Babson Tax-Free Income Fund
Annual Report
June 30, 1995
MESSAGE
To Our Shareholders
For the fiscal year ended June 30, 1995, total investment returns (price
change and reinvested distributions) for Babson Tax-Free Income Fund were
7.2% for Portfolio L and 5.3% for Portfolio S. Portfolio MM's price remained
at $1.00 and provided a return of 3.1% for the same period.
After a difficult 1994, the bond market made an about face and turned in a
strong performance during the first half of 1995. Interest rates declined
during 1995 in response to a marked slowing in the economy's growth rate and
the attendant reduction of inflationary pressures and credit demands that go
along with a weakening business environment. Bond prices were further
supported by the stabilization of the dollar and heightened prospects for
meaningful budget reform.
Municipal bonds underperformed taxable securities last year largely because
of investor concern over how municipal securities might fare under various
tax reform balloons floated in Washington. Many of the proposals would
incorporate some form of flat tax, which typically lowers marginal tax rates
and offsets this revenue loss by eliminating deductions. Since municipals are
a tax advantaged investment, any lowering of income tax rates negatively
affects their relative attractiveness versus taxable alternatives.
Such concerns pushed June 30 municipal bond yields to their highest ratios
versus Treasury yields since Fall, 1993. At these levels, the effects of
various tax reform plans are already reflected in current prices. For example,
10 year AA rated municipals are now yielding more than 83% of comparable
maturity Treasuries. Accordingly, if nothing happens or perhaps something
less radical eventually develops, the current environment will be remembered
as a major buying opportunity for tax-free bonds.
During the year, both Portfolio L and Portfolio S increased their ownership
of essential service revenue issues, such as water and sewer bonds. These
issues have the advantage of being more immune to the uncertainties of the
political process than general obligation debt and often have superior legal
protections. In the current environment of moderate economic growth and
skepticism over whether taxes are spent efficiently, the willingness of the
electorate to honor its obligations may not be as certain as in the past.
At June 30, 1995, the average maturities of Portfolio L, S and MM were 14
years, 4.5 years and 44 days, respectively. The Fund's three portfolios offer
shareholders the opportunity to invest in the type of securities that closely
meet individual requirements, while allowing exchange among different
portfolios without cost as investment objectives and the market environment
change.
We continue the policy of holding high quality issues in sectors of the
market which we believe offer the best value at a particular time. This
should provide a favorable risk/reward balance for shareholders.
Sincerely,
Larry D. Armel
President
<PAGE>
Tables indicating Tax Information, Quality Ratings and Indices Comparisons of
D.L. Babson Tax-Free Income Fund are shown below:
Tax InformationDuring the past fiscal year, the following percentages of
total regular income dividends declared are exempt-interest dividends of
federal income tax purposes:
Portfolio L - Longer Term 98.72%
Portfolio S - Shorter Term 99.10%
Portfolio MM - Money Market 99.70%
Quality Ratings
Portfolio Portfolio Portfolio
L S MM
Aaa 46% 50% 82%
Aa 19 21 18
A 30 21 0
Lower 5 8 0
TOTAL 100% 100% 100 %
D.L. Babson Tax-Free Income Fund Portfolios L & S versus
Lipper General Municipal Bond Funds & Lipper Short Term Municipal Bond Funds
Average annual compounded total returns for one, five and ten year periods
ended June 30, 1995, were 5.32%, 6.00% and 6.28% for Portfolio L and 7.21%,
7.46% and 8.27% for Portfolio S, respectively. Performance data contained in
this report is for past periods only. Past performance is not predictive of
future performance. Investment return and share value will fluctuate, and
redemption value may be more or less than original cost.
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1995
PORTFOLIO L - LONGER TERM
PRINCIPAL MARKET
STATE/TERRITORY DESCRIPTION AMOUNT COST VALUE
ALABAMA
Birmingham GO (Callable 10/1/97 @ 102),
8.00%, due October 1, 2015 $ 1,000,000 $ 1,055,588 $ 1,088,750
ARIZONA
Maricopa Cnty. Unified School Dist.
#48 (Scottsdale),
9.25%, due July 1, 2007 500,000 588,936 670,000
CALIFORNIA
California GO,
6.10%, due September 1, 2004 1,000,000 1,024,152 1,053,750
California Health Facilities Auth. Rev.
(Kaiser Permanente Medical) (Callable
10/1/01 @ 101),
5.45%, due October 1, 2013 250,000 250,000 233,750
Pomona Unified School Dist. GO
(FGIC Insured), Series B, O.I.D.,
5.50%, due August 1, 2015 1,000,000 904,471 933,750
Santa Monica-Malibu Unified School Dist.
GO (Public School Facilities
Reconstruction), Series A
(Callable 8/1/01 @ 102),
6.90%, due August 1, 2012 500,000 556,133 533,750
Santa Rosa, Water Rev. Ref. (FGIC Insured),
Series B (Callable 9/1/02 @ 101.5), O.I.D.,
6.00%, due September 1, 2015 500,000 485,708 491,875
Southern California Public Power Auth.
Project Rev. Ref., Series A (Callable
7/1/03 @ 102; Optional Putable 7/1/05
@ 100), O.I.D.,
5.00%, due July 1, 2015 1,000,000 930,414 865,000
Univ. of California Multiple Purpose Rev.
(MBIA Insured), Series D
(Callable 9/1/02 @ 102),
5.50%, due September 1, 2003 500,000 500,242 510,625
COLORADO
Boulder Sales Tax Rev. (Callable
8/15/04 @ 101; Optional Putable
8/15/05 @ 100),
5.95%, due August 15, 2008 500,000 477,120 515,000
Denver City & Cnty. School Dist. #001
Certficates of Participation (Colorado
Assn. School Board Lease), Series B
(Pre-refunded 12/1/02 @ 101), O.I.D.,
6.75%, due December 1, 2012 500,000 497,414 561,875
Denver City & Cnty. School Dist.
#1 GO, Series A (Callable 12/1/04
@ 101), O.I.D.,
5.125%, due December 1, 2012 500,000 491,633 448,750
DISTRICT OF
COLUMBIA
Dist. of Columbia GO, Series A,
5.75%, due June 1, 2003 500,000 494,335 485,000
FLORIDA
Palm Beach Cnty. Airport System Rev. Ref.
(MBIA Insured) (Callable 10/1/01 @ 102),
7.75%, due October 1, 2010 500,000 551,315 578,125
Sarasota Cnty. School Board Financing
Corp. Lease Rev. (MBIA Insured)
(Pre-refunded 7/1/00 @ 101), O.I.D.,
7.25%, due July 1, 2010 500,000 520,616 563,750
St. John's Cnty. School Board Certificates
of Participation (MBIA Insured),
4.80%, due July 1, 2003 500,000 496,827 491,875
INDIANA
Indiana Bond Bank Special Program,
Series 94 A-1 (Callable 8/1/04 @ 102),
5.60%, due August 1, 2015 500,000 459,733 459,375
Indiana Health Facilities Financing Auth.
Hospital Rev. (Lutheran Hospital)
(AMBAC Insured) (Callable 2/15/99 @ 102),
7.00%, due February 15, 2019 500,000 550,477 525,625
Indiana State Office Building Commission
Capital Complex Rev. (MBIA Insured),
Series A,
7.40%, due July 1, 2015 500,000 521,420 581,875
KANSAS
Johnson Cnty. Water Dist. #1 Rev. Ref.
(Callable 12/1/96 @ 101),
7.25%, due December 1, 2002 500,000 516,332 528,750
LOUISIANA
St. Tammany Parish Hospital Service
Dist. #2 Rev. (Slidell Memorial Hospital
& Medical Center) (Connie Lee Insured)
(Callable 10/1/04 @ 102), O.I.D.,
6.125%, due October 1, 2011 500,000 490,381 504,375
MASSACHUSETTS
Massachusetts Health & Educational Facilities
Auth. Rev. (Winchester Hospital), Series C
(Pre-refunded 7/1/01 @ 102), O.I.D.,
7.55%, due July 1, 2011 500,000 495,482 580,000
Massachusetts Health & Educational Facilities
Auth. Rev. (Winchester Hospital)
(Connie Lee Insured), Series D (Callable
7/1/04 @ 102), O.I.D.,
5.75%, due July 1, 2014 500,000 483,137 478,750
Massachusetts Housing Finance Agency Projects,
Series A (Callable 4/1/03 @ 102),
6.375%, due April 1, 2021 1,000,000 1,000,000 993,750
MISSISSIPPI
Jackson Cnty. Port Facility Rev. Ref.
(Chevron USA Inc.), Series 93,
Fltg. Rate, 4.20%, due June 1, 2023 200,000 200,000 200,000
NEVADA
Reno Hospital Rev. (St. Mary's Regional
Medical Center) (MBIA Insured), Series A
(Callable 5/15/03 @ 102), O.I.D.,
5.625%, due May 15, 2023 500,000 476,212 460,625
NEW HAMPSHIRE
New Hampshire GO Capital Improvement
(College Savings Bond Program), O.I.D.,
0.00%, due August 1, 2010 1,000,000 340,752 416,250
NEW JERSEY
New Jersey Economic Dev. Auth. Public
Schools Rev. (Small Project Loan Program)
(Callable 8/15/03 @ 102),
5.20%, due August 15, 2008 250,000 225,653 243,750
New Jersey Turnpike Auth. Rev.,
10.375%, due January 1, 2003 220,000 220,000 265,650
NEW YORK
Battery Park City Auth. Rev. Ref., Series A
(Callable 11/1/03 @ 102), O.I.D.,
5.00%, due November 1, 2004 1,000,000 942,709 975,000
New York City Municipal Water Financing Auth.
Water & Sewer System Rev. (FSA Insured),
Series A (Callable 6/15/01 @ 101),
6.80%, due June 15, 2004 1,000,000 1,020,199 1,091,250
New York Dormitory Auth. Rev.
(State Univ. Educational Facilities),
Series B (Callable 5/15/04 @ 102;
Optional Putable 5/15/06 @ 100), O.I.D.,
6.10%, due May 15, 2008 1,000,000 986,483 1,001,250
NEW YORK (Continued)
New York Environmental Facilities Corp.
Pollution Control Rev. (State Water-
Revolving Fund), Series B
(Callable 9/15/02 @ 102),
6.65%, due September 15, 2013 500,000 500,000 540,000
New York Medical Care Facilities Finance
Agency Rev. Ref. (Mental Health Services)
(FSA Insured), Series F (Callable 2/15/04
@ 102), O.I.D.,
4.90%, due February 15, 2006 1,000,000 993,078 955,000
New York Thruway Auth. Hwy. & Bridge Trust
Fund (FGIC Insured), Series B (Callable
4/1/04 @ 102; Optional Putable 4/1/06 @
100), O.I.D.,
5.80%, due April 1, 2007 500,000 491,548 513,125
OHIO
Ohio Bldg. Auth. Ref. (State Correctional
Facilities), Series A, O.I.D.,
4.20%, due October 1, 2000 500,000 455,896 480,625
RHODE ISLAND
Rhode Island Depositors Economic
Protection Corp. Special Obligation
(MBIA Insured), Series A
(Pre-refunded 8/1/01 @ 102),
7.50%, due August 1, 2014 500,000 514,856 579,375
Rhode Island Industrial Facility Corp.
Pollution Control Rev. (Inge Co.)
(SBA Guaranteed)
(Callable 8/30/95 @ 101),
9.125%, due October 1, 2000 100,000 88,681 101,625
TEXAS
Harris Cnty. Toll Road Ref. (FGIC
Insured) (Callable 8/15/04 @ 102;
Optional Putable 8/15/06 @ 100), O.I.D.,
5.00%, due August 15, 2016 500,000 432,479 435,625
Houston Hotel Occupancy Tax Receipts Rev.
(FGIC Insured), Series A (Callable
7/1/01 @ 100),
7.00%, due July 1, 2009 500,000 531,694 561,875
Lewisville Independent School Dist.
(PSF Guaranteed) (Callable 8/15/07
@ 100), O.I.D.,
5.50%, due August 15, 2017 500,000 469,564 474,375
Texas Public Finance Auth. Bldg. Rev.
(AMBAC Insured), Series A (Callable
2/1/05 @ 100),
6.00%, due February 1, 2008 500,000 497,841 512,500
UTAH
Intermountain Power Agency, Utah Power
Supply Rev. Ref., Series D (Callable
7/1/97 @ 102),
8.625%, due July 1, 2021 500,000 536,328 550,000
VIRGINIA
Danville Industrial Dev. Auth. Hospital Rev.
(Danville Regional Medical Center)
(FGIC Insured) (Callable 10/1/04 @
101), O.I.D.,
6.375%, due October 1, 2014 500,000 495,240 520,000
Fairfax Cnty. Water Auth. Rev.
(Callable 4/1/04 @ 102), O.I.D.,
5.00%, due April 1, 2016 500,000 476,679 441,250
Prince William Cnty. Service Auth. Water
& Sewer System Rev. Ref. (FGIC Insured)
(Callable 7/1/03 @ 102), O.I.D.,
4.75%, due July 1, 2008 500,000 415,706 450,625
WASHINGTON
Port of Longview Industrial Dev. Control
(Atlantic Richfield Co.) (Callable
9/1/98 @ 100),
10.75%, due September 1, 2012 250,000 255,865 255,938
Washington GO, Series B & AT-7,
6.25%, due June 1, 2010 500,000 525,516 525,625
Washington Public Power Supply System
Nuclear Project #2 Rev. Ref., Series 94 A
(Callable 7/1/04 @ 102), O.I.D.,
5.375%, due July 1, 2011 500,000 493,376 456,875
TOTAL INVESTMENTS - 98.68% $ 26,928,221 27,686,338
Other assets less liabilities - 1.32% 369,642
TOTAL NET ASSETS - 100.00%
(equivalent to $8.67 per share;
50,000,000 shares of $0.10 par value
capital shares authorized; 3,237,433 shares outstanding) $ 28,055,980
For federal income tax purposes, the identified cost of investments owned at
June 30, 1995 was $26,928,221.
Net unrealized appreciation for federal income tax purposes was $758,117,
which is comprised of unrealized appreciation of $1,080,776 and unrealized
depreciation of $322,659.
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1995
PORTFOLIO S - SHORTER TERM
PRINCIPAL MARKET
STATE/TERRITORY DESCRIPTION AMOUNT COST VALUE
ALABAMA
Alabama Corrections Institution Finance
Auth. Rev. (MBIA Insured), Series A,
4.65%, due April 1, 2001 $ 500,000 $ 495,215 $ 492,500
ARIZONA
Lake Havasu City Municipal Property
Corp. Facilities Rev. (MBIA Insured),
Series A (Callable 6/1/96 @ 101),
6.30%, due June 1, 1999 500,000 500,000 511,875
CALIFORNIA
Sacramento Cnty. Tax & Rev. Anticipation
Notes,
4.75%, due October 4, 1996 1,000,000 1,007,110 1,011,780
San Buenaventura Water Rev. Ref.
(AMBAC Insured),
4.40%, due October 1, 2003 400,000 397,345 375,500
San Diego Cnty. Regional Transportation
Commission Sales Tax Rev. (FGIC
Insured), Series A,
6.00%, due April 1, 2004 500,000 531,356 526,875
Ventura Cnty. Tax Anticipation Notes,
4.50%, due August 1, 1995 500,000 500,315 500,165
DELAWARE
Delaware Transportation Auth.
System Rev., O.I.D.,
5.40%, due July 1, 1996 500,000 500,295 506,875
DISTRICT OF
COLUMBIA
Dist. of Columbia GO, Series A,
5.75%, due June 1, 2003 500,000 494,335 485,000
FLORIDA
Florida Municipal Power Agency Rev. Ref.
(Stanton II) (AMBAC Insured),
4.35%, due October 1, 2002 240,000 240,000 227,400
Florida Sunshine Skyway Rev. Ref.,
6.00%, due July 1, 1996 500,000 501,293 508,750
GUAM
Guam Government Limited Obligation Hwy.
(Capital Guaranty), Series A,
5.75%, due May 1, 2001 500,000 494,845 522,500
Guam Power Auth. Rev., Series A,
5.00%, due October 1, 2002 500,000 498,529 480,000
HAWAII
Hawaii GO, Series BU,
7.00%, due November 1, 1995 500,000 505,288 505,305
ILLINOIS
Illinois Finance Auth. Industrial
Dev. Rev. (Citizens Utility Co.)
(Mandatory Redemption 8/1/97 @ 100),
7.10%, due August 1, 2025 250,000 250,000 260,625
Illinois GO (Callable 12/1/96 @ 102),
5.90%, due December 1, 1998 500,000 505,862 518,125
INDIANA
Indianapolis Line of Credit Public
Improvement Bond Bank, Series D,
5.70%, due February 1, 2000 250,000 247,090 256,875
MARYLAND
Prince Georges Cnty. GO,
5.60%, due July 1, 1995 500,000 480,815 500,015
MASSACHUSETTS
Massachusetts Health & Educational
Facilities Auth. Rev. (Medical Center
of Central Massachusetts)
(AMBAC Insured), Series B,
5.00%, due July 1, 1997 500,000 498,950 505,625
Massachusetts Health & Educational
Facilities Auth. Rev. (New England
Deaconess Hospital), Series D,
5.80%, due April 1, 1998 500,000 497,500 507,500
Massachusetts Health & Educational
Facilities Auth. Rev. (Winchester
Hospital) (Connie Lee Insured), Series D,
5.10%, due July 1, 2001 500,000 498,725 499,375
Massachusetts Housing Finance Agency
Projects (AMBAC Insured), Series A,
5.35%, due April 1, 2003 500,000 500,000 498,125
Massachusetts Municipal Wholesale
Electric Co. Power Supply System
Rev., Series D,
5.70%, due July 1, 2001 500,000 491,455 511,250
Massachusetts Water Resources Auth.,
Series 90 A,
7.00%, due April 1, 1999 500,000 496,620 536,875
MICHIGAN
Wayne Cnty. Airport Rev. (AMBAC Insured),
Series B (Pre-refunded 12/1/00 @ 102),
7.00%, due December 1, 2010 1,000,000 1,111,396 1,128,750
MINNESOTA
Minneapolis & St. Paul Housing &
Redevelopment Auth. Health Care
System Rev. (Healthspan)
(AMBAC Insured), Series A,
4.50%, due November 15, 2001 500,000 502,259 485,000
Minnesota GO,
7.00%, due August 1, 1995 500,000 500,240 501,245
MISSOURI
Jackson Cnty. Industrial Dev. Auth.
Health Care Corp. Rev. (St. Joseph
Health Center) (MBIA Insured),
4.60%, due July 1, 2001 500,000 497,991 488,750
Sikeston Electric Rev. Ref.
(MBIA Insured),
5.80%, due June 1, 2002 500,000 494,380 523,125
NEVADA
Clark Cnty. School Dist., Series A,
7.20%, due March 1, 1998 500,000 503,537 530,625
NEW HAMPSHIRE
New Hampshire GO Capital Improvement
(College Savings Bond Program), O.I.D.,
0.00%, due August 1, 1996 500,000 466,157 478,125
NEW JERSEY
Montclair Township GO Ref.,
3.80%, due January 1, 1999 500,000 496,847 481,875
NEW MEXICO
Albuquerque Hospital Rev. Ref.
(MBIA Insured), Series A, O.I.D.,
5.60%, due August 1, 1999 500,000 498,249 516,875
Las Cruces School Dist. (MBIA Insured),
6.125%, due August 1, 2000 500,000 497,835 526,875
NEW YORK
Battery Park City Auth. Rev. Ref.,
Series A,
6.00%, due November 1, 2003 500,000 532,563 525,625
New York Dormitory Auth. Rev.
(City Univ.), Series U,
4.90%, due July 1, 1996 500,000 500,000 500,625
New York Medical Care Facilities
Finance Agency Rev. Ref. (Mental
Health Services), Series F,
6.00%, due August 15, 2002 500,000 525,108 511,875
New York Medical Care Facilities Finance
Agency Rev. (Surgical Hospital)
(FHA Insured), Series A,
5.40%, due August 15, 2004 500,000 500,000 503,750
New York Thruway Auth. Service Contract Rev.
(MBIA Insured),
5.375%, due April 1, 2004 500,000 497,452 508,750
NORTH CAROLINA
Franklin Cnty. Certificates of
Participation,
5.60%, due June 1, 1998 500,000 500,000 513,750
Greensboro Public Improvement GO,
6.00%, due March 1, 1997 500,000 514,575 513,750
North Carolina Eastern Municipal
Power Agency System Rev. Ref.,
Series 93 B,
5.375%, due January 1, 2001 500,000 496,005 495,625
OHIO
Hamilton Electric System Mortgage Rev. Ref.
(FGIC Insured), Series A,
4.50%, due October 15, 1996 500,000 499,090 500,625
Ohio Special Obligation (AMBAC Insured),
Series A,
5.55%, due June 1, 2000 500,000 500,000 513,750
PUERTO RICO
Puerto Rico Commonwealth Hwy. &
Transportation Auth.
Rev. Ref., Series V,
6.10%, due July 1, 2001 250,000 248,285 262,188
Puerto Rico Electric Power Auth.
Rev. Ref., Series Q,
5.30%, due July 1, 1998 500,000 497,525 506,250
RHODE ISLAND
Rhode Island Depositors Economic
Protection Corp. Special Obligation
(FSA Insured), Series A,
5.60%, due August 1, 1998 500,000 498,675 512,500
SOUTH CAROLINA
South Carolina GO, O.I.D.,
4.20%, due April 1, 2002 500,000 465,682 480,625
TENNESSEE
Tennessee Housing Dev. Agency
Mortgage Finance, Series A,
4.95%, due July 1, 2000 500,000 502,179 495,625
TEXAS
Port Arthur Navigation Dist.
Pollution Control Rev.
Ref. (Texaco Inc.), Fltg. Rate,
4.25%, due October 1, 2024 200,000 200,000 200,000
San Antonio Water Rev.
(Pre-refunded 5/1/00 @ 49.8), O.I.D.,
0.00%, due May 1, 2010 1,250,000 493,725 493,750
UTAH
Intermountain Power Agency Power
Supply Rev., Series F,
6.40%, due July 1, 1996 500,000 502,793 510,000
VIRGINIA
Chesterfield Cnty. Certificates of
Participation
(Pre-refunded 12/15/96 @ 102),
7.45%, due June 15, 1997 500,000 507,639 533,125
Stafford Cnty. Certificates of
Participation (AMBAC Insured),
4.15%, due November 1, 2000 500,000 496,526 481,875
Upper Occoquan Sewer Auth. Regional
Rev. Ref. (AMBAC Insured),
5.35%, due July 1, 2002 500,000 496,215 513,125
WASHINGTON
Port Seattle Rev. Ref. (AMBAC Insured),
Series A,
4.80%, due April 1, 1999 500,000 501,600 499,375
Washington Public Power Supply System
Nuclear Project #2 Rev. Ref., Series A,
4.65%, due July 1, 1996 500,000 500,225 501,250
Washington Public Power Supply System
Nuclear Project #3 Rev. Ref., Series A,
7.00%, due July 1, 1996 500,000 500,000 511,250
WISCONSIN
Milwaukee Metropolitan Sewer Dist.
GO, Series A,
7.00%, due September 1, 2000 500,000 539,538 550,625
TOTAL INVESTMENTS - 102.43% $ 28,717,234 29,049,848
Other assets less liabilities - (2.43%) (690,208)
TOTAL NET ASSETS - 100.00%
(equivalent to $10.71 per share;
50,000,000 shares of $0.10 par value
capital shares authorized;
2,647,241 shares outstanding) $ 28,359,640
For federal income tax purposes, the identified cost of investments owned at
June 30, 1995 was $28,717,234.
Net unrealized appreciation for federal income tax purposes was $332,614,
which is comprised of unrealized appreciation of $490,422 and unrealized
depreciation of $157,808.
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1995
PORTFOLIO MM - MONEY MARKET
PRINCIPAL MARKET
STATE DESCRIPTION AMOUNT COST VALUE
ALABAMA
Mobile Industrial Dev. Board Solid
Waste Disposal Rev. (Scott Paper
Co.), Series C (LOC: Morgan Guaranty
Trust Co.), Fltg. Rate,
4.05%, due December 1, 2019 $ 200,000 $ 200,000 $ 200,000
Mobile Industrial Dev. Board Solid
Waste Disposal Rev. (Scott Paper
Co.), Series D (LOC: Swiss Bank Corp.),
Fltg. Rate, 4.05%, due December 1, 2019 400,000 400,000 400,000
Mobile Industrial Dev. Board Solid Waste
Disposal Rev. (Scott Paper Co.),
Series E (LOC: Swiss Bank Corp.),
Fltg. Rate, 4.05%, due December 1, 2019 200,000 200,000 200,000
COLORADO
Denver City & Cnty. GO,
5.00%, due October 1, 1995 200,000 200,389 200,389
Platte River Power Auth. Electric
Rev., Series S-1 (SBPA: Morgan Guaranty
Trust Co.) (Mandatory Redemption
9/6/95 @ 100),
4.20%, due June 1, 2018 400,000 400,000 400,000
CONNECTICUT
Connecticut GO, Series B,
4.90%, due November 15, 1995 200,000 200,360 200,360
Connecticut Special Assessment
Unemployment Compensation Adv. Fund
Rev., Series C (FGIC Insured) (Optional
Putable 7/1/96 @ 100),
3.90%, due November 15, 2001 500,000 500,000 500,000
DELAWARE
Wilmington Hospital Rev. (Franciscan Health),
Series A (LOC: Toronto-Dominion Bank),
Fltg. Rate, 4.35%, due July 1, 2011 200,000 200,000 200,000
FLORIDA
Florida Municipal Power Agency
Tax-Exempt Commercial Paper, Series A
(LOC: First Union),
3.50%, due August 11, 1995 400,000 400,000 400,000
Gainsville Utilities System Tax-Exempt
Commercial Paper, Series C (Line:
Bank of America; Sun Bank),
3.80%, due August 15, 1995 400,000 400,000 400,000
Jacksonville Tax-Exempt Commercial Paper
(Line: Morgan Guaranty Trust Co.),
3.65%, due July 26, 1995 600,000 600,000 600,000
GEORGIA
Burke Cnty. Dev. Auth. Pollution Control
Rev. (Oglethorpe Power) (FGIC Insured),
Series A (Line: Credit Locale de France),
Fltg. Rate, 4.15%, due January 1, 2019 500,000 500,000 500,000
Burke Cnty. Dev. Auth. Pollution Control Rev.
(Georgia Power Co.), 5th Series,
Fltg. Rate, 4.25%, due July 1, 2024 400,000 400,000 400,000
Georgia Municipal Gas Auth. Rev.,
Series D (LOC: Wachovia)
(Mandatory Redemption 7/12/95 @ 100),
3.85%, due January 1, 2001 300,000 300,000 300,000
Savannah Downtown Dev. Auth. Rev.
(Parking Facilities Project)
(SBPA: National Westminster Bank),
Fltg. Rate, 4.25%, due September 1, 2000 200,000 200,000 200,000
HAWAII
Hawaii Dept. of Budget & Finance Special
Purpose Mortgage Rev. (Kaiser Permanente),
Series 84 B
(Optional Putable 9/1/95 @ 100),
4.20%, due March 1, 2014 200,000 200,000 200,000
INDIANA
Sullivan Pollution Control Rev.
(Hoosier Energy), Series 85L-1 (Guaranty:
National Rural Util. Coop.) (Mandatory
Redemption 7/11/95 @ 100),
3.00%, due December 1, 2015 250,000 250,000 250,000
KANSAS
Kansas Dept. of Transportation Hwy.
Rev., Series 94 B, Fltg. Rate,
4.15%, due September 1, 2014 500,000 500,000 500,000
KENTUCKY
Trimble Cnty. Pollution Control Rev.
(Louisville Gas & Electric Co.), Series A
(Mandatory Redemption 8/10/95 @ 100),
3.80%, due September 1, 2017 400,000 400,000 400,000
LOUISIANA
Lake Charles Harbor & Terminal Dist.
Port Facilities Rev. (Conoco)
(Guaranty: Dupont), Fltg. Rate,
4.25%, due November 1, 2011 200,000 200,000 200,000
Louisiana Public Facilities Auth.
(Sisters of Charity) (Mandatory
Redemption 7/13/95 @ 100),
4.10%, due January 1, 2015 300,000 300,000 300,000
Louisiana Offshore Terminal Auth.
Deepwater Port Rev. Ref. (Loop)
(SBPA: Union Bank of Switzerland),
Fltg. Rate, 4.10%, due September 1, 2006 550,000 550,000 550,000
Louisiana Recovery Dist. Sales Tax Rev.
(FGIC Insured) (SBPA: Swiss Bank Corp.),
Fltg. Rate, 4.35%, due July 1, 1997 500,000 500,000 500,000
Louisiana Recovery Dist. Sales Tax Rev.
(MBIA Insured) (SBPA: Swiss Bank Corp.),
Fltg. Rate, 4.35%, due July 1, 1998 200,000 200,000 200,000
MARYLAND
Howard Cnty. Bond Anticipation Notes
Tax-Exempt Commercial Paper (LOC:
Swiss Bank Corp.),
3.60%, due September 8, 1995 400,000 400,000 400,000
MASSACHUSETTS
Massachusetts Health & Educational
Facilities Auth. Rev. (Harvard Univ.),
Series L (Mandatory Redemption
9/12/95 @ 100),
3.30%, due January 1, 2024 200,000 200,000 200,000
MINNESOTA
Rochester Health Care Facilities Rev.
(Mayo Foundation/Mayo Medical Center),
Series E (SBPA: Credit Suisse Bank)
(Mandatory Redemption 8/21/95 @ 100),
4.15%, due November 15, 2016 600,000 600,000 600,000
MISSISSIPPI
Jackson Cnty. Port Auth. Facility Rev.
Ref. (Chevron Corp.), Series 93,
Fltg. Rate, 4.20%, due June 1, 2023 600,000 600,000 600,000
MISSOURI
Kansas City School Dist. Building Corp.
Insured Leasehold Rev. (FGIC Insured),
Series A, 6.80%, due February 1, 1996 270,000 274,321 274,321
NEVADA
Clark Cnty. Airport Improvement Rev.,
Series 95 A-1 (LOC: Toronto-Dominion
Bank), Fltg. Rate,
4.15%, due July 1, 2025 300,000 300,000 300,000
NEW MEXICO
Albuquerque Airport Rev. Ref.
(AMBAC Insured), Series 95 (SBPA:
Canadian Imperial Bank of Commerce),
Fltg. Rate, 4.15%, due July 1, 2014 300,000 300,000 300,000
PENNSYLVANIA
Pennsylvania Higher Educational
Facilities Auth. Health Services
Rev. (Univ. of Pennsylvania),
Series 94 B, Fltg. Rate,
4.05%, due January 1, 2024 400,000 400,000 400,000
SOUTH CAROLINA
South Carolina GO, Series T,
6.40%, due August 1, 1995 250,000 250,459 250,459
TEXAS
Austin Utility System Rev.
(Pre-refunded 11/15/95 @ 102),
10.00%, due November 15, 1999 200,000 208,748 208,748
Calhoun Cnty. Navigation Industrial
Dev. Auth. Pollution Control Rev.
Ref. (ALCOA), Series 87 (LOC: Credit
Suisse Bank), Fltg. Rate,
4.20%, due March 1, 2001 300,000 300,000 300,000
Grapevine Industrial Dev. Corp.
Rev. (American Airlines), Series A-1
(LOC: Morgan Guaranty Trust Co.),
Fltg. Rate, 4.35%, due December 1, 2024 100,000 100,000 100,000
Grapevine Industrial Dev. Corp. Rev.
(American Airlines), Series A-4 (LOC:
Morgan Trust Guaranty Co.), Fltg. Rate,
4.35%, due December 1, 2024 100,000 100,000 100,000
Harris Cnty. Industrial Dev. Corp.
Pollution Control Rev. (Exxon
Corp.), Series 84 B, Fltg. Rate,
4.25%, due March 1, 2024 100,000 100,000 100,000
North Central Health Facility Dev.
Corp. Rev. (Presbyterian Medical
Center) (MBIA Insured), Series C
(SBPA: NationsBank NC), Fltg. Rate,
4.35%, due December 1, 2015 200,000 200,000 200,000
North Central Health Facilities Dev.
Corp. Rev. (Presbyterian Medical
Center) (MBIA Insured), Series D
(SBPA: NationsBank NC), Fltg. Rate,
4.35%, due December 1, 2015 400,000 400,000 400,000
Port Arthur Navigation Dist. Pollution
Control Rev. Ref. (Texaco Inc.),
Fltg. Rate, 4.25%, due October 1, 2024 200,000 200,000 200,000
Southwest Higher Education Auth. Inc.
Rev. (Southern Methodist Univ.) (LOC:
Morgan Guaranty Trust Co.), Fltg. Rate,
4.20%, due July 1, 2015 300,000 300,000 300,000
UTAH
Intermountain Power Agency Power Supply
Rev., Series 85 F (SBPA: Bank of America)
(Optional Putable 9/15/95 @ 100),
4.15%, due July 1, 2015 300,000 300,000 300,000
Intermountain Power Agency Power Supply Rev.,
Series 85 F (SBPA: Bank of America)
(Optional Putable 6/17/96 @ 100),
3.80%, due July 1, 2021 250,000 250,000 250,000
Salt Lake Water & Sewer Rev. Ref.
(AMBAC Insured),
7.15%, due February 1, 1996 200,000 203,357 203,357
Salt Lake Pollution Control Rev. Ref.
(British Petroleum),
Fltg. Rate, 4.25%, due February 1, 2008 400,000 400,000 400,000
WASHINGTON
Seattle Municipal Light & Power Rev.
(SBPA: Morgan Guaranty Trust Co.),
Fltg. Rate, 4.00%, due November 1, 2018 200,000 200,000 200,000
Washington Public Power Supply System
Nuclear Project #1 Rev. Ref., Series 1A-1
(LOC: Bank of America), Fltg. Rate,
4.20%, due July 1, 2017 300,000 300,000 300,000
WISCONSIN
Oak Creek Pollution Control Rev.
(Wisconsin Electric Power Co.),
Series 86, Fltg. Rate,
4.10%, due August 1, 2016 400,000 400,000 400,000
Sheboygan Pollution Control Rev.
(Wisconsin Power & Light Co.),
Fltg. Rate, 4.25%, due August 1, 2014 200,000 200,000 200,000
WYOMING
Lincoln Cnty. Pollution Control Rev.
(Exxon Corp.), Series C,
Fltg. Rate, 4.25%, due November 1, 2014 100,000 100,000 100,000
Lincoln Cnty. Pollution Control Rev.
(Exxon Corp.), Series 85,
Fltg. Rate, 4.20%, due August 1, 2015 300,000 300,000 300,000
TOTAL INVESTMENTS - 102.35% $ 16,087,634 16,087,634
Other assets less liabilities - (2.35%) (369,341)
TOTAL NET ASSETS - 100.00%
(equivalent to $1.00 per share; 100,000,000
shares of $0.10 par value
capital shares authorized;
15,712,300 shares outstanding) $ 15,718,293
For federal income tax purposes, the identified cost of investments owned
at June 30, 1995 was $16,087,634.
Line (Line of Credit)
LOC (Letter of Credit)
SBPA (Stand by Purchase Agreement)
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1995
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
<S> <C> <C> <C>
ASSETS:
Investment securities, at market value
(identified cost of $26,928,221,
$28,717,234 and $16,087,634, respectively) $ 27,686,338 $ 29,049,848 $ 16,087,634
Cash - - 15,469
Interest receivable 526,534 485,293 115,190
Total assets 28,212,872 29,535,141 16,218,293
LIABILITIES AND NET ASSETS:
Cash overdraft 156,288 168,191 -
Payable for investments purchased - 1,007,110 500,000
Payable to shareholders 604 200 -
Total liabilities 156,892 1,175,501 500,000
NET ASSETS $ 28,055,980 $ 28,359,640 $ 15,718,293
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 27,833,210 $ 28,088,673 $ 15,713,678
Accumulated undistributed net realized gain
(loss) on investments (535,347) (61,647) 4,615
Net unrealized appreciation in value of investments 758,117 332,614 _
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 28,055,980 $ 28,359,640 $ 15,718,293
Capital shares, $0.10 par value
Authorized 50,000,000 50,000,000 100,000,000
Outstanding 3,237,433 2,647,241 15,712,300
NET ASSET VALUE PER SHARE $ 8.67 $ 10.71 $ 1.00
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1995
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
<S> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 1,690,144 $ 1,514,283 $ 518,784
Expenses:
Management fees (Note 3) 267,825 272,253 73,576
Registration fees and other expenses 18,294 18,190 10,202
286,119 290,443 83,778
Net investment income 1,404,025 1,223,840 435,006
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 1):
Realized gain (loss) from investment transactions
(excluding repurchase agreements):
Proceeds from sales of investments 11,200,753 9,889,405 68,426,525
Cost of investments sold 11,775,586 9,902,372 68,426,525
Net realized gain (loss) from investment transactions (574,833) (12,967) -
Unrealized appreciation (depreciation) on investments:
Beginning of year (324,253) 81,831 -
End of year 758,117 332,614 -
Increase in net unrealized appreciation on investments 1,082,370 250,783 -
Net gain on investments 507,537 237,816 -
Increase in net assets resulting from operations $ 1,911,562 $ 1,461,656 $ 435,006
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
For The Two Years Ended June 30, 1995
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S PORTFOLIO MM INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 1,543,486 $ 1,221,906 $ 235,158
Net realized gain from investment transactions 502,510 16,311 1,592
Decrease in net unrealized appreciation on investments (2,464,259) (1,073,552) -
Net increase (decrease) in net assets resulting from operations (418,263) 164,665 236,750
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,543,486) (1,221,906) (235,158)
Net realized gain from investment transactions (1,445,552) (157,281) -
Total distributions to shareholders (2,989,038) (1,379,187) (235,158)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold, 584,067(L), 930,730(S), 20,790,620(MM) 5,239,061 10,257,258 20,790,642
Net asset value of shares issued for reinvestment of distributions,
198,544(L), 77,426(S), 203,529(MM) 1,828,167 845,646 203,529
7,067,228 11,102,904 20,994,171
Cost of shares redeemed, 924,140(L), 708,846(S), 15,572,728(MM) (8,357,281) (7,750,942) (15,572,728)
Net increase (decrease) from capital share transactions (1,290,053) 3,351,962 5,421,443
Total increase (decrease) in net assets (4,697,354) 2,137,440 5,423,035
NET ASSETS - June 30, 1993 34,234,712 26,454,666 9,473,203
NET ASSETS - June 30, 1994 $ 29,537,358 $ 28,592,106 $ 14,896,238
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,404,025 $ 1,223,840 $ 435,006
Net realized gain (loss) from investment transactions (574,833) (12,967) -
Increase in net unrealized appreciation on investments 1,082,370 250,783 -
Net increase in net assets resulting from operations 1,911,562 1,461,656 435,006
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,404,025) (1,223,840) (435,006)
Net realized gain from investment transactions (65,946) (15,040) (1,592)
Total distributions to shareholders (1,469,971) (1,238,880) (436,598)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold, 295,147(L), 308,389(S), 29,790,951(MM) 2,494,554 3,278,080 29,790,961
Net asset value of shares issued for reinvestment of distributions,
102,507(L), 75,054(S), 387,363(MM) 865,434 795,502 387,363
3,359,988 4,073,582 30,178,324
Cost of shares redeemed, 626,791(L), 428,910(S), 29,354,669(MM) (5,282,957) (4,528,824) (29,354,677)
Net increase (decrease) from capital share transactions (1,922,969) (455,242) 823,647
Total increase (decrease) in net assets (1,481,378) (232,466) 822,055
NET ASSETS - June 30, 1994 29,537,358 28,592,106 14,896,238
NET ASSETS - June 30, 1995 $ 28,055,980 $ 28,359,640 $ 15,718,293
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company. Its shares are
currently issued in three series with each series, in effect, representing a
separate Fund. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
Investments - Securities held in the short-term and long-term portfolios are
valued at the market value on the last business day of the period as
determined by an independent pricing service. Short-term notes and the money
market portfolio are valued at amortized cost which approximates market value.
Investment transactions are recorded on the trade date. Investment income and
dividends to shareholders are recorded daily and dividends are distributed
monthly. Realized gains and losses from investment transactions and unrealized
appreciation and depreciation of investments are reported on the identified
cost basis.
Federal and State Taxes - The Fund's policy is to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income to its shareholders. Therefore, no
provision for federal or state tax is required.
2. PURCHASES AND SALES OF SECURITIES:
The aggregate amounts of security transactions during the year ended
June 30, 1995 (excluding repurchase agreements), were as follows:
Portfolio L
Purchases $ 9,478,555
Proceeds from sales 11,200,753
Portfolio S
Purchases $ 9,768,000
Proceeds from sales 9,889,405
Portfolio MM
Purchases $ 69,168,220
Proceeds from sales 68,426,525
3. MANAGEMENT FEES:
Management fees, which include all normal expenses of the Fund other than
taxes, fees and other charges of governmental agencies for qualifying the
Fund's shares for sale, special legal fees, interest and brokerage
commissions, are paid to Jones & Babson, Inc., an affiliated company. These
fees are based on average daily net assets of the portfolios at the annual
rate of .95 of one percent of net assets of Portfolio L and Portfolio S and
.50 of one percent of net assets of Portfolio MM. Certain officers and/or
directors of the Fund are also officers and/or directors of Jones & Babson,
Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth information as to capital and income changes
for a share outstanding for each of the five years in the period ended
June 30, 1995:
PORTFOLIO L 1995 1994 1993 1992 1991
Net asset value, beginning of year $ 8.52 $ 9.49 $ 9.04 $ 8.74 $ 8.63
Income from investment operations:
Net investment income 0.42 0.43 0.46 0.52 0.54
Net gains (or losses) on securities
(both realized and unrealized) 0.17 (0.56) 0.57 0.57 0.11
Total from Investment Operations 0.59 (0.13) 1.03 1.09 0.65
Less distributions:
Dividends from net investment income (0.42) (0.43) (0.46) (0.52) (0.54)
Distributions from capital gains (0.02) (0.41) (0.12) (0.27) -
Total Distributions (0.44) (0.84) (0.58) (0.79) (0.54)
Net asset value, end of year $ 8.67 $ 8.52 $ 9.49 $ 9.04 $ 8.74
Total Return 7% (2%) 12% 13% 8%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 28 $ 30 $ 34 $ 30 $ 29
Ratio of expenses to average net assets 1.02% 1.02% 1.00% 0.99% 0.98%
Ratio of net investment income to
average net assets 4.98% 4.73% 5.03% 5.73% 6.22%
Portfolio turnover rate 34% 53% 126% 128% 116%
PORTFOLIO S 1995 1994 1993 1992 1991
Net asset value, beginning of year $10.62 $ 11.05 $10.78 $10.54 $10.44
Income from investment operations:
Net investment income 0.45 0.46 0.50 0.55 0.59
Net gains (or losses) on securities
(both realized and unrealized) 0.10 (0.37) 0.29 0.36 0.21
Total from Investment Operations 0.55 0.09 0.79 0.91 0.80
Less distributions:
Dividends from net investment income (0.45) (0.46) (0.50) (0.55) (0.59)
Distributions from capital gains (0.01) (0.06) (0.02) (0.12) (0.11)
Total Distributions (0.46) (0.52) (0.52) (0.67) (0.70)
Net asset value, end of year $10.71 $10.62 $11.05 $10.78 $10.54
Total Return 5% 1% 8% 9% 8%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 28 $ 29 $ 26 $ 22 $ 18
Ratio of expenses to average net assets 1.01% 1.02% 1.00% 1.00% 0.99%
Ratio of net investment income to
average net assets 4.28% 4.22% 4.58% 5.14% 5.57%
Portfolio turnover rate 34% 21% 47% 81% 98%
PORTFOLIO MM 1995 1994 1993 1992 1991
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.03 0.02 0.02 0.03 0.05
Less distributions:
Dividends from net investment income (0.03) (0.02) (0.02) (0.03) (0.05)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return 3% 2% 2% 3% 5%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 16 $ 15 $ 9 $ 10 $ 10
Ratio of expenses to average net assets 0.59% 0.57% 0.56% 0.55% 0.54%
Ratio of net investment income to
average net assets 3.07% 1.99% 2.18% 3.40% 4.82%
See accompanying Notes to Financial Statements.
<PAGE>
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
D.L. Babson Tax-Free Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the statement of net assets, of D.L. Babson Tax-Free Income Fund,
Inc. (a Maryland corporation, comprising, respectively, Portfolio L,
Portfolio S and Portfolio MM), as of June 30, 1995, and the related statement
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and the financial highlights. Our procedures
included confirmation of securities owned as of June 30, 1995, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement and the
financial highlights presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting the D.L. Babson Tax-Free
Income Fund, Inc. as of June 30, 1995, the results of their operations for
the year then ended, the changes in their net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Kansas City, Missouri
August 4, 1995
This report has been prepared for the information of the Shareholders of the
D.L. Babson Tax-Free Income Fund, Inc., and is not to be construed as an
offering of the shares of the Fund. Shares of this Fund and of the other
Babson Funds are offered only by the Prospectus, a copy of which may be
obtained from Jones & Babson, Inc.
