MESSAGE
To Our Shareholders
For the six month period ended December 31, 1995, total investment returns
(price change and reinvested distributions) for Babson Tax-Free Income Fund
were 6.9% for Portfolio L and 3.9% for Portfolio S. Portfolio MM's price
remained at $1.00 and provided a return of 1.67% for the same period. Some
income from the fund may be subject to the federal Alternative Minimum Tax
as well as state and local taxes.
After struggling through 1994 _ one of the worst years on record, the general
bond market came storming back in 1995 and ended the year on a very positive
note. During 1995 taxable interest rates across the maturity spectrum
dropped by approximately 20%, producing the biggest bull market in bonds
in the last ten years and more than offsetting the record-setting slump in
1994. At December 31, yield on the thirty-year Treasury bond stood just below
6%, the lowest level in two years.
This powerful bond market rally occurred during a period of moderate economic
growth and stable prices. The absence of inflationary pressures has been the
primary force behind the bond market's strength. However, strong institutional
demand for bonds, especially by insurance companies, and the prospect of
meaningful federal budget reform also helped to fuel the rally.
Municipal bonds somewhat underperformed their taxable counterparts during
1995. The principal culprit reigning in performance was the fear of
potential federal tax reform and the negative effects that it could have on
the valuation of municipal bonds. Underperformance was concentrated in the
intermediate and longer-term portion of the yield curve, which would suffer
disproportionately if one of the proposed flat or consumption based taxes
were law. Meanwhile, such political uncertainty has continued to provide
attractive investment opportunities in the tax-free bond market.
At December 31, 1995, the average maturities of Portfolio L, S and MM were
14 years, 5 years and 39 days, respectively. The Fund's three portfolios
offer shareholders the opportunity to invest in the types of securities which
closely meet their individual requirements. They also make it possible to
exchange assets among different portfolios without cost, as investment
objectives and the market environment change.
We continue the policy of owning high quality issues in sectors of the
market which we believe offer the best value at a particular time. This
provides a favorable risk and return balance for shareholders.
Sincerely,
Larry D. Armel
President
<PAGE>
Tables indicating Quality Ratings and Market Sector Diversification of D.L.
Babson Tax-Free Income Fund's three portfolios are shown below:
Quality Ratings
Portfolio Portfolio Portfolio
L S MM
Aaa 47% 56% 75%
Aa 22 14 25
A 26 21 0
Lower 5 9 0
TOTAL 100% 100% 100%
Source: Moody's
Market Sector Diversification
Portfolio Portfolio Portfolio
L S MM
Bonds Collateralized by
U.S. Government Securities 7% 8% 2%
General Obligations 33 39 8
Variable Rate Demand Bonds and Notes 0 1 71
Tax-Exempt Commercial Paper 0 0 17
Revenue:
Electric 12 12 0
Housing and Housing Finance Agencies 5 8 0
Pollution Control 1 0 0
Water and Sewer 15 5 2
Industrial Development 0 0 0
Education 8 2 0
Transportation 4 12 0
Hospital 13 13 0
Aviation 2 0 0
TOTAL 100% 100% 100%
<PAGE>
STATEMENT OF NET ASSETS
December 31, 1995 (unaudited)
PORTFOLIO L _ LONGER TERM
PRINCIPAL MARKET
STATE/TERRITORY DESCRIPTION AMOUNT VALUE
ARIZONA
Maricopa Cnty Unified School Dist #48 (Scottsdale),
9.25%, due July 1, 2007 $ 500,000 $ 697,500
CALIFORNIA
California GO, 6.10%, due September 1, 2004 1,000,000 1,098,750
California Health Fac Auth Rev (Kaiser Permanente
Medical)(Call 10/1/01 @ 101), 5.45%,
due October 1, 2013 250,000 250,625
Pomona Unified School Dist GO (FGIC Ins)
Series B, O.I.D., 5.50%, due August 1, 2015 1,000,000 1,015,000
Santa Monica-Malibu Unified School Dist GO
(Public School Fac Reconstruction) Series A
(Call 8/1/01 @ 102), 6.90%, due August 1, 2012 500,000 552,500
Santa Rosa Water Rev Ref (FGIC Ins) Series B
(Call 9/1/10 @ 100), O.I.D., 6.00%,
due September 1, 2015 500,000 547,500
Southern California Public Power Auth Project
Rev Ref, Series A (Call 7/1/03 @ 102; Optional
Put 7/1/05 @ 100), O.I.D.,
5.00%, due July 1, 2015 1,000,000 962,500
Univ of California Multiple Purpose Rev (MBIA Ins)
Series D (Call 9/1/02 @ 102), 5.50%,
due September 1, 2003 500,000 530,000
COLORADO
Adams Cnty School Dist #12 Thornton Rev Ref
(FGIC Ins), O.I.D.,
6.20%, due December 15, 2010 500,000 535,625
Denver City & Cnty School Dist #1 GO, Series A
(Call 12/1/04 @ 101),
O.I.D., 5.125%, due December 1, 2012 500,000 479,375
DISTRICT OF
COLUMBIA
Dist of Columbia GO, Series A, 5.75%,
due June 1, 2003 500,000 498,125
FLORIDA
Palm Beach Cnty Airport Sys Rev Ref (MBIA Ins)
(Call 10/1/01 @ 102),
7.75%, due October 1, 2010 500,000 591,250
Sarasota Cnty School Board Financing Corp
Lease Rev (MBIA Ins)(Pre-refunded 7/1/00 @ 101),
O.I.D., 7.25%, due July 1, 2010 500,000 566,875
St. John's Cnty School Board Certificates of
Participation (MBIA Ins),
4.80%, due July 1, 2003 500,000 512,500
GEORGIA
Georgia Municipal Electric Auth Power Rev,
Series O (Crossover Refunded by an Issue
1/1/98 @ 102), 8.125%, due January 1, 2017 1,000,000 1,090,000
INDIANA
Indiana Bond Bank Special Program, Series 94 A-1
(Call 8/1/04 @ 102),
5.60%, due August 1, 2015 500,000 492,500
Indiana State Office Bldg Commission Capital
Complex Rev (MBIA Ins) Series A,
7.40%, due July 1, 2015 500,000 621,250
KANSAS
Johnson Cnty Water Dist #1 Rev Ref
(Call 12/1/96 @ 101), 7.25%,
due December 1, 2002 500,000 522,040
LOUISIANA
St. Tammany Parish Hosp Service Dist #2 Rev
(Slidell Memorial Hosp & Medical Center)
(Connie Lee Ins) (Call 10/1/04 @ 102), O.I.D.,
6.125%, due October 1, 2011 500,000 526,250
MASSACHUSETTS
Massachusetts Health & Ed Fac Auth Rev
(Winchester Hosp) Series C
(Pre-refunded 7/1/01 @ 102), O.I.D.,
7.55%, due July 1, 2011 500,000 585,000
Massachusetts Health & Ed Fac Auth Rev
(Winchester Hosp) (Connie Lee Ins) Series D
(Call 7/1/04 @ 102), O.I.D., 5.75%,
due July 1, 2014 500,000 512,500
Massachusetts Housing Finance Agy Projects,
Series A (Call 4/1/03 @ 102), 6.375%,
due April 1, 2021 975,000 1,001,812
MICHIGAN
Milan Area Schools GO (Call 5/1/04 @ 101),
O.I.D., 5.00%, due May 1, 2013 500,000 488,125
MINNESOTA
Southern Minnesota Municipal Power Agency
Supply Sys Rev (MBIA Ins) Series B
(Call 1/1/04 @ 102), O.I.D.,
5.00%, due January 1, 2009 500,000 493,750
NEW HAMPSHIRE
New Hampshire GO Capital Improvement
(College Savings Bond Program), O.I.D.,
0.00%, due August 1, 2010 1,000,000 466,250
NEW JERSEY
New Jersey Economic Dev Auth Public Schools
Rev (Small Project Loan Program)
(Call 8/15/03 @ 102), 5.20%,
due August 15, 2008 250,000 255,938
New Jersey Turnpike Auth Rev, 10.375%,
due January 1, 2003 220,000 267,575
NEW YORK
Battery Park City Auth Rev Ref, Series A
(Call 11/1/03 @ 102), O.I.D.,
5.00%, due November 1, 2004 1,000,000 1,005,000
New York City Municipal Water Financing Auth
Water & Sewer Sys Rev (FSA Ins) Series A
(Call 6/15/01 @ 101),
6.80%, due June 15, 2004 1,000,000 1,117,500
New York Dormitory Auth Rev (State Univ Ed Fac)
Series B (Call 5/15/04 @ 102; Optional Put
5/15/06 @ 100), O.I.D.,
6.10%, due May 15, 2008 1,000,000 1,048,750
New York Environmental Fac Corp Pollution
Control Rev (State Water-Revolving Fund) Series B
(Call 9/15/02 @ 102),
6.65%, due September 15, 2013 500,000 562,500
New York Medical Care Fac Finance Agy Rev
Ref (Mental Health Services) (FSA Ins) Series F
(Call 2/15/04 @ 102), O.I.D.,
4.90%, due February 15, 2006 1,000,000 992,500
New York Thruway Auth Hwy & Bridge Trust Fund
(FGIC Ins) Series B (Call 4/1/04 @ 102;
Optional Put 4/1/06 @ 100), O.I.D.,
5.80%, due April 1, 2007 500,000 533,125
OHIO
Euclid GO (Call 12/1/05 @ 102 & 12/1/07 @ 100),
O.I.D., 5.45%, due December 1, 2008 500,000 518,750
Ohio Bldg Auth Ref (State Correctional Fac)
Series A, O.I.D.,
4.20%, due October 1, 2000 500,000 497,500
RHODE ISLAND
Rhode Island Depositors Economic Protection
Corp Special Obligation (MBIA Ins) Series A
(Pre-refunded 8/1/01 @ 102),
7.50%, due August 1, 2014 500,000 585,000
Rhode Island Industrial Fac Corp Pollution
Control Rev (Inge Co)(SBA Gtd)(Call 10/1/96 @ 100),
9.125%, due October 1, 2000 100,000 101,320
TEXAS
Harris Cnty Toll Road Ref (FGIC Ins)
(Call 8/15/04 @ 102; Optional Put 8/15/06 @ 100),
O.I.D., 5.00%, due August 15, 2016 500,000 484,375
Houston Hotel Occupancy Tax Receipts Rev (FGIC Ins)
Series A (Call 7/1/01 @ 100), 7.00%,
due July 1, 2009 500,000 564,375
Lewisville Independent School Dist (PSF Gtd)
(Call 8/15/07 @ 100),
O.I.D., 5.50%, due August 15, 2017 500,000 504,375
TEXAS (Continued)
Port Arthur Navigation Dist Pollution Control
Rev Ref (Texaco Inc.),
6.00%, due October 1, 2024 500,000 500,000
Texas Public Finance Auth Bldg Rev (AMBAC Ins)
Series A (Call 2/1/05 @ 100),
6.00%, due February 1, 2008 500,000 535,000
UTAH
Intermountain Power Agy Supply Rev Ref,
Series D (Call 7/1/97 @ 102),
8.625%, due July 1, 2021 500,000 546,875
VIRGINIA
Danville Industrial Dev Auth Hosp Rev
(Danville Regional Medical Center) (FGIC Ins)
(Call 10/1/04 @ 101), O.I.D.,
6.375%, due October 1, 2014 500,000 540,625
Fairfax Cnty Water Auth Rev (Call 4/1/04 @ 102),
O.I.D., 5.00%, due April 1, 2016 500,000 478,125
Prince William Cnty Service Auth Water &
Sewer Sys Rev Ref (FGIC Ins)
(Call 7/1/03 @ 102), O.I.D.,
4.75%, due July 1, 2008 500,000 473,750
WASHINGTON
Washington GO, Series B & AT-7,
6.25%, due June 1, 2010 500,000 553,125
Washington Public Power Supply Sys Nuclear
Project #2 Rev Ref, Series 94 A
(Call 7/1/04 @ 102), O.I.D.,
5.375%, due July 1, 2011 500,000 483,125
28,786,810
REPURCHASE AGREEMENT
UMB Bank, n.a., 5.25%, due January 2, 1996
(Collateralized by U.S. Treasury Notes,
7.75%, due March 31, 1996) 100,000 100,000
TOTAL INVESTMENTS _ 98.60% $ 28,886,810
Other assets less liabilities _ 1.40% 410,270
TOTAL NET ASSETS _ 100.00%
(equivalent to $9.06 per share; 50,000,000 shares
of $0.10 par value capital shares authorized;
3,235,379 shares outstanding) $ 29,297,080
<PAGE>
STATEMENT OF NET ASSETS
December 31, 1995 (unaudited)
PORTFOLIO S _ SHORTER TERM
PRINCIPAL MARKET
STATE/TERRITORY DESCRIPTION AMOUNT VALUE
ARIZONA
Lake Havasu City Municipal Property Corp
Fac Rev (MBIA Ins) Series D
(Call 6/1/96 @ 101), 6.30%, due June 1, 1999 $ 500,000 $ 509,325
CALIFORNIA
Sacramento Cnty Tax & Rev Anticipation Notes,
4.75%, due October 4, 1996 1,000,000 1,008,910
San Buenaventura Water Ref Ref (AMBAC Ins),
4.40%, due October 1, 2003 400,000 395,500
San Diego Cnty Regional Transportation
Commission Sales Tax Rev (FGIC Ins) Series A,
6.00%, due April 1, 2004 500,000 545,000
DISTRICT OF
COLUMBIA
Dist of Columbia GO, Series A,
5.75%, due June 1, 2003 500,000 498,125
Washington D.C. Metropolitan Area Transportation
Auth Gross Rev Ref (FGIC Ins), O.I.D.,
4.70%, due July 1, 2003 500,000 503,750
FLORIDA
Florida Sunshine Skyway Rev Ref,
6.00%, due July 1, 1996 500,000 505,815
GUAM
Guam Gov't Limited Obligation Hwy (Capital
Guaranty)(FSA Ins) Series A,
5.75%, due May 1, 2001 500,000 534,375
Guam Power Auth Rev, Series A,
5.00%, due October 1, 2002 500,000 494,375
ILLINOIS
Illinois Finance Auth Industrial Dev Rev
(Citizens Utility Co.)(Mandatory Redemption
8/1/97 @ 100), 7.10%, due August 1, 2025 250,000 261,250
Illinois GO (Call 12/1/96 @ 102),
5.90%, due December 1, 1998 500,000 517,740
Illinois Toll Hwy Auth Priority Rev Ref,
Series A (Call 1/1/03 @ 100),
O.I.D., 3.50%, due January 1, 2005 500,000 453,750
INDIANA
Indianapolis Line of Credit Public Improvement
Bond Bank, Series D,
5.70%, due February 1, 2000 250,000 260,625
MASSACHUSETTS
Massachusetts Health & Ed Fac Auth Rev
(New England Deaconess Hosp)
Series D, 5.80%, due April 1, 1998 500,000 513,125
Massachusetts Health & Ed Fac Auth Rev
(Winchester Hosp)(Connie Lee Ins) Series D,
5.10%, due July 1, 2001 500,000 515,625
Massachusetts Housing Finance Agy Projects
(AMBAC Ins) Series A,
5.35%, due April 1, 2003 500,000 525,000
Massachusetts Municipal Wholesale Electric
Co Power Supply Sys Rev,
Series D, 5.70%, due July 1, 2001 500,000 531,875
Massachusetts Water Resources Auth, Series 90 A,
7.00%, due April 1, 1999 500,000 541,250
Northampton GO (AMBAC Ins),
6.80%, due December 1, 1998 515,000 551,694
MICHIGAN
Wayne Cnty Airport Rev (AMBAC Ins) Series B
(Pre-refunded 12/1/00 @ 102),
7.00%, due December 1, 2010 1,000,000 1,138,750
MINNESOTA
Minneapolis & St. Paul Housing & Redevelopment
Auth Health Care Sys Rev (Healthspan)
(AMBAC Ins) Series A,
4.50%, due November 15, 2001 500,000 500,625
MISSOURI
Jackson Cnty Industrial Dev Auth Health
Care Corp Rev (St. Joseph Health Center)
(MBIA Ins), 4.60%, due July 1, 2001 500,000 505,000
Sikeston Electric Rev Ref (MBIA Ins),
5.80%, due June 1, 2002 500,000 538,750
NEVADA
Clark Cnty School Dist, Series A,
7.20%, due March 1, 1998 500,000 530,625
NEW HAMPSHIRE
New Hampshire GO Capital Improvement
(College Savings Bond Program),
O.I.D., 0.00%, due August 1, 1996 500,000 489,290
NEW JERSEY
Montclair Township GO Ref,
3.80%, due January 1, 1999 500,000 491,250
New Jersey GO, Series C,
6.50%, due January 15, 2004 500,000 539,375
NEW MEXICO
Albuquerque Hosp Rev Ref (MBIA Ins)
Series A, O.I.D.,
5.60%, due August 1, 1999 500,000 523,750
Las Cruces School Dist #2 (MBIA Ins),
6.125%, due August 1, 2000 500,000 536,250
NEW YORK
Battery Park City Auth Rev Ref, Series A,
6.00%, due November 1, 2003 500,000 542,500
New York Dormitory Auth Rev (City Univ)
Series U, 4.90%, due July 1, 1996 500,000 502,795
New York Medical Care Fac Finance Agy
Rev Ref (Mental Health Services) Series F,
6.00%, due August 15, 2002 500,000 533,125
New York Medical Care Fac Finance Agy Rev
(Surgical Hosp)(FHA Ins) Series A,
5.40%, due August 15, 2004 500,000 526,250
New York Thruway Auth Service Contract Rev
(MBIA Ins), 5.375%, due April 1, 2004 500,000 524,375
NORTH CAROLINA
Franklin Cnty Certificates of Participation
(FGIC Ins), 5.60%, due June 1, 1998 500,000 516,875
North Carolina Eastern Municipal Power Agy
Sys Rev Ref, Series 93 B,
5.375%, due January 1, 2001 500,000 506,250
OHIO
Columbus City School Dist (FGIC Ins)
(Pre-refunded 12/1/02 @ 102),
6.65%, due December 1, 2012 500,000 573,750
Hamilton Cnty GO, 4.40%, due December 1, 2001 500,000 500,000
Ohio Special Obligation (AMBAC Ins) Series A,
5.55%, due June 1, 2000 500,000 528,750
PUERTO RICO
Puerto Rico Commonwealth Hwy & Transportation
Auth Rev Ref, Series V,
6.10%, due July 1, 2001 250,000 268,125
Puerto Rico Electric Power Auth Rev Ref,
Series Q, 5.30%, due July 1, 1998 500,000 513,125
RHODE ISLAND
Rhode Island Depositors Economic Protection
Corp Special Obligation (FSA Ins) Series A,
5.60%, due August 1, 1998 500,000 519,375
SOUTH CAROLINA
South Carolina GO, O.I.D.,
4.20%, due April 1, 2002 500,000 497,500
SOUTH DAKOTA
South Dakota Housing Dev Auth (Home
Ownership Mortgage) Series C,
4.70%, due May 1, 1999 500,000 506,875
TENNESSEE
Tennessee Housing Dev Agy Mortgage
Finance, Series A,
4.95%, due July 1, 2000 500,000 506,250
TEXAS
Round Rock GO (Call 8/1/97 @ 100),
6.40%, due August 1, 1998 500,000 517,500
San Antonio Water Rev (Pre-refunded
5/1/00 @ 49.8), O.I.D.,
0.00%, due May 1, 2010 1,250,000 514,062
VIRGINIA
Chesterfield Cnty Certificates of
Participation (Pre-refunded 12/15/96 @ 102),
7.45%, due June 15, 1997 500,000 527,420
Stafford Cnty Certificates of
Participation (AMBAC Ins),
4.15%, due November 1, 2000 500,000 494,375
WASHINGTON
Washington Public Power Supply Sys
Nuclear Project #2 Rev Ref,
Series B (MBIA Ins), 5.10%,
due July 1, 2004 500,000 511,875
WISCONSIN
Madison GO, Series B, 5.60%,
due November 1, 2000 300,000 318,375
Milwaukee Metropolitan Sewer Dist GO, Series A,
7.00%, due September 1, 2000 500,000 556,250
TOTAL INVESTMENTS _ 98.16% $ 26,966,551
Other assets less liabilities _ 1.84% 504,234
TOTAL NET ASSETS _ 100.00%
(equivalent to $10.88 per share;
50,000,000 shares of $0.10 par value
capital shares authorized;
2,524,202 shares outstanding) $ 27,470,785
<PAGE>
STATEMENT OF NET ASSETS
December 31, 1995 (unaudited)
PORTFOLIO MM _ MONEY MARKET
PRINCIPAL MARKET
STATE DESCRIPTION AMOUNT VALUE
ALABAMA
Columbia Industrial Dev Board Environmental
Improvement Rev Ref (Alabama Power Co)
Series 95 D, Fltg Rate,
6.00%, due October 1, 2022 $ 300,000 $ 300,000
ALASKA
Alaska Housing Finance Corp, Series C
(SBPA: Swiss Bank Corp),
Fltg Rate, 5.15%, due June 1, 2026 200,000 200,000
COLORADO
Denver City & Cnty Certificates of
Participation (MBIA Inc) Series A,
7.00%, due April 1, 1996 250,000 250,000
Platte River Power Auth Electic Rev,
Series S-1 (SBPA: Morgan Guaranty
Trust Co)(Mandatory Redemption 1/16/96 @ 100),
3.80%, due June 1, 2018 400,000 400,000
CONNECTICUT
Connecticut Special Assessment Unemployment
Compensation Adv Fund Rev, Series C (FGIC Ins)
(Optional Put 7/1/96 @ 100),
3.90%, due November 15, 2001 500,000 500,000
FLORIDA
Florida Municipal Power Agy Tax-Exempt
Coml Paper, Series A (LOC: First Union),
3.80%, due January 12, 1996 400,000 400,000
Orlando Waste Water Sys Rev Ref, Series A
(Line: Union Bank of Switzerland)
(Mandatory Redemption 1/17/96 @ 100),
3.90%, due October 1, 2015 500,000 500,000
GEORGIA
Burke Cnty Dev Auth Pollution Control Rev
(Oglethorpe Power)(FGIC Ins) Series A
(Line: Credit Locale de France), Fltg Rate,
5.05%, due January 1, 2019 500,000 500,000
HAWAII
Hawaii Dept of Budget & Finance Special
Purpose Mortgage Rev (Kaiser Permanente)
Series 84 B (Optional Put 3/1/96 @ 100),
3.75%, due March 1, 2014 200,000 200,000
ILLINOIS
Chicago GO Tender Notes, Series B (LOC:
Morgan Guaranty Trust Co)(Mandatory Put
5/1/96 @ 100),
3.75%, due October 31, 1996 200,000 200,000
KANSAS
Kansas Dept of Transportation Hwy Rev,
Series 94 B, Fltg Rate,
5.05%, due September 1, 2014 500,000 500,000
LOUISIANA
Lake Charles Harbor & Terminal Dist Port
Fac Rev (Conoco)(Guaranty: Dupont),
Fltg Rate, 5.95%, due November 1, 2011 300,000 300,000
Louisiana Offshore Terminal Auth Deepwater
Port Rev Ref (Loop) (SBPA: Union Bank of
Switzerland), Fltg Rate,
5.90%, due September 1, 2006 200,000 200,000
Louisiana Recovery Dist Sales Tax Rev
(MBIA Ins)(SBPA: Swiss Bank Corp),
Fltg Rate, 6.00%, due July 1, 1998 500,000 500,000
MARYLAND
Howard Cnty Bond Anticipation Notes
Tax-Exempt Coml Paper (LOC: Swiss Bank Corp),
3.75%, due February 21, 1996 400,000 400,000
MASSACHUSETTS
Massachusetts Bay Transportation Auth General
Transportation Sys, Series 84 A (LOC: State
Street Bank)(Optional Put 3/1/96 @ 100),
3.75%, due March 1, 2024 200,000 199,980
MISSISSIPPI
Jackson Cnty Port Auth Fac Rev Ref
(Chevron Corp) Series 93,
Fltg Rate, 5.95%, due June 1, 2023 500,000 500,000
MISSOURI
Kansas City School Dist Bldg Corp Insured
Leasehold Rev (FGIC Ins) Series A,
6.80%, due February 1, 1996 270,000 270,640
NEW MEXICO
Albuquerque Gross Receipts Lodgers Tax Rev
(LOC: Canadian Imperial Bank of Commerce),
Fltg Rate, 5.15%, due July 1, 2023 200,000 200,000
Albuquerque Airport Rev Ref (AMBAC Ins)
Series 95 (SBPA: Canadian Imperial Bank
of Commerce), Fltg Rate,
5.05%, due July 1, 2014 300,000 300,000
NORTH CAROLINA
Raleigh-Durham Airport Auth Special Fac
Rev Ref (American Airlines) Series A
(LOC: Royal Bank Canada), Fltg Rate,
5.95%, due November 1, 2005 200,000 200,000
SOUTH CAROLINA
Berkeley Cnty Pollution Control Fac Rev
Ref (Amoco), Fltg Rate,
5.95%, due July 1, 2012 150,000 150,000
TENNESSEE
Metropolitan Govt Nashville & Davidson
Cnty Rev Ref (Pre-refunded 6/15/96 @ 102),
6.50%, due June 15, 2006 190,000 195,982
TEXAS
Harris Cnty Industrial Dev Corp Pollution
Control Rev (Exxon Corp), Series 84 B,
Fltg Rate, 6.00%, due March 1, 2024 300,000 300,000
North Central Health Fac Dev Corp Rev
(Presbyterian Medical Center)(MBIA Ins)
Series C (SBPA: NationsBank NC), Fltg Rate,
6.00%, due December 1, 2015 300,000 300,000
Port Arthur Navigation Dist Pollution Control
Rev Ref (Texaco Inc), Fltg Rate,
6.00%, due October 1, 2024 500,000 500,000
Southwest Higher Ed Auth Inc Rev (Southern
Methodist Univ)(LOC: Morgan Guaranty Trust Co),
Fltg Rate, 5.95%, due July 1, 2015 200,000 200,000
Texas Municipal Power Agy Tax-Exempt Coml Paper
(Line: Morgan Guaranty Trust Co; Canadian
Imperial Bank of Commerce),
3.60%, due February 22, 1996 200,000 200,000
UTAH
Intermountain Power Agy Power Supply Rev,
Series 85 E (LOC: Swiss Bank Corp)
(Optional Put 3/15/96 @ 100),
3.75%, due July 1, 2014 300,000 300,000
Intermountain Power Agy Power Supply Rev,
Series 85 F (SBPA: Bank of America)
(Optional Put 6/17/96 @ 100),
3.80%, due July 1, 2021 250,000 250,000
Salt Lake Pollution Control Rev Ref (British
Petroleum), Fltg Rate,
5.95%, due February 1, 2008 300,000 300,000
Salt Lake Water & Sewer Rev Ref (AMBAC Ins),
7.15%, due February 1, 1996 200,000 200,497
WASHINGTON
Seattle Municipal Light & Power Rev (SBPA:
Morgan Guaranty Trust Co),
Fltg Rate, 5.00%, due November 1, 2018 200,000 200,000
Washington Public Power Supply Sys Nuclear
Project #1 Rev Ref, Series 1A-1 (LOC: Bank
of America), Fltg Rate,
4.95%, due July 1, 2017 200,000 200,000
WISCONSIN
Oak Creek Pollution Control Rev (Wisconsin
Electric Power Co) Series 86, Fltg Rate,
5.00%, due August 1, 2016 400,000 400,000
Sheboygan Pollution Control Rev (Wisconsin
Power & Light Co),
Fltg Rate, 5.25%, due August 1, 2014 200,000 200,000
Wisconsin GO Operating Notes,
4.50%, due June 17, 1996 500,000 502,006
TOTAL INVESTMENTS _ 107.38% $ 11,419,105
Other assets less liabilities _ (7.38%) (784,518)
TOTAL NET ASSETS _ 100.00%
(equivalent to $1.00 per share;
100,000,000 shares of $0.10 par value
capital shares authorized;
10,624,329 shares outstanding) $ 10,634,587
Line (Line of Credit)
LOC (Letter of Credit)
SBPA (Stand by Purchase Agreement)
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1995 (unaudited)
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
</CAPTION>
<S> <C> <C> <C>
ASSETS:
Investment securities, at market value
(identified cost of $27,024,538,
$26,211,423 and $11,419,105, respectively) $ 28,886,810 $ 26,966,551 $ 11,419,105
Interest receivable 542,470 416,953 80,567
Receivable for investments sold _ 511,375 _
Other assets _ 308 883
Total assets 29,429,280 27,895,187 11,500,555
LIABILITIES AND NET ASSETS:
Cash overdraft 132,024 418,744 865,826
Payable to shareholders 176 5,658 142
Total liabilities 132,200 424,402 865,968
NET ASSETS $ 29,297,080 $ 27,470,785 $ 10,634,587
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 27,797,708 $ 26,754,615 $ 10,629,972
Accumulated undistributed net realized gain
(loss) on investments (362,900) (38,958) 4,615
Net unrealized appreciation in value
of investments 1,862,272 755,128 _
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 29,297,080 $ 27,470,785 $ 10,634,587
Capital shares, $0.10 par value
Authorized 50,000,000 50,000,000 100,000,000
Outstanding 3,235,379 2,524,202 10,624,329
NET ASSET VALUE PER SHARE $ 9.06 $ 10.88 $ 1.00
See accompanying Notes to Financial Statements.
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<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended December 31, 1995 (unaudited)
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<CAPTION>
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
</CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 815,666 $ 721,372 $ 236,161
Expenses:
Management fees (Note 3) 137,001 134,667 30,930
Registration fees and other expenses 9,230 9,108 4,071
146,231 143,775 35,001
Net investment income 669,435 577,597 201,160
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 1):
Realized gain from investment transactions
(excluding repurchase agreements):
Proceeds from sales of investments 4,987,655 8,514,789 23,804,000
Cost of investments sold 4,815,208 8,425,395 23,804,000
Net realized gain from investment
transactions 172,447 89,394 _
Unrealized appreciation on investments:
Beginning of period 758,117 332,614 _
End of period 1,862,272 755,128 _
Increase in net unrealized appreciation
on investments 1,104,155 422,514 _
Net gain on investments 1,276,602 511,908 _
Increase in net assets resulting from
operations $ 1,946,037 $ 1,089,505 $ 201,160
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
Six Months Ended December 31, 1995 (unaudited)
and Year Ended June 30, 1995
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PORTFOLIO L PORTFOLIO S PORTFOLIO MM
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<S> <C> <C> <C>
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
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 669,435 $ 577,597 $ 201,160
Net realized gain from investment transactions 172,447 89,394 _
Increase in net unrealized appreciation on investments 1,104,155 422,514 _
Net increase in net assets resulting from operations 1,946,037 1,089,505 201,160
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (669,435) (577,597) (201,160)
Net realized gain from investment transactions _ (66,705) _
Total distributions to shareholders (669,435) (644,302) (201,160)
DECREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold, 441,543(L), 75,346(S),
11,054,590(MM) 3,898,182 816,411 11,058,855
Net asset value of shares issued for reinvestment
of distributions, 43,224(L), 36,244(S), 162,525(MM) 383,161 392,920 162,525
4,281,343 1,209,331 11,221,380
Cost of shares redeemed, 486,821(L), 234,629(S),
16,305,086(MM) (4,316,845) (2,543,389) (16,305,086)
Net decrease from capital share transactions (35,502) (1,334,058) (5,083,706)
Total increase (decrease) in net assets 1,241,100 (888,855) (5,083,706)
NET ASSETS _ June 30, 1995 28,055,980 28,359,640 15,718,293
NET ASSETS _ December 31, 1995 $ 29,297,080 $ 27,470,785 $ 10,634,587
</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 period ended
December 31, 1995 (excluding repurchase agreements), were as follows:
Portfolio L
Purchases $ 4,829,260
Proceeds from sales 4,987,655
Portfolio S
Purchases $ 5,929,740
Proceeds from sales 8,514,789
Portfolio MM
Purchases $ 19,152,374
Proceeds from sales 23,804,000
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.
This report has been prepared for the information of the Shareholders of
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.
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