SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 95 File No. 2-10002 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 95 File No. 811-495 [X]
D. L. BABSON BOND TRUST
(Exact Name of Registrant as Specified in Charter)
2440 Pershing Road, G-15 Kansas City, Missouri 64108
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code (816) 471-5200
Larry D. Armel, Trustee, D. L. BABSON BOND TRUST
2440 Pershing Road, G-15, Kansas City, Missouri 64108
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: March 31, 1995
It is proposed that this filing become effective:
X On March 31, 1993 pursuant to paragraph (b) of Rule 485
Registrant has registered an indefinite number or amount of securities
under the Securities Act of 1933 pursuant to Rule 24f-2 of the
Investment Company Act of 1940, and will file its required Rule 24f-2
Notice for the Registrant's fiscal year ended November 30, 1995, by
January 30, 1996.
Please address inquiries and a carbon copy of all
and communications to: communications to:
John G. Dyer, Esq. Mark H. Plafker, Esq.
D.L. Babson Bond Trust Stradley, Ronon, Stevens & Young
2440 Pershing Road, G-15 2600 One Commerce Square
Kansas City, MO 64108 Philadelphia, PA 19103-7098
Telephone: (816) 471-5200 Telephone: (215) 564-8024
D.L.BABSON BOND TRUST
CROSS REFERENCE SHEET
Form N-1A Item Number Location in Prospectus
Item 1. Cover Page . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . Not Applicable
Item 3. Condensed Financial Information . . Per Share Capital and
Income Changes
Item 4. General Description of Registrant. . Investment Objective
and Portfolio
Management Policy
Item 5. Management of the Fund . . . . . . . Trustees;
Management and
Investment Counsel
Item 6. Capital Stock and Other Securities . How to Purchase Shares;
How to Redeem Shares;
How Share Price is
Determined; General
Information and
History; Dividends,
Distributions and
their Taxation
Item 7. Purchase of Securities . . . . . . . Cover Page; How to
being Offered Purchase Shares;
Shareholder Services
Item 8. Redemption or Repurcdhase . . . . . How to Redeem Shares
Item 9. Pending Legal Proceedings . . . . . Not Applicable
D.L. BABSON BOND TRUST
CROSS REFERENCE SHEET (Continued)
Location in Statement
of Additional
Form N-1A Item Number Information
Item 10. Cover Page . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . . Cover Page
Item 12. General Information and History . . Investment Objectives
and Policies;Management
and Investment Counsel
Item 13. Investment Objectives and Policies . Investment Objectives
and Policies;
Investment Restrictions
Item 14. Management of the Fund . . . . . . . Management and
Investment Counsel;
Trustees
Item 15. Control Persons and Principal . . . Management and Invest-
Holders of Securities ment Counsel; Trustees
Item 16. Investment Advisory and other . . . Management of the Fund
Services
Item 17. Brokerage Allocation . . . . . . . . Portfolio Transactions
Item 18. Capital Stock and Other Securities . General Information
and History
(Prospectus);
Financial Statements
Item 19. Purchase, Redemption and Pricing . . How Share Purchases
of Securities Being Offered are Handled; Redemption
of Shares
Financial Statements
Item 20. Tax Status . . . . . . . . . . . . . Dividends,Distributions
and their Taxation
(Prospectus)
Item 21. Underwriters . . . . . . . . . . . . How the Fund's Shares
are Distributed
Item 22. Calculation of Yield Quotations . . Performance Measures
of Money Market Fund
Item 23. Financial Statements . . . . . . . . Financial Statements
PROSPECTUS
March 31, 1995
D.L. BABSON BOND TRUST
Managed and Distributed By:
JONES & BABSON, INC.
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
Toll-Free 1-800-4-BABSON (1-800-422-2766)
In the Kansas City area 471-5200
Investment Counsel:
DAVID L. BABSON & CO. INC.
Cambridge, Massachusetts
INVESTMENT OBJECTIVE
The D.L. Babson Bond Trust offers two Portfolios with differing
maturity lengths to investors who share the Fund's objective of
providing maximum current income and reasonable stability of
principal, consistent with its quality and maturity standards, by
investing in a diversified portfolio of fixed income securities, and
who especially want the portfolio supervision of the staff of David L.
Babson & Co. Inc. This Fund is not intended to be a complete
investment program. (For a discussion of risk factors see page 9 of
this prospectus.)
PURCHASE INFORMATION
Minimum Investment
(each Portfolio selected)
Initial Purchase $ 500
Initial IRA and Uniform Transfers (Gifts)
to Minors Purchases $ 250
Subsequent Purchase:
By Mail $ 50
By Telephone or Wire $ 1,000
All Automatic Purchases $ 100
Shares are purchased and redeemed at net asset value. There are no
sales, redemption or Rule 12b-1 distribution charges. If you need
further information, please call the Trust at the telephone numbers
indicated.
ADDITIONAL INFORMATION
This prospectus should be read and retained for future reference. It
contains the information that you should know before you invest. A
"Statement of Additional Information" of the same date as this
prospectus has been filed with the Securities and Exchange Commission
and is incorporated by reference. Investors desiring additional
information about the Trust may obtain a copy without charge by
writing or calling the Trust.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
Fund Expenses 3
Financial Highlights 5
Investment Objective and Portfolio Management Policy 7
Repurchase Agreements 9
Risk Factors 9
Investment Restrictions 10
Performance Measures 10
How to Purchase Shares 11
Initial Investments 12
Investments Subsequent to Initial Investment 12
Telephone Investment Service 13
Automatic Monthly Investment Plan 13
How to Redeem Shares 13
Systematic Redemption Plan 15
How to Exchange Shares Between Babson Funds 16
How Share Price is Determined 17
Trustees and Officers 17
Management and Investment Counsel 17
General Information and History 19
Dividends, Distributions and Their Taxation 20
Shareholder Services 22
Shareholder Inquiries 23
</TABLE>
D.L. BABSON BOND TRUST
FUND EXPENSES
Portfolio L
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees .95%
12b-1 fees None
Other expenses .02%
Total Fund operating expenses .97%
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Year 5 Year 10 Year
$10 $31 $54 $119
The above information is provided in order to assist you in
understanding the various costs and expenses that a shareholder of the
Fund will bear directly or indirectly. The expenses set forth above
are for the fiscal year ended November 30, 1994. The example should
not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown.
D.L. BABSON BOND TRUST
FUND EXPENSES
Portfolio S
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees .65%
12b-1 fees None
Other expenses .02%
Total Fund operating expenses .67%
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Year 5 Year 10 Year
$7 $22 $37 $84
* Reduced from .95% by the Board of Trustees through March 31, 1996.
The above information is provided in order to assist you in
understanding the various costs and expenses that a shareholder of the
Fund will bear directly or indirectly. The expenses set forth above are for
the fiscal year ended November 30, 1994. The example should not be considered
a representation of past or future expenses. Actual expenses may be
greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following financial highlights for each of the ten years in the
period ended November 30, 1994, have been derived from audited
financial statements of D.L. Babson Bond Trust. Such information for
each of the five years in the period ended November 30, 1994 should be
read in conjunction with the financial statements of the Trust and the
report of Ernst & Young LLP, independent auditors, appearing in the
November 30, 1994 annual report to shareholders which is incorporated
by reference in this prospectus. The information for each of the five
years in the period ended November 30, 1989 is not covered by the
report of Ernst & Young LLP.
See Financial Data Schedules -- Exhibit 27
INVESTMENT OBJECTIVE AND PORTFOLIO MANAGEMENT POLICY
Babson Bond Trust's investment objective is to provide shareholders
with maximum current income and reasonable stability of principal,
consistent with its quality and maturity standards, by investing in a
diversified portfolio of fixed-income securities. (The Babson Bond
Trust is a mutual fund organized as a common law trust and may also be
referred to throughout this Prospectus as the Trust or the Fund.) The
Trust offers two portfolios: Portfolio L is expected to have a
weighted average maturity beyond five years, and Portfolio S is
expected to have a weighted average maturity of five years or
less.
Each Portfolio normally will invest at least 80% of its assets in
debt securities such as: (1) direct or guaranteed obligations of the
U.S. government and its agencies, and (2) investment quality debt
securities issued by corporations or other business organizations
including notes and bonds.
In order to provide for unexpected
redemptions and to enhance portfolio flexibility, each Portfolio may,
from time to time, maintain a significant portion of its assets in
reserves. These reserves will be held in cash or short-term debt
obligations such as U.S. treasury bills, commercial paper,
certificates of deposit, bankers' acceptances and repurchase
agreements.
The Fund's investment objective and policy as described in
this section will not be changed without approval of a majority of the
Fund's outstanding shares.
Although short-term trading profits are not
a goal of the Trust, it is possible that it may engage in trading
activity in order to take advantage of opportunities to enhance yield,
protect principal or improve liquidity.
For the fiscal years ended
November 30, 1994, November 30, 1993 and November 30, 1992, the total
dollar amount of brokerage commissions paid by the Trust and the
annual portfolio turnover rate were as follows:
Portfolio L
Portfolio
Fiscal Brokerage Turnover
Year Commissions Rate
1994 None 40%
1993 None 80%
1992 None 54%
Portfolio S
Portfolio
Fiscal Brokerage Turnover
Year Commissions Rate
1994 None 42%
1993 None 147%
1992 None 47%
The Trust cannot guarantee that its objective will be achieved because
there are inherent risks in the ownership of fixed-income investments.
The value of each Portfolio's shares will reflect changes in the
market values of its investments which will vary inversely with
changes in interest rates. Dividends paid by the Trust will vary
according to the income it receives from its investments. However, the
Trust will seek, through careful management and diversification, to
reduce these risks and enhance the opportunities for maximizing
current income.
Portfolio Quality Standards
Each Portfolio's investments
in securities issued by corporations or other business organizations
will usually be rated at the time of purchase within the top three
classifications of either Moody's Investors Service, Inc. (Moody's)
(Aaa, Aa and A) or Standard & Poor's Corp. (S&P) (AAA, AA and A).
Up to 25% of a Portfolio's assets, however, may be invested in securities
rated Baa by Moody's Investors Service or BBB by Standard & Poor's
Corp. Bonds in this category are regarded as having an adequate
capacity to pay principal and interest. Such bonds are considered
investment grade but have speculative characteristics. This policy may
be changed by the Trust's Board of Trustees. It is anticipated that
the Trust will use obligations secured by specific assets of the
issuing corporation (such as mortgage bonds and equipment trusts) as
well as unsecured debentures which represent claims on the general
credit of the issuer.
Each Portfolio will invest only in the following" U.S. Government Securities:"
1. Direct obligations of the U.S. government such as bills, notes, bonds
and other debt securities issued by the U.S. Treasury.
2. Obligations of U.S. government agencies and instrumentalities which
are secured by the full faith and credit of the U.S. Treasury, such as
securities of the Government National Mortgage Association, the
Export-Import Bank, or the Student Loan Marketing Association, or
which are secured by the right of the issuer to borrow from the Treasury
such as securities issued by the Federal Financing Bank or the U.S.
Postal Service; or are supported by the credit of the government agency
or instrumentality itself, such as securities of the Federal Home Loan Banks,
Federal Farm Credit Banks, or the Federal National Mortgage Association.
Each Portfolio may also
invest, at the time of purchase, up to 20% of its assets in U.S.
dollar-denominated securities issued in the United States by: (1) the
Canadian Federal Government or by Canadian Provincial Governments
including any agency or instrumentality of either as long as their
obligations are guaranteed as to both principal and interest by either
government, and (2) by Canadian corporations so long as these
securities are rated at the time of purchase within the top three
classifications of either Moody's Investors Service, Inc. (Aaa, Aa and
A) or of Standard & Poor's Corp. (AAA, AA and A).
Each Portfolio may
invest in commercial paper, including variable rate master demand
notes, of companies whose commercial paper is rated P-1 or P-2 by
Moody's or A-1 or A-2 by Standard & Poor's. If not rated by either
Moody's or Standard & Poor's, a company's commercial paper, including
variable rate master demand notes, may be purchased if the company has
an outstanding bond issue rated A or higher by Moody's or by S&P.
Each Portfolio may invest in variable rate master demand notes which
represent a borrowing arrangement under a letter of agreement between
a commercial paper issuer and an institutional lender. Applicable
interest rates are determined on a formula basis and are adjusted on a
monthly, quarterly, or other term as set out in the agreement. They
vary as to the right of the lender to demand payment. It is not
generally contemplated that such instruments will be traded, and there
is no secondary market for these notes, although they are redeemable
(and thus immediately repayable by the borrower) at face value, plus
accrued interest, at any time. In connection with variable rate master
demand notes, the Trust's investment manager will monitor on an
on-going basis the earning power, cash flow and other liquidity ratios
of the issuer, and the borrower's ability to pay principal and
interest on demand.
Each Portfolio may invest in certificates of
deposit, bankers' acceptances, and other commercial bank short-term
obligations issued domestically by United States banks having assets
of at least $1 billion and which are members of the Federal Deposit
Insurance Corporation, or such securities which may be issued by
holding companies of such banks.
Each Portfolio may invest in issues of
the United States Treasury or a United States government agency
subject to repurchase agreements. The use of repurchase agreements by
the Fund involves certain risks. For a discussion of these risks see
"Risk Factors Applicable to Repurchase Agreements" on page 10.
Portfolio Maturity Standards
In general, the average weighted maturity
of Portfolio L will be kept within a range of 7 to 15 years, and the
average weighted maturity of Portfolio S will be kept within a range
of 2 to 5 years. It will be the policy of each Portfolio to include
maturities outside these ranges when they appear to be best suited to
its investment objective. Changes in interest rates affect the price
of each Portfolio's shares inversely. Normally, an interest rate
decline will result in a share price increase. Conversely, as interest
rates rise, share prices are likely to decline. Future interest rates
cannot be accurately and consistently forecast. Nevertheless, when
management believes that interest rates are likely to rise in the
future, it will tend to shorten portfolio maturities so that it may
reinvest maturing holdings as soon as possible and thereby obtain
higher yields. When management believes that interest rates are likely
to fall in the future, it will seek to preserve and extend the Trust's
yields by lengthening the maturities of the portfolio holdings.
REPURCHASE AGREEMENTS
A repurchase agreement involves the sale of securities to the Trust
with the concurrent agreement by the seller to repurchase the
securities at the Trust's cost plus interest at an agreed rate upon
demand or within a specified time, thereby determining the yield
during the purchaser's period of ownership. This result is a fixed
rate of return insulated from market fluctuations during such period.
Under the Investment Company Act of 1940, repurchase agreements are
considered loans by the Trust.
The Trust will enter into such
repurchase agreements only with United States banks having assets in
excess of $1 billion which are members of the Federal Deposit
Insurance Corporation, and with certain securities dealers who meet
the qualifications set from time to time by the Board of Trustees of
the Trust. The term to maturity of a repurchase agreement normally
will be no longer than a few days. Repurchase agreements maturing in
more than seven days and other illiquid securities will not exceed 10%
of the total assets of the Trust.
RISK FACTORS
Risk Factors Peculiar to Fixed Income Obligations
The yield and the principal value of fixed
income instruments are sensitive to fluctuations in interest rates,
and it is possible that an issuer may default. Each Portfolio will
seek to minimize these risks through diversification and careful
selection among securities considered to be high quality.
Risk Factors Applicable to Repurchase Agreements
The use of repurchase agreements
involves certain risks. For example, if the seller of the agreement
defaults on its obligation to repurchase the underlying securities at
a time when the value of these securities has declined, the Trust may
incur a loss upon disposition of them. If the seller of the agreement
becomes insolvent and subject to liquidation or reorganization under
the Bankruptcy Code or other laws, disposition of the underlying
securities may be delayed pending court proceedings. Finally, it is
possible that the Trust may not be able to perfect its interest in the
underlying securities. While the Trust's management acknowledges these
risks, it is expected that they can be controlled through stringent
security selection criteria and careful monitoring procedures.
INVESTMENT RESTRICTIONS
In addition to the investment objective and portfolio management
policies set forth under the caption "Investment Objective and
Portfolio Management Policy," the Trust is subject to certain other
restrictions which may not be changed without approval of the lesser
of: (1) at least 67% of the voting securities present at a meeting if
the holders of more than 50% of the outstanding voting securities of
the Trust are present or represented by proxy, or (2) more than 50% of
the outstanding voting securities of the Trust. Among these
restrictions, the more important ones are that the Trust will not
purchase the securities of any issuer if more than 5% of the Trust's
total assets would be invested in the securities of such issuer, or
the Trust would hold more than 10% of any class of voting securities
of such issuer; the Fund will not make any loan (the purchase of a
security subject to a repurchase agreement or the purchase of a
portion of an issue of publicly distributed debt securities is not
considered the making of a loan); and the Trust will not borrow money,
securities or other property in any event or for any purpose
whatsoever; or issue any security senior to the shares authorized by
the Trust Indenture. The full text of these restrictions is set forth
in the "Statement of Additional Information."
There is no limitation
with respect to investments in U.S. Treasury bills, or other
obligations issued or guaranteed by the federal government, its
agencies and instrumentalities.
PERFORMANCE MEASURES
From time to time, the Fund may advertise its performance in various
ways, as summarized below. Further discussion of these matters also
appears in the "Statement of Additional Information." A discussion of
Fund performance is included in the Fund's Annual Report to
Shareholders which is available from the Fund upon request at no
charge.
Total Return
The Fund may advertise "average annual total
return" for each Portfolio over various periods of time. Such total
return figures show the average percentage change in value of an
investment in a Portfolio from the beginning date of the measuring
period to the end of the measuring period. These figures reflect
changes in the price of the Funds' shares and assume that any income
dividends and/or capital gains distributions made by a Portfolio
during the period were reinvested in shares of the Portfolio. Figures
will be given for recent one-, five- and ten-year periods (if
applicable), and may be given for other periods as well (such as from
commencement of a Portfolio's operations, or on a year-by-year basis).
When considering "average" total return figures for periods longer
than one year, it is important to note that a Portfolio's annual total
return for any one year in the period might have been greater or less
than the average for the entire period.
Performance Comparisons
In advertisements or in reports to shareholders, each Portfolio may
compare its performance to that of other mutual funds with similar
investment objectives and to bond or other relevant indices. For
example, the Fund may compare its performance to rankings prepared by
Lipper Analytical Services, Inc. (Lipper), a widely recognized
independent service which monitors the performance of mutual funds.
The Fund may compare its performance to the Shearson/Lehman
Government/Corporate Index, an unmanaged index of government and
corporate bonds. Performance information, rankings, ratings, published
editorial comments and listings as reported in national financial
publications such as Kiplinger's Personal Finance Magazine, Business
Week, Institutional Investor, The Wall Street Journal, Mutual Fund
Forecaster, No-Load Investor, Money, Forbes, Fortune and Barron's may
also be used in comparing performance of the Fund. Performance
comparisons should not be considered as representative of the future
performance of any Fund. Further information regarding the performance
of the Fund is contained in the "Statement of Additional
Information."
Performance rankings, recommendations, published
editorial comments and listings reported in Money, Barron's,
Kiplinger's Personal Finance Magazine, Financial World, Forbes, U.S.
News & World Report, Business Week, The Wall Street Journal, Investors
Business Daily, USA Today, Fortune and Stangers's may also be cited
(if the Fund is listed in any such publication) or used for
comparison, as well as performance listings and rankings from
Morningstar Mutual Funds, Personal Finance, Income and Safety, The
Mutual Fund Letter, No-Load Fund Investor, United Mutual Fund
Selector, No-Load Fund Analyst, No-Load Fund X, Louis Rukeyser's Wall
Street newsletter, Donoghue's Money Letter, CDA Investment
Technologies, Inc., Wiesenberger Investment Companies Service, and
Donoghue's Mutual Fund Almanac.
HOW TO PURCHASE SHARES
Shares are purchased at net asset value (no sales charge) from the
Fund through its agent, Jones & Babson, Inc., Three Crown Center, 2440
Pershing Road, Suite G-15, Kansas City, MO 64108. For information call
toll free 1-800-4-BABSON (1-800-422-2766), or in the Kansas City area
471-5200. If an investor wishes to engage the services of any other
broker to purchase (or redeem) shares of the Fund, a fee may be
charged by such broker. The Fund will not be responsible for the
consequences of delays including delays in the banking or Federal
Reserve wire systems.
You do not pay a sales commission when you buy
shares of the Fund. Shares are purchased at each Portfolio's net asset
value (price) per share next effective after a purchase order and
payment have been received by the Fund. In the case of certain
institutions which have made satisfactory payment arrangements with
the Fund, orders may be processed at the net asset value per share
next effective after a purchase order has been received by the
Fund.
The Fund reserves the right in its sole discretion to withdraw
all or any part of the offering made by this prospectus or to reject
purchase orders when, in the judgment of management, such withdrawal
or rejection is in the best interest of the Fund and its shareholders.
The Fund also reserves the right at any time to waive or increase the
minimum requirements applicable to initial or subsequent investments
with respect to any person or class of persons, which include
shareholders of the Fund's special investment programs. The Fund
reserves the right to refuse to accept orders for fund shares unless
accompanied by payment, except when a responsible person has
indemnified the Fund against losses resulting from the failure of
investors to make payment. In the event that the Fund sustains a loss
as the result of failure by a purchaser to make payment, the Fund's
underwriter, Jones & Babson, Inc. will cover the loss.
INITIAL INVESTMENTS
Initial investments - By mail. You may open an account and make an
investment by completing and signing the application which accompanies
this prospectus. Make your check ($500 minimum for each Portfolio
selected unless your purchase is pursuant to an IRA or the Uniform
Transfers (Gifts) to Minors Act in which case the minimum initial
purchase is $250) payable to UMB Bank, n.a. Mail your
application and check to:
D.L. Babson Bond Trust
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
Initial investments - By wire. You may purchase shares of a Portfolio
by wiring funds ($1,000 minimum for each Portfolio selected) through
the Federal Reserve Bank to the custodian, UMB Bank, n.a.
Prior to sending your money, you must call the Fund toll free
1-800-4-BABSON (1-800-422-2766) or in the Kansas City area 471-5200
and provide it with the identity of the registered account owner, the
registered address, the Social Security or Taxpayer Identification
Number of the registered owner, the amount being wired, the name and
telephone number of the wiring bank and the person to be contacted in
connection with the order. You will then be provided a Fund account
number, after which you should instruct your bank to wire the
specified amount, along with the account number and the account
registration to:
UMB Bank, n.a.
Kansas City, Missouri, ABA #101000695
For D.L. Babson Bond Trust (insert name and number of Portfolio)
Portfolio L /AC=987032-6256
Portfolio S /AC=987032-6248
OBI=(Assigned Fund number and name in which registered.)
A completed application must be sent to the Fund as soon as possible
so the necessary remaining information can be recorded in your
account. No redemptions can occur until this is done.
INVESTMENTS SUBSEQUENT TO INITIAL INVESTMENT
You may add to your Fund account at any time in amounts of $50 or more
if purchases are made by mail, or $1,000 or more if purchases are made
by wire or telephone. Automatic monthly investments must be in amounts
of $100 or more.
Checks should be mailed to the Fund at its address,
but make them payable to UMB Bank, n.a. Always identify
your account number or include the detachable reminder stub which
accompanies each confirmation.
Wire share purchases should include your
account registration, your account number and the Babson Fund
(Portfolio) in which you are purchasing shares. It also is advisable
to notify the Fund by telephone that you have sent a wire purchase
order to the bank.
TELEPHONE INVESTMENT SERVICE
To use the Telephone Investment Service, you must first establish your
Fund account and authorize telephone orders of $1,000 or more in the
application form, or, subsequently, on a special authorization form
provided upon request. If you elect the Telephone Investment Service,
you may purchase Fund shares by telephone and authorize the Fund to
draft your checking account for the cost of the shares so purchased.
You will receive the next available price after the Fund has received
your telephone call. Availability and continuance of this privilege is
subject to acceptance and approval by the Fund and all participating
banks. During periods of increased market activity, you may have
difficulty reaching the Fund by telephone, in which case you should
contact the Fund by mail or telegraph. The Fund will not be
responsible for the consequences of delays including delays in the
banking or Federal Reserve wire systems.
The Fund will employ
reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if such procedures are not followed, the
Fund may be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, but are not limited to
requiring personal identification prior to acting upon instructions
received by telephone, providing written confirmations of such
transactions, and/or tape recording of telephone instructions.
The Fund reserves the right to initiate a charge for this service and to
terminate or modify any or all of the privileges in connection with
this service at any time upon 15 days written notice to shareholders,
and to terminate or modify the privileges without prior notice in any
circumstances where such termination or modification is in the best
interest of the Fund and its investors.
AUTOMATIC MONTHLY INVESTMENT PLAN
You may elect to make monthly investments in a constant dollar amount
from your checking account ($100 minimum). The Fund will draft your
checking account on the same day each month in the amount you
authorize in your application, or, subsequently, on a special
authorization form provided upon request. Availability and continuance
of this privilege is subject to acceptance and approval by the Fund
and all participating banks. If the date selected falls on a day upon
which UMB Bank, n.a. is closed, investment will be made on the
first date thereafter upon which the bank is open and Fund shares are
priced. The Fund will not be responsible for the consequences of
delays including delays in the banking or Federal Reserve wire
systems.
The Fund reserves the right to initiate a charge for this
service and to terminate or modify any or all of the privileges in
connection with this service at any time upon 15 days written notice
to shareholders, and to terminate or modify the privileges without
prior notice in any circumstances where such termination or
modification is in the best interest of the Fund and its investors.
HOW TO REDEEM SHARES
The Fund will redeem shares at the price (net asset value per share)
next computed after receipt of a redemption request in "good order."
(See "How Share Price is Determined," page 17.)
A written request for redemption, together with an endorsed share
certificate where a certificate has been issued, must be received by
the Fund in order to constitute a valid tender for redemption. For
authorization of redemptions by a corporation, it will also be
necessary to have an appropriate certified copy of resolutions on file
with the Fund before a redemption request will be considered in "good
order." In the case of certain institutions which have made
satisfactory redemption arrangements with the Fund, redemption orders
may be processed by facsimile or telephone transmission at net asset
value per share next effective after receipt by the Fund. If an
investor wishes to engage the services of any other broker to redeem
(or purchase) shares of the Fund, a fee may be charged by such
broker.
To be in "good order" the request must include the following:
(1) A written redemption request or stock assignment (stock power)
containing the genuine signature of each registered owner exactly as
the shares are registered, with clear identification of the account by
registered name(s) and account number and the number of shares or the
dollar amount to be redeemed;
(2) any outstanding stock certificates representing shares to be redeemed;
(3) signature guarantees as required; and (See Signature Guarantees
page 15.)
(4) any additional documentation which the Fund may deem necessary
to insure a genuine redemption.
Where additional documentation is normally required to
support redemptions as in the case of corporations, fiduciaries, and
others who hold shares in a representative or nominee capacity such as
certified copies of corporate resolutions, or certificates of
incumbency, or such other documentation as may be required under the
Uniform Commercial Code or other applicable laws or regulations, it is
the responsibility of the shareholder to maintain such documentation
on file and in a current status. A failure to do so will delay the
redemption. If you have questions concerning redemption requirements,
please write or telephone the Fund well ahead of an anticipated
redemption in order to avoid any possible delay.
Requests which are
subject to special conditions or which specify an effective date other
than as provided herein cannot be accepted. All redemption requests
must be transmitted to the Fund at Three Crown Center, 2440 Pershing
Road, Suite G-15, Kansas City, Missouri 64108. The Fund will redeem
shares at the price (net asset value per share) next computed after
receipt of a redemption request in "good order." (See "How Share Price
is Determined," page 17.)
The Fund will endeavor to transmit redemption
proceeds to the proper party, as instructed, as soon as practicable
after a redemption request has been received in "good order" and
accepted, but in no event later than the seventh day thereafter.
Transmissions are made by mail unless an expedited method has been
authorized and specified in the redemption request. The Fund will not
be responsible for the consequences of delays including delays in the
banking or Federal Reserve wire systems.
Redemptions will not become
effective until all documents in the form required have been received.
In the case of redemption requests made within 15 days of the date of
purchase, the Fund will delay transmission of proceeds until such time
as it is certain that unconditional payment in federal funds has been
collected for the purchase of shares being redeemed or 15 days from the
date of purchase. You can avoid the possibility of delay by paying
for all of your purchases with a transfer of federal funds.
Signature Guarantees are required in connection with all redemptions by
mail, or changes in share registration, except as hereinafter provided. These
requirements may be waived by the Fund in certain instances where it
appears reasonable to do so and will not unduly affect the interests
of other shareholders. Signature(s) must be guaranteed by an "eligible
Guarantor institution" as defined under Rule 17Ad-15 under the
Securities Exchange Act of 1934. Eligible guarantor institutions
include: (1) national or state banks, savings associations, savings
and loan associations, trust companies, savings banks, industrial loan
companies and credit unions; (2) national securities exchanges,
registered securities associations and clearing agencies; or (3)
securities broker/dealers which are members of a national securities
exchange or clearing agency or which have a minimum net capital of
$100,000. A notarized signature will not be sufficient for the request
to be in proper form.
Signature guarantees will be waived for mail
redemptions of $10,000 or less, but they will be required if the
checks are to be payable to someone other than the registered
owner(s), or are to be mailed to an address different from the
registered address of the shareholder(s), or where there appears to be
a pattern of redemptions designed to circumvent the signature
guarantee requirement, or where the Fund has other reason to believe
that this requirement would be in the best interests of the Fund and
its shareholders.
The right of redemption may be suspended or the date
of payment postponed beyond the normal seven-day period when the New
York Stock Exchange is closed or under emergency circumstances as
determined by the Securities and Exchange Commission.
Due to the high
cost of maintaining smaller accounts, the Board of Trustees has
authorized the Fund to close shareholder accounts where their value
falls below the current minimum initial investment requirement at the
time of initial purchase as a result of redemptions and not as the
result of market action, and remains below this level for 60 days
after each such shareholder account is mailed a notice of: (1) the
Fund's intention to close the account, (2) the minimum account size
requirement, and (3) the date on which the account will be closed if
the minimum size requirement is not met.
SYSTEMATIC REDEMPTION PLAN
If you own shares in an open account valued at $10,000 or more, and
desire to make regular monthly or quarterly withdrawals without the
necessity and inconvenience of executing a separate redemption request
to initiate each withdrawal, you may enter into a Systematic
Withdrawal Plan by completing forms obtainable from the Fund. For this
service, the manager may charge you a fee not to exceed $1.50 for each
withdrawal. Currently the manager assumes the additional expenses
arising out of this type of plan, but it reserves the right to
initiate such a charge at any time in the future when it deems it
necessary. If such a charge is imposed, participants will be provided
30 days notice.
Subject to a $50 minimum, you may withdraw each period
a specified dollar amount. Shares also may be redeemed at a rate
calculated to exhaust the account at the end of a specified period of
time.
Dividends and capital gains distributions must be reinvested in
additional shares. Under all withdrawal programs, liquidation of
shares in excess of dividends and distributions reinvested will
diminish and may exhaust your account, particularly during a period of
declining share values.
You may revoke or change your plan or redeem
all of your shares remaining at any time. Withdrawal payments will be
continued until the shares are exhausted or until the Fund or you
terminate the plan by written notice to the other.
HOW TO EXCHANGE SHARES BETWEEN BABSON FUNDS
Shareholders may exchange their Fund shares, which have been held in
open account for 30 days or more, and for which good payment has been
received for identically registered shares of any other Babson Fund,
or any other Portfolio in the Babson Fund Group which is legally
registered for sale in the state of residence of the investor, except
Babson Enterprise Fund, Inc., provided that the minimum amount
exchanged has a value of $1,000 or more and meets the minimum
investment requirement of the Fund or Portfolio into which it is
exchanged.
Effective at the close of business on January 31, 1992, the Directors of the
Babson Enterprise Fund, Inc. took action to limit the offering of that Fund's
shares. Babson Enterprise Fund, Inc. will not accept any new accounts,
including IRAs and other retirement plans, until further notice, nor
will Babson Enterprise Fund accept transfers from shareholders of
other Babson Funds, who were not shareholders of record of Babson
Enterprise Fund at the close of business on January 31, 1992.
Investors may want to consider purchasing shares in Babson Enterprise
Fund II, Inc. as an alternative.
To authorize the Telephone/Telegraph
Exchange Privilege, all registered owners must sign the appropriate
section on the original application, or the Fund must receive a
special authorization form, provided upon request. During periods of
increased market activity, you may have difficulty reaching the Fund
by telephone, in which case you should contact the Fund by mail or
telegraph. The Fund reserves the right to initiate a charge for this
service and to terminate or modify any or all of the privileges in
connection with this service at any time and without prior notice
under any circumstances where continuance of these privileges would be
detrimental to the Fund or its shareholders, or under any other
circumstances such as an emergency, or where the volume of such activity
threatens the ability of the Fund to conduct business, upon 60 days written
notice to shareholders. The Fund will not be responsible for the
consequences of delays including delays in the banking or Federal
Reserve wire systems.
The Fund will
employ reasonable procedures to confirm that instructions communicated
by telephone are genuine, and if such procedures are not followed, the
Fund may be liable for losses due to unauthorized or fraudulent
instructions. Such procedures may include, but are not limited to
requiring personal identification prior to acting upon instructions
received by telephone, providing written confirmations of such
transactions, and/or tape recording of telephone
instructions.
Exchanges by mail may be accomplished by a written
request properly signed by all registered owners identifying the
account, the number of shares or dollar amount to be redeemed for
exchange, and the Babson Fund into which the account is being
transferred.
If you wish to exchange part or all of your shares in a
Portfolio for shares of another Fund or Portfolio in the Babson Fund
Group, you should review the prospectus of the Fund to be purchased,
which can be obtained from Jones & Babson, Inc. Any such exchange will
be based on the respective net asset values of the shares involved. An
exchange between Funds involves the sale of an asset. Unless the
shareholder account is tax-deferred, this is a taxable event.
HOW SHARE PRICE IS DETERMINED
In order to determine the price at which new shares of each Portfolio
will be sold and at which issued shares presented for redemption will
be liquidated, the net asset value per share is computed once daily,
Monday through Friday, at the specific time during the day that the
Board of Trustees sets at least annually, except on days on which
changes in the value of portfolio securities will not materially
affect the net asset value, or days during which no security is
tendered for redemption and no order to purchase or sell such security
is received by the Fund, or customary holidays. For a list of the
holidays during which the Fund is not open for business, see "How
Share Price is Determined" in the "Statement of Additional
Information."
The price at which new shares of each Portfolio will be
sold and at which issued shares presented for redemption will be
liquidated is computed once daily at 4:00 P.M. (Eastern Time), except
on those days when the Fund is not open for business.
The per share
calculation is made by subtracting from each Portfolio's total assets
any liabilities and then dividing into this amount the total
outstanding shares as of the date of the calculation.
Debt securities
(other than short-term obligations), including listed issues, are
valued on the basis of valuations furnished by a pricing service which
utilizes both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate factors such
as institution-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon exchange or
over-the-counter prices, since such valuations are believed to reflect
more accurately the fair value of such securities. Use of the pricing
service has been approved by the Trust's Board of Trustees. Short-term
obligations are valued at amortized cost, which constitutes fair value
as determined by the Board of Trustees. If acquired, preferred stocks,
common stocks, and warrants, if listed on an exchange, will be valued
at the last sale price on the principal exchange upon which the
security is traded on the Trust evaluation date. If not traded, or if
unlisted, the security is valued at the mean between the last current
bid and asked prices. Portfolio securities for which there are no such
quotations or valuations are valued at fair value as determined in
good faith by or at the direction of the Board of Trustees.
TRUSTEES AND OFFICERS
The officers of the Fund manage its day-to-day operations. The Fund's
manager and its officers are subject to the supervision and control of
the Board of Trustees. A list of the trustees and officers of the Fund
and a brief statement of their present positions and principal
occupations during the past five years is set forth in the "Statement
of Additional Information."
MANAGEMENT AND INVESTMENT COUNSEL
Jones & Babson, Inc. was founded in 1960. It assumed the management of
the Trust on March 1, 1972. Jones & Babson, Inc. also acts as the
Trust's principal underwriter. Pursuant to the current Management
Agreement, Jones & Babson, Inc. provides or pays the cost of all
management, supervisory and administrative services required in the
normal operation of the Trust. This includes investment management and
supervision; fees of the custodian, independent auditors and legal
counsel; remuneration of Trustees, officers and other personnel; rent;
shareholder services, including the maintenance of the shareholder
accounting system and transfer agency; and such other items as are
incidental to the Trust's administration.
Not considered normal operating expenses, and therfore payable by the Trust,
are taxes, fees and other charges
of governments and their agencies including the cost of qualifying the
Trust's shares for sale in any jurisdiction, interest, brokerage
costs, dues, and all costs and expenses, including but not limited to
legal and accounting fees incurred in anticipation of or arising out
of litigation or administrative proceedings to which the Trust, its
trustees or officers may be subject or a party thereto.
As a part of
the Management Agreement, Jones & Babson, Inc. employs at its own
expense David L. Babson & Co. Inc. as its investment counsel to assist
in the investment advisory function. David L. Babson & Co. Inc. is an
independent investment counseling firm founded in 1940. It serves a
broad variety of individual, corporate and other institutional clients
by maintaining an extensive research and analytical staff. It has an
experienced investment analysis and research staff which eliminates
the need for Jones & Babson, Inc. and the Trust to maintain an
extensive duplicate staff, with the consequent increase in the cost of
investment advisory service. The cost of the services of David L.
Babson & Co. Inc. is included in the fee of Jones & Babson, Inc. The
Management Agreement limits the liability of the manager and its
investment counsel, as well as their officers, directors and
personnel, to acts or omissions involving willful malfeasance, bad
faith, gross negligence, or reckless disregard of their duties. Edward
L. Martin became the manager of Babson Bond Trust in 1984, and also
heads the Babson fixed income department. A Chartered Financial
Analyst with 24 years of investment management experience, he joined
David L. Babson & Co. in 1984.
As compensation for all the foregoing
services, Portfolio L and Portfolio S pay Jones & Babson, Inc. a fee
amounting to 95/100 of one percent (.95%) of each Portfolio's average
daily net assets except that during the period from May 1, 1988
through March 31, 1996 Jones & Babson has waived 30/100 of one percent
(.30%) of the fee for Portfolio S with the effect that the fee charged
for Portfolio S is 65/100 of one percent (.65%).
The annual fee charged
by Jones & Babson, Inc. is higher than the fees of most
investment advisers whose charges cover only investment advisory
services with all remaining operational expenses absorbed directly by
the Fund. Yet, it compares favorably with these other advisers when
all expenses to Trust shareholders are taken into account. Jones &
Babson, Inc. pays David L. Babson & Co. Inc. a fee of 25/100 of one
percent (.25%) of the average daily total net assets, which is
computed daily and paid semimonthly. This fee has been reduced to
15/100 of one percent (.15%) for Portfolio S until March 31, 1996. The
total expenses of Portfolio L for the fiscal year ended November 30,
1994 amounted to 97/100 of one percent (.97%) of its average net
assets. The total expenses of Portfolio S for the fiscal year ended
November 30, 1994 amounted to 67/100 of one percent (.67%) of its
average net assets. In order to reduce the expense ratio of Portfolio
S during its initial periods of operations, while expenses relative to
income may otherwise be higher than anticipated, the Fund's manager,
Jones & Babson, Inc., has waived 30/100 of one percent (.30%) of the
fee for Portfolio S with the effect that the fee charged for Portfolio
S is 65/100 of one percent (.65%) during the period from May 1, 1988
through March 31, 1996.
Certain officers and trustees of the Trust are
also officers or directors or both of other Babson Funds, Jones &
Babson, Inc. or David L. Babson & Co. Inc.
Jones & Babson, Inc. is a wholly-owned subsidiary of Business Men's
Assurance Company of America which is considered to be a controlling
person under the Investment Company Act of 1940. Assicurazioni
Generali S.p.A., an insurance organization founded in 1831 based in Trieste,
Italy, is considered to be a controlling person and is the ultimate parent
of Business Men's Assurance Company of America. Mediobanca is a 5%
owner of Generali.
David L. Babson & Co. Inc. is a closely held corporation and has
limitations in the ownership of its stock designed to maintain control
in those who are active in management.
The current Management Agreement between the
Trust and Jones & Babson, Inc., which includes the Investment Counsel
Agreement between Jones & Babson, Inc. and David L. Babson & Co. Inc.,
will continue in effect until October 31, 1995, and will continue
automatically for successive annual periods ending each October 31 so
long as such continuance is specifically approved at least annually by
the Board of Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of the Trust, and provided also that
such continuance is approved by a vote of the majority of the Trustees
who are not parties to the Agreements or interested persons of any
such party at a meeting held in person and called specifically for the
purpose of evaluating and voting on such approval. Both Agreements
provide that either party may terminate by giving the other 60 days
written notice. The Agreements terminate automatically if assigned by
either party.
GENERAL INFORMATION AND HISTORY
The Trust was organized in Kansas City, Missouri, as a common law
trust under an Agreement and Declaration of Trust dated November 2,
1944, which was amended and restated on February 24, 1989. It
originally was known as Mutual Trust. When it came under the
management of Jones & Babson, Inc., its name was changed to Babson
(D.L.) Income Trust. On February 14, 1984, shareholders changed its
name to D.L. Babson Bond Trust. On March 31, 1988, the issued and
outstanding shares of beneficial interest of the Trust were
redesignated as "Portfolio L" (longer term) and a second class or
series of shares known as "Portfolio S" (shorter term) was created.
The Trust is an open-end, diversified, fully-managed investment
company commonly known as a mutual fund. Each full and fractional
share, when issued and outstanding, has: (1) equal voting rights with
respect to matters which affect the Trust in general and with respect
to matters relating solely to the interests of the Portfolio for which
issued, and (2) equal dividend, distribution and redemption rights to
the assets of the Portfolio for which issued and to general assets, if
any, of the Trust which are not specifically allocated to either
Portfolio. Shares when issued are fully paid and non-assessable.
Except for the priority of each share in the assets of its Portfolio,
the Fund will not issue any class of securities senior to any other
class. The initial par value of the shares was $1.00 each. On
September 30, 1955, this was changed to $0.25 each, and three
additional shares at that time were issued for each share then
outstanding. Shareholders do not have pre-emptive or conversion
rights.
Non-cumulative voting -- These shares have non-cumulative voting
rights, which means that the holders of more than 50% of the shares
voting for the election of Trustees can elect 100% of the Trustees, if
they choose to do so, and in such event, the holders of the remaining
less than 50% of the shares voting will not be able to elect any
Trustees.
The Fund's Agreement and Declaration of Trust permits the
Fund to operate without an annual meeting of shareholders under
specified circumstances if an annual meeting is not required by the
Investment Company Act of 1940. There are procedures whereby the
shareholders may remove trustees. These procedures are described in
the "Statement of Additional Information" under the caption "Officers
and Trustees." The Fund has adopted the appropriate provisions in its
By-Laws and may not, at its discretion, hold annual meetings of
shareholders for the following purposes unless required to do so: (1)
election of trustees; (2) approval of any investment advisory
agreement; (3) ratification of the selection of independent auditors;
and (4) approval of a distribution plan. As a result, the Fund does not
intend to hold annual meetings.
The Fund may use the name
"Babson" in its name so long as Jones & Babson, Inc. is continued as
manager and David L. Babson & Co. Inc. as its investment counsel.
Complete details with respect to the use of the name are set out in
the Management Agreement between the Fund and Jones & Babson, Inc.
This prospectus omits certain of the information contained in the
registration statement filed with the Securities and Exchange
Commission, Washington, D.C. These items may be inspected at the
offices of the Commission or obtained from the Commission upon payment
of the fee prescribed.
DIVIDENDS, DISTRIBUTIONS AND THEIR TAXATION
At the close of each business day, dividends consisting of
substantially all of each Portfolio's net investment income are
declared payable to shareholders of record at the close of the
previous business day, and credited to their accounts. All daily
dividends declared during a given month will be distributed on the
last day of the month. Dividends and capital gains distributions, if
any, are automatically reinvested in additional shares at net asset
value, unless the shareholder has elected in writing to receive cash.
The method of payment elected remains in effect until the Fund is
notified in writing to the contrary. If at the time of a complete
redemption and closing of a shareholder account, there is net
undistributed income to the credit of the shareholder, it will be paid
by separate check on the next dividend distribution date. In the case
of a partial redemption, any net undistributed credit will be
distributed on the next dividend date according to the shareholder's
instructions on file with the Fund. Shares begin earning income on the
day following the effective date of purchase. Income earned by the
Fund on weekends, holidays and other days on which the Fund is closed
for business is declared as a dividend on the next day on which the
Fund is open for business, except for month-ends when such dividend is
declared as of the last day of the month.
The Fund paid dividends each
quarter from its inception to March, 1988, and has paid monthly
dividends from April, 1988 through the end of its current fiscal year,
November 30, 1994. Past dividends, however, are no guarantee of future
payouts.
Each Portfolio within the Fund has qualified and intends to
continue to qualify for taxation as a "regulated investment company"
under the Internal Revenue Code so that each Portfolio will not be
subject to federal income tax to the extent it distributes its income
to shareholders. Dividends, either in cash or reinvested in shares,
paid by a Portfolio from net investment income will be taxable to
shareholders as ordinary income. Due to the make-up of each Portfolio,
it is anticipated that only a small portion, if any, of dividends paid
will qualify for the 70% dividends-received deduction for
corporations. The portion of the dividends so qualified depends on the
aggregate taxable qualifying dividend income received by each
Portfolio from domestic (U.S.) sources. The Fund will send to
shareholders a statement each year advising the amount of the dividend
income which qualifies for such treatment.
Whether paid in cash or
additional shares of a Portfolio, and regardless of the length of time
the shares in such Portfolio have been owned by the shareholder,
distributions from long-term capital gains are taxable to shareholders
as such, but are not eligible for the dividends-received deduction for
corporations. Shareholders are notified annually by the Fund as to
federal tax status of dividends and distributions paid by a Portfolio.
Such dividends and distributions may also be subject to state and
local taxes.
Exchange and redemption of Fund shares are taxable events
for federal income tax purposes. Shareholders may also be subject to
state and municipal taxes on such exchanges and redemptions. You
should consult your tax adviser with respect to the tax status of
distributions from the Fund in your state and locality.
Each Portfolio
intends to declare and pay dividends and capital gains distributions
so as to avoid imposition of the federal excise tax. To do so, each
Portfolio expects to distribute an amount equal to: (1) 98% of its
calendar year ordinary income; (2) 98% of its capital gains net income
(the excess of short- and long-term capital gain over short- and
long-term capital loss) for the one-year period ending each November
30; and (3) 100% of any undistributed ordinary or capital gain net
income from the prior calendar year. Dividends declared in October,
November or December and made payable to shareholders of record in
such a month are deemed to have been paid by the Fund and received by
shareholders on December 31 of such year, so long as the dividends are
actually paid before February 1 of the following year.
To comply with
IRS regulations, the Fund is required by federal law to withhold 31%
of reportable payments (which may include dividends, capital gains
distributions, and redemptions) paid to shareholders who have not
complied with IRS regulations. In order to avoid this withholding
requirement, shareholders must certify on their Application, or on a
separate form supplied by the Fund, that their Social Security or
Taxpayer Identification Number provided is correct and that they are
not currently subject to backup withholding, or that they are exempt
from backup withholding.
The federal income tax status of all
distributions will be reported to shareholders each January as a part
of the annual statement of shareholder transactions. Shareholders not
subject to tax on their income will not be required to pay tax on
amounts distributed to them.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX
ADVISERS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF AN INVESTMENT
IN THE FUND.
SHAREHOLDER SERVICES
The Fund and its manager offer shareholders a broad variety of
services described throughout this prospectus. In addition, the
following services are available:
Automatic Monthly Investment -- You
may elect to make monthly investments in a constant dollar amount from
your checking account ($100 minimum). The Fund will draft your
checking account on the same day each month in the amount you
authorize in your application, or, subsequently, on a special
authorization form provided upon request.
Automatic Reinvestment -- Dividends and capital gains distributions
may be reinvested automatically, or shareholders may elect to have
dividends paid in cash and capital gains reinvested, or to have both paid in
cash.
Telephone Investments -- You may make investments of $1,000 or
more by telephone if you have authorized such investments in your
application, or, subsequently, on a special authorization form
provided upon request. See "Telephone Investment Service."
Automatic Exchange -- You may exchange shares from your account ($100
minimum) in any of the Babson Funds to an identically registered account
in any other fund in the Babson Group according to your instructions.
Monthly exchanges will be continued until all shares have been exchanged
or until you terminate the Automatic Exchange authorization. A special
authorization form will be provided upon request.
Transfer of Ownership -- A shareholder may transfer shares to another
shareholder account. The requirements which apply to redemptions apply
to transfers. A transfer to a new account must meet initial investment
requirements.
Systematic Redemption Plan -- Shareholders who own shares in open
account valued at $10,000 or more may arrange to make regular
withdrawals without the necessity of executing a separate redemption
request to initiate each withdrawal.
Sub-Accounting -- Keogh and corporate tax qualified retirement plans,
as well as certain other investors who must maintain separate
participant accounting records, may meet these needs through services
provided by the Fund's manager, Jones & Babson, Inc. Investment
minimums may be met by accumulating the separate accounts of the
group. Although there is currently no charge for sub-accounting, the
Fund and its manager reserve the right to make reasonable charges for
this service.
Prototype Retirement Plans -- Jones & Babson, Inc. offers a defined
contribution prototype plan - The Universal Retirement Plan - which is
suitable for all who are self-employed, including sole proprietors,
partnerships, and corporations. The Universal Prototype includes both
money purchase pension and profit-sharing plan options.
Individual Retirement Accounts -- Also available is an Individual
Retirement Account (IRA). The IRA uses the IRS model form of plan and
provides an excellent way to accumulate a retirement fund which will
earn tax-deferred dollars until withdrawn. An IRA may also be used to
defer taxes on certain distributions from employer-sponsored
retirement plans. You may contribute up to $2,000 of compensation each
year ($2,250 if a spousal IRA is established), some or all of which
may be deductible. Consult your tax adviser concerning the amount of
the tax deduction, if any.
Simplified Employee Pensions (SEPs) -- The Jones & Babson IRA may be
used with IRS Form 5305 - SEP to establish a SEP-IRA, to which the
self-employed individual may contribute up to 15% of net earned income
or $30,000, whichever is less. A SEP-IRA offers the employer the
ability to make the same level of deductible contributions as a
Profit-Sharing Plan with greater ease of administration, but less
flexibility in plan coverage of employees.
SHAREHOLDER INQUIRIES
Telephone inquiries may be made toll free to the Fund, 1-800-4-BABSON
(1-800-422-2766), or in the Kansas City area 471-5200.
Shareholders may address written inquiries to the Fund at:
D.L. Babson Bond Trust
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, MO 64108
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
Kansas City, Missouri
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG
Philadelphia, Pennsylvania
JOHN G. DYER
Kansas City, Missouri
CUSTODIAN
UMB BANK, n.a.
Kansas City, Missouri
TRANSFER AGENT
JONES & BABSON, INC.
Kansas City, Missouri
PART B
D. L. BABSON BOND TRUST
STATEMENT OF ADDITIONAL INFORMATION
March 31, 1995
This Statement is not a prospectus but should be read in
conjunction with the Fund's current Prospectus dated March 31, 1995.
To obtain the Prospectus please call the Fund toll-free 1-800-4-BABSON
(1-800-422-2766), or in the Kansas City area 471-5200.
TABLE OF CONTENTS
Investment Objective and Policies
Portfolio Transactions
Investment Restrictions
Performance Measures
How the Fund's Shares are Distributed
How Share Purchases are Handled
Redemption of Shares
Signature Guarantees
Management and Investment Counsel
How Share Price is Determined
Trustees and Officers
Custodian
Independent Auditors
Other Jones & Babson Funds
Fixed Income Securities Described and Ratings
Financial Statements
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the Fund's investment
objective and policies set forth in the Prospectus. The D. L. Babson
Bond Trust is a mutual fund organized as a common law trust and may
also be referred to throughout the Prospectus and this "Statement of
Additional Information" as the Trust or the Fund.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Fund are made by
Jones & Babson, Inc. pursuant to recommendations by David L. Babson &
Co. Inc. Trustees of the Fund and officers of Jones & Babson, Inc.
are generally responsible for implementing or supervising these
decisions, including allocation of portfolio brokerage and principal
business and the negotiation of commissions and/or the price of the
securities. In instances where securities are purchased on a
commission basis the Fund will seek competitive and reasonable
commission rates based on the circumstances of the trade involved and
to the extent that they do not detract from the quality of the
execution.
The Fund, in purchasing and selling portfolio securities, will
seek the best available combination of execution and overall price
(which shall include the cost of the transaction) consistent with the
circumstances which exist at the time. The Fund does not intend to
solicit competitive bids on each transaction. The Fund expects that
purchases and sales of portfolio securities usually will be principal
transactions from a principal market maker for the securities, unless
it appears that a better combination of price and execution may be
obtained elsewhere. Usually there will be no brokerage commission
paid by the Fund for such purchases. Purchases from underwriters of
portfolio securities will include a commission or concession paid by
the issuer to the underwriter, and purchases from dealers serving as
market makers will include the spread between the bid and asked price.
The Fund believes it is in its best interest and that of its
shareholders to have a stable and continuous relationship with a
diverse group of financially strong and technically qualified
broker-dealers who will provide quality executions at competitive
rates. Broker-dealers meeting these qualifications also will be
selected for their demonstrated loyalty to the Fund, when acting on
its behalf, as well as for any research or other services provided to
the Fund. When buying securities in over-the-counter markets, the
Fund will select a broker who maintains a primary market for the
security unless it appears that a better combination of price and
execution may be obtained elsewhere. The Fund normally will not pay a
higher commission rate to broker-dealers providing benefits or
services to it than it would pay to broker-dealers who do not provide
it such benefits or services. However, the Fund reserves the right to
do so within the principles set out in Section 28(e) of the Securities
Exchange Act of 1934 when it appears that this would be in the best
interests of the shareholders.
No commitment is made to any broker or dealer with regard to
placing of orders for the purchase or sale of Fund portfolio
securities, and no specific formula is used in placing such business.
Allocation is reviewed regularly by both the Board of Trustees of the
Trust and Jones & Babson, Inc.
Since the Fund does not market its shares through intermediary
brokers or dealers, it is not the Fund's practice to allocate
brokerage or principal business on the basis of sales of its shares
which may be made through such firms. However, it may place portfolio
orders with qualified broker-dealers who recommend the Fund to other
clients, or who act as agents in the purchase of the Fund's shares for
their clients.
Research services furnished by broker-dealers may be useful to
the Fund manager and its investment counsel in serving other clients,
as well as the Fund. Conversely, the Fund may benefit from research
services obtained by the manager or its investment counsel from the
placement of portfolio brokerage of other clients.
When it appears to be in the best interests of its shareholders,
the Fund may join with other clients of the manager and its investment
counsel in acquiring or disposing of a portfolio holding. Securities
acquired or proceeds obtained will be equitably distributed between
the Fund and other clients participating in the transaction. In some
instances, this investment procedure may affect the price paid or
received by the Fund or the size of the position obtained by the Fund.
INVESTMENT RESTRICTIONS
In addition to the investment objective and portfolio management
policies set forth in the Prospectus under the caption "Investment
Objective and Portfolio Management Policy," the following restrictions
also may not be changed without approval of the "holders of a majority
of the outstanding shares" of the Fund or the affected Portfolio
series.
The Fund will not: (1) purchase any investment security for
credit or on margin, except such short-term credits as are necessary
for the clearance of transactions; (2) participate on a joint or a
joint-and-several basis in any trading account in securities; (3) sell
any securities short; (4) borrow money, securities or other property
in any event or for any purpose whatsoever, or issue any security
senior to the shares authorized by the Trust Indenture; (5) lend
money, securities or other assets of the Trust for any purpose
whatsoever, provided however, that the acquisition of any publicly
distributed securities shall not be held or construed to be the making
of a loan; (6) mortgage, pledge, hypothecate or encumber in any manner
whatsoever any investment securities at any time owned or held by the
Trust; (7) underwrite or participate in the underwriting of any
securities; (8) purchase shares of other investment companies except
in the open market at ordinary broker's commission or pursuant to a
plan of merger or consolidation; (9) acquire any security issued by
any issuer in which an officer, director or stockholder of such issuer
is a Trustee of the Trust or an officer or director of a principal
underwriter (as defined in the Investment Company Act of 1940) if
after the purchase of such security one or more of the Trustees owns
beneficially more than one-half (1/2) of one per centum (1%) of the
capital stock of such issuer and such Trustees together own
beneficially more than five per centum (5%) of the capital stock of
such issuer; (10) acquire any security of another issuer if
immediately after and as a result of such acquisition the market value
of such securities of such other issuer shall exceed five per
centum (5%) of the market value of the total assets of the
Trust or the Trust shall own more than ten per centum (10%)
of the outstanding voting securities of such issuer. This restriction
does not apply to securities issued by the United States or any state,
county, or municipality thereof; (11) invest more than 25% of the
value of its assets in any one industry; (12) engage in the purchase
or sale of real estate or commodities; (13) invest in companies for
the purpose of exercising control of management; (14) purchase any
securities which are subject to legal or contractual restrictions,
i.e., restricted securities which may not be distributed publicly
without registration under the Securities Act of 1933.
In addition to the fundamental investment restrictions set out
above, in order to comply with the law or regulations of various
States, the Fund will not engage in the following practices: (1)
invest in securities which are not readily marketable or in securities
of foreign issuers which are not listed on a recognized domestic or
foreign securities exchange; (2) write put or call options; (3) invest
in oil, gas and other mineral leases or arbitrage transactions; (4)
purchase or sell real estate (including limited partnership interests,
but excluding readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest in
real estate); or (5) purchase securities of issuers which the company is
restricted from selling to the public without registration under the
Securities Act of 1933, including Rule 144(a) securities.
Certain States also require that the Fund's investments in
warrants, valued at the lower of cost or market, may not exceed 5% of
the value of the Fund's net assets. Included within that amount, but
not to exceed 2% of the value of the Fund's net assets, may be
warrants which are not listed on the New York or American Stock
Exchange. Warrants acquired by the Fund in units or attached to
securities may be deemed to be without value for purposes of this
limitation.
PERFORMANCE MEASURES
Total Return
The Fund's "average annual total return" figures described and
shown below are computed according to a formula prescribed by the
Securities and Exchange Commission. The formula can be expressed as
follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1000 payment
made at the beginning of the 1, 5, or 10 year (or other) periods at
the end of the 1,5, or 10 year (or other) periods (or fractional
portions thereof);
The table below shows the average total return for the Fund for
the specified periods.
Portfolio L Portfolio S
For the one year
12/1/93-11/30/94 (2.71%) (2.06%)
For the five years
12/1/89-11/30/94 7.44% 7.00%
For the ten years
12/1/84-11/30/94 9.35% N/A
From
commencement
of operation
to 11/30/94* 7.58% 7.34%
____________________________________________
* Portfolio L commenced operation November 2, 1944.
* Portfolio S commenced operation April 19, 1988.
PORTFOLIO L
Total Return by Year
The total return calculated by the same formula described above for
each calendar year (January 1 to December 31) below is as follows:
1973 -3.19% 1984 12.99%
1974 1.76 1985 20.64
1975 9.03 1986 13.89
1976 11.74 1987 1.93
1977 2.84 1988 7.19
1978 0.65 1989 13.11
1979 2.35 1990 7.79
1980 7.01 1991 15.00
1981 5.81 1992 7.97
1982 18.19 1993 11.15
1983 9.62 1994 (3.27)
HOW THE FUND'S SHARES ARE DISTRIBUTED
Jones & Babson, Inc., as agent of the Trust, agrees to supply its
best efforts as sole distributor of the Trust's shares and, at its own
expense, pay all sales and distribution expenses in connection with
their offering other than registration fees and other government
charges.
Jones & Babson, Inc. does not receive any fee or other
compensation under the distribution agreement which continues in
effect until October 31, 1994, and which will continue automatically
for successive annual periods ending each October 31, if continued at
least annually by the Trustees, including a majority of those Trustees
who are not parties to such Agreements or interested persons of any
such party. It terminates automatically if assigned by either party
or upon 60 days written notice by either party to the other.
Jones & Babson, Inc. also acts as sole distributor of the shares
for David L. Babson Growth Fund, Inc., D. L. Babson Money Market Fund,
Inc., D. L. Babson Tax-Free Income Fund, Inc., Babson Enterprise Fund,
Inc., Babson Enterprise Fund II, Inc., Babson Value Fund, Inc., Shadow
Stock Fund, Inc., Babson-Stewart Ivory International Fund, Inc., UMB
Stock Fund, Inc., UMB Bond Fund, Inc., UMB Money Market Fund, Inc.,
UMB Tax-Free Money Market Fund, Inc., UMB Heartland Fund, Inc., UMB
WorldWide Fund, Inc. and Buffalo Balanced Fund, Inc.
HOW SHARE PURCHASES ARE HANDLED
Each order accepted will be fully invested in whole and
fractional shares, unless the purchase of a certain number of whole
shares is specified, at the net asset value per share next effective
after the order is accepted by the Fund.
Each investment is confirmed by a year-to-date statement which
provides the details of the immediate transaction, plus all prior
transactions in your account during the current year. This includes
the dollar amount invested, the number of shares purchased or
redeemed, the price per share, and the aggregate shares owned. A
transcript of all activity in your account during the previous year
will be furnished each January. By retaining each annual summary and
the last year-to-date statement, you have a complete detailed history
of your account which provides necessary tax information. A duplicate
copy of a past annual statement is available from Jones & Babson, Inc.
at its cost, subject to a minimum charge of $5 per account, per year
requested.
Normally, the shares which you purchase are held by the Fund in
open account, thereby relieving you of the responsibility of providing
for the safekeeping of a negotiable share certificate. Should you
have a special need for a certificate, one will be issued on request
for all or a portion of the whole shares in your account. There is no
charge for the first certificate issued. A charge of $3.50 will be
made for any replacement certificates issued. In order to protect the
interests of the other shareholders, share certificates will be sent
to those shareholders who request them only after the Fund has
determined that unconditional payment for the shares represented by
the certificate has been received by its custodian, UMB Bank, n.a.
If an order to purchase shares must be canceled due to
non-payment, the purchaser will be responsible for any loss incurred
by the Fund arising out of such cancellation. To recover any such
loss, the Fund reserves the right to redeem shares owned by any
purchaser whose order is canceled, and such purchaser may be
prohibited or restricted in the manner of placing further orders.
The Fund reserves the right in its sole discretion to withdraw all or
any part of the offering made by the prospectus or to reject purchase
orders when, in the judgment of management, such withdrawal or
rejection is in the best interest of the Fund and its shareholders.
The Fund also reserves the right at any time to waive or increase the
minimum requirements applicable to initial or subsequent investments
with respect to any person or class of persons, which include
shareholders of the Fund's special investment programs.
REDEMPTION OF SHARES
The right of redemption may be suspended, or the date of payment
postponed beyond the normal seven-day period by the Fund's Board of
Trustees under the following conditions authorized by the Investment
Company Act of 1940: (1) for any period (a) during which the New York
Stock Exchange is closed, other than customary weekend and holiday
closing, or (b) during which trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as
a result of which (a) disposal by the Fund of securities owned by it
is not reasonably practicable, or (b) it is not reasonably practicable
for the Fund to determine the fair value of its net assets; or (3) for
such other periods as the Securities and Exchange Commission may by
order permit for the protection of the Fund's shareholders.
SIGNATURE GUARANTEES
Signature guarantees normally reduce the possibility of forgery
and are required in connection with each redemption method to protect
shareholders from loss. Signature guarantees are required in
connection with all redemptions by mail or changes in share
registration, except as provided in the Prospectus.
Signature guarantees must appear together with the signature(s)
of the registered owner(s), on:
(1) a written request for redemption,
(2) a separate instrument of assignment, which should specify the
total number of shares to be redeemed (this "stock power" may be
obtained from the Fund or from most banks or stockbrokers), or
(3) all stock certificates tendered for redemption.
MANAGEMENT AND INVESTMENT COUNSEL
As a part of the Management Agreement, Jones & Babson, Inc.
employs at its own expense David L. Babson & Co. Inc., as its
investment counsel. David L. Babson & Co. Inc. was founded in 1940.
It is a private investment research and counseling organization
serving individual, corporate and other institutional clients. It
participates with Jones & Babson, Inc. in the management of nine
Babson no-load mutual funds, in addition to UMB Money Market Fund,
Inc. and UMB Tax-Free Money Market Fund, Inc.
The aggregate management fees paid to Jones & Babson, Inc. during
the most recent fiscal year ended November 30, 1994, and from which
Jones & Babson, Inc. paid all the Fund's expenses except those payable
directly by the Fund, were $1,426,093 for Portfolio L and $223,441 for
Portfolio S. The annual fee charged by Jones & Babson, Inc. covers
all normal operating costs of the Fund.
David L. Babson & Co. Inc. has an experienced investment analysis
and research staff which eliminates the need for Jones & Babson, Inc.
and the Fund to maintain an extensive duplicate staff, with the
consequent increase in the cost of investment advisory service. The
cost of the services of David L. Babson & Co. Inc. is included in the
services of Jones & Babson, Inc. During the most recent fiscal year
ended November 30, 1994, Jones & Babson, Inc. paid David L. Babson &
Co. Inc. fees amounting to $374,289 for Portfolio L and $51,562 for
Portfolio S.
HOW SHARE PRICE IS DETERMINED
The net asset value per share of each Fund Portfolio is computed
once daily, Monday through Friday, at the specific time during the day
that the Board of Trustees of the Fund sets at least annually, except
on days on which changes in the value of a Fund's portfolio securities
will not materially affect the net asset value, or days during which
no security is tendered for redemption and no order to purchase or
sell such security is received by the Fund, or the following holidays:
New Year's Day January 1
Presidents' Holiday Third Monday in February
Good Friday Friday before Easter
Memorial Day Last Monday in May
Independence Day July 4
Labor Day First Monday in September
Thanksgiving Day Fourth Thursday in November
Christmas Day December 25
TRUSTEES AND OFFICERS
The Fund is managed by Jones & Babson, Inc. subject to the
supervision and control of the Trustees. Following is a list of the
Officers and Trustees of the Fund. Unless noted otherwise, the
address of each Officer and Trustee is Three Crown Center, 2440
Pershing Road, Suite G-15, Kansas City, Missouri 64108. Except as
indicated, each has been an employee of Jones & Babson, Inc. for more
than five years.
* Larry D. Armel, President and Trustee.
President and Director, Jones & Babson, Inc., David L. Babson Growth
Fund, Inc. , D. L. Babson
Money Market Fund, Inc., D. L. Babson Tax-Free Income Fund, Inc.,
Babson Enterprise Fund, Inc., Babson Enterprise Fund II, Inc., Babson
Value Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., UMB Stock Fund, Inc., UMB Bond Fund, Inc.,
UMB Money Market Fund, Inc., UMB Tax-Free Money Market Fund, Inc., UMB
Heartland Fund, Inc., UMB WorldWide Fund, Inc.; Buffalo Balanced, Fund, Inc.
Francis C. Rood, Trustee.
Retired, 6429 West 92nd Street, Overland Park, Kansas 66212.
Formerly, Group Vice President-Administration, Hallmark Cards, Inc.;
Director, David L. Babson Growth Fund, Inc., D. L. Babson Money Market
Fund, Inc., D. L. Babson Tax-Free Income Fund, Inc., Babson Enterprise
Fund, Inc., Babson Enterprise Fund II, Inc., Babson Value Fund, Inc.,
Shadow Stock Fund, Inc.; Buffalo Balanced Fund, Inc.
William H. Russell, Trustee.
Financial consultant, 645 West 67th Street, Kansas City, Missouri
64113; previously Vice President, United Telecommunications, Inc.;
Director, David L. Babson Growth Fund, Inc., D. L. Babson Money Market
Fund, Inc., D. L. Babson Tax-Free Income Fund, Inc., Babson Enterprise
Fund, Inc. , Babson Enterprise Fund II, Inc., Babson Value Fund Inc.,
Shadow Stock Fund, Inc. and Babson-Stewart Ivory International Fund,
Inc.; Buffalo Balanced Fund, Inc.
H. David Rybolt, Trustee.
Consultant, HDR Associates, P.O. Box 2468, Shawnee Mission, Kansas
66202; Director, David L. Babson Growth Fund, Inc., D.L. Babson Money
Market Fund, Inc., D.L. Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund II, Inc., Babson Value
Fund, Inc., Shadow Stock Fund, Inc.; Buffalo Balanced Fund, Inc.
________________________________
* Trustees who are interested persons as that term is defined in the
Investment Company Act of 1940, as amended.
P. Bradley Adams, Vice President and Treasurer.
Vice President and Treasurer, Jones & Babson, Inc., David L. Babson
Growth Fund, Inc., D.L. Babson Money Market Fund, Inc., D.L. Babson
Tax-Free Income Fund, Inc., Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., Babson Value Fund, Inc., Shadow Stock Fund,
Inc., Babson-Stewart Ivory International Fund, Inc.; UMB Stock Fund,
Inc., UMB Bond Fund, Inc., UMB Money Market Fund, Inc., UMB Tax-Free
Money Market Fund, Inc., UMB Heartland Fund, Inc., UMB WorldWide Fund,
Inc.; Buffalo Balanced Fund, Inc.
Michael A. Brummel, Vice President, Assistant Secretary and
Assistant Treasurer.
Vice President, Jones & Babson, Inc., D.L. Babson Money Market Fund,
Inc., D.L. Babson Tax-Free Income Fund, Inc., Babson Enterprise Fund,
Inc., Babson Enterprise Fund II, Inc., Babson Value Fund, Inc., Shadow
Stock Fund, Inc., Babson-Stewart Ivory International Fund, Inc.; Vice
President, Assistant Secretary and Assistant Treasurer, UMB Stock
Fund, Inc., UMB Bond Fund, Inc., UMB Money Market Fund, Inc., UMB
Tax-Free Money Market Fund, Inc., UMB Heartland Fund, Inc.,UMB
WorldWide Fund, Inc.; Buffalo Balanced Fund, Inc.
Martin A. Cramer, Vice President and Secretary.
Vice President and Secretary, Jones & Babson, Inc., D.L. Babson Money
Market Fund, Inc., D.L. Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund II, Inc., Babson Value
Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc.; UMB Stock Fund, Inc., UMB Bond Fund, Inc.,
UMB Money Market Fund, Inc., UMB Tax-Free Money Market Fund, Inc., UMB
Heartland Fund, Inc., UMB WorldWide Fund, Inc.; Buffalo Balanced Fund, Inc.
Ruth Evans, Vice President.
Vice President, Jones & Babson, Inc., D.L. Babson Money Market Fund,
Inc., D.L. Babson Tax-Free Income Fund, Inc., Babson Enterprise Fund,
Inc., Babson Enterprise Fund II, Inc., Babson Value Fund, Inc., Shadow
Stock Fund, Inc., Babson-Stewart Ivory International Fund, Inc., UMB
Stock Fund, Inc., UMB Bond Fund, Inc., UMB Money Market Fund, Inc.,
UMB Tax-Free Money Market Fund, Inc., UMB Heartland Fund, Inc., UMB
WorldWide Fund, Inc.; Buffalo Balanced Fund, Inc.
Edward L. Martin, Vice President-Portfolio.
Senior Vice President, David L. Babson & Co. Inc., One Memorial Drive,
Cambridge, Massachussetts 02142.; Vice President, D. L. Babson Money
Market Fund, Inc.,D. L. Babson Tax-Free Income Fund, Inc.
None of the Trustees or agents of the Fund will be remunerated by
the Fund for their normal duties and services. Their compensation and
expenses arising out of normal operations will be paid by Jones &
Babson, Inc. under the provisions of the Management Agreement.
Messrs. Rood, Russell and Rybolt have no financial
interest in, nor are they affiliated with, either Jones & Babson, Inc.
or David L. Babson & Co. Inc.
The Audit Committee of the Board of Trustees is composed of
Messrs. Rood, Russell and Rybolt.
The Trustees of the Trust as a group own less than 1% of the Fund.
The Fund will not hold annual meetings except as required by the
Investment Company Act of 1940 and other applicable laws. The Fund is
a common law trust organized under the laws of Missouri. Under the
terms of the Declaration of Trust, a special meeting of shareholders
of the Fund must be held if the Fund receives the written request for
a meeting from the shareholders entitled to cast at least 25 percent
of all the votes entitled to be cast at the meeting. The Fund has
undertaken that its Trustees will call a meeting of shareholders if
such a meeting is requested in writing by the holders of not less than
10% of the outstanding shares of the Fund. To the extent required by
the undertaking, the Fund will assist shareholder communications in
such matters.
CUSTODIAN
The Fund's assets are held for safekeeping by an independent
custodian, UMB Bank, n.a. This means the bank, rather than
the Fund, has possession of the Fund's cash and securities. The
custodian bank is not responsible for the Fund's investment management
or administration. But, as directed by the Fund's Trustees, it
delivers cash to those who have sold securities to the Fund in return
for such securities, and to those who have purchased portfolio
securities from the Fund, it delivers such securities in return for
their cash purchase price. It also collects income directly from
issuers of securities owned by the Fund and holds this for payment to
shareholders after deduction of the Fund's expenses. The custodian is
compensated for its services by the manager. There is no charge to
the Fund.
INDEPENDENT AUDITORS
The Fund's financial statements are audited annually by independent
auditors approved by the trustees each year, and in years in which an
annual meeting is held the trustees may submit their selection of
independent auditors to the shareholders for ratification. Ernst &
Young LLP, One Kansas City Place, 1200 Main Street, Suite 2000, Kansas
City, Missouri 64105, is the Fund's present independent auditors.
Reports to shareholders will be published at least semiannually.
OTHER JONES & BABSON FUNDS
The Fund is one of nine no-load funds comprising the Babson
Mutual Fund Group managed by Jones & Babson, Inc. in association with
its investment counsel, David L. Babson & Co. Inc. The other funds
are:
EQUITY FUNDS
DAVID L. BABSON GROWTH FUND, INC. was organized in 1960 with the
objective of long-term growth of both capital and dividend income
through investment in the common stocks of well-managed companies
which have a record of long term above-average growth of both earnings
and dividends.
BABSON ENTERPRISE FUND, INC. was organized in 1983 with the
objective of long-term growth of capital by investing in a diversified
portfolio of common stocks of smaller, faster-growing companies with
market capital of $15 million to $300 million at the time of purchase.
This Fund is intended to be an investment vehicle for that part of an
investor's capital which can appropriately be exposed to above-average
risk in anticipation of greater rewards. This Fund is currently
closed to new shareholders.
BABSON ENTERPRISE FUND II, INC. was organized in 1991 with the
objective of long-term growth of capital by investing in a diversified
portfolio of common stocks of smaller, faster-growing companies which
at the time of purchase are considered by the Investment Adviser to be
realistically valued in the smaller company sector of the market.
This Fund is intended to be an investment vehicle for that part of an
investor's capital which can appropriately be exposed to above-average
risk in anticipation of greater rewards.
BABSON VALUE FUND, INC. was organized in 1984 with the objective
of 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.
SHADOW STOCK FUND, INC. was organized in 1987 with the objective
of long-term growth of capital that can be exposed to above-average
risk in anticipation of greater-than-average rewards. The Fund
expects to reach its objective by investing in small company stocks
called "Shadow Stocks," i.e., stocks that combine the characteristics
of "small stocks" (as ranked by market capitalization) and "neglected
stocks" (least held by institutions and least covered by analysts).
BABSON-STEWART IVORY INTERNATIONAL FUND, INC. was organized in
1987 with the objective of seeking a favorable total return (from
market appreciation and income) by investing primarily in a
diversified portfolio of equity securities (common stocks and
securities convertible into common stocks) of established companies
whose primary business is carried on outside the United States.
FIXED INCOME FUNDS
D. L. BABSON MONEY MARKET FUND, INC. was organized in 1979 to
provide investors the opportunity to manage their money over the short
term by investing in high-quality 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, INC. was organized in 1979 to
provide shareholders the highest level of regular income exempt from
federal income taxes consistent with investing in quality municipal
securities. It offers three separate high quality portfolios
(including a money market portfolio) which vary as to average length
of maturity.
A prospectus for any of the Funds may be obtained from Jones &
Babson, Inc., Three Crown Center, 2440 Pershing Road, Suite G-15,
Kansas City, Missouri 64108.
Jones & Babson, Inc. also sponsors and manages six mutual funds
which especially seek to provide services to customers of affiliate
banks of UMB Financial Corporation. They are UMB Stock
Fund, Inc., UMB Bond Fund, Inc., UMB Money Market Fund, Inc., UMB
Tax-Free Money Market Fund, Inc., UMB Heartland Fund, Inc. and UMB
WorldWide Fund, Inc.
Jones & Babson, Inc. also sponsors and manages the Buffalo Balanced
Fund, Inc.
FIXED INCOME SECURITIES
DESCRIBED AND RATINGS
Description of Bond Ratings:
Standard & Poor's Corporation (S&P).
AAA - Highest Grade. These securities possess the ultimate degree
of protection as to principal and interest. Marketwise, they move
with interest rates, and hence provide the maximum safety on all
counts.
AA - High Grade. Generally, these bonds differ from AAA issues
only in a small degree. Here too, prices move with the long-term
money market.
A - Upper-medium Grade. They have considerable investment
strength, but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as
safe. They predominately reflect money rates in their market behavior
but, to some extent, also economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in
the A category.
BB, B, CCC, CC - Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the
terms of the obligations. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse conditions.
Moody's Investors Service, Inc. (Moody's).
Aaa - Best Quality. These securities carry the smallest degree of
investment risk and are generally referred to as "gilt-edge."
Interest payments are protected by a large, or by an exceptionally
stable margin, and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such
issues.
Aa - High Quality by All Standards. They are rated lower than
the best bonds because margins of protection may not be as large as in
Aaa securities, fluctuation of protective elements may be of greater
amplitude, or there may be other elements present which make the
long-term risks appear somewhat greater.
A - Upper-medium Grade. Factors giving security to principal and
interest are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have predominantly
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may
be very moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period of
time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
Description of Commercial Paper Ratings:
Moody's . . . Moody's commercial paper rating is an opinion of the
ability of an issuer to repay punctually promissory obligations not
having an original maturity in excess of nine months. Moody's has one
rating - prime. Every such prime rating means Moody's believes that
the commercial paper note will be redeemed as agreed. Within this
single rating category are the following classifications:
Prime - 1 Highest Quality
Prime - 2 Higher Quality
Prime - 3 High Quality
The criteria used by Moody's for rating a commercial paper issuer
under this graded system include, but are not limited to the following
factors:
(1) evaluation of the management of the issuer;
(2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative type risks which may be inherent in certain
areas;
(3) evaluation of the issuer's products in relation to competition
and customer acceptance;
(4) liquidity;
(5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years;
(7) financial strength of a parent company and relationships which
exist with the issuer; and
(8) recognition by the management of obligations which may be present
or may arise as a result of public interest questions and preparations
to meet such obligations.
S&P . . . Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely repayment of debt having an
original maturity of no more than 270 days. Ratings are graded into
four categories, ranging from "A" for the highest quality obligations
to "D" for the lowest. The four categories are as follows:
"A" Issues assigned this highest rating are regarded as having
the greatest capacity for timely payment. Issues in this category are
further refined with the designations 1, 2, and 3 to indicate the
relative degree of safety.
"A-1" This designation indicates that the degree of safety
regarding timely payment is very strong.
"A-2" Capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety is not
as overwhelming.
"A-3" Issues carrying this designation have a satisfactory
capacity for timely payment. They are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designations.
"B" Issues rated "B" are regarded as having only an adequate capacity
for timely payment. Furthermore, such capacity may be damaged by
changing conditions or short-term adversities.
"C" This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
"D" This rating indicates that the issuer is either in default or is
expected to be in default upon maturity.
The Fund may invest a portion of its assets in lower rated
fixed-income securities and unrated securities of comparable quality.
The market values of such securities tend to reflect individual
corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level
of interest rates. Such lower rated securities also tend to be more
sensitive to economic conditions than higher rated securities. These
lower rated fixed-income securities are considered by S&P and Moody's,
on balance, to be predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of
the obligation and will generally involve more credit risk than
securities in the higher rating categories. Even securities rated BBB
or Baa by S&P and Moody's, ratings which are considered investment
grade, possess some speculative characteristics.
The risk of loss due to default by the issuer may be significantly greater
for the holders of high yielding securities, because such securities are
generally unsecured and are often subordinated to other creditors of the
issuer. In addition, since the high yield bond market is relatively new,
its growth has paralleled a long economic expansion, and it has not
weathered a recession in its present size and form. An economic downturn
could disrupt the market for high yield bonds and adversely affect the
value of outstanding bonds and the ability of issuers of such bonds to repay
principal and interest.
The Fund may have difficulty disposing of certain high yielding
securities because there may be a thin trading market for a particular
t as liquid as the secondary market for higher rated securities.
Reduced liquidity in the secondary market may have an adverse impact
on market price and the Fund's ability to dispose of particular
issues, when necessary, to meet the Fund's liquidity needs or in
response to a specific economic event, such as the deterioration in
the creditworthiness of the issuer. Reduced liquidity in the
secondary market for certain securities may also make it more
difficult for the Fund to obtain market quotations based on actual
trades for purposes of valuing the Fund's portfolio.
FINANCIAL STATEMENTS
The audited financial statements of the Fund which are contained in the
November 30, 1994 Annual Report to Shareholders are incorporated herein
by reference.
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
Herewith are all financial statements and exhibits
filed as a part of this registration statement:
Included in Part-A - Prospectus:
Per Share Capital and Income Changes
Included in Part B - Statement of Additional
Information:
The audited financial statements
contained in the most recent Annual
Report to Shareholders of D. L. Babson
Bond Trust are incorporated by reference
into Part B of this Registration
Statement.
Included in Part C - Other Information:
Consent of Independent Public
Accountants
Annual Report to Shareholders of D. L.
Babson Bond trust
(b) *(1) (a) Form of Registrant's Agreement and
Declaration of Trust
(b) Form of Registrant's Supplementary
Agreement and Declaration of Trust
*(2) Form of Registrant's By-laws
(3) Not applicable, because there is no voting
trust agreement
*(4) Specimen copy of each security to be issued
by the registrant
*(5) (a) Form of Management Agreement between
Jones & Babson, Inc. and the Registrant
(b) Form of Investment Counsel Agreement
between Jones & Babson, Inc. and David
L. Babson & Co. Inc.
*(6) Form of principal Underwriting Agreement
between Jones & Babson, Inc. and the
Registrant
(7) Not applicable, because there are no pension,
bonus or other agreements for the benefit of
directors and officers
*(8) Form of Custodian Agreement between
Registrant and United Missouri Bank of Kansas
City, N.A.
(9) There are no other material contracts not
made in the ordinary course of business
between the Registrant and others
(10) Opinion and consent of counsel as to the
legality of the registrant's securities being
registered. (To be supplied annually
pursuant to Rule 24f-2 of the Investment
Company Act of 1940.)
(11) The consent of Ernst & Young LLP,
Independent Public Accountants.
(12) Not applicable.
*(13) Form of letter from contributors of initial
capital to the Registrant that purchase was
made for investment purposes without any
present intention of redeeming or selling.
*(14) Copies of the model plan used in the
establishment of any retirement plan in
conjunction with which Registrant offers its
securities.
(15) Not applicable.
*(16) Schedule for computation of performance
quotations.
*(17) Copies of Powers of Attorney pursuant to Rule
402(c)
* Previously filed on Form N-1 and herein
incorporated by reference
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL OF THE
REGISTRANT.
NONE
Item 26. NUMBER OF HOLDERS OF SECURITIES.
The number of record holders of each class of
securities of the Registrant as of March 10, 1995,
is as follows:
(1) (2)
Title of class Number of Record Holders
Shares of Beneficial Interest 6,200
$0.25 par value Portfolio L -
Shares of Beneficial Interest 1,318
$1.00 par value Portfolio S -
Item 27. INDEMNIFICATION.
Under the terms of the Missouri general trust law and
the company's Agreement and Declaration of Trust, the
company shall indemnify any person who was or is a
trustee, agent or employee of the company to the
maximum extent permitted by the Missouri general law;
provided however, that any such indemnification (unless
ordered by a court) shall be made by the company only
as authorized in the specific case upon a determination
that indemnification of such persons is proper in the
circumstances. Such determination shall be made
(i) by the Trustees by a majority vote of a quorum
which consists of the Trustees who are neither
"interested persons" of the company as defined in
Section 2(a)(19) of the 1940 Act, nor parties to the
proceedings, or
(ii) if the required quorum is not obtainable or if a
quorum of such Trustees so directs, by independent
legal counsel in a written opinion.
No indemnification will be provided by the company to
any Trustee or agent of the company for any liability
to the company or shareholders to which he would
otherwise be subject by reason of willful misfeasance,
bad faith, gross neglegience, or reckless disregard of
duty.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
The principal business of Jones & Babson, Inc. is the
management of the Babson family of mutual funds. It
also has expertise in the tax and pension plan field.
It supervises a number of prototype and profit-sharing
plan programs sponsored by various organizations
eligible to be prototype plan sponsors.
The principal business of David L. Babson & Co., Inc.
is to provide investment counsel and advice to a wide
variety of clients. David L. Babson & Co. Inc. and its
affiliates have $4 billion under management, of which
$2.4 billion is securities and $1.6 billion is real
estate.
Item 29. PRINCIPAL UNDERWRITERS.
(a) Jones & Babson, Inc., the only principal
underwriter of the Registrant, also acts as
principal underwriter for the David L. Babson
Growth Fund, Inc., Babson Enterprise Fund, Inc.,
Babson Enterprise Fund II, Inc., D.L. Babson Money
Market Fund, Inc., D.L. Babson Tax-Free Income
Fund, Inc., Babson Value Fund, Inc., Shadow Stock
Fund, Inc., Babson-Stewart Ivory International
Fund, Inc., UMB Stock Fund, Inc., UMB Bond Fund,
Inc., UMB Money Market Fund, Inc., UMB Tax-Free
Money Market Fund, Inc. and UMB Heartland Fund,
Inc.
(b) Herewith is the information required by the
following table with respect to each director,
officer or partner of the only underwriter named
in answer to Item 21 of Part B:
<TABLE>
<CAPTION>
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
<S> <C> <S>
Stephen S. Soden Chairman and Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Larry D. Armel President and Director President and
Three Crown Center Director
2440 Pershing Road
Kansas City, MO 64108
Giorgio Balzer Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
J. William Sayler Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Edward S. Ritter Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Robert N. Sawyer Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Vernon W. Voorhees Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Richard S. Graber Sr. Vice President - None
Three Crown Center Marketing and Director
2440 Pershing Road, G-15
Kanasas City, MO 64108
P. Bradley Adams Vice President Vice President
Three Crown Center and Treasurer and Treasurer
2440 Pershing Road, G-15
Kanasas City, MO 64108
Michael A Brummel Vice President Vice President
Three Crown Center
2440 Pershing Road, G-15
Kanasas City, MO 64108
Ruth Evans Vice President Vice President
Three Crown Center
2440 Pershing Road, G-15
Kanasas City, MO 64108
Martin A. Cramer Vice President Vice President
Three Crown Center and Secretary and Secretary
2440 Pershing Road, G-15
Kanasas City, MO 64108
</TABLE>
(c) The principal underwriter does not receive any
remuneration or compansation for the duties or
services rendered to the Registrant pursuant to
the principal underwriting Agreement.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
Each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the
Rules (17 CFR 270.31a-1 to 31a-3) promulgated
thereunder is in the physical possession of Jones &
Babson, Inc., at Three Crown Center, 2440 Pershing
Road, G-15, Kansas City, Missouri 64108.
Item 31. MANAGEMENT SERVICES.
All management services are covered in the management
agreement between the Registrant and Jones & Babson,
Inc., which are discussed in Parts A and B.
Item 32. DISTRIBUTION EXPENSES.
Not applicable.
Item 33. UNDERTAKINGS.
Registrant undertakes that, if requested to do so by
the holders of at least 10% of the registrant;s
outstanding shares, to call a meeting of shareholders
for the purpose of voting upon the question of removal
of a trustee or trustees and to assist in
communications with other shareholders as required by
Section 16(c) of the Investment Company Act of 1940, as
amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this amendment to its
registration statement to be signed on its behalf by the
undersigned, thereunto authorized, in the City of Kansas City,
and State of Missouri on the 14th day of March, 1994.
D.L. BABSON BOND TRUST
(Registrant)
By LARRY D. ARMEL
(Larry D. Armel, President)
Pursuant to the requirements of the Securities Act of 1933,
this Post-effective Amendment #94 to the Registration Statement
has been signed below by the following persons in the capacities
and on the date indicated.
LARRY D. ARMEL President, Principal March 17, 1995
Larry D. Armel Executive Officer, and Trustee
FRANCIS C. ROOD Trustee March 17, 1995
Francis C. Rood*
WILLIAM H. RUSSELL Trustee March 17, 1995
William H. Russell*
H. DAVID RYBOLT Trustee March 17, 1995
H. David Rybolt*
P. BRADLEY ADAMS Treasurer and Principal March 17, 1995
P. Bradley Adams Financial and Accounting Officer
*Signed pursuant to Power of Attorney
By LARRY D. ARMEL
Attorney-in Fact
REPRESENTATIONS OF COUNSEL
I assisted in the preparation of this Post Effective Amendment to
the Fund's Registration Statement filed under the Securities Act
of 1933 and the Amendment to the Fund's Registration Statement
filed under the Investment Company Act of 1940. Based on my
review it is my opinion that this amendment does not contain
disclosures which would render it ineligible to become effective
pursuant to paragraph (b) of Rule 485 under the Securities Act of
1933.
JOHN G. DYER Attorney March 17, 19954
John G. Dyer
Exhibit (11)
Consent of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" and "Independent Auditors" and to the incorporation by reference
of our report dated January 6, 1995 in this post-effective amendment to the
Registration Statement (Form N-1A) and related Prospectus of Bond Trust filed
with the Securities and Exchange Commission under the Securities Act of 1933.
Kansas City, Missouri
March 13, 1995
Ernst & Young LLP
Ernst & Young LLP
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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