Shadow Stock Fund
Annual Report
June 30, 1995
MESSAGE
To Our Shareholders
Shadow Stock Fund's fourth fiscal quarter ended June 30, 1995, was stronger
than the prior quarter, producing an 8.4% total return (price change and
reinvested distributions). The total return for the fiscal year ended June
30, 1995 was 16.2%, and the return in the first half of calendar 1995 was
14.5%. Results for the unmanaged Russell 2000 index of small capitalization
stocks for the same periods were 9.4%, 20.1% and 14.4%, respectively. Average
returns for the small company growth funds covered by the Lipper Mutual Fund
Performance Analysis were 9.0%, 24.8% and 15.4% for the same three periods.
Net asset value per share rose from $10.06 on
March 31, 1995, to $10.55 at the end of June. Net assets increased from $37.1
million at the end of the prior quarter, to $38.6 million at June 30.
Distributions of $0.05 of ordinary income dividends, and $0.30 net capital
gains were made in late June. Shareholders who had elected reinvestment
received additional shares at a reinvestment price of $10.54. For our
corporate shareholders, 100% of ordinary income distributions qualify for the
corporate dividends received deduction.
The Fund continues to have attractive valuation characteristics. The average
price/earnings ratio based on estimated earnings for 1995 for the companies
in the portfolio is only 10.0, way below the Standard & Poor's 500 multiple
of 15.2 times earnings. The average price-to-book value is 1.2, compared to
3.0 for the S&P 500 companies and 2.1 for the Russell 2000.
A few more holdings were sold during the quarter because they had risen to
more than double the upper limit of market capitalization to qualify for
purchase, and their price-to-book value ratios had risen too high. Among
these sales were Safeguard Scientifics, Trident Micro Systems, Money Store
and Pfizer (received in exchange for Salick Healthcare).
Among the more significant new additions to the portfolio are American
Medical Electronics (medical devices), Ben & Jerry's Homemade (ice cream),
Finish Line (athletic shoe stores), R&B (auto parts), Sportmart (sporting
goods superstores), Tide West (oil and gas) and Toastmaster (toasters and
small electric appliances). American Medical Electronics agreed to be acquired
at $10 per share about two weeks after it was purchased in the Fund for $7.18.
The strong stock market continued during the second quarter of 1995.
Technology stocks lead the market, and the Russell 2000 is weighted about 15%
in technology. The Fund is underweighted in this sector, partly because of
the emphasis on lower price-to-book value ratios, but also because the
popular technology issues have higher institutional ownership. The market has
continued to benefit from lower interest rates and good earnings, although
the recent two-day sell-off is a sign of some healthy skepticism.
The reasonable valuations of the Fund's investments should help to reduce
risk if the market experiences a setback. The same valuations should begin
to attract attention if the market remains strong.
We appreciate your continued use of our Fund in your investment program.
Sincerely,
Larry D. Armel
President
Shadow Stock Fund versus Russell 2000
**Unmanaged stock index
Shadow Stock Fund's average annual compounded total returns for one year,
five years and the life of the Fund (inception August 28, 1987) as of
June 30, 1995, were 16.16%, 11.10% and 6.58%, respectively. Performance data
contained in this report is for past periods only. Past performance is not
predictive of future performance. Investment return and share value will
fluctuate, and redemption value may be more or less than original cost.
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1995
S&P
RANKING** SHARES COMPANY COST MARKET VALUE
COMMON STOCKS - 97.26%
BASIC MATERIALS - 3.30%
B+ 10,638 Aceto Corp. $ 127,953 $ 156,911
C 31,400 American Pacific* 345,455 149,150
NR 4,900 Badger Paper Mills, Inc.* 87,635 72,275
B- 6,480 Baltek Corp.* 46,051 55,890
NR 2,974 Detrex Corp.* 78,654 22,305
B+ 15,393 Gibson (The C.R.) Co. 96,908 119,296
B 20,500 Hauser Chemical Research, Inc.* 93,221 108,906
B 18,717 Insteel Industries, Inc. 149,658 140,378
NR 11,000 National Sanitary Supply Co. 117,013 132,000
B- 4,300 Pitt-Des Moines, Inc. 159,487 145,125
B 15,225 Roanoke Electric Steel Corp. 134,830 171,281
1,436,865 1,273,517
CAPITAL GOODS - 13.66%
B- 18,100 American Ecology Corp. 169,500 90,500
B+ 6,700 American Filtrona Corp. 163,611 197,650
C 9,444 Athey Products Corp. 65,750 56,664
B+ 2,900 Badger Meter, Inc. 51,106 68,512
B 26,400 Baker (Michael) Corp.* 221,374 128,700
B- 6,927 Binks Manufacturing Co. 168,545 175,773
B+ 20,200 Cascade Corp. 170,815 323,200
B- 12,200 Cherry Corp. Cl. A* 126,120 161,650
B- 12,000 Cherry Corp. Cl. B* 125,670 165,000
B- 8,925 CIMCO, Inc.* 76,059 37,931
B- 6,000 Communication Cable, Inc.* 48,687 57,000
C 8,000 Davis Water & Waste Industries, Inc. 85,394 96,000
B 8,642 Del Electronics Corp. 63,247 48,611
B- 8,700 Devcon International Corp.* 93,335 63,075
B+ 6,200 Eastern (The) Co. 76,003 85,250
B+ 8,715 Ecology and Environment, Inc. Cl. A 101,012 69,720
B- 10,800 Elco Industries, Inc. 150,909 202,500
NR 16,400 Engle Homes, Inc. 173,275 149,650
NR 16,800 Failure (The) Group, Inc.* 105,261 90,300
C 7,775 Farr Co.* 55,198 58,312
CAPITAL GOODS (Continued)
NR 12,200 Farrel Corp. 78,080 71,675
B- 2,600 Graham Corp.* 41,081 29,900
B+ 11,582 Greiner Engineering, Inc. 154,505 133,193
B 5,000 Heist (C.H.) Corp.* 43,458 40,625
B+ 6,200 Industrial Acoustics Company, Inc. 74,625 99,200
NR 15,300 International Jensen, Inc.* 128,537 114,750
B 2,400 Lynch Corp.* 51,883 110,400
B- 5,649 Maxwell Laboratories, Inc.* 56,808 49,429
B 14,600 Mestek, Inc.* 128,923 184,325
B+ 8,475 Met-Pro Corp. 69,087 116,531
NR 7,700 Noland Co. 142,685 161,700
B 35,400 O'Sullivan Corp. 360,207 407,100
NR 1,800 Oilgear Co. 40,835 32,400
B 11,500 Oriole Homes Corp. Cl. A 109,732 81,938
B+ 3,700 Penn Engineering & Manufacturing
Corp. 128,292 279,350
B- 12,200 Plasti-Line, Inc.* 72,725 87,688
B+ 12,600 Puerto Rican Cement Co., Inc. 277,756 384,300
B- 3,700 Salem Corp. 51,697 104,525
B 5,700 Southwest Water Co. 73,290 49,875
B- 14,700 Starrett Housing Corp. 109,311 132,300
C 26,875 Terex Corp.* 237,255 124,297
NR 24,500 Video Lottery Technologies, Inc.* 358,277 159,250
5,079,920 5,280,749
CONSUMER CYCLICAL _ 19.95%
B 12,400 American Recreation
Centers, Inc. 75,135 89,900
B+ 12,300 Amplicon, Inc. 179,536 193,725
B+ 6,800 Analysis & Technology, Inc. 97,839 95,200
B+ 8,000 Ben & Jerry's Homemade,
Inc. Cl. A* 101,625 110,000
NR 20,500 Bon-Ton Stores, Inc.* 153,000 213,969
NR 13,800 Campo Electrics Appliances
and Computers, Inc.* 98,601 91,425
B 12,000 Carmike Cinemas, Inc. Cl. A* 137,760 291,000
B- 8,300 Comarco, Inc.* 46,772 78,850
NR 13,300 Crown Books Corp.* 206,367 149,625
B- 30,721 Dixie Yarns, Inc. 245,835 207,367
NR 45,600 Egghead, Inc.* 405,331 609,900
CONSUMER CYCLICAL (Continued)
B+ 18,900 Fay's, Inc. 160,009 144,113
B 2,700 Federal Screw Works 49,917 61,762
NR 13,100 Finish Line, Inc.* 101,361 127,725
B 7,066 Frederick's of Hollywood,
Inc. Cl. A 51,519 36,213
B 8,932 Frederick's of Hollywood,
Inc. Cl. B 61,419 40,194
B- 4,880 Gander Mountain, Inc.* 41,400 45,750
B 5,800 Geodynamics Corp. 58,015 63,800
B- 26,300 Gottschalks, Inc.* 240,374 174,237
NR 20,300 Government Technology
Services, Inc.* 179,045 121,800
C 9,703 Hampton Industries, Inc.* 60,896 55,186
C 5,827 Hein-Werner Corp. 51,417 28,407
B 1,700 Howell Industries, Inc. 45,133 46,537
B- 11,200 Hyde Athletic Industries,
Inc. Cl. A* 57,041 44,800
B 26,200 InaCom Corp.* 340,243 337,325
B+ 16,816 Knape & Vogt Manufacturing Co. 227,500 252,240
B- 9,015 LDI Corp.* 58,010 29,299
NR 5,199 M/A/R/C (The) Group 46,371 67,587
B+ 5,000 McRae Industries, Inc. Cl. A 44,063 30,937
B 14,711 Oneita Industries, Inc.* 160,401 134,238
B 20,700 Optical Coating Laboratory, Inc. 148,661 191,475
NR 14,300 OroAmerica, Inc.* 79,025 51,838
NR 8,000 Outlook Graphics Corp.* 100,470 74,000
B- 14,000 Pancho's Mexican Buffet, Inc. 118,633 59,500
NR 5,500 ProGroup, Inc.* 56,875 26,125
B 6,700 Pulaski Furniture Corp. 128,867 122,275
NR 17,400 R & B, Inc.* 105,270 139,200
B- 33,000 RPC Energy Services, Inc.* 266,313 297,000
NR 17,400 S & K Famous Brands, Inc.* 132,375 156,600
B+ 10,500 S K I Ltd. 106,662 154,875
B+ 17,272 Sands Regent 133,018 90,678
C 8,000 Scheib (Earl), Inc.* 118,613 44,000
NR 10,200 Spec's Music, Inc.* 68,010 35,700
NR 10,700 Sportmart, Inc. New* 100,526 107,669
NR 13,800 Strouds, Inc.* 102,051 82,800
B 46,100 Syms Corp. 382,317 334,225
NR 22,000 Syratech Corp.* 360,821 404,250
CONSUMER CYCLICAL (Continued)
B 34,200 TCBY Enterprises, Inc. 165,651 205,200
B 14,500 Thomaston Mills, Inc. Cl. A 169,150 181,250
B 1,000 Thomaston Mills, Inc. Cl. B 10,500 13,625
NR 11,200 Trimark Holdings, Inc.* 83,138 84,000
B+ 14,600 Uni-Marts, Inc. 89,976 85,775
B+ 3,500 Valley Forge Corp. 48,338 63,438
B 11,122 Virco Manufacturing Corp. 53,332 97,318
B 7,700 Vista Resources, Inc.* 99,756 155,925
B+ 9,877 Watsco, Inc. Cl. B 74,880 128,401
NR 4,900 Weyco Group, Inc. 155,927 176,400
A- 14,828 Wolohan Lumber Co. 197,538 174,229
7,438,628 7,710,882
CONSUMER STAPLES - 13.62%
B 12,900 Bio-Rad Labs, Inc. Cl. A* 182,124 464,400
B 6,800 Cagle's, Inc. Cl. A 79,103 113,900
B 19,400 Chattem, Inc.* 116,408 97,000
B- 6,700 Continental Can Company, Inc.* 164,608 161,638
B+ 1,700 Del Laboratories, Inc. 28,429 75,650
C 3,000 Foodarama Supermarkets, Inc.* 54,531 31,125
B 21,100 Forschner Group, Inc.* 222,665 221,550
B 3,200 Genesee Corp. Cl. B 138,775 123,200
B- 32,750 Golden Poultry Company, Inc. 182,699 192,406
B 20,500 Health Images, Inc. 102,416 125,562
NR 15,600 Immucor, Inc.* 89,860 144,300
NR 42,500 Ingles Markets, Inc. Cl. A 343,267 456,875
A 6,725 Marsh Supermarkets, Inc. Cl. A 85,278 80,700
NR 9,125 Marsh Supermarkets, Inc. Cl. B 112,058 102,656
A- 18,850 Medex, Inc. 236,191 235,625
B+ 9,000 PSICOR, Inc.* 100,772 103,500
B+ 7,250 Rauch Industries, Inc. 59,486 66,609
NR 21,200 Riser Foods, Inc. Cl. A* 167,704 214,650
NR 23,700 Robert Mondavi Corp. Cl. A* 222,665 414,750
NR 7,250 Salick Health Care, Inc.* 179,035 268,250
B 20,550 Sanderson Farms, Inc. 167,551 231,187
B 4,100 Seaway Food Town, Inc. 58,681 60,475
NR 5,900 Seneca Foods Corp.* 129,402 210,925
CONSUMER STAPLES (Continued)
B+ 8,400 Span-America Medical
Systems, Inc. 67,040 35,700
NR 14,100 St. Ives Laboratories, Inc. 126,816 107,513
NR 17,100 Toastmaster, Inc. 104,925 102,600
B+ 4,900 Tranzonic Cos. Cl. A 57,753 74,112
B+ 2,950 Tranzonic Cos. Cl. B 40,273 41,300
NR 9,500 Triple S Plastics, Inc.* 82,292 106,875
B+ 12,900 Vallen Corp.* 160,056 232,200
B 12,800 Western Beef, Inc.* 89,125 83,200
A- 12,800 Worthington Foods, Inc. 119,615 192,000
NR 13,000 Zaring Homes, Inc.* 95,250 92,625
4,166,853 5,265,058
ENERGY - 0.84%
NR 11,000 Maynard Oil Co.* 54,576 63,250
B 16,360 Swift Energy Co.* 136,573 149,285
NR 9,600 Tide West Oil, Inc.* 101,255 110,400
292,404 322,935
FINANCIAL - 21.20%
A 18,000 ALLIED Group, Inc. 226,020 513,000
B 20,100 American Travellers Corp.* 185,553 354,263
B+ 5,400 Amwest Insurance Group, Inc. 55,178 78,300
B+ 8,700 Central Reserve Life Corp. 64,033 70,687
B+ 5,900 Cotton States Life and Health
Insurance Co. 49,705 53,837
B 36,100 EMC Insurance Group, Inc. 320,203 433,200
NR 5,200 Financial Institutions Insurance
Group Ltd. 62,905 91,000
NR 17,200 First Financial Caribbean Corp. 173,911 253,700
B 13,500 Jefferies Group, Inc. 309,920 486,000
NR 4,900 Kentucky Medical Insurance
Co. Cl. A* 44,460 31,850
NR 8,400 Lawrence Insurance Group, Inc.* 64,070 21,000
B 10,820 Markel Corp.* 293,429 603,215
B 18,920 McDonald & Co. Investments, Inc. 189,848 300,355
B- 7,000 Merchants Group, Inc. 98,644 126,875
B 15,500 Meridian Insurance Group, Inc. 148,039 201,500
A- 5,800 Midland Co. 180,897 253,750
B 12,648 Mid-South Insurance Co. 58,150 139,128
NR 10,300 Milwaukee Insurance Group, Inc.* 101,850 208,575
FINANCIAL (Continued)
NR 7,600 Minuteman International, Inc. 72,333 75,050
NR 12,500 Mobile America Corp. 106,328 104,687
B 40,200 Morgan Keegan, Inc. 189,823 492,450
NR 10,800 National Insurance Group 125,283 75,600
NR 4,850 National Security Group, Inc. 56,275 84,875
NR 7,100 National Western Life
Insurance Co.* 175,588 307,075
NR 17,500 Navigators Group, Inc.* 281,504 275,625
B- 12,300 Norex America, Inc.* 102,643 135,300
NR 14,500 Penn Treaty American Corp.* 139,217 184,875
NR 10,800 Piedmont Management Company, Inc.* 108,772 97,200
B- 15,100 Pioneer Financial Services, Inc. 115,810 222,725
NR 18,400 PXRE Corp. 371,021 432,400
NR 8,500 Reading Co. Cl. A* 110,732 86,594
B+ 15,000 RLI Corp. 125,042 341,250
B+ 4,200 Scott & Stringfellow Financial,
Inc. 48,350 51,450
NR 23,300 State Auto Financial Corp. 248,383 436,875
B 18,400 Stewart Information Services Corp. 258,028 361,100
NR 8,085 Walshire Assurance Co. 80,413 133,403
B+ 5,000 Ziegler (The) Companies, Inc. 78,435 76,250
5,420,795 8,195,019
MISCELLANEOUS - 0.43%
NR 13,400 Celebrity, Inc.* 94,470 92,125
NR 4,500 Programming and Systems, Inc.* 32,940 9,000
B- 2,600 Scope Industries 79,121 65,325
206,531 166,450
TECHNOLOGY - 9.42%
NR 2,900 Allen Organ Co. Cl. B 89,513 129,050
NR 14,300 American Medical Electrics, Inc.* 102,603 139,425
B 14,700 BEI Electronics, Inc. 102,081 106,575
B- 10,600 Dataram Corp.* 106,178 56,975
B 6,000 Datron Systems, Inc.* 58,688 69,000
NR 12,400 E For M Corp.* 65,795 93,000
NR 8,900 Equitrac Corp.* 48,058 42,275
B 3,100 Espey Mfg. & Electronics Corp. 52,389 40,300
TECHNOLOGY (Continued)
NR 33,800 Future Now, Inc.* 307,172 253,500
NR 4,700 Giga-tronics, Inc.* 37,688 36,425
B 11,000 GTI Corp.* 127,988 211,750
B 18,100 Hadco Corp.* 134,820 450,238
B- 5,100 HEICO Corp. 60,309 88,612
B- 7,900 IFR Systems, Inc.* 57,895 92,825
NR 5,400 Information International, Inc.* 55,475 55,350
NR 18,848 Intellicall, Inc.* 133,145 122,512
B 8,300 Intermetrics, Inc. 44,874 53,950
C 8,600 Interphase Corp.* 73,205 99,975
NR 11,513 Isco, Inc. 122,333 123,765
B- 15,300 K-Tron International, Inc.* 127,716 91,800
B- 6,900 Keithley Instruments, Inc. 81,971 151,800
NR 22,300 Micronics Computers, Inc.* 111,050 91,988
NR 4,300 Moore Products Co.* 104,660 79,550
NR 11,400 Nichols Research Corp.* 144,185 195,225
B 8,100 Norstan, Inc.* 112,784 196,425
NR 19,300 North Star Universal, Inc.* 135,149 98,912
B- 17,000 Powell Industries, Inc.* 102,850 106,250
NR 25,000 Rexon, Inc.* 173,653 121,875
NR 3,700 SBE, Inc.* 33,420 42,550
NR 12,000 TRM Copy Center Corp.* 81,350 78,000
NR 8,800 Vertex Communications Corp.* 116,970 121,000
3,105,967 3,640,877
TRANSPORTATION & SERVICES - 2.36%
B 12,100 AirTran Corp. 101,250 122,512
B+ 10,650 International Shipholding Corp. 201,335 222,319
NR 4,800 Kenan Transport Co. 76,783 96,000
B 9,466 KLLM Transport Services, Inc. * 130,870 113,592
NR 8,000 Marten Transport Ltd.* 52,750 162,000
NR 12,100 Petroleum Helicopters, Inc. 153,572 139,150
B- 3,600 VSE Corp. 49,650 55,350
766,210 910,923
UTILITIES - 12.48%
NR 4,400 AlaTenn Resources, Inc. 67,408 89,100
B+ 17,100 Bangor Hydro-Electric Co. 259,451 175,275
NR 3,800 Berkshire Gas Co. 62,195 57,000
B 21,450 Cascade Natural Gas Corp. 304,305 300,300
B 7,700 Chesapeake Utilities Corp. 108,732 101,063
B+ 17,150 Colonial Gas Co. 309,408 338,712
A- 19,450 Connecticut Energy Corp. 375,767 381,706
B+ 6,000 Connecticut Water Service, Inc. 138,600 148,500
B+ 10,600 Consumers Water Co. 163,570 178,875
B+ 4,000 Delta Natural Gas Company, Inc. 67,695 69,000
NR 2,200 Dominguez Services Corp. 42,130 37,950
B+ 12,600 E'town Corp. 357,213 341,775
A- 7,613 EnergyNorth, Inc. 119,018 129,421
A 3,400 Essex County Gas Co. 91,205 81,600
B+ 3,100 Florida Public Utilities Co. 61,411 55,025
A- 11,600 Green Mountain Power Corp. 301,579 291,450
B 3,600 Maine Public Service Co. 71,995 76,050
A- 8,500 Middlesex Water Co. 136,900 138,125
B 22,419 NUI Corp. 494,422 375,518
B+ 21,900 Philadelphia Suburban Corp. 364,923 405,150
B 10,800 Providence Energy Corp. 178,252 164,700
B+ 8,100 SJW Corp. 242,579 290,587
B+ 17,200 Southern California Water Co. 279,951 333,250
B+ 8,476 UNITIL Corp. 144,720 144,092
B+ 7,100 Upper Peninsula Energy Corp. 111,120 120,700
4,854,549 4,824,924
TOTAL COMMON STOCKS - 97.26% 32,768,722 37,591,334
REPURCHASE AGREEMENT - 3.30%
$1,275,000 UMB Bank, n.a.,
5.65%, due July 3, 1995
(Collateralized by U.S. Treasury Notes,
7.50%, due February 29, 1996) 1,275,000 1,275,000
TOTAL INVESTMENTS - 100.56% $ 34,043,722 38,866,334
Other assets less liabilities - (0.56%) (217,079)
TOTAL NET ASSETS - 100.00%
(equivalent to $10.55 per share; 10,000,000 shares of
$1.00 par value capital shares authorized;
3,662,473 shares outstanding) $ 38,649,255
For federal income tax purposes, the identified cost of investments owned at
June 30, 1995 was $34,043,722.
Net unrealized appreciation for federal income tax purposes was $4,822,612,
which is comprised of unrealized appreciation of $7,614,602 and unrealized
depreciation of $2,791,990.
*Securities on which no cash dividends were paid during the preceding year.
**Standard & Poor's rankings are derived from statistical measurements of
past earnings and dividend stability and growth.
NR - indicates no ranking is available. Rankings are not covered by the
report of independent auditors.
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1995
ASSETS:
Investment securities, at market value
(identified cost $34,043,722) $ 38,866,334
Dividends receivable 67,943
Total assets 38,934,277
LIABILITIES AND NET ASSETS:
Cash overdraft 202,947
Payables for investments purchased 82,075
Total liabilities 285,022
NET ASSETS $ 38,649,255
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 33,239,688
Accumulated undistributed income:
Undistributed net investment income 31,691
Accumulated net realized gain on investment transactions 555,264
Net unrealized appreciation in value of investments 4,822,612
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 38,649,255
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 3,662,473
NET ASSET VALUE PER SHARE $ 10.55
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1995
INVESTMENT INCOME:
Income:
Dividends $ 659,413
Interest 82,995
742,408
Expenses:
Management fees (Note 3) 344,518
Custodian fees 18,072
Pricing service fees 24,203
Registration fees 5,102
391,895
Net investment income 350,513
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 1):
Realized gain from investment transactions
(excluding repurchase agreements):
Proceeds from sales of investments 6,603,765
Cost of investments sold 4,649,395
Net realized gain from investment transactions 1,954,370
Unrealized appreciation on investments:
Beginning of year 1,625,960
End of year 4,822,612
Increase in net unrealized appreciation on investments 3,196,652
Net gain on investments 5,151,022
Increase in net assets resulting from operations $ 5,501,535
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
For The Two Years Ended June 30, 1995
1995 1994
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 350,513 $ 175,642
Net realized gain from investment transactions 1,954,370 7,198,648
Increase (decrease) in net unrealized
appreciation on investments 3,196,652 (5,645,177)
Net increase in net assets resulting from
operations 5,501,535 1,729,113
Net equalization included in the price of
shares issued and redeemed 8,699 (16,860)
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (347,140) (163,860)
Net realized gain from investment transactions (1,872,936) (6,719,224)
Total distributions to shareholders (2,220,076) (6,883,084)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 2,806,431 and 2,545,193 shares sold 27,945,096 31,168,654
Net asset value of 202,754 and 629,783 shares
issued for reinvestment of distributions 2,037,204 6,374,107
29,982,300 37,542,761
Cost of 2,540,077 and 2,850,794 shares redeemed (25,516,139) (34,933,816)
Net increase from capital share transactions 4,466,161 2,608,945
Total increase (decrease) in net assets 7,756,319 (2,561,886)
NET ASSETS:
Beginning of year 30,892,936 33,454,822
End of year (including undistributed net
investment income of $31,691 in 1995
and $96,080 in 1994) $ 38,649,255 $ 30,892,936
*Distributions to shareholders:
Income dividends per share $ 0.10 $ 0.06
Capital gains distribution per share $ 0.5388 $ 2.45
See accompanying Notes to Financial Statements.
<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. The following is a
summary of significant accounting policies consistently followed by the Fund
in the preparation of its financial statements.
Investments - Common stocks traded on a national securities exchange are
valued at the last reported sales price on the last business day of the
period or, if no sale was reported on that date, at the average of the last
reported bid and asked prices. Common stocks traded over-the-counter are
valued at the average of the last reported bid and asked prices. Investment
transactions are recorded on the trade date. Dividend income and distributions
to shareholders are recorded on the ex-dividend dates. 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.
Equalization - The Fund uses the accounting practice known as equalization,
by which a portion of the proceeds from sales and costs of redemption of
capital shares, equivalent on a per share basis to the amount of undistributed
net investment income on the date of the transactions, is credited or charged
to undistributed income. As a result, undistributed net investment income per
share is unaffected by sales or redemptions of capital shares.
2. PURCHASES AND SALES OF SECURITIES:
The aggregate amounts of security transactions during the year ended
June 30, 1995 (excluding repurchase agreements), were as follows:
Purchases $ 8,896,529
Proceeds from sales 6,603,765
3. MANAGEMENT FEES:
Management fees, which include all normal expenses of the Fund other than
fees for pricing services, custodian fees, dues, 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 Fund at the annual rate of one percent of net assets.
Certain officers and/or directors of the Fund are also officers and/or
directors of Jones & Babson, Inc.
4. RECLASSIFICATION OF UNDISTRIBUTED NET
INVESTMENT INCOME:
During the year ended June 30, 1995, $76,461 was reclassified from
undistributed net investment income to capital stock. Net investment income
and net assets were not affected by this change.
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth information as to capital and income changes
for a share outstanding for each of the five years in the period ended
June 30, 1995:
1995 1994 1993 1992 1991
Net asset value, beginning of year $ 9.67 $11.66 $10.32 $ 8.96 $ 9.01
Income from investment operations:
Net investment income 0.10 0.06 0.12 0.09 0.10
Net gains or losses on securities
(Both realized and unrealized) 1.42 0.46 1.87 1.36 (0.05)
Total from Investment Operations 1.52 0.52 1.99 1.45 0.05
Less distributions:
Dividends from net investment income (0.10) (0.06) (0.11) (0.09) (0.10)
Distributions from capital gains (0.54) (2.45) (0.54) - -_
Total Distributions (0.64) (2.51) (0.65) (0.09) (0.10)
Net asset value, end of year $10.55 $ 9.67 $11.66 $10.32 $ 8.96
Total Return 16% 4% 19% 16% 1%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 39 $ 31 $ 33 $ 26 $ 22
Ratio of expenses to average net assets 1.13% 1.28% 1.25% 1.26% 1.31%
Ratio of net investment income to
average net assets 1.01% 0.50% 1.05% 0.87% 1.20%
Portfolio turnover rate 19% 43% 15% 23% 0%
See accompanying Notes to Financial Statements.
<PAGE>
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Shadow Stock Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the statement of net assets, of Shadow Stock Fund, Inc. (a Maryland
corporation), as of June 30, 1995, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and the financial highlights. Our procedures
included confirmation of securities owned as of June 30, 1995, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement and the
financial highlights presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Shadow Stock Fund, Inc. as of June 30, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Kansas City, Missouri
August 4, 1995
This report has been prepared for the information of the Shareholders of
Shadow Stock 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.
<PAGE>
THE BABSON FUNDS
Equities
Shadow Stock Fund - designed to achieve long-term growth of capital by
investing in common stocks of small, established, profitable companies
presently neglected by analysts and institutional investors.
David L. Babson Growth Fund - invested in common stocks selected for their
long-term possibilities of both capital and income growth.
Babson Enterprise Fund _ closed to new investors as of January 31, 1992.
Babson Enterprise Fund -_ designed to achieve growth with greater price
stability than many small stock funds by investing in undervalued small
companies with higher market capitalizations. A good choice for long-term
growth, Enterprise II seeks out profitable, established small companies that
are dominant in their industries.
Babson Value Fund - seeks long-term growth of capital and income by investing
in a diversified portfolio of common stocks which are considered to be
undervalued in relation to earnings, dividends and/or assets.
Babson-Stewart Ivory International Fund - for investors seeking international
diversification and favorable total return, this Fund includes equities of
various developed investment markets in the free world, principally Western
Europe and certain areas of the Pacific Basin.
Fixed Income
D.L. Babson Bond Trust - emphasizes current income return and relative
stability of principal by investing in corporate bonds, U.S. government
issues and other fixed-income securities of high quality. The Fund offers
two portfolios: Portfolio S with average maturities of less than 5 years,
and Portfolio L with average maturities of more than 5 years.
D.L. Babson Money Market Fund - provides investors the opportunity to manage
their money over the short-term by investing in high-quality, domestic,
short-term debt instruments for the purpose of maximizing income to the
extent consistent with safety of principal and maintenance of liquidity.
It offers two portfolios, Prime and Federal.
D.L. Babson Tax-Free Income Fund - invests principally in quality municipal
securities, the income from which is judged exempt from federal income tax.
The Fund offers a choice among three separate portfolios of investment-grade
securities, differing only in average length of maturity - Longer Term
(Portfolio L), Shorter Term (Portfolio S) and Money Market (Portfolio MM).
For a free prospectus kit, which contains more complete information,
including all charges and expenses, write or call Jones & Babson at
1-800-4-BABSON. Please read the prospectus carefully before you invest or
send money. Money market funds are neither insured nor guaranteed by the
U.S. Government and there is no assurance that the funds will maintain a
stable net asset value.
