Shadow
Stock
FUND
Annual Report
June 30, 1996
JONES & BABSON
MUTUAL FUNDS
MESSAGE
To Our Shareholders
Shadow Stock Fund's fourth fiscal quarter ended June 30, 1996, produced
a 2.27% total return (price change and reinvested distributions). The
total return for the fiscal year ended June 30, 1996, was 16.90%, and
the return in the first half of calendar 1996 was 8.29%. Results for the
unmanaged Russell 2000 index of small capitalization stocks for the same
periods were 5.00%, 23.94% and 10.40%, respectively. Average returns for
the small company growth funds covered by the Lipper Mutual Fund
Performance Analysis were 7.93%, 29.71% and 15.12% for the same three
periods.
Distributions of $0.05 of ordinary income dividends, and $0.45 net
capital gains were made in late June. Shareholders who had elected
reinvestment received additional shares at a reinvestment price of
$11.24. 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 1996 for
the companies in the portfolio is only 16.3, way below the Standard &
Poor's 500 multiple of 22.7 times earnings. The average price-to-book
value is 1.5, compared to 4.6 for the S&P 500 companies and 4.0 for the
Russell 2000.
A number of 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 Bio-Rad Labs (medical specialties firm), Finish
Line (athletic shoe stores), Jefferies Group (investment
bankers/brokers), Masaba Holdings (airline), Robert Mondavi Corp. (wine
producer).
Among the more significant new additions to the portfolio are Plexus
Corp. (electrical components), Penn-America Group, Inc. (property
casualty insurers), SL Industries, Inc. (electrical products), Sherwood
Group, Inc. (investment bankers/brokers), and Fairfield Communities,
Inc. (vacation homebuilders). There has also been a fair amount of
merger and acquisition activity. Some of the new names in the portfolio
are due to consolidation. Rauch Industries is now Syratech Corp.,
Forscher Group, Inc. has been renamed to Swiss Army Brands, Inc.,
Greiner Engineering, Inc. has merged with URS Corp., and Information
International, Inc. is now Autologic Information International, Inc.
Small capitalization stocks enjoyed a return to favor late last year and
into this year. Most of the gains during 1996 came in the energy and
consumer discretionary services sectors. The Fund was underweight in
these two areas, due partly to price/book valuations and partly because
of higher institutional ownership, which put it at a disadvantage
versus other small capitalization strategies.
The reasonable valuations of the Fund's investments should help to
reduce risk if the market experiences a setback. This characteristic
played out in late June as the Russell 2000 universe suffered a decline
of -4.11% versus the Fund's decline of -2.86%.
We appreciate your continued use of our Fund in your investment program.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
Shadow Stock Fund versus Russell 2000
GRAPH
Shadow Stock Fund's average annual compounded total returns for
one, five and life of the Fund (inception August 28, 1987) as of
June 30, 1996, were 16.93%, 14.47% and 7.73%, respectivley.
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 past redemption value may be more or less than original cost.
STATEMENT OF NET ASSETS
June 30, 1996
S&P
RANKING** SHARES COMPANY COST MARKET VALUE
COMMON STOCKS 99.90%
BASIC MATERIALS 3.20%
B+ 9,401 Aceto Corp. $ 95,299 $ 148,066
NR 31,400 American Pacific Corp.* 345,455 196,250
NR 3,500 Badger Paper Mills, Inc. 51,820 48,125
BD 4,480 Baltek Corp.* 28,424 39,200
NR 2,974 Detrex Corp.* 78,654 16,728
BD 17,700 Hauser Chemical Research, Inc 80,481 119,475
B 15,517 Insteel Industries, Inc. 112,395 114,438
NR 11,000 National Sanitary Supply Co. 118,050 145,750
B 4,400 Pitt-Des Moines, Inc. 167,793 187,000
B 16,325 Roanoke Electric Steel Corp. 150,643 226,509
1,229,014 1,241,541
CAPITAL GOODS 15.98%
B+ 6,700 American Filtrona Corp. 163,611 214,400
BD 7,000 American Technical Ceramics Corp.* 63,883 56,438
C 7,044 Athey Products Corp.* 40,350 29,937
B 9,900 Aztec Manufacturing Co. 59,887 71,775
B+ 3,300 Badger Meter, Inc. 62,297 91,988
C 26,400 Baker (Michael) Corp.* 221,374 143,550
BD 5,627 Binks Manufacturing Co. 130,676 153,335
NR 20,900 BMC West Corp.* 391,564 357,912
NR 19,300 Cameron Ashley Building
Products, Inc.* 233,404 221,950
B 28,200 Cascade Corp. 280,320 377,175
BD 12,200 Cherry Corp. Cl. A* 126,120 131,150
BD 12,000 Cherry Corp. Cl. B* 125,670 129,000
BD 6,000 Davis Water & Waste
Industries, Inc. 56,024 178,500
NR 7,901 Del Global Technology 55,677 77,035
C 7,700 Devcon International Corp.* 78,035 71,225
B+ 7,315 Ecology and
Environment, Inc. Cl. A 81,393 60,349
NR 14,400 Engle Homes, Inc. 149,025 124,200
NR 14,800 Failure (The) Group, Inc.* 91,161 96,200
NR 20,500 Fairfield Communities, Inc.* 243,775 284,438
BD 6,475 Farr Co.* 44,573 85,794
BD 11,300 Gehl Co.* 94,194 94,638
BD 2,100 Graham Corp.* 31,489 37,800
B 4,000 Heist (C.H.) Corp.* 33,898 27,000
NR 5,400 Industrial Acoustics Company, Inc. 61,225 57,713
NR 13,300 International Jensen, Inc.* 111,515 153,781
NR 7,600 Liberty Homes, Inc. Cl. A 95,680 95,950
B 2,400 Lynch Corp.* 149,038 211,200
NR 6,000 M/I Schottenstein Homes, Inc. * 59,739 55,500
BD 5,649 Maxwell Laboratories, Inc.* 56,808 86,147
B 16,800 Mestek, Inc.* 158,480 249,900
B+ 8,475 Met-Pro Corp. 69,087 157,847
NR 8,600 Monaco Coach Corp.* 103,630 107,500
BD 5,700 Noland Co. 98,460 111,150
B 29,500 OOSullivan Corp. 297,166 350,313
NR 1,800 Oilgear Co. 40,835 26,550
BD 8,600 Oriole Homes Corp. Cl. A* 76,842 63,425
B+ 3,200 Penn Engineering &
Manufacturing Corp. (voting) 34,608 75,600
B+ 9,600 Penn Engineering &
Manufacturing Corp. (non-voting)* 69,217 181,200
BD 11,200 Plasti-Line, Inc.* 61,450 100,800
B+ 9,700 Puerto Rican Cement Co., In 191,881 301,913
B 3,700 Salem Corp. 51,697 83,250
BD 11,900 SL Industries, Inc. 100,710 108,588
B 5,985 Southwest Water Co. 73,290 68,828
NR 11,000 Starrett Housing Corp. 72,230 136,125
C 19,875 Terex Corp.* 152,076 173,906
BD 16,800 URS Corp. New 131,807 132,300
5,175,871 6,205,275
CONSUMER CYCLICAL 18.27%
NR 19,000 All American Communications Inc.* 199,381 192,375
B 7,800 American Recreation Centers, Inc. 45,248 50,700
B+ 10,200 Amplicon, Inc. 139,813 170,850
B+ 4,400 Analysis & Technology, Inc. 59,796 60,500
B+ 13,400 Ben & Jerry's Homemade, Inc. Cl. A* 187,350 227,800
NR 20,500 Bon-Ton Stores, Inc.* 153,000 105,063
B 19,200 Carmike Cinemas, Inc. Cl. A* 349,592 518,400
NR 13,300 Crown Books Corp.* 206,367 179,550
NR 30,721 Dixie Yarns, Inc.* 245,835 149,765
BD 40,600 Egghead, Inc.* 358,356 451,675
BD 9,300 ELXSI Corp. New* 68,610 53,475
B+ 17,900 Fay's, Inc. 151,277 140,963
NR 2,700 Federal Screw Works 49,917 70,200
B 8,600 Fuqua Enterprises, Inc.* 125,992 249,400
C 21,300 Gottschalks, Inc.* 187,259 143,775
NR 20,300 Government Technology
Services, Inc.* 179,045 124,338
C 8,703 Hampton Industries, Inc.* 51,451 38,076
BD 6,118 Hein-Werner Corp. 51,417 48,944
B 900 Howell Industries, Inc. 23,090 28,350
B 22,200 InaCom Corp.* 272,163 416,250
B+ 9,916 Knape & Vogt Manufacturing Co. 112,145 156,177
NR 5,199 M/A/R/C (The) Group 46,371 113,078
B+ 4,000 McRae Industries, Inc. Cl. A 35,003 34,000
NR 8,700 National Picture & Frame Co.* 90,225 93,525
B 12,700 Optical Coating Laboratory, Inc. 82,351 228,600
NR 11,000 OroAmerica Inc.* 60,050 71,500
B 20,000 Piccadilly Cafeterias, Inc. 206,803 210,000
B 5,700 Pulaski Furniture Corp. 105,990 88,350
B 16,400 R & B, Inc.* 99,220 114,800
B 17,500 Rex Stores Corp.* 283,782 269,063
BD 23,000 RPC Energy Services, Inc.* 183,459 264,500
NR 17,400 S & K Famous Brands, Inc.* 132,375 167,475
B 6,500 S K I Ltd. 60,337 116,188
C 8,000 Scheib (Earl), Inc.* 118,613 60,000
NR 23,100 Sportmart, Inc.* 166,549 86,625
B 40,100 Syms Corp.* 326,697 295,738
NR 17,000 Syratech Corp.* 276,082 382,500
BD 30,200 TCBY Enterprises, Inc. 145,911 128,350
B 11,800 Thomaston Mills, Inc. Cl. A 133,321 132,750
NR 1,000 Thomaston Mills, Inc. Cl. B 10,500 10,750
NR 8,100 Trimark Holdings, Inc.* 52,854 43,537
NR 12,300 Uni-Marts, Inc. 75,463 99,169
B+ 5,250 Valley Forge Corp. 48,338 72,187
B+ 9,634 Virco Manufacturing Corp. 37,316 93,932
NR 4,900 Weyco Group, Inc. 155,927 198,450
B+ 13,828 Wolohan Lumber Co. 180,276 141,737
6,330,917 7,093,430
CONSUMER STAPLES 11.75%
B+ 19,100 Blessings Corp. 217,238 195,775
NR 16,100 Buttrey Food & Drug Stores Co.* 131,025 127,794
B 9,300 Cagle's, Inc. Cl. A 119,266 149,962
B 14,400 Chattem, Inc.* 78,599 126,900
BD 4,200 Christiana Companies, Inc.* 100,440 89,250
BD 6,700 Continental Can Company, Inc.* 164,608 97,987
B+ 8,900 Del Laboratories, Inc. 219,041 253,650
C 2,500 Foodarama Supermarkets, Inc.* 38,219 45,000
B 3,200 Genesee Corp. Cl. B 138,775 147,200
BD 17,750 Golden Poultry Company, Inc. 80,596 171,953
B 11,900 Grist Mill Co. New* 74,981 75,862
B 21,800 Health Images, Inc. 114,194 253,425
NR 33,500 Ingles Markets, Inc. Cl. A 244,423 393,625
A 7,225 Marsh Supermarkets, Inc. Cl. A 91,553 86,700
NR 9,125 Marsh Supermarkets, Inc. Cl. B 112,058 107,219
B+ 13,850 Medex, Inc. 151,707 178,319
BD 19,600 Orange-Co. Inc. New 168,451 156,800
NR 15,200 Quaker Fabric Corp. New* 142,350 133,000
NR 13,200 Riser Foods, Inc. Cl. A 100,938 316,800
NR 8,200 Safety Components
International, Inc.* 103,722 94,300
NR 12,550 Sanderson Farms, Inc. 85,444 156,875
B 3,100 Seaway Food Town, Inc. 41,846 51,925
NR 8,900 Seneca Foods Corp. New Cl. A* 111,790 142,400
NR 5,900 Seneca Foods Corp. Cl. B* 65,761 94,400
B+ 7,400 Span-America Medical Systems, Inc. 57,290 38,850
B 15,600 Swiss Army Brands, Inc.* 158,139 206,700
NR 12,100 Toastmaster Inc. 74,245 54,450
B 4,900 Tranzonic Cos. Cl. A 57,753 60,637
B 2,950 Tranzonic Cos. Cl. B 40,273 33,925
NR 9,500 Triple S Plastics, Inc.* 82,292 53,437
B+ 7,900 Vallen Corp.* 82,093 138,250
B+ 10,800 Western Beef, Inc.* 73,709 90,450
NR 8,000 Worthington Foods, Inc. 57,812 138,000
NR 7,400 Zaring Homes, Inc.* 53,950 101,750
3,634,581 4,563,570
ENERGY 1.68%
NR 2,203 HS Resources, Inc.* 13,677 25,610
NR 9,100 Maynard Oil Co.* 44,601 76,781
NR 6,800 Prima Energy Corp.* 105,425 100,300
NR 2,600 Roanoke Gas Co. 46,800 44,850
B 22,560 Swift Energy Co.* 234,595 406,080
445,098 653,621
FINANCIAL 18.88%
B+ 4,300 Amwest Insurance Group, Inc. 41,593 50,525
B+ 7,700 Central Reserve Life Corp. 55,033 67,375
NR 14,208 Chartwell Re Corp. 236,164 314,352
B+ 6,375 Cotton States Life and
Health Insurance Co. 42,365 70,125
B+ 33,900 EMC Insurance Group, Inc. 295,783 423,750
NR 8,988 Financial Institutions
Insurance Group Ltd. 86,905 139,876
NR 17,200 First Financial Caribbean Corp. 173,911 352,600
BD 11,500 Interstate/Johnson Lane, Inc. 134,340 140,875
NR 11,800 Lawyers Title Corp. 221,626 228,625
NR 9,800 Lexington Global Asset
Managers, Inc.* 40,843 49,000
B+ 10,920 McDonald & Co. Investments, Inc. 70,613 215,670
BD 5,000 Merchants Group, Inc. 66,774 96,250
B+ 12,300 Meridian Insurance Group, Inc. 111,575 168,356
AD 5,800 Midland Co. 180,897 243,600
B+ 5,600 Minuteman International, Inc. 50,988 47,600
NR 11,300 Mobile America Corp. 86,798 132,775
B 38,800 Morgan Keegan, Inc. 177,538 514,100
NR 10,800 National Insurance Group* 125,282 64,800
NR 4,850 National Security Group, Inc. 56,275 62,444
NR 6,300 National Western Life
Insurance Co.* 142,748 420,525
NR 15,200 Navigators Group, Inc.* 246,958 269,800
BD 11,500 Norex America, Inc.* 95,079 228,562
NR 12,400 Penn Treaty American Corp.* 119,430 266,600
NR 7,500 Penn-America Group, Inc. 98,468 124,687
NR 6,000 Picom Insurance Co.* 144,300 150,000
B 19,600 Pioneer Financial Services, Inc. 186,906 325,850
B 16,000 PXRE Corp. 308,202 388,000
NR 8,500 Reading Co. Cl. A* 110,733 91,375
B+ 13,900 RLI Corp. 105,611 338,812
B+ 3,700 Scott & Stringfellow
Financial, Inc. 42,547 61,050
BD 22,800 Sherwood Group, Inc.* 239,870 259,350
NR 21,900 State Auto Financial Corp. 227,733 531,075
B 13,400 Stewart Information
Services Corp. 170,167 269,675
NR 8,793 Walshire Assurance Co. 79,375 134,093
B 4,600 Ziegler (The) Companies, Inc. 72,899 86,250
4,646,329 7,328,402
MISCELLANEOUS 2.31%
NR 12,900 Celebrity, Inc.* 90,945 58,050
NR 9,000 Edelbrock Corp.* 161,350 157,500
NR 16,000 IWC Resources Corp. 313,365 286,000
NR 10,600 Primesource Corp. 74,200 74,200
NR 4,500 Programming and Systems, Inc. 32,940 4,500
NR 12,400 Rottlund Inc.* 99,655 81,375
BD 2,600 Scope Industries 79,121 96,200
NR 10,500 Tylan General Inc.* 99,960 139,125
951,536 896,950
TECHNOLOGY 14.32%
NR 19,100 Airways Corp.* 116,454 128,925
NR 2,100 Allen Organ Co. Cl. B 60,713 82,162
NR 6,400 Autologic Information
International, Inc.* 63,525 52,000
BD 11,400 BEI Electronics, Inc. 71,731 116,850
BD 15,100 Bell Industries Inc.* 321,514 252,925
NR 18,700 Bell Microproducts Inc.* 160,048 142,588
B+ 12,800 CPAC Inc.* 143,575 131,200
NR 16,800 Data Systems & Software Inc.* 127,536 111,300
C 10,600 Dataram Corp.* 106,178 63,600
B 4,000 Datron Systems, Inc.* 34,675 49,000
B+ 5,200 Eastern (The) Co. 60,601 59,150
NR 7,900 Equitrac Corp.* 42,258 74,063
BD 3,100 Espey Mfg. & Electronics Corp. 52,389 49,212
BD 26,200 Genus Inc.* 258,861 252,175
NR 4,700 Giga-tronics, Inc.* 37,688 52,875
B 18,200 GTI Corp.* 192,885 131,950
B 24,400 Hadco Corp.* 275,002 524,600
BD 8,056 HEICO Corp. 51,603 217,512
NR 13,000 IEC Electronics Corp. New* 107,070 94,250
BD 11,900 IFR Systems, Inc.* 115,575 145,775
C 18,848 Intellicall, Inc.* 133,145 103,664
BD 50,463 Intelligent Electronics, Inc. 626,657 428,935
C 8,600 Interphase Corp.* 73,205 133,300
NR 9,313 Isco, Inc. 90,668 88,473
C 13,200 K-Tron International, Inc.* 99,941 112,200
NR 4,300 Moore Products Co.* 104,660 80,625
BD 16,400 Newport Corp. 159,275 161,950
NR 13,300 Nichols Research Corp.* 201,037 415,625
B 8,100 Norstan, Inc.* 112,784 301,725
NR 14,900 North Star Universal, Inc.* 94,499 119,200
B 13,500 Plexus Corp.* 189,325 205,875
NR 5,100 Pomeroy Computer Resources, Inc.* 83,525 76,500
NR 12,000 Powell Industries, Inc.* 72,600 139,500
NR 17,400 Proxima Corp.* 242,585 210,975
NR 3,700 SBE, Inc.* 33,420 34,225
NR 8,000 TRM Copy Center Corp.* 54,150 89,000
NR 6,800 Vertex Communications Corp.* 89,320 126,650
4,860,677 5,560,534
TRANSPORTATION & SERVICES 1.92%
B+ 9,312 International Shipholding Corp. 131,312 164,124
NR 3,800 Kenan Transport Co. 57,723 78,850
NR 9,466 KLLM Transport Services, Inc.* 130,870 115,958
NR 8,000 Marten Transport Ltd.* 52,750 133,000
NR 11,100 Petroleum Helicopters, Inc. 136,272 177,600
B 4,200 VSE Corp. 26,025 75,600
534,952 745,132
UTILITIES 11.59%
NR 4,400 Atrion Corp. 67,408 112,200
B 17,100 Bangor Hydro-Electric Co. 259,451 183,825
NR 3,800 Berkshire Gas Co. 62,195 58,425
B+ 16,350 Cascade Natural Gas Corp. 217,583 235,031
B+ 5,700 Chesapeake Utilities Corp. 76,930 91,200
B+ 12,150 Colonial Gas Co. 203,244 255,150
AD 14,450 Connecticut Energy Corp. 266,867 274,550
B+ 5,000 Connecticut Water Service, Inc. 112,440 128,750
NR 17,800 Consumers Water Co. 286,618 275,900
B 4,000 Delta Natural Gas Company, Inc. 67,695 62,000
A 2,200 Dominguez Services Corp. 42,130 45,100
B+ 11,600 EOtown Corp. 326,528 321,900
AD 5,000 EnergyNorth, Inc. 70,637 97,500
A 3,400 Essex County Gas Co. 91,205 79,900
B+ 3,100 Florida Public Utilities Co. 61,411 61,612
AD 10,600 Green Mountain Power Corp. 270,769 257,050
B 2,600 Maine Public Service Co. 45,538 47,450
NR 7,600 Middlesex Water Co. 118,645 126,350
B 22,419 NUI Corp. 494,422 400,740
B+ 15,900 Philadelphia Suburban Corp. 250,858 393,525
B 9,800 Providence Energy Corp. 160,000 169,050
B+ 6,100 SJW Corp. 174,497 202,825
B+ 14,300 Southern California Water Co. 221,777 314,600
B+ 9,176 UNITIL Corp. 159,885 208,754
B+ 5,100 Upper Peninsula Energy Corp. 73,120 94,350
4,181,853 4,497,737
COST MARKET VALUE
TOTAL COMMON STOCKS 99.90% 31,990,828 38,786,192
TOTAL INVESTMENTS 99.90% $ 31,990,828 38,786,192
Other assets less liabilities 0.10% 37,114
TOTAL NET ASSETS 100.00%
(equivalent to $11.31 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
3,433,476 shares outstanding) $ 38,823,306
For federal income tax purposes, the identified cost of investments owned at
June 30, 1996 was $31,990,828.
Net unrealized appreciation for federal income tax purposes was $6,795,364,
which is comprised of unrealized appreciation
of $9,033,780 and unrealized depreciation of $2,238,416.
*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.
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1996
ASSETS:
Investment securities, at market value
(identified cost $31,990,828) $ 38,786,192
Cash 112,721
Dividends receivable 54,155
Total assets 38,953,068
LIABILITIES AND NET ASSETS:
Payable for investments purchased 129,762
Total liabilities 129,762
NET ASSETS $ 38,823,306
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 30,625,107
Accumulated undistributed income:
Undistributed net investment income 7,768
Accumulated net realized gain on
investment transactions 1,395,067
Net unrealized appreciation in value of investments 6,795,364
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 38,823,306
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 3,433,476
NET ASSET VALUE PER SHARE $ 11.31
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year Ended June 30, 1996
INVESTMENT INCOME:
Income:
Dividends $ 710,211
Interest 43,832
754,043
Expenses:
Management fees (Note 3) 388,469
Custodian fees 8,105
Pricing service fees 24,182
Registration fees 24,196
444,952
Net investment income 309,091
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 1):
Realized gain from investment transactions
(excluding repurchase agreements):
Proceeds from sales of investments 13,970,247
Cost of investments sold 10,127,739
Net realized gain from investment transactions 3,842,508
Unrealized appreciation on investments:
Beginning of year 4,822,612
End of year 6,795,364
Increase in net unrealized appreciation
on investments 1,972,752
Net gain on investments 5,815,260
Increase in net assets resulting from
operations $ 6,124,351
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
For The Two Years Ended June 30, 1996
1996 1995
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 309,091 $ 350,513
Net realized gain from investment
transactions 3,842,508 1,954,370
Increase in net unrealized
appreciation on investments 1,972,752 3,196,652
Net increase in net assets
resulting from operations 6,124,351 5,501,535
Net equalization included in the price
of shares issued and redeemed (Note 1) (14,204) 8,699
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (333,014) (347,140)
Net realized gain from investment
transactions (3,002,705) (1,872,936)
Total distributions to shareholders (3,335,719) (2,220,076)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 401,940 and 2,806,431
shares sold 4,446,012 27,945,096
Net asset value of 281,278 and 202,754
shares issued for reinvestment
of distributions 3,105,517 2,037,204
7,551,529 29,982,300
Cost of 912,215 and 2,540,077
shares redeemed (10,151,906) (25,516,139)
Net increase (decrease) from
capital share transactions (2,600,377) 4,466,161
Total increase in net assets 174,051 7,756,319
NET ASSETS:
Beginning of year 38,649,255 30,892,936
End of year (including undistributed
net investment income of $7,768
in 1996 and $31,691 in 1995) $ 38,823,306 38,649,255
*Distributions to shareholders:
Income dividends per share $ 0.10 $ 0.10
Capital gains distribution per share $ 0.90 $ 0.5388
See accompanying Notes to Financial Statements.
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 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 - 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. During the year ended
June 30, 1996, $14,204 was reclassified from undistributed net investment income
to capital stock.
2. PURCHASES AND SALES OF SECURITIES:
The aggregate amounts of security transactions during the year ended June 30,
1996 (excluding repurchase agreements), were as follows:
Purchases $ 9,349,845
Proceeds from sales 13,970,247
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.
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, 1996:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
</CAPTION>
<S> <S> <S> <S> <S> <S>
Net asset value, beginning of year $10.55 $ 9.67 $11.66 $10.32 $ 8.96
Income from investment operations:
Net investment income 0.09 0.10 0.06 0.12 0.09
Net gains on securities
(both realized and unrealized) 1.67 1.42 0.46 1.87 1.36
Total from investment operations 1.76 1.52 0.52 1.99 1.45
Less distributions:
Dividends from net investment income (0.10) (0.10) (0.06) (0.11) (0.09)
Distributions from capital gains (0.90) (0.54) (2.45) (0.54) -
Total distributions (1.00) (0.64) (2.51) (0.65) (0.09)
Net asset value, end of year $11.31 $10.55 $ 9.67 $11.66 $10.32
Total return 17% 16% 4% 19% 16%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 39 $ 39 $ 31 $ 33 $ 26
Ratio of expenses to average net assets 1.14% 1.13% 1.28% 1.25% 1.26%
Ratio of net investment income
to average net assets 0.79% 1.01% 0.50% 1.05% 0.87%
Portfolio turnover rate 25% 19% 43% 15% 23%
</TABLE>
See accompanying Notes to Financial Statements.
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, 1996, 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, 1996, 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, 1996, 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
July 26, 1996
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.
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
2440 Perhsing Road
Kansas City, MO 64108-2518
816-471-5200
1-800-4-BABSON
(1-800-422-2766)
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Shadow Stock Fund, Inc.
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