MESSAGE
To Our Shareholders
Babson Growth Fund had a total return (price change and reinvested
distributions) of 12.33% for the six month period ended December 31, 1995.
Average annual compounded total returns for one year, five year and ten years
were 31.43%, 14.66% and 12.07%, 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.
After struggling through 1994 _ a frustrating year for equity investors and
one of the worst years ever for bond investors _ both the stock and bond
markets came storming back in 1995. Bonds experienced the biggest bull market
in the past ten years and more than offset the record slump in 1994. The
stock market in 1995 benefited from strong earnings growth and low inflation,
which drove large company shares up over 35%.
The economy slowed sufficiently in 1995 to avoid higher inflation, but not
enough to cause a recession. The Federal Reserve appears to have successfully
controlled the growth rate of the economy in order to prolong economic
prosperity, but it is still uncertain whether the soft landing is an
exception to the typical business cycle or the beginning of a new trend.
Rarely does a single year include such a confluence of favorable forces in
the securities markets as the one just ended. During 1995 interest rates
across the maturity spectrum dropped approximately 20%, producing the biggest
bull market in bonds in a decade. At year-end the yield on the thirty-year
Treasury bond stood just below 6%, the lowest level in two years.
Strong earnings growth and low inflation (which caused the large drop in
interest rates) sustained a high level of enthusiasm for stocks on the part
of individual investors. As a result, they continued to pour money into
equity mutual funds at a near record rate of $100 billion. U.S. corporations
emerged as another huge buyer of equities, and in 1995 they boosted their
acquisitions to a record level (exceeding the 1988 peak). This strong demand
for stocks created a favorable supply/demand imbalance in the securities
markets.
1995 will go down in the record books as one of the great performance years
of all time. When the dust settled at year-end, the stock market had
increased by 37% on a total return basis (as measured by the unmanaged
Standard & Poor's 500 index). Only twice in the past half century have the
leading stock market averages risen more than last year's advance. We see a
reasonably positive picture for the stock and bond markets over the next five
years, though less favorable than the environment we have experienced in the
past thirteen years.
Babson Growth Fund performed relatively well last year, especially when our
low-risk approach to growth stock investing is taken into consideration. We
were able to produce attractive results with a well diversified portfolio of
high quality, reasonably valued companies while avoiding the speculative
activity in the high technology sector of the stock market.
Sincerely,
Larry D. Armel
President
<PAGE>
HISTORICAL RECORD
Progress of the Fund since it was founded in 1960.
<TABLE>
<CAPTION>
net asset
net asset value per
*long-term *short-term value per share with
FISCAL net *ordinary capital capital share with dividends and
YEAR TOTAL ASSET INCOME GAINS GAINS CAPITAL GAINS CAPITAL GAINS
ended net value dividends distributions distributions distributions distributions
June 30 assets per share per share per share per share reinvested reinvested
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1960 $ 128,066 $ 4.87 $ _0_ $ _0_ $ _0_ $ 4.87 $ 4.87
1965 5,176,041 6.36 0.100 0.07 _0_ 6.52 6.97
1970 28,729,379 7.16 0.170 0.02 _0_ 7.63 8.87
1971 54,672,327 9.60 0.190 _0_ _0_ 10.23 12.15
1972 77,860,344 10.90 0.180 _0_ _0_ 11.62 14.05
1973 106,017,401 10.66 0.160 0.09 _0_ 11.46 14.05
1974 143,011,492 9.34 0.200 _0_ _0_ 10.04 12.54
1975 207,734,395 10.22 0.220 _0_ _0_ 10.99 14.09
1976 224,727,885 10.00 0.250 _0_ _0_ 10.75 14.16
1977 217,273,868 9.27 0.240 _0_ _0_ 9.97 13.46
1978 217,114,139 9.40 0.280 _0_ _0_ 10.11 14.06
1979 218,528,345 10.20 0.320 _0_ _0_ 10.97 15.76
1980 234,348,577 11.25 0.390 _0_ _0_ 12.08 18.01
1981 281,980,936 12.74 0.410 _0_ _0_ 13.68 21.04
1982 205,749,921 9.67 0.440 0.79 _0_ 11.24 17.97
1983 249,201,722 14.40 0.380 0.19 0.04 16.96 27.97
1984 208,290,661 10.85 0.380 1.615 _0_ 14.68 24.91
1985 215,374,722 13.40 0.4025 1.6285 0.2225 18.14 31.36
1986 253,780,848 13.62 0.3525 1.3725 _0_ 22.89 42.37
1987 288,727,782 16.25 0.305 1.29 0.005 28.45 53.43
1988 237,465,629 11.66 0.2925 2.3425 _0_ 26.09 50.10
1989 266,125,877 11.87 0.3085 1.20 0.0965 29.38 58.38
1990 259,076,870 11.18 0.2725 1.125 0.01 30.36 62.04
1991 235,812,697 11.05 0.245 0.18 _0_ 30.55 63.92
1992 232,400,994 11.70 0.20 0.025 0.011 32.45 69.10
1993 245,201,417 12.30 0.195 0.865 _0_ 36.49 78.97
1994 227,724,061 11.78 0.20 0.7931 _0_ 37.28 81.97
1995 247,282,420 13.43 0.18 0.5345 _0_ 44.19 98.55
**1995 271,121,841 14.66 0.07 0.35 _0_ 49.37 110.70
</TABLE>
* Includes dividends and distributions applicable to the fiscal year
which may have been paid soon after the fiscal year-end.
** Six months ended December 31, 1995.
<PAGE>
STATEMENT OF NET ASSETS
December 31, 1995 (unaudited)
Shares Company Market Value
COMMON STOCKS _ 96.64%
BASIC MATERIALS _ 4.22%
50,000 Air Products & Chemicals, Inc. $ 2,637,500
80,000 duPont (E.I.) deNemours & Co. 5,590,000
65,000 Sigma-Aldrich Corp. 3,217,500
11,445,000
CAPITAL GOODS _ 10.14%
94,000 Boeing Co. 7,367,250
90,000 General Electric Co. 6,480,000
45,000 Grainger (W.W.), Inc. 2,981,250
200,000 Pall Corp. 5,375,000
40,000 Sundstrand Corp. 2,815,000
26,000 United Technologies 2,466,750
27,485,250
CONSUMER CYCLICAL _ 16.93%
60,000 Capital Cities/ABC, Inc. 7,402,500
150,000 Circuit City Stores, Inc. 4,143,750
90,000 Dillard Department Stores, Inc. Cl. A 2,565,000
100,000 Heilig-Meyers Co. 1,837,500
150,000 King World Productions, Inc. 5,831,250
140,000 Mattel, Inc. 4,305,000
60,000 May Department Stores Co. 2,535,000
60,000 Reader's Digest Association Inc., Cl. A 3,075,000
150,000 Reebok International Ltd. 4,237,500
100,000 Service Corp., International 4,400,000
120,000 Viking Office Products, Inc. 5,580,000
45,912,500
CONSUMER STAPLES _ 31.41%
130,000 Abbott Laboratories 5,427,500
75,000 American Home Products Corp. 7,275,000
100,000 Anheuser-Busch Cos., Inc. 6,687,500
75,000 Bausch & Lomb, Inc. 2,971,875
105,000 Bristol-Myers Squibb Co. 9,016,875
65,000 CPC International, Inc. 4,460,625
43,000 DENTSPLY International, Inc. 1,720,000
57,000 Foundation Health Corp. 2,451,000
80,000 Gillette Co. 4,170,000
106,000 IBP, Inc. 5,353,000
100,000 Johnson & Johnson 8,562,500
100,000 PepsiCo, Inc. 5,587,500
110,000 Philip Morris Cos., Inc. 9,955,000
102,000 Scherer (R.P.) Corp. 5,010,750
225,000 Tenet Healthcare Corp. 4,668,750
28,000 United Healthcare 1,834,000
85,151,875
ENERGY _ 5.29%
140,000 Coastal Corp. 5,215,000
50,000 Mobil Corp. 5,600,000
25,000 Royal Dutch Petroleum Co. 3,528,125
14,343,125
FINANCIAL _ 14.80%
55,000 American International Group, Inc. 5,087,500
103,125 Banc One Corp. 3,892,969
62,000 Federal Home Loan Mortgage Corp. 5,177,000
104,171 First Data Corp. 6,966,436
50,000 General Re Corp. 7,750,000
95,562 KeyCorp New 3,464,122
80,000 Mellon Bank Corp. 4,300,000
50,000 NationsBank Corp. 3,481,250
40,119,277
TECHNOLOGY _ 13.85%
100,000 Advanced Micro Devices, Inc. 1,650,000
100,000 Automatic Data Processing, Inc. 7,425,000
95,000 Computer Sciences Corp. 6,673,750
60,000 Minnesota Mining & Manufacturing Co. 3,975,000
70,000 Read-Rite Corp. 1,627,500
111,000 Seagate Technology 5,272,500
80,000 Texas Instruments, Inc. 4,140,000
115,000 Vodafone Group PLC ADR 4,053,750
50,000 Wallace Computer Services, Inc. 2,731,250
37,548,750
TOTAL COMMON STOCKS _ 96.64% 262,005,777
SHORT-TERM CORPORATE NOTES _ 2.58%
$3,000,000 Ford Motor Credit Co.,
5.65%, due January 31, 1996 3,000,000
4,000,000 Sears Roebuck Acceptance Corp.,
5.90%, due January 10, 1996 4,000,000
TOTAL SHORT-TERM
CORPORATE NOTES _ 2.58% 7,000,000
REPURCHASE AGREEMENT _ 0.74%
2,000,000 UMB Bank, n.a.
5.25%, due January 2, 1996
(Collateralized by U.S.
Treasury Notes, 7.75%,
due March 31, 1996) 2,000,000
TOTAL INVESTMENTS _ 99.96% $ 271,005,777
Other assets less liabilities _ 0.04% 116,064
TOTAL NET ASSETS _ 100.00%
(equivalent to $14.66 per share;
100,000,000 shares of $1.00 par
value capital shares authorized;
18,493,207 shares outstanding) $ 271,121,841
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1995 (unaudited)
ASSETS:
Investment securities, at market value
(identified cost $165,175,149) $ 271,005,777
Dividends receivable 435,706
Interest receivable 4,522
Total assets 271,446,005
LIABILITIES AND NET ASSETS:
Cash overdraft 324,164
Total liabilities 324,164
NET ASSETS $ 271,121,841
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 147,884,426
Accumulated undistributed income:
Undistributed net investment income 67,190
Accumulated net realized gain on investment transactions 17,339,597
Net unrealized appreciation in value of investments 105,830,628
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 271,121,841
Capital shares, $1.00 par value
Authorized 100,000,000
Outstanding 18,493,207
NET ASSET VALUE PER SHARE $ 14.66
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended December 31, 1995 (unaudited)
INVESTMENT INCOME:
Income:
Dividends $ 2,134,685
Interest 174,073
2,308,758
Expenses:
Management fees (Note 3) 1,109,698
Registration fees and other expenses 15,195
1,124,893
Net investment income 1,183,865
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 1):
Realized gain from investment transactions
(excluding repurchase agreements):
Proceeds from sales of investments 53,918,709
Cost of investments sold 31,056,566
Net realized gain from investment transactions 22,862,143
Unrealized appreciation on investments:
Beginning of period 99,606,960
End of period 105,830,628
Increase in net unrealized appreciation on investments 6,223,668
Net gain on investments 29,085,811
Increase in net assets resulting from operations $ 30,269,676
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
Six Months
Ended Year Ended
December 31,1995 June 30,
(Unaudited) 1995
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,183,865 $ 3,311,100
Net realized gain from investment transactions 22,862,143 10,032,297
Increase in net unrealized appreciation on
investments 6,223,668 30,108,767
Net increase in net assets resulting
from operations 30,269,676 43,452,164
Net equalization included in the price of shares
issued and redeemed (3,368) (40,263)
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (1,275,323) (3,314,210)
Net realized gain from investment transactions (6,376,613) (9,640,620)
Total distributions to shareholders (7,651,936) (12,954,830)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 988,134 and 1,301,049 shares sold 14,078,835 16,159,476
Net asset value of 484,996 and 909,226 shares
issued for reinvestment of distributions 7,013,037 12,003,961
21,091,872 28,163,437
Cost of 1,386,266 and 3,136,550 shares redeemed (19,866,823) (39,062,149)
Net increase (decrease) from capital share
transactions 1,225,049 (10,898,712)
Total increase in net assets 23,839,421 19,558,359
NET ASSETS:
Beginning of period 247,282,420 227,724,061
End of period $ 271,121,841 $ 247,282,420
Distributions to shareholders:
Income dividends per share $ .07 $ .18
Capital gains distribution per share $ .35 $ .5345
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund
in the preparation of its financial statements.
Investments _ Common stocks traded on a national securities exchange are
valued at the last reported sales price on the last business day of the
period or, if no sale was reported on that date, at the average of the last
reported bid and asked prices. Common stocks traded over-the-counter are
valued at the average of the last reported bid and asked prices. Investment
transactions are recorded on the trade date. Dividend income and distributions
to shareholders are recorded on the ex-dividend dates. Realized gains and
losses from investment transactions and unrealized appreciation and
depreciation of investments are reported on the identified cost basis.
Federal and State Taxes _ The Fund's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no provision for federal or state tax is required.Equalization _
The Fund uses the accounting practice known as equalization, by which a
portion of the proceeds from sales and costs of redemption of capital shares,
equivalent on a per share basis to the amount of undistributed net investment
income on the date of the transactions, is credited or charged to
undistributed income. As a result, undistributed net investment income per
share is unaffected by sales or redemptions of capital shares.
2. PURCHASES AND SALES OF SECURITIES:
The aggregate amounts of security transactions during the period ended
December 31, 1995 (excluding repurchase agreements), were as follows:
Purchases $ 41,220,473
Proceeds from sales 53,918,709
3. MANAGEMENT FEES:
Management fees, which include all normal expenses of the Fund other than
taxes, fees and other charges of governmental agencies for qualifying the
Fund's shares for sale, special legal fees, interest and brokerage
commissions, are paid to Jones & Babson, Inc., an affiliated company. These
fees are based on average daily net assets of the Fund at the annual rate of
.85 of one percent on net assets up to $250,000,000, and .70 of one percent
on net assets exceeding that amount. Certain officers and/or directors of the
Fund are also officers and/or directors of Jones & Babson, Inc.
<PAGE>
THE BABSON FUNDS
BOARD OF DIRECTORS
Larry D. Armel
Francis C. Rood
William H. Russell
H. David Rybolt
OFFICERS
Larry D. Armel
President
P. Bradley Adams
Vice President & Treasurer
Michael A. Brummel
Vice President
Martin A. Cramer
Vice President & Secretary
David G. Kirk
Vice President _ Portfolio
James B. Gribbell
Vice President _ Portfolio
INVESTMENT COUNSEL
David L. Babson & Co. Inc.
Cambridge, Massachusetts
AUDITORS
Arthur Andersen LLP
Kansas City, Missouri
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
Philadelphia, Pennsylvania
John G. Dyer
Kansas City, Missouri
CUSTODIAN
UMB Bank, n.a.
Kansas City, Missouri
This report has been prepared for the information of the Shareholders of
David L. Babson Growth Fund, Inc., and is not to be construed or an offering
of the shares of the Fund. Shares of this Fund and of the other Babson Funds
are offered only by the Prospectus, a copy of which may be obtained from
Jones & Babson, Inc.
<TABLE> <S> <C>
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<CIK> 0000009017
<NAME> DAVID L BABSON GROWTH FUND INC
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 165175149
<INVESTMENTS-AT-VALUE> 271005777
<RECEIVABLES> 440228
<ASSETS-OTHER> 0
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<OTHER-ITEMS-LIABILITIES> 324164
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<NUMBER-OF-SHARES-SOLD> 988134
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