BABSON
BOND TRUST
Semiannual Report
May 31, 1997
JONES & BABSON
MUTUAL FUNDS
MESSAGE
TO OUR SHAREHOLDERS
After 1997's rocky start, the bond market turned around, thanks to a late
spring rally that drove interest rates down, erasing a majority of this year's
earlier increases.
At the beginning of the second quarter investors were nervous over additional
tightening of monetary policy, after the Federal Reserve raised rates in late
March. However, these fears dissipated in May when it became clear that the
economy's growth rate was slowing from the first quarter's torrid pace. The
market was also buoyed by a continuation of favorable inflation reports and
strong demand by domestic and foreign investors. May inflation numbers showed
that year-over-year growth in the Consumer Price Index fell from 3.2% in
December to 2.2% just five months later.
When it became apparent that monetary policy was on hold, the slope of the
Treasury coupon curve steepened modestly. The slope of the curve between 10
and 30 years widened by 10 basis points, primarily due to the Treasury's
announcement that it would be cutting the number of annual ten-year note
auctions from six to four. This had a favorable impact on the ten-year area
and is indicative of the Treasury's reduced borrowing needs due to the
decrease in the federal deficit.
For the six and twelve month periods ending May 31, 1997, total investment
returns (price change and reinvested distributions) of Babson Bond Trust -
Portfolio S were 1.3% and 7%, respectively. During the same periods, total
investment returns for Portfolio L were 0.65% and 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, 1997,
were 7.03%, 6.10% and 7.58%, respectively. For Portfolio L, total returns for
one, five and ten year periods were 6.92%, 6.63% and 8.17%, 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 the second half of the year commences, unemployment remains at a near
record low, real wages are rising at the fastest pace since the early 1980s,
consumer confidence is high, there are signs that productivity is accelerating
and inflation is benign. This is all wonderful news for both holders of
financial assets and the real economy, but it does beg the question - how
much longer can it last? After all, the business cycle is now in its seventh
year, traditionally a time when inflation starts to accelerate and capacity
constraints come into play. The bond market continues to be skeptical that
inflation will remain well behaved, but it also recognizes that new forces may
be at play.
There is growing debate within academic and investment communities that
because we are in a so-called "new era," the economy's long-term potential
growth rate is higher today than in the past. New era proponents argue that
the opening of more economies around the globe and the attendant increase in
global competition, coupled with productivity benefits from the technology
revolution beginning to flow through to both the manufacturing and service
sectors of the economy, are the primary reasons why inflation has not reared
its ugly head. As a result of this, it is felt that the economy's non-
inflationary growth rate is now closer to 3%-3.5%, rather than the
conventional norm of 2.5%, and therefore, policy makers shouldn't try to
impede the higher rate due to inflationary fears. Traditionalists argue that
it is only a matter of time before low unemployment combined with strong
growth will lead to inflation accelerating, as employer's bid up wages to
attract needed workers.
This ongoing debate between the two schools of thought leads to uncertainty in
the market. Compounding this is increased questioning of the accuracy of
government statistics measuring productivity and inflation. As a result,
investors and particularly bond market participants, intensely scrutinize
comments by Fed officials to determine which camp they may fall into.
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.
We continue to diversify corporate exposure in an ongoing effort to minimize
credit risk and limit the impact of market volatility. In recent activity,
exposure to the energy and hotel and lodging sectors has been added to the
portfolios. Three energy related debt issues were purchased: Tosco, one of the
largest independent petroleum refiners and the largest operator of convenience
and gasoline retail stores in the U.S.; Airgas, the largest independent
distributor of industrial, medical and specialty gases; and Petroleum Geo-
Services, a firm that acquires, processes, and sells state of the art marine
seismic data, used in the exploration for oil and gas. In the hotel sector, a
Marriott International bond was purchased. Marriott's business is divided
between hotel operations and contract services. In recent years, the full
service hotel industry has had very strong fundamentals due to limited new
construction and a healthy economy. The fee based contract services business
adds stability to Marriott's earnings and cash flows.
In addition, we sold Southern Pacific equipment trust certificates (ETC's),
purchased last fall, when ETC's were trading at a yield equal to Southern
Pacific's unsecured debentures. By February, that relationship corrected
itself, and we successfully swapped into a twelve-year bond issued by Union
Pacific, the recent acquirer of Southern Pacific, for an additional ten basis
points. In another swap, we took advantage of a steepening in the Lockheed
Martin credit curve, switching from a twenty-year bond into a thirty-year bond
for a ten basis point pickup. Lockheed continues to successfully integrate
Loral into its operations and to improve its
balance sheet.
Currently, the average maturity is 5.5 years for Portfolio S and 10 years for
Portfolio L, after taking into consideration bonds trading to their call dates
and average life assumptions for mortgage and asset-backed securities. A more
precise measure of a portfolio's sensitivity to change in the level of
interest rates is its average effective duration. Portfolio S and L have
average effective durations of 3.7 and 4.9 years, respectively.
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, 1997 (unaudited)
PORTFOLIO L
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL MARKET VALUE
RATING DESCRIPTION AMOUNT (NOTE 1-A)
</CAPTION>
<S> <C> <C>
CORPORATE BONDS - 53.99%
BANKS AND FINANCE - 17.44%
Baa2 American Stores Company,
8.00% debentures,
due June 1, 2026 $ 1,150,000 $ 1,166,698
Aa3 Associates Corporation North America,
6.75% notes,
due July 15, 2001 4,500,000 4,486,545
Aa3 Chase Capital I, Series A,
7.67% capital securities,
due December 1, 2026 700,000 666,253
Aa3 Chase Capital II, Series B,
6.06% capital securities,
due February 1, 2027 1,300,000 1,258,559
A1 Ford Capital B V,
10.125% notes,
due November 15, 2000 2,500,000 2,737,350
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 2,737,927
Baa3 Green Tree Securitized Net Interest
Margin Trust,
Series 95-A,
7.25% certificates,
due July 15, 2005 623,299 611,020
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 2,387,436
Aa2 Morgan (J.P.) & Company, Incorporated,
7.54%
due January 15, 2027 2,000,000 1,882,560
Baa1 Southern Investments UK PLC,
6.375% senior notes,
due November 15, 2001 1,300,000 1,268,735
A2 SunTrust Banks, Incorporated,
6.00% subordinate notes,
due February 15, 2026 3,000,000 2,782,920
Aa3 Wachovia Capital Trust II,
6.32% capital securities,
due January 15, 2027 1,300,000 1,273,532
23,473,299 23,259,535
COMMUNICATIONS - 5.56%
Aa1 BellSouth Savings & Employee Stock
Ownership Trust,
9.19% medium term notes,
due July 1, 2003 1,053,165 1,115,249
Ba1 TCI Communications, Incorporated,
8.65% senior notes,
due September 15, 2004 1,050,000 1,093,428
Ba1 Tele Communications, Incorporated,
8.75% debentures,
due February 15, 2023 1,000,000 969,450
Baa3 Time Warner Entertainment Company L P,
8.375% senior debentures,
due March 15, 2023 $ 2,350,000 $ 2,367,837
Baa2 Tosco Corporporation,
7.625% notes,
due May 15, 2006 1,850,000 1,876,918
7,303,165 7,422,882
DIVERSIFIED - 1.80%
Baa1 Marriott International, Incorporated,
7.875% notes,
due April 15, 2005 2,350,000 2,401,489
INDUSTRIALS - 19.67%
Baa3 Airgas, Incorporated,
7.14% medium term notes,
due March 8, 2004 1,650,000 1,642,030
A3 Cardinal Health, Incorporated,
6.00% notes,
due January 16, 2006 2,900,000 2,682,935
Baa1 Comdisco, Incorporated,
6.375% shelf issue,
due November 30, 2001 4,675,000 4,551,393
A2 Cooper Industries, Incorporated,
7.87% medium term notes,
due November 18, 1998 5,000,000 5,109,350
A1 Ford Motor Company Delaware,
7.25% notes,
due October 1, 2008 2,900,000 2,882,223
Baa2 Georgia-Pacific Corporation,
9.625% debentures,
due March 15, 2022 1,500,000 1,611,075
A2 Hydro Quebec, Series IQ,
8.05% debentures,
due July 7, 2024 3,100,000 3,324,812
A3 Lockheed Martin Corporation,
7.70% guaranteed notes,
due June 15, 2008 2,450,000 2,523,524
A3 Lockheed Martin Corporation,
7.65% notes,
due May 1, 2026 930,000 937,198
A2 Philip Morris Companies, Incorporated,
7.20% senior notes,
due February 1, 2007 1,000,000 978,920
26,105,000 26,243,460
TRANSPORTATION - 4.99%
Baa2 CSX Corporation,
9.50% notes,
due August 1, 2000 $ 1,775,000 $ 1,907,965
Baa3 Delta Air Lines, Incorporated Delaware,
10.375% debentures,
due December 15, 2022 2,330,000 2,885,262
Baa1 United Airlines Pass Thru Trusts,
7.27% pass thru certificates,
Series 96-A, Cl. A-1,
due January 30, 2013 1,911,349 1,857,411
6,016,349 6,650,638
U.S. DOLLAR DENOMINATED CANADIAN SECURITIES - 3.04%
Baa2 Canadian National Railway Company,
7.00% notes,
due March 15, 2004 1,950,000 1,921,159
Baa1 Newfoundland Province of Canada,
8.65% debentures,
due October 22, 2022 1,950,000 2,131,292
3,900,000 4,052,451
UTILITIES - 1.49%
Baa3 United Illuminating Company,
6.20% notes,
due January 15, 1999 2,000,000 1,991,020
TOTAL CORPORATE BONDS - 53.99% 71,147,813 72,021,475
U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES - 37.66%
(All rated Aaa)
U.S. GOVERNMENTAL AGENCY - 13.27%
*Government National Mortgage Association,
7.50%, due March 15, 2007 174,051 174,540
*Government National Mortgage Association,
7.50%, due July 15, 2007 292,522 293,344
*Government National Mortgage Association,
8.00%, due October 15, 2007 405,016 417,413
*Government National Mortgage Association,
8.00%, due November 15, 2009 5,055,994 5,210,808
*Government National Mortgage Association,
9.50%, due April 15, 2016 $ 63,927 $ 69,000
*Government National Mortgage Association,
9.50%, due January 15, 2019 184,308 198,658
*Government National Mortgage Association,
8.00%, due May 15, 2022 628,490 643,800
*Government National Mortgage Association,
7.00%, due March 15, 2024 4,220,722 4,131,032
*Government National Mortgage Association,
8.50%, due August 15, 2024 341,154 354,585
*Government National Mortgage Association,
8.00%, due December 15, 2026 4,939,043 5,025,477
Small Business Administration
guaranteed development
participation certificates, Series 88-20 G,
9.80% debentures,
due July 1, 2008 313,995 342,531
Small Business Administration
guaranteed development
participation certificates, Series 88-20 H,
10.05% debentures,
due August 1, 2008 365,848 403,358
Small Business Administration
guaranteed development
participation certificates, Series 89-20 D,
10.05% debentures,
due April 1, 2009 396,819 439,449
17,381,889 17,703,995
U.S. GOVERNMENT SECURITIES - 14.47%
U.S. Treasury Bonds,
8.125%, due May 15, 2021 1,800,000 2,030,616
U.S. Treasury Notes,
6.25%, due March 31, 1999 1,000,000 1,001,410
U.S. Treasury Notes,
5.875%, due February 15, 2000 4,000,000 3,955,000
U.S. Treasury Notes,
11.125%, due August 15, 2003 1,520,000 1,867,700
U.S. Treasury Notes,
7.25%, due August 15, 2004 5,000,000 5,178,900
U.S. Treasury Notes,
8.125%, due August 15, 2019 4,645,000 5,262,646
17,965,000 19,296,272
GOVERNMENT SPONSORED ENTERPRISES - 9.92%
Federal Home Loan Mortgage Corporation,
6.30%, due April 8, 1999 $ 3,150,000 $ 3,139,164
Federal Home Loan Mortgage Corporation,
7.61%, due October 20, 1999 3,000,000 3,022,980
Federal Home Loan Mortgage Corporation,
7.75%, due April 1, 2008 341,001 344,895
Federal Home Loan Mortgage Corporation,
7.75%, due November 1, 2008 74,963 75,654
Federal Home Loan Mortgage Corporation,
8.00%, due August 1, 2009 78,908 80,290
Federal Home Loan Mortgage Corporation,
8.25%, due October 1, 2010 552,334 565,044
Federal Home Loan Mortgage Corporation,
9.00%, due June 1, 2016 218,058 229,120
Federal Home Loan Mortgage Corporation,
8.00%, due October 1, 2018 294,538 302,028
Federal Home Loan Mortgage Corporation,
7.50%, due February 1, 2021 1,695,417 1,706,606
Federal Home Loan Mortgage Corporation,
9.00%, due January 1, 2024 134,621 141,401
Federal National Mortgage Association,
7.00%, due December 1, 2007 650,602 647,447
Federal National Mortgage Association,
8.25%, due January 1, 2009 310,734 319,487
Federal National Mortgage Association,
8.00%, due February 1, 2009 324,647 332,160
Federal National Mortgage Association,
7.50%, due September 1, 2011 495,001 499,487
Federal National Mortgage Association,
conventional mortgage pass-thru,
8.50%, due July 1, 2013 105,247 108,496
Federal National Mortgage Association,
MO Series 88-16B, guaranteed REMIC pass-thru,
9.50%, due June 25, 2018 275,517 288,259
Federal National Mortgage Association,
CMO Series 90-52D, REMIC Trust,
9.30%, due May 25, 2019 $ 1,177,054 $ 1,202,808
Federal National Mortgage Association,
9.25%, due October 1, 2020 219,275 231,837
13,097,917 13,237,163
TOTAL U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES - 37.66% 48,444,806 50,237,430
REPURCHASE AGREEMENT - 6.89%
UMB Bank, n.a.,
4.90%, due June 2, 1997
(Collateralized by U.S. Treasury Notes,
7.875%, due November 15, 1999) 9,185,000 9,185,000
TOTAL INVESTMENTS - 98.54% $ 128,777,619 131,443,905
Other assets less liabilities - 1.46% 1,945,475
TOTAL NET ASSETS - 100.00%
(equivalent to $1.51 per share;
88,128,426 shares outstanding) $ 133,389,380
*Mortgage-backed securities
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF NET ASSETS
May 31, 1997 (unaudited)
PORTFOLIO S
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL MARKET VALUE
RATING DESCRIPTION AMOUNT (NOTE 1-A)
</CAPTION>
<S> <C> <C>
CORPORATE BONDS - 49.43%
BANKS AND FINANCE - 19.13%
Baa2 American Stores Company,
8.00% debentures,
due June 1, 2026 $ 300,000 $ 304,356
Aa3 Associates Corporation North America,
6.75% notes,
due July 15, 2001 250,000 249,252
Aa3 Chase Capital I, Series A,
7.67% capital securities,
due December 1, 2026 250,000 237,948
Aa3 Chase Capital II, Series B,
6.06% capital securities,
due February 1, 2027 375,000 363,046
A3 Chrysler Financial Corporation,
6.375% notes,
due January 28, 2000 600,000 596,280
A2 Credithrift Financial Corporation,
9.76% medium term notes,
due September 18, 1998 150,000 156,331
A3 General Motors Acceptance Corporation,
6.75% notes,
due February 7, 2002 1,100,000 1,091,255
Aaa Green Tree Financial Corporation,
CMO Series 92-1 REMIC Trust, Cl. A-3,
6.70% manufactured housing certificates,
due October 15, 2017 750,000 746,707
Baa3 Green Tree Securitized Net Interest
Margin Trust,
Series 94 A,
6.90% certificates,
due February 15, 2004 273,829 269,374
Aaa Merrill Lynch Mortgage Investors Incorporated,
Series 92-B REMIC Trust, Cl. A-2,
8.05% manufactured housing certificates,
due April 15, 2012 68,722 68,743
Aa2 Morgan (J.P.) & Company, Incorporated,
7.54%, due January 15, 2027 375,000 352,980
due April 15, 1998 1,075,000 1,102,735
A2 Sears Roebuck Acceptance Corporation,
6.95% notes,
due May 15, 2002 375,000 374,280
Baa1 Southern Investments UK PLC,
6.375% senior notes,
due November 15, 2001 300,000 292,785
A2 SunTrust Banks, Incorporated,
6.00% subordinate notes,
due February 15, 2026 700,000 649,348
Aa3 Wachovia Capital Trust II,
6.32% capital securities,
due January 15, 2027 375,000 367,365
A2 World Savings & Loan Association,
Oakland, California,
10.25% subordinate notes,
due October 1, 1997 500,000 506,855
7,817,551 7,729,640
COMMUNICATIONS - 5.95%
Aa1 BellSouth Savings & Employee Stock
Ownership Trust,
9.19% medium term notes,
due July 1, 2003 $ 763,666 $ 808,684
Baa3 Time Warner Entertainment Company L P,
8.875% senior notes,
due October 1, 2012 1,000,000 1,087,570
Baa2 Tosco Corporation,
7.625% notes,
due May 15, 2006 500,000 507,275
2,263,666 2,403,529
DIVERSIFIED - 1.45%
Baa1 Marriott International, Incorporated,
7.875% notes,
due April 15, 2005 575,000 587,598
INDUSTRIALS - 15.93%
Baa3 Airgas, Incorporated,
7.14% medium term notes,
due March 8, 2004 550,000 547,344
A3 Cardinal Health, Incorporated,
6.50% notes,
due February 15, 2004 650,000 629,597
A3 Cardinal Health, Incorporated,
6.00% notes,
due January 15, 2006 850,000 786,378
Baa1 Comdisco, Incorporated,
6.375% shelf issue,
due November 30, 2001 1,000,000 973,560
A2 Cooper Industries, Incorporated,
7.87% medium term notes,
due November 18, 1998 500,000 510,935
A1 Ford Motor Company Delaware,
7.25% notes,
due October 1, 2008 700,000 695,709
A2 Hydro-Quebec, Series IO,
8.05% debentures,
due July 7, 2024 925,000 992,081
A3 Lockheed Martin Corporation,
7.70% guaranteed notes,
due June 15, 2008 300,000 309,003
Baa2 McDonnell Douglas Finance Corporation,
6.50% medium term senior notes,
due July 1, 1998 500,000 499,305
Baa3 Petroleum Geo-Services A/S,
7.50% notes,
due March 31, 2007 300,000 298,689
A2 Philip Morris Companies, Incorporated,
7.20% senior notes,
due February 1, 2007 200,000 195,784
6,475,000 6,438,385
TRANSPORTATION - 3.37%
Baa2 CSX Corporation,
9.00% debentures,
due August 15, 2006 $ 225,000 $ 254,385
Baa1 Norfolk Southern Corporation,
6.70% notes,
due May 1, 2000 400,000 399,492
Baa2 Union Pacific Corporation,
7.25% notes,
due November 1, 2008 300,000 297,027
Baa1 United Airlines Pass Thru Trusts,
7.27% pass thru certificates,
Series 96-A, Cl. A-1,
due January 30, 2013 421,986 410,078
1,346,986 1,360,982
U.S. DOLLAR DENOMINATED CANADIAN SECURITIES - 2.37%
Baa2 Canadian National Railway Company,
7.00% notes,
due March 15, 2004 500,000 492,605
Aa3 Ontario Province of Canada,
6.00% bonds,
due February 21, 2006 500,000 464,140
1,000,000 956,745
UTILITIES - 1.23%
Baa3 United Illuminating Company,
6.20% notes,
due January 15, 1999 500,000 497,755
TOTAL CORPORATE BONDS - 49.43% 19,978,203 19,974,634
U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES AND
GOVERNMENT SPONSORED ENTERPRISES - 38.55%
(All rated Aaa)
U.S. GOVERNMENTAL AGENCY - 12.25%
*Government National Mortgage Association,
8.00%, due October 15, 2007 29,364 30,263
*Government National Mortgage Association,
8.00%, due November 15, 2009 907,328 935,110
*Government National Mortgage Association,
7.50%, due October 15, 2011 518,686 526,301
*Government National Mortgage Association,
7.50%, due November 15, 2011 497,095 504,392
*Government National Mortgage Association,
9.50%, due September 15, 2019 $ 20,844 $ 22,466
*Government National Mortgage Association,
8.00%, due December 15, 2022 362,754 371,590
*Government National Mortgage Association,
7.00%, due May 15, 2024 862,547 844,218
*Government National Mortgage Association,
8.50%, due August 15, 2024 716,303 744,503
*Government National Mortgage Association,
8.00%, due November 15, 2026 897,355 913,059
Small Business Administration
guaranteed development
participation certificates,
Series 88-20 G,
9.80% debentures, due July 1, 2008 52,332 57,089
4,864,608 4,948,991
U.S. GOVERNMENT SECURITIES - 18.35%
U.S. Treasury Bonds,
11.125%, due August 15, 2003 700,000 860,125
U.S. Treasury Notes,
6.25%, due March 31, 1999 1,000,000 1,001,410
U.S. Treasury Notes,
5.875%, due February 15, 2000 3,925,000 3,880,844
U.S. Treasury Notes,
6.25%, due February 15, 2003 900,000 889,596
U.S. Treasury Notes,
7.25%, due August 15, 2004 250,000 258,945
U.S. Treasury Notes,
7.50%, due February 15, 2005 500,000 525,705
7,275,000 7,416,625
GOVERNMENT SPONSORED ENTERPRISES - 7.95%
Federal Home Loan Mortgage Corporation,
6.30%, due April 8, 1999 750,000 747,420
Federal Home Loan Mortgage Corporation,
8.25%, due July 1, 2008 48,858 49,555
Federal Home Loan Mortgage Corporation,
9.00%, due June 1, 2016 176,123 185,058
Federal Home Loan Mortgage Corporation,
8.00%, due May 1, 2017 65,468 67,218
Federal Home Loan Mortgage Corporation,
CMO Series 130-E,
9.00%, due May 15, 2021 226,053 231,138
Federal National Mortgage Association,
7.00%, due December 1, 2007 $ 120,826 $ 120,240
Federal National Mortgage Association,
8.25%, due January 1, 2009 32,368 3,280
Federal National Mortgage Association,
7.50%, due September 1, 2011 495,001 499,487
Federal National Mortgage Association,
8.00%, due June 30, 2012 1,000,000 1,025,156
Federal National Mortgage Association,
CMO Series 90-52D, REMIC Trust,
9.30%, due May 25, 2019 128,406 131,215
Federal National Mortgage Association,
9.25%, due October 1, 2020 115,408 122,019
3,158,511 3,211,790
TOTAL U.S. GOVERNMENTAL AGENCY, GOVERNMENT SECURITIES
AND GOVERNMENT SPONSORED ENTERPRISES - 38.55% 15,298,119 15,577,406
REPURCHASE AGREEMENT - 13.12%
UMB Bank, n.a.,
4.90%, due June 2, 1997
(Collateralized by U.S. Treasury Notes,
7.875%, due November 15, 1999) 5,300,000 5,300,000
TOTAL INVESTMENTS -- 101.10% $ 40,576,322 40,852,040
Other assets less liabilities - (1.10%) (444,446)
TOTAL NET ASSETS - 100.00%
(equivalent to $9.58 per share;
4,215,828 shares outstanding) $ 40,407,594
*Mortgage-backed securities.
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
May 31, 1997 (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 $72,835,397 [L],
$20,209,685 [S]) $ 72,021,475 $ 19,974,634
U.S. governmental agency,
government securities and government sponsored
enterprises, at market value
(identified cost $49,908,302 [L],
$15,530,446 [S]) 50,237,430 15,577,406
Repurchase agreement,
at cost - approximates market value 9,185,000 5,300,000
Total investments 131,443,905 40,852,040
Cash - 14,430
Interest receivable 2,065,555 563,708
Other assets 7,456 2,572
Total assets 133,516,916 41,432,750
LIABILITIES AND NET ASSETS:
Cash overdraft 104,464 -
Payable for investments purchased - 1,025,156
Other liabilities 23,072 -
Total liabilities 127,536 1,025,156
NET ASSETS $ 133,389,380 $ 40,407,594
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 139,454,086 $ 43,141,484
Accumulated undistributed income (loss):
Undistributed net investment income 259,884 -
Undistributed net realized loss on
investment transactions (5,839,796) (2,545,799)
Net unrealized depreciation
in value of investments (484,794) (188,091)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 133,389,380 $ 40,407,594
Capital shares outstanding 88,128,426 4,215,828
NET ASSET VALUE PER SHARE $ 1.51 $ 9.58
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six Months Ended May 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PORTFOLIO L PORTFOLIO S
</CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 5,100,558 $ 1,352,410
Expenses (Note 2):
Management fees 641,904 179,281
Registration fees and expenses 12,126 3,306
Total expenses before voluntary reduction - 182,587
Less: voluntary reduction of management fee - (56,615)
Net expenses 654,030 125,972
Net investment income (Note 1-B) 4,446,528 1,226,438
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Realized loss from investment transactions
(excluding maturities of short-term
commercial notes and repurchase agreements):
Proceeds from sales of investments 66,875,864 16,057,749
Cost of investments sold 67,706,320 16,564,998
Net realized loss from investment transactions (830,456) (507,249)
Unrealized appreciation (depreciation) of investments:
Beginning of period 2,401,780 (8,280)
End of period (484,794) (188,091)
Unrealized depreciation of investments
during the period (2,886,574) (179,811)
Net loss on investments (3,717,030) (687,060)
Increase in net assets resulting
from operations $ 729,498 $ 539,378
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
May 31, 1997 Year Ended
(unaudited) November 30, 1996
PORTFOLIO L PORTFOLIO S PORTFOLIO L PORTFOLIO S
</CAPTION>
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 4,446,528 $ 1,226,438 $ 10,323,635 $ 2,257,472
Net realized loss from
investment transactions (830,456) (507,249) (1,367,653) (537,313)
Unrealized appreciation (depreciation)
of investments during the period (2,886,574) (179,811) (1,588,047) 119,740
Net increase in net assets resulting
from operations 729,498 539,378 7,367,935 1,839,899
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income (4,446,528) (1,226,438) (10,323,635) (2,257,472)
Net realized gain from investment
transactions - - - -
Total distributions to shareholders (4,446,528) (1,226,438) (10,323,635) (2,257,472)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold 9,188,233 10,460,799 23,760,936 9,617,449
Net asset value of shares issued for
reinvestment of distributions 3,596,235 1,000,914 8,272,174 1,709,489
12,784,468 11,461,713 32,033,110 11,326,938
Cost of shares repurchased (17,938,683) (4,542,201) (47,467,140) (9,886,471)
Net increase (decrease) from
capital share transactions (5,154,215) 6,919,512 (15,434,030) 1,440,467
Total increase (decrease) in net assets (8,871,245) 6,232,452 (18,389,730) 1,022,894
NET ASSETS:
Beginning of period 142,260,625 34,175,142 160,650,355 33,152,248
End of period
(including undistributed net investment income
of $259,884 [L] and $-- [S], respectively) $133,389,380 $ 40,407,594 $142,260,625 $ 34,175,142
*Shares issued and repurchased:
Number of shares sold 6,054,546 1,086,597 15,421,389 990,865
Number of shares issued for
reinvestment of distributions 2,370,734 104,266 5,387,854 176,067
8,425,280 1,190,863 20,809,243 1,166,932
Number of shares repurchased (11,801,037) (472,458) (30,899,645) (1,019,424)
Net increase (decrease) (3,375,757) 718,405 (10,090,402) 147,508
**Distributions to shareholders:
Income dividends per share $ .0496 $ .3111 $ .1070 $ .6921
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, 1996
to May 31, 1997, 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, 1997 (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
Portfolio L
Purchases $ 49,144,515
Proceeds from sales 66,875,864
Portfolio S
Purchases $ 20,762,468
Proceeds from sales 16,057,749
This report has been prepared for the information of the Shareholders of D.L.
Babson Bond Trustand 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 64108-2561
816-471-5200
1-800-4-BABSON
(1-800-422-2766)
http://www.jbfunds.com
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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