BABSON
TAX-FREE
INCOME
FUND
Semiannual Report
December 31, 1997
JONES & BABSON
MUTUAL FUNDS
MESSAGE
TO OUR SHAREHOLDERS
For the six month period ended December 31, 1997, total investment
returns (price change and reinvested distributions) for Babson Tax-Free
Income Fund were 5.61% for Portfolio L and 3.05% for Portfolio S.
Portfolio MM's price remained at $1.00 and provided a return of 1.57%
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.
The bond market ended the calendar year on a very strong note, fueled by
lower expectations for inflation and the safe haven status of U.S.
capital markets in the midst of the Asian capital crisis.
At home, disinflation and actual deflation at the
wholesale level, rising productivity, a dramatic shrinking in the
federal deficit to near surplus levels, and the growing credibility of
monetary policy have all contributed to propelling rates lower. In
addition, the U.S. bond market has been the beneficiary of a
strengthening dollar and capital flows out of Asia in the wake of the
Asian currency crisis. While deflation in Asia and other parts of the
world is expected to have a negative impact on our export industries in
1998, it diminishes the potential for our rate of inflation to increase,
even with the U.S. economy running at or close to full employment.
For the six month period, municipal bond prices
underperformed their taxable counterparts. This is typical during
periods of market strength when the lessened relative liquidity of tax-
free bonds causes their performance to lag. Other important contributing
factors were the greater than expected new issuance of municipals and
the low level of absolute interest rates - at least in terms of recent
history. Individuals pay close attention to interest rate levels prior
to committing funds. Since individuals and their surrogate mutual funds
are the major source of demand in the marketplace, their attitude can
have a significant impact on the market.
During the six-month period, longer-term tax frees generally
outperformed those with a shorter duration, reflecting the overall
market strength and further flattening of the yield curve. Quality
spreads continued to remain at the historically narrow levels that have
been experienced for some time. Accordingly, lower quality issues
outperformed higher grade debt due to their greater coupon income.
At December 31, 1997, the average maturities of Portfolio L, S and MM
were 13 years, 4 years and 37 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 54% 56% 79%
Aa 21 10 21
A 17 19 0
Lower 8 15 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% 6% 0%
General Obligations 31 32 5
Variable Rate Demand Bonds and Notes 0 2 79
Tax-Exempt Commercial Paper 0 0 16
Revenue:
Electric 8 14 0
Housing and Housing Finance Agencies 7 9 0
Pollution Control 0 0 0
Water and Sewer 12 5 0
Industrial Development 0 5 0
Education 16 5 0
Transportation 2 6 0
Hospital 13 16 0
Aviation 2 0 0
TOTAL 100% 100% 100%
STATEMENT OF NET ASSETS
December 31, 1997 (unaudited)
PORTFOLIO L - LONGER TERM
<TABLE>
<CAPTION>
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 $ 687,500
ARKANSAS
Arkansas GO, Series B,
0.00%, due June 1, 2010 1,000,000 546,250
Univ of Arkansas Rev Ref
(Athletic Facilities Fayetteville),
4.80%, due September 15, 2007 1,000,000 1,011,250
CALIFORNIA
California Health Fac Auth Rev (Kaiser Permanente Medical)
(Call 10/1/01 @ 101),
5.45%, due October 1, 2013 250,000 253,438
Santa Rosa Water Rev Ref (FGIC Ins) Series B
(Call 9/1/02 @ 101.5), O.I.D.,
6.00%, due September 1, 2015 500,000 568,125
Univ of California Rev (Call 7/1/06 @ 101),
5.75%, due July 1, 2013 1,000,000 1,075,000
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 500,000 545,000
Denver City & Cnty School Dist #1 GO,
Series A (Call 12/1/04 @ 101),
O.I.D., 5.125%, due December 1, 2012 500,000 505,000
DIST OF COLUMBIA
Dist of Columbia GO, Series A,
5.75%, due June 1, 2003 500,000 523,125
FLORIDA
Dade Cnty Special Obligation (AMBAC Ins Cabs)
(Pre-refunded 10/1/08 @ 30.8464),
0.00%, due October 1, 2027 1,000,000 187,500
Miami-Dade Cnty Special Obligation Ref,
Series A (MBIA Ins)
(Call 4/1/08) @ 69.484), O.I.D.,
0.00%, due October 1, 2015 500,000 199,375
Palm Beach Cnty Airport Sys Rev Ref (MBIA Ins)
(Call 10/1/01 @ 102),
7.75%, due October 1, 2010 500,000 567,500
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 500,000 542,500
ILLINOIS
Chicago GO (AMBAC Ins) Series B,
5.125%, due January 1, 2022 1,000,000 1,006,250
Lake Cnty Community Unit School Dist #60
Waukegan (FSA Ins),
6.10%, due December 1, 2001 500,000 536,875
INDIANA
Indiana Bond Bank Special Program, Series 94 A-1
(Call 8/1/04 @ 102),
5.60%, due August 1, 2015 500,000 512,500
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 500,000 547,500
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 500,000 563,125
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 500,000 523,750
Massachusetts Housing Finance Agy Projects, Series A
(Callable 4/1/03 @ 102),
6.375%, due April 1, 2021 975,000 1,033,500
MICHIGAN
Michigan State Hosp Finance Auth Rev (Mercy Health Services)
Series Q (Call 8/15/06 @ 101),
5.375%, due August 15, 2026 500,000 504,375
Milan Area Schools GO (Call 5/1/04 @ 101), O.I.D.,
5.00%, due May 1, 2013 500,000 503,125
Spring Lake Public Schools,
4.875%, due May 1, 2009 500,000 509,375
NEVADA
Clark Cnty School Dist GO (MBIA Ins) Series A
(Callable 3/1/01 @ 101),
6.75%, due March 1, 2007 500,000 541,875
Nevada GO (Natural Resources) Series C (Call 5/15/07 @ 100),
5.375%, due May 15, 2017 500,000 514,375
NEW HAMPSHIRE
New Hampshire Higher Ed & Health Fac Auth Rev
(AMBAC Ins) (Call 10/01/06 @ 102),
5.70%, due October 1, 2010 500,000 536,875
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 250,000 262,187
New Jersey Turnpike Auth Rev,
10.375%, due January 1, 2003 155,000 181,350
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 1,038,750
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 1,093,750
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 1,111,250
New York Environmental Fac Corp PCR (Call 6/15/07 @ 101),
4.80%, due June 15, 2009 500,000 502,500
New York Environmental Fac Corp PCR
(State Water-Revolving Fund) Series B
(Call 9/15/02 @ 102),
6.65%, due September 15, 2013 500,000 555,625
PENNSYLVANIA
Philadelphia School Dist Rev Ref, Series A,
5.00%, due April 1, 2003 500,000 518,750
RHODE ISLAND
Rhode Island Depositors Economic Protection Corp
Special Obligation
(MBIA Ins) Series B, O.I.D.,
5.80%, due August 1, 2009 500,000 555,000
Rhode Island Depositors Economic Protection Corp
Special Obligation
(MBIA Ins) Series A (Pre-refunded 8/1/01 @ 102),
7.50%, due August 1, 2014 500,000 563,750
Rhode Island Industrial Fac Corp PCR (Inge Co)
(SBA Gtd) (Call 2/17/98 @ 100),
9.125%, due October 1, 2000 70,000 70,986
TEXAS
Harris Cnty Toll Road Ref (FGIC Ins)
(Call 8/15/04 @ 102), O.I.D.,
5.00%, due August 15, 2016 500,000 493,750
Hays Consolidated Independent School Dist (PSF Gtd)
(Call 9/1/06 @ 100), O.I.D.,
4.50%, due September 1, 2010 500,000 483,750
Houston Hotel Occupancy Tax Receipts Rev (FGIC Ins)
Series A (Pre-refunded 7/1/01 @ 100),
7.00%, due July 1, 2009 500,000 545,625
San Antonio Electric & Gas Rev
(Pre-refunded 2/1/02 @ 102), O.I.D.,
5.75%, due February 1, 2011 500,000 520,000
Texas Public Finance Auth Bldg Rev (AMBAC Ins)
Series A (Call 2/1/05 @ 100),
6.00%, due February 1, 2008 500,000 548,125
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 500,000 555,000
Fairfax Cnty Industrial Dev Auth Rev
(Inova Health Sys) (Call 8/15/06 @ 102),
5.50%, due August 15, 2009 500,000 534,375
Virginia State Univ Commonwealth Rev
(Call 5/01/06 @ 102),
5.75%, due May 1, 2021 500,000 525,625
WASHINGTON
Tacoma Conservation Sys Project Rev
(Tacoma Public Utilities Light Div),
6.50%, due January 1, 2012 500,000 555,000
Washington GO, Series DD-13 (Call 3/1/04 @ 100),
5.875%, due March 1, 2014 500,000 529,375
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 500,000 510,000
WISCONSIN
Wisconsin Public Power Inc Sys Rev (MBIA Ins)
(Call 7/1/06 @ 102),
5.90%, due July 1, 2011 500,000 544,375
TOTAL INVESTMENTS - 100.29% $ 27,843,961
Other assets less liabilities - (0.29%) (79,768)
TOTAL NET ASSETS - 100.00%
(equivalent to $9.23 per share;
50,000,000 shares of $0.10 par value
capital shares authorized;
3,008,461 shares outstanding) $ 27,764,193
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF NET ASSETS
December 31, 1997 (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 7/01/01 @ 101),
6.30%, due June 1, 1999 500,000 503,300
ARKANSAS
Univ of Arkansas Rev Ref (Athletic Fac Fayetteville),
4.50%, due September 15, 2003 500,000 503,750
DIST OF COLUMBIA
Dist of Columbia GO, Series A,
5.75%, due June 1, 2003 500,000 523,125
GUAM
Guam Govt Limited Obligation Hwy (FSA Ins) Series A,
5.75%, due May 1, 2001 500,000 528,125
Guam Power Auth Rev, Series A,
5.00%, due October 1, 2002 500,000 507,500
ILLINOIS
Du Page & Will Cntys Community School Dist #204,
7.25%, due December 30, 2004 500,000 582,500
Illinois GO (Call 2/10/98 @ 102),
5.90%, due December 1, 1998 500,000 510,675
Illinois State Toll Hwy Auth Priority Rev Ref,
Series A, O.I.D.,
3.50%, due January 1, 2005 500,000 468,750
INDIANA
Indianapolis Line of Credit Public Improvement Bond Bank,
Series D,
5.70%, due February 1, 2000 250,000 258,750
KENTUCKY
Jefferson Cnty Capital Projects Rev,
5.20%, due June 1, 2004 500,000 526,250
MASSACHUSETTS
Massachusetts Health & Ed Fac Auth Rev (Winchester Hosp)
(Connie Lee Ins) Series D,
5.10%, due July 1, 2001 500,000 515,000
Massachusetts Housing Finance Agy Projects (AMBAC Ins)
Series A,
5.35%, due April 1, 2003 500,000 527,500
Massachusetts Municipal Wholesale Electric Co
Power Supply Sys Rev, Series D,
5.70%, due July 1, 2001 500,000 521,250
Massachusetts Water Resources Auth, Series 90 A,
7.00%, due April 1, 1999 500,000 518,125
MINNESOTA
St. Cloud Hosp Fac Rev (AMBAC Ins) Series 96 A,
4.00%, due July 1, 1998 500,000 500,685
MISSOURI
Jackson Cnty Industrial Dev Auth Health Care Corp Rev
(St. Joseph Health Center) (MBIA Ins),
4.60%, due July 1, 2001 500,000 508,750
Sikeston Electric Rev Ref (MBIA Ins),
5.80%, due June 1, 2002 500,000 533,750
NEVADA
Washoe Cnty Hosp Fac Rev Ref (Wahoe Medical Center Inc)
Series A,
5.25%, due June 1, 2001 500,000 518,125
NEW MEXICO
Albuquerque Hosp Rev Ref (MBIA Ins) Series A, O.I.D.,
5.60%, due August 1, 1999 500,000 511,875
Las Cruces School Dist (MBIA Ins),
6.125%, due August 1, 2000 500,000 525,000
NEW YORK
Battery Park City Auth Rev Ref,
6.00%, due November 1, 2003 500,000 543,750
New York Dormitory Auth Rev (Beth Israel Medical Center),
5.35%, due November 1, 2005 500,000 529,375
New York Medical Care Fac Finance Agy Rev Ref
(Mental Health Services) Series F,
6.00%, due August 15, 2002 500,000 534,375
New York Medical Care Fac Finance Agy Rev
(Surgical Hosp) (FHA Ins) Series A,
5.40%, due August 15, 2004 500,000 520,625
NORTH CAROLINA
North Carolina Eastern Municipal Power Agy Sys Rev Ref,
Series 93 B,
5.375%, due January 1, 2001 500,000 513,125
OHIO
Columbus City School Dist (FGIC Ins)
(Pre-refunded 12/1/02 @ 102),
6.65%, due December 1, 2012 500,000 561,875
Ohio Special Obligation (AMBAC Ins) Series A,
5.55%, due June 1, 2000 500,000 518,750
PENNSYLVANIA
Pennsylvania State Univ GO, E.T.M.,
6.75%, due July 1, 1999 500,000 519,375
PUERTO RICO
Puerto Rico Commonwealth Hwy & Transportation
Auth Rev Ref, Series V,
6.10%, due July 1, 2001 250,000 266,563
Puerto Rico Electric Power Auth Rev Ref, Series Q,
5.30%, due July 1, 1998 500,000 504,100
RHODE ISLAND
Rhode Island Depositors Economic Protection Corp
Special Obligation (FSA Ins) Series A,
5.60%, due August 1, 1998 500,000 505,260
SOUTH DAKOTA
South Dakota Housing Dev Auth
(Home Ownership Mortgage) Series C,
4.70%, due May 1, 1999 500,000 505,625
TENNESSEE
Tennessee Housing Dev Agy Mortgage Finance, Series A,
4.95%, due July 1, 2000 500,000 510,000
TEXAS
Fort Bend Cnty Industrial Dev Corp Rev Ref
(Frito-Lay Inc) (Call 10/01/99 @ 100),
4.55%, due October 1, 2011 500,000 513,125
Grapevine Industrial Dev Corp (American Airlines) Series B-3,
4.55%, due October 1, 2011 500,000 500,000
Houston GO, Series C (Call 3/1/02 @ 100),
5.90%, due March 1, 2003 500,000 533,750
Round Rock GO (FGIC Ins) (Call 2/1/98 @ 100),
6.40%, due August 1, 1998 500,000 500,880
San Antonio Water Rev (AMBAC Ins)
(Pre-refunded 5/1/00 @ 49.8), O.I.D.,
0.00%, due May 1, 2010 1,250,000 565,625
WASHINGTON
Washington Public Power Supply Sys Nuclear
Project #2 Rev Ref (MBIA Ins) Series B,
5.10%, due July 1, 2004 500,000 519,375
Washington Public Power Supply Sys Nuclear
Project #2 Rev Ref, Series B
(Pre-refunded 7/1/00 @ 102),
7.50%, due July 1, 2004 300,000 329,625
WISCONSIN
Milwaukee Cnty GO, Series A,
5.35%, due September 1, 2001 500,000 521,250
Milwaukee Metropolitan Sewer Dist GO, Series A,
7.00%, due September 1, 2000 500,000 537,500
TOTAL INVESTMENTS - 98.84% $ 22,246,713
Other assets less liabilities - 1.16% 262,080
TOTAL NET ASSETS - 100.00%
(equivalent to $10.82 per share;
50,000,000 shares of $0.10 par value
capital shares authorized;
2,079,445 shares outstanding) $ 22,508,793
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF NET ASSETS
December 31, 1997 (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,
5.00%, due October 1, 2022 $ 400,000 $ 400,000
ALASKA
Alaska Housing Finance Corp, Series C
(SBPA: Swiss Bank Corp),
Fltg Rate, 3.70%, due June 1, 2026 300,000 300,000
COLORADO
Regional Transportation Dist, Series 89 A
(LOC: Credit Local De France),
Fltg Rate, 3.65%, due June 1, 1999 200,000 200,000
CONNECTICUT
Connecticut GO, Series 97 B (SBPA: Bayerische Landesbank),
Fltg Rate, 4.05%, due May 15, 2014 500,000 500,000
Connecticut Special Assessment Unemployment
Compensation Adv Fund Rev (FGIC Ins) Series C
(SBPA: FGIC SPI) (Optional Put 7/1/98 @ 100),
3.90%, due November 15, 2001 300,000 300,000
FLORIDA
Dade Cnty Water & Sewer Sys Rev (FGIC Ins)
(SBPA: Commerzbank),
Fltg Rate, 3.65%, due October 5, 2022 400,000 400,000
Gainsville Utility Sys, Series C (Line: BOA Sun),
3.75%, due February 26, 1998 313,000 313,000
Jacksonville GO (Liq: Morgan Guaranty Trust Co;
Credit Suisse Bank;
Bayerische Landesbank; Sun Bank),
3.75%, due January 8, 1998 300,000 300,000
Jacksonville GO (Liq: Morgan Guaranty Trust Co;
Credit Suisse Bank;
Bayerische Landesbank; Sun Bank),
3.70%, due January 29, 1998 200,000 199,934
GEORGIA
De Kalb Private Hosp Auth Rev Anticipation Certificates
(Egleston Childrens Hosp) Series A,
Fltg Rate, 3.70%, due March 1, 2024 300,000 300,000
ILLINOIS
Illinois Health Fac Auth Rev (Rush-Presbyterian)
(LOC: Northern Trust)
(Mandatory Redemption 1/7/98 @ 100),
3.65%, due October 1, 2010 250,000 250,000
KANSAS
Kansas Dept of Transportation Highway Rev, Series 94 B,
Fltg Rate, 3.60%, due September 1, 2014 400,000 400,000
LOUISIANA
Lake Charles Harbour & Terminal Dist Port Fac Rev
(Conoco-duPont) Series 84 E,
Fltg Rate, 5.00%, due November 1, 2011 100,000 100,000
Louisiana Offshore Terminal Auth Deepwater Port Rev Ref
(Loop) (SBPA: Union Bank of Switzerland),
Fltg Rate, 5.00%, due September 1, 2006 100,000 100,000
MASSACHUSETTS
Massachusetts Bay Transportation Auth
General Transportation Sys,
Series 84 A (LOC: State Street Bank)
(Optional Put 3/1/98 @ 100),
3.75%, due March 1, 2014 300,000 300,000
MISSOURI
Missouri Health & Ed Auth Rev (Washington Univ)
Series A (SBPA: Morgan Guaranty Trust Co),
Fltg Rate, 4.95%, due September 1, 2030 200,000 200,000
NEW MEXICO
Albuquerque Airport Rev Ref, Series 95 (AMBAC Ins)
(SBPA: Canadian Imperial Bank of Commerce),
Fltg Rate, 3.65%, due July 1, 2014 300,000 300,000
Albuquerque Joint Water & Sewer Sys Rev Ref, Series B,
6.75%, due July 1, 1998 250,000 253,577
Hurley PCR (British Petroleum),
Fltg Rate, 5.00%, due December 1, 2015 200,000 200,000
New Mexico State Tax & Rev Anticipation Notes, Series 98,
4.50%, due June 30, 1998 300,000 300,932
NEW YORK
New York City GO, Series 95F-7
(LOC: Union Bank of Switzerland),
Fltg Rate, 3.60%, due February 15, 2012 200,000 200,000
Municipal Assistance Corp for New York City, Series K-2
(LOC: Bayerische Landesbank),
Fltg Rate, 3.55%, due July 1, 2008 200,000 200,000
NORTH CAROLINA
Charlotte Airport Rev Ref, Series 93 A
(MBIA Ins) (SBPA: Commerzbank),
Fltg Rate, 3.65%, due July 1, 2016 300,000 300,000
Raleigh-Durham Airport (American Airlines) Series A-1
(LOC: Royal Bank of Canada),
Fltg Rate, 5.00%, due November 1, 2015 100,000 100,000
Winston-Salem Water & Sewer Sys Rev (SBPA: Wachovia Bank NC),
Fltg Rate, 3.70%, due June 1, 2014 200,000 200,000
OHIO
Ohio Highway GO, Series R,
5.00%, due May 15, 1998 100,000 100,450
TENNESSEE
Metropolitan Govt Nashville & Davidson Cnty
Health & Ed Fac Board Rev
(Vanderbilt Univ) Series 85 A
(Optional Put 1/15/98 @ 100),
3.65%, due January 15, 2015 200,000 200,000
Tennessee GO Bond Anticipation Notes, Series 96 E,
Fltg Rate, 3.60%, due July 2, 2001 500,000 500,000
TEXAS
Dallas Area Rapid Transit Sales Tax A,
3.75%, due March 6, 1998 200,000 200,000
Grapevine Industrial Dev Corp (American Airlines)
Series A-1
(LOC: Morgan Guaranty Trust Co),
Fltg Rate, 5.00%, due December 1, 2024 100,000 100,000
Harris Cnty GO, Series A (LOC: Union Bank of Switzerland),
3.80%, due January 9, 1998 117,000 117,000
Harris Cnty Health Fac Memorial Health Sys,
Series 97 B (SBPA: Societe Generale),
Fltg Rate, 3.65%, due June 1, 2024 200,000 200,000
Lone Star Airport Improvement Auth Inc Rev
(American Airlines)
Series B-1 (LOC: Royal Bank of Canada),
Fltg Rate, 5.00%, due December 1, 2014 200,000 200,000
Lower Colorado River Auth Rev Ref (MBIA Ins),
Fltg Rate, 3.65%, due January 1, 2013 200,000 200,000
Lower Neches Valley Auth Industrial Dev Corp PCR
(Mobil Corp),
Fltg Rate, 3.70%, due February 1, 2004 300,000 300,000
Southwest Higher Ed Auth Inc Rev (Southern Methodist Univ)
Series 85 (LOC: Morgan Guaranty Trust Co),
Fltg Rate, 5.00%, due July 1, 2015 100,000 100,000
Texas GO Tax & Rev Anticipation Notes,
4.75%, due August 31, 1998 300,000 301,770
UTAH
Intermountain Power Agy Supply Rev, Series 85 E
(LOC: Swiss Bank Corp) (Optional Put 3/16/98 @ 100),
3.75%, due July 1, 2014 250,000 250,000
VERMONT
Vermont Ed & Health Buildings Fin Agy Rev
(Middlebury College)
Series 88 A (Optional Put 5/1/98 @ 100),
3.95%, due May 1, 2028 200,000 200,000
WASHINGTON
Washington Health Care Fac Auth Rev (Sister of Providence)
Series B (Line: RaboBank),
Fltg Rate, 5.00%, due October 1, 2005 200,000 200,000
Washington Health Care Fac Auth Rev (Sister of Providence)
Series D (Line: RaboBank),
Fltg Rate, 5.00%, due October 1, 2005 300,000 300,000
Washington GO, Series 96 B (LOC: Landesbank Hessen),
Fltg Rate, 3.60%, due June 1, 2020 200,000 200,000
WYOMING
Lincoln Cnty PCR (Exxon) Series 85,
Fltg Rate, 4.95%, due August 1, 2015 200,000 200,000
WISCONSIN
Sheboygan PCR (Wisconsin Power & Light Co),
Fltg Rate, 3.80%, due August 1, 2014 300,000 300,000
Wisconsin GO, Series 97 A,
3.70%, due March 9, 1998 400,000 400,000
TOTAL INVESTMENTS - 95.41% $ 11,186,663
Other assets less liabilities - 4.59% 537,996
TOTAL NET ASSETS - 100.00%
(equivalent to $1.00 per share;
100,000,000 shares of $0.10 par value
capital shares authorized;
11,718,645 shares outstanding) $ 11,724,659
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
</CAPTION>
<S> <C> <C> <C>
ASSETS:
Investment securities, at market value
(identified cost of $25,940,311, $21,662,614 and
$11,186,663, respectively) $ 27,843,961 $ 22,246,713 $ 11,186,663
Cash - - 460,009
Interest receivable 469,584 372,060 76,432
Other assets 3,385 2,234 1,555
Total assets 28,316,930 22,621,007 11,724,659
LIABILITIES AND NET ASSETS:
Cash overdraft 552,737 112,214 -
Total liabilities 552,737 112,214 -
NET ASSETS $ 27,764,193 $ 22,508,793 $ 11,724,659
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 25,800,738 $ 21,961,162 $ 11,720,044
Accumulated undistributed net realized gain
(loss) on investments 59,805 (36,468) 4,615
Net unrealized appreciation in value of investments 1,903,650 584,099 -
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 27,764,193 $ 22,508,793 $ 11,724,659
Capital shares, $0.10 par value
Authorized 50,000,000 50,000,000 100,000,000
Outstanding 3,008,461 2,079,445 11,718,645
NET ASSET VALUE PER SHARE $ 9.23 $ 10.82 $ 1.00
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six Months Ended December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
</CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 762,807 $ 567,510 $ 200,265
Expenses:
Management fees (Note 3) 131,847 108,677 27,293
Registration fees and other expenses 10,351 8,607 3,800
142,198 117,284 31,093
Net investment income 620,609 450,226 169,172
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 1):
Realized gain from investment transactions
(excluding repurchase agreements):
Proceeds from sales of investments 2,229,740 2,288,420 15,313,193
Cost of investments sold 2,209,185 2,246,359 15,313,193
Net realized gain from investment transactions 20,555 42,061 -
Unrealized appreciation on investments:
Beginning of period 1,044,898 388,509 -
End of period 1,903,650 584,099 -
Increase in net unrealized appreciation on investments 858,752 195,590 -
Net gain on investments 879,307 237,651 -
Increase in net assets resulting from operations $ 1,499,916 $ 687,877 $ 169,172
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
Six Months Ended December 31, 1997 (unaudited)
and Year Ended June 30, 1997
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S PORTFOLIO MM
</CAPTION>
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,272,767 $ 990,979 $ 299,426
Net realized gain from investment transactions 88,015 71,438 -
Increase in net unrealized appreciation on investments 638,927 154,211 -
Net increase in net assets resulting from operations 1,999,709 1,216,628 299,426
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,272,767) (990,979) (299,426)
Net realized gain from investment transactions (60,533) (112,777) -
Total distributions to shareholders (1,333,300) (1,103,756) (299,426)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold, 105,940(L),
54,132(S), 18,555,914(MM) 930,420 579,845 18,555,943
Net asset value of shares issued for reinvestment
of distributions, 88,162(L), 62,762(S), 237,906(MM) 791,899 673,723 237,906
1,722,319 1,253,568 18,793,849
Cost of shares redeemed, 238,370(L), 345,284(S),
17,374,707(MM) (2,112,020) (3,699,095) (17,374,733)
Net increase (decrease) from capital share transactions (389,701) (2,445,527) 1,419,116
Total increase (decrease) in net assets 276,708 (2,332,655) 1,419,116
NET ASSETS - June 30, 1996 26,966,421 25,268,497 8,031,257
NET ASSETS - June 30, 1997 $ 27,243,129 $ 22,935,842 $ 9,450,373
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 620,609 $ 450,226 $ 169,172
Net realized gain from investment transactions 20,555 42,061 -
Increase in net unrealized appreciation on investments 858,752 195,590 -
Net increase in net assets resulting from operations 1,499,916 687,877 169,172
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (620,609) (450,226) (169,173)
Net realized gain from investment transactions (65,479) (62,302) -
Total distributions to shareholders (xxx) (512,528) (169,173)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold, 88,240(L), 65,408(S),
10,800,426(MM) 866,677 767,713 10,800,426
Net asset value of shares issued for reinvestment of
distributions, 49,430(L), 35,442(S), 130,197(MM) 389,534 323,855 130,197
1,256,211 1,091,568 10,930,623
Cost of shares redeemed, 169,809(L), 156,252(S),
8,656,336(MM) (1,548,975) (1,693,966) (8,656,336)
Net increase (decrease) from capital share transactions (292,764) (602,398) 2,274,287
Total increase (decrease) in net assets 521,064 (427,049) 2,274,286
NET ASSETS - June 30, 1997 27,243,129 22,935,842 9,450,373
NET ASSETS - December 31, 1997 $ 27,764,193 $ 22,508,793 $ 11,724,659
</TALBE>
See accompanying 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, 1997 (excluding repurchase agreements), were as follows:
Portfolio L
Purchases $ 2,392,140
Proceeds from sales 2,229,740
Portfolio S
Purchases $ 2,015,710
Proceeds from sales 2,288,420
Portfolio MM
Purchases $ 17,503,401
Proceeds from sales 15,313,193
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.
EQUITIES
Growth Fund
Enterprise Fund*
Enterprise Fund II
Value Fund
Shadow Stock Fund
International Fund
FIXED INCOME
Bond Trust
Money Market Fund
Tax-Free Income Fund
* Closed to new investors.
JONES & BABSON
MUTUAL FUNDS
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
816-751-5900
1-800-4-BABSON
(1-800-422-2766)
http://www.jbfunds.com
</TABLE>
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