BABSON
Bond Trust
Semiannual Report
May 31, 1996
JONES & BABSON
MUTUAL FUNDS
MESSAGE
To Our Shareholders
The bond market continues on a seemingly endless rollercoaster ride. For
the last several years, the market has had to cope with dramatic swings
in the general level of interest rates. This, in turn has resulted in
volatile returns for investors in bond mutual funds.
The first half of 1996 was no exception to this recent trend. Since the
beginning of the year intermediate and long-term rates have risen more
than a full percentage point. The sharp rise in rates and attendant drop
in prices reflects the reversal of positive factors that had been built
into the bond market at the end of 1995. At that time, sluggish to
moderate economic growth along with stable prices led market
participants to believe that the Federal Reserve would be in a position
to allow short-term rates to move lower. Though the Fed did cut rates in
January, the economy has gained considerable momentum since then,
raising inflationary concerns and expectations that the Fed's next move
will be to tighten monetary policy. The failure, this past winter, by
Congress to complete a bipartisan package to balance the federal budget,
as formulated last fall, also negatively impacted the market.
For the six and twelve month periods ending May 31, 1996, total
investment returns (price change and reinvested distributions) of Babson
Bond Trust - Portfolio S were 0.3% and 4.7%, respectively. During the
same periods, total investment returns for Portfolio L were -1.1% and
3.7%, respectively.
Average annual compounded total returns for Portfolio S for one year,
five years and the life of the Fund (inception April 19, 1988) as of
June 30, 1996, were 5.17%, 7.18% and 7.65%, respectively. For Portfolio
L, total returns for one, five and ten year periods were 4.43%, 8.13%
and 8.02%, respectively. Performance data contained in this report is
for past periods only. Past performance is not predictive of future
performance. Investment return and share value will fluctuate, and
redemption value may be more or less than original cost.
OUTLOOK
As summer begins, the economy is doing quite well. Leaving the doldrums
of the winter months behind, business activity has accelerated and the
economy is now growing at, or near, a 4% real rate. This is evidenced by
strong employment growth in recent months and real wages and salaries
increasing at a 2.5% to 3% rate. The latter bodes well for consumer
spending continuing on an upward path. The fact that inventories are
lean and need to be replenished also argues that the economy should grow
at a rate above its long-term non-inflationary level of 2% to 2.5% for
at least the near term. The economy's momentum should decelerate as the
second half of the year progresses, in response to the sharp sell off in
the bond market and attendant rise in yields.
The longer the economy grows beyond its productive capacity, the more
the fear of higher inflation will set the bond market on edge. Inflation
remains subdued, but it is no longer on a downward path. Unit labor
costs have begun to move up and with the country having been at full
employment for over a year, mounting wage pressures would not be a
surprise. However, wage inflation is not expected to accelerate at an
alarming pace. Global competition, easier access to cheap labor in other
parts of the world, and progress in controlling the costs of health
benefits should mean that wage inflation only increases at a gradual
rate.
Since the Federal Reserve's primary responsibility is to maintain price
stability, it is expected that it will adopt a tighter monetary policy
sometime over the course of the summer. The big unknown how high do
interest rates need to go to dampen economic activity and thus alleviate
inflationary concerns? So far, the percentage point rise in longer term
rates since the beginning of the year has not meaningfully slowed
demand; however, a point and one-half jump in long-term rates in 1994
did set the stage for slower growth in 1995. Further increases in long-
term interest rates will be minimized the sooner the Fed intervenes to
check inflationary expectations.
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.
Performance in the Trust's portfolios has benefited from their
substantial exposure to high quality corporate bonds. The overall credit
quality of corporate America continues to improve and reflects a healthy
economy and low inflation. This favorable environment for issuers of
corporate debt has translated into a reduction in the yield premium that
investors demand when taking on credit risk. Because corporate bond
yields have narrowed during this period of rising interest rates, the
prices of corporate bonds have not fared as poorly as those of default
free Treasury securities. Overall quality of the portfolios has been
increased since year-end, again reflective of narrow credit quality
spreads. Average portfolio quality is AA. The average maturity for
Portfolio S is 4.5 years and for Portfolio L 8.3 years, after taking
into consideration average life assumptions for mortgages and bonds that
are trading to their call dates.
Activity in the Trust in recent months has focused on diversifying
corporate exposure by adding names to the portfolios and reducing the
impact of market volatility on the portfolios. To help achieve the
latter, the Trust purchased a 30-year SunTrust Bank bond with a put
option in the tenth year. Such a bond gives the holder, i.e. the
investor, the option to sell the bond back to the issuer in 10 years or
continue holding the bond for an additional 20 years. The bond can be
viewed as a 30-year bond with an option to shorten or as a 10-year bond
with an extension option. The value to the option holder increases with
an increase in market volatility.
Other activity included reducing exposure in the ten- year maturity area
after analysis indicated that that section of the yield curve was
overvalued. Issues sold were replaced with a combination of issues
having maturities of seven, eight, and fifteen years. The net effect was
to leave the average maturity unaltered, while increasing the effective
yield of the portfolios.
We appreciate your continued interest and participation in Babson Bond
Trust.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
STATEMENT OF NET ASSETS
May 31, 1996 (unaudited)
<TABLE>
<CAPTION>
PORTFOLIO L
MOODY'S PRINCIPAL MARKET VALUE
RATING DESCRIPTION AMOUNT (NOTE 1-A)
</CAPTION>
<S> <C> <C> <C>
CORPORATE BONDS - 56.06%
BANKS AND FINANCE - 12.92%
Aa3 Associates Corporation North America,
5.44% medium term senior notes, due January 29, 1999 $ 4,500,000 $ 4,369,725
A1 Ford Capital B V,
10.125% notes, due November 15, 2000 2,500,000 2,784,625
A3 General Motors Acceptance Corporation,
6.625% notes, due October 15, 2005 2,900,000 2,728,842
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 2,722,500
Baa3 Green Tree Securitized Net Interest Margin Trust, Series 95-A,
7.25% certificates, due July 15, 2005 800,821 798,619
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 2,400,666
A2 SunTrust Banks, Incorporated,
6.00% subordinate notes, due February 15, 2026 3,000,000 2,727,630
18,800,821 18,532,607
COMMUNICATIONS - 4.27%
Aa1 BellSouth Savings & Employee Stock Ownership Trust,
9.19% medium term notes, due July 1, 2003 1,146,138 1,222,861
Ba1 TCI Communications, Incorporated,
8.65% senior notes, due September 15, 2004 1,050,000 1,062,085
Ba1 Tele Communications, Incorporated,
9.80% debentures, due February 1, 2012 450,000 480,334
Ba1 Tele Communications, Incorporated,
8.75% debentures, due February 15, 2023 1,000,000 937,910
Baa3 Time Warner Entertainment Company LP,
8.375% senior debentures, due March 15, 2023 2,500,000 2,413,925
6,146,138 6,117,115
INDUSTRIALS - 14.41%
A3 Burlington Resources, Incorporated,
6.875% debentures, due February 15, 2026 2,000,000 1,771,240
A3 Cardinal Distribution, Incorporated,
8.00% notes, due March 1, 1997 2,900,000 2,937,584
INDUSTRIALS (Continued)
Baa2 Comdisco, Incorporated,
6.50% notes, due June 15, 2000 $ 5,200,000 $ 5,103,124
A2 Cooper Industries, Incorporated,
7.87% medium term notes, due November 18, 1998 5,000,000 5,127,550
Baa2 Georgia-Pacific Corporation,
9.625% debentures, due March 15, 2022 1,500,000 1,600,440
A3 Lockheed Martin Corporation,
6.85% notes, due May 15, 2001 2,000,000 1,981,220
Baa2 McDonnell Douglas Corporation,
9.75% notes, due April 1, 2012 930,000 1,101,259
A2 Philip Morris Companies, Incorporated,
8.25% notes, due October 15, 2003 1,000,000 1,042,910
20,530,000 20,665,327
TRANSPORTATION - 3.77%
A3 CSX Corporation,
9.50% notes, due August 1, 2000 5,000,000 5,411,750
U.S. DOLLAR DENOMINATED CANADIAN POWER AUTHORITY - 15.29%
Aa2 British Columbia Hydro and Power Authority Series FJ,
15.50% senior debentures, due November 15, 2011 2,450,000 2,712,934
Baa2 Canadian National Railway Company,
7.00% notes, due March 15, 2004 2,600,000 2,486,900
A2 Hydro-Quebec,
8.40% debentures, due January 15, 2022 5,250,000 5,463,098
Baa1 Newfoundland Province of Canada,
8.65% debentures, due October 22, 2022 6,050,000 6,497,579
Aa3 Ontario Province of Canada,
15.75% debentures, due March 15, 2012 4,250,000 4,769,393
20,600,000 21,929,904
UTILITIES - 5.40%
Baa3 Long Island Lighting Company,
8.75% general & refunding bonds, due February 15, 1997 3,500,000 3,552,080
Baa3 United Illuminating Company,
6.20% notes, due January 15, 1999 2,000,000 1,939,880
UTILITIES (Continued)
A2 Virginia Electric & Power Company, Series A,
7.00% 1st & refunding mortgage, due January 1, 2024 $ 2,500,000 $ 2,244,650
8,000,000 7,736,610
TOTAL CORPORATE BONDS - 56.06% 79,076,959 80,393,313
U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES - 43.01% (All rated Aaa)
U.S. GOVERNMENTAL AGENCY - 14.02%
* Government National Mortgage Association,
7.50%, due March 15, 2007 212,967 210,118
* Government National Mortgage Association,
7.50%, due July 15, 2007 327,417 323,036
* Government National Mortgage Association,
8.00%, due October 15, 2007 473,842 481,234
* Government National Mortgage Association,
9.50%, due April 15, 2016 80,482 86,778
* Government National Mortgage Association,
9.50%, due January 15, 2019 217,770 233,759
* Government National Mortgage Association,
8.00%, due May 15, 2022 761,032 766,999
* Government National Mortgage Association,
7.00%, due March 15, 2024 4,660,907 4,454,568
* Government National Mortgage Association,
8.50%, due August 15, 2024 409,998 419,477
* Government National Mortgage Association,
7.50%, due October 15, 2025 12,059,088 11,791,497
Small Business Administration guaranteed development
participation certificates, Series 88-20 G,
9.80% debentures, due July 1, 2008 368,322 401,688
Small Business Administration guaranteed development
participation certificates, Series 88-20 H,
10.05% debentures, due August 1, 2008 407,604 449,550
U.S. GOVERNMENTAL AGENCY (Continued)
Small Business Administration guaranteed development
participation certificates, Series 89-20 D,
10.05% debentures, due April 1, 2009 $ 439,237 $ 486,472
20,418,666 20,105,176
U.S. GOVERNMENT SECURITIES - 18.54%
U.S. Treasury Bonds, 10.375%, due November 15, 2012 3,000,000 3,766,410
U.S. Treasury Bonds, 8.125%, due May 15, 2021 4,300,000 4,762,250
U.S. Treasury Notes, 7.25%, due November 15, 1996 1,200,000 1,209,192
U.S. Treasury Notes, 6.50%, due May 15, 1997 3,000,000 3,017,820
U.S. Treasury Notes, 8.50%, due May 15, 1997 3,000,000 3,072,660
U.S. Treasury Notes, 6.375%, due January 15, 1999 1,000,000 1,000,000
U.S. Treasury Notes, 7.50%, due October 31, 1999 1,400,000 1,440,684
U.S. Treasury Notes, 6.25%, due August 31, 2000 800,000 789,248
U.S. Treasury Notes, 6.25%, due February 15, 2003 2,375,000 2,311,540
U.S. Treasury Notes, 11.125%, due August 15, 2003 2,520,000 3,129,512
U.S. Treasury Notes, 7.50%, due February 15, 2005 2,000,000 2,081,880
24,595,000 26,581,196
*GOVERNMENT SPONSORED ENTERPRISES - 10.45%
Federal Home Loan Mortgage Corporation,
6.30%, due April 8, 1999 3,150,000 3,119,477
Federal Home Loan Mortgage Corporation,
7.61%, due October 20, 1999 3,000,000 3,044,070
Federal Home Loan Mortgage Corporation,
7.75%, due April 1, 2008 439,110 437,999
Federal Home Loan Mortgage Corporation,
7.75%, due November 1, 2008 134,240 133,846
Federal Home Loan Mortgage Corporation,
8.00%, due August 1, 2009 93,586 94,157
Federal Home Loan Mortgage Corporation,
8.25%, due October 1, 2010 653,489 659,305
Federal Home Loan Mortgage Corporation,
9.00%, due June 1, 2016 281,749 291,892
Federal Home Loan Mortgage Corporation, CMO Series 1003-C,
8.50%, due December 15, 2016 717,032 716,452
Federal Home Loan Mortgage Corporation,
8.00%, due October 1, 2018 366,746 368,213
*GOVERNMENT SPONSORED ENTERPRISES (Continued)
Federal Home Loan Mortgage Corporation,
7.50%, due February 1, 2021 $ 1,878,439 $ 1,849,079
Federal Home Loan Mortgage Corporation,
9.00%, due January 1, 2024 176,893 183,474
Federal National Mortgage Association,
7.00%, due December 1, 2007 780,142 762,885
Federal National Mortgage Association,
8.25%, due January 1, 2009 356,704 361,947
Federal National Mortgage Association,
8.00%, due February 1, 2009 445,951 450,143
Federal National Mortgage Association,
conventional mortgage pass-through,
8.50%, due July 1, 2013 135,210 138,049
Federal National Mortgage Association,
CMO Series 88-16B, guaranteed REMIC pass-through,
9.50%, due June 25, 2018 339,563 347,740
Federal National Mortgage Association,
CMO Series 90-52D, REMIC Trust,
9.30%, due May 25, 2019 1,724,355 1,758,842
Federal National Mortgage Association,
9.25%, due October 1, 2020 255,647 266,000
14,928,856 14,983,570
TOTAL U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES - 43.01% 59,942,522 61,669,942
TOTAL INVESTMENTS - 99.07% $ 139,019,481 142,063,255
Other assets less liabilities - 0.93% 1,329,154
TOTAL NET ASSETS - 100.00%
(equivalent to $1.51 per share; 95,116,368 shares outstanding) $ 143,392,409
<FN>
<F1>*Mortgage-backed securities.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF NET ASSETS
May 31, 1996 (unaudited)
<TABLE>
<CAPTION>
PORTFOLIO S
MOODY'S PRINCIPAL MARKET VALUE
RATING DESCRIPTION AMOUNT (NOTE 1-A)
</CAPTION>
<S> <C> <C> <C>
CORPORATE BONDS - 49.35%
BANKS AND FINANCE - 15.69%
Aa3 Associates Corporation North America,
5.44% medium term senior notes, due January 29, 1999 $ 250,000 $ 242,762
A1 Credithrift Financial Corporation,
9.76% medium term notes, due September 18, 1998 150,000 159,140
A3 General Motors Acceptance Corporation,
8.40% notes, due October 15, 1999 800,000 837,224
A3 General Motors Acceptance Corporation,
6.625% notes, due October 15, 2005 700,000 658,686
Aaa Green Tree Financial Corporation,
CMO Series 92-1 REMIC Trust, Cl. A-3,
6.70% manufactured housing certificates, due
October 15, 2017 750,000 742,500
Baa3 Green Tree Securitized Net Interest Margin Trust, Series 94 A,
6.90% certificates, due February 15, 2004 333,014 334,264
Aaa Merrill Lynch Mortgage Investors Incorporated,
Series 92-B REMIC Trust, Cl. A-2,
8.05% manufactured housing certificates, due
April 15, 2012 435,134 438,668
A2 SunTrust Banks, Incorporated,
6.00% subordinate notes, due February 15, 2026 1,000,000 909,210
A2 World Savings & Loan Association, Oakland, California,
10.25% subordinate notes, due October 1, 1997 500,000 523,505
4,918,148 4,845,959
COMMUNICATIONS - 5.20%
Aa1 BellSouth Savings & Employee Stock Ownership Trust,
9.19% medium term notes, due July 1, 2003 528,870 564,273
Baa3 Time Warner Entertainment Company L P,
8.875% senior notes, due October 1, 2012 1,000,000 1,040,180
1,528,870 1,604,453
INDUSTRIALS - 12.89%
A3 Cardinal Distribution, Incorporated,
8.00% notes, due March 1, 1997 850,000 861,016
A3 Cardinal Health, Incorporated,
6.50% notes, due February 15, 2004 650,000 616,330
INDUSTRIALS (Continued)
Baa2 Comdisco, Incorporated,
6.50% notes, due June 15, 2000 $ 1,000,000 $ 981,370
A2 Cooper Industries, Incorporated,
7.87% medium term notes, due November 18, 1998 500,000 512,755
A2 John Deere Capital Corporation,
7.20% notes, due May 15, 1997 500,000 503,910
A3 Lockheed Martin Corporation,
6.85% notes, due May 15, 2001 300,000 297,183
A2 Philip Morris Companies, Incorporated,
8.25% notes, due October 15, 2003 200,000 208,582
4,000,000 3,981,146
TRANSPORTATION - 7.41%
A3 CSX Corporation,
8.25% notes, due November 1, 1996 1,000,000 1,009,120
A3 Hertz Corporation,
9.625% senior notes, due June 15, 1996 250,000 250,273
Baa1 Hertz Corporation,
10.125% senior subordinate notes, due March 1, 1997 1,000,000 1,029,140
2,250,000 2,288,533
U.S. DOLLAR DENOMINATED CANADIAN POWER AUTHORITY - 6.59%
Aa2 British Columbia Hydro and Power Authority, Series FJ,
15.50% senior debentures, due November 15, 2011 750,000 830,490
Baa2 Canadian National Railway Company,
7.00% notes, due March 15, 2004 750,000 717,375
Aa3 Ontario Province of Canada,
7.00% bonds, due August 4, 2005 500,000 488,190
2,000,000 2,036,055
UTILITIES - 1.57%
Baa3 United Illuminating Company,
6.20% notes, due January 15, 1999 500,000 484,970
TOTAL CORPORATE BONDS - 49.35% 15,197,018 15,241,116
U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES - 42.79% (All rated Aaa)
U.S. GOVERNMENTAL AGENCY - 14.00%
* Government National Mortgage Association,
8.00%, due October 15, 2007 $ 34,353 $ 34,889
* Government National Mortgage Association,
9.50%, due September 15, 2019 29,683 31,808
* Government National Mortgage Association,
8.00%, due December 15, 2022 409,930 413,144
* Government National Mortgage Association,
7.00%, due May 15, 2024 932,577 887,404
* Government National Mortgage Association
8.50%, due August 15, 2024 905,075 926,001
* Government National Mortgage Association,
7.50%, due October 15, 2025 2,009,848 1,965,250
Small Business Administration guaranteed development
participation certificates, Series 88-20 G,
9.80% debentures, due July 1, 2008 61,387 66,948
4,382,853 4,325,444
U.S. GOVERNMENT SECURITIES - 22.76%
U.S. Treasury Notes, 8.50%, due May 15, 1997 3,645,000 3,733,281
U.S. Treasury Notes, 7.50%, due October 31, 1999 1,000,000 1,029,060
U.S. Treasury Notes, 6.25%, due February 15, 2003 900,000 875,952
U.S. Treasury Notes, 11.125%, due August 15, 2003 700,000 869,309
U.S. Treasury Notes, 7.50%, due February 15, 2005 500,000 520,470
6,745,000 7,028,072
*GOVERNMENT SPONSORED ENTERPRISES - 6.03%
Federal Home Loan Mortgage Corporation,
6.30%, due April 8, 1999 750,000 742,733
Federal Home Loan Mortgage Corporation,
8.25%, due July 1, 2008 64,533 64,979
Federal Home Loan Mortgage Corporation,
9.00%, due June 1, 2016 216,730 224,532
Federal Home Loan Mortgage Corporation,
8.00%, due May 1, 2017 66,647 66,934
*GOVERNMENT SPONSORED ENTERPRISES (Continued)
Federal Home Loan Mortgage Corporation, CMO Series 130-E,
9.00%, due May 15, 2021 $ 250,000 $ 252,085
Federal National Mortgage Association,
7.00%, due December 1, 2007 144,883 141,679
Federal National Mortgage Association,
8.25%, due January 1, 2009 37,156 37,703
Federal National Mortgage Association,
CMO Series 90-52D, REMIC Trust,
9.30%, due May 25, 2019 188,111 191,874
Federal National Mortgage Association,
9.25%, due August 1, 2022 134,550 140,000
1,852,610 1,862,519
TOTAL U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES - 42.79% 12,980,463 13,216,035
REPURCHASE AGREEMENT - 6.94%
UMB Bank, n.a.,
4.75%, due June 3, 1996
(Collateralized by U.S. Treasury Notes,
7.50%, due December 31, 1996) 2,145,000 2,145,000
TOTAL INVESTMENTS - 99.08% $ 30,322,481 30,602,151
Other assets less liabilities - 0.92% 283,462
TOTAL NET ASSETS - 100.00%
(equivalent to $9.58 per share; 3,224,033 shares outstanding) $ 30,885,613
<FN>
<F1>*Mortgage-backed securities.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
May 31, 1996 (unaudited)
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S
</CAPTION>
<S> <C> <C>
ASSETS:
Investments in securities:
Corporate and general obligation bonds, at market value
(identified cost $81,392,762 [L], $14,764,886 [S]) $ 80,393,313 $ 15,241,116
U.S. governmental agency, government securities and
government sponsored enterprises, at market value
(identified cost $63,827,115 [L], $14,714,528 [S]) 61,669,942 13,216,035
Repurchase agreement, at cost - approximates market value --- 2,145,000
Total investments 142,063,255 30,602,151
Interest receivable 2,035,206 371,701
Other assets 6,337 2,444
Total assets 144,104,798 30,976,296
LIABILITIES AND NET ASSETS:
Cash overdraft 711,430 90,683
Other liabilities 959 ---
Total liabilities 712,389 90,683
NET ASSETS $ 143,392,409 $ 30,885,613
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 150,072,501 $ 33,562,500
Accumulated undistributed income (loss):
Undistributed net investment income 259,884 ---
Undistributed net realized loss on investment transactions (3,783,354) (1,654,624)
Net unrealized appreciation (depreciation) in value of investments (3,156,622) (1,022,263)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 143,392,409 $ 30,885,613
Capital shares outstanding 95,116,368 3,224,033
NET ASSET VALUE PER SHARE $ 1.51 $ 9.58
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1996 (unaudited)
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S
</CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 6,113,705 $ 1,281,685
Expenses (Note 2):
Management fees 734,947 155,182
Voluntary reduction of management fee --- (49,005)
Registration fees and expenses 13,358 2,852
748,305 109,029
Net investment income (Note 1-B) 5,365,400 1,172,656
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 45,207,808 8,638,335
Cost of investments sold 45,349,475 8,791,722
Net realized loss from investment transactions (141,667) (153,387)
Unrealized appreciation (depreciation) of investments:
Beginning of period 3,989,827 (128,020)
End of period (3,156,622) (1,022,263)
Unrealized depreciation of investments during
the period (7,146,449) (894,243)
Net loss on investments (7,288,116) (1,047,630)
Increase (decrease) in net assets resulting
from operations $ (1,922,716) $ 125,026
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
May 31, 1996 Year Ended
(unaudited) November 30, 1995
PORTFOLIO L PORTFOLIO S PORTFOLIO L PORTFOLIO S
</CAPTION>
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 5,365,400 $ 1,172,656 $ 10,575,720 $ 2,274,447
Net realized loss from investment
transactions (141,667) (153,387) (434,426) (393,854)
Unrealized appreciation (depreciation)
of investments during the period (7,146,449) (894,243) 11,720,738 1,834,338
Net increase (decrease)
in net assets resulting
from operations (1,922,716) 125,026 21,862,032 3,714,931
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (5,365,400) (1,172,656) (10,575,720) (2,274,447)
Net realized gain from investment
transactions --- --- --- ---
Total distributions to
shareholders (5,365,400) (1,172,656) (10,575,720) (2,274,447)
INCREASE (DECREASE) FROM CAPITAL SHARE
TRANSACTIONS:*
Proceeds from shares sold 13,504,780 3,079,233 28,428,269 8,583,142
Net asset value of shares issued for
reinvestment of distributions 4,311,071 888,052 8,605,301 1,767,780
17,815,851 3,967,285 37,033,570 10,350,922
Cost of shares repurchased (27,785,681) (5,186,290) (28,063,464) (9,107,392)
Net increase (decrease) from
capital share transactions (9,969,830) (1,219,005) 8,970,106 1,243,530
Total increase
(decrease) in
net assets (17,257,946) (2,266,635) 20,256,418 2,684,014
NET ASSETS:
Beginning of period 160,650,355 33,152,248 140,393,937 30,468,234
End of period (including undistributed
net investment income of $259,884 [L]
and $-- [S], respectively) $ 143,392,409 $ 30,885,613 $ 160,650,355 $ 33,152,248
*Shares issued and repurchased:
Number of shares sold 8,645,080 313,649 18,628,982 881,030
Number of shares issued for
reinvestment of distributions 2,783,906 90,826 5,616,146 181,863
11,428,986 404,475 24,245,128 1,062,893
Number of shares repurchased (17,907,203) (530,357) (18,376,617) (943,557)
Net increase (decrease) (6,478,217) (125,882) 5,868,511 119,336
**Distributions to shareholders:
Income dividends per share $ .0539 $ .3514 $ .1076 $ .7257
Capital gains distribution per share $ --- $ --- $ --- $ ---
</TABLE>
See accompanying Notes to Financial Statements.
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 - 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, 1995 to May 31, 1996, 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, 1996 (excluding
maturities of short-term commercial notes and repurchase agreements) are
as follows:
Portfolio L
Purchases $ 39,277,081
Proceeds from sales 45,207,808
Portfolio S
Purchases $ 6,254,871
Proceeds from sales 8,638,335
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.
EQUITIES
Growth Fund
Enterprise Fund*
Enterprise Fund II
Value Fund
Shadow Stock Fund
International Fund
FIXED INCOME
Bond Trust
Money Market Fund
Tax-Free Income Fund
*Closed to new investors.
JONES & BABSON
MUTUAL FUNDS
2440 Pershing Road
Kansas City, MO 64108-2518
816-471-5200
1-800-4-BABSON
(1-800-422-2766)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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