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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-2963
D.L. Babson Money Market Fund, Inc.
(Exact name of registrant as specified in charter)
90 South Seventh Street, Minneapolis, MN 55402
(Address of principal executive offices) (Zip code)
BISYS Fund Services, 3435 Stelzer Road, Columbus, OH 43219
(Name and address of agent for service)
Registrant's telephone number, including area code: 614-470-8000
Date of fiscal year end: June 30, 2004
Date of reporting period: December 31, 2003
Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Include a copy of the report transmitted to stockholders pursuant to
Rule 30e-1 under the Act (17 CFR 270.30e-1).
BABSON FUNDS
SEMIANNUAL REPORT
DECEMBER 31, 2003
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
[LOGO]
BABSON FUNDS
JONES & BABSON, INC. DISTRIBUTORS
A MEMBER OF THE GENERALI GROUP
TABLE OF
CONTENTS
Babson Enterprise Fund ............................................. 1
Babson Enterprise Fund II ......................................... 4
Babson Growth Fund ................................................ 7
Shadow Stock Fund ................................................. 9
Babson Value Fund ................................................. 15
Babson-Stewart Ivory
International Fund ................................................ 17
Babson Bond Trust ................................................. 22
Babson Money Market Fund .......................................... 34
Babson Tax-Free Income Fund ....................................... 36
Statements of Assets
and Liabilities ................................................... 40
Statements of Operations .......................................... 42
Statements of Changes
in Net Assets ..................................................... 44
Notes to Financial Statements ..................................... 48
Financial Highlights .............................................. 53
- --------------------------------------------------------------------------------
BABSON ENTERPRISE FUND
- --------------------------------------------------------------------------------
During Reporting Period, equity markets benefited from a surge in positive
investor psychology, renewed interest in stock investing and a recovering U.S.
economy. Companies associated with shaky fundamentals, low stock prices and
higher risk characteristics quickly emerged as key beneficiaries of this
changing equity market dynamic. Additionally, stocks that generally suffered the
most during the recent bear market such as technology issues rebounded strongly
during the second half of 2003. Economically sensitive sectors including
producer durables and materials & processing also realized highly favorable
performance.
The Babson Enterprise Fund realized highly favorable results during the
Reporting Period, strongly outperforming its benchmark, The Russell 2000 Value
Index(R). The Fund's results were driven by highly favorable stock selection in
the financial services and technology sectors. In financial services, the Fund
continued to capitalize, as it has for some time, on strong gains from a number
of regional bank holdings. Additionally, a number of the Funds cyclical,
economically sensitive holdings in the technology and materials and processing
sectors also added value during the period. Performance for the Fund's holdings
in the other energy sector was also highly favorable for the period, advancing
considerably above benchmark positions.
On a negative note, the Fund's stock selection in the consumer discretionary
sector was disappointing, as a few specialty retail holdings in this area showed
weakness during the period. Stock selection in the health care sector also
detracted from results.
- --------------------------------------------------------------------------------
FUND COMPOSITION
- --------------------------------------------------------------------------------
TOP HOLDINGS % OF TOTAL
--------------------------------- -----------
INTERTAPE POLYMER GROUP ......... 2.6%
EDO CORP. ....................... 2.6
ENCORE WIRE CORP. ............... 2.5
TEREX CORP. ..................... 2.5
LSI INDUSTRIES INC. ............. 2.3
NN, INC. ........................ 2.3
TYLER TECHNOLOGIES INC. ......... 2.2
MATRIX SERVICE CO. .............. 2.2
REGENT COMMUNICATIONS ........... 2.2
KEITH COS INC. .................. 2.2
----
TOTAL ........................... 23.6%
- --------------------------------------------------------------------------------
AS OF DECEMBER 31, 2003, SCHEDULE OF INVESTMENTS. SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON ENTERPRISE FUND (CONTINUED)
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 91.61%
BASIC MATERIALS -- 13.78%
424,300 Encore Wire Corp. (b) ....................... $7,514,353
290,200 Ennis Business Forms, Inc. .................. 4,440,060
617,700 Intertape Polymer Group, Inc. (b) ........... 7,863,321
118,300 New England Business Service, Inc. .......... 3,489,850
552,900 NN, Inc. .................................... 6,961,011
429,450 Penford Corp. ............................... 5,896,349
542,900 Universal Stainless & Alloy
Products, Inc. (b) .......................... 5,863,320
----------
42,028,264
==========
CAPITAL GOODS -- 13.54%
122,500 Cuno, Inc. (b) .............................. 5,516,175
133,600 ESCO Technologies, Inc. (b) ................. 5,831,640
482,490 Keith (The) Cos., Inc. (b) .................. 6,571,514
161,700 Lindsay Manufacturing Co. ................... 4,082,925
526,037 LSI Industries, Inc. ........................ 7,101,500
194,110 Quixote Corp. ............................... 4,738,225
262,600 Terex Corp. (b) ............................. 7,478,847
----------
41,320,826
==========
CONSUMER CYCLICAL -- 5.83%
149,600 Advanced Marketing Services, Inc. ........... 1,705,440
66,323 Bassett Furniture Industries, Inc. .......... 1,094,330
98,900 Mac-Gray Corp. (b) .......................... 534,060
221,000 Movado Group, Inc. .......................... 6,238,830
495,600 Remedytemp, Inc. Cl. A (b) .................. 5,406,996
144,600 Ultimate Electronics, Inc. (b) .............. 1,103,298
171,200 Whitehall Jewellers, Inc. (b) ............... 1,689,744
----------
17,772,698
==========
CONSUMER STAPLES -- 1.69%
143,500 United Natural Foods, Inc. (b) .............. 5,153,085
==========
ENERGY -- 7.41%
340,800 Gulf Island Fabrication, Inc. (b) ........... 5,803,824
140,766 Kaneb Services, LLC ......................... 4,486,212
364,700 Matrix Service Co. (b) ...................... 6,619,305
234,700 Tetra Technologies, Inc. (b) ................ 5,689,128
----------
22,598,469
==========
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
FINANCIAL -- 16.22%
63,800 ASTA Funding, Inc. .......................... $2,185,150
122,400 Bank of the Ozarks, Inc. .................... 2,755,224
64,100 Boston Private Financial
Holdings, Inc. .............................. 1,592,244
118,961 Capital Corp. of the West (b) ............... 4,715,614
86,732 Cobiz, Inc. ................................. 1,597,603
24,670 Cooperative Bankshares, Inc. ................ 632,045
386,600 Gold Banc Corporation, Inc. ................. 5,435,597
136,498 Hanmi Financial Corp. ....................... 2,698,565
144,900 Hawthorne Financial Corp. (b) ............... 4,054,302
82,300 Mercantile Bank Corp. ....................... 3,003,950
100,000 Metrocorp Bancshares, Inc. .................. 1,489,000
126,800 Northrim Bancorp, Inc. ...................... 2,910,060
60,000 Resource Bancshares Corp. ................... 1,891,800
122,306 Sterling Financial Corp. (b) ................ 4,186,534
110,739 Taylor Capital Group, Inc. .................. 2,948,980
184,500 Umpqua Holdings Corp. ....................... 3,835,755
183,400 Wilshire State Bank (b) ..................... 3,561,445
----------
49,493,868
==========
HEALTHCARE -- 4.61%
138,700 Landauer, Inc. .............................. 5,656,186
324,175 Penwest Pharmaceutical Co. (b) .............. 5,601,744
77,650 Young Innovations, Inc. ..................... 2,795,400
----------
14,053,330
==========
MEDIA & ENTERTAINMENT -- 2.15%
1,034,900 Regent Communications, Inc. (b) ............. 6,571,615
==========
REAL ESTATE INVESTMENT TRUSTS -- 3.13%
351,600 Lasalle Hotel Properties .................... 6,522,180
152,100 One Liberty Properties, Inc. ................ 3,034,395
----------
9,556,575
==========
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
2 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON ENTERPRISE FUND (CONTINUED)
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
TECHNOLOGY -- 18.09%
209,500 Allied Defense Group, Inc. (b) .............. $ 5,009,145
89,400 Covansys Corp. (b) .......................... 983,400
318,900 EDO Corp. ................................... 7,860,884
278,300 EMS Technologies, Inc. (b) .................. 5,716,282
399,900 Fargo Electronics, Inc. (b) ................. 5,086,728
306,600 GTSI Corp. (b) .............................. 4,246,717
284,800 Herley Industries, Inc. (b) ................. 5,895,360
436,000 Integrated Electrical
Services, Inc. (b) .......................... 4,033,000
273,300 Spectrum Control, Inc. (b) .................. 2,175,741
164,300 Trimble Navigation Ltd. (b) ................. 6,118,532
705,900 Tyler Technologies, Inc. (b) ................ 6,797,817
75,600 Zygo Corp. (b) .............................. 1,246,644
------------
55,170,250
============
TRANSPORTATION & SERVICES -- 3.52%
303,000 ABM Industries, Inc. ........................ 5,275,229
46,500 Old Dominion Freight Line (b) ............... 1,584,720
109,273 Rush Enterprises, Inc. Cl. A (b) ............ 1,069,783
160,094 SCS Transportation, Inc. (b) ................ 2,814,453
------------
10,744,185
============
UTILITIES -- 1.64%
106,700 Central Vermont Public Service Co. .......... 2,507,450
97,000 Unitil Corp. ................................ 2,502,600
------------
5,010,050
============
TOTAL COMMON STOCKS ............................................. 279,473,215
(COST $192,743,286) ============
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
OR SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SPONSORED AND AGENCY
OBLIGATIONS -- 4.39%
FEDERAL HOME LOAN BANK DISCOUNT NOTES -- 4.39%
$13,390,000 0.60%, 01/02/04 .................................. $ 13,389,554
============
TOTAL U.S. GOVERNMENT SPONSORED AND
AGENCY OBLIGATIONS .............................................. 13,389,554
(COST $13,389,777) ============
INVESTMENT COMPANIES -- 4.03%
12,293,175 Wells Fargo Prime Investment
Money Market .................................... 12,293,175
============
TOTAL INVESTMENT COMPANIES ...................................... 12,293,175
(COST $12,293,175) ============
TOTAL INVESTMENTS ............................................... 305,155,944
(COST $218,426,238) (a) -- 100.03%
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.03)% ................ (46,265)
============
NET ASSETS -- 100.00% ........................................... $305,109,679
============
(a) SEE NOTES TO FINANCIAL STATEMENTS FOR UNREALIZED APPRECIATION
(DEPRECIATION) OF SECURITIES.
(b) NON-INCOME PRODUCING SECURITY.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BABSON ENTERPRISE FUND II
- --------------------------------------------------------------------------------
During Reporting Period, equity markets benefited from a surge in positive
investor psychology, renewed interest in stock investing and a recovering U.S.
economy. Companies associated with shaky fundamentals, low stock prices and
higher risk characteristics quickly emerged as key beneficiaries of this
changing equity market dynamic. Additionally, stocks that generally suffered the
most during the recent bear market such as technology issues rebounded strongly
during the second half of 2003. Economically sensitive sectors including
producer durables and materials & processing also realized highly favorable
performance.
The Babson Enterprise II Fund realized highly favorable results during the
Reporting Period, outperforming its benchmark, The Russell 2000 Index(R).
Results were driven by favorable stock selection in the financial services,
technology and consumer discretionary sectors. The financial services sector is
an area that has been particularly strong for the Fund throughout 2003. A number
of core positions in small regional banks added considerable value relative to
the Fund's benchmark. In the consumer discretionary sector, a number of the
Fund's specialty retail and service companies drove stock selection results. An
area of additional strength for the Fund was the health care sector, which
trailed the broader small cap market during the fourth quarter.
While weakness during the Reporting Period was not widespread, stock selection
results in the producer durables and other energy sectors did trail the
benchmark. However, it is worth noting that the Fund's results in producer
durables were highly favorable, but trailed the brisk results for the benchmark
in this sector.
- --------------------------------------------------------------------------------
FUND COMPOSITION
- --------------------------------------------------------------------------------
TOP HOLDINGS % OF TOTAL
--------------------------------- -----------
POLYMEDICA CORP. ................ 3.7%
CARLISLE COS., INC. ............. 3.5
CUNO INC. ....................... 3.2
HARMAN INTL ..................... 3.0
MOHAWK INDUSTRIES INC. .......... 2.9
RESPIRONICS INC. ................ 2.9
NEW YORK COMM. BANCORP .......... 2.7
PSS WORLD MEDICAL, INC. ......... 2.7
UCBH HOLDINGS, INC. ............. 2.6
ALBERTO CULVER CO. .............. 2.3
----
TOTAL ........................... 29.5%
- --------------------------------------------------------------------------------
AS OF DECEMBER 31, 2003, SCHEDULE OF INVESTMENTS. SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
4 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON ENTERPRISE FUND II
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.25%
BASIC MATERIALS -- 13.62%
56,400 ElkCorp ...................................... $1,505,880
18,700 Georgia Gulf Corp. ........................... 540,056
188,600 Interface, Inc., Cl. A (b) ................... 1,042,958
127,200 Intertape Polymer Group, Inc. (b) ............ 1,619,256
33,900 Millennium Chemicals, Inc. ................... 429,852
28,687 Mohawk Industries, Inc. (b) .................. 2,023,581
30,200 New England Business Service, Inc. ........... 890,900
56,500 Spartech Corp. ............................... 1,392,160
----------
9,444,643
==========
CAPITAL GOODS -- 9.79%
36,200 A.O. Smith Corp. ............................. 1,268,810
48,600 Cuno, Inc. (b) ............................... 2,188,458
40,600 Gardner Denver, Inc. (b) ..................... 969,122
27,000 Herman Miller, Inc. .......................... 655,290
24,300 Lindsay Manufacturing Co. .................... 613,575
14,500 Roper Industries, Inc. ....................... 714,270
68,891 Surebeam Corp. (b) ........................... 16,362
8,400 Tennant Co. .................................. 363,720
----------
6,789,607
==========
CONSUMER CYCLICAL -- 17.89%
39,450 ADVO, Inc. ................................... 1,252,932
30,750 Ann Taylor Stores Corp. (b) .................. 1,199,250
37,100 BJ's Wholesale Club, Inc. (b) ................ 851,816
68,700 Casual Male Retail Group, Inc. (b) ........... 476,778
49,200 Charming Shoppes, Inc. (b) ................... 265,680
95,700 Enesco Group, Inc. (b) ....................... 987,624
58,600 Huffy Corp. (b) .............................. 307,650
72,500 La-Z-Boy, Inc. ............................... 1,521,050
54,300 Movado Group, Inc. ........................... 1,532,889
46,400 Princeton Review, Inc. (b) ................... 452,400
25,800 Red Robin Gourmet
Burgers, Inc. (b) ............................ 785,352
30,450 SCP Pool Corp. (b) ........................... 995,106
68,800 Stein Mart, Inc. (b) ......................... 566,912
91,200 Stride Rite Corp. ............................ 1,037,856
22,400 Ultimate Electronics, Inc. (b) ............... 170,912
----------
12,404,207
==========
CONSUMER STAPLES -- 2.35%
25,800 Alberto-Culver Co., Cl. B .................... 1,627,464
==========
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
DIVERSIFIED -- 3.50%
39,900 Carlisle Cos., Inc. .......................... $2,428,314
==========
ENERGY -- 0.77%
111,600 Newpark Resources, Inc. (b) .................. 534,564
==========
FINANCIAL -- 19.80%
11,400 Bank of the Ozarks, Inc. ..................... 256,614
18,400 Banner Corp. ................................. 462,760
70,608 Cash America International, Inc. ............. 1,495,477
16,284 Commerce Bancorp, Inc. ....................... 857,841
22,650 Delphi Financial Group, Inc., Cl. A .......... 815,400
7,200 East-West Bancorp, Inc. ...................... 386,496
30,200 First Niagara Financial Group, Inc. .......... 450,282
21,744 FNB Corp. .................................... 770,825
46,000 Gold Banc Corporation, Inc. .................. 646,760
24,200 Hub International Ltd. ....................... 405,592
50,078 New York Community Bancorp, Inc. ............. 1,905,468
15,200 Platinum Underwriters
Holdings Ltd. ................................ 456,000
11,400 ProAssurance Corp. (b) ....................... 366,510
27,600 Scottish Annuity &
Life Holdings Ltd. ........................... 573,528
15,700 SL Green Realty Corp. ........................ 644,485
4,300 Sun Bancorp, Inc. (b) ........................ 113,520
45,900 UCBH Holdings, Inc. .......................... 1,788,723
5,400 United Fire & Casualty Co. ................... 217,944
59,593 W Holding Co., Inc. .......................... 1,109,026
----------
13,723,251
==========
HEALTHCARE -- 10.23%
31,900 Inverness Medical
Innovation, Inc. (b) ......................... 694,782
97,800 PolyMedica Corp. ............................. 2,573,118
152,475 PSS World Medical, Inc. (b) .................. 1,840,373
44,100 Respironics, Inc. (b) ........................ 1,988,469
----------
7,096,742
==========
MEDIA & ENTERTAINMENT -- 1.51%
38,600 Salem Communications Corp.,
Cl. A (b) .................................... 1,046,832
==========
SEE NOTES TO FINANCIAL STATEMENTS. CONTINUED ON NEXT PAGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON ENTERPRISE FUND II (CONTINUED)
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
TECHNOLOGY -- 9.40%
82,100 Aeroflex, Inc. (b) ................................ $ 959,749
23,700 Benchmark Electronics, Inc. (b) ................... 824,997
35,500 Borland Software Corp. (b) ........................ 345,415
39,900 Boston Communications Group (b) ................... 370,671
43,500 Cubic Corp. ....................................... 1,000,500
28,000 JDA Software Group, Inc. (b) ...................... 462,280
17,200 MKS Instruments, Inc. (b) ......................... 498,800
39,000 PAXAR Corp. (b) ................................... 522,600
72,000 Skyworks Solutions, Inc. (b) ...................... 626,400
26,800 Technitrol, Inc. (b) .............................. 555,832
21,200 Zygo Corp. (b) .................................... 349,588
-----------
6,516,832
===========
TRANSPORTATION & SERVICES -- 5.89%
27,500 Arkansas Best Corp. ............................... 863,225
27,800 Harman International
Industries, Inc. .................................. 2,056,644
68,300 Wabtec Corp. ...................................... 1,163,832
-----------
4,083,701
===========
UTILITIES -- 2.50%
25,700 Energen Corp. ..................................... 1,054,471
14,700 WPS Resources Corp. ............................... 679,581
-----------
1,734,052
===========
TOTAL COMMON STOCKS ............................................. 67,430,209
(COST $42,490,379) ===========
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES -- 2.81%
1,951,511 Wells Fargo Prime Investment
Money Market ...................................... $ 1,951,511
===========
TOTAL INVESTMENT COMPANIES ...................................... 1,951,511
(COST $1,951,511) ===========
TOTAL INVESTMENTS ............................................... 69,381,720
(COST $44,441,890) (a) -- 100.06%
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.06)% ................ (20,930)
===========
NET ASSETS -- 100.00% ........................................... $69,360,790
===========
(a) SEE NOTES TO FINANCIAL STATEMENTS FOR UNREALIZED APPRECIATION
(DEPRECIATION) OF SECURITIES.
(b) NON-INCOME PRODUCING SECURITY.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BABSON GROWTH FUND
- --------------------------------------------------------------------------------
During Reporting Period, equity markets benefited from a surge in positive
investor psychology, renewed interest in stock investing and a recovering U.S.
economy. Companies associated with shaky fundamentals, low stock prices and
higher risk characteristics quickly emerged as key beneficiaries of this
changing equity market dynamic. Additionally, stocks that generally suffered the
most during the recent bear market such as technology issues rebounded strongly
during the second half of 2003. Economically sensitive sectors including
producer durables and materials & processing also realized highly favorable
performance.
During the reporting period, the Babson Growth Fund modestly underperformed its
benchmark, the S&P 500 Index(R). This underperformance was due primarily to weak
stock selection in the consumer discretionary sector. An overall investment
environment that favored smaller cap stocks and renewed speculation on behalf of
many investors also hurt the Fund in the second half of 2003. The Fund's strong
emphasis on fundamentals, particularly visible growth, was not rewarded in this
environment. Also detracting from results was the Fund's moderate overweight
position in the health care sector, which was the lowest performing sector for
the S&P 500 Index(R) during the Reporting Period.
On a positive note, stock selection results for the Fund in the technology and
health care sectors were highly favorable. In health care, Fund's holdings
relating to health care supplies and equipment realized strong results. In
technology, the Fund's emphasis on semiconductor companies and software
providers added considerable value, as these previously troubled industries
rebounded in the 2003 market rally.
- --------------------------------------------------------------------------------
FUND COMPOSITION
- --------------------------------------------------------------------------------
TOP HOLDINGS % OF TOTAL
--------------------------------- -----------
MICROSOFT CORP. ................... 4.1%
AMGEN, INC. ....................... 3.8
AMERICAN INT'L GROUP .............. 3.7
CITIGROUP, INC. ................... 3.6
MEDTRONIC, INC. ................... 3.4
EXXON MOBIL CORP. ................. 3.3
MAXIM INTEGRATED PRODUCTS ......... 3.1
LINEAR TECHNOLOGY CORP. ........... 3.0
BERKSHIRE HATHAWAY CL-B ........... 3.0
ZIMMER HOLDINGS INC. .............. 3.0
----
TOTAL ............................. 34.0%
- --------------------------------------------------------------------------------
AS OF DECEMBER 31, 2003, SCHEDULE OF INVESTMENTS. SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON GROWTH FUND
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.37%
CAPITAL GOODS -- 9.30%
62,400 Air Products & Chemical, Inc. ............... $ 3,296,592
117,500 Expeditors International of
Washington, Inc. ............................ 4,425,050
115,100 General Electric Co. ........................ 3,565,798
44,100 Lockheed Martin Corp. ....................... 2,266,740
95,500 Parker-Hannifin Corp. ....................... 5,682,250
------------
19,236,430
============
CONSUMER CYCLICAL -- 12.45%
106,300 Bed Bath & Beyond, Inc. (b) ................. 4,608,105
95,100 Clear Channel Communications, Inc. 4,453,533
14,200 New York Times Co., Cl. A ................... 678,618
134,400 Viacom, Inc., Cl. A ......................... 5,949,888
113,900 Wal-Mart Stores, Inc. ....................... 6,042,395
110,400 Walgreen Co. ................................ 4,016,352
------------
25,748,891
============
CONSUMER STAPLES -- 6.53%
57,600 Anheuser Busch Companies, Inc. .............. 3,034,368
96,200 Gillette Co. ................................ 3,533,426
77,700 PepsiCo, Inc. ............................... 3,622,374
33,300 Procter & Gamble Co. ........................ 3,326,004
------------
13,516,172
============
ENERGY -- 6.33%
102,200 BP Amoco PLC ADR ............................ 5,043,570
167,774 Exxon Mobil Corp. ........................... 6,878,734
22,400 Royal Dutch Petroleum Co. ADR ............... 1,173,536
------------
13,095,840
============
FINANCIAL -- 21.06%
137,000 AFLAC, Inc. ................................. 4,956,660
110,700 American Express Co. ........................ 5,339,061
114,518 American International Group, Inc. .......... 7,590,253
2,200 Berkshire Hathaway, Inc., Cl. B (b) ......... 6,193,000
5,100 China Life Insurance Co., Ltd.
ADR (b) ..................................... 168,147
154,666 Citigroup, Inc. ............................. 7,507,488
30,900 Fifth Third Bancorp ......................... 1,826,190
44,000 Freddie Mac ................................. 2,566,080
108,000 SLM Corp. ................................... 4,069,440
57,000 Wells Fargo & Co. ........................... 3,356,730
------------
43,573,049
============
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
HEALTHCARE -- 17.25%
126,100 Amgen, Inc. (b) ............................. $ 7,792,980
97,500 Johnson & Johnson, Inc. ..................... 5,036,850
143,200 Medtronic, Inc. ............................. 6,960,952
170,600 Pfizer, Inc. ................................ 6,027,298
43,500 Stryker Corp. ............................... 3,697,935
87,800 Zimmer Holdings, Inc. (b) ................... 6,181,120
------------
35,697,135
============
TECHNOLOGY -- 22.13%
133,200 Analog Devices, Inc. (b) .................... 6,080,580
106,500 Automatic Data Processing, Inc. ............. 4,218,465
103,450 Fiserv, Inc. (b) ............................ 4,087,310
147,700 Linear Technology Corp. ..................... 6,213,739
129,700 Maxim Integrated Products, Inc. (b) ......... 6,459,060
90,200 Microchip Technology, Inc. .................. 3,009,072
308,800 Microsoft Corp. ............................. 8,504,351
54,900 Molex, Inc. ................................. 1,915,461
153,100 Symantec Corp. (b) .......................... 5,304,915
------------
45,792,953
============
UTILITIES -- 2.32%
191,900 Vodafone Group PLC ADR ...................... 4,805,176
============
TOTAL COMMON STOCKS ............................................. 201,465,646
(COST $144,656,025) ============
INVESTMENT COMPANIES -- 2.66%
5,493,502 Wells Fargo Prime Investment
Money Market Fund ........................... 5,493,502
============
TOTAL INVESTMENT COMPANIES ...................................... 5,493,502
(COST $5,493,502) ============
TOTAL INVESTMENTS -- 100.03% .................................... 206,959,148
(COST $150,149,527) (a)
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.03)% ................ (42,493)
============
NET ASSETS -- 100.00% ........................................... $206,916,655
============
(a) SEE NOTES TO FINANCIAL STATEMENTS FOR UNREALIZED APPRECIATION
(DEPRECIATION) OF SECURITIES.
(b) NON-INCOME PRODUCING SECURITY.
ADR AMERICAN DEPOSITORY RECEIPT.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHADOW STOCK FUND
- --------------------------------------------------------------------------------
During Reporting Period, equity markets benefited from a surge in positive
investor psychology, renewed interest in stock investing and a recovering U.S.
economy. Companies associated with shaky fundamentals, low stock prices and
higher risk characteristics quickly emerged as key beneficiaries of this
changing equity market dynamic. Additionally, stocks that generally suffered the
most during the recent bear market such as technology issues rebounded strongly
during the second half of 2003. Economically sensitive sectors including
producer durables and materials & processing also realized highly favorable
performance.
During the Reporting Period, the Babson Shadow Stock Fund outperformed its
benchmark, the Russell 2000 Value Index(R). The Reporting Period featured an
almost ideal performance pattern for the Shadow Stock Fund, as the smallest of
small cap stocks were rewarded handsomely throughout the year. Additionally, the
Fund's prescribed methodology of overweighting technology stocks and
underweighting financial services stocks added value to results. An additional
area of strength was stock selection in the health care holdings
The Fund was fortunate to have few areas of weakness during the Reporting
Period. However, the Fund's prescribed methodology of overweighting consumer
discretionary stocks detracted from results as did stock selection in the
utilities and autos and transportation sectors.
- --------------------------------------------------------------------------------
FUND COMPOSITION
- --------------------------------------------------------------------------------
TOP HOLDINGS % OF TOTAL
--------------------------------- -----------
STEWART INFORMATION SERVICES 1.3%
MERITAGE CORP. ................... 1.2
WILLIAM LYON HOMES INC. .......... 1.2
IMAGISTICS INTERNATIONAL ......... 1.2
CSK AUTO CORP. ................... 1.1
FINISH LINE CL A ................. 1.1
MICROSEMI CORP. .................. 1.1
URS CORP. ........................ 1.0
SANDERSON FARMS INC. ............. 1.0
ISLE OF CAPRIS CASINO ............ 1.0
----
TOTAL ............................ 11.2%
- --------------------------------------------------------------------------------
AS OF DECEMBER 31, 2003, SCHEDULE OF INVESTMENTS. SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
SHADOW STOCK FUND
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.28%
BASIC MATERIALS -- 5.25%
22,151 Aceto Corp. .................................. $ 565,737
40,000 AMCOL International Corp. .................... 812,000
17,200 American Pacific Corp. ....................... 165,120
36,800 Encore Wire Corp. (b) ........................ 651,728
42,000 Ennis Business Forms, Inc. ................... 642,600
16,600 Fibermark, Inc. (b) .......................... 29,050
34,000 Gibraltar Steel Corp. ........................ 855,100
96,400 North American Palladium Ltd. (b) ............ 764,452
15,800 Northwest Pipe Co. (b) ....................... 210,456
26,000 Octel Corp. .................................. 511,940
26,700 Roanoke Electric Steel Corp. ................. 355,911
45,000 RTI International Metals, Inc. (b) ........... 759,150
19,000 Stepan Co. ................................... 487,350
7,700 United States Lime & Minerals, Inc. .......... 51,975
15,000 Universal Stainless & Alloy
Products, Inc. (b) ........................... 162,000
2,200 Vulcan International Corp. ................... 96,250
37,000 Wolverine Tube, Inc. (b) ..................... 233,100
----------
7,353,919
==========
CAPITAL GOODS -- 14.97%
7,300 American Biltrite, Inc. ...................... 56,210
50,000 Anaren, Inc. (b) ............................. 706,000
7,500 Badger Meter, Inc. ........................... 286,125
72,000 Buckeye Technologies, Inc. (b) ............... 723,600
39,000 Building Materials Holding Corp. ............. 605,670
27,800 Cascade Corp. ................................ 619,940
1,800 Chicago Rivet & Machine Co. .................. 48,618
33,000 CIRCOR International, Inc. ................... 795,300
17,000 Compudyne Corp. (b) .......................... 173,264
30,000 CompX International, Inc. .................... 192,000
12,700 CPAC, Inc. ................................... 76,708
17,000 Dominion Homes, Inc. (b) ..................... 515,610
37,000 Drill-Quip, Inc. (b) ......................... 603,100
25,000 Ducommun, Inc. (b) ........................... 558,750
7,800 Eastern (The) Co. ............................ 121,992
7,315 Ecology and Environment, Inc.,
Cl. A ........................................ 71,321
13,600 Gehl Co. (b) ................................. 193,120
3,150 Graham Corp. ................................. 32,130
26,000 Gundle/SLT Environmental, Inc. (b) ........... 539,760
21,750 Hardinge, Inc. ............................... 251,865
39,000 Heico Corp. .................................. 709,800
7,000 Jinpan International Ltd. .................... 92,330
22,000 Keith (The) Cos., Inc. (b) ................... 299,640
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
9,807 Knape & Vogt Manufacturing Co. ............... $ 117,096
25,000 Ladish Co., Inc. (b) ......................... 202,775
7,600 Liberty Homes, Inc., Cl. A ................... 38,456
44,750 LSI Industries, Inc. ......................... 604,125
14,000 Lufkin Industries, Inc. ...................... 403,060
30,800 M/I Homes, Inc. .............................. 1,202,740
26,000 Meritage Corp. (b) ........................... 1,724,061
21,300 Mestek, Inc. (b) ............................. 410,238
18,816 Met-Pro Corp. ................................ 303,878
19,800 Michael Baker Corp. (b) ...................... 204,930
32,000 Mobile Mini, Inc. (b) ........................ 631,040
10,562 Mod-Pac Corp. (b) ............................ 84,390
34,500 Natco Group, Inc., Cl. A (b) ................. 261,855
9,300 Nobility Homes, Inc. ......................... 99,045
9,000 Noland Co. ................................... 373,500
5,000 P & F Industries, Inc., Cl. A (b) ............ 43,000
30,000 Palm Harbor Homes, Inc. (b) .................. 536,100
4,600 Quipp, Inc. (b) .............................. 52,895
32,000 Robbins & Myers, Inc. ........................ 607,680
70,000 Semitool, Inc. (b) ........................... 750,470
10,300 Summa Industries, Inc. (b) ................... 90,846
29,000 Technical Olympic USA, Inc. (b) .............. 798,370
57,000 URS Corp. (b) ................................ 1,425,570
27,000 William Lyon Homes, Inc. (b) ................. 1,694,790
9,000 Williams Industries, Inc. (b) ................ 35,100
----------
20,968,863
==========
CONSUMER CYCLICAL -- 23.68%
12,800 Ag Services of America, Inc. (b) ............. 108,544
2,800 Allen Organ Co., Cl. B ....................... 129,500
21,800 Ambassadors International, Inc. .............. 272,500
25,000 AMERCO (b) ................................... 537,500
60,000 Applica, Inc. ................................ 456,000
40,000 Ashworth, Inc. (b) ........................... 322,800
65,000 Audiovox Corp., Cl. A (b) .................... 834,600
19,000 Benihana, Inc., Cl. A (b) .................... 244,150
52,000 Bluegreen Corp. (b) .......................... 324,480
32,000 Bon-Ton Stores, Inc. ......................... 355,200
12,127 Bowl America, Inc., Cl. A .................... 170,688
37,500 Brookstone, Inc. (b) ......................... 799,125
37,000 Buca, Inc. (b) ............................... 251,970
45,000 Charlotte Russe Holding, Inc. (b) ............ 623,700
41,000 Cole National Corp., Cl. A (b) ............... 820,000
34,000 Consolidated Graphics, Inc. (b) .............. 1,073,720
85,000 CSK Auto Corp. (b) ........................... 1,595,450
25,000 CSS Industries, Inc. ......................... 775,250
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
10 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
SHADOW STOCK FUND (CONTINUED)
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
32,000 Cutter & Buck, Inc. (b) ...................... $ 300,160
39,400 Dave & Buster's, Inc. (b) .................... 499,592
30,000 DEB Shops, Inc. .............................. 645,000
39,000 Department 56, Inc. (b) ...................... 510,900
9,500 Duckwall-ALCO Stores, Inc. (b) ............... 149,150
13,860 Edelbrock Corp. .............................. 174,220
40,000 Electro Rent Corp. (b) ....................... 533,600
7,500 Equity Marketing, Inc. (b) ................... 105,750
2,656 Federal Screw Works .......................... 100,397
50,000 Finish (The) Line, Inc., Cl. A (b) ........... 1,498,500
20,000 Finlay Enterprises, Inc. (b) ................. 282,600
43,000 Friedman's, Inc., Cl. A ...................... 288,530
2,250 FRMO Corp. (b) ............................... 1,193
13,000 Garden Fresh Restaurant Corp. (b) ............ 208,780
90,000 Goody's Family Clothing, Inc. ................ 842,400
9,000 Hampshire Group Ltd. (b) ..................... 282,330
34,000 II-VI, Inc. (b) .............................. 877,200
45,000 Imagistics International, Inc. (b) ........... 1,687,499
65,000 Isle of Capri Casinos, Inc. (b) .............. 1,395,550
58,000 JAKKS Pacific, Inc. (b) ...................... 763,280
29,657 K2, Inc. (b) ................................. 451,083
38,000 Marinemax, Inc. (b) .......................... 738,340
36,750 Maxwell Shoe Co., Inc., Cl. A (b) ............ 623,648
20,000 Midas, Inc. (b) .............................. 286,000
22,500 Monro Muffler Brake, Inc. (b) ................ 450,225
25,400 Movado Group, Inc. ........................... 717,042
22,000 National R.V. Holdings, Inc. (b) ............. 218,900
18,500 Perry Ellis International, Inc. (b) .......... 476,930
69,000 Pinnacle Entertainment, Inc. (b) ............. 643,080
89,000 Prime Hospitality Corp. (b) .................. 907,800
43,400 Quaker Fabric Corp. .......................... 412,300
37,550 Rex Stores Corp. (b) ......................... 531,708
11,300 S & K Famous Brands, Inc. (b) ................ 194,925
27,000 Shoe Carnival, Inc. (b) ...................... 480,600
55,000 Source Interlink Co., Inc. (b) ............... 584,100
12,000 Sport Chalet, Inc. (b) ....................... 117,600
24,000 Sports Authority, Inc. (b) ................... 921,600
95,000 Stein Mart, Inc. (b) ......................... 782,800
22,000 Steinway Musical
Instruments, Inc. (b) ........................ 543,400
15,000 Superior Uniform Group, Inc. ................. 246,750
40,000 Syms Corp. (b) ............................... 275,600
38,600 Tarrant Apparel Group (b) .................... 138,574
32,000 Ultimate Electronics, Inc. (b) ............... 244,160
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
39,000 Vans, Inc. (b) ............................... $ 444,990
11,700 Weyco Group, Inc. ............................ 393,693
33,000 Whitehall Jewellers, Inc. (b) ................ 325,710
52,000 Wilsons, The Leather
Experts, Inc. (b) ............................ 181,480
----------
33,174,846
==========
CONSUMER STAPLES -- 4.47%
9,300 Cagle's, Inc., Cl. A (b) ..................... 82,770
26,000 Chalone (The) Wine Group Ltd. (b) ............ 228,800
53,000 Elizabeth Arden, Inc. (b) .................... 1,055,760
1,700 Foodarama Supermarkets, Inc. (b) ............. 45,985
11,000 Fresh Brands, Inc. ........................... 121,000
3,200 Genesee Corp., Cl. B ......................... 11,552
52,000 Ingles Markets, Inc., Cl. A .................. 534,040
14,000 Lifetime Hoan Corp. .......................... 236,600
39,000 M & F Worldwide Corp. (b) .................... 521,040
17,425 Marsh Supermarkets, Inc., Cl. A .............. 189,061
28,125 Marsh Supermarkets, Inc., Cl. B .............. 303,750
30,000 Natures Sunshine Products, Inc. .............. 253,500
35,050 Sanderson Farms, Inc. ........................ 1,412,515
52,000 Spartan Stores, Inc. (b) ..................... 260,000
36,000 Standard Commercial Corp. .................... 722,520
23,000 Water Pik Technologies, Inc. (b) ............. 282,210
----------
6,261,103
==========
DIVERSIFIED -- 6.00%
18,400 Andersons (The), Inc. ........................ 293,793
21,125 Astronics Corp. (b) .......................... 105,625
20,000 Carlisle Holdings Ltd. (b) ................... 123,000
9,000 Childtime Learning Centers, Inc. (b) ......... 17,910
32,000 Cornell Corrections, Inc. (b) ................ 436,800
15,800 Exponet, Inc. (b) ............................ 338,120
39,800 IShares Russell 2000 Value
Index Fund ................................... 6,383,919
4,500 McRae Industries, Inc., Cl. A ................ 45,000
24,000 New Horizons Worldwide, Inc. (b) ............. 136,536
14,300 Nobel Learning
Communities, Inc. (b) ........................ 76,934
2,700 Scope Industries ............................. 201,285
13,800 SL Industries, Inc. (b) ...................... 110,676
12,000 Sun Hydraulics Corp. ......................... 86,280
3,350 VSE Corp. .................................... 44,388
----------
8,400,266
==========
SEE NOTES TO FINANCIAL STATEMENTS. CONTINUED ON NEXT PAGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
SHADOW STOCK FUND (CONTINUED)
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
ENERGY -- 3.59%
30,000 Callon Petroleum Corp. (b) ................... $ 311,100
31,000 Carrizo Oil & Gas, Inc. (b) .................. 223,231
21,000 Giant Industries, Inc. (b) ................... 251,580
76,000 Harvest Natural Resources, Inc. (b) .......... 756,200
23,000 PetroCorp, Inc. (b) .......................... 309,580
35,000 Petrofund Energy Trust ....................... 506,100
33,000 Petroleum Development Corp. (b) .............. 782,100
37,000 Resource America, Inc., Cl. A ................ 555,000
60,200 RPC, Inc. .................................... 661,598
40,000 Semco Energy, Inc. ........................... 196,000
22,000 Torch Energy Royalty Trust ................... 126,720
55,000 Transmontaigne, Inc. (b) ..................... 354,750
----------
5,033,959
==========
FINANCIAL -- 10.44%
23,000 America's Car-Mart, Inc. (b) ................. 619,160
8,766 American Business Financial
Services, Inc. ............................... 37,696
37,000 American Home Mortgage
Investment Corp. ............................. 832,870
10,500 Bancinsurance Corp. (b) ...................... 80,535
8,300 Brantley Capital Corp. ....................... 84,660
29,000 California First National Bancorp ............ 414,700
15,452 Cotton States Life Insurance Co. ............. 304,713
5,000 Credit Acceptance Corp. (b) .................. 76,500
28,000 Danielson Holding Corp. (b) .................. 81,480
16,200 Donegal Group, Inc., Cl. A ................... 356,724
7,000 Donegal Group, Inc., Cl. B ................... 134,750
33,000 DVI, Inc. (b) ................................ 1,320
20,000 EMC Insurance Group, Inc. .................... 422,800
24,725 First Albany Cos., Inc. ...................... 347,139
22,000 First Cash Financial
Services, Inc. (b) ........................... 564,102
5,300 Investors Title Co. .......................... 164,358
13,000 Matrix Bankcorp, Inc. (b) .................... 120,250
18,000 Maxcor Financial Group, Inc. ................. 232,902
9,000 Mego Financial Corp. (b) ..................... 405
5,000 Merchants Group, Inc. ........................ 119,100
86,000 MFA Mortgage Investments, Inc. ............... 838,500
29,000 MFC Bancorp Ltd. (b) ......................... 533,600
2,250 MFC Development Corp. (b) .................... 2,813
36,800 Midland (The) Co. ............................ 869,216
3,900 National Security Group, Inc. ................ 75,118
6,000 National Western Life Insurance
Co., Cl. A (b) ............................... 929,100
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
18,400 Navigators (The) Group, Inc. (b) ............. $ 568,008
55,000 Penn Treaty American Corp. (b) ............... 101,200
29,750 Penn-America Group, Inc. ..................... 394,783
65,000 PMA Capital Corp., Cl. A ..................... 332,800
28,500 PXRE Group Ltd. .............................. 671,745
35,000 Sanders Morris Harris Group, Inc. ............ 434,000
33,100 Sizeler Property Investors, Inc. ............. 354,501
45,000 Stewart Information Services Corp. ........... 1,824,749
6,000 Stifel Financial Corp. (b) ................... 117,000
38,000 SWS Group, Inc. .............................. 676,400
32,000 TALX Corp. ................................... 736,960
16,000 Trover Solutions, Inc. (b) ................... 106,080
4,600 Ziegler (The) Cos., Inc. ..................... 65,550
----------
14,628,287
==========
HEALTHCARE -- 4.76%
20,000 Air Methods Corp. (b) ........................ 179,600
17,000 Allou Health Care, Inc., Cl. A (b) ........... 17
8,000 American Shared Hospital Services ............ 48,000
22,000 Candela Corp. (b) ............................ 399,960
58,000 Ceres Group, Inc. (b) ........................ 338,720
31,000 D & K Healthcare Resources, Inc. ............. 420,360
40,000 DJ Orthopedics, Inc. (b) ..................... 1,072,000
25,000 Healthcare Services Group, Inc. .............. 482,250
6,100 Kewaunee Scientific Corp. .................... 64,050
20,000 Matria Healthcare, Inc. (b) .................. 422,600
64,000 Medical Staffing Network
Holdings, Inc. (b) ........................... 700,800
95,000 Nabi Biopharmaceuticals (b) .................. 1,207,450
26,000 PDI, Inc. (b) ................................ 697,060
46,000 Prime Medical Services, Inc. (b) ............. 215,740
52,000 Res-Care, Inc. (b) ........................... 421,200
----------
6,669,807
==========
TECHNOLOGY -- 12.22%
8,600 Ault, Inc. (b) ............................... 23,048
42,300 Bell Microproducts, Inc. (b) ................. 383,238
68,000 Computer Network Technologies
Corp. (b) .................................... 648,720
26,617 Del Global Technologies Corp. (b) ............ 54,831
2,967 Del Global Technologies Corp.
Warrants ..................................... 1,335
27,450 Diodes, Inc. (b) ............................. 521,550
43,400 EDO Corp. .................................... 1,069,810
20,000 ePlus, Inc. (b) .............................. 246,620
50,000 ESS Technology, Inc. (b) ..................... 850,500
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
12 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
SHADOW STOCK FUND (CONTINUED)
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
20,000 GTSI Corp. (b) ................................ $ 277,020
24,000 Inforte Corp. (b) ............................. 198,960
79,000 Integrated Electrical
Services, Inc. (b) ............................ 730,750
65,000 MCSI, Inc. (b) ................................ 202
75,000 Methode Electronics, Inc. ..................... 917,250
60,000 Microsemi Corp. (b) ........................... 1,474,800
41,000 Modtech Holdings, Inc. (b) .................... 344,810
42,000 Nu Horizons Electronics Corp. (b) ............. 411,600
67,000 NYFIX, Inc. (b) ............................... 532,650
8,000 Opticnet, Inc. (b) ............................ 80
61,000 PC Connection, Inc. (b) ....................... 510,570
32,000 Peak International Ltd. (b) ................... 179,200
28,800 Penn Engineering & Manufacturing
Corp. (Non-Voting) ............................ 548,064
6,400 Penn Engineering & Manufacturing
Corp., Cl. A (Voting) ......................... 109,760
56,000 Pericom Semiconductor Corp. (b) ............... 596,960
37,000 Plato Learning, Inc. (b) ...................... 390,350
26,000 Pomeroy Computer Resources, Inc. .............. 383,240
27,000 Powell Industries, Inc. (b) ................... 517,050
30,000 Richardson Electronics Ltd. ................... 368,700
22,000 Rofin-Sinar Technologies, Inc. (b) ............ 760,320
33,000 SBS Technologies, Inc. (b) .................... 485,430
59,000 Stoneridge, Inc. (b) .......................... 887,950
31,000 Sypris Solutions, Inc. ........................ 521,110
10,000 Tessco Technologies, Inc. (b) ................. 141,600
41,000 Tier Technologies, Inc. (b) ................... 334,970
30,000 Trikon Technologies, Inc. (b) ................. 168,300
104,000 Ulticom, Inc. (b) ............................. 1,003,600
8,760 Video Display Corp. ........................... 107,310
82,000 Zomax, Inc. (b) ............................... 409,180
-----------
17,111,438
===========
TELECOMMUNICATION SERVICES -- 1.32%
31,200 California Amplifier, Inc. (b) ................ 438,984
17,000 Communication Systems, Inc. ................... 136,170
37,000 Journal Communications, Inc. .................. 685,610
64,000 Lightbridge, Inc. (b) ......................... 582,400
-----------
1,843,164
===========
TRANSPORTATION & SERVICES -- 5.48%
34,000 Covenant Transport, Inc., Cl. A (b) ........... 646,340
12,000 International Shipholding Corp. (b) ........... 177,000
26,700 Interpool, Inc. ............................... 387,150
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
38,000 Knightsbridge Tankers Ltd. .................... $ 476,900
50,000 Mair Holdings, Inc. (b) ....................... 364,000
20,000 Maritrans, Inc. ............................... 334,200
29,250 Marten Transport Ltd. (b) ..................... 449,865
36,900 Navigant International, Inc. (b) .............. 511,065
23,000 Nordic American Tanker
Shipping Ltd. ................................. 346,150
23,250 Old Dominion Freight Line (b) ................. 792,360
26,100 P.A.M. Transportation
Services, Inc. (b) ............................ 556,713
10,600 Petroleum Helicopters, Inc. (b) ............... 259,700
78,000 RailAmerica, Inc. (b) ......................... 920,400
38,000 Stelmar Shipping Ltd. ......................... 830,680
20,200 Transport Corporation of
America, Inc. (b) ............................. 146,450
25,000 U.S. Xpress Enterprises,
Inc., Cl. A (b) ............................... 306,250
17,000 USA Truck, Inc. (b) ........................... 168,113
-----------
7,673,336
===========
UTILITIES -- 5.10%
34,000 American States Water Co. ..................... 849,999
30,554 California Water Service Group ................ 837,180
26,900 Cascade Natural Gas Corp. ..................... 567,321
12,700 Chesapeake Utilities Corp. .................... 330,835
19,500 Connecticut Water Service, Inc. ............... 539,175
7,000 Delta Natural Gas Co., Inc. ................... 167,020
9,000 EnergySouth, Inc. ............................. 315,000
8,000 Florida Public Utilities Co. .................. 126,280
13,500 Green Mountain Power Corp. .................... 318,600
3,900 Maine & Maritimes Corp. ....................... 136,539
24,400 Middlesex Water Co. ........................... 495,320
35,000 NUI Corp. ..................................... 564,200
4,500 RGC Resources, Inc. ........................... 102,825
4,800 SJW Corp. ..................................... 428,400
17,200 South Jersey Industries, Inc. ................. 696,600
23,551 Southwest Water Co. ........................... 377,994
11,476 Unitil Corp. .................................. 296,081
-----------
7,149,369
===========
TOTAL COMMON STOCKS ............................................. 136,268,357
(COST $98,976,577) ===========
SEE NOTES TO FINANCIAL STATEMENTS. CONTINUED ON NEXT PAGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
SHADOW STOCK FUND (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
OR SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SPONSORED AND AGENCY
OBLIGATIONS -- 2.28%
FEDERAL HOME LOAN BANK DISCOUNT NOTES -- 2.28%
$3,190,000 0.60%, 01/02/04 .................................. $ 3,190,000
============
TOTAL U.S. GOVERNMENT SPONSORED AND
AGENCY OBLIGATIONS .............................................. 3,190,000
(COST $3,189,947) ============
TOTAL INVESTMENTS ............................................... 139,458,357
(COST $102,166,524) (a) -- 99.56%
Other assets in excess of liabilities -- 0.44% .................. 627,042
============
NET ASSETS -- 100.00% ........................................... $140,085,399
============
(a) SEE NOTES TO FINANCIAL STATEMENTS FOR UNREALIZED APPRECIATION
(DEPRECIATION) OF SECURITIES.
(b) NON-INCOME PRODUCING SECURITY.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BABSON VALUE FUND
- --------------------------------------------------------------------------------
During Reporting Period, equity markets benefited from a surge in positive
investor psychology, renewed interest in stock investing and a recovering U.S.
economy. Companies associated with shaky fundamentals, low stock prices and
higher risk characteristics quickly emerged as key beneficiaries of this
changing equity market dynamic. Additionally, stocks that generally suffered the
most during the recent bear market such as technology issues rebounded strongly
during the second half of 2003. Economically sensitive sectors including
producer durables and materials & processing also realized highly favorable
performance.
During the Reporting Period, the Babson Value Fund underperformed its benchmark,
the Russell 1000 Value Index(R). The Fund's underperformance was driven by weak
stock selection in the technology, financial services and utilities sectors. In
each area the Fund's holdings generated positive results but failed to advance
as strongly as the benchmark's positions. The Fund's positions in the producer
durables sector also detracted from results.
The Fund did realize strong performance during the Reporting Period in the
health care sector, which was the weakest economic sector on a benchmark basis.
Additionally, the Fund's chemical holdings in the materials and processing
sector added considerable value.
- --------------------------------------------------------------------------------
FUND COMPOSITION
- --------------------------------------------------------------------------------
TOP HOLDINGS % OF TOTAL
--------------------------------- -----------
CITIGROUP, INC. .............. 3.7%
WEYERHAEUSER CO. ............. 3.3%
ROCKWELL COLLINS ............. 3.3%
EXXON MOBIL CORP. ............ 3.2%
AMERICAN INT'L GROUP ......... 3.2%
PPG INDUSTRIES INC. .......... 3.2%
DIAGEO PLC ADR ............... 3.0%
MC DONALDS ................... 2.9%
WELLS FARGO COMPANY .......... 2.9%
PFIZER, INC. ................. 2.7%
----
TOTAL ........................ 31.4%
- --------------------------------------------------------------------------------
AS OF DECEMBER 31, 2003, SCHEDULE OF INVESTMENTS. SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON VALUE FUND
- -------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS -- 99.13%
BASIC MATERIALS -- 10.10%
214,000 Dow Chemical Co. ............................ $ 8,895,980
127,100 du Pont (E.I.) de Nemours & Co. ............. 5,832,619
201,660 PPG Industries, Inc. ........................ 12,910,273
209,920 Weyerhaeuser Co. ............................ 13,434,880
------------
41,073,752
============
CAPITAL GOODS -- 6.47%
155,672 Lockheed Martin Corp. ....................... 8,001,541
84,500 Parker-Hannifin Corp. ....................... 5,027,750
443,200 Rockwell Collins, Inc. ...................... 13,309,296
------------
26,338,587
============
CONSUMER CYCLICAL -- 11.96%
276,900 (The) Walt Disney Co. ....................... 6,460,077
108,870 Gannett Co., Inc. ........................... 9,706,849
586,300 Limited Brands, Inc. ........................ 10,570,989
478,500 McDonald's Corp. ............................ 11,881,155
339,740 Waste Management, Inc. ...................... 10,056,304
------------
48,675,374
============
CONSUMER STAPLES -- 8.57%
233,400 Diageo PLC ADR .............................. 12,337,524
263,100 H.J. Heinz Co. .............................. 9,584,733
213,200 Kellogg Co. ................................. 8,118,656
799,700 Rite Aid Corp. (b) .......................... 4,830,188
------------
34,871,101
============
ENERGY -- 7.94%
198,732 BP Amoco PLC ADR ............................ 9,807,424
322,300 Exxon Mobil Corp. ........................... 13,214,300
176,900 Royal Dutch Petroleum Co. ADR ............... 9,267,791
------------
32,289,515
============
FINANCIAL -- 32.27%
144,100 AFLAC, Inc. ................................. 5,213,538
191,950 Allstate Corp. .............................. 8,257,689
198,100 American Express Co. ........................ 9,554,363
197,800 American International Group, Inc. .......... 13,110,184
112,000 Bank of America Corp. ....................... 9,008,160
313,066 Citigroup, Inc. ............................. 15,196,224
63,100 Everest Re Group Ltd. ....................... 5,338,260
98,600 Fifth Third Bancorp ......................... 5,827,260
190,300 Freddie Mac ................................. 11,098,296
123,800 Morgan Stanley Dean Witter & Co. ............ 7,164,306
142,790 National City Corp. ......................... 4,846,293
166,600 Radian Group, Inc. .......................... 8,121,750
209,100 SLM Corp. ................................... 7,878,888
- -------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- -------------------------------------------------------------------------------
60,800 Student Loan Corp. .......................... $ 8,876,800
200,380 Wells Fargo & Co. ........................... 11,800,378
------------
131,292,389
============
HEALTHCARE -- 5.07%
330,800 Bristol-Myers Squibb Co. .................... 9,460,880
316,400 Pfizer, Inc. ................................ 11,178,412
------------
20,639,292
============
TECHNOLOGY -- 5.87%
464,400 Apple Computer, Inc. (b) .................... 9,924,228
120,200 Automatic Data Processing, Inc. ............. 4,761,122
99,220 International Business
Machines Corp. .............................. 9,195,710
------------
23,881,060
============
TELECOMMUNICATION SERVICES -- 3.60%
167,900 BCE, Inc. ................................... 3,754,244
310,800 Verizon Communications, Inc. ................ 10,902,864
------------
14,657,108
============
TRANSPORTATION & SERVICES -- 2.68%
156,700 Union Pacific Corp. ......................... 10,887,516
============
UTILITIES -- 4.60%
186,200 Entergy Corp. ............................... 10,637,606
63,200 Exelon Corp. ................................ 4,193,952
80,000 NSTAR ....................................... 3,880,000
------------
18,711,558
============
TOTAL COMMON STOCKS ........................................... 403,317,252
(COST $256,711,937) ============
INVESTMENT COMPANIES -- 0.94%
3,833,069 Wells Fargo Prime Investment
Money Market ................................ 3,833,069
============
TOTAL INVESTMENT COMPANIES .................................... 3,833,069
(COST $3,833,069) ============
TOTAL INVESTMENTS -- 100.07% .................................. 407,150,321
(COST $260,545,006) (a)
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.07)% .............. (297,559)
============
NET ASSETS -- 100.00% ......................................... $406,852,762
============
(a) SEE NOTES TO FINANCIAL STATEMENTS FOR UNREALIZED APPRECIATION
(DEPRECIATION) OF SECURITIES.
(b) NON-INCOME PRODUCING SECURITY.
ADR AMERICAN DEPOSITORY RECEIPT.
SEE NOTES TO FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------
16 BABSON FUNDS SEMIANNUAL REPORT
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BABSON-STEWART IVORY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
MARKET REVIEW
Global equity markets had a solid six months and finished the calendar year up
strongly. The MSCI EAFE index returned 26.7% over the six months ending 31
December 2003 and ended up 39.2% for the year, which resulted in 2003 being the
first year in the last four to deliver positive returns to investors. Economic
data around the globe, and particularly in the US, surprised on the upside which
supported stock markets. Over the period, all regions performed strongly
registering returns greater than 20%. Emerging markets was the top performing
region as it benefited from improving demand for its exports and stronger global
economic growth. Further, all MSCI sectors delivered double digit returns. The
materials sector outperformed other industry sectors due to the growing demand
for commodities, particularly from China, and a strong appetite for cyclical
stocks amongst investors.
FUND PERFORMANCE
The fund returned 21.4% during the six month to 31 December 2003, resulting in a
5.3% underperformance. Stocks that detracted from fund performance were:
Schering, due to disappointing results and a profit warning; Gamuda Berhad,
after the company lost a major rail project with the Malaysian government;
Yamato Transport, which reported poor first half earnings and downgraded its
full year result due to higher personnel costs; and Fuji Television Network,
which said its annual profits fell due to lower sales and losses on securities.
More generally, the fund's underweight exposure to Japan and the materials
sector held back performance. Stocks that positively contributed to fund
performance were: Vodafone, which delivered a good first half result due to
strength across the business; Mitsui & Co, which experienced a positive reaction
to its acquisition of additional LNG assets; Total, due to strong third quarter
profits and a production growth forecast of 5% per annum until 2007; and Irish
Life & Permanent, which continued to rise throughout the period after reporting
a good set of results in September.
FUND ACTIVITY -- PURCHASES
Twenty new companies were added to the fund over the period. These included
Reckitt Benckiser, a global leader in household cleaning products with high
growth prospects; and Heineken, a high quality company that has fallen out of
favour with the market. The opportunity to buy Shin-Etsu Chemical, a synthetic
resin and chemicals producer, arose after underperformance led to a cheap
valuation. A placing at a large discount to NAV created a good opportunity to
buy Hong Kong based Henderson Land, which is highly exposed to the positive
dynamics of the Hong Kong property sector.
H&M, GlaxoSmithKline and Macquarie Infrastructure Group were also purchased. H&M
is Europe's largest clothing retailer, the company has a strong earnings growth
outlook as it continues to roll out new stores in Europe and remains focused on
improving its purchasing processes. GlaxoSmithKline became attractive after its
share price declined and the prospect of more positive news flow from its drug
pipeline emerged at its R&D day. Macquarie Infrastructure Group has high quality
assets and the potential for an upward revaluation of its assets as it opens a
new toll road in the UK.
In the financials sector we added HSBC Holdings, ABN Amro and Deutsche Boerse.
HSBC Holdings, an international banking and financial services group has a
positive outlook due to its exposure to Hong Kong. The market over-reacted to
ABN Amro's exposure to US mortgage growth, which created an attractive buying
opportunity in the company. Deutsche Boerse, the German stock exchange, was
purchased as we expect strong earnings growth from its low cost electronic
trading systems.
Other smaller new purchases included Abbey National, Fresenius Medical Care,
Shionogi & Co, Jafco, Diageo, Intercontinental, WH Smith, Credit Suisse Group,
Novartis, Fuji Television Network, NTT Docomo, Gamuda Berhad and Canon.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BABSON-STEWART IVORY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
FUND ACTIVITY -- SALES
Several stocks were completely sold during the period. China Resources, Nippon
Television, Pearson, Pernod Richard, Kaneka, Dixons Group, AstraZeneca and
Television Broadcasts were sold to take profits after strong share price
rallies. Interbrew was sold and the proceeds reinvested into Heineken, which has
a greater earnings growth outlook. Seiko Epson was sold to fund the purchase of
Canon where the outlook appears more favourable. Disappointing share price
performance from Aventis, poor results from Sony and Securitas, high management
turnover at Brambles and regulatory risk surrounding SK Telecom led to their
sell down.
OUTLOOK
Global stockmarkets are being supported by historically low interest rates
globally, notably in the US, and improved corporate balance sheets and cash
flows. Economic data continues to paint a positive backdrop for the first half
of 2004. Commodity prices remain strong as Chinese growth drives demand for many
natural resources. However, weakness in the US dollar and greater currency
volatility could undermine this confidence. High budget deficits and personal
debt in many major economies has led to expectations of tighter monetary policy
in some economies and bond yields are rising as a consequence. Valuations for
many stocks also now appear quite full and investors need to be convinced that
stronger economies will drive better earnings growth than is currently
anticipated.
- --------------------------------------------------------------------------------
FUND COMPOSITION
- --------------------------------------------------------------------------------
TOP HOLDINGS % OF TOTAL
--------------------------------- -----------
VODAFONE GROUP PLC ............ 4.3%
TOTALFINAELF SA ............... 3.2
ROYAL DUTCH PETROLEUM ......... 3.0
GLAXOSMITHKLINE PLC ........... 2.9
NESTLE SA ..................... 2.8
ROYAL BK OF SCOTLAND .......... 2.6
BNP PARIBAS SA ................ 2.4
TESCO PLC ..................... 2.3
ROCHE HOLDING AG .............. 2.0
UNICREDITO ITALIANO ........... 2.0
----
TOTAL ......................... 27.5%
- --------------------------------------------------------------------------------
AS OF DECEMBER 31, 2003, SCHEDULE OF INVESTMENTS. SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
18 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON-STEWART IVORY INTERNATIONAL FUND
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 100.38%
AUSTRALIA -- 1.50%
BANKING & FINANCE -- 1.50%
70,354 Macquarie Infrastructure Group .............. $180,228
========
FINLAND -- 1.43%
TELECOMMUNICATIONS -- 1.43%
9,900 Nokia Oyj Cl. A ............................. 171,202
========
FRANCE -- 8.29%
BANKING & FINANCE -- 3.35%
4,549 BNP Paribas SA .............................. 286,435
4,877 Credit Agricole SA .......................... 116,450
--------
402,885
========
CONSUMER CYCLICAL -- 1.73%
2,538 L'Oreal SA .................................. 208,085
ENERGY -- 3.21%
2,072 Total SA Cl. B .............................. 385,233
--------
996,203
========
GERMANY -- 4.37%
BANKING & FINANCE -- 1.33%
2,910 Deutsche Boerse AG .......................... 159,668
HEALTHCARE -- 1.05%
1,768 Fresenius Medical Care AG ................... 125,999
TECHNOLOGY -- 1.22%
870 SAP AG ...................................... 146,829
TRANSPORTATION & SERVICES -- 0.77%
156 Porsche AG .................................. 92,285
--------
524,781
========
HONG KONG -- 4.53%
ENERGY -- 0.90%
55,500 CNOOC Ltd. .................................. 108,661
REAL ESTATE -- 1.62%
44,000 Henderson Land Development Co.
Ltd. ....................................... 194,394
TELECOMMUNICATIONS -- 1.09%
69,000 Asia Satellite Telecommunications
Holdings Ltd. .............................. 131,093
UTILITIES -- 0.92%
72,100 Hong Kong & China Gas Co. Ltd. .............. 110,050
--------
544,198
========
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
IRELAND -- 0.84%
BANKING & FINANCE -- 0.84%
6,271 Irish Life & Permanent PLC .................. $101,247
========
ITALY -- 2.01%
BANKING & FINANCE -- 2.01%
44,760 UniCredito Italiano S.p.A. .................. 241,640
========
JAPAN -- 23.51%
BANKING & FINANCE -- 2.54%
1,500 Jafco Co. Ltd ............................... 117,850
11,000 Nomura Holdings, Inc. ....................... 187,319
--------
305,169
========
CHEMICALS -- 1.33%
3,900 Shin-Etsu Chemical Co. Ltd .................. 159,392
CONSUMER CYCLICAL -- 4.53%
9,000 Bridgestone Corp. ........................... 121,013
6,000 Fuji Photo Film Co. Ltd. .................... 193,711
5,200 Honda Motor Co. Ltd ......................... 230,961
--------
545,685
========
HEALTHCARE -- 1.77%
5,000 Shionogi & Co. Ltd .......................... 93,123
3,000 Takeda Chemical Industries Ltd. ............. 118,970
--------
212,093
========
INDUSTRIAL GOODS & SERVICES -- 2.70%
6,000 Daikin Industries Ltd ....................... 138,565
23,000 Mitsui & Co. Ltd. ........................... 185,210
--------
323,775
========
MULTI-MEDIA -- 1.26%
28 Fuji Television Network, Inc. ............... 151,535
OFFICE AUTOMATION & EQUIPMENT -- 1.55%
4,000 Canon, Inc. ................................. 186,246
TECHNOLOGY -- 2.59%
2,500 Murata Manufacturing Co. Ltd. ............... 135,066
1,500 Rohm Co. Ltd. ............................... 175,795
--------
310,861
========
TELECOMMUNICATIONS -- 2.96%
23 KDDI Corp. .................................. 131,772
99 Ntt Docomo, Inc. ............................ 224,475
--------
356,247
========
SEE NOTES TO FINANCIAL STATEMENTS. CONTINUED ON NEXT PAGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON-STEWART IVORY INTERNATIONAL FUND (CONTINUED)
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
JAPAN (CONTINUED)
TRANSPORTATION & SERVICES -- 2.28%
33 East Japan Railway Co. ...................... $ 155,501
10,000 Yamato Transport Co. Ltd .................... 117,757
---------
273,258
=========
2,824,261
=========
MALAYSIA -- 2.03%
INDUSTRIAL GOODS & SERVICES -- 0.97%
70,000 Gamuda Berhad ............................... 116,974
TELECOMMUNICATIONS -- 1.06%
64,000 Maxis Communications Berhad ................. 127,158
---------
244,132
=========
NETHERLANDS -- 8.79%
BANKING & FINANCE -- 1.53%
7,838 ABN Amro Holding NV ......................... 183,394
CONSUMER STAPLES -- 1.25%
3,955 Heineken NV ................................. 150,607
ENERGY -- 2.97%
6,768 Royal Dutch Petroleum Co. ................... 356,840
MULTI-MEDIA -- 3.04%
7,272 Philips Electronics NV ...................... 212,344
4,839 VNU NV ...................................... 152,897
365,241
---------
1,056,082
=========
SOUTH KOREA -- 2.48%
BANKING & FINANCE -- 1.31%
4,210 Kookmin Bank (b) ............................ 157,765
TECHNOLOGY -- 1.17%
370 Samsung Electronics Co. Ltd. ................ 140,050
---------
297,815
=========
SPAIN -- 1.10%
BANKING & FINANCE -- 1.10%
2,217 Banco Popular Espanol SA .................... 132,270
=========
SWEDEN -- 1.44%
CONSUMER CYCLICAL -- 1.44%
7,300 Hennes & Mauritz AB, Series B ............... 173,488
=========
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
SWITZERLAND -- 10.00%
BANKING & FINANCE -- 1.08%
3,551 Credit Suisse Group ......................... $ 129,923
CONSUMER CYCLICAL -- 1.14%
2,135 Adecco SA ................................... 137,241
CONSUMER STAPLES -- 2.80%
1,347 Nestle SA ................................... 336,546
HEALTHCARE -- 3.66%
4,336 Novartis AG ................................. 196,860
2,402 Roche Holding AG ............................ 242,288
---------
439,148
=========
INSURANCE -- 1.32%
2,981 Converium Holding AG ........................ 158,480
---------
1,201,338
=========
THAILAND -- 1.40%
BANKING & FINANCE -- 1.40%
94,900 Kasikornbank Public Co. Ltd. (b) ............ 167,657
=========
UNITED KINGDOM -- 26.66%
BANKING & FINANCE -- 5.71%
16,120 Abbey National PLC .......................... 153,232
14,275 HSBC Holdings PLC ........................... 224,368
10,403 Royal Bank of Scotland Group PLC ............ 306,534
---------
684,134
=========
CONSUMER CYCLICAL -- 3.45%
18,068 Intercontinental Hotels Group PLC ........... 171,102
6,515 Reckitt & Benckiser PLC ..................... 147,418
19,416 W.H. Smith PLC .............................. 95,757
---------
414,277
=========
CONSUMER STAPLES -- 3.15%
7,962 Diageo PLC .................................. 104,761
59,397 Tesco PLC ................................... 274,065
---------
378,826
=========
HEALTHCARE -- 3.90%
15,023 Glaxosmithkline PLC ......................... 344,236
14,752 Smith & Nephew PLC .......................... 123,921
---------
468,157
=========
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
20 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON-STEWART IVORY INTERNATIONAL FUND (CONTINUED)
- --------------------------------------------------------------------------------
SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
UNITED KINGDOM (CONTINUED)
MANUFACTURING -- 1.50%
15,189 Smiths Group PLC ............................ $ 179,730
MULTI-MEDIA -- 2.54%
14,021 British Sky Broadcasting Group
PLC (b) ..................................... 176,451
11,520 Pearson PLC ................................. 128,272
-----------
304,723
===========
TELECOMMUNICATIONS -- 4.27%
207,035 Vodafone Group PLC .......................... 513,313
TRANSPORTATION & SERVICES -- 0.50%
11,474 easyJet PLC (b) ............................. 60,183
UTILITIES -- 1.64%
52,237 Centrica PLC ................................ 197,311
-----------
3,200,654
===========
TOTAL COMMON STOCKS ........................................... 12,057,196
(COST $9,973,859) ===========
TOTAL INVESTMENTS -- 100.38% .................................. 12,057,196
COST $9,973,859) (a)
Liabilities in excess of other assets -- (0.38)% .............. (46,021)
===========
NET ASSETS -- 100.00% ......................................... $12,011,175
===========
(a) SEE NOTES TO FINANCIAL STATEMENTS FOR UNREALIZED APPRECIATION
(DEPRECIATION) OF SECURITIES.
(b) NON-INCOME PRODUCING SECURITY.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BABSON BOND TRUST
- --------------------------------------------------------------------------------
MARKET HIGHLIGHTS
By the summer of 2003, there were more positive signs for the economy. Consumer
spending climbed from first quarter dips, the housing market remained strong and
the Federal Reserve continued its accommodative policy, reducing short-term
interest rates in June to their lowest levels since 1958. In the late-summer
reporting periods, many companies announced better than expected results and
Gross Domestic Product figures for the 3rd quarter were the highest since 1984.
Corporate bonds performed strongly, as investors looked for yield and corporate
America continued to take advantage of lower interest rates to improve balance
sheets. Mortgages, on the other hand, did not perform as well in 2003. Volatile
interest rates have resulted in underperformance for this asset class,
especially versus credit sectors.
Despite the predominantly positive news, unemployment remained the one sticking
point. Unemployment remained high during for the six months ending December 2003
(the "Reporting Period"), peaking at 6.2% in July. However, the employment
picture did begin to show signs of improvement in the latter months of the 2003,
albeit at a very slow pace.
PORTFOLIO HIGHLIGHTS -- BOND TRUST LONG
For the six months ending December 2003, the Babson Bond Trust Long returned
+3.65% net-of-fees, versus a return of +3.93% for the Lehman Brothers Aggregate
Index, the Fund's benchmark.
Contributions to performance for the period came primarily from the Fund's
overweight exposure in corporate credits and the Fund's downward tilt in quality
within the investment grade names held. Deleveraging, lower interest costs, and
balance sheet repair contributed to healthier credit fundamentals, and corporate
spreads tightened over 2003. At the same time, investors continued to search for
yield, keeping demand high. Corporate bonds on the lower end of the quality
spectrum were the best performers within the corporate market during the period,
and the Fund's overweight exposure to BBB-rated bonds served the Fund well.
Detracting from performance was the Fund's underweight in the utility sector.
This particular sector did well this year and represented a significant exposure
in the benchmark index. We continue to favor corporate bonds in which the Fund
is currently overweight, and anticipate that they will continue to offer
opportunities in an improving economic environment.
Treasury exposure remains underweight in the Fund, replaced by higher yielding
corporate bonds. Although mortgages presented brief yet considerable
opportunities for the Fund over the Reporting Period, due to significant
interest rate volatility, the Fund has been cautious in its exposure to this
asset class throughout the year, and as of the end of 2003 held an underweight
position.
PORTFOLIO HIGHLIGHTS -- BOND TRUST SHORT
For the six months ending December 2003, the Babson Bond Trust Short returned
+0.32% net-of-fees, versus a return of +0.61% for the Lehman Brothers
Intermediate Aggregate Index, the Fund's benchmark.
Contributions to performance for the period came primarily from the Fund's
overweight exposure in corporate credits and the Fund's downward tilt in quality
within the investment grade names held. Deleveraging, lower interest costs, and
balance sheet repair contributed to healthier credit fundamentals, and corporate
spreads tightened over 2003. At the same time, investors continued to search for
yield, keeping demand high. Corporate bonds on the lower end of the quality
spectrum were the best performers within the corporate market during the period,
and the Fund's overweight exposure to BBB-rated bonds served the Fund well.
Detracting from performance was the Fund's underweight in the utility sector.
This particular sector did well this year and represented a significant exposure
in the benchmark index. We continue to favor corporate bonds in which the Fund
is currently over-
- --------------------------------------------------------------------------------
22 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BABSON BOND TRUST
- --------------------------------------------------------------------------------
weight, and anticipate that they will continue to offer opportunities in an
improving economic environment.
Treasury exposure remains underweight in the Fund, replaced by higher yielding
corporate bonds. Although mortgages presented brief yet considerable
opportunities for the Fund over the Reporting Period, due to significant
interest rate volatility, the Fund has been cautious in its exposure to this
asset class throughout the year, and as of the end of 2003 held an underweight
position.
- ------------------------------------------------
QUALITY RATINGS
- ------------------------------------------------
PORTFOLIO L PORTFOLIO S
------------- ------------
Aaa ........... 53.4% 50.5%
Aa ............ 5.6% 7.3%
A ............. 20.1% 20.0%
Lower ......... 21.0% 22.2%
---- ----
TOTAL ......... 100% 100%
- --------------------------------------------------------------------------------
SOURCE: MOODY'S
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON BOND TRUST - PORTFOLIO L
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 41.30%
BANKS & FINANCE -- 14.87%
$ 200,000 American General Finance,
5.875%, 07/14/06 .............................. $ 215,953
175,000 Bank of America Corp.,
3.25%, 08/15/08 ............................... 173,057
285,000 Boeing Capital Corp.,
7.10%, 09/27/05 ............................... 308,351
200,000 CIT Group, Inc.,
4.125%, 02/21/06 .............................. 207,067
225,000 CIT Group, Inc.,
7.375%, 04/02/07 .............................. 254,321
445,000 Countrywide Home Loans, Inc.,
5.50%, 02/01/07 ............................... 477,153
400,000 Daimler Chrysler Holding Corp.,
6.90%, 09/01/04 ............................... 412,695
280,000 Ford Motor Co.,
6.375%, 02/01/29 .............................. 250,528
500,000 Ford Motor Credit Co.,
7.60%, 08/01/05 ............................... 534,606
80,000 Ford Motor Credit Co.,
5.625%, 10/01/08 .............................. 82,212
200,000 Ford Motor Credit Co.,
7.00%, 10/01/13 ............................... 211,309
200,000 Franklin Resources, Inc.,
3.70%, 04/15/08 ............................... 199,110
270,000 General Electric Capital Corp.,
4.25%, 12/01/10 ............................... 269,062
500,000 General Motors Acceptance Corp.,
7.75%, 01/19/10 ............................... 567,472
150,000 General Motors Acceptance Corp.,
8.375%, 07/15/33 .............................. 174,645
345,000 Goldman Sachs Group, Inc.,
2.85%, 10/27/06 ............................... 346,836
590,000 Household Finance Corp.,
6.375%, 11/27/12 .............................. 648,372
220,000 Jefferies Group, Inc.,
7.50%, 08/15/07 ............................... 247,497
210,000 John Deere Capital Corp.,
5.125%, 10/19/06 .............................. 223,959
400,000 JP Morgan Chase & Co.,
3.125%, 12/11/06 .............................. 403,536
500,000 Kimco Realty Corp.,
7.86%, 11/01/07 ............................... 577,543
575,000 Merrill Lynch & Co.,
4.125%, 01/15/09 .............................. 581,946
375,000 National Rural Utilities Co.,
8.00%, 03/01/32 ............................... 468,546
300,000 National Rural Utilities Cooperative
Finance Corp.,
4.375%, 10/01/10 ............................... 301,670
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
$1,600,000 SLM Corp.,
5.00%, 10/01/13 ............................... $1,592,844
375,000 Textron Financial Corp.,
2.69%, 10/03/06 ............................... 372,719
1,200,000 Toyota Motor Credit Corp.,
4.35%, 12/15/10 ............................... 1,218,184
400,000 Washington Mutual, Inc.,
2.40%, 11/03/05 ............................... 401,192
----------
11,722,385
==========
COMMUNICATIONS -- 3.32%
225,000 Clear Channel Communications, Inc.,
4.25%, 05/15/09 ............................... 225,900
505,000 Comcast Cable Communications, Inc.,
6.375%, 01/30/06 .............................. 543,974
115,000 Cox Communications, Inc.,
6.75%, 03/15/11 ............................... 130,474
175,000 Interactive Corp.,
7.00%, 01/15/13 ............................... 193,278
150,000 Sprint Corp.,
6.90%, 05/01/19 ............................... 153,666
345,000 TCI Communications, Inc.,
6.875%, 02/15/06 .............................. 374,767
275,000 Verizon Global Funding Corp.,
7.75%, 12/01/30 ............................... 324,244
200,000 Verizon Virginia, Inc.,
4.625%, 03/15/13 .............................. 193,184
250,000 WorldCom, Inc.,
0.00%, 05/15/04 (b) ........................... 84,375
1,165,000 WorldCom, Inc.,
0.00%, 05/15/31 (b) ........................... 393,188
----------
2,617,050
==========
CONSUMER CYCLICAL -- 1.17%
100,000 Aramark Services, Inc.,
7.00%, 05/01/07 ............................... 110,034
805,000 Liberty Media Corp.,
3.50%, 09/25/06 ............................... 809,648
----------
919,682
==========
DIVERSIFIED -- 14.78%
400,000 Albertson's, Inc.,
7.50%, 02/15/11 ............................... 459,186
185,000 Anheuser-Busch Companies, Inc.,
5.05%, 10/15/16 ............................... 184,210
200,000 Anheuser-Busch Companies, Inc.,
6.50%, 02/01/43 ............................... 218,067
150,000 Aramark Corp.,
8.15%, 05/01/05 ............................... 160,575
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
24 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON BOND TRUST - PORTFOLIO L (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
DIVERSIFIED (CONTINUED)
$ 290,000 AutoZone, Inc.,
5.875%, 10/15/12 .............................. $ 301,244
250,000 Cendant Corp.,
7.375%, 01/15/13 .............................. 287,155
50,000 Crane Co.,
5.50%, 09/15/13 ............................... 51,260
75,000 CRH America, Inc.,
6.40%, 10/15/33 ............................... 76,962
375,000 CSX Corp.,
6.25%, 10/15/08 ............................... 411,403
650,000 Daimler Chrysler N.A. Holding
Corp.,
4.05%, 06/04/08 ............................... 646,220
10,000 Electronic & Data Systems, Inc.,
7.125%, 10/15/09 .............................. 10,690
400,000 Enterprise Products Partners LP,
7.50%, 02/01/11 ............................... 447,627
331,422 Federal Express Corp.,
7.50%, 01/15/18 ............................... 379,263
540,000 First Brands Corp.,
7.25%, 03/01/07 ............................... 612,280
175,000 First Industrial LP,
7.60%, 05/15/07 ............................... 197,490
280,000 Ford Motor Co.,
6.625%, 02/15/28 .............................. 258,529
450,000 Fred Meyer, Inc.,
7.45%, 03/01/08 ............................... 512,983
50,000 General Electric Co.,
5.00%, 02/01/13 ............................... 50,658
800,000 General Mills, Inc.,
2.625%, 10/24/06 .............................. 796,145
410,000 Hershey Foods Corp.,
7.20%, 08/15/27 ............................... 480,033
325,000 Humana, Inc.,
7.25%, 08/01/06 ............................... 355,310
145,000 International Game Technology,
8.375%, 05/15/09 .............................. 173,804
200,000 International Paper Co.,
5.50%, 01/15/14 ............................... 201,127
500,000 Johnson Controls, Inc.,
4.875%, 09/15/13 .............................. 505,359
25,000 Kroger Co.,
6.75%, 04/15/12 ............................... 27,745
185,000 Marriott International, Inc.,
7.00%, 01/15/08 ............................... 206,289
155,000 Mohawk Industries, Inc.,
6.50%, 04/15/07 ............................... 170,302
100,000 Newell Rubbermaid, Inc.,
4.00%, 05/01/10 ............................... 96,889
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
$ 450,000 Norfolk Southern Corp.,
7.25%, 02/15/31 ............................... $ 511,201
775,000 Procter & Gamble Co.,
3.50%, 12/15/08 ............................... 773,529
125,000 Rouse Co.,
5.375%, 11/26/13 .............................. 124,581
400,000 Safeway, Inc.,
2.50%, 11/01/05 ............................... 396,301
175,000 Simon Debartolo Group LP,
6.875%, 11/15/06 .............................. 195,102
225,000 SUPERVALU, Inc.,
7.50%, 05/15/12 ............................... 255,994
625,000 Tosco Corp.,
7.25%, 01/01/07 ............................... 700,771
250,000 Transalta Corp.,
5.75%, 12/15/13 ............................... 251,815
150,000 Walt Disney Co.,
6.75%, 03/30/06 ............................... 163,232
----------
11,651,331
==========
INDUSTRIALS -- 2.29%
450,000 Avery Dennison Corp.,
6.76%, 04/15/05 ............................... 477,944
350,000 Ingersoll-Rand Co., Ltd.,
5.80%, 06/01/04 ............................... 356,263
275,000 Lockheed Martin Corp.,
8.50%, 12/01/29 ............................... 361,451
550,000 Praxair, Inc.,
6.50%, 03/01/08 ............................... 611,692
----------
1,807,350
==========
UTILITIES -- 4.87%
100,000 Buckeye Partners LP,
4.625%, 07/15/13 .............................. 96,340
445,000 Canadian National Railway Co.,
6.375%, 10/15/11 .............................. 492,031
150,000 Carolina Power & Light Co.,
6.125%, 09/15/33 .............................. 154,704
300,000 Consolidated Edison, Inc.,
6.15%, 07/01/08 ............................... 329,929
225,000 Consolidated Natural Gas Co.,
6.25%, 11/01/11 ............................... 248,934
450,000 Dominion Resources, Inc.,
7.82%, 09/15/04 ............................... 469,715
100,000 Exelon Generation Co., LLC,
6.95%, 06/15/11 ............................... 112,499
450,000 Keyspan Gas East Corp.,
6.90%, 01/15/08 ............................... 506,604
SEE NOTES TO FINANCIAL STATEMENTS. CONTINUED ON NEXT PAGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON BOND TRUST - PORTFOLIO L (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
UTILITIES (CONTINUED)
$ 250,000 Kinder Morgan, Inc.,
7.125%, 03/15/12 .............................. $ 286,865
325,000 MidAmerican Energy Holdings Co.,
5.125%, 01/15/13 .............................. 331,227
100,000 New Valley Corp.,
4.69%, 01/15/22 ............................... 98,247
125,000 Nisource Finance Corp.,
3.20%, 11/01/06 ............................... 126,094
200,000 Piedmont Natural Gas Co.,
6.00%, 12/19/33 ............................... 198,492
155,000 PSEG Power,
5.50%, 12/01/15 ............................... 155,623
225,000 Public Service Company of Colorado,
5.50%, 04/01/14 ............................... 234,404
----------
3,841,708
==========
TOTAL CORPORATE BONDS ............................................ 32,559,506
(COST $32,165,309) ==========
U.S. GOVERNMENT SPONSORED AND AGENCY
OBLIGATIONS -- 37.39%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 6.08%
21,244 7.75%, 04/01/08 ................................ 22,696
8,784 7.75%, 11/01/08 ................................ 9,292
3,916 8.00%, 08/01/09 ................................ 4,050
24,132 8.25%, 10/01/10 ................................ 25,311
23,467 9.00%, 06/01/16 ................................ 26,074
63,990 6.00%, 02/01/18 ................................ 67,163
40,422 8.00%, 10/01/18 ................................ 44,055
10,563 9.00%, 10/01/18 ................................ 11,474
49,829 7.50%, 02/01/21 ................................ 53,901
1,486,585 6.00%, 11/01/28 ................................ 1,540,132
250,000 7.00%, 08/15/29 ................................ 267,482
358,045 7.50%, 02/01/30 ................................ 385,719
126,848 7.50%, 02/01/30 ................................ 136,259
226,016 7.50%, 01/01/31 ................................ 242,784
345,484 6.50%, 06/01/31 ................................ 361,980
130,590 6.50%, 08/01/32 ................................ 136,836
356,545 6.50%, 08/01/32 ................................ 373,569
1,045,842 6.00%, 04/01/33 ................................ 1,081,563
----------
4,790,340
==========
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
FEDERAL NATIONAL CONVENTIONAL LOAN -- 4.55%
$ 59,904 7.00%, 12/01/07 ................................ $ 62,693
27,462 8.25%, 01/01/09 ................................ 29,009
28,365 8.00%, 02/01/09 ................................ 30,471
9,252 8.50%, 07/01/13 ................................ 10,131
11,371 9.25%, 10/01/20 ................................ 12,685
194,012 6.50%, 03/01/29 ................................ 203,090
290,032 7.50%, 09/01/29 ................................ 310,272
63,224 7.00%, 10/01/29 ................................ 67,016
1,567 7.00%, 01/01/30 ................................ 1,660
1,960 7.00%, 02/01/30 ................................ 2,075
65,546 7.00%, 02/01/30 ................................ 69,422
132,212 7.00%, 02/01/30 ................................ 140,031
12,316 7.00%, 02/01/30 ................................ 13,044
85,759 6.50%, 05/01/31 ................................ 89,721
500,258 6.50%, 10/01/31 ................................ 523,369
119,894 6.50%, 04/01/32 ................................ 125,445
402,725 6.50%, 08/01/32 ................................ 421,371
222,443 6.50%, 08/01/32 ................................ 232,742
630,988 5.00%, 04/01/33 ................................ 624,933
43,658 5.00%, 05/01/33 ................................ 43,239
563,694 5.50%, 06/01/33 ................................ 571,497
----------
3,583,916
==========
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 9.64%
282,015 6.42%, 11/01/08 ................................ 310,862
3,845,704 4.50%, 12/01/17 ................................ 3,855,532
28,128 9.50%, 06/25/18 ................................ 31,542
392,883 4.50%, 09/01/18 ................................ 393,907
493,046 5.00%, 08/01/33 ................................ 488,315
1,044,502 5.00%, 09/01/33 ................................ 1,034,479
1,501,784 5.00%, 09/01/33 ................................ 1,487,373
----------
7,602,010
==========
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 9.15%
7,632 7.50%, 03/15/07 ................................ 8,079
7,273 7.50%, 03/15/07 ................................ 7,699
39,084 7.50%, 07/15/07 ................................ 41,373
56,230 8.00%, 10/15/07 ................................ 60,219
22,440 9.80%, 07/01/08 ................................ 23,903
685,585 8.00%, 11/15/09 ................................ 739,178
6,617 9.50%, 04/15/16 ................................ 7,408
19,993 9.50%, 01/15/19 ................................ 22,398
49,959 8.00%, 05/15/22 ................................ 54,860
18,301 6.50%, 08/15/23 ................................ 19,420
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
26 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON BOND TRUST - PORTFOLIO L (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
$ 17,524 6.50%, 11/15/23 ................................ $ 18,595
15,699 6.50%, 12/15/23 ................................ 16,659
25,870 6.50%, 02/15/24 ................................ 27,402
288,065 6.50%, 03/15/24 ................................ 305,127
818,666 7.00%, 03/15/24 ................................ 878,099
307,291 6.50%, 06/15/24 ................................ 325,492
890,132 8.00%, 12/15/26 ................................ 971,837
385,359 7.00%, 12/15/29 ................................ 411,288
98,708 6.50%, 05/15/31 ................................ 104,179
34,755 7.00%, 08/15/32 ................................ 37,049
678,509 6.00%, 01/15/33 ................................ 705,791
243,111 5.00%, 08/15/33 ................................ 241,227
257,177 5.00%, 08/15/33 ................................ 255,184
623,371 5.00%, 08/15/33 ................................ 618,539
590,022 5.00%, 08/15/33 ................................ 585,449
238,940 5.00%, 08/15/33 ................................ 237,089
492,262 5.00%, 08/15/33 ................................ 488,447
----------
7,211,990
==========
SMALL BUSINESS ADMINISTRATION -- 0.02%
3,362 10.05%, 08/01/08 ................................... 3,593
14,237 10.05%, 04/01/09 ................................... 15,285
----------
18,878
==========
U.S. TREASURY BONDS -- 7.40%
750,000 7.875%, 02/15/21 ............................... 998,116
2,650,000 8.125%, 05/15/21 ............................... 3,611,868
400,000 6.25%, 08/15/23 ................................ 456,047
675,000 6.125%, 08/15/29 ............................... 765,123
----------
5,831,154
==========
U.S. TREASURY NOTES -- 0.55%
1,135,000 0.00%, 11/15/21 ................................ 431,138
==========
TOTAL U.S. GOVERNMENT SPONSORED AND
AGENCY OBLIGATIONS ............................................... 29,469,426
(COST $28,408,172) ==========
ASSET BACKED SECURITIES -- 5.99%
BANKS & FINANCE -- 5.99%
325,000 Capital Auto Receivables Asset Trust,
2.27%, 01/17/06 ............................... 327,720
644,648 Chase Mortgage Finance Corp.,
5.00%, 10/25/33 ............................... 633,614
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
$ 380,000 Conseco Finance Corp.,
6.21%, 07/01/32 ............................... $ 385,535
395,681 Ford Credit Auto Owner Trust,
4.14%, 12/15/05 ............................... 400,972
145,705 Master Asset Securitization Trust,
6.50%, 10/25/32 ............................... 151,868
750,000 Master Asset Securitization Trust,
5.00%, 02/25/34 ............................... 733,478
500,000 MBNA Master Credit Card Trust II,
5.90%, 08/15/11 ............................... 551,669
52,567 MMCA Automobile Trust,
4.15%, 05/15/06 ............................... 52,630
108,671 New Century Home Equity Loan
Trust,
6.70%, 10/25/28 ............................... 111,907
302,157 Oakwood Mortgage Investments,
5.92%, 09/15/17 ............................... 226,148
350,000 Vanderbilt Mortgage & Finance, Inc.,
4.23%, 02/07/15 ............................... 356,483
796,510 Washington Mutual,
5.00%, 11/25/33 ............................... 793,134
==========
TOTAL ASSET BACKED SECURITIES .................................... 4,725,158
(COST $4,699,447) ==========
COMMERCIAL MORTGAGE-BACKED
BONDS -- 5.25%
BANKS & FINANCE -- 5.25%
553,549 Chase Commercial Mortgage
Securities Corp.,
7.60%, 03/18/06 ............................... 588,046
1,181,568 Credit Suisse First Boston Mortgage
Securities Corp.,
6.52%, 01/17/35 ............................... 1,240,389
606,528 GE Capital Commercial Mortgage
Corp.,
5.03%, 12/10/35 ............................... 634,484
1,500,000 JP Morgan Commercial Mortgage
Financial Corp.,
6.51%, 10/15/35 ............................... 1,673,018
==========
TOTAL COMMERCIAL
MORTGAGE-BACKED BONDS ............................................ 4,135,937
(COST $3,892,410) ==========
FOREIGN BONDS -- 4.04%
BANKS & FINANCE -- 1.55%
1,225,000 BP Capital Markets PLC,
2.75%, 12/29/06 ............................... 1,227,788
==========
SEE NOTES TO FINANCIAL STATEMENTS. CONTINUED ON NEXT PAGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON BOND TRUST - PORTFOLIO L (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
COMMUNICATIONS -- 1.21%
$ 265,000 British Telecom PLC,
7.875%, 12/15/05 ............................. $ 292,193
265,000 British Telecom PLC,
8.875%, 12/15/30 ............................. 347,767
85,000 France Telecom SA,
9.75%, 03/01/31 .............................. 113,325
200,000 Vodafone Group PLC,
5.375%, 01/30/15 ............................. 202,355
-----------
955,640
===========
DIVERSIFIED -- 1.11%
225,000 Deutsche Telekom International
Finance AG,
8.25%, 06/15/05 .............................. 244,171
100,000 Deutsche Telekom International
Finance AG,
5.25%, 07/22/13 .............................. 101,248
500,000 Tyco International Ltd.,
6.375%, 02/15/06 ............................. 535,000
-----------
880,419
===========
TECHNOLOGY -- 0.16%
115,000 Tyco International Group SA Ltd.,
6.375%, 10/15/11 ............................. 123,481
===========
TOTAL FOREIGN BONDS ............................................. 3,187,328
(COST $3,117,217) ===========
NON-AGENCY MORTGAGE-BACKED
BONDS -- 1.76%
BANKS & FINANCE -- 1.76%
469,536 General Motors Acceptance Corp.,
6.75%, 11/25/31 .............................. 473,893
78,611 GSR Mortgage Loan Trust,
6.50%, 09/25/32 .............................. 79,266
190,713 Residential Accredit Loans, Inc.,
8.00%, 07/25/30 .............................. 190,548
638,009 Structured Asset Securities Corp.,
5.50%, 10/25/33 .............................. 646,071
===========
TOTAL NON-AGENCY MORTGAGE-BACKED BONDS .......................... 1,389,778
(COST $1,393,779) ===========
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
OR SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
ILLINOIS -- 0.51%
$ 435,000 Illinois State,
5.10%, 06/01/33 .............................. $ 399,969
===========
TOTAL MUNICIPAL BOND -- TAXABLE ................................. 399,969
(COST $435,000) ===========
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 0.36%
BANKS & FINANCE -- 0.36%
260,760 Vendee Mortgage Trust,
7.75%, 05/15/22 .............................. 280,934
===========
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS ..................................................... 280,934
(COST $277,860) ===========
FOREIGN GOVERNMENT BOND -- 0.20%
FOREIGN BOND -- 0.20%
150,000 Republic of Chile,
5.50%, 01/15/13 .............................. 154,650
===========
TOTAL FOREIGN GOVERNMENT BOND ................................... 154,650
(COST $148,739) ===========
INVESTMENT COMPANIES -- 3.64%
INVESTMENT COMPANIES -- 3.64%
533,944 Wells Fargo Government Institutional
Money Market ................................. 533,944
2,332,714 Wells Fargo Prime Investment
Money Market ................................. 2,332,714
===========
TOTAL INVESTMENT COMPANIES ...................................... 2,866,658
(COST $2,866,658) ===========
TOTAL INVESTMENTS ............................................... 79,169,344
(COST $77,404,591) (a) -- 100.44%
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.44)% ................ (347,622)
===========
NET ASSETS -- 100.00% ........................................... $78,821,722
===========
(a) SEE NOTES TO FINANCIAL STATEMENTS FOR UNREALIZED APPRECIATION
(DEPRECIATION) OF SECURITIES.
(b) SECURITY IN DEFAULT.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
28 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON BOND TRUST -- PORTFOLIO S
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
BANKS & FINANCE -- 16.72%
$ 75,000 American General Finance,
5.875%, 07/14/06 ............................. $ 80,982
55,000 Bank of America Corp.,
3.25%, 08/15/08 .............................. 54,389
80,000 Boeing Capital Corp.,
7.10%, 09/27/05 .............................. 86,555
150,000 Caterpillar Financial Service Corp.,
3.00%, 02/15/07 .............................. 150,330
100,000 CIT Group, Inc.,
4.125%, 02/21/06 ............................. 103,533
70,000 CIT Group, Inc.,
7.375%, 04/02/07 ............................. 79,122
140,000 Countrywide Home Loans, Inc.,
5.50%, 02/01/07 .............................. 150,116
125,000 Daimler Chrysler Holding Corp.,
6.90%, 09/01/04 .............................. 128,967
125,000 Ford Credit Auto Owner Trust,
2.20%, 07/17/06 .............................. 125,885
150,000 Ford Motor Credit Co.,
5.625%, 10/01/08 ............................. 154,148
75,000 Franklin Resources, Inc.,
3.70%, 04/15/08 .............................. 74,666
100,000 General Electric Capital Corp.,
4.25%, 12/01/10 .............................. 99,653
200,000 General Motors Acceptance Corp.,
7.75%, 01/19/10 .............................. 226,989
125,000 General Motors Acceptance Corp.,
7.125%, 07/15/13 ............................. 137,324
125,000 Goldman Sachs Group, Inc.,
2.85%, 10/27/06 .............................. 125,665
150,000 Household Finance Corp.,
4.125%, 12/15/08 ............................. 151,480
165,000 Household Finance Corp.,
6.375%, 10/15/11 ............................. 181,977
10,000 Household Finance Corp.,
6.375%, 11/27/12 ............................. 10,989
80,000 Jefferies Group, Inc.,
7.50%, 08/15/07 .............................. 89,999
80,000 John Deere Capital Corp.,
5.125%, 10/19/06 ............................. 85,318
150,000 JP Morgan Chase & Co.,
3.125%, 12/11/06 ............................. 151,326
150,000 Kimco Realty Corp.,
7.86%, 11/01/07 .............................. 173,263
300,000 Merrill Lynch & Co.,
2.94%, 01/30/06 .............................. 304,022
75,000 National Rural Utilities
Cooperative Finance Corp.,
4.375%, 10/01/10 ............................. 75,418
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
$ 160,000 National Rural Utilities
Cooperative Finance Corp.,
7.25%, 03/01/12 .............................. $ 186,724
500,000 SLM Corp.,
5.00%, 10/01/13 .............................. 497,763
125,000 Textron Financial Corp.,
2.69%, 10/03/06 .............................. 124,240
450,000 Toyota Motor Credit Corp.,
4.35%, 12/15/10 .............................. 456,818
150,000 Verizon New England, Inc.,
6.50%, 09/15/11 .............................. 165,587
150,000 Washington Mutual, Inc.,
2.40%, 11/03/05 .............................. 150,447
240,000 Wells Fargo Financial,
7.00%, 11/01/05 .............................. 261,689
---------
4,845,384
=========
COMMUNICATIONS -- 3.85%
65,000 AOL Time Warner, Inc.,
5.625%, 05/01/05 ............................. 68,068
100,000 BT Group PLC,
8.375%, 12/15/10 ............................. 121,886
75,000 Clear Channel Communications, Inc.,
4.25%, 05/15/09 .............................. 75,300
155,000 Comcast Cable Communications, Inc.,
6.375%, 01/30/06 ............................. 166,962
40,000 Cox Communications, Inc.,
6.75%, 03/15/11 .............................. 45,382
65,000 Interactive Corp.,
7.00%, 01/15/13 .............................. 71,789
85,000 SBC Communications, Inc.,
7.00%, 08/15/05 .............................. 91,644
70,000 Sprint Capital Corp.,
7.125%, 01/30/06 ............................. 75,775
175,000 TCI Communications, Inc.,
6.875%, 02/15/06 ............................. 190,100
70,000 WorldCom, Inc.,
0.00%, 05/15/04 (b) .......................... 23,625
550,000 WorldCom, Inc.,
0.00%, 05/15/06 (b) .......................... 185,625
---------
1,116,156
=========
CONSUMER CYCLICAL -- 1.52%
125,000 Aramark Services, Inc.,
7.00%, 05/01/07 ............................... 137,542
300,000 Liberty Media Corp.,
3.50%, 09/25/06 ............................... 301,732
---------
439,274
=========
SEE NOTES TO FINANCIAL STATEMENTS. CONTINUED ON NEXT PAGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 29
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON BOND TRUST -- PORTFOLIO S (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
DIVERSIFIED -- 14.25%
$ 150,000 Anheuser-Busch Companies, Inc.,
6.00%, 04/15/11 .............................. $ 167,112
50,000 Aramark Corp.,
8.15%, 05/01/05 .............................. 53,525
125,000 AutoZone, Inc.,
5.875%, 10/15/12 ............................. 129,847
95,000 Cendant Corp.,
7.375%, 01/15/13 ............................. 109,119
150,000 CSX Corp., 6.25%, 10/15/08 .................... 164,561
200,000 Daimler Chrysler N.A. Holding
Corp., 4.05%, 06/04/08 ....................... 198,837
30,000 Electronic & Data Systems, Inc.,
7.125%, 10/15/09 ............................. 32,071
155,000 Eli Lilly & Co.,
5.50%, 07/15/06 .............................. 167,184
130,000 Enterprise Products Partners LP,
7.50%, 02/01/11 .............................. 145,479
132,569 Federal Express Corp.,
7.50%, 01/15/18 .............................. 151,705
175,000 First Brands Corp.,
7.25%, 03/01/07 .............................. 198,424
65,000 First Industrial LP,
7.60%, 05/15/07 .............................. 73,353
150,000 Fred Meyer, Inc.,
7.45%, 03/01/08 .............................. 170,994
100,000 General Electric Co.,
5.00%, 02/01/13 .............................. 101,317
300,000 General Mills, Inc.,
2.625%, 10/24/06 ............................. 298,553
100,000 Humana, Inc.,
7.25%, 08/01/06 .............................. 109,326
55,000 International Game Technology,
8.375%, 05/15/09 ............................. 65,926
60,000 International Paper Co.,
5.50%, 01/15/14 .............................. 60,338
200,000 Johnson Controls, Inc.,
4.875%, 09/15/13 ............................. 202,143
15,000 Kroger Co.,
6.75%, 04/15/12 .............................. 16,647
65,000 Marriott International, Inc.,
7.00%, 01/15/08 .............................. 72,480
155,000 Masco Corp.,
6.75%, 03/15/06 .............................. 169,055
55,000 Mohawk Industries, Inc.,
6.50%, 04/15/07 .............................. 60,430
35,000 Newell Rubbermaid, Inc.,
4.00%, 05/01/10 .............................. 33,911
300,000 Procter & Gamble Co.,
3.50%, 12/15/08 .............................. 299,429
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
$ 45,000 Rouse Co.,
5.375%, 11/26/13 ............................. $ 44,849
150,000 Safeway, Inc.,
2.50%, 11/01/05 .............................. 148,613
70,000 Simon Debartolo Group LP,
6.875%, 11/15/06 ............................. 78,041
70,000 SUPERVALU, Inc.,
7.50%, 05/15/12 .............................. 79,643
175,000 Tosco Corp.,
7.25%, 01/01/07 .............................. 196,216
100,000 Transalta Corp.,
5.75%, 12/15/13 .............................. 100,726
150,000 United American Healthcare Corp.,
5.20%, 01/17/07 .............................. 160,625
60,000 Walt Disney Co.,
6.75%, 03/30/06 .............................. 65,293
---------
4,125,772
=========
INDUSTRIALS -- 2.98%
150,000 Avery Dennison Corp.,
6.76%, 04/15/05 .............................. 159,315
175,000 Conoco, Inc.,
6.35%, 04/15/09 .............................. 196,544
140,000 Ecolab, Inc.,
6.875%, 02/01/11 ............................. 157,261
125,000 Ingersoll-Rand Co., Ltd.,
5.80%, 06/01/04 .............................. 127,237
200,000 Praxair, Inc.,
6.50%, 03/01/08 .............................. 222,433
---------
862,790
=========
UTILITIES -- 5.07%
145,000 Canadian National Railway Co.,
6.375%, 10/15/11 ............................. 160,325
50,000 Carolina Power and Light Co.,
5.125%, 09/15/13 ............................. 50,721
100,000 Consolidated Edison, Inc.,
6.15%, 07/01/08 .............................. 109,976
70,000 Consolidated Natural Gas Co.,
6.25%, 11/01/11 .............................. 77,446
150,000 Dominion Resources, Inc.,
7.82%, 09/15/04 .............................. 156,572
50,000 Dominion Resources, Inc.,
2.80%, 02/15/05 .............................. 50,532
155,000 Duke Energy Field Services LLC,
7.875%, 08/16/10 ............................. 181,878
35,000 Exelon Generation Co., LLC,
6.95%, 06/15/11 .............................. 39,375
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
30 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON BOND TRUST -- PORTFOLIO S (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
UTILITIES (CONTINUED)
$ 140,000 Keyspan Gas East Corp.,
6.90%, 01/15/08 .............................. $ 157,610
75,000 Kinder Morgan, Inc.,
7.125%, 03/15/12 ............................. 86,059
125,000 MidAmerican Energy Holdings Co.,
5.125%, 01/15/13 ............................. 127,395
45,000 Nisource Finance Corp.,
3.20%, 11/01/06 .............................. 45,394
90,000 Progress Energy, Inc.,
6.55%, 03/01/04 .............................. 90,676
55,000 PSEG Power,
5.50%, 12/01/15 .............................. 55,221
75,000 Public Service Company of Colorado,
5.50%, 04/01/14 .............................. 78,135
----------
1,467,315
==========
TOTAL CORPORATE BONDS ........................................... 12,856,691
(COST $12,781,191) ==========
U.S. GOVERNMENT SPONSORED AND AGENCY
OBLIGATIONS -- 38.21%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 5.27%
48 8.25%, 07/01/08 ............................... 48
81,373 8.00%, 01/01/12 ............................... 87,263
18,954 9.00%, 06/01/16 ............................... 21,060
45,170 6.00%, 02/01/18 ............................... 47,409
5,256 9.00%, 05/15/21 ............................... 5,287
457,411 6.00%, 11/01/28 ............................... 473,886
358,045 7.50%, 02/01/30 ............................... 385,719
63,424 7.50%, 02/01/30 ............................... 68,130
46,483 7.00%, 09/01/31 ............................... 49,197
100,607 5.50%, 11/01/31 ............................... 101,947
117,912 6.50%, 08/01/32 ............................... 123,551
50,935 6.50%, 08/01/32 ............................... 53,367
104,585 6.00%, 04/01/33 ............................... 108,157
----------
1,525,021
==========
FEDERAL NATIONAL CONVENTIONAL LOAN -- 12.37%
11,125 7.00%, 12/01/07 ............................... 11,643
2,861 8.25%, 01/01/09 ............................... 3,022
73,328 5.50%, 03/01/17 ............................... 76,091
6,633 5.50%, 03/01/17 ............................... 6,883
112,597 5.50%, 05/01/17 ............................... 116,840
500,498 5.50%, 11/01/17 ............................... 519,389
297,454 5.00%, 03/01/18 ............................... 303,857
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
$ 5,985 9.25%, 10/01/20 ............................... $ 6,676
155,210 6.50%, 03/01/29 ............................... 162,472
2,728 6.50%, 06/01/29 ............................... 2,855
87,010 7.50%, 09/01/29 ............................... 93,082
71,120 7.00%, 12/01/29 ............................... 75,386
1,134 7.00%, 02/01/30 ............................... 1,202
51,456 6.50%, 05/01/31 ............................... 53,833
229,656 6.50%, 09/01/31 ............................... 240,266
200,103 6.50%, 10/01/31 ............................... 209,348
124,237 6.50%, 01/01/32 ............................... 129,977
39,964 6.50%, 04/01/32 ............................... 41,815
80,079 6.50%, 08/01/32 ............................... 83,787
302,043 6.50%, 08/01/32 ............................... 316,028
163,250 6.00%, 11/01/32 ............................... 168,870
263,469 6.00%, 03/01/33 ............................... 272,539
451,209 5.50%, 05/01/33 ............................... 457,455
225,510 5.50%, 06/01/33 ............................... 228,631
----------
3,581,947
==========
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 4.09%
279,929 4.50%, 09/01/18 ............................... 280,659
172,566 5.00%, 08/01/33 ............................... 170,910
573,049 5.00%, 09/01/33 ............................... 567,550
167,514 5.00%, 09/01/33 ............................... 165,907
----------
1,185,026
==========
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 12.96%
4,077 8.00%, 10/15/07 ............................... 4,366
3,740 9.80%, 07/01/08 ............................... 3,984
123,032 8.00%, 11/15/09 ............................... 132,650
72,864 7.50%, 10/15/11 ............................... 78,431
7,887 7.50%, 10/15/11 ............................... 8,489
88,184 7.50%, 11/15/11 ............................... 94,921
1,228 9.50%, 09/15/19 ............................... 1,376
28,277 8.00%, 12/15/22 ............................... 31,051
107,390 6.50%, 09/15/23 ............................... 113,957
74,416 6.50%, 12/15/23 ............................... 78,966
106,423 7.00%, 05/15/24 ............................... 114,149
66,301 8.00%, 11/15/26 ............................... 72,386
358,474 7.00%, 12/15/29 ............................... 382,594
12,986 6.00%, 05/15/31 ............................... 13,509
16,451 6.50%, 05/15/31 ............................... 17,363
124,960 6.50%, 07/15/31 ............................... 131,852
15,542 6.50%, 08/15/31 ............................... 16,400
14,426 6.50%, 11/15/31 ............................... 15,222
146,014 6.00%, 02/15/32 ............................... 151,952
SEE NOTES TO FINANCIAL STATEMENTS. CONTINUED ON NEXT PAGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 31
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON BOND TRUST -- PORTFOLIO S (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (CONTINUED)
$ 55,726 6.50%, 04/15/32 ............................... $ 58,769
289,055 6.00%, 06/15/32 ............................... 300,811
63,092 7.00%, 07/15/32 ............................... 67,256
183,577 6.00%, 08/15/32 ............................... 191,043
41,706 7.00%, 08/15/32 ............................... 44,459
208,749 6.50%, 09/15/32 ............................... 220,148
33,926 6.00%, 01/15/33 ............................... 35,290
297,544 6.00%, 03/15/33 ............................... 309,595
131,538 6.00%, 04/15/33 ............................... 136,865
231,092 5.00%, 08/15/33 ............................... 229,301
457,817 5.00%, 08/15/33 ............................... 454,270
242,422 5.00%, 08/15/33 ............................... 240,543
----------
3,751,968
==========
U.S. TREASURY NOTES -- 3.52%
450,000 5.75%, 08/15/10 ............................... 504,703
290,000 5.00%, 02/15/11 ............................... 311,535
290,000 United States Treasury Sec Stripped,
0.00%, 05/15/12 .............................. 202,600
----------
1,018,838
==========
TOTAL U.S. GOVERNMENT SPONSORED
AND AGENCY OBLIGATIONS .......................................... 11,062,800
(COST $10,829,121) ==========
ASSET BACKED SECURITIES -- 6.51%
BANKS & FINANCE -- 6.51%
115,000 Capital Auto Receivables Asset Trust,
2.27%, 01/17/06 .............................. 115,963
247,942 Chase Mortgage Finance Corp.,
5.00%, 10/25/1933 ............................ 243,698
110,000 Conseco Finance Corp.,
6.21%, 07/01/1932 ............................ 111,602
130,649 Ford Credit Auto Owner Trust,
4.14%, 12/15/05 .............................. 132,397
72,852 Master Asset Securitization Trust,
6.50%, 10/25/32 .............................. 75,934
250,000 Master Asset Securitization Trust,
5.00%, 02/25/34 .............................. 244,492
150,000 MBNA Master Credit Card Trust II,
5.90%, 08/15/11 .............................. 165,501
16,174 MMCA Automobile Trust,
4.15%, 05/15/06 .............................. 16,194
160,000 MMCA Automobile Trust,
2.97%, 03/15/07 .............................. 160,827
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
$ 43,469 New Century Home Equity
Loan Trust,
6.70%, 10/25/28 .............................. $ 44,763
95,708 Oakwood Mortgage Investments,
5.92%, 09/15/17 .............................. 71,632
200,000 Vanderbilt Mortgage & Finance, Inc.,
4.23%, 02/07/15 .............................. 203,704
298,691 Washington Mutual,
5.00%, 11/25/33 .............................. 297,424
==========
TOTAL ASSET BACKED SECURITIES ................................... 1,884,131
(COST $1,873,398) ==========
COMMERCIAL MORTGAGE-BACKED
BONDS -- 3.73%
BANKS & FINANCE -- 3.73%
177,926 Chase Commercial Mortgage
Securities Corp.,
7.60%, 03/18/06 .............................. 189,015
378,102 Credit Suisse First Boston
Mortgage Securities Corp.,
6.52%, 01/17/35 .............................. 396,925
204,703 GE Capital Commercial
Mortgage Corp.,
5.03%, 12/10/35 .............................. 214,138
250,000 JP Morgan Commercial Mortgage
Financial Corp.,
6.51%, 10/15/35 .............................. 278,836
==========
TOTAL COMMERCIAL
MORTGAGE-BACKED BONDS ........................................... 1,078,914
(COST $1,024,840) ==========
FOREIGN BONDS -- 3.44%
BANKS & FINANCE -- 1.56%
450,000 BP Capital Markets PLC,
2.75%, 12/29/06 .............................. 451,025
==========
COMMUNICATIONS -- 0.76%
75,000 British Telecom PLC,
7.875%, 12/15/05 ............................. 82,696
50,000 France Telecom SA,
9.00%, 03/01/11 .............................. 60,152
75,000 Vodafone Group PLC,
5.375%, 01/30/15 ............................. 75,883
----------
218,731
==========
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
32 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON BOND TRUST -- PORTFOLIO S (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
DIVERSIFIED -- 0.96%
$ 75,000 Deutsche Telekom International
Finance AG, 8.25%, 06/15/05 ................... $ 81,390
35,000 Deutsche Telekom International
Finance AG, 5.25%, 07/22/13 ................... 35,437
150,000 Tyco International Ltd.,
6.375%, 02/15/06 .............................. 160,500
45,000 Tyco International Group SA Ltd.,
6.375%, 10/15/11 .............................. 48,319
-----------
277,327
===========
TOTAL FOREIGN BONDS ............................................. 995,402
(COST $976,952) ===========
NON-AGENCY MORTGAGE-BACKED
BONDS -- 0.77%
BANKS & FINANCE -- 0.77%
24,825 GSR Mortgage Loan Trust,
6.50%, 09/25/32 ............................... 25,031
196,311 Structured Asset Securities Corp.,
5.50%, 10/25/33 ............................... 198,792
===========
TOTAL NON-AGENCY M............................................... 223,823
(COST $217,935) ===========
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
OR SHARES DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 0.30%
BANKS & FINANCE -- 0.30%
$ 80,925 Vendee Mortgage Trust,
7.75%, 05/15/22 .............................. $ 87,186
===========
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS ............................................ 87,186
(COST $86,232) ===========
FOREIGN BOND -- 0.18%
50,000 Republic of Chile,
5.50%, 01/15/13 .............................. 51,550
===========
TOTAL FOREIGN GOVERNMENT BOND ................................... 51,550
(COST $49,546) ===========
INVESTMENT COMPANIES -- 2.80%
810,154 Wells Fargo Prime Investment
Money Market ................................. 810,154
===========
TOTAL INVESTMENT COMPANIES ...................................... 810,154
(COST $810,154) ===========
TOTAL INVESTMENTS -- 100.33% .................................... 29,050,651
(COST $28,649,369) (a)
Liabilities in excess of other assets -- (0.33)% ................ (95,281)
===========
NET ASSETS -- 100.00% ........................................... $28,955,370
===========
(a) SEE NOTES TO FINANCIAL STATEMENTS FOR UNREALIZED APPRECIATION
(DEPRECIATION) OF SECURITIES.
(b) NON-INCOME PRODUCING SECURITY.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BABSON MONEY MARKET FUND
- --------------------------------------------------------------------------------
The Babson Money Market Fund returned 0.05% net-of-fees for the latter six
months of 2003, versus the 0.50% for the Merrill Lynch 91-Day T-Bill Index, the
Fund's benchmark.
Most of the Fund's holdings are in A1 and P1 paper -- that is paper at the
higher quality end of the money market spectrum. During the first half of the
fiscal year, the Fund held over 50% of its portfolio in Treasuries, as there has
been a distinct lack of corporate paper issuance on the short-end of the curve
during the Reporting Period. Many companies are either repaying debt or
restructuring their financing at current low rates, and have little need for
short-term coverage. We have also been reducing our exposure to agency discount
notes, Freddie Macs and Fannie Maes, in the wake of recent accounting scandals.
In such a low interest rate environment returns for money market instruments
have been subdued.
- --------------------------------------------------------------------------------
34 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON MONEY MARKET FUND
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SPONSORED AND AGENCY
OBLIGATIONS -- 59.8%
FEDERAL FARM CREDIT BANK DISCOUNT NOTES -- 1.4%
$ 390,000 1.250%, 02/27/04 .............................. $ 389,228
===========
U.S. TREASURY BILLS -- 58.4%
550,000 0.935%, 01/02/04 .............................. 549,986
700,000 0.960%, 01/08/04 .............................. 699,869
715,000 0.940%, 01/15/04 .............................. 714,739
310,000 0.918%, 01/22/04 .............................. 309,834
1,360,000 0.886%, 01/29/04 .............................. 1,359,062
1,020,000 0.940%, 02/05/04 .............................. 1,019,068
745,000 1.010%, 02/12/04 .............................. 744,122
835,000 0.920%, 02/19/04 .............................. 833,954
755,000 0.970%, 02/26/04 .............................. 753,861
1,880,000 0.890%, 03/04/04 .............................. 1,877,074
685,000 0.995%, 03/11/04 .............................. 683,675
750,000 0.945%, 03/18/04 .............................. 748,484
720,000 0.960%, 03/25/04 .............................. 718,387
720,000 0.955%, 04/01/04 .............................. 718,262
1,250,000 0.920%, 04/08/04 .............................. 1,246,869
765,000 0.930%, 04/15/04 .............................. 762,925
345,000 0.995%, 04/22/04 .............................. 343,932
865,000 1.001%, 04/29/04 .............................. 862,137
840,000 0.915%, 05/06/04 .............................. 837,308
400,000 0.985%, 05/20/04 .............................. 398,468
-----------
16,182,016
===========
TOTAL U.S. GOVERNMENT SPONSORED AND
AGENCY OBLIGATIONS .............................................. 16,571,244
(COST $16,571,244) ===========
COMMERCIAL PAPER -- 40.2%
BEVERAGES -- 2.5%
700,000 Coca-Cola Co.,
1.030%, 01/30/04 ............................. 699,419
===========
COMPUTER HARDWARE -- 2.5%
690,000 International Business Machines
Corp.,
0.970%, 01/14/04 ............................. 689,758
===========
FINANCIAL -- 16.1%
657,000 American Honda,
1.050%, 01/27/04 ............................. 656,502
615,000 CIT Group, Inc.,
1.140%, 05/17/04 ............................. 612,332
650,000 General Electric Capital Corp.,
1.050%, 03/23/04 ............................. 648,445
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
$ 620,000 Household Finance Corp.,
1.080%, 01/21/04 ............................. $ 619,628
530,000 PACCAR Financial Corp.,
1.040%, 03/30/04 ............................. 528,637
125,000 PACCAR Financial Corp.,
1.100%, 04/05/04 ............................. 124,637
715,000 Toyota Motor Credit Corp.,
1.040%, 01/28/04 ............................. 714,442
570,000 Verizon Net Fund,
1.020%, 01/07/04 ............................. 569,903
-----------
4,474,526
===========
FOOD -- 6.8%
530,000 Nestle Capital Corp.,
1.020%, 02/03/04 ............................. 529,504
695,000 Sysco Corp.,
1.030%, 03/15/04 ............................. 693,529
660,000 Unilever Capital Corp.,
1.020%, 01/23/04 ............................. 659,589
-----------
1,882,622
===========
OIL & GAS PRODUCERS -- 2.5%
690,000 BP America, Inc.,
1.030%, 03/17/04 ............................. 688,500
===========
PHARMACEUTICAL PREPARATIONS -- 2.5%
700,000 Pfizer, Inc.,
1.030%, 01/09/04 ............................. 699,840
===========
PUBLIC UTILITIES -- 4.9%
655,000 Florida Power & Light,
1.050%, 02/25/04 ............................. 653,949
700,000 Northern Illinois Gas,
1.100%, 03/02/04 ............................. 698,696
-----------
1,352,645
===========
PUBLISHING & PRINTING -- 2.4%
675,000 Gannett Co.,
1.030%, 01/20/04 ............................. 674,633
===========
TOTAL COMMERCIAL PAPER .......................................... 11,161,943
(COST $11,161,943) ===========
TOTAL INVESTMENTS ............................................... 27,733,187
(COST $27,733,187) (a) -- 100.0%
Other assets inexcess of liabilities -- 0.0% .................... 2,275
===========
NET ASSETS -- 100.0% ............................................ $27,735,462
===========
(a) SEE NOTES TO FINANCIAL STATEMENTS FOR UNREALIZED APPRECIATION
(DEPRECIATION) OF SECURITIES.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BABSON TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
MARKET HIGHLIGHTS
Municipal bonds posted solid returns for 2003. During the year, we saw record
issuance of $383 billion of municipal bonds as state and local governments took
advantage of historically low interest rates to fund capital expenditures as
deficits rose.
This record issuance led municipal bonds to become attractive relative to
Treasuries in early 2003. While interest rates changed little year over year, we
did see tremendous volatility. Tax-exempt interest rates mirrored the movements
of the Treasury market, hitting historical lows in late June, following the
Federal Reserves last cut. A rebounding for the latter half of 2003 followed
this. With the exception of July, when we saw a major a correction and municipal
bonds decline -3.5%, tax-free bonds performed well over the second half of the
year.
In the closing six months of 2003, demand for municipals waned, as investors,
feeling more confident and fearing rising interest rates, returned to the stock
market.
PORTFOLIO HIGHLIGHTS -- TAX FREE FUND
The Babson Tax-Exempt Fund returned +1.31% (net-of-fees) for the latter six
months of the year, underperforming the Lehman Bothers Municipal Bond Index, the
Fund's benchmark index, which returned +1.45% for the same period.
The Fund remains diversified, with 47% of its holdings held in general
obligation municipals. State governments are benefiting from a pick-up in the
economy, seeing improved revenue collections.
- --------------------------------------------------------------------------------
FUND COMPOSITION
- --------------------------------------------------------------------------------
TOP HOLDINGS % OF TOTAL
--------------------------------- -----------
HOWELL MI 5.25% 05/01/15 ........... 4.5%
FRISCO TEX 6.50% 08/18/15 .......... 3.4
BRIDGEPORT 6.00% 07/15/14 .......... 3.4
HARTLAND MI 6.00% 05/01/20 ......... 3.4
JACKSON MI 6.00% 05/01/13 .......... 3.3
FOXBORO 6.00% 06/01/14 ............. 3.3
DEPT TRANS 5.50% 06/15/16 .......... 3.3
COOK COUNTY 5.5% 12/01/19 .......... 3.3
MASS ST 5.375% 01/01/17 ............ 3.3
MASS ST 5.75% 07/01/12 ............. 3.2
----
TOTAL .............................. 34.4%
- --------------------------------------------------------------------------------
AS OF DECEMBER 31, 2003, SCHEDULE OF INVESTMENTS. SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
36 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 98.84%
ARIZONA -- 1.93%
$ 500,000 Maricopa County Unified School
District,
9.25%, 07/01/07 .............................. $ 681,333
==========
ARKANSAS -- 2.30%
1,000,000 Arkansas State College Savings,
Series B,
0.00%, 06/01/10 .............................. 811,960
==========
CALIFORNIA -- 1.71%
500,000 Santa Rosa Waste Water Project,
Series B,
6.00%, 09/01/15 .............................. 603,285
==========
COLORADO -- 8.07%
1,000,000 Colorado Department of
Transportation, Series B,
5.50%, 06/15/16 .............................. 1,172,700
500,000 Jefferson County School District,
Series A,
6.00%, 12/15/06 .............................. 560,815
1,000,000 Weld County School District,
5.50%, 12/01/19 .............................. 1,114,350
----------
2,847,865
==========
CONNECTICUT -- 3.40%
1,000,000 Bridgeport, Series A,
6.00%, 07/15/14 .............................. 1,201,940
==========
FLORIDA -- 4.62%
1,000,000 Florida State Board of Education,
Series J,
5.00%, 06/01/19 .............................. 1,072,060
1,000,000 Miami-Dade County Special
Obligation,
0.00%, 10/01/27 .............................. 271,290
500,000 Miami-Dade County Special
Obligation, Series A,
0.00%, 10/01/15 .............................. 287,590
----------
1,630,940
==========
ILLINOIS -- 9.59%
1,000,000 Chicago, Series B,
5.125%, 01/01/22 ............................. 1,095,990
1,000,000 Cook County Illinois Township
High School District,
5.50%, 12/01/19 .............................. 1,154,710
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
$1,000,000 University of Illinois Certificates,
5.50%, 08/15/13 .............................. $1,133,250
----------
3,383,950
==========
INDIANA -- 0.82%
250,000 Kokomo Center School Building
Corp.,
6.75%, 07/15/07 .............................. 290,120
==========
LOUISIANA -- 1.49%
500,000 St. Tammany Parish Hospital Service
District #2 (Slidell Memorial
Hospital & Medical Center),
6.125%, 10/01/11 ............................ 525,825
==========
MASSACHUSETTS -- 14.55%
1,000,000 Foxborough Stadium Project,
6.00%, 06/01/14 .............................. 1,177,970
500,000 Framingham County,
6.00%, 03/01/15 .............................. 586,305
1,000,000 Massachusetts State Consolidated
Loan,
5.375%, 01/01/17 ............................. 1,153,490
500,000 Massachusetts State Consolidated
Loan, Series A,
5.75%, 02/01/07 .............................. 554,440
1,000,000 Massachusetts State Health &
Education Facilities Authorization
(Partners Healthcare), Series C,
5.75%, 07/01/12 .............................. 1,145,520
500,000 Massachusetts State Health &
Education Facilities Authorization
(Winchester Hospital), Series D,
5.75%, 07/01/14 .............................. 519,580
----------
5,137,305
==========
MICHIGAN -- 14.36%
1,000,000 Hartland School District
Construction,
6.00%, 05/01/20 .............................. 1,187,940
1,430,000 Howell Public Schools,
5.25%, 05/01/15 .............................. 1,581,537
1,000,000 Jackson Public Schools,
6.00%, 05/01/13 .............................. 1,179,680
1,000,000 Michigan State Building Authority,
5.375%, 10/15/16 ............................. 1,122,080
----------
5,071,237
==========
SEE NOTES TO FINANCIAL STATEMENTS. CONTINUED ON NEXT PAGE.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
BABSON TAX-FREE INCOME FUND (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
MINNESOTA -- 3.12%
$1,100,000 Minneapolis Guthrie Parking Ramp,
1.15%, 12/01/28 (b) .......................... $ 1,100,000
===========
NEW HAMPSHIRE -- 1.50%
500,000 New Hampshire Higher Education &
Health Facility (Franklin Pierce Law
Center),
5.50%, 07/01/18 .............................. 528,580
===========
NEW YORK -- 2.50%
785,000 New York City Transitional Finance
Prefunded Future, Series B,
5.50%, 02/01/16 .............................. 880,833
===========
OHIO -- 3.19%
1,000,000 Cleveland Waterworks,
5.375%, 01/01/15 ............................. 1,126,680
===========
RHODE ISLAND -- 1.66%
500,000 Rhode Island Depositors Economic
Protection Corp., Series B,
5.80%, 08/01/09 .............................. 585,280
===========
TEXAS -- 14.62%
1,000,000 Frisco Independent School Distict,
6.50%, 08/15/15 .............................. 1,208,360
1,000,000 Plano Independent School District,
5.375%, 02/15/16 ............................. 1,107,110
1,000,000 San Antonio Electric & Gas,
5.375%, 02/01/15 ............................. 1,140,240
500,000 San Antonio Electric & Gas,
Series A, 5.75%, 02/01/15 .................... 580,585
1,000,000 University of Texas Revenue,
Series B,
5.25%, 08/15/19 ............................... 1,127,870
-----------
5,164,165
===========
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------------
WASHINGTON -- 7.80%
$1,000,000 Seattle Municipal Light & Power,
5.625%, 12/01/16 ............................. $ 1,126,660
1,000,000 Seattle Water Systems,
5.75%, 07/01/23 .............................. 1,116,500
500,000 Washington Public Power Supply
Systems (Nuclear Project #2),
Series B,
5.10%, 07/01/04 .............................. 509,915
-----------
2,753,075
===========
WISCONSIN -- 1.61%
500,000 Milwaukee Metropolitan Sewer
District, Series A,
6.00%, 10/01/07 .............................. 569,120
===========
TOTAL MUNICIPAL BONDS ........................................... 34,893,493
(COST $31,967,544) ===========
TOTAL INVESTMENTS ............................................... 34,893,493
(COST $31,967,544) (a) -- 98.84%
Other assets inexcess of liabilities -- 1.16% ................... 410,985
===========
NET ASSETS -- 100.00% ........................................... $35,304,478
===========
(a) SEE NOTES TO FINANCIAL STATEMENTS FOR UNREALIZED APPRECIATION
(DEPRECIATION) OF SECURITIES.
(b) VARIABLE RATE SECURITY. THE RATE REFLECTED IN THE STATEMENT OF INVESTMENTS
IS THE RATE IN EFFECT ON DECEMBER 31, 2003. THE MATURITY DATE REPRESENTS
THE ACTUAL MATURITY DATE.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
38 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(This page has been left blank intentionally.)
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------------------------------------------------------
BABSON BABSON BABSON
ENTERPRISE FUND ENTERPRISE FUND II GROWTH FUND
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at cost ................................................... $ 218,426 $ 44,442 $ 150,149
=========== ========== ===========
Investments, at value .................................................. $ 305,156 $ 69,382 $ 206,959
Cash ................................................................... 107 1 --
Receivables:
Investments sold ...................................................... 1,405 -- --
Interest and dividends ................................................ 112 24 168
Fund shares sold ...................................................... 1,025 136 --
Expense reimbursement ................................................. 79 28 43
Foreign tax ........................................................... -- -- --
Prepaid expenses and other assets ..................................... -- -- --
----------- ---------- -----------
Total assets: ........................................................ 307,884 69,571 207,170
----------- ---------- -----------
LIABILITIES AND NET ASSETS:
Cash overdraft ......................................................... -- -- --
Payables:
Management fees ....................................................... 235 64 121
Administration fees ................................................... 25 6 17
Transfer agent fees ................................................... 58 5 33
Custodian fees ........................................................ 5 1 6
Accounting fees ....................................................... 11 3 8
Directors'/Trustees' fees ............................................. 17 4 15
Dividends ............................................................. -- -- --
Investments purchased ................................................. 2,334 110 --
Other ................................................................. 89 17 53
----------- ---------- -----------
Total liabilities: ................................................... 2,774 210 253
----------- ---------- -----------
NET ASSETS ............................................................... $ 305,110 $ 69,361 $ 206,917
=========== ========== ===========
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) ............................ $ 223,799 $ 44,773 $ 247,192
Accumulated undistributed net investment income (loss) ................. (189) (133) 155
Accumulated undistributed net realized gain (loss) on sale of
investments and foreign currency transactions ......................... (5,230) (219) (97,240)
Net unrealized appreciation (depreciation) in value of investments
and translation of assets and liabilities in foreign currency ......... 86,730 24,940 56,810
----------- ---------- -----------
NET ASSETS APPLICABLE TO OUTSTANDING SHARES .............................. $ 305,110 $ 69,361 $ 206,917
=========== ========== ===========
Capital shares, $1.00 par value except for $0.01 Money Market
and $0.10 Tax-Free Income:
Authorized .............................................................. 40,000 10,000 100,000
=========== ========== ===========
Outstanding ............................................................. 13,340 2,271 20,728
=========== ========== ===========
NET ASSET VALUE PER SHARE ................................................ $ 22.87 $ 30.54 $ 9.98
=========== ========== ===========
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
40 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
BABSON BABSON BABSON BABSON BABSON
SHADOW BABSON STEWART IVORY BOND TRUST BOND TRUST MONEY MARKET TAX-FREE
STOCK FUND VALUE FUND INTERNATIONAL FUND PORTFOLIO L PORTFOLIO S FUND INCOME FUND
- --------------------------------------------------------------------------------------------------------------------------
$ 102,166 $260,545 $ 9,974 $ 77,404 $ 28,649 $ 27,733 $ 31,967
========== ======== ======== ========== ========== ========== =========
$ 139,458 $407,150 $ 12,057 $ 79,169 $ 29,051 $ 27,733 $ 34,893
-- -- -- -- -- 34 52
-- -- 65 -- -- -- --
110 534 14 769 279 -- 508
852 135 -- -- -- -- --
31 61 35 15 15 6 5
-- -- 23 -- -- -- --
-- -- -- -- 2 -- --
---------- -------- -------- ---------- ---------- ---------- ---------
140,451 407,880 12,194 79,953 29,347 27,773 35,458
---------- -------- -------- ---------- ---------- ---------- ---------
44 -- 49 1 -- -- --
103 286 32 57 21 18 26
11 34 1 7 2 2 3
27 62 13 19 10 -- 14
1 13 80 1 1 1 1
7 14 -- 8 6 2 2
7 29 1 6 2 2 3
-- -- -- 264 97 2 98
136 491 -- 740 247 -- --
30 98 7 28 6 11 7
---------- -------- -------- ---------- ---------- ---------- ---------
366 1,027 183 1,131 392 38 154
---------- -------- -------- ---------- ---------- ---------- ---------
$ 140,085 $406,853 $ 12,011 $ 78,822 $ 28,955 $ 27,735 $ 35,304
========== ======== ======== ========== ========== ========== =========
$ 104,640 $262,889 $ 19,540 $ 81,429 $ 30,408 $ 27,789 $ 32,214
1 1,023 (25) (41) (34) -- --
(1,848) (3,664) (9,591) (4,331) (1,821) (54) 164
37,292 146,605 2,087 1,765 402 -- 2,926
---------- -------- -------- ---------- ---------- ---------- ---------
$ 140,085 $406,853 $ 12,011 $ 78,822 $ 28,955 $ 27,735 $ 35,304
========== ======== ======== ========== ========== ========== =========
10,000 50,000 10,000 Unlimited Unlimited 2,000,000 100,000
========== ======== ======== ========== ========== ========== =========
8,103 9,433 893 50,884 2,982 27,798 3,750
========== ======== ======== ========== ========== ========== =========
$ 17.29 $ 43.13 $ 13.45 $ 1.55 $ 9.71 $ 1.00 $ 9.41
========== ======== ======== ========== ========== ========== =========
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED DECEMBER 31, 2003 (UNAUDITED)
(IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------
BABSON BABSON BABSON
ENTERPRISE FUND ENTERPRISE FUND II GROWTH FUND
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ............................................................. $ 1,143 $ 267 $ 1,187
Interest .............................................................. 28 -- --
Foreign tax withheld .................................................. -- -- --
------- ------- -------
1,171 267 1,187
------- ------- -------
EXPENSES:
Management fees ....................................................... 1,209 353 745
Administration fees ................................................... 126 31 100
Registration fees ..................................................... 51 16 20
Transfer agent fees ................................................... 100 27 88
Custodian fees ........................................................ 10 3 8
Accounting fees ....................................................... 52 14 41
Professional fees ..................................................... 23 6 21
Directors'/Trustees' fees ............................................. 15 4 12
Other ................................................................. 33 8 31
------- ------- -------
Total expenses before voluntary reduction of management fees ......... 1,619 462 1,066
Expenses voluntarily reduced ......................................... (259) (62) (214)
------- ------- -------
Net expenses ......................................................... 1,360 400 852
------- ------- -------
Net investment income (loss) ......................................... (189) (133) 335
------- ------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Realized gain (loss) from:
Investment transactions .............................................. 11,635 2,067 9,476
Foreign currency transactions ........................................ -- -- --
Change in net unrealized appreciation (depreciation) from:
Investments .......................................................... 53,293 13,112 18,755
Translation of assets and liabilities in foreign currencies .......... -- -- --
------- ------- -------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ................................... 64,928 15,179 28,231
------- ------- -------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......... $64,739 $15,046 $28,566
======= ======= =======
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
42 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
BABSON BABSON BABSON BABSON BABSON
SHADOW BABSON STEWART IVORY BOND TRUST BOND TRUST MONEY MARKET TAX-FREE
STOCK FUND VALUE FUND INTERNATIONAL FUND PORTFOLIO L PORTFOLIO S FUND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------
$ 698 $ 4,592 $ 82 $ 16 $ 5 $ -- $ --
10 -- -- 1,898 638 152 817
-- -- (8) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
708 4,592 74 1,914 643 152 817
- ------------------------------------------------------------------------------------------------------------------
513 1,656 51 347 129 112 156
57 195 6 41 15 15 18
23 29 16 15 6 12 9
45 170 16 36 13 15 16
5 15 76 4 2 2 2
28 78 6 31 20 7 11
11 40 1 12 5 3 4
7 24 1 5 2 2 2
15 58 3 11 4 6 7
- ------------------------------------------------------------------------------------------------------------------
704 2,265 176 502 196 174 225
(117) (398) (77) (104) (94) (38) (44)
- ------------------------------------------------------------------------------------------------------------------
587 1,867 99 398 102 136 181
- ------------------------------------------------------------------------------------------------------------------
121 2,725 (25) 1,516 541 16 636
- ------------------------------------------------------------------------------------------------------------------
3,690 8,069 697 505 158 -- 513
-- -- (38) -- -- -- --
23,349 44,059 1,676 (2,128) (625) -- (787)
-- -- (1) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
27,039 52,128 2,334 (1,623) (467) -- (274)
- ------------------------------------------------------------------------------------------------------------------
$27,160 $54,853 $2,309 $ (107) $ 74 $ 16 $ 362
==================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
BABSON ENTERPRISE FUND BABSON ENTERPRISE FUND II
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
2003 2003 2003 2003
- ------------------------------------------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
OPERATIONS:
Net investment income (loss) ................................. $ (189) $ 434 $ (133) $ (89)
Net realized gain (loss) from investments and foreign
currency transactions ....................................... 11,635 (16,021) 2,067 (2,283)
Change in net unrealized appreciation (depreciation) on
investments and translation of assets and liabilities in
foreign currencies during the period ........................ 53,293 (13,779) 13,112 (1,397)
------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations ................................................ 64,739 (29,366) 15,046 (3,769)
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ........................................ (44) (390) -- --
Net realized gain from investment transactions ............... -- (229) -- (1,110)
Return of capital ............................................ -- -- -- --
------------------------------------------------------------
Total distributions to shareholders ........................ (44) (619) -- (1,110)
CAPITAL SHARE TRANSACTIONS:
Shares sold .................................................. 57,410 77,754 5,010 9,289
Reinvested distributions ..................................... 39 529 -- 1,044
------------------------------------------------------------
57,449 78,283 5,010 10,333
Shares repurchased ........................................... (25,685) (209,998) (3,956) (13,613)
------------------------------------------------------------
Net increase (decrease) from capital share transactions .... 31,764 (131,715) 1,054 (3,280)
------------------------------------------------------------
Net increase (decrease) in net assets ..................... 96,459 (161,700) 16,100 (8,159)
NET ASSETS:
Beginning of period .......................................... 208,651 370,351 53,261 61,420
------------------------------------------------------------
End of period ................................................ $ 305,110 $ 208,651 $ 69,361 $ 53,261
============================================================
Undistributed net investment income (loss) at end of period .. $ (189) $ 44 $ (133) $ --
============================================================
Fund share transactions:
Shares sold .................................................. 2,809 5,059 174 425
Reinvested distributions ..................................... 2 30 -- 44
------------------------------------------------------------
2,811 5,089 174 469
Shares repurchased ........................................... (1,283) (13,870) (143) (626)
------------------------------------------------------------
Net increase (decrease) in fund shares ..................... 1,528 (8,781) 31
============================================================
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
44 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
BABSON-STEWART IVORY
BABSON GROWTH FUND SHADOW STOCK FUND BABSON VALUE FUND INTERNATIONAL FUND
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
2003 2003 2003 2003 2003 2003 2003 2003
- --------------------------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
$ 335 $ 493 $ 121 $ 298 $ 2,725 $ 4,518 $ (25) $ 142
9,476 (38,994) 3,690 (4,610) 8,069 (5,434) 659 (3,321)
18,755 25,101 23,349 (850) 44,059 (45,673) 1,675 656
- --------------------------------------------------------------------------------------------------------------------
28,566 (13,400) 27,160 (5,162) 54,853 (46,589) 2,309 (2,523)
(200) (473) (151) (297) (1,700) (4,450) -- (91)
-- -- (728) (1,908) (3,743) -- -- --
-- -- -- -- -- -- -- (676)
- --------------------------------------------------------------------------------------------------------------------
(200) (473) (879) (2,205) (5,443) (4,450) -- (767)
5,236 19,171 32,359 41,993 18,139 83,748 1,718 742
180 428 823 2,092 5,245 4,271 -- 708
- --------------------------------------------------------------------------------------------------------------------
5,416 19,599 33,182 44,085 23,384 88,019 1,718 1,450
(19,011) (39,642) (11,580) (40,828) (39,722) (99,686) (3,918) (3,943)
- --------------------------------------------------------------------------------------------------------------------
(13,595) (20,043) 21,602 3,257 (16,338) (11,667) (2,200) (2,493)
- --------------------------------------------------------------------------------------------------------------------
14,771 (33,916) 47,883 (4,110) 33,072 (62,706) 109 (5,783)
192,146 226,062 92,202 96,312 373,781 436,487 11,902 17,685
- --------------------------------------------------------------------------------------------------------------------
$ 206,917 $ 192,146 $ 140,085 $ 92,202 $ 406,853 $ 373,781 $ 12,011 $ 11,902
====================================================================================================================
$ 155 $ 20 $ 1 $ 31 $ 1,023 $ (2) $ (25) $ --
====================================================================================================================
581 2,343 2,014 3,453 455 2,327 148 65
18 48 47 156 124 119 -- 62
- --------------------------------------------------------------------------------------------------------------------
599 2,391 2,061 3,609 579 2,446 148 127
(2,057) (4,795) (737) (3,427) (988) (2,790) (329) (340)
- --------------------------------------------------------------------------------------------------------------------
(1,458) (2,404) 1,324 182 (409) (344) (181) (213)
====================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------
BABSON BOND TRUST
PORTFOLIO L
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 2003 JUNE 30, 2003
- ------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
OPERATIONS:
Net investment income (loss) ............................................ $ 1,516 $ 4,463
Net realized gain (loss) from investments ............................... 505 (1,159)
Change in net unrealized appreciation (depreciation) on investments ..... (2,128) 3,818
-------------------------------
Net increase (decrease) in net assets resulting from operations ....... (107) 7,122
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ................................................... (1,668) (4,463)
Net realized gain from investment transactions .......................... -- --
-------------------------------
Total distributions to shareholders ................................... (1,668) (4,463)
CAPITAL SHARE TRANSACTIONS:
Shares sold ............................................................. 3,765 10,988
Reinvested distributions ................................................ 1,454 3,852
-------------------------------
5,219 14,840
Shares repurchased ...................................................... (10,156) (23,521)
-------------------------------
Net increase (decrease) from capital share transactions ............... (4,937) (8,681)
-------------------------------
Net increase (decrease) in net assets ................................ (6,712) (6,022)
NET ASSETS:
Beginning of period ..................................................... 85,534 91,556
-------------------------------
End of period ........................................................... $ 78,822 $ 85,534
===============================
Undistributed net investment income (loss) at end of period ............. $ (41) $ 111
===============================
Fund share transactions:
Shares sold ............................................................. 2,440 7,110
Reinvested distributions ................................................ 941 2,497
-------------------------------
3,381 9,607
Shares repurchased ...................................................... (6,590) (15,177)
-------------------------------
Net increase (decrease) in fund shares ................................ (3,209) (5,570)
===============================
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
46 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
BABSON BOND TRUST BABSON BABSON
PORTFOLIO S MONEY MARKET FUND TAX-FREE INCOME FUND
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 2003 JUNE 30, 2003 DECEMBER 31, 2003 JUNE 30, 2003 DECEMBER 31, 2003 JUNE 30, 2003
- --------------------------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
$ 541 $ 1,592 $ 16 $ 210 $ 636 $ 1,418
158 (215) -- -- 513 86
(625) 1,069 -- -- (787) 1,730
- --------------------------------------------------------------------------------------------------------------------
74 2,446 16 210 362 3,234
(617) (1,592) (16) (210) (636) (1,418)
-- -- -- -- (435) (56)
- --------------------------------------------------------------------------------------------------------------------
(617) (1,592) (16) (210) (1,071) (1,474)
1,278 7,866 4,584 23,111 3,404 7,306
574 1,458 19 224 660 900
- --------------------------------------------------------------------------------------------------------------------
1,852 9,324 4,603 23,335 4,064 8,206
(4,521) (8,919) (9,022) (29,058) (7,096) (7,356)
- --------------------------------------------------------------------------------------------------------------------
(2,669) 405 (4,419) (5,723) (3,032) 850
- --------------------------------------------------------------------------------------------------------------------
(3,212) 1,259 (4,419) (5,723) (3,741) 2,610
32,167 30,908 32,154 37,877 39,045 36,435
- --------------------------------------------------------------------------------------------------------------------
$ 28,955 $ 32,167 $ 27,735 $ 32,154 $ 35,304 $ 39,045
====================================================================================================================
$ (34) $ 42 $ -- $ -- $ -- $ --
====================================================================================================================
132 811 4,584 23,111 366 779
59 150 19 224 70 96
- --------------------------------------------------------------------------------------------------------------------
191 961 4,603 23,335 436 875
(466) (919) (9,022) (29,058) (764) (782)
- --------------------------------------------------------------------------------------------------------------------
(275) 42 (4,419) (5,723) (328) 93
====================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. ORGANIZATION:
The Babson Enterprise Fund (Enterprise), Babson Enterprise Fund II (Enterprise
II), David L. Babson Growth Fund (Growth), Shadow Stock Fund (Shadow Stock),
Babson Value Fund (Value), Babson-Stewart Ivory International Fund (Stewart
Ivory International), D.L. Babson Bond Trust (Bond Trust), D.L. Babson Money
Market Fund (Money Market) and D.L. Babson Tax-Free Income Fund (Tax-Free
Income) (collectively referred to herein as the "Funds" and individually as a
"Fund") are registered under the Investment Company Act of 1940, as amended, as
no-load open-end, diversified management investment companies. All Funds listed
above except the Bond Trust are established as Maryland Corporations. The Bond
Trust (comprising of Portfolio L and S) is of a series type and has been
reorganized as a Delaware Business Trust according to the Delaware Business
Trust Act of 1988.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by the
Funds in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles in the United States
("GAAP"). The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses for the period. Actual results could differ from those
estimates.
A. SECURITIES 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 Fair Market Value Committee. 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. Money Market instruments are valued at amortized cost which approximates
market value. The Money Market Fund's use of amortized cost is subject to the
Fund's compliance with certain conditions as specified under Rule 2a-7 of the
1940 Act.
B. SECURITY TRANSACTIONS AND RELATED
INCOME -- Securities transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the accrual
basis and includes, where applicable, the pro rata amortization of premium or
accretion of discount. Dividend income is recorded on the ex-dividend date.
Gains or losses realized from sales of securities are determined by comparing
the identified cost of the security lot sold with the net sales proceeds.
C. OPTIONS -- Purchased options are recorded as investments and marked-to-market
daily to reflect the current market value of the option contract. If a purchased
option expires, a loss is realized in the amount of the cost of the option. If a
closing transaction is entered into, a gain or loss is realized, to the extent
that the proceeds from the sale are greater or less than the cost of the option.
If a put option is exercised, a gain or loss is realized from the sale of the
underlying security by adjusting the proceeds from such sale by the amount of
the premium originally paid. If a call option is exercised, the cost of the
security purchased upon exercise is increased by the premium originally paid.
D. FOREIGN CURRENCY TRANSLATION -- The accounting records of the Funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities of the Stewart Ivory International Fund denominated in a foreign
currency are translated into U.S. dollars at current exchange rates. Purchases
and sales of securities, income receipts and expense payments are translated
into U.S. dollars at the exchange rate on the date of the transactions.
The Stewart Ivory International Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments and foreign currencies.
Reported net realized foreign currency exchange gains or losses arise from sales
and maturities of portfolio securities, sales of foreign currencies, currency
exchange fluctuations between the trade and settlement dates of securities
transactions, and the differences between the
- --------------------------------------------------------------------------------
48 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
amounts of assets and liabilities recorded and the U.S. dollar equivalents of
the amounts actually received or paid. Net unrealized foreign currency
appreciation or depreciation arises from changes in the values of assets and
liabilities, including investments in securities, resulting from changes in
currency exchange rates.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Stewart Ivory International Fund
may enter into foreign currency exchange contracts to convert U.S. dollars to
and from various foreign currencies. A foreign currency exchange contract is an
obligation by a Fund to purchase or sell a specific foreign currency at a future
date at a price (in U.S. dollars) set at the time of the contract. The Fund does
not engage in "cross-currency" foreign exchange contracts (i.e., contracts to
purchase or sell one foreign currency in exchange for another foreign currency).
The Fund's foreign currency contracts might be considered spot (typically a
contract of one week or less) contracts or forward (contract length over one
week) contracts. Spot contracts are entered into for purposes of hedging against
foreign currency fluctuations relating to a specific portfolio transaction, such
as the delay between a security transaction trade date and settlement date.
Forward contracts are entered into for purposes of hedging portfolio holdings or
concentrations of such holdings. The Fund enters into foreign currency exchange
contracts solely for spot or forward hedging purposes, and not for speculative
purposes (i.e., the Fund does not enter into such contracts for the purpose of
earning foreign currency gains). Foreign currency exchange contracts are
adjusted daily by the prevailing spot or forward rate of the underlying
currency, and any appreciation or depreciation is recorded for financial
statement purposes as unrealized until the contract settlement date, at which
time the Fund records realized gains or losses equal to the difference between
the value of the contract at the time it was opened and the value at the time it
was closed. A Fund could be exposed to risk if the counterparty is unable to
meet the terms of a forward foreign exchange currency contract or if the value
of the foreign currency changes unfavorably.
F. REPURCHASE AGREEMENTS -- The Funds may enter into repurchase agreements with
member banks of the Federal Reserve or registered broker dealers whom the Funds'
investment advisor deems creditworthy under guidelines approved by the Funds'
Board of Directors/Trustees, subject to the seller's agreement to repurchase
such securities at a mutually agreed upon date and price. The repurchase price
generally equals the price paid by the Funds plus interest negotiated on the
basis of current short-term rates. Securities pledged as collateral for
repurchase agreements are held by the custodian bank until the respective
agreements mature. Provisions of the repurchase agreements ensure that the
market value of the collateral, including accrued interest thereon, is
sufficient in the event of default of the counterparty. If the counterparty
defaults and the value of the collateral declines or if the counterparty enters
an insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
G. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income are
declared daily and paid monthly for the Money Market, Bond Trust and the
Tax-Free Income Funds. Dividends from net investment income are declared and
paid quarterly for the Value Fund. Dividends from net investment income are
declared and paid semi-annually for the Enterprise, Enterprise II, Growth,
Shadow Stock and Stewart Ivory International Funds. Distributable net realized
capital gains, if any, are declared and distributed annually for all the Funds.
The amounts of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations, which may differ from GAAP. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the composition of net
assets based on their federal tax-basis treatment; temporary differences do not
require reclassification.
H. ALLOCATION METHODOLOGY -- Expenses directly related to one Fund are charged
to that Fund. Other operating expenses for the Funds are prorated to the Funds
on the basis of relative net assets or other appropriate basis.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
six-months ended December 31, 2003 are as follows:
BABSON ENTERPRISE FUND:
Purchases $49,283,179
Proceeds from sales 29,675,488
BABSON ENTERPRISE FUND II:
Purchases $ 9,059,304
Proceeds from sales 9,772,232
BABSON GROWTH FUND:
Purchases $32,272,580
Proceeds from sales 49,015,171
SHADOW STOCK FUND:
Purchases $24,110,443
Proceeds from sales 6,134,259
BABSON VALUE FUND:
Purchases $15,013,254
Proceeds from sales 32,719,202
BABSON-STEWART IVORY
INTERNATIONAL FUND:
Purchases $ 5,637,429
Proceeds from sales 7,345,756
BABSON BOND TRUST - PORTFOLIO L:
Purchases $43,368,932
Proceeds from sales 46,773,207
BABSON BOND TRUST - PORTFOLIO S:
Purchases $14,765,075
Proceeds from sales 16,504,361
BABSON TAX-FREE INCOME FUND:
Purchases $ 4,391,330
Proceeds from sales 8,885,961
4. TRANSACTIONS WITH AFFILIATES:
Management fees are paid to Jones & Babson, Inc. ("J&B"), a wholly owned
subsidiary of RBC Dain Rauscher Corp., in accordance with the advisory
agreements with the Funds. Management fees are accrued daily and paid monthly.
The fees charged are calculated based on the following annual rates of average
daily net assets:
AVERAGE DAILY NET ANNUAL RATE
FUND ASSETS OF FUND PERCENTAGE
- -------------------------------------------------------------------------------
Enterprise Up to $30 million 1.40%
Over $30 million 0.90%
Enterprise II Up to $30 million 1.40%
Over $30 million 0.90%
Growth Up to $250 million 0.75%
Over $250 million 0.60%
Shadow Stock 0.90%
Value 0.85%
Stewart Ivory
International 0.85%
Bond Trust --
Portfolio L 0.85%
Bond Trust --
Portfolio S 0.85%
Money Market 0.75%
Tax-Free Income 0.85%
J&B and each Fund entered into an Administrative Services Agreement under which
J&B will provide fund administration, transfer agency, fund accounting and
other. Each Fund will pay J&B an annual fee of 0.10% of average daily net assets
under the Administrative Services Agreement.
Under the terms of an Expense Limitation Agreement ("the Agreement") with J&B,
J&B has agreed to waive its management fee and, if necessary, to bear certain
operating expenses in order to limit the total annual operating expenses of the
Funds for at least the next two years. The limits imposed for each Fund are
calculated based on the total fees and expenses incurred for the six-months
ended December 31, 2003.
- --------------------------------------------------------------------------------
50 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the six-months ended December 31, 2003, the annual expense limits, expressed
as a percentage of average net assets, were as follows:
ANNUAL RATE
FUND PERCENTAGE
- --------------------------------------------------------------------------------
Enterprise 1.08%
Enterprise II 1.30%
Growth 0.85%
Shadow Stock 1.03%
Value 0.96%
Stewart Ivory International 1.65%
Bond Trust -- Portfolio L 0.98%
Bond Trust -- Portfolio S 0.68%
Money Market 0.93%
Tax-Free Income 0.99%
- --------------------------------------------------------------------------------
5. FEDERAL INCOME TAX INFORMATION:
It is the policy of each Fund to continue to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies as defined in applicable sections of the Internal Revenue Code, and to
make distributions from net investment income and from net realized gains
sufficient to relieve it from all, or substantially all, federal income taxes.
Withholding taxes on foreign dividends have been paid or provided for in
accordance with applicable country's tax rules and rates.
On June 30, 2003, the Funds' most recent fiscal year end for tax purposes, the
following Funds had net capital loss carryforwards to offset future net capital
gains, if any:
CAPITAL LOSS POST-OCTOBER
FUND CARRYOVER EXPIRES LOSSES
--------------------------------------------------------------
Enterprise $16,231,051 2011 $ --
=========== ==========
Enterprise II $ 2,283,852 2011 $ --
=========== ==========
Growth $44,250,086 2010 $7,760,902
==========
$51,087,562 2011
-----------
$95,337,648
===========
Shadow Stock $ 3,790,606 2011 $ 877,860
==========
Value $ 4,239,465 2011 $ --
==========
Stewart Ivory
International $ 101,277 2009 $1,897,849
==========
$ 3,455,652 2010
$ 4,752,636 2011
-----------
$ 8,309,565
===========
Bond Trust --
Portfolio L $ 1,367,653 2004 $ 74,532
==========
$ 545,666 2005
$ 104,840 2009
$ 1,268,050 2010
$ 1,108,515 2011
-----------
$ 4,394,724
===========
Bond Trust --
Portfolio S $ 577,562 2004 $ 114,139
==========
$ 442,862 2005
$ 115,326 2008
$ 377,379 2009
$ 90,261 2010
----------- ---- ----------
$ 1,603,390
===========
Money Market $ 306 2005 $ --
==========
$ 136 2006
$ 1,135 2008
$ 45 2009
$ 52,860 2010
-----------
$ 54,482
===========
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
POST OCTOBER LOSS DEFERRAL -- Capital (and foreign currency) losses incurred
after October 31 within a Fund's fiscal year are deemed to arise on the first
business day of the following fiscal year for tax purposes.
As of December 31, 2003, the breakdown of unrealized appreciation (depreciation)
for each Fund was as follows:
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
FUND APPRECIATION DEPRECIATON (DEPRECIATION)
- -----------------------------------------------------------------------
Enterprise $91,933,042 $(5,203,336) $86,729,706
Enterprise II 26,990,517 (2,050,687) 24,939,830
Growth 58,931,522 (2,121,901) 56,809,621
Shadow Stock 45,021,603 (7,729,771) 37,291,832
Value 146,605,315 -- 146,605,315
Stewart Ivory
International 2,159,917 (76,580) 2,083,337
Bond Trust --
Long 2,878,272 (1,113,518) 1,764,754
Bond Trust --
Short 881,122 (479,840) 401,282
Money Market -- -- --
Tax Free 2,939,615 (13,666) 2,925,949
- -----------------------------------------------------------------------
6. SUBSEQUENT EVENTS:
In February 2004, proxy statements were mailed to shareholders containing
certain proposals to be considered at a special meeting of shareholders that is
scheduled to occur on or about March 15, 2004. Among the matters to be
considered by shareholders are: (i) closing Babson-Stewart Ivory International
Fund; (ii) combining Babson Growth Fund, Babson Bond Trust -Portfolio L, Babson
Bond Trust -Portfolio S and Babson Money Market Fund into other portfolios with
similar investment objectives also advised by the Funds' advisor, Voyageur Asset
Management Inc; (iii) electing directors/trustees; (iv) modifying certain
investment restrictions; and (v) reorganizing all of the Funds (other than
Babson-Stewart Ivory International Fund) as separate series of a new Delaware
statutory trust and renaming them as the Tamarack Funds. Currently, all of the
Funds (with the exception of Babson Bond Trust) are Maryland corporations.
- --------------------------------------------------------------------------------
52 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
BABSON ENTERPRISE FUND
- ----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK DECEMBER 31, 2003 YEARS ENDED JUNE 30,
OUTSTANDING THROUGHOUT EACH PERIOD. (Unaudited) 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................. $ 17.66 $ 17.98 $ 15.24 $ 13.82 $ 14.72
----------------------------------------------------------------
Income from investment operations:
Net investment income (loss) ...................... -- 0.04 0.02 0.03 0.03
Net gains (losses) on securities
(both realized and unrealized) ................... 5.21 (0.31) 3.08 2.46 0.18
----------------------------------------------------------------
Total from investment operations .................... 5.21 (0.27) 3.10 2.49 0.21
----------------------------------------------------------------
Less distributions:
Dividends from net investment income .............. --(a) (0.03) (0.05) (0.02) (0.04)
In excess of net investment income ................ -- -- -- -- --
Distributions from capital gains .................. -- (0.02) (0.31) (1.05) (1.07)
----------------------------------------------------------------
Total distributions: ............................... -- (0.05) (0.36) (1.07) (1.11)
----------------------------------------------------------------
Net asset value, end of period ....................... $ 22.87 $ 17.66 $ 17.98 $ 15.24 $ 13.82
================================================================
Total return* ........................................ 29.52% (1.48%) 20.82% 20.08% 2.84%
================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) .............. $ 305 $ 209 $ 370 $ 137 $ 111
Ratio of expenses to average net assets** ............ 1.08% 1.08% 1.08% 1.15% 1.14%
Ratio of expenses to average net assets before fee
waivers and expense reimbursements** ................ 1.29% 1.14% 1.08% 1.15% 1.14%
Ratio of net investment income
to average net assets** ............................. (0.15%) 0.21% 0.04% 0.25% 0.15%
Ratio of net investment income to average net
assets before fee waivers and expense
reimbursements** .................................... (0.36%) 0.15% 0.04% 0.25% 0.15%
Portfolio turnover rate .............................. 13% 13% 93% 55% 32%
[WIDE TABLE CONTINUED FROM ABOVE]
- -----------------------------------------------------------------------------------
SEVEN MONTHS YEAR ENDED
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK ENDED NOVEMBER 30,
OUTSTANDING THROUGHOUT EACH PERIOD. JUNE 30, 1999 1998
- -----------------------------------------------------------------------------------
Net asset value, beginning of period ................. $ 16.63 $ 21.22
-----------------------
Income from investment operations:
Net investment income (loss) ...................... 0.03 0.04
Net gains (losses) on securities
(both realized and unrealized) ................... 0.58 (2.15)
-----------------------
Total from investment operations .................... 0.61 (2.11)
-----------------------
Less distributions:
Dividends from net investment income .............. (0.05) (0.06)
In excess of net investment income ................ -- --
Distributions from capital gains .................. (2.47) (2.42)
-----------------------
Total distributions: ............................... (2.52) (2.48)
-----------------------
Net asset value, end of period ....................... $ 14.72 $ 16.63
=======================
Total return* ........................................ 4.70% (11.05%)
=======================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) .............. $ 155 $ 179
Ratio of expenses to average net assets** ............ 1.11% 1.09%
Ratio of expenses to average net assets before fee
waivers and expense reimbursements** ................ 1.11% 1.09%
Ratio of net investment income
to average net assets** ............................. 0.32% 0.29%
Ratio of net investment income to average net
assets before fee waivers and expense
reimbursements** .................................... 0.32% 0.29%
Portfolio turnover rate .............................. 12% 22%
(a)AMOUNT IS LESS THAN $0.01.
*TOTAL RETURN NOT ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
**ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 53
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
BABSON ENTERPRISE FUND II
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED SEVEN MONTHS YEAR
DECEMBER 31, ENDED ENDED
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK 2003 YEARS ENDED JUNE 30, JUNE 30, NOVEMBER 30,
OUTSTANDING THROUGHOUT EACH PERIOD. (Unaudited) 2003 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............. $ 23.78 $ 25.62 $ 26.19 $ 25.18 $ 24.48 $ 23.20 $ 26.70
--------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .................. (0.07) (0.04) (0.03) 0.04 0.02 0.03 0.10
Net gains (losses) on securities
(both realized and unrealized) ............... 6.83 (1.29) 0.73 3.63 1.30 2.37 (1.50)
--------------------------------------------------------------------------
Total from investment operations ................ 6.76 (1.33) 0.70 3.67 1.32 2.40 (1.40)
--------------------------------------------------------------------------
Less distributions:
Dividends from net investment income .......... -- -- (0.01) (0.03) (0.02) (0.05) (0.05)
Distributions from capital gains .............. -- (0.51) (1.26) (2.63) (0.60) (1.07) (2.05)
--------------------------------------------------------------------------
Total distributions: ............................ -- (0.51) (1.27) (2.66) (0.62) (1.12) (2.10)
--------------------------------------------------------------------------
Net asset value, end of period ................... $ 30.54 $ 23.78 $ 25.62 $ 26.19 $ 25.18 $ 24.48 $ 23.20
==========================================================================
Total return* .................................... 28.48% (5.22%) 2.91% 15.54% 5.63% 11.03% (5.61%)
==========================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) .......... $ 69 $ 53 $ 61 $ 60 $ 60 $ 77 $ 83
Ratio of expenses to average net assets** ........ 1.30% 1.30% 1.30% 1.30% 1.27% 1.23% 1.22%
Ratio of expenses to average net assets before fee
waivers and expense reimbursements** ............ 1.50% 1.38% 1.30% 1.30% 1.27% 1.23% 1.22%
Ratio of net investment income
to average net assets** ......................... (0.43%) (0.18%) (0.14%) 0.12% 0.08% 0.11% 0.40%
Ratio of net investment income to average net
assets before fee waivers and expense
reimbursements** ................................ (0.64%) (0.26%) (0.14%) 0.12% 0.08% 0.11% 0.40%
Portfolio turnover rate .......................... 15% 25% 37% 41% 23% 14% 25%
*TOTAL RETURN NOT ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
**ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
54 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
BABSON GROWTH FUND
- -------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK DECEMBER 31, 2003 YEARS ENDED JUNE 30,
OUTSTANDING THROUGHOUT EACH PERIOD. (Unaudited) 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..................... $ 8.66 $ 9.19 $ 12.51 $ 20.87 $ 20.01 $ 20.77
-------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .......................... 0.02 0.02 -- (0.03) (0.04) 0.02
Net gains (losses) on securities
(both realized and unrealized) ....................... 1.31 (0.53) (3.07) (5.22) 4.00 3.25
-------------------------------------------------------------------
Total from investment operations ........................ 1.33 (0.51) (3.07) (5.25) 3.96 3.27
-------------------------------------------------------------------
Less distributions:
Dividends from net investment income .................. (0.01) (0.02) -- -- -- (0.02)
Distributions from capital gains ...................... -- -- (0.25) (3.11) (3.10) (4.01)
-------------------------------------------------------------------
Total distributions: .................................... (0.01) (0.02) (0.25) (3.11) (3.10) (4.03)
-------------------------------------------------------------------
Net asset value, end of period ........................... $ 9.98 $ 8.66 $ 9.19 $ 12.51 $ 20.87 $ 20.01
====================================================================
Total return* ............................................ 15.35% (5.54%) (24.90%) (26.27%) 20.69% 17.04%
====================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) .................. $ 207 $ 192 $ 226 $ 347 $ 525 $ 490
Ratio of expenses to average net assets** ................ 0.85% 0.85% 0.85% 0.80% 0.79% 0.79%
Ratio of expenses to average net assets before fee waivers
and expense reimbursements** ............................ 1.06% 0.90% 0.85% 0.80% 0.79% 0.79%
Ratio of net investment income to average net assets** ... 0.33% 0.26% (0.03%) (0.16%) (0.18%) 0.09%
Ratio of net investment income to average net assets
before fee waivers and expense reimbursements** ......... 0.12% 0.21% (0.03%) (0.16%) (0.18%) 0.09%
Portfolio turnover rate .................................. 16% 71% 31% 64% 62% 39%
SHADOW STOCK FUND
- -------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK DECEMBER 31, 2003 YEARS ENDED JUNE 30,
OUTSTANDING THROUGHOUT EACH PERIOD. (Unaudited) 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..................... $ 13.60 $ 14.60 $ 13.23 $ 12.26 $ 12.06 $ 13.24
-------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .......................... 0.02 0.05 0.03 0.13 0.09 0.11
Net gains (losses) on securities
(both realized and unrealized) ....................... 3.78 (0.72) 1.58 1.74 1.04 (0.24)
-------------------------------------------------------------------
Total from investment operations ........................ 3.80 (0.67) 1.61 1.87 1.13 (0.13)
-------------------------------------------------------------------
Less distributions:
Dividends from net investment income .................. (0.02) (0.04) (0.02) (0.13) (0.07) (0.07)
Distributions from capital gains ...................... (0.09) (0.29) (0.22) (0.77) (0.86) (0.98)
-------------------------------------------------------------------
Total distributions: .................................... (0.11) (0.33) (0.24) (0.90) (0.93) (1.05)
-------------------------------------------------------------------
Net asset value, end of period ........................... $ 17.29 $ 13.60 $ 14.60 $ 13.23 $ 12.26 $ 12.06
====================================================================
Total return* ............................................ 27.94% (4.55%) 12.44% 16.82% 9.91% (0.25%)
====================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) .................. $ 140 $ 92 $ 96 $ 62 $ 45 $ 50
Ratio of expenses to average net assets** ................ 1.03% 1.03% 1.03% 1.03% 1.07% 1.10%
Ratio of expenses to average net assets before fee waivers
and expense reimbursements** ............................ 1.24% 1.08% 1.03% 1.03% 1.07% 1.10%
Ratio of net investment income to average net assets** ... 0.21% 0.36% 0.26% 1.20% 0.66% 0.97%
Ratio of net investment income to average net assets
before fee waivers and expense reimbursements** ......... 0.01% 0.31% 0.26% 1.20% 0.66% 0.97%
Portfolio turnover rate .................................. 6% 17% 34% 29% 18% 21%
*TOTAL RETURN NOT ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
**ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 55
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
BABSON VALUE FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED SEVEN MONTHS YEAR
DECEMBER 31, ENDED ENDED
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK 2003 YEARS ENDED JUNE 30, JUNE 30, NOVEMBER 30,
OUTSTANDING THROUGHOUT EACH PERIOD. (Unaudited) 2003 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ......... $ 37.98 $ 42.85 $ 45.43 $ 38.76 $ 51.36 $ 47.42 $ 47.73
----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .............. 0.29 0.45 0.44 0.65 1.27 0.45 0.62
Net gains (losses) on securities
(both realized and unrealized) ........... 5.44 (4.88) (1.87) 7.12 (9.35) 5.90 1.09
----------------------------------------------------------------------------
Total from investment operations ............ 5.73 (4.43) (1.43) 7.77 (8.08) 6.35 1.71
----------------------------------------------------------------------------
Less distributions:
Dividends from net investment income ...... (0.18) (0.44) (0.07) (0.90) (0.96) (0.44) (0.56)
Distributions from capital gains .......... (0.40) -- (0.67) (0.20) (3.56) (1.97) (1.46)
Return of capital ......................... -- -- (0.41) -- -- -- --
----------------------------------------------------------------------------
Total distributions: ........................ (0.58) (0.44) (1.15) (1.10) (4.52) (2.41) (2.02)
----------------------------------------------------------------------------
Net asset value, end of period ............... $ 43.13 $ 37.98 $ 42.85 $ 45.43 $ 38.76 $ 51.36 $ 47.42
============================================================================
Total return* ................................ 15.12% (10.26%) (3.02%) 20.30% (15.93%) 14.14% 3.85%
============================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) ...... $ 407 $ 374 $ 436 $ 496 $ 528 $ 1,244 $ 1,494
Ratio of expenses to average net assets** .... 0.96% 0.96% 0.96% 0.96% 0.96% 0.96% 0.98%
Ratio of expenses to average net assets before
fee waivers and expense reimbursements** .... 1.16% 0.99% 0.96% 0.96% 0.96% 0.96% 0.98%
Ratio of net investment income to average net
assets** .................................... 1.40% 1.24% 1.02% 1.38% 2.41% 1.05% 1.28%
Ratio of net investment income to average net
assets before fee waivers and expense
reimbursements** ............................ 1.21% 1.21% 1.02% 1.38% 2.41% 1.05% 1.28%
Portfolio turnover rate ...................... 4% 78% 25% 27% 18% 13% 42%
*TOTAL RETURN NOT ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
**ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
56 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
BABSON-STEWART IVORY INTERNATIONAL FUND
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK DECEMBER 31, 2003 YEARS ENDED JUNE 30,
OUTSTANDING THROUGHOUT EACH PERIOD. (Unaudited) 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..................... $ 11.08 $ 13.74 $ 15.93 $ 23.59 $ 19.48 $ 19.65
---------------------------------------------------------
Income from investment operations:
Net investment income (loss) .......................... (0.03) 0.18 (0.13) (0.03) (0.04) 0.03
Net gains (losses) on securities
(both realized and unrealized) ....................... 2.40 (2.08) (2.06) (7.19) 4.45 0.66
---------------------------------------------------------
Total from investment operations ........................ 2.37 (1.90) (2.19) (7.22) 4.41 0.69
---------------------------------------------------------
Less distributions:
Dividends from net investment income .................. -- (0.09) -- -- -- (0.04)
Distributions from capital gains ...................... -- -- -- (0.44) (0.30) (0.82)
Return of capital ..................................... -- (0.67) -- -- -- --
---------------------------------------------------------
Total distributions: .................................... -- (0.76) -- (0.44) (0.30) (0.86)
---------------------------------------------------------
Net asset value, end of period ........................... $ 13.45 $ 11.08 $ 13.74 $ 15.93 $ 23.59 $ 19.48
=========================================================
Total return* ............................................ 21.39% (13.97%) (13.72%) (0.97%) 22.64% 3.76%
=========================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) .................. $ 12 $ 12 $ 18 $ 51 $ 85 $ 89
Ratio of expenses to average net assets** ................ 1.65% 1.27% 1.65% 1.23% 1.24% 1.23%
Ratio of expenses to average net assets before fee waivers
and expense reimbursements** ............................ 2.94% 1.46% 1.65% 1.23% 1.24% 1.23%
Ratio of net investment income to average net assets** ... (0.41%) 1.11% (0.54%) (0.15%) (0.06%) 0.24%
Ratio of net investment income to average net assets
before fee waivers and expense reimbursements** ......... (1.70%) 0.92% (0.54%) (0.15%) (0.06%) 0.24%
Portfolio turnover rate .................................. 49% 69% 48% 49% 47% 51%
*TOTAL RETURN NOT ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
**ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BABSON BOND TRUST -- PORTFOLIO L
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED SEVEN MONTHS YEAR
DECEMBER 31, ENDED ENDED
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK 2003 YEARS ENDED JUNE 30, JUNE 30, NOVEMBER 30,
OUTSTANDING THROUGHOUT EACH PERIOD. (Unaudited) 2003 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............. $ 1.58 $ 1.53 $ 1.54 $ 1.48 $ 1.52 $ 1.59 $ 1.56
-------------------------------------------------------------------------
Income from investment operations:
Net investment income ......................... 0.03 0.08 0.08 0.09 0.09 0.05 0.09
Net gains (losses) on securities
(both realized and unrealized) ............... (0.03) 0.05 (0.01) 0.06 (0.04) (0.07) 0.03
-------------------------------------------------------------------------
Total from investment operations ................ (0.00) 0.13 0.07 0.15 0.05 (0.02) 0.12
-------------------------------------------------------------------------
Less distributions:
Dividends from net investment income .......... (0.03) (0.08) (0.08) (0.09) (0.09) (0.05) (0.09)
-------------------------------------------------------------------------
Total distributions: ............................ (0.03) (0.08) (0.08) (0.09) (0.09) (0.05) (0.09)
-------------------------------------------------------------------------
Net asset value, end of period ................... $ 1.55 $ 1.58 1.53 $ 1.54 $ 1.48 $ 1.52 $ 1.59
-------------------------------------------------------------------------
Total return* .................................... 0.14% 8.47% 4.81% 10.45% 3.54% (1.16%) 8.13%
-------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) .......... $ 79 $ 86 92 $ 97 $ 100 $ 121 $ 128
Ratio of expenses to average net assets** ........ 0.98% 0.98% 0.98% 0.98% 0.98% 0.97% 0.97%
Ratio of expenses to average net assets before fee
waivers and expense reimbursements** ............ 1.24% 1.02% 0.98% 0.98% 0.98% 0.97% 0.97%
Ratio of net investment income to average net
assets** ........................................ 3.72% 4.95% 5.25% 5.98% 6.14% 5.73% 5.93%
Ratio of net investment income to average net
assets before fee waivers and expense
reimbursements** ................................ 3.47% 4.91% 5.25% 5.98% 6.14% 5.73% 5.93%
Portfolio turnover rate .......................... 57% 44% 61% 38% 26% 38% 43%
(a) AS REQUIRED, EFFECTIVE JULY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF
THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN
AMORTIZING PREMIUM ON DEBT SECURITIES. THE EFFECT OF THIS CHANGE FOR THE
YEAR ENDED JUNE 30, 2002 WAS TO DECREASE NET INVESTMENT INCOME PER SHARE BY
LESS THAN 1/2 OF A CENT, INCREASE NET REALIZED AND UNREALIZED GAINS AND
LOSSES PER SHARE BY LESS THAN 1/2 OF A CENT, AND DECREASE THE RATIO OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 5.37% TO 5.25%. PER SHARE,
RATIOS AND SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JULY 1, 2001 HAVE NOT BEEN
RESTATED TO REFLECT THIS CHANGE IN PRESENTATION.
*TOTAL RETURN NOT ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
**ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
58 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BABSON BOND TRUST -- PORTFOLIO S
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED SEVEN MONTHS YEAR
DECEMBER 31, ENDED ENDED
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK 2003 YEARS ENDED JUNE 30, JUNE 30, NOVEMBER 30,
OUTSTANDING THROUGHOUT EACH PERIOD. (Unaudited) 2003 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............. $ 9.88 $ 9.61 $ 9.66 $ 9.35 $ 9.60 $ 9.91 $ 9.78
-------------------------------------------------------------------------
Income from investment operations:
Net investment income ......................... 0.18 0.49 0.54 0.59 0.58 0.33 0.58
Net gains (losses) on securities
(both realized and unrealized) ............... (0.15) 0.27 (0.04) 0.31 (0.25) (0.31) 0.13
-------------------------------------------------------------------------
Total from investment operations ................ 0.03 0.76 0.50 0.90 0.33 0.02 0.71
-------------------------------------------------------------------------
Less distributions:
Dividends from net investment income .......... (0.20) (0.49) (0.55) (0.59) (0.58) (0.33) (0.58)
-------------------------------------------------------------------------
Total distributions: ............................ (0.20) (0.49) (0.55) (0.59) (0.58) (0.33) (0.58)
-------------------------------------------------------------------------
Net asset value, end of period ................... $ 9.71 $ 9.88 $ 9.61 $ 9.66 $ 9.35 $ 9.60 $ 9.91
=========================================================================
Total return* .................................... 0.31% 8.05% 5.21% 9.85% 3.55% 0.15% 7.47%
=========================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) .......... $ 29 $ 32 $ 31 $ 30 $ 30 $ 37 $ 38
Ratio of expenses to average net assets** ........ 0.68% 0.68% 0.68% 0.68% 0.68% 0.67% 0.67%
Ratio of expenses to average net assets before fee
waivers and expense reimbursements** ............ 1.30% 1.04% 0.98% 0.98% 0.98% 0.97% 0.97%
Ratio of net investment income to average net
assets** ........................................ 3.57% 4.98% 5.32% 6.16% 6.12% 5.75% 5.90%
Ratio of net investment income to average net
assets before fee waivers and expense
reimbursements** ................................ 2.94% 4.62% 5.02% 6.46% 6.42% 6.05% 6.20%
Portfolio turnover rate .......................... 51% 43% 63% 39% 35% 54% 60%
(a) AS REQUIRED, EFFECTIVE JULY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF
THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN
AMORTIZING PREMIUM ON DEBT SECURITIES. THE EFFECT OF THIS CHANGE FOR THE
YEAR ENDED JUNE 30, 2002 WAS TO DECREASE NET INVESTMENT INCOME PER SHARE BY
LESS THAN 1/2 OF A CENT, INCREASE NET REALIZED AND UNREALIZED GAINS AND
LOSSES PER SHARE BY LESS THAN 1/2 OF A CENT, AND DECREASE THE RATIO OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 5.37% TO 5.25%. PER SHARE,
RATIOS AND SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JULY 1, 2001 HAVE NOT BEEN
RESTATED TO REFLECT THIS CHANGE IN PRESENTATION.
*TOTAL RETURN NOT ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
**ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
BABSON MONEY MARKET FUND (a)
- -----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31,
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK 2003 YEARS ENDED JUNE 30,
OUTSTANDING THROUGHOUT EACH PERIOD. (Unaudited) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
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 ................................. -- 0.01 0.02 0.05 0.05 0.04
--------------------------------------------------------------
Total from investment operations ...................... -- 0.01 0.02 0.05 0.05 0.04
--------------------------------------------------------------
Less distributions:
Dividends from net investment income .................. --(c) (0.01) (0.02) (0.05) (0.05) (0.04)
--------------------------------------------------------------
Total distributions: .................................... -- (0.01) (0.02) (0.05) (0.05) (0.04)
--------------------------------------------------------------
Net asset value, end of period ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==============================================================
Total return* ............................................ 0.05% 0.56% 1.55% 5.13% 4.97% 4.38%
==============================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) .................. $ 28 $ 32 $ 38 $ 40 $ 39 $ 39
Ratio of expenses to average net assets** ................ 0.91% 0.91% 0.93% 0.90% 0.88% 0.88%
Ratio of expenses to average net assets before fee waivers
and expense reimbursements** ............................ 1.16% 1.02% 0.93% 0.90% 0.88% 0.88%
Ratio of net investment income to average net assets** ... 0.11% 0.58% 1.56% 5.01% 4.86% 4.30%
Ratio of net investment income to average net assets
before fee waivers and expense reimbursements** ......... (0.15%) 0.47% 1.56% 5.01% 4.86% 4.30%
BABSON TAX-FREE INCOME FUND (b)
- -----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31,
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK 2003 YEARS ENDED JUNE 30,
OUTSTANDING THROUGHOUT EACH PERIOD. (Unaudited) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..................... $ 9.57 $ 9.14 $ 8.96 $ 8.62 $ 8.91 $ 9.22
--------------------------------------------------------------
Income from investment operations:
Net investment income ................................. 0.16 0.35 0.36 0.37 0.39 0.40
Net gains (losses) on securities
(both realized and unrealized) ....................... (0.04) 0.44 0.18 0.38 (0.21) (0.24)
--------------------------------------------------------------
Total from investment operations ........................ 0.12 0.79 0.54 0.75 0.18 0.16
--------------------------------------------------------------
Less distributions:
Dividends from net investment income .................. (0.16) (0.35) (0.36) (0.37) (0.39) (0.40)
Distributions from capital gains ...................... (0.12) (0.01) -- (0.04) (0.08) (0.07)
--------------------------------------------------------------
Total distributions: .................................... (0.28) (0.36) (0.36) (0.41) (0.47) (0.47)
--------------------------------------------------------------
Net asset value, end of period ........................... $ 9.41 $ 9.57 $ 9.14 $ 8.96 $ 8.62 $ 8.91
==============================================================
Total return* ............................................ 1.31% 8.82% 6.12% 8.89% 2.18% 1.70%
==============================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) .................. $ 35 $ 39 $ 36 $ 35 $ 24 $ 26
Ratio of expenses to average net assets** ................ 0.99% 0.99% 0.99% 1.00% 1.01% 1.03%
Ratio of expenses to average net assets before fee waivers
and expense reimbursements** ............................ 1.23% 1.04% 0.99% 1.00% 1.01% 1.03%
Ratio of net investment income to average net assets** ... 3.49% 3.73% 3.96% 4.19% 4.53% 4.36%
Ratio of net investment income to average net assets
before fee waivers and expense reimbursements** ......... 3.25% 3.68% 3.96% 4.19% 4.53% 4.36%
Portfolio turnover rate .................................. 12% 15% 12% 27% 48% 9%
(a)THE FINANCIAL HIGHLIGHTS FOR THE BABSON MONEY MARKET FUND AS SET FORTH HEREIN
EVALUATE THE HISTORICAL FINANCIAL HIGHLIGHTS OF THE PRIME PORTFOLIO. THE
ASSETS OF THE FEDERAL PORTFOLIO WERE ACQUIRED BY THE PRIME PORTFOLIO ON
OCTOBER 31, 2000.
(b)THE FINANCIAL HIGHLIGHTS FOR THE BABSON TAX-FREE INCOME FUND AS SET FORTH
HEREIN EVALUATE THE HISTORICAL FINANCIAL HIGHLIGHTS OF THE PORTFOLIO L. THE
ASSETS OF THE PORTFOLIO S WERE ACQUIRED BY THE PORTFOLIO L ON OCTOBER 31,
2000.
(c)AMOUNT IS LESS THAN $0.01.
*TOTAL RETURN NOT ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
**ANNUALIZED FOR PERIODS LESS THAN ONE FULL YEAR
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
60 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
On November 24, 2003, the Board of Directors selected Deloitte as independent
auditors of the Funds for the fiscal year ending June 30, 2004. Deloitte has
confirmed to the Audit Committee of the Board of Directors ("Audit Committee")
that they are independent auditors with respect to the Funds.
PricewaterhouseCoopers LLP ("PwC") served as independent auditors of the Funds
for the fiscal year ended June 30, 2003. In July and August 2003, a PwC
affiliate in Canada provided certain prohibited non-audit services for the
benefit of the Canadian subsidiary of RBC, the indirect parent company of J&B,
the Fund's investment advisor at that time. PwC represented to the Funds that
although the provision of these services may have impaired their independence
under SEC rules, PwC personnel working on the audit of the Funds for the fiscal
year ended June 30,2003, had no knowledge of the situation in Canada until after
the audit of the Funds had been completed and the audited financial statements
had been sent to the Funds' shareholders. As a result of the PwC affiliate in
Canada's provision of these services, PwC declined to seek appointment as
independent auditors for the Funds for the fiscal year ending June 30, 2004.
During the Funds' fiscal year ended June 30, 2003, PwC's audit reports
concerning the Funds contained no adverse opinion or disclaimer of opinion; nor
were its reports qualified or modified as to uncertainty, audit scope, or
accounting principles. Further, in connection with its audit work for the fiscal
year ended June 30, 2003, and through October 9, 2003, there were no
disagreements between the Funds and PwC on any matter of accounting principles
or practices, financial statement disclosures or auditing scope or procedure,
which if not resolved to the satisfaction of PwC would have caused it to make
reference to the disagreements in its report on the financial statements for
such periods.
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
DECEMBER 31, 2003 61
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62 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
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DECEMBER 31, 2003 63
- --------------------------------------------------------------------------------
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64 BABSON FUNDS SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
[LOGO]
BABSON FUNDS
JONES & BABSON, INC. 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
BABSONFUNDS PRSRT STD
P.O. Box 219757 U.S. POSTAGE
Kansas City, MO 64121-9757 PAID
PERMIT NO. 2891
KANSAS CITY MO
JB177C (2/04) 529836
ITEM 2. CODE OF ETHICS.
Disclose whether, as of the end of the period covered by the report,
the registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party. If the registrant has not adopted
such a code of ethics, explain why it has not done so.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) Disclose that the registrant's board of directors has
determined that the registrant either:
(i) Has at least one audit committee financial expert
serving on its audit committee; or
(ii) Does not have an audit committee financial expert
serving on its audit committee.
(2) If the registrant provides the disclosure required by
paragraph (a)(1)(i) of this Item, it must disclose the name
of the audit committee financial expert and whether that
person is "independent." In order to be considered
"independent" for purposes of this Item, a member of an
audit committee may not, other than in his or her capacity
as a member of the audit committee, the board of directors,
or any other board committee:
(i) Accept directly or indirectly any consulting,
advisory, or other compensatory fee from the
issuer; or
(ii) Be an "interested person" of the investment
company as defined in Section 2(a)(19) of the Act
(15 U.S.C. 80a- 2(a)(19)).
(3) If the registrant provides the disclosure required by
paragraph (a)(1)(ii) of this Item, it must explain why it
does not have an audit committee financial expert.
NOT APPLICABLE - ONLY FOR ANNUAL REPORTS.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Disclose, under the caption Audit Fees, the aggregate fees billed
for each of the last two fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Disclose, under the caption Audit-Related Fees, the aggregate fees
billed in each of the last two fiscal years for assurance and related services
by the principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
(c) Disclose, under the caption Tax Fees, the aggregate fees billed in
each of the last two fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the fees
disclosed under this category.
(d) Disclose, under the caption All Other Fees, the aggregate fees
billed in each of the last two fiscal years for products and services provided
by the principal accountant, other than the services reported in paragraphs (a)
through (c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
(e) (1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) If greater than 50 percent, disclose the percentage of hours
expended on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were attributed to
work performed by persons other than the principal accountant's full-time,
permanent employees.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant for
each of the last two fiscal years of the registrant.
(h) Disclose whether the registrant's audit committee of the board of
directors has considered whether the provision of nonaudit services that were
rendered to the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountant's independence.
ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR AFTER DECEMBER 15,
2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) If the registrant is a listed issuer as defined in Rule
10A-3 under the Exchange Act (17CFR 240.10A-3), state
whether or not the registrant has a separately-designated
standing audit committee established in accordance with
Section 3(a)(58)(A) of the Exchange Act (15 U.S.C.
78c(a)(58)(A)). If the registrant has such a committee,
however designated, identify each committee member. If the
entire board of directors is acting as the registrant's
audit committee as specified in Section 3(a)(58)(B) of the
Exchange Act (15 U.S.C. 78c(a)(58)(B)), so state.
(b) If applicable, provide the disclosure required by Rule
10A-3(d) under the Exchange Act (17CFR 240.10A-3(d))
regarding an exemption from the listing standards for all
audit committees.
NOT APPLICABLE.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
A closed-end management investment company that is filing an annual
report on this Form N-CSR must, unless it invests exclusively in non-voting
securities, describe the policies and procedures that it uses to determine how
to vote proxies relating to portfolio securities, including the procedures that
the company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities. NOT APPLICABLE.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
(a) If the registrant is a closed-end management investment company, provide the
information specified in paragraph (b) of this Item with respect to any purchase
made by or on behalf of the registrant or any "affiliated purchaser," as defined
in Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of shares
or other units of any class of the registrant's equity securities that is
registered by the registrant pursuant to Section 12 of the Exchange Act (15
U.S.C. 781).
NOT APPLICABLE.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Describe any material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors, where those changes
were implemented after the registrant last provided disclosure in response to
the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or
this Item.
NOT APPLICABLE.
ITEM 10. CONTROLS AND PROCEDURES.
(a) Disclose the conclusions of the registrant's principal executive
and principal financial officers, or persons performing similar functions,
regarding the effectiveness of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as
of a date within 90 days of the filing date of the report that includes the
disclosure required by this paragraph, based on the evaluation of these controls
and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or
240.15d-15(b)).
THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
HAVE CONCLUDED, BASED ON THEIR EVALUATION OF THE REGISTRANT'S DISCLOSURE
CONTROLS AND PROCEDURES AS CONDUCTED WITHIN 90 DAYS OF THE FILING DATE OF THIS
REPORT, THAT THESE DISCLOSURE CONTROLS AND PROCEDURES ARE ADEQUATELY DESIGNED
AND ARE OPERATING EFFECTIVELY TO ENSURE THAT INFORMATION REQUIRED TO BE
DISCLOSED BY THE REGISTRANT ON FORM N-CSR IS (I) ACCUMULATED AND COMMUNICATED TO
THE INVESTMENT COMPANY'S MANAGEMENT, INCLUDING ITS CERTIFYING OFFICERS, TO ALLOW
TIMELY DECISIONS REGARDING REQUIRED DISCLOSURE; AND (II) RECORDED, PROCESSED,
SUMMARIZED AND REPORTED WITHIN THE TIME PERIODS SPECIFIED IN THE SECURITIES AND
EXCHANGE COMMISSION'S RULES AND FORMS.
(b) Disclose any change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that
occurred during the registrant's last fiscal half-year (the registrant's second
fiscal half-year in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control
over financial reporting.
THERE WERE NO CHANGES IN THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL
REPORTING THAT OCCURRED DURING THE REGISTRANT'S MOST RECENT FISCAL HALF-YEAR
(THE REGISTRANT'S SECOND FISCAL HALF-YEAR IN THE CASE OF AN ANNUAL REPORT) THAT
HAVE MATERIALLY AFFECTED OR ARE REASONABLY LIKELY TO MATERIALLY AFFECT, THE
REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING.
ITEM 11. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or
number the exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject
of the disclosure required by Item 2, to the extent that the registrant intends
to satisfy the Item 2 requirements through filing of an exhibit. NOT APPLICABLE
- - ONLY EFFECTIVE FOR ANNUAL REPORTS.
(a)(2) A separate certification for each principal executive officer
and principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2). CERTIFICATIONS PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002 ARE ATTACHED HERETO.
(a)(3) Any written solicitation to purchase securities under Rule
23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered
by the report by or on behalf of the registrant to 10 or more persons. NOT
APPLICABLE. [IF AN OPEN-END FUND OR IF THE CLOSED END FUND HAS NONE TO REPORT.]
(b) A separate or combined certification for each principal executive
officer and principal officer of the registrant as required by Rule 30a-2(b)
under the Act of 1940. CERTIFICATIONS PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002 ARE ATTACHED HERETO.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934 and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) D.L. Babson Money Market Fund, Inc.
-----------------------------------
By (Signature and Title)* /s/ Jennifer Lammers
-------------------------------
Jennifer Lammers, President
Date 3/9/04
-----------------
Pursuant to the requirements of the Securities Exchange Act of
1934 and the Investment Company Act of 1940, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates
indicated.
By (Signature and Title)* /s/ Jennifer Lammers
-------------------------------
Jennifer Lammers, President
Date 3/9/04
-----------------
By (Signature and Title)* /s/ Christopher Tomas
-------------------------------
Christopher Tomas, Treasurer
Date 3/9/04
-----------------
* Print the name and title of each signing officer under his or her signature.