MESSAGE
To Our Shareholders
Shareholders of the Trust benefited from a significant decline in the general
level of interest rates over the course of 1995. The powerful bond market
rally, one of the strongest on record, reflects a period of moderate economic
growth and a stable price environment. The absence of inflationary pressures
has been the primary force behind the bond market's strength; however, strong
institutional demand for bonds, especially by insurance companies, and
prospects for meaningful federal budget reform have also helped to fuel the
rally.
Total investment return (price change and reinvested distributions) for
Portfolio S in fiscal 1995 was 13.1%. Monthly dividends totaled $0.725 per
share, producing an income yield of 7.69% based on a beginning net asset
value of $9.43.
For the 1995 fiscal year, total investment return on Portfolio L was 15.3%.
Aggregate monthly dividends were $0.107 per share, producing an income yield
of 7.31% based on a beginning net asset value of $1.47.
During 1995 interest rates across the maturity spectrum dropped by
approximately 20%, producing the biggest bull market in bonds in the last ten
years and more than offsetting the record setting slump in 1994. Intermediate
and long-term issues, due to their greater price sensitivity for a given
change in interest rates, profited the most from the decline in yields.
Within the investment grade universe, corporate bonds turned in the best
performance. Quality yield spreads, narrow at the beginning of the year,
contracted further and today are at their narrowest level in a long time.
In a business environment characterized by low inflation and moderate
economic growth, several years of strong earnings, ongoing cost reductions
in corporate America and mergers financed with equity or only modest leverage,
investors have been willing to accept a smaller yield premium on corporates
when assuming credit risk. The general improvement in credit quality is
reflected in the fact that quality rating upgrades by nationally recognized
rating agencies have outnumbered downgrades for 1995 as a whole.
Mortgage issues' performance lagged compared to the rest of the major sectors
of the bond market. This is not surprising in a setting of falling interest
rates, given the refinancing risk inherent in all mortgages. Also negatively
impacting performance and causing mortgage yield spreads to widen relative to
Treasuries and corporates was less demand for mortgages by financial
institutions. Because regulators and rating agencies are now establishing
guidelines for risk-based capital ratios and are stress testing the
sensitivity of mortgages (particularly complex collateralized mortgage
obligation structures) to changes in interest rates, mortgages are not as
attractive relative to other investment alternatives to certain investors.
OUTLOOK
After a robust advance in 1994, total U.S. economic growth decelerated in the
past year. Currently the economy is growing below its long-term non-
inflationary level of approximately 2.5%.
Several factors were responsible for the moderate pace of economic growth
last year: the Federal Reserve's policy of monetary restraint; the dampening
effect of fairly high consumer indebtedness; and a substantial buildup of
inventories which began in the second half of 1994, holding down production
of new goods as 1995 progressed. Inventories are probably still too high and
until they are brought under better control, the manufacturing sector of the
economy will be sluggish.
At the start of the new year, growth will remain below trend; however, aside
from inventories, there are not any obvious excesses in the economy of the
type that typically cause business recessions. Risks to this outlook are a
weakening in export growth due to tepid economic conditions in Europe and
Japan and a greater than expected slowing in capital spending. Capital
spending has been robust and underpinning the economy for several years and
as a result, coupled with softening demand, productive capacity has been
growing. The need for new fixed investment by businesses is much less today
than a year ago.
As we move through the year, the economy should benefit from the effects of
lower interest rates, consumer wealth generated from the rise in the stock
market and a bounceback in government spending. Due to the budget impasse in
Washington, the federal government has been operating under continuing budget
resolutions that have had the effect of dampening discretionary government
spending in recent months. This fiscal drag should end once a budget accord
is reached. The proposed deficit reduction plans, which call for a balanced
budget by the year 2002, merely stabilize the deficit for the next year and
would not result in actual reductions until fiscal 1998.
The Federal Reserve recently moved gingerly toward the side of easing, with a
.25% reduction in the short-term rates it controls. Today's flat yield curve
is indicative of further easing in 1996 anticipated by investors. Long-term
rates are at their lowest levels in two years. With inflation well controlled
and only moderate economic growth expected, long rates could move lower. The
likelihood of a major selloff in the bond market, similar to what occurred in
1994 after the 1993 rally, seems remote due to the fact that inflationary
expectations are actually declining and in general there is less leverage in
the financial system compared to the outset of 1994.
INVESTMENT POLICY
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.
Average credit quality for both Portfolio S and Portfolio L is higher than a
year ago and reflects several rating upgrades to existing holdings and a
preference to own higher rated issues in an environment of narrow yield
spreads. Corporate holdings in the Trust upgraded over the course of 1995
were Cardinal Health and GMAC.
The Trust's portfolios are prudently diversified across Treasuries, federal
agency-backed mortgages, asset-backed securities, U.S. Dollar pay Canadians
and high- quality corporates. Names that were added to the portfolios in 1995
were Browning Ferris, Delta Air Lines, Virginia Electric Power, and Canadian
National Railway.
Exposure to mortgage issues was increased during the year, after mortgage
yield spreads relative to Treasury and corporate yields widened due to the
negative impact falling interest rates had on the mortgage sector. Mortgages
currently represent 25% of both portfolios.
The average maturity for Portfolio S is 4.2 years and for Portfolio L 8.0
years, after taking into consideration average life assumptions for mortgages
and bonds that are trading to their call dates.
Sincerely,
Larry D. Armel
President
Babson Bond Trust, Portfolio _ L versus Lehman Brothers Aggregate Bond Index
Babson Bond Trust, Portfolio _ S versus Lehman Brothers Intermediate Gov't./
Corp. Index
Average annual compounded total returns for Portfolio L for one, five and ten
year periods as of November 30, 1995, were 15.28%, 9.17% and 9.05%,
respectively. For Portfolio S, total returns for one year, five years and the
life of the Fund (inception April 19, 1988) were 13.10%, 8.18% and 8.07%,
respectively. Performance data contained in this report is for past periods
only. Past performance is not predictive of future performance. Investment
return and share value will fluctuate, and redemption value may
be more or less than original cost.
<PAGE>
STATEMENT OF NET ASSETS
November 30, 1995
<TABLE>
<CAPTION>
PORTFOLIO L
MARKET
MOODY'S PRINCIPAL VALUE
RATING DESCRIPTION AMOUNT COST (NOTE 1-A)
</CAPTION>
<S> <C> <C> <C> <C>
CORPORATE BONDS _ 54.91%
BANKS AND FINANCE _ 14.17%
A1 Chemical Bank New York,
5.9805% subordinated notes,
due July 29, 2003 $ 4,650,000 $ 4,641,863 $ 4,557,000
A3 First Union Corporation,
6.0469% notes, due July 22, 2003 2,500,000 2,495,000 2,450,000
A1 Ford Capital B V,
10.125% notes, due November 15, 2000 2,500,000 3,029,690 2,919,150
A3 General Motors Acceptance Corporation,
8.60% medium term notes,
due April 12, 1996 2,000,000 1,994,560 2,014,680
A3 General Motors Acceptance Corporation,
7.85% medium term notes,
due November 17, 1997 4,500,000 4,436,370 4,666,950
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 2,741,562 2,792,955
Aaa Green Tree Securitized Net Interest
Margin Trust, Series 95-A,
7.25% certificates, due July 15, 2005 907,099 906,674 915,880
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 2,340,453 2,450,603
22,157,099 22,586,172 22,767,218
COMMUNICATIONS _ 4.04%
Aa1 BellSouth Savings & Employee Stock
Ownership Trust,
9.19% medium term notes,
due July 1, 2003 1,199,326 1,306,965 1,336,601
Baa3 Tele Communications, Incorporated,
7.25% senior notes, due August 1, 2005 1,500,000 1,448,362 1,500,825
Baa3 Tele Communications, Incorporated,
8.75% debentures, due February 15, 2023 1,000,000 1,026,130 1,026,130
Baa3 Time Warner Entertainment Company L P,
8.375% senior debentures,
due March 15, 2023 2,500,000 2,697,700 2,633,100
6,199,326 6,479,157 6,496,656
INDUSTRIALS _ 11.48%
A3 Cardinal Distribution, Incorporated,
8.00% notes, due March 1, 1997 2,900,000 2,916,850 2,960,813
Baa2 Comdisco, Incorporated,
9.75% notes, due January 15, 1997 6,500,000 7,083,208 6,763,510
A2 Cooper Industries, Incorporated,
7.87% medium term notes,
due November 18, 1998 5,000,000 5,000,000 5,269,150
Baa2 Georgia-Pacific Corporation,
9.625% debentures, due March 15, 2022 3,000,000 3,179,190 3,452,820
17,400,000 18,179,248 18,446,293
RETAILING _ 1.07%
Baa3 K mart Corporation,
13.50% lease certificates,
due January 1, 2009 $ 1,500,000 $ 1,549,215 $ 1,717,470
TRANSPORTATION _ 4.15%
A3 CSX Corporation,
9.50% notes, due August 1, 2000 5,000,000 5,350,145 5,669,850
Baa2 Delta Air Lines Incorporated Del.,
Series 92-E,
8.54% equipment trust certificates,
due January 2, 2007 938,448 988,796 995,562
5,938,448 6,338,941 6,665,412
U.S. DOLLAR DENOMINATED CANADIAN SECURITIES _ 14.98%
Aa2 British Columbia Hydro and Power Authority,
Series FJ,
15.50% senior debentures,
due November 15, 2011 2,450,000 3,022,012 2,819,411
Baa2 Canadian National Railway Company,
7.00% notes, due March 15, 2004 2,600,000 2,513,124 2,663,492
A2 Hydro-Quebec,
8.40% debentures, due January 15, 2022 5,250,000 5,177,363 5,918,325
Aa3 Ontario Province of Canada,
15.75% debentures, due March 15, 2012 4,250,000 5,242,585 4,983,040
A3 Saskatchewan Province of Canada,
9.375% debentures,
due December 15, 2020 6,050,000 7,100,552 7,673,034
20,600,000 23,055,636 24,057,302
UTILITIES _ 5.02%
Baa3 Long Island Lighting Company,
8.75% general & refunding bonds,
due February 15, 1997 3,500,000 3,584,070 3,601,010
Baa3 United Illuminating Company,
6.20% notes, due January 15, 1999 2,000,000 2,000,000 1,982,160
A2 Virginia Electric & Power Company,
Series A,
7.00% 1st & refunding mortgage,
due January 1, 2024 2,500,000 2,174,786 2,480,375
8,000,000 7,758,856 8,063,545
TOTAL CORPORATE BONDS _ 54.91% 81,794,873 85,947,225 88,213,896
U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES _ 41.68% (All rated Aaa)
U.S. GOVERNMENTAL AGENCY _ 13.46%
Government National Mortgage Association,
7.50%, due March 15, 2007 $ 229,722 $ 206,319 $ 235,718
Government National Mortgage Association,
7.50%, due July 15, 2007 344,032 308,755 353,012
Government National Mortgage Association,
8.00%, due October 15, 2007 518,273 487,176 542,165
Government National Mortgage Association,
9.50%, due April 15, 2016 99,250 99,788 107,066
Government National Mortgage Association,
9.50%, due January 15, 2019 290,496 289,134 312,646
Government National Mortgage Association,
8.00%, due May 15, 2022 814,237 799,733 843,891
Government National Mortgage Association,
7.00%, due March 15, 2024 4,783,028 4,684,378 4,793,455
Government National Mortgage Association,
8.50%, due August 15, 2024 455,753 459,883 475,834
Government National Mortgage Association,
7.50%, due October 15, 2025 12,230,400 12,427,233 12,482,591
Small Business Administration guaranteed
development participation certificates,
Series 88-20 G,
9.80% debentures, due July 1, 2008 381,957 381,957 439,140
Small Business Administration guaranteed
development participation certificates,
Series 88-20 H,
10.05% debentures, due August 1, 2008 417,780 417,780 485,966
Small Business Administration guaranteed
development participation certificates,
Series 89-20 D,
10.05% debentures, due April 1, 2009 476,291 476,290 557,246
21,041,219 21,038,426 21,628,730
U.S. GOVERNMENT SECURITIES _ 19.20%
U.S. Treasury Bonds,
10.375%, due November 15, 2012 3,000,000 4,072,094 4,092,180
U.S. Treasury Bonds,
8.125%, due May 15, 2021 4,300,000 5,093,148 5,305,813
U.S. Treasury Notes,
7.25%, due November 15, 1996 1,200,000 1,220,438 1,219,872
U.S. Treasury Notes,
6.50%, due May 15, 1997 3,000,000 2,977,031 3,045,480
U.S. Treasury Notes,
8.50%, due May 15, 1997 3,000,000 3,349,688 3,128,430
U.S. GOVERNMENT SECURITIES (Continued)
U.S. Treasury Notes,
6.375%, due January 15, 1999 $ 1,000,000 $ 1,013,906 $ 1,025,780
U.S. Treasury Notes,
7.50%, due October 31, 1999 5,000,000 5,283,984 5,342,950
U.S. Treasury Notes,
6.25%, due August 31, 2000 800,000 818,875 822,496
U.S. Treasury Notes,
6.25%, due February 15, 2003 3,400,000 3,370,198 3,512,098
U.S. Treasury Notes,
11.125%, due August 15, 2003 2,520,000 3,112,988 3,352,784
27,220,000 30,312,350 30,847,883
GOVERNMENT SPONSORED ENTERPRISES _ 9.02%
Federal Home Loan Mortgage Corporation,
7.61%, due October 20, 1999 3,000,000 3,001,875 3,108,750
Federal Home Loan Mortgage Corporation,
7.75%, due April 1, 2008 495,041 447,857 499,596
Federal Home Loan Mortgage Corporation,
7.75%, due November 1, 2008 160,294 152,174 162,089
Federal Home Loan Mortgage Corporation,
8.00%, due August 1, 2009 112,394 106,275 114,574
Federal Home Loan Mortgage Corporation,
8.25%, due October 1, 2010 717,697 652,961 731,118
Federal Home Loan Mortgage Corporation,
9.00%, due June 1, 2016 314,622 329,271 326,987
Federal Home Loan Mortgage Corporation,
CMO Series 1003-C,
8.50%, due December 15, 2016 2,085,893 2,061,122 2,093,110
Federal Home Loan Mortgage Corporation,
8.00%, due October 1, 2018 418,163 423,226 428,074
Federal Home Loan Mortgage Corporation,
7.50%, due February 1, 2021 1,926,860 1,873,872 1,968,403
Federal Home Loan Mortgage Corporation,
9.00%, due January 1, 2024 198,663 208,471 207,206
Federal National Mortgage Association,
7.00%, due December 1, 2007 854,956 816,986 855,127
Federal National Mortgage Association,
8.25%, due January 1, 2009 384,292 373,126 393,707
Federal National Mortgage Association,
8.00%, due February 1, 2009 487,981 469,894 499,594
GOVERNMENT SPONSORED ENTERPRISES (Continued)
Federal National Mortgage Association,
conventional mortgage pass-through,
8.50%, due July 1, 2013 $ 155,008 $ 130,449 $ 159,224
Federal National Mortgage Association,
CMO Series 88-16B, guaranteed REMIC
pass-through,
9.50%, due June 25, 2018 383,076 364,880 400,782
Federal National Mortgage Association,
CMO Series 90-52D, REMIC Trust,
9.30%, due May 25, 2019 2,171,653 2,153,566 2,220,494
Federal National Mortgage Association,
9.25%, due August 1, 2020 301,507 320,163 314,652
14,168,100 13,886,168 14,483,487
TOTAL U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES _ 41.68% 62,429,319 65,236,944 66,960,100
REPURCHASE AGREEMENT _ 2.16%
UMB Bank, n.a.,
5.40%, due December 1, 1995
(Collateralized by
$3,534,263 U.S. Treasury Notes,
7.625%, due April 30, 1996) 3,465,000 3,465,000 3,465,000
TOTAL INVESTMENTS _ 98.75% $ 147,689,192 $ 154,649,169 158,638,996
Other assets less liabilities _ 1.25% 2,011,359
TOTAL NET ASSETS _ 100.00%
(equivalent to $1.58 per share;
101,594,585 shares outstanding) $ 160,650,355
</TABLE>
For federal income tax purposes, the identified cost of investments owned at
November 30, 1995 was $154,649,169.
Net unrealized appreciation for federal income tax purposes was $3,989,827,
which is comprised of unrealized appreciation of $5,325,399 and unrealized
depreciation of $1,335,572.
*Mortgage-backed securities.
Ratings are not covered by the report of independent auditors.
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF NET ASSETS
November 30, 1995
PORTFOLIO S
<TABLE>
<CAPTION>
MARKET
MOODY'S PRINCIPAL VALUE
RATING DESCRIPTION AMOUNT COST (NOTE 1-A)
<S> <C> <C> <C> <C>
CORPORATE BONDS _ 57.42%
BANKS AND FINANCE _ 14.31%
A1 Credithrift Financial Corporation,
9.76% medium term notes,
due September 18, 1998 $ 150,000 $ 151,484 $ 164,516
A3 First Union Corporation,
6.0468% notes, due July 22, 2003 1,200,000 1,194,127 1,176,000
A3 General Motors Acceptance Corporation,
8.60% medium term notes,
due April 12, 1996 100,000 99,728 100,734
A3 General Motors Acceptance Corporation,
7.85% medium term notes,
due November 17, 1997 250,000 246,465 259,275
A3 General Motors Acceptance Corporation,
8.40% notes, due October 15, 1999 800,000 837,116 865,184
Aaa Green Tree Financial Corporation,
CMO Series 92-1 REMIC Trust, Cl. A-3,
6.70% manufactured housing certificates,
due October 15, 2017 750,000 748,008 761,715
Baa3 Green Tree Securitized Net Interest
Margin Trust, Series 94-A,
6.90% certificates, due February 15, 2004 375,032 374,122 374,679
Aaa Merrill Lynch Mortgage Investors Incorporated,
Series 92-B REMIC Trust, Cl. A-2,
8.05% manufactured housing certificates,
due April 15, 2012 500,000 499,375 507,185
A2 World Savings & Loan Association,
Oakland, California,
10.25% subordinated notes,
due October 1, 1997 500,000 582,590 536,075
4,625,032 4,733,015 4,745,363
COMMUNICATIONS _ 5.20%
Aa1 BellSouth Savings & Employee Stock
Ownership Trust,
9.19% medium term notes, due July 1, 2003 553,477 604,959 616,828
NR Time Warner Entertainment Company L P,
8.875% senior notes, due October 1, 2012 1,000,000 1,139,733 1,105,100
1,553,477 1,744,692 1,721,928
INDUSTRIALS _ 14.81%
A2 Browning Ferris Industries, Incorporated,
7.875% notes, due March 15, 2005 950,000 988,574 1,054,490
A3 Cardinal Distribution, Incorporated,
8.00% notes, due March 1, 1997 850,000 858,306 867,825
A3 Cardinal Health, Incorporated,
6.50% notes, due February 15, 2004 650,000 634,083 651,150
Baa2 Comdisco, Incorporated,
9.75% notes, due January 15, 1997 1,250,000 1,373,048 1,300,675
A2 Cooper Industries, Incorporated,
7.87% medium term notes,
due November 18, 1998 500,000 500,000 526,915
INDUSTRIALS (Continued)
A2 John Deere Capital Corporation,
7.20% notes, due May 15, 1997 $ 500,000 $ 499,650 $ 508,995
4,700,000 4,853,661 4,910,050
TRANSPORTATION _ 9.42%
A3 CSX Corporation,
8.25% notes, due November 1, 1996 1,000,000 1,024,330 1,021,320
Baa2 Delta Air Lines Incorporated Del.,
Series 92-E,
8.54% equipment trust certificates,
due January 2, 2007 750,758 790,731 796,449
Baa1 Hertz Corporation,
10.125% senior subordinated notes,
due March 1, 1997 1,000,000 1,055,310 1,048,950
A3 Hertz Corporation,
9.625% senior notes, due June 15, 1996 250,000 263,063 254,523
3,000,758 3,133,434 3,121,242
U.S. DOLLAR DENOMINATED CANADIAN SECURITIES _ 9.13%
Aa2 British Columbia Hydro and Power Authority,
Series FJ,
15.50% senior debentures,
due November 15, 2011 750,000 1,062,368 863,085
Baa2 Canadian National Railway Company,
7.00% notes, due March 15, 2004 750,000 731,581 768,315
Aa3 Ontario Province of Canada,
7.00% bonds, due August 4, 2005 500,000 499,106 521,575
Aa3 Ontario Province of Canada,
15.125% debentures, due May 1, 2011 800,000 933,553 873,312
2,800,000 3,226,608 3,026,287
UTILITIES _ 4.55%
Baa3 Long Island Lighting Company,
8.75% general & refunding bonds,
due May 1, 1996 1,000,000 1,023,120 1,013,670
Baa3 United Illuminating Company,
6.20% notes, due January 15, 1999 500,000 500,000 495,540
1,500,000 1,523,120 1,509,210
TOTAL CORPORATE BONDS _ 57.42% 18,179,267 19,214,530 19,034,080
U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES _ 38.76% (All rated Aaa)
U.S. GOVERNMENTAL AGENCY _ 14.66%
Government National Mortgage Association,
8.00%, due October 15, 2007 $ 37,575 $ 36,460 $ 39,307
Government National Mortgage Association,
9.50%, due September 15, 2019 32,156 31,123 34,581
Government National Mortgage Association,
8.00%, due December 15, 2022 424,736 419,595 439,870
Government National Mortgage Association,
7.00%, due May 15, 2024 963,616 943,741 965,716
Government National Mortgage Association,
8.50%, due August 15, 2024 1,174,808 1,185,454 1,226,570
Government National Mortgage Association,
7.50%, due October 15, 2025 2,038,401 2,071,206 2,080,433
Small Business Administration guaranteed
development participation certificates,
Series 88-20 G,
9.80% debentures, due July 1, 2008 63,659 63,660 73,190
4,734,951 4,751,239 4,859,667
U.S. GOVERNMENT SECURITIES _ 20.30%
U.S. Treasury Notes, 8.50%,
due May 15, 1997 3,645,000 4,069,870 3,801,042
U.S. Treasury Notes, 7.50%,
due October 31, 1999 1,000,000 1,056,796 1,068,590
U.S. Treasury Notes, 6.25%,
due February 15, 2003 900,000 824,519 929,673
U.S. Treasury Notes, 11.125%,
due August 15, 2003 700,000 864,718 931,329
6,245,000 6,815,903 6,730,634
GOVERNMENT SPONSORED ENTERPRISES _ 3.80%
Federal Home Loan Mortgage Corporation,
8.25%, due July 1, 2008 73,338 70,038 74,438
Federal Home Loan Mortgage Corporation,
9.00%, due June 1, 2016 242,017 253,287 251,528
Federal Home Loan Mortgage Corporation,
8.00%, due May 1, 2017 67,200 62,069 68,807
Federal Home Loan Mortgage Corporation,
CMO Series 130-E,
9.00%, due May 15, 2021 250,000 250,859 258,085
Federal National Mortgage Association,
7.00%, due December 1, 2007 158,778 151,823 158,809
Federal National Mortgage Association,
8.25%, due January 1, 2009 40,030 38,855 41,011
GOVERNMENT SPONSORED ENTERPRISES (Continued)
Federal National Mortgage Association,
CMO Series 90-52D, REMIC Trust,
9.30%, due May 25, 2019 $ 236,908 $ 235,813 $ 242,236
Federal National Mortgage Association,
9.25%, due October 1, 2020 158,688 168,506 165,607
1,226,959 1,231,250 1,260,521
TOTAL U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES _ 38.76% 12,206,910 12,798,392 12,850,822
REPURCHASE AGREEMENT _ 3.48%
UMB Bank, n.a.,
5.40%, due December 1, 1995
(Collateralized by
$1,178,088 U.S. Treasury Notes,
7.625%, due April 30, 1996) 1,155,000 1,155,000 1,155,000
TOTAL INVESTMENTS _ 99.66% $ 31,541,177 $ 33,167,922 33,039,902
Other assets less liabilities _ 0.34% 112,346
TOTAL NET ASSETS _ 100.00%
(equivalent to $9.90 per share;
3,349,915 shares outstanding) $ 33,152,248
</TABLE>
For federal income tax purposes, the identified cost of investments owned at
November 30, 1995 was $33,167,922.
Net unrealized depreciation for federal income tax purposes was $128,020,
which is comprised of unrealized appreciation of $608,458 and unrealized
depreciation of $736,478.
*Mortgage-backed securities.
Ratings are not covered by the report of independent auditors.
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
November 30, 1995
PORTFOLIO L PORTFOLIO S
ASSETS:
Investments in securities:
Corporate and general obligation bonds,
at market value (identified cost
$85,947,225 [L], $19,214,530 [S]) $ 88,213,896 $ 19,034,080
U.S. governmental agency, government
securities and government sponsored
enterprises, at market value (identified cost
$65,236,944 [L], $12,798,392 [S]) 66,960,100 12,850,822
Repurchase agreement, at cost _
approximates market value 3,465,000 1,155,000
Total investments 158,638,996 33,039,902
Interest receivable 2,423,786 411,658
Total assets 161,062,782 33,451,560
LIABILITIES AND NET ASSETS:
Cash overdraft 260,127 45,097
Payable for investments purchased 152,300 254,215
Total liabilities 412,427 299,312
NET ASSETS $ 160,650,355 $ 33,152,248
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 160,042,331 $ 34,781,505
Accumulated undistributed income (loss):
Undistributed net investment income 259,884 _
Undistributed net realized loss on
investment transactions (3,641,687) (1,501,237)
Net unrealized appreciation
(depreciation) in value of investments 3,989,827 (128,020)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 160,650,355 $ 33,152,248
Capital shares outstanding 101,594,585 3,349,915
NET ASSET VALUE PER SHARE $ 1.58 $ 9.90
<PAGE>
STATEMENT OF OPERATIONS
Year Ended November 30, 1995
PORTFOLIO L PORTFOLIO S
INVESTMENT INCOME:
Income:
Interest $ 12,028,674 $ 2,477,693
Expenses (Note 2):
Management fees 1,425,821 289,394
Voluntary reduction of management fee _ (91,989)
Registration fees and expenses 27,133 5,841
1,452,954 203,246
Net investment income (Note 1-B) 10,575,720 2,274,447
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 71,286,514 16,749,034
Cost of investments sold 71,720,940 17,142,888
Net realized loss from investment
transactions (434,426) (393,854)
Unrealized appreciation (depreciation)
of investments:
Beginning of year (7,730,911) (1,962,358)
End of year 3,989,827 (128,020)
Unrealized appreciation of investments
during the year 11,720,738 1,834,338
Net gain on investments 11,286,312 1,440,484
Increase in net assets resulting from
operations $ 21,862,032 $ 3,714,931
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
For The Two Years Ended November 30, 1995
<TABLE>
<CAPTION>
1995 1994
PORTFOLIO L PORTFOLIO S PORTFOLIO L PORTFOLIO S
</CAPTION>
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 10,575,720 $ 2,274,447 $ 10,427,952 $ 2,408,234
Net realized loss from investment transactions (434,426) (393,854) (3,218,360) (1,112,752)
Unrealized appreciation (depreciation)
of investments during the year 11,720,738 1,834,338 (12,094,931) (2,071,566)
Net increase (decrease) in net assets
resulting from operations 21,862,032 3,714,931 (4,885,339) (776,084)
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (10,575,720) (2,274,447) (10,427,952) (2,408,234)
Net realized gain from investment transactions _ _
(4,852,549) (537,830)
Total distributions to shareholders (10,575,720) (2,274,447) (15,280,501) (2,946,064)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 28,428,269 8,583,142 25,936,916 10,416,809
Net asset value of shares issued for
reinvestment of distributions 8,605,301 1,767,780 12,685,786 2,325,321
37,033,570 10,350,922 38,622,702 12,742,130
Cost of shares repurchased (28,063,464) (9,107,392) (40,186,981) (15,006,959)
Net increase (decrease) from capital
share transactions 8,970,106 1,243,530 (1,564,279) (2,264,829)
Total increase (decrease) in net assets 20,256,418 2,684,014 (21,730,119) (5,986,977)
NET ASSETS:
Beginning of year 140,393,937 30,468,234 162,124,056 36,455,211
End of year (including undistributed
net investment income of $259,884 [L]
and $-- [S] in 1995 and 1994) $ 160,650,355 $ 33,152,248 $ 140,393,937 $ 30,468,234
Shares issued and repurchased:
Number of shares sold 18,628,982 881,030 16,757,796 1,034,050
Number of shares issued for
reinvestment of distributions 5,616,146 181,863 8,086,634 233,819
24,245,128 1,062,893 24,844,430 1,267,869
Number of shares repurchased (18,376,617) (943,557) (25,961,874) (1,517,422)
Net increase (decrease) 5,868,511 119,336 (1,117,444) (249,553)
Distributions to shareholders:
Income dividends per share $ .1076 $ .7257 $ .1075 $ .6936
Capital gains distribution per share $ _ $ _ $ .0505 $ .1509
</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.
At November 30, 1995, Portfolio L and S have an accumulated net realized loss
on sales of investments for federal income tax purposes of $3,641,687
(expiring $3,218,360 in 2002 and $423,327 in 2003) and $1,501,237 (expiring
$1,112,752 in 2002 and $388,485 in 2003), respectively, which are available
to offset future taxable gains.
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 five years ended
November 30, 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 year ended November 30, 1995 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Portfolio L
Purchases $ 79,540,517
Proceeds from sales 71,286,514
Portfolio S
Purchases $ 17,836,784
Proceeds from sales 16,749,034
<PAGE>
FINANCIAL HIGHLIGHTS
PORTFOLIO L
Condensed data for a share of capital stock outstanding throughout each year.
<TABLE>
<CAPTION>
Years Ended November 30,
1995 1994 1993 1992 1991
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.47 $ 1.67 $ 1.62 $ 1.60 $ 1.53
Income from investment operations:
Net investment income .108 .108 .116 .124 .130
Net gains or losses on securities
(both realized and unrealized) .110 (.149) .061 .020 .071
Total from investment operations .218 (.041) .177 .144 .201
Less distributions:
Dividends from net investment income (.108) (.108) (.116) (.124) (.131)
Distributions from capital gains _ (.051) (.011) _ _
Total distributions (.108) (.159) (.127) (.124) (.131)
Net asset value, end of year $ 1.58 $ 1.47 $ 1.67 $ 1.62 $ 1.60
Total return 15% (3)% 11% 9% 14%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 161 $ 140 $ 162 $ 142 $ 114
Ratio of expenses to average net assets .97% .97% .98% .99% .98%
Ratio of net investment income to average
net assets 7.06% 6.95% 7.00% 7.67% 8.42%
Portfolio turnover rate 50% 40% 80% 54% 75%
</TABLE>
FINANCIAL HIGHLIGHTS
Condensed data for a share of capital stock outstanding throughout each year.
<TABLE>
<CAPTION>
PORTFOLIO S
Years Ended November 30,
1995 1994 1993 1992 1991
</CAPTION> <C> <C> <C> <C> <C>
<S>
Net asset value, beginning of year $ 9.43 $10.48 $10.33 $10.30 $ 9.85
Income from investment operations:
Net investment income .726 .694 .718 .753 .808
Net gains or losses on securities
(both realized and unrealized) .470 (.899) .207 .054 .450
Total from investment operations 1.196 (.205) .925 .807 1.258
Less distributions:
Dividends from net investment income (.726) (.694) (.718) (.753) (.808)
Distributions from capital gains _ (.151) (.057) (.024) _
Total distributions (.726) (.845) (.775) (.777) (.808)
Net asset value, end of year $ 9.90 $ 9.43 $10.48 $10.33 $ 10.30
Total return 13% (2)% 9% 8% 13%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 33 $ 30 $ 36 $ 31 $ 14
Ratio of expenses to average net assets .67% .67% .68% .67% .66%
Ratio of net investment income to
average net assets 7.47% 7.02% 6.80% 7.22% 7.98%
Ratio of expenses to average net assets before
voluntary reduction of management fee .97% .97% .98% .97% .96%
Portfolio turnover rate 57% 42% 147% 47% 60%
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
The Board of Trustees and Shareholders of
D.L. Babson Bond Trust:
We have audited the accompanying statement of assets and liabilities,
including the statements of net assets, of D.L. Babson Bond Trust (comprised
of Portfolio L and Portfolio S) as of November 30, 1995, the related
statements of operations for the year then ended, changes in net assets for
each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments owned as of November 30, 1995, by correspondence with the
custodian. As to securities relating to uncompleted transactions, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the portfolios comprising the D.L. Babson Bond Trust at November 30,
1995, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended in
conformity with generally accepted accounting principles.
Kansas City, Missouri
December 28, 1995
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.
<TABLE> <S> <C>
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</TABLE>
