $ 4,958,930
Proceeds from sales 6,439,138
Babson Tax-Free Income Fund - Portfolio S:
Purchases $ 2,313,183
Proceeds from sales 4,740,597
Babson Tax-Free Income Fund - Portfolio MM:
Purchases $ 13,521,785
Proceeds from sales 17,193,494
4. LINE OF CREDIT:
Babson Enterprise Fund, Babson Enterprise
Fund II, Babson Growth Fund, Shadow Stock
Fund, Babson Value Fund and Babson-Stewart
Ivory International Fund share in a $45
million revolving credit facility for
temporary or emergency purposes, including
the meeting of redemption requests that
otherwise might require the untimely
disposition of securities. Any related
commitment fees are paid by Jones & Babson,
Inc. There were no borrowings under the line
of credit for the six months ended December
31, 1999.
FINANCIAL HIGHLIGHTS
BABSON ENTERPRISE FUND
Condensed data for a share of capital stock
Outstanding throughout each period.
<TABLE>
<CAPTION>
SIX MONTHS SEVEN MONTHS
ENDED ENDED
DECEMBER 31, 1999 JUNE 30, YEARS
ENDED NOVEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.72 $ 16.63 $ 21.22 $ 18.51 $ 17.35 $ 16.64
Income from investment operations:
Net investment income .01 .03 .04 .06 .06 .10
Net gains (losses) on securities
(both realized and unrealized) (1.55) .58 (2.15) 5.31 3.06 2.34
Total from investment operations (1.54) .61 (2.11) 5.37 3.12 2.44
Less distributions:
Dividends from net investment income (.02) (.05) (.06) - (.12) (.04)
Distributions from capital gains (1.05) (2.47) (2.42) (2.66) (1.84) (1.69)
Total distributions (1.07) (2.52) (2.48) (2.66) (1.96) (1.73)
Net asset value, end of period $ 12.11 $ 14.72 $ 16.63 $ 21.22 $ 18.51 $ 17.35
Total return* (10.16%) 4.70% (11.05%) 33.49% 20.17% 16.42%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 116 $ 155 $ 179 $ 216 $ 202 $ 202
Ratio of expenses to average net assets** 1.14% 1.11% 1.09% 1.08% 1.08% 1.09%
Ratio of net investment income
to average net assets** .07% .32% .29% .30% .35% .67%
Portfolio turnover rate 16% 12% 22% 22% 24% 13%
BABSON ENTERPRISE FUND II
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS SEVEN MONTHS
ENDED ENDED
DECEMBER 31, 1999 JUNE 30, YEARS
ENDED NOVEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.48 $ 23.20 $ 26.70 $ 22.75 $ 19.19 $ 16.22
Income from investment operations:
Net investment income .02 .03 .10 .08 .11 .05
Net gains (losses) on securities
(both realized and unrealized) (.40) 2.37 (1.50) 6.97 4.45 3.03
Total from investment operations (.38) 2.40 (1.40) 7.05 4.56 3.08
Less distributions:
Dividends from net investment income (.02) (.05) (.05) (.11) (.05) (.02)
Distributions from capital gains (.49) (1.07) (2.05) (2.99) (.95) (.09)
Total distributions (.51) (1.12) (2.10) (3.10) (1.00) (.11)
Net asset value, end of period $ 23.59 $ 24.48 $ 23.20 $ 26.70 $ 22.75 $ 19.19
Total return* (1.48%) 11.03% (5.61%) 35.29% 25.04% 19.11%
Ratios/supplemental data
Net assets, end of period (in millions) $ 63 $ 77 $ 83 $ 82 $ 46 $ 40
Ratio of expenses to average net assets** 1.26% 1.23% 1.22% 1.28% 1.38% 1.45%
Ratio of net investment income
to average net assets** .13% .11% .40% .27% .55% .30%
Portfolio turnover rate 10% 14% 25% 25% 30% 15%
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
See accompanying Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
BABSON GROWTH FUND
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, 1999 YEARS ENDED
JUNE 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.01 $ 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) 3.00 3.25 4.41 4.16 2.91 2.18
Total from investment operations 3.00 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 (2.30) (4.01) (1.44) (.78) (1.91) (.53)
Total distributions (2.30) (4.03) (1.50) (.87) (2.04) (.71)
Net asset value, end of period $ 20.71 $ 20.01 $ 20.77 $ 17.80 $ 14.42 $ 13.43
Total return* 9.84% 17.04% 26.73% 30.10% 22.99% 20.23%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 500 $ 490 $ 451 $ 365 $ 280 $ 247
Ratio of expenses to average net assets** .79% .79% .80% .83% .85% .85%
Ratio of net investment income
to average net assets** (.01%) .09% .30% .61% .82% 1.42%
Portfolio turnover rate 28% 39% 35% 20% 33% 17%
SHADOW STOCK FUND
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, 1999 YEARS ENDED
JUNE 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.06 $ 13.24 $ 12.57 $ 11.31 $ 10.55 $ 9.67
Income from investment operations:
Net investment income .08 .11 .08 .12 .09 .10
Net gains (losses) on securities
(both realized and unrealized) .01 (.24) 2.54 2.44 1.67 1.42
Total from investment operations .09 (.13) 2.62 2.56 1.76 1.52
Less distributions:
Dividends from net investment income (.08) (.07) (.10) (.09) (.10) (.10)
Distributions from capital gains (.61) (.98) (1.85) (1.21) (.90) (.54)
Total distributions (.69) (1.05) (1.95) (1.30) (1.00) (.64)
Net asset value, end of period $ 11.46 $ 12.06 $ 13.24 $ 12.57 $ 11.31 $ 10.55
Total return* (1.92%) (.25%) 21.98% 23.63% 17.13% 16.16%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 41 $ 50 $ 52 $ 41 $ 39 $ 39
Ratio of expenses to average net assets** 1.10% 1.10% 1.16% 1.13% 1.14% 1.13%
Ratio of net investment income
to average net assets** .60% .97% .56% 1.00% .79% 1.01%
Portfolio turnover rate 2% 21% 43% 0% 25% 19%
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
See accompanying Notes to Financial Statements
FINANCIAL HIGHLIGHTS
BABSON VALUE FUND
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS SEVEN MONTHS
ENDED ENDED
DECEMBER 31, 1999 JUNE 30, YEARS
ENDED NOVEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 51.36 $ 47.42 $ 47.73 $ 38.65 $ 31.78 $ 25.19
Income from investment operations:
Net investment income .85 .45 .62 .51 .55 .59
Net gains (losses) on securities
(both realized and unrealized) (6.04) 5.90 1.09 9.65 7.20 7.20
Total from investment operations (5.19) 6.35 1.71 10.16 7.75 7.79
Less distributions:
Dividends from net investment income (.51) (.44) (.56) (.47) (.53) (.60)
Distributions from capital gains (1.41) (1.97) (1.46) (.61) (.35) (.60)
Total distributions (1.92) (2.41) (2.02) (1.08) (.88) (1.20)
Net asset value, end of period $ 44.25 $ 51.36 $ 47.42 $ 47.73 $ 38.65 $ 31.78
Total return* (10.24%) 14.14% 3.85% 26.89% 24.91% 32.07%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 823 $ 1,244 $ 1,494 $ 1,419 $ 764 $ 293
Ratio of expenses to average net assets** .96% .96% .98% .97% .96% .98%
Ratio of net investment income
to average net assets** 2.79% 1.05% 1.28% 1.22% 1.63% 2.12%
Portfolio turnover rate 12% 13% 42% 17% 11% 6%
BABSON-STEWART IVORY INTERNATIONAL FUND
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, 1999 YEARS ENDED
JUNE 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.48 $ 19.65 $ 19.53 $ 18.04 $ 15.96 $ 16.41
Income from investment operations:
Net investment income (.06) .03 .08 .07 .07 .16
Net gains (losses) on securities
(both realized and unrealized) 5.61 .66 1.07 1.70 2.85 .23
Total from investment operations 5.55 .69 1.15 1.77 2.92 .39
Less distributions:
Dividends from net investment income - (.04) (.07) (.05) (.08) (.17)
Distributions from capital gains (.30) (.82) (.96) (.23) (.65) (.67)
Distributions in excess of
realized capital gains - - - - (.11) -
Total distributions (.30) (.86) (1.03) (.28) (.84) (.84)
Net asset value, end of period $ 24.73 $ 19.48 $ 19.65 $ 19.53 $ 18.04 $ 15.96
Total return* 28.57% 3.76% 6.48% 9.91% 18.66% 2.54%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 97 $ 89 $ 104 $ 111 $ 80 $ 65
Ratio of expenses to average net assets** 1.26% 1.23% 1.16% 1.19% 1.26% 1.30%
Ratio of net investment income
to average net assets** (.43%) .24% .37% .47% .44% 1.13%
Portfolio turnover rate 24% 51% 48% 40% 33% 37%
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
See accompanying Notes to Financial Statements
FINANCIAL HIGHLIGHTS
BABSON BOND TRUST - PORTFOLIO L
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS SEVEN MONTHS
ENDED ENDED
DECEMBER 31, 1999 JUNE 30, YEARS
ENDED NOVEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.52 $ 1.59 $ 1.56 $ 1.55 $ 1.58 $ 1.47
Income from investment operations:
Net investment income .05 .05 .09 .10 .11 .11
Net gains (losses) on securities
(both realized and unrealized) (.04) (.07) .03 .01 (.03) .11
Total from investment operations .01 (.02) .12 .11 .08 .22
Less distributions:
Dividends from net investment income (.05) (.05) (.09) (.10) (.11) (.11)
Distributions from capital gains - - - - - -
Total distributions (.05) (.05) (.09) (.10) (.11) (.11)
Net asset value, end of period $ 1.48 $ 1.52 $ 1.59 $ 1.56 $ 1.55 $ 1.58
Total return* .37% (1.16%) 8.13% 7.26% 5.17% 15.28%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 108 $ 121 $ 128 $ 132 $ 142 $ 161
Ratio of expenses to average net assets** .98% .97% .97% .97% .97% .97%
Ratio of net investment income
to average net assets** 6.03% 5.73% 5.93% 6.38% 6.96% 7.06%
Portfolio turnover rate 8% 38% 43% 59% 61% 50%
BABSON BOND TRUST - PORTFOLIO S
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS SEVEN MONTHS
ENDED ENDED
DECEMBER 31, 1999 JUNE 30, YEARS
ENDED NOVEMBER 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.60 $ 9.91 $ 9.78 $ 9.77 $ 9.90 $ 9.43
Income from investment operations:
Net investment income .30 .33 .58 .62 .69 .73
Net gains (losses) on securities
(both realized and unrealized) (.23) (.31) .13 .01 (.13) .47
Total from investment operations .07 .02 .71 .63 .56 1.20
Less distributions:
Dividends from net investment income (.30) (.33) (.58) (.62) (.69) (.73)
Distributions from capital gains - - - - - -
Total distributions (.30) (.33) (.58) (.62) (.69) (.73)
Net asset value, end of period $ 9.37 $ 9.60 $ 9.91 $ 9.78 $ 9.77 $ 9.90
Total return* .60% .15% 7.47% 6.70% 5.96% 13.10%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 33 $ 37 $ 38 $ 41 $ 34 $ 33
Ratio of expenses to average net assets** .68% .67% .67% .66% .66% .67%
Ratio of net investment income
to average net assets** 6.02% 5.75% 5.90% 6.42% 7.10% 7.47%
Ratio of expenses to average net assets
before voluntary reduction of
management fee ** .98% .97% .97% .97% .96% .97%
Portfolio turnover rate 19% 54% 60% 65% 48% 57%
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
See accompanying Notes to Financial Statements
BABSON MONEY MARKET FUND - PRIME PORTFOLIO
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, 1999 YEARS ENDED
JUNE 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income .02 .04 .05 .05 .05 .05
Less distributions:
Dividends from net investment income (.02) (.04) (.05) (.05) (.05) (.05)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return* 2.30% 4.38% 4.82% 4.61% 4.83% 4.66%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 40 $ 39 $ 37 $ 38 $ 36 $ 40
Ratio of expenses to average net assets** .88% .88% .91% .92% .92% .92%
Ratio of net investment income
to average net assets** 4.54% 4.30% 4.73% 4.58% 4.75% 4.58%
BABSON MONEY MARKET FUND - FEDERAL PORTFOLIO
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, 1999 YEARS ENDED
JUNE 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income .02 .04 .05 .04 .05 .04
Less distributions:
Dividends from net investment income (.02) (.04) (.05) (.04) (.05) (.04)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return* 2.23% 4.31% 4.75% 4.58% 4.77% 4.56%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 10 $ 13 $ 12 $ 13 $ 10 $ 10
Ratio of expenses to average net assets** .88% .88% .91% .91% .91% .92%
Ratio of net investment income
to average net assets** 4.38% 4.23% 4.65% 4.51% 4.67% 4.48%
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
See accompanying Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
BABSON TAX-FREE INCOME FUND - PORTFOLIO L
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, 1999 YEARS ENDED
JUNE 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.91 $ 9.22 $ 8.96 $ 8.74 $ 8.67 $ 8.52
Income from investment operations:
Net investment income .20 .40 .40 .42 .41 .42
Net gains (losses) on securities
(both realized and unrealized) (.34) (.24) .28 .24 .07 .17
Total from investment operations (.14) .16 .68 .66 .48 .59
Less distributions:
Dividends from net investment income (.20) (.40) (.40) (.42) (.41) (.42)
Distributions from capital gains (.08) (.07) (.02) (.02) - (.02)
Total distributions (.28) (.47) (.42) (.44) (.41) (.44)
Net asset value, end of period $ 8.49 $ 8.91 $ 9.22 $ 8.96 $ 8.74 $ 8.67
Total return* (1.63%) 1.70% 7.82% 7.69% 5.60% 7.21%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 24 $ 26 $ 27 $ 27 $ 27 $ 28
Ratio of expenses to average net assets** 1.02% 1.03% 1.06% 1.01% 1.01% 1.02%
Ratio of net investment income
to average net assets** 4.49% 4.36% 4.46% 4.71% 4.67% 4.98%
Portfolio turnover rate 20% 9% 18% 21% 39% 34%
BABSON TAX-FREE INCOME FUND - PORTFOLIO S
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, 1999 YEARS ENDED
JUNE 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.56 $ 10.79 $ 10.74 $ 10.69 $ 10.71 $ 10.62
Income from investment operations:
Net investment income .20 .42 .44 .44 .44 .45
Net gains (losses) on securities
(both realized and unrealized) (.11) (.20) .08 .10 .01 .10
Total from investment operations .09 .22 .52 .54 .45 .55
Less distributions:
Dividends from net investment income (.20) (.42) (.44) (.44) (.44) (.45)
Distributions from capital gains (.04) (.03) (.03) (.05) (.03) (.01)
Total distributions (.24) (.45) (.47) (.49) (.47) (.46)
Net asset value, end of period $ 10.41 $ 10.56 $ 10.79 $ 10.74 $ 10.69 $ 10.71
Total return* .86% 1.96% 4.84% 5.18% 4.25% 5.32%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 17 $ 19 $ 21 $ 23 $ 25 $ 28
Ratio of expenses to average net assets** 1.02% 1.01% 1.06% 1.01% 1.01% 1.01%
Ratio of net investment income
to average net assets** 3.78% 3.82% 4.00% 4.12% 4.13% 4.28%
Portfolio turnover rate 13% 22% 21% 23% 41% 34%
*Total return not annualized for periods less than one full year
**Annualized for periods less than one full year
See accompanying Notes to Financial Statements.
BABSON TAX-FREE INCOME FUND - PORTFOLIO MM
Condensed data for a share of capital stock
Outstanding throughout each period.
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, 1999 YEARS ENDED
JUNE 30,
(UNAUDITED) 1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income .01 .03 .03 .03 .03 .03
Less distributions:
Dividends from net investment income (.01) (.03) (.03) (.03) (.03) (.03)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return* 1.42% 2.70% 3.06% 3.03% 3.15% 3.05%
Ratios/Supplemental Data
Net assets, end of period (in millions) $ 7 $ 10 $ 10 $ 9 $ 8 $ 16
Ratio of expenses to average net assets** .58% .55% .61% .58% .58% .59%
Ratio of net investment income
to average net assets** 2.78% 2.65% 3.06% 3.10% 3.15% 3.07%
*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.
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 219757, KANSAS CITY, MO 64121-9757
1-800-4-BABSON
(1-800-422-2766)
WWW.BABSONFUNDS.COM
