BABSON
TAX-FREE
INCOME
FUND
Semiannual Report
December 31, 1996
JONES & BABSON
MUTUAL FUNDS
MESSAGE
TO OUR SHAREHOLDERS
For the six month period ended December 31, 1996, total investment returns
(price change and reinvested distributions) for Babson Tax-Free Income Fund
were 4.59% for Portfolio L and 3.12% for Portfolio S. Portfolio MM's price
remained at $1.00 and provided a return of 1.49% 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.
Conflicting data concerning the economy's strength whipsawed investors during
the past six months, pushing bond prices up and down. Reports indicating that
business activity continued above trend added to expectations that the Federal
Reserve would tighten monetary policy. Conversely, other economic releases
indicated a slowing economy and no need for the Fed to take action. The
September decision not to raise rates was well received by the financial
markets and reflected the belief that the economy was slowing then
sufficiently to offset the risk of accelerating inflation.
The late summer and fall rally in the bond market continued into the fourth
quarter. However, in December the market sold off, relinquishing a good
portion of the gains from the previous few months. The reversal in market
sentiment and upward move in rates reflected investor concerns that the Fed
might alter policy because it appeared that the slowdown in consumer spending
seen in the third quarter was ending, fear that strong demand for dollar
assets by foreign investors would dissipate in 1997 and worries about rising
oil prices.
The market was further rattled when Federal Reserve Chairman, Alan Greenspan,
warned market participants about the "irrational exuberance" of the stock
market. This led to speculation that the Fed was also getting anxious about a
growing speculative bubble and that it might try to counter it by raising
short-term rates.
Although the December activity jolted the fixed income markets, interest rates
ended the six month period at levels lower than those that existed at mid-
1996. As a result, municipals underperformed. This was to be expected since
the reduced liquidity of municipals versus Treasuries usually results in tax-
frees lagging movements in the taxable bond markets. However, for all of 1996,
municipals outperformed taxable alternatives.
Aiding municipals were fading concerns that legislators would press for
radical tax reform such as a flat or consumption-based tax. Either one of
those options would most probably have caused the attractiveness of tax-free
securities to diminish. Additionally, credit quality has been generally
healthy due to continuing economic growth and improving fiscal conditions in
most parts of the country. In fact, general fund balances for the last two
fiscal years have registered the healthiest levels since 1980.
The yield differential between lower and higher quality tax-free securities
remained modest during the last six months, continuing to highlight the weak
argument for reaching for yield. In addition to the relatively low interest
rate environment and modest supply, the strong presence of insurance in the
marketplace has also been responsible for the tight quality spreads. Since
approximately half of the new issues have been priced with insurance included,
thereby receiving a AAA rating and a lower yield, investors have generally bid
up the prices of lesser rated securities, thus lowering their yields.
Due to the existing environment of moderate new issuance and tight quality
spreads, opportunities to take advantage of market inefficiencies were limited
over the period. However, we were able to pick-up yield by focusing on
supply/demand imbalances. Accordingly, we sold certain sought after issues
from states that levy relatively high state income taxes and reinvested the
proceeds in issues from states with lower tax burdens, where somewhat less
demand and higher yields occurred.
At December 31, 1996, the average maturities of Portfolio L, S and MM were 14
years, 5 years and 31 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,
/s/Larry D. Armel
Larry D. Armel
President
Tables indicating Quality Ratings and Market Sector Diversification of D.L.
Babson Tax-Free Income Fund are shown below:
Quality Ratings
Portfolio Portfolio Portfolio
L S MM
Aaa 58% 59% 77%
Aa 21 11 23
A 13 14 0
Lower 8 16 0
TOTAL 100% 100% 100%
Source: Moody's
Market Sector Diversification
Portfolio Portfolio Portfolio
L S MM
Bonds Collateralized by
U.S. Government Securities 9% 8% 0%
General Obligations 33 32 6
Variable Rate Demand Bonds
and Notes 0 0 77
Tax-Exempt Commercial Paper 0 0 17
Revenue:
Electric 8 14 0
Housing and Housing
Finance Agencies 7 9 0
Pollution Control 0 0 0
Water and Sewer 10 4 0
Industrial Development 0 2 0
Education 12 0 0
Transportation 2 14 0
Hospital 17 17 0
Aviation 2 0 0
TOTAL 100% 100% 100%
STATEMENT OF NET ASSETS
December 31, 1996 (unaudited)
PORTFOLIO L - LONGER TERM
<TABLE>
<CATPION>
PRINCIPAL MARKET
STATE/TERRITORY DESCRIPTION AMOUNT VALUE
[/CAPTION]
<S> <C> <C>
ARIZONA
Maricopa Cnty Unified School Dist #48
(Scottsdale),
9.25%, due July 1, 2007 $ 500,000 $ 674,375
ARKANSAS
Arkansas GO, Series B,
0.00%, due June 1, 2010 1,000,000 471,250
CALIFORNIA
California Health Fac Auth Rev
(Kaiser Permanente Medical)
(Call 10/1/01 @ 101),
5.45%, due October 1, 2013 250,000 245,937
Santa Monica-Malibu Unified School Dist GO
(Public School Fac Reconstruction)
Series A (Call 8/1/01 @ 102),
6.90%, due August 1, 2012 500,000 543,125
Santa Rosa Water Rev Ref (FGIC Ins) Series B
(Call 9/1/02 @ 101.5), O.I.D.,
6.00%, due September 1, 2015 500,000 537,500
Univ of California Rev (Call 7/1/06 @ 101),
5.75%, due July 1, 2013 1,000,000 1,025,000
COLORADO
Adams Cnty School Dist #12 Thornton Rev Ref
(FGIC Ins)
(Call 12/15/03 @ 100), O.I.D.,
6.20%, due December 15, 2010 500,000 530,625
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
DIST OF COLUMBIA
Dist of Columbia GO, Series A,
5.75%, due June 1, 2003 500,000 501,875
FLORIDA
Dade Cnty Special Obligation (AMBAC Ins Cabs)
(Call 10/1/08 @ 30.8464),
0.00%, due October 1, 2027 1,000,000 152,500
Palm Beach Cnty Airport Sys Rev Ref
(MBIA Ins) (Call 10/1/01 @ 102),
7.75%, due October 1, 2010 500,000 573,750
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 500,000 551,875
St. John's Cnty School Board Certificates of
Participation (MBIA Ins),
4.80%, due July 1, 2003 500,000 503,750
ILLINOIS
Chicago GO (AMBAC Ins) Series B,
5.125%, due January 1, 2022 1,000,000 933,750
Lake Cnty Community Unit School Dist #60
Waukegan (FSA Ins),
6.10%, due December 1, 2001 500,000 540,000
INDIANA
Indiana Bond Bank Special Program, Series 94 A-1
(Call 8/1/04 @ 102),
5.60%, due August 1, 2015 500,000 481,250
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 500,000 519,375
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 500,000 569,375
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 500,000 493,750
Massachusetts Housing Finance Agy Projects,
Series A
(Callable 4/1/03 @ 102),
6.375%, due April 1, 2021 975,000 987,187
MICHIGAN
Michigan Hosp Finance Auth Rev
(Mercy Health Services) Series Q,
5.375%, due August 15, 2026 500,000 473,750
Milan Area Schools GO (Call 5/1/04 @ 101),
O.I.D.,
5.00%, due May 1, 2013 500,000 476,875
Spring Lake Public Schools,
4.875%, due May 1, 2009 500,000 478,125
NEVADA
Clark Cnty School Dist GO (MBIA Ins)
(Callable 3/1/01 @ 101),
6.75%, due March 1, 2007 500,000 541,875
NEW HAMPSHIRE
New Hampshire Higher Ed & Health Fac Auth Rev
(AMBAC Ins),
5.70%, due October 1, 2010 500,000 509,375
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 250,000 252,188
New Jersey Turnpike Auth Rev,
10.375%, due January 1, 2003 200,000 236,000
NEW YORK
Battery Park City Auth Rev Ref, Series A
(Call 11/1/03 @ 102), O.I.D.,
5.00%, due November 1, 2004 1,000,000 992,500
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 1,095,000
New York Dormitory Auth Rev
(State Univ Ed Fac) Series B
(Call 5/15/04 @ 102), O.I.D.,
6.10%, due May 15, 2008 1,000,000 1,035,000
New York Environmental Fac Corp PCR
(State Water-Revolving Fund)
Series B (Call 9/15/02 @ 102),
6.65%, due September 15, 2013 500,000 548,750
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 1,000,000 986,250
RHODE ISLAND
Rhode Island Depositors Economic Protection Corp
Special Obligation
(MBIA Ins) Series B, O.I.D.,
5.80%, due August 1, 2009 500,000 528,125
Rhode Island Depositors Economic Protection Corp
Special Obligation
(MBIA Ins) Series A
(Pre-refunded 8/1/01 @ 102),
7.50%, due August 1, 2014 500,000 569,375
Rhode Island Industrial Fac Corp PCR (Inge Co)
(SBA Gtd) (Call 3/3/97 @ 100),
9.125%, due October 1, 2000 75,000 75,944
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 500,000 463,750
Hays Consolidated Independent School Dist
(PSF Gtd)
(Call 9/1/06 @ 100), O.I.D.,
4.50%, due September 1, 2010 500,000 453,125
Houston Hotel Occupancy Tax Receipts Rev
(FGIC Ins)
Series A (Pre-refunded 7/1/01 @ 100),
7.00%, due July 1, 2009 500,000 550,000
TEXAS (Continued)
Lewisville Independent School Dist (PSF Gtd)
(Call 8/15/07 @ 100),
O.I.D., 5.50%, due August 15, 2017 500,000 496,250
San Antonio Electric & Gas Rev
(Call 2/1/02 @ 101), O.I.D.,
5.75%, due February 1, 2011 500,000 508,125
Texas Public Finance Auth Bldg Rev
(AMBAC Ins) Series A
(Call 2/1/05 @ 100),
6.00%, due February 1, 2008 500,000 526,875
UTAH
Intermountain Power Agy Supply Rev Ref,
Series D (Call 7/1/97 @ 102),
8.625%, due July 1, 2021 500,000 522,070
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 500,000 536,875
Fairfax Cnty Industrial Dev Auth Rev
(Inova Health Sys),
5.50%, due August 15, 2009 500,000 507,500
Virginia State Univ Commonwealth Rev,
5.75%, due May 1, 2021 500,000 503,125
WASHINGTON
Washington GO, Series DD-13
(Call 3/1/04 @ 100),
5.875%, due March 1, 2014 500,000 510,625
Washington Public Power Supply Sys Nuclear
Project #2 Rev Ref,
Series 94 A (Call 7/1/04 @ 102),
5.375%, due July 1, 2011 500,000 483,125
WISCONSIN
Wisconsin Public Power Inc Sys Rev
(MBIA Ins) (Call 7/1/06 @ 102),
5.90%, due July 1, 2011 500,000 513,125
TOTAL INVESTMENTS - 98.56% $ 26,689,326
Other assets less liabilities - 1.44% 389,328
TOTAL NET ASSETS - 100.00%
(equivalent to $8.91 per share;
50,000,000 shares of $0.10 par value
capital shares authorized;
3,039,505 shares outstanding) $ 27,078,654
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF NET ASSETS
December 31, 1996 (unaudited)
PORTFOLIO S - SHORTER TERM
<TABLE>
<CAPTION>
PRINCIPAL MARKET
STATE/TERRITORY DESCRIPTION AMOUNT VALUE
</CAPTION>
<S> <C> <C>
ARIZONA
Chandler GO,
6.90%, due July 1, 2005 $ 1,000,000 $ 1,100,000
Lake Havasu City Municipal Property Corp Fac Rev
(AMBAC Ins) Series A (Call 2/3/97 @ 101),
6.30%, due June 1, 1999 500,000 506,400
CALIFORNIA
Los Angeles Cnty Metropolitan Transportation Auth
Sales Tax Rev Ref (MBIA Ins),
5.50%, due July 1, 2006 500,000 524,375
DIST OF COLUMBIA
Dist of Columbia GO, Series A,
5.75%, due June 1, 2003 500,000 501,875
Washington DC Metropolitan Area Transportation Auth
Gross Rev Ref (FGIC Ins), O.I.D.,
4.70%, due July 1, 2003 500,000 498,125
GUAM
Guam Govt Limited Obligation Hwy
(FSA Ins) Series A,
5.75%, due May 1, 2001 500,000 527,500
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 3/16/97 @ 100),
7.10%, due August 1, 2025 250,000 253,885
Illinois GO (Call 2/24/97 @ 102),
5.90%, due December 1, 1998 500,000 513,335
Illinois State Toll Hwy Auth Priority Rev Ref,
Series A, O.I.D.,
3.50%, due January 1, 2005 500,000 450,625
INDIANA
Indianapolis Line of Credit Public Improvement
Bond Bank, Series D,
5.70%, due February 1, 2000 250,000 259,688
MASSACHUSETTS
Massachusetts Health & Ed Fac Auth Rev
(Winchester Hosp)
(Connie Lee Ins) Series D,
5.10%, due July 1, 2001 500,000 508,125
Massachusetts Housing Finance Agy Projects
(AMBAC Ins) Series A,
5.35%, due April 1, 2003 500,000 514,375
MASSACHUSETTS (Continued)
Massachusetts Municipal Wholesale Electric Co
Power Supply Sys Rev, Series D,
5.70%, due July 1, 2001 500,000 516,250
Massachusetts Water Resources Auth, Series 90 A,
7.00%, due April 1, 1999 500,000 528,750
MICHIGAN
Michigan State Hosp Finance Auth Rev
(Mercy Health Services) Series Q,
5.00%, due August 15, 2006 500,000 496,875
MINNESOTA
St. Cloud Hosp Fac Rev (AMBAC Ins) Series 96 A,
4.00%, due July 1, 1998 500,000 499,375
MISSOURI
Jackson Cnty Industrial Dev Auth Health
Care Corp Rev
(St. Joseph Health Center) (MBIA Ins),
4.60%, due July 1, 2001 500,000 500,000
Sikeston Electric Rev Ref (MBIA Ins),
5.80%, due June 1, 2002 500,000 530,625
NEVADA
Washoe Cnty Hosp Fac Rev Ref
(Wahoe Medical Center Inc) Series A,
5.25%, due June 1, 2001 500,000 512,500
NEW JERSEY
New Jersey GO, Series C,
6.50%, due January 15, 2004 500,000 528,750
New Jersey Turnpike Auth Rev (AMBAC Ins)
Series A,
5.70%, due January 1, 2001 500,000 523,750
NEW MEXICO
Albuquerque Hosp Rev Ref (MBIA Ins)
Series A, O.I.D.,
5.60%, due August 1, 1999 500,000 515,000
Las Cruces School Dist (MBIA Ins),
6.125%, due August 1, 2000 500,000 528,125
NEW YORK
Battery Park City Auth Rev Ref,
6.00%, due November 1, 2003 500,000 531,250
New York Dormitory Auth Rev
(Beth Israel Medical Center),
5.35%, due November 1, 2005 500,000 515,000
New York Medical Care Fac Finance Agy Rev Ref
(Mental Health Services) Series F,
6.00%, due August 15, 2002 500,000 523,750
NEW YORK (Continued)
New York Medical Care Fac Finance Agy Rev
(Surgical Hosp) (FHA Ins) Series A,
5.40%, due August 15, 2004 500,000 513,750
New York Thruway Auth Service Contract Rev
(MBIA Ins),
5.375%, due April 1, 2004 500,000 521,250
NORTH CAROLINA
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 500,000 563,125
Ohio Special Obligation (AMBAC Ins) Series A,
5.55%, due June 1, 2000 500,000 521,875
PENNSYLVANIA
Pennsylvania State Univ GO, E.T.M.,
6.75%, due July 1, 1999 500,000 529,375
PUERTO RICO
Puerto Rico Commonwealth Hwy & Transportation
Auth Rev Ref, Series V,
6.10%, due July 1, 2001 250,000 265,000
Puerto Rico Electric Power Auth Rev Ref,
Series Q,
5.30%, due July 1, 1998 500,000 508,125
RHODE ISLAND
Rhode Island Depositors Economic Protection Corp
Special Obligation (FSA Ins) Series A,
5.60%, due August 1, 1998 500,000 511,250
SOUTH CAROLINA
Horry Cnty School Dist Rev Ref (FSA Ins) Series B,
4.70%, due April 1, 2002 500,000 503,125
SOUTH DAKOTA
South Dakota Housing Dev Auth
(Home Ownership Mortgage) Series C,
4.70%, due May 1, 1999 500,000 502,500
TENNESSEE
Tennessee Housing Dev Agy Mortgage Finance,
Series A,
4.95%, due July 1, 2000 500,000 502,500
TEXAS
Houston GO Series C (Call 3/1/02 @ 100),
5.90%, due March 1, 2003 500,000 530,000
Round Rock GO (FGIC Ins) (Call 8/1/97 @ 100),
6.40%, due August 1, 1998 500,000 507,205
San Antonio Water Rev (AMBAC Ins)
(Pre-refunded 5/1/00 @ 49.8), O.I.D.,
0.00%, due May 1, 2010 1,250,000 535,937
UTAH
Utah GO, 6.00%, due July 1, 2001 500,000 535,625
VIRGINIA
Stafford Cnty Certificates of Participation
(AMBAC Ins),
4.15%, due November 1, 2000 500,000 495,000
WASHINGTON
Washington Public Power Supply Sys Nuclear
Project #2 Rev Ref (MBIA Ins) Series B,
5.10%, due July 1, 2004 500,000 503,750
Washington Public Power Supply Sys Nuclear
Project #2 Rev Ref, Series B
(Pre-refunded 7/1/00 @ 102),
7.50%, due July 1, 2004 300,000 335,250
WISCONSIN
Milwaukee Cnty GO, Series A,
5.35%, due September 1, 2001 500,000 516,250
Milwaukee Metropolitan Sewer Dist GO, Series A,
7.00%, due September 1, 2000 500,000 542,500
TOTAL INVESTMENTS - 99.94% $ 24,352,325
Other assets less liabilities - 0.06% 14,634
TOTAL NET ASSETS - 100.00%
(equivalent to $10.75 per share;
50,000,000 shares of $0.10 par value
capital shares authorized;
2,267,036 shares outstanding) $ 24,366,959
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF NET ASSETS
December 31, 1996 (unaudited)
PORTFOLIO MM - MONEY MARKET
<TABLE>
<CAPTION>
PRINCIPAL MARKET
STATE DESCRIPTION AMOUNT VALUE
</CAPTION>
<S> <C> <C>
ALABAMA
Columbia Industrial Dev Board Environmental
Improvement Rev Ref
(Alabama Power Co) Series 95 D, Fltg Rate,
4.90%, due October 1, 2022 $ 100,000 $ 100,000
ALASKA
Alaska Housing Finance Corp, Series C
(SBPA: Swiss Bank Corp),
Fltg Rate, 4.15%, due June 1, 2026 300,000 300,000
ARIZONA
Maricopa Cnty (Arizona Public Service Co)
Series B
(LOC: Morgan Guaranty Trust Co),
Fltg Rate, 4.95%, due May 1, 2029 100,000 100,000
CALIFORNIA
California Rev Anticipation Notes,
Series A,
4.50%, due June 30, 1997 200,000 200,618
COLORADO
Univ of Colorado Enterprise Sys Rev,
Series 96 A
(SBPA: Morgan Guaranty Trust Co),
Fltg Rate, 4.00%, due June 1, 2020 300,000 300,000
CONNECTICUT
Connecticut Special Assessment Unemployment
Compensation Adv Fund Rev (FGIC Ins)
Series C
(SBPA: FGIC SPI) (Optional Put 7/1/97 @ 100),
3.90%, due November 15, 2001 300,000 300,000
FLORIDA
Dade Cnty Water & Sewer Sys Rev
(FGIC Ins) (SBPA: Commerzbank),
Fltg Rate, 4.00%, due October 5, 2022 400,000 400,000
Florida Mun Power Agy, Series A
(LOC: First Union),
3.55%, due January 6, 1997 200,000 200,000
GEORGIA
Burke Cnty Dev Auth PCR
(Georgia Power Co) 5th Series,
Fltg Rate, 4.95%, due July 1, 2024 100,000 100,000
De Kalb Private Hosp Auth Rev Anticipation
Certificates
(Egleston Childrens Hosp)
Series A (LOC: Trust Co Bank),
Fltg Rate, 4.05%, due March 1, 2024 300,000 300,000
Georgia Mun Gas Auth Rev, Series A
(LOC: Morgan Guaranty Trust Co;
Credit Suisse Bank; ABN Amro),
Fltg Rate, 4.00%, due November 1, 2006 200,000 200,000
HAWAII
Hawaii GO, Series CE,
4.20%, due June 1, 1997 115,000 115,092
Hawaii Dept of Budget & Finance Special
Purpose Mortgage Rev
(Kaiser Permanente) Series 84 B
(Optional Put 3/3/97 @ 100),
3.65%, due March 1, 2014 200,000 200,000
KANSAS
Kansas Dept of Transportation Hwy Rev,
Series 94 B,
Fltg Rate, 3.95%, due September 1, 2014 400,000 400,000
LOUISIANA
Louisiana Offshore Terminal Auth Deepwater
Port Rev Ref
(Loop) (SBPA: Union Bank of Switzerland),
Fltg Rate, 5.00%, due September 1, 2006 400,000 400,000
MASSACHUSETTS
Massachusetts Bay Transportation Auth General
Transportation Sys,
Series 84 A (LOC: State Street Bank)
(Optional Put 3/1/97 @ 100),
3.625%, due March 1, 2024 200,000 200,000
MINNESOTA
Rochester Health Care Fac Rev
(Mayo Foundation/Mayo Medical Center)
Series E (SBPA: Credit Suisse Bank)
(Mandatory Redemption 2/6/97 @ 100),
3.60%, due November 15, 2016 160,000 160,000
Rochester Health Care Fac Rev
(Mayo Foundation/ Mayo Medical Center)
Series 92 A (Mandatory Redemption
1/13/97 @ 100),
3.45%, due November 15, 2018 300,000 300,000
Univ of Minnesota Rev (Full Faith & Credit)
Series 85 H
(Line: First Bank Minnesota)
(Mandatory Redemption 1/31/97 @ 100),
3.45%, due October 1, 2013 300,000 300,000
Univ of Minnesota Rev (Full Faith & Credit) Series G
(Optional Put 2/1/97 @ 100),
3.75%, due October 1, 2007 200,000 200,000
MISSOURI
Missouri Health & Ed Auth Rev (Washington Univ),
Fltg Rate, 4.95%, due September 1, 2030 100,000 100,000
NEVADA
Clark Cnty Airport Improvement Rev, Series A-1
(LOC: Toronto-Dominion Bank),
Fltg Rate, 4.00%, due July 1, 2025 400,000 400,000
NEW MEXICO
Albuquerque Airport Rev Ref (AMBAC Ins)
(SBPA: Canadian Imperial Bank of
Commerce) Series 95,
Fltg Rate, 4.00%, due July 1, 2014 300,000 300,000
NEW YORK
New York City Mun Water Finance Auth Water &
Sewer Sys Rev
(FGIC Ins) Series 94 G,
Fltg Rate, 5.00%, due June 15, 2024 100,000 100,000
Port Auth of New York & New Jersey Special
Obligation Rev
(SBPA: Morgan Guaranty Trust Co),
Fltg Rate, 4.85%, due June 1, 2020 100,000 100,000
NORTH CAROLINA
Raleigh-Durham Airport (American Airlines)
Series A-1
(LOC: Royal Bank of Canada),
Fltg Rate, 4.95%, due November 1, 2015 300,000 300,000
Winston-Salem Water & Sewer Sys Rev
(SBPA: Wachovia Bank NC),
Fltg Rate, 4.00%, due June 1, 2014 200,000 200,000
PENNSYLVANIA
Pennsylvania Higher Ed Fac Auth Health
Services Rev
(Univ of Pennsylvania) Series B,
Fltg Rate, 4.00%, due January 1, 2024 200,000 200,000
SOUTH CAROLINA
South Carolina Public Service Auth
(Line: NationsBank NC),
3.40%, due January 22, 1997 300,000 300,000
TENNESSEE
Metropolitan Govt Nashville & Davidson
Cnty Health & Ed Fac Board Rev
(Vanderbilt Univ) Series 85 A
(Optional Put 1/15/97 @ 100),
3.50%, due January 15, 2013 200,000 200,000
TEXAS
Lower Colorado River Auth Rev Ref
(MBIA Ins) (LOC: Bayre Riche),
Fltg Rate, 4.00%, due January 1, 2013 200,000 200,000
Lower Neches Valley Auth Industrial Dev
Corp PCR (Mobil Corp),
Fltg Rate, 4.15%, due February 1, 2004 300,000 300,000
North Central Health Fac Dev Corp Rev
(Presbyterian Medical Center)
(MBIA Ins)
Series C (SBPA: NationsBank NC),
Fltg Rate, 4.95%, due December 1, 2015 200,000 200,000
North Central Health Fac Dev Corp Rev
(Presbyterian Medical Center)
(MBIA Ins) Series D (SBPA: NationsBank NC),
Fltg Rate, 4.95%, due December 1, 2015 200,000 200,000
TEXAS (Continued)
Texas Tax & Rev Anticipation Notes,
4.75%, due August 29, 1997 140,000 140,727
Univ of Texas, Series A,
3.40%, due February 13, 1997 200,000 200,000
UTAH
Intermountain Power Agy Supply Rev,
Series 85 E
(LOC: Swiss Bank Corp)
(Optional Put 3/17/97 @ 100),
3.75%, due July 1, 2014 300,000 300,000
VIRGINIA
Virginia GO Bond Anticipation Notes, Series 95,
3.65%, due January 7, 1997 220,000 220,000
Virginia Public Bldg Auth Rev Ref, Series A,
5.10%, due August 1, 1997 100,000 100,797
WASHINGTON
Seattle Municipal Light & Power Rev
(SBPA: Morgan Guaranty Trust Co),
Fltg Rate, 4.15%, due November 1, 2018 200,000 200,000
Washington GO, Series 96 B
(LOC: Landesbank Hessen),
Fltg Rate, 4.00%, due June 1, 2020 400,000 400,000
Washington Public Power Supply Sys Nuclear
Project #1 Rev Ref,
Series 1A-1 (LOC: Bank of America),
Fltg Rate, 4.10%, due July 1, 2017 100,000 100,000
WISCONSIN
Sheboygan PCR (Wisconsin Power & Light Co),
Fltg Rate, 4.60%, due August 1, 2014 300,000 300,000
Wisconsin GO,
5.10%, due May 1, 1997 135,000 135,480
TOTAL INVESTMENTS - 96.19% $ 9,972,714
Other assets less liabilities - 3.81% 395,512
TOTAL NET ASSETS - 100.00%
(equivalent to $1.00 per share;
100,000,000 shares of $0.10 par value
capital shares authorized;
10,362,204 shares outstanding) $ 10,368,226
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1996 (unaudited)
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
</CAPTION>
<S> <C> <C> <C>
ASSETS:
Investment securities, at market value
(identified cost of $25,749,893,
$23,918,338 and $9,972,714, respectively) $ 26,689,326 $ 24,352,325 $ 9,972,714
Cash - - 334,277
Interest receivable 516,573 440,524 60,167
Other assets 2,143 2,140 1,068
Total assets 27,208,042 24,794,989 10,368,226
LIABILITIES AND NET ASSETS:
Cash overdraft 129,290 427,290 -
Payable to shareholders 98 740 -
Total liabilities 129,388 428,030 -
NET ASSETS $ 27,078,654 $ 24,366,959 $ 10,368,226
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 26,082,015 $ 23,978,891 $ 10,363,611
Accumulated undistributed net realized gain
(loss) on investments 57,206 (45,919) 4,615
Net unrealized appreciation in value of investments 939,433 433,987 -
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 27,078,654 $ 24,366,959 $ 10,368,226
Capital shares, $0.10 par value
Authorized 50,000,000 50,000,000 100,000,000
Outstanding 3,039,505 2,267,036 10,362,204
NET ASSET VALUE PER SHARE $ 8.91 $ 10.75 $ 1.00
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six Months Ended December 31, 1996 (unaudited)
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
</CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 772,923 $ 630,779 $ 171,793
Expenses:
Management fees (Note 3) 129,641 117,966 24,505
Registration fees and other expenses 7,969 7,277 2,781
137,610 125,243 27,286
Net investment income 635,313 505,536 144,507
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 1):
Realized gain from investment transactions
(excluding repurchase agreements):
Proceeds from sales of investments 4,534,280 5,423,781 14,335,000
Cost of investments sold 4,493,788 5,382,035 14,335,000
Net realized gain from investment transactions 40,492 41,746 -
Unrealized appreciation on investments:
Beginning of period 405,971 234,298 -
End of period 939,433 433,987 -
Increase in net unrealized appreciation on
investments 533,462 199,689 -
Net gain on investments 573,954 241,435 -
Increase in net assets resulting
from operations $ 1,209,267 $ 746,971 $ 144,507
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
Six Months Ended December 31, 1996 (unaudited)
and Year Ended June 30, 1996
<TABLE>
<CATPION>
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
</CATPION>
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,322,894 $ 1,122,322 $ 355,654
Net realized gain from investment transactions 612,594 153,464 -
Decrease in net unrealized appreciation on
investments (352,146) (98,316) -
Net increase in net assets resulting from
operations 1,583,342 1,177,470 355,654
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,322,894) (1,122,322) (355,654)
Net realized gain from investment transactions - (66,705 ) -
Total distributions to shareholders (1,322,894) (1,189,027) (355,654)
DECREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold, 1,160,619 (L),
100,122 (S), 7,559,563(MM) 10,320,589 1,082,966 17,563,829
Net asset value of shares issued for reinvestment
of distributions, 86,053(L),
66,672(S), 285,903(MM) 761,701 720,344 285,903
11,082,290 1,803,310 17,849,732
Cost of shares redeemed, 1,399,237(L),
450,798(S), 25,532,521(MM) (12,432,297) (4,882,896) (25,536,768)
Net decrease from capital
share transactions (1,350,007) (3,079,586) (7,687,036)
Total decrease in net assets (1,089,559) (3,091,143) (7,687,036)
NET ASSETS - June 30, 1995 28,055,980 28,359,640 15,718,293
NET ASSETS - June 30, 1996 $ 26,966,421 $ 25,268,497 $ 8,031,257
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 635,313 $ 505,536 $ 144,507
Net realized gain from investment transactions 40,492 41,746 -
Increase in net unrealized appreciation on
investments 533,462 199,689 -
Net increase in net assets resulting
from operations 1,209,267 746,971 144,507
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (635,313) (505,536) (144,507)
Net realized gain from investment transactions (60,533) (112,777) -
Total distributions to shareholders (695,846) (618,313) (144,507)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold, 43,274(L),
17,116(S), 8,782,106(MM) 382,344 183,925 8,782,116
Net asset value of shares issued for
reinvestment of distributions, 46,601(L),
35,121(S), 116,873(MM) 413,437 377,552 116,873
795,781 561,477 8,898,989
Cost of shares redeemed, 135,238(L),
148,438(S), 6,562,020(MM) (1,196,969) (1,591,673) (6,562,020)
Net increase (decrease) from capital
share transactions (401,188) (1,030,196) 2,336,969
Total increase (decrease)
in net assets 112,233 (901,538) 2,336,969
NET ASSETS - June 30, 1996 26,966,421 25,268,497 8,031,257
NET ASSETS - December 31, 1996 $ 27,078,654 $ 24,366,959 $ 10,368,226
</TABLE>
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 financial statements have been prepared in conformity with
generally accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial statements. 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, 1996 (excluding repurchase agreements), were as follows:
Portfolio L
Purchases $ 3,959,900
Proceeds from sales 4,534,280
Portfolio S
Purchases $ 4,412,081
Proceeds from sales 5,423,781
Portfolio MM
Purchases $ 13,793,173
Proceeds from sales 14,335,000
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.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
BABSON TAX-FREE INCOME FUND - PORTFOLIO S
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 25749893
<INVESTMENTS-AT-VALUE> 26689326
<RECEIVABLES> 516573
<ASSETS-OTHER> 2143
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27208042
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 129388
<TOTAL-LIABILITIES> 129388
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26082015
<SHARES-COMMON-STOCK> 3039505
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 57206
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 939433
<NET-ASSETS> 27078654
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 772923
<OTHER-INCOME> 0
<EXPENSES-NET> 137610
<NET-INVESTMENT-INCOME> 635313
<REALIZED-GAINS-CURRENT> 40492
<APPREC-INCREASE-CURRENT> 533462
<NET-CHANGE-FROM-OPS> 1209267
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 635313
<DISTRIBUTIONS-OF-GAINS> 60533
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 43274
<NUMBER-OF-SHARES-REDEEMED> 135238
<SHARES-REINVESTED> 46601
<NET-CHANGE-IN-ASSETS> 112233
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 129641
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 137610
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.91
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
BABSON TAX-FREE INCOME FUND - PORTFOLIO S
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 23918338
<INVESTMENTS-AT-VALUE> 24352325
<RECEIVABLES> 440524
<ASSETS-OTHER> 2140
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24794989
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 428030
<TOTAL-LIABILITIES> 428030
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23978891
<SHARES-COMMON-STOCK> 2267036
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (45919)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 433987
<NET-ASSETS> 24366959
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 630779
<OTHER-INCOME> 0
<EXPENSES-NET> 125243
<NET-INVESTMENT-INCOME> 505536
<REALIZED-GAINS-CURRENT> 41746
<APPREC-INCREASE-CURRENT> 199689
<NET-CHANGE-FROM-OPS> 746971
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 505536
<DISTRIBUTIONS-OF-GAINS> 112777
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17116
<NUMBER-OF-SHARES-REDEEMED> 148438
<SHARES-REINVESTED> 35121
<NET-CHANGE-IN-ASSETS> (901538)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 117966
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 125243
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.75
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
BABSON TAX-FREE INCOME FUND - PORTFOLIO MM
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 9972714
<INVESTMENTS-AT-VALUE> 9972714
<RECEIVABLES> 60167
<ASSETS-OTHER> 334277
<OTHER-ITEMS-ASSETS> 1068
<TOTAL-ASSETS> 10368226
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10363611
<SHARES-COMMON-STOCK> 10362204
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4615
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10368226
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 171793
<OTHER-INCOME> 0
<EXPENSES-NET> 27286
<NET-INVESTMENT-INCOME> 144507
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 144507
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 144507
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8782106
<NUMBER-OF-SHARES-REDEEMED> 6562020
<SHARES-REINVESTED> 116873
<NET-CHANGE-IN-ASSETS> 2336969
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24505
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27286
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
