Babson
Bond Trust
Semiannual Report
May 31, 1995
MESSAGE
To Our Shareholders
What a difference a new year makes! After struggling through 1994 - one of
the worst years on record, the bond market has come storming back in the
first half of 1995. The powerful bond rally reflects a marked slowing in the
economy's growth rate and the attendant reduction of inflationary pressures
and credit demands that go along with an environment where business activity
is weakening. Since the beginning of the year, intermediate-term interest
rates have fallen nearly two percentage points and long-term rates are down
one and one half percentage points.
For the six month period ending May 31, 1995, total investment return (price
change and reinvested distributions) of Babson Bond Trust - Portfolio S was
8.3%. Dividends for the preceding twelve months amounted to $0.70604 a share,
resulting in a yield of 7.25% on a beginning net asset value of $9.75.
During the same six month period, total investment return for Portfolio L was
10%. Dividends for the past twelve months came to $0.1069 a share, producing
a yield of 7.03% on a beginning net asset value of $1.52. Performance data
contained in this report is for past periods only. Past performance is not
predictive of future performance. Investment return and share value will
fluctuate, and redemption value may be more or less than original cost.
OUTLOOK
Interest rates have declined steadily since the beginning of the year, as it
has become progressively clear that the economy is losing momentum. After
growing at a pace in excess of 5% during the fourth quarter of 1994, real
economic growth slowed to slightly under 3% for the first quarter of 1995 and
is currently expanding at a rate below the economy's long-term,
non-inflationary growth potential of 2.5%.
The Federal Reserve has yet to react to the slowing economy and the
significant decline in the general level of interest rates by lowering the
rates it controls. Market action is suggesting that there is a high risk that
the so called "soft landing" scenario will turn into a recession. As so often
is the case, the Fed finds itself in a difficult position. In contrast to last
year, when the Fed was tightening monetary policy in order to bring growth
back to the economy's long-term potential, it now must decide whether to ease
policy to insure that the pace of business activity does not stay below growth
potential for an extended period of time. Favoring easing is the fact that
there are few signs inflation is about to accelerate. Labor costs remain well
behaved, and the recent drop in interest rates has reduced pricing pressures.
However, the Fed knows that lower rates can have a positive self-correcting
influence on the economy and it does not want to be in the position of having
to cool off an overheating economy later this year or in early 1996- the
beginning of the presidential election season.
Currently the economy is going through an inventory correction. Last year's
spike in interest rates has dampened consumption, most noticeably in the
interest rate sensitive auto and housing sectors. Because of this, production
got ahead of demand, which in turn has forced cut backs in the manufacturing
sector. However, the likelihood of a major inventory correction leading to
mass layoffs and recession seems low at this juncture. Consumer confidence
remains high and overall inventory-to-sales levels are not out of line.
Corporations continue to show strengthened balance sheets and register
productivity improvements, both of which reduce the risk of businesses
overreacting quickly to a slowdown in sales. Capital investment spending,
which has been underpinning this economic cycle, remains strong.
PORTFOLIO REVIEW
The primary objectives of Babson Bond Trust are to attain a favorable total
return over the long run, provide a high level of income and maintain
reasonable stability of principal.
The average quality for both Portfolio S and Portfolio L is Aa. The Trust's
portfolios are prudently diversified across Treasuries, federal agency-backed
mortgages, asset-backed securities and corporates. The average maturity for
Portfolio S is 4.6 years and for Portfolio L 8.6 years, after taking into
consideration average life assumptions for mortgages and bonds that are
trading to their call dates.
The sunny skies that one hopes for, as we commence the summer season, have
prevailed all year long for financial assets. In the wake of the spectacular
rally, taking profits, going into cash and then sitting on the beach for the
summer would be tempting if one were a market timer. Not being timers, we
continue to look for value within the bond market.
The drop in interest rates has been accompanied by market volatility and
heightened corporate issuance. Maturity structuring has proved difficult
due to the increased volatility, especially in the two to ten year maturity
area. The Treasury yield curve is relatively flat from three months out to
five years, but since the beginning of the year, the curve between five and
thirty years has steepened a fair amount.
Activity in the portfolios has included increasing exposure to the mortgage-
backed sector, which we believe offers value relative to corporate debt.
Federal agency debt, callable in two and three years, also has been added to
the portfolios. After valuing the issuers' call option rights, these bonds
were attractive when compared to other short-term alternatives.
On an historical basis, corporate yield spreads remain tight and because of
this we have been reluctant to take on much additional exposure in this
sector. However, we have added selective corporate names, one of which is
Delta Air Lines.
The airline industry hit bottom at the start of the decade due to a worldwide
recession, sharp increases in fuel prices, terrorism-related declines in the
number of air travelers and excessive new plane deliveries. Such a disastrous
combination of events sparked a drastic restructuring. Within the past few
years companies announced their transition plans and began scaling back
capacity and cutting expenses. Since 1992, domestic carriers' net profit
margins have been increasing while the ratio of debt and leases to revenues
has been declining. The industry is expected to report a net profit for the
first time in several years. Delta Air Lines developed an effective cost
reduction plan to improve its competitiveness by lowering unit costs and
improving earnings and cash flows and continues to meet its specific goals.
We appreciate your continued interest and participation in Babson Bond Trust.
Sincerely,
Larry D. Armel
President
<PAGE>
STATEMENT OF NET ASSETS
May 31, 1995 (unaudited)
PORTFOLIO L
MOODY'S PRINCIPAL MARKET VALUE
RATING DESCRIPTION AMOUNT (NOTE 1-A)
CORPORATE BONDS - 56.31%
BANKS AND FINANCE - 14.08%
A2 Chemical Bank New York,
6.25% subordinate notes, due July 29, 2003 $ 4,650,000 $ 4,533,750
A3 First Union Corporation,
6.375% notes, due July 22, 2003 2,500,000 2,443,750
A1 Ford Capital B V,
10.125% notes, due November 15, 2000 2,500,000 2,861,350
Bbb1 General Motors Acceptance Corporation,
8.60% medium term notes, due April 12, 1996 2,000,000 2,032,320
Bbb1 General Motors Acceptance Corporation,
7.85% medium term notes,
due November 17, 1997 4,500,000 4,634,505
Aa General Motors Acceptance Corporation,
12.375% mortgage pass-through,
due September 1, 1998 5,127 5,511
Aaa Green Tree Financial Corporation,
CMO Series 92-1 REMIC Trust, Cl. A-3,
6.70% manufactured housing certificates,
due October 15, 2017 2,750,000 2,757,727
Aaa Merrill Lynch Mortgage Investors Incorporated,
Series 92-B REMIC Trust, Cl. A-3,
8.30% manufactured housing certificates,
due April 15, 2012 2,350,000 2,452,061
21,255,127 21,720,974
COMMUNICATIONS - 3.48%
Aa1 BellSouth Savings & Employee Stock Ownership Trust,
9.19% medium term notes, due July 1, 2003 1,226,069 1,356,743
Baa3 TCI Communications, Incorporated,
8.65% senior notes, due September 15, 2004 1,500,000 1,568,295
Baa3 Time Warner Entertainment Company L P,
8.375% senior debentures, due March 15, 2023 2,500,000 2,446,500
5,226,069 5,371,538
INDUSTRIALS - 9.35%
A3 Cardinal Distribution, Incorporated,
8.00% notes, due March 1, 1997 2,400,000 2,451,240
Baa2 Comdisco, Incorporated,
9.75% notes, due January 15, 1997 3,250,000 3,415,035
A3 Cooper Industries, Incorporated,
7.87% medium term notes,
due November 18, 1998 5,000,000 5,216,550
INDUSTRIALS (Continued)
Baa2 Georgia-Pacific Corporation,
9.625% debentures, due March 15, 2022 3,000,000 3,341,760
13,650,000 14,424,585
RETAILING - 2.15%
Baa2 Fruit of the Loom, Incorporated,
7.375% debentures, due November 15, 2023 1,700,000 1,567,791
Baa2 Kmart Corporation,
13.50% lease certificates,
due January 1, 2009 1,500,000 1,750,275
3,200,000 3,318,066
TRANSPORTATION - 3.63%
A3 CSX Corporation,
9.50% notes, due August 1, 2000 5,000,000 5,591,350
U.S. DOLLAR DENOMINATED CANADIAN SECURITIES - 16.74%
A1 Bell Telephone of Canada,
13.375% debentures, due October 15, 2010 1,460,000 1,570,420
Aa2 British Columbia Hydro and Power Authority,
Series FJ, 15.50% senior debentures,
due November 15, 2011 2,450,000 2,902,662
A1 Canadian National RY Company,
7.00% notes, due March 15, 2004 1,750,000 1,744,960
A3 Hydro-Quebec,
8.40% debentures, due January 15, 2022 3,500,000 3,752,525
A3 Hydro-Quebec, Series DY
10.75% debentures, due June 15, 2010 3,250,000 3,374,540
Aa3 Ontario Province of Canada,
15.75% debentures, due March 15, 2012 4,250,000 5,116,235
A3 Saskatchewan Province of Canada,
9.375% debentures, due December 15, 2020 6,050,000 7,359,946
22,710,000 25,821,288
UTILITIES - 6.88%
B3 Columbia Gas System, Incorporated, Series B,
9.62% medium term notes, due June 15, 2005 2,500,000 2,697,905
Baa3 Long Island Lighting Company,
8.75% general & refunding bonds,
due February 15, 1997 3,500,000 3,614,205
UTILITIES (Continued)
Baa3 United Illuminating Company,
6.20% notes, due January 15, 1999 2,000,000 1,946,060
A2 Virginia Electric & Power Company, Series A,
7.00% 1st & refunding mortgage,
due January 1, 2024 2,500,000 2,354,525
10,500,000 10,612,695
TOTAL CORPORATE BONDS - 56.31% 81,541,196 86,860,496
U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES - 39.53% (All rated Aaa)
U.S. GOVERNMENTAL AGENCY - 6.14%
*Government National Mortgage Association,
7.00%, due June 19, 1995 5,000,000 4,896,875
*Government National Mortgage Association,
7.50%, due March 15, 2007 249,000 254,753
*Government National Mortgage Association,
7.50%, due July 15, 2007 358,711 366,997
*Government National Mortgage Association,
8.00%, due October 15, 2007 571,444 598,302
*Government National Mortgage Association,
9.50%, due April 15, 2016 104,814 111,266
*Government National Mortgage Association,
9.50%, due January 15, 2019 299,632 316,699
*Government National Mortgage Association,
8.00%, due May 15, 2022 891,411 913,411
*Government National Mortgage Association,
8.50%, due August 15, 2024 477,803 496,017
Small Business Administration guaranteed development
participation certificates, Series 88-20 G,
9.80% debentures, due July 1, 2008 399,489 450,576
Small Business Administration guaranteed development
participation certificates, Series 88-20 H,
10.05% debentures, due August 1, 2008 449,865 513,575
Small Business Administration guaranteed development
participation certificates, Series 89-20 D,
10.05% debentures, due April 1, 2009 484,555 555,755
9,286,724 9,474,226
U.S. GOVERNMENT SECURITIES - 20.90%
U.S. Treasury Bonds, 10.375%, due November 15, 2012 $ 4,885,000 $ 6,429,099
U.S. Treasury Notes, 6.50%, due May 15, 1997 3,000,000 3,034,680
U.S. Treasury Notes, 8.50%, due May 15, 1997 3,000,000 3,144,360
U.S. Treasury Notes, 7.875%, due April 15, 1998 2,000,000 2,100,320
U.S. Treasury Notes, 6.25%, due February 15, 2003 5,800,000 5,791,822
U.S. Treasury Notes, 11.125%, due August 15, 2003 2,520,000 3,288,600
U.S. Treasury Notes, 9.25%, due February 15, 2016 4,850,000 6,178,464
U.S. Treasury Strips, 0.00%, due August 15, 2020 13,005,000 2,273,404
39,060,000 32,240,749
GOVERNMENT SPONSORED ENTERPRISES - 12.49%
Federal Home Loan Mortgage Corporation,
7.61%, due October 20, 1999 3,000,000 3,078,750
Federal Home Loan Mortgage Corporation,
7.75%, due April 1, 2008 518,579 521,172
Federal Home Loan Mortgage Corporation,
7.75%, due November 1, 2008 184,786 185,562
Federal Home Loan Mortgage Corporation,
8.00%, due August 1, 2009 116,371 118,024
Federal Home Loan Mortgage Corporation,
8.25%, due October 1, 2010 771,319 782,195
Federal Home Loan Mortgage Corporation,
9.00%, due June 1, 2016 349,429 362,462
Federal Home Loan Mortgage Corporation,
CMO Series 1003-C,
8.50%, due December 15, 2016 3,064,180 3,097,733
Federal Home Loan Mortgage Corporation,
8.00%, due October 1, 2018 440,115 447,773
Federal Home Loan Mortgage Corporation,
7.50%, due February 1, 2021 2,000,512 2,016,136
Federal Home Loan Mortgage Corporation,
9.00%, due January 1, 2024 212,803 221,358
Federal National Mortgage Association,
6.40%, due January 13, 2004 3,000,000 2,855,625
Federal National Mortgage Association,
7.00%, due December 1, 2007 930,128 921,394
Federal National Mortgage Association,
8.25%, due January 1, 2009 416,389 424,758
GOVERNMENT SPONSORED ENTERPRISES (Continued)
Federal National Mortgage Association,
8.00%, due February 1, 2009 547,412 556,827
Federal National Mortgage Association,
conventional mortgage pass-through,
8.50%, due July 1, 2013 176,631 181,171
Federal National Mortgage Association,
CMO Series 88-16B, guaranteed REMIC pass-through,
9.50%, due June 25, 2018 424,743 458,706
Federal National Mortgage Association,
CMO Series 90-52D, REMIC Trust,
9.30%, due May 25, 2019 2,582,387 2,688,291
Federal National Mortgage Association,
9.25%, due October 1, 2020 324,831 338,441
19,060,615 19,256,378
TOTAL U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES - 39.53% 67,407,339 60,971,353
REPURCHASE AGREEMENT - 1.26%
UMB Bank, n.a.,
5.60%, due June 1, 1995
(Collateralized by U.S. Treasury Notes,
7.50%, due February 29, 1996) 1,950,000 1,950,000
TOTAL INVESTMENTS - 97.10% $ 150,898,535 149,781,849
Other assets less liabilities - 2.90% 4,470,112
TOTAL NET ASSETS - 100.00%
(equivalent to $1.56 per share;
98,997,858 shares outstanding) $ 154,251,961
*Mortgage-backed securities.
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF NET ASSETS
May 31, 1995 (unaudited)
PORTFOLIO S
MOODY'S PRINCIPAL MARKET VALUE
RATING DESCRIPTION AMOUNT (NOTE 1-A)
CORPORATE BONDS - 58.06%
BANKS AND FINANCE - 15.81%
A1 Credithrift Financial Corporation,
9.76% medium term notes,
due September 18, 1998 $ 150,000 $ 164,103
A3 First Union Corporation,
6.375% notes, due July 22, 2003 1,200,000 1,173,000
Bbb1 General Motors Acceptance Corporation,
8.60% medium term notes,
due April 12, 1996 100,000 101,616
Bbb1 General Motors Acceptance Corporation,
7.85% medium term notes,
due November 17, 1997 250,000 257,473
Bbb1 General Motors Acceptance Corporation,
8.40% notes, due October 15, 1999 800,000 848,200
Aaa Green Tree Financial Corporation,
CMO Series 92-1 REMIC Trust, Cl. A-3,
6.70% manufactured housing certificates,
due October 15, 2017 750,000 752,108
Baa3 Green Tree Securitized Net Interest Margin
Trust, Series 94 A,
6.90% certificates, due February 15, 2004 375,532 370,601
Aaa Merrill Lynch Mortgage Investors Incorporated,
Series 92-B REMIC Trust, Cl. A-2,
8.05% manufactured housing certificates,
due April 15, 2012 500,000 508,905
Aaa Security Pacific Acceptance Corporation,
Series 92-2 REMIC Trust, Cl. A-1,
5.55% manufactured housing contract
senior/subordinate,
due June 15, 2012 54,860 54,672
A2 World Savings & Loan Association
Oakland California,
10.25% subordinate notes,
due October 1, 1997 500,000 539,370
4,680,392 4,770,048
COMMUNICATIONS - 5.52%
Aa1 BellSouth Savings & Employee
Stock Ownership Trust,
9.19% medium term notes,
due July 1, 2003 565,785 626,086
Baa3 Time Warner Entertainment Company L P,
8.875% senior notes, due October 1, 2012 1,000,000 1,039,340
1,565,785 1,665,426
INDUSTRIALS - 13.96%
A2 Browning Ferris Industries, Incorporated,
7.875% notes, due March 15, 2005 $ 700,000 $ 749,434
A3 Cardinal Distribution, Incorporated,
8.00% notes, due March 1, 1997 600,000 612,810
Baa1 Cardinal Health, Incorporated,
6.50% notes, due February 15, 2004 550,000 533,890
Baa2 Comdisco, Incorporated,
9.75% notes, due January 15, 1997 750,000 788,085
A3 Cooper Industries, Incorporated,
7.87% medium term notes,
due November 18, 1998 500,000 521,655
A1 Georgia Power Company, Series 2,
6.03% first mortgage remarketed,
due July 1, 2032 500,000 499,715
A2 John Deere Capital Corporation,
7.20% notes, due May 15, 1997 500,000 507,755
4,100,000 4,213,344
TRANSPORTATION - 4.37%
A3 Hertz Corporation,
9.625% senior notes, due June 15, 1996 250,000 257,602
Baa1 Hertz Corporation,
10.125% senior subordinate notes,
due March 1, 1997 1,000,000 1,059,760
1,250,000 1,317,362
U.S. DOLLAR DENOMINATED CANADIAN SECURITIES - 13.43%
Aa2 British Columbia Hydro and Power
Authority, Series FJ,
15.50% senior debentures,
due November 15, 2011 750,000 888,570
A1 Canadian National RY Company,
7.00% notes, due March 15, 2004 500,000 498,560
A3 Hydro-Quebec, Series DY,
10.75% debentures, due June 15, 2010 1,200,000 1,245,984
Aa3 Ontario Province of Canada,
7.375% bonds, due January 27, 2003 500,000 517,085
Aa3 Ontario Province of Canada,
15.125% debentures, due May 1, 2011 800,000 903,544
3,750,000 4,053,743
UTILITIES - 4.97%
Baa3 Long Island Lighting Company,
8.75% general & refunding bonds,
due May 1, 1996 $ 1,000,000 $ 1,013,670
Baa3 United Illuminating Company,
6.20% notes, due January 15, 1999 500,000 486,515
1,500,000 1,500,185
TOTAL CORPORATE BONDS - 58.06% 16,846,177 17,520,108
U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES - 38.85% (All rated Aaa)
U.S. GOVERNMENTAL AGENCY - 9.48%
*Government National Mortgage Association,
7.00%, due June 9, 1995 1,000,000 979,375
*Government National Mortgage Association,
8.00%, due October 15, 2007 41,430 43,377
*Government National Mortgage Association,
9.50%, due September 15, 2019 33,437 35,278
*Government National Mortgage Association,
8.00%, due December 15, 2022 449,053 460,135
*Government National Mortgage Association,
8.50%, due August 15, 2024 1,221,043 1,267,589
Small Business Administration guaranteed development
participation certificates, Series 88-20 G,
9.80% debentures, due July 1, 2008 66,582 75,096
2,811,545 2,860,850
U.S. GOVERNMENT SECURITIES - 21.64%
U.S. Treasury Notes, 8.50%, due May 15, 1997 3,645,000 3,820,397
U.S. Treasury Notes, 6.25%, due February 15, 2003 1,800,000 1,797,462
U.S. Treasury Notes, 11.125%, due August 15, 2003 700,000 913,500
6,145,000 6,531,359
GOVERNMENT SPONSORED ENTERPRISES - 7.73%
Federal Home Loan Mortgage Corporation,
8.25%, due July 1, 2008 $ 78,391 $ 79,315
Federal Home Loan Mortgage Corporation,
9.00%, due June 1, 2016 268,791 278,817
Federal Home Loan Mortgage Corporation,
8.00%, due May 1, 2017 67,731 68,808
Federal Home Loan Mortgage Corporation,
CMO Series 130-E,
9.00%, due May 15, 2021 250,000 267,798
Federal National Mortgage Association,
6.40%, due January 13, 2004 1,000,000 951,875
Federal National Mortgage Association,
7.00%, due December 1, 2007 172,738 171,116
Federal National Mortgage Association,
8.25%, due January 1, 2009 43,374 44,246
Federal National Mortgage Association,
CMO Series 90-52D, REMIC Trust,
9.30%, due May 25, 2019 281,715 293,268
Federal National Mortgage Association,
9.25%, due October 1, 2020 170,963 178,127
2,333,703 2,333,370
TOTAL U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES - 38.85% 11,290,248 11,725,579
TOTAL INVESTMENTS - 96.91% $ 28,136,425 29,245,687
Other assets less liabilities - 3.09% 933,271
TOTAL NET ASSETS - 100.00%
(equivalent to $9.84 per share;
3,065,870 shares outstanding) $ 30,178,958
*Mortgage-backed securities.
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
May 31, 1995 (unaudited)
PORTFOLIO L PORTFOLIO S
ASSETS:
Investments in securities:
Corporate and general obligation bonds, at
market value (identified cost $85,891,888
[L], $17,449,803 [S]) $ 86,860,496 $ 17,520,108
U.S. governmental agency, government securities
and government sponsored enterprises, at market
value (identified cost $58,871,268 [L],
$12,160,482 [S]) 60,971,353 11,725,579
Repurchase agreement, at cost - approximates
market value 1,950,000 --
Total investments 149,781,849 29,245,687
Interest receivable 3,583,547 640,088
Receivable for investments sold 5,979,660 1,500,234
Other assets 13,048 1,171
Total assets 159,358,104 31,387,180
LIABILITIES AND NET ASSETS:
Cash overdraft 209,268 228,847
Payable for investments purchased 4,896,875 979,375
Total liabilities 5,106,143 1,208,222
NET ASSETS $ 154,251,961 $ 30,178,958
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 156,009,507 $ 31,993,105
Accumulated undistributed income (loss):
Undistributed net investment income 259,884 --
Undistributed net realized loss on investment
transactions (5,086,123) (1,449,549)
Net unrealized appreciation (depreciation) in
value of investments 3,068,693 (364,598)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $154,251,961 $ 30,178,958
Capital shares outstanding 98,997,858 3,065,870
NET ASSET VALUE PER SHARE $ 1.56 $ 9.84
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1995 (unaudited)
PORTFOLIO L PORTFOLIO S
INVESTMENT INCOME:
Income:
Interest $ 5,897,93 $ 1,200,748
Expenses (Note 2):
Management fees 684,196 95,408
Registration fees and expenses 16,342 3,339
700,538 98,747
Net investment income (Note 1-B) 5,197,397 1,102,001
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized loss from investment transactions
(excluding maturities of short-term commercial
notes and repurchase agreements):
Proceeds from sales of investments 35,482,732 12,316,633
Cost of investments sold 37,350,495 12,653,430
Net realized loss from investment
transactions (1,867,763) (336,797)
Unrealized appreciation (depreciation)
of investments:
Beginning of period (7,730,911) (1,962,358)
End of period 3,068,693 (364,598)
Unrealized appreciation of investments
during the period 10,799,604 1,597,760
Net gain on investments 8,931,841 1,260,963
Increase in net assets resulting from
operations $ 14,129,238 $ 2,362,964
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
May 31, 1995 Year Ended
(unaudited) November 30, 1994
PORTFOLIO L PORTFOLIO S PORTFOLIO L PORTFOLIO S
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 5,197,397 $ 1,102,001 $ 10,427,952 $ 2,408,234
Net realized loss from investment transactions (1,867,763) (336,797) (3,218,360) (1,112,752)
Unrealized appreciation (depreciation) of investments
during the period 10,799,604 1,597,760 (12,094,931) (2,071,566)
Net increase (decrease) in net assets
resulting from operations 14,129,238 2,362,964 (4,885,339) (776,084)
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (5,197,397) (1,102,001) (10,427,952) (2,408,234)
Net realized gain from investment transactions -- -- (4,852,549) (537,830)
Total distributions to shareholders (5,197,397) (1,102,001) (15,280,501) (2,946,064)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 13,532,644 3,039,848 25,936,916 10,416,809
Net asset value of shares issued for
reinvestment of distributions 4,239,534 864,088 12,685,786 2,325,321
17,772,178 3,903,936 38,622,702 12,742,130
Cost of shares repurchased (12,845,995) (5,454,175) (40,186,981) (15,006,959)
Net increase (decrease) from capital share
transactions 4,926,183 (1,550,239) (1,564,279) (2,264,829)
Total increase (decrease) in net assets 13,858,024 (289,276) (21,730,119) (5,986,977)
NET ASSETS:
Beginning of period 140,393,937 30,468,234 162,124,056 36,455,211
End of period (including undistributed
net investment income of $259,884 [L] and
$-- [S], respectively) $154,251,961 $ 30,178,958 $140,393,937 $ 30,468,234
Shares issued and repurchased:
Number of shares sold 9,077,666 317,510 16,757,796 1,034,050
Number of shares issued for
reinvestment of distributions 2,823,807 89,978 8,086,634 233,819
11,901,473 407,488 24,844,430 1,267,869
Number of shares repurchased (8,629,689) (572,197) (25,961,874) (1,517,422)
Net increase (decrease) 3,271,784 (164,709) (1,117,444) (249,553)
Distributions to shareholders:
Income dividends per share $ .0538 $ .3585 $ .1075 $ .6936
Capital gains distribution per share $ -- $ -- $ .0505 $ .1509
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The Trust is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company of the Series type.
Its shares are currently issued in two Series with each Series, in effect,
representing a separate Fund. The Trust is required to account for the assets
of each Series separately and to allocate general liabilities of the Trust to
each Series based upon the net asset value of each Series. The following is a
summary of significant accounting policies consistently followed by the Trust
in the preparation of its financial statements.
A. Security Valuation _ Debt securities (other than short-term obligations),
including listed issues, are valued at market on the basis of valuations
provided by an independent pricing service or by utilizing matrix pricing
techniques. Short-term obligations are valued at amortized cost, which
constitutes fair value as determined by the Trust's Board of Trustees.
B. Federal and State Taxes _ It is the Trust's policy to comply with
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of each Series' taxable income to its
shareholders. Therefore, no provision for federal or state tax is required.
C. Other _ As is common in the industry, security transactions are accounted
for on the date the securities are purchased or sold. Distributions to
shareholders are recorded on the ex-dividend date. Realized gains and losses
from investment transactions and unrealized appreciation and depreciation of
investments are reported on the identified cost basis. Discounts and premiums
on securities are generally not amortized.
2. MANAGEMENT FEES:
Management fees for services which include administration, trustees' and
agents' compensation and all other operating expenses of the Trust except
the cost of acquiring and disposing of portfolio securities, the taxes, if
any, imposed directly on the Trust and its shares and the cost of qualifying
the Trust's shares for sale in any jurisdiction are paid to Jones & Babson,
Inc. These fees are based on average daily net assets of Portfolio L and
Portfolio S, at the annual rate of .95 of 1%, except during the period
December 1, 1994 to May 31, 1995, when the fee for Portfolio S was reduced to
an annual rate of .65 of 1% of the average daily net asset value of the
portfolio. Certain officers and/or trustees of the Trust are officers and/or
directors of Jones & Babson, Inc.
3. INVESTMENT TRANSACTIONS:
Investment transactions for the period ended May 31, 1995 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Portfolio L
Purchases $ 38,922,953
Proceeds from sales 35,482,732
Portfolio S
Purchases $ 10,977,724
Proceeds from sales 12,316,633
This report has been prepared for the information of the Shareholders of
D.L. Babson Bond Trust and is not to be construed as an offering of the
shares of the Fund. Shares of this Fund and of the other Babson Funds are
offered only by the Prospectus, a copy of which may be obtained from Jones &
Babson, Inc.
