UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number(s) 811-22845
Babson Capital Funds Trust
(Exact Name of Registrant as Specified in Charter)
550 South Tryon Street
Suite 3300
Charlotte, NC 28202
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (704) 805-7200
Janice M. Bishop
Vice President, Secretary and Chief Legal Officer
c/o Babson Capital Management LLC
Independence Wharf
470 Atlantic Avenue, Boston MA 02210
(Name and Address of Agent for Service)
Date of fiscal year end: June 30
Date of reporting period: June 30, 2014
| Item 1. | Reports to Stockholders. |
The Report to Stockholders is attached hereto.
BABSON CAPITAL FUNDS TRUST
Annual Report
June 30, 2014
BCFT Service Providers
ADVISER
Babson Capital Management LLC
550 South Tryon Street
Suite 3300
Charlotte, NC 28202
SUB-ADVISER
Babson Capital Global Advisors Limited
61 Aldwych
London, UK
WC2B 4AE
COUNSEL TO THE TRUST
Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, MA 02110
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
200 Berkley Street
Boston, MA 02116
CUSTODIAN
State Street Bank & Trust
One Lincoln Street
Boston, MA 02111
TRANSFER AGENT AND REGISTRAR
State Street Bank & Trust
One Lincoln Street
Boston, MA 02111
FUND ADMINISTRATION/ACCOUNTING
State Street Bank & Trust
One Lincoln Street
Boston, MA 02111
FUND DISTRIBUTOR
ALPS Distributors, Inc.
1290 Broadway
Suite 1100
Denver, CO 80203
BLUE SKY ADMINISTRATION
Boston Financial Data Services
2000 Crown Colony Drive
Quincy, MA 02169
PROXY VOTING POLICIES & PROCEDURES
The Trustees of Babson Capital Funds Trust (the “Trust”) have delegated proxy voting responsibilities relating to the voting of securities held by the Trust to Babson Capital Management LLC (“Babson Capital”). A description of Babson Capital’s proxy voting policies and procedures is available (1) without charge, upon request, by calling, toll-free 1-877-766-0014; (2) on the Trust’s website at http://www.BabsonCapital.com; and (3) on the U.S. Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.
FORM N-Q
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This information is available (i) on the SEC’s website at http://www.sec.gov; and (ii) at the SEC’s Public Reference Room in Washington, DC (which information on their operation may be obtained by calling 1-800-SEC-0330). A complete schedule of portfolio holdings as of each quarter-end is available on the Trust’s website at http://www.BabsonCapital.com or upon request by calling, toll-free, 1-877-766-0014.
Anthony Sciacca
President
Babson Capital Funds Trust
Babson Capital Funds Trust
Babson Global Floating Rate Fund
Babson Global Credit Income Opportunities Fund
Dear Shareholder,
During the second half of 2013, we saw signs that the global economic landscape was improving. That trend continued during the first and second quarters of 2014, albeit at a slower pace than we anticipated at the beginning of the year. Clearly, severe winter weather in the U.S. and geopolitics contributed to the slower-than-expected economic growth in the first half, but other factors are also present that seem to be restraining the economy. Specifically, companies are still under-investing and consumers remain cautious about their spending despite accommodative global monetary policy.
As we move into the remainder of 2014, the Fed will likely complete its quantitative easing (QE) program by year end. In the U.K., the economy has performed relatively well this year and inflation has been kept in check—that said, policy makers signaled that interest rates could rise before the end of the year. The European Central Bank continues to battle a weak economic outlook and persistent low inflation, which may portend a U.S.-style QE program to attempt to reflate the Euro zone through sovereign bond purchases. In Japan, reflationary policies are expected to continue, while China’s short-term growth outlook remains relatively unchanged despite concerns of an economic slowdown there. Overall, we expect the slow-growth, low-interest-rate environment to continue, supported by highly accommodative monetary policy from global central banks.
At Babson Capital, we take a long-term view of investing through market and economic cycles and adhere to a disciplined, repeatable investment process that’s deeply rooted in fundamental bottom-up analysis. As we reflect on the past year and celebrate the upcoming first anniversary of the Babson Capital Funds Trust which launched in September 2013, we thank you for your business. Through our mutual funds, we’re offering individual investors the same expertise and time-tested investment approach that have produced consistent risk-adjusted returns for our institutional clients for more than six decades. We value your continued partnership, and look forward to helping you achieve your investment objectives in 2014 and beyond.
Sincerely,
Anthony Sciacca
Cautionary Notice: Certain statements contained in this report maybe “forward looking” statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date in which they are made and which reflect management’s current estimates, projections, expectations or beliefs, and which are subject to risks and uncertainties that may cause actual results to differ materially. These statements are subject to change at anytime based upon economic, market or other conditions and may not be relied upon as investment advice or an indication of the Trust’s trading intent. References to specific securities are not recommendations of such securities, and may not be representative of the Trust’s current or future investments. We undertake no obligation to publicly update forward looking statements, whether as a result of new information, future events, or otherwise.
ALPS Distributors, Inc. is the distributor for the Babson Capital mutual funds. Shares of the funds are offered by Babson Capital Securities LLC, an affiliated broker dealer of Babson Capital Management LLC. ALPS and Babson Capital Management are separate and unaffiliated. This material must be preceded or accompanied by the current fund prospectus. Investors should carefully consider the investment objective, risks, charges and expenses of any mutual fund before investing. This and other important information is contained in the prospectus and summary prospectus.
Babson Global Floating Rate Fund 2014 Annual Report
Investment Objective
The investment objective of the Babson Global Floating Rate Fund (“Global Floating Rate Fund” or the “Fund”) is to seek a high level of current income. Preservation of capital is a secondary goal.
Portfolio Management Commentary
How did the Fund perform?
| | n | | The Fund reported a net total rate of return year-to-date through June 30, 2014 of +2.40% and underperformed the Credit Suisse Global Loan Benchmark which returned +2.59%. In addition, the Fund returned +4.04% on a net basis since the Fund’s inception date of September 16, 2013 and underperformed the Benchmark which retuned +5.06%.1 |
What factors influenced performance of the Fund?
| | n | | Returns on the Fund’s U.S. holdings were generally less than its European holdings from a total return perspective. Spreads started the year tighter in the U.S. than in Europe therefore driving more price appreciation in the European holdings and contributing to Fund performance. Ultimately, good credit selection across both the U.S. and European markets helped influence Fund performance. |
| | n | | Generally, the U.S. market could be described as a par market (or coupon clipping market) since inception and the Fund focused on investments in the primary market, which typically allocated below par and subsequently gained 50 to 100 basis points2 post allocation. While the weighting to the European market was less than the U.S., several investments in this region were purchased at a discount and helped drive Fund performance through capital appreciation. |
| | n | | The senior secured loans have contributed the most to performance since inception. However, it should be noted that the high yield bond exposure also influenced performance. Global high yield bonds outperformed global senior secured loans resulting in additional pick-up in performance. |
Describe recent portfolio activity.
| | n | | The Fund has doubled in size since the September 16, 2013 launch to a NAV of $114,631,442 as of June 30, 2014 and the portfolio managers have prudently been putting capital to work. The number of holdings in the portfolio has increased by over 100 issues, while keeping its positioning across geographies fairly consistent and still building concentrated positions in high conviction credits. |
| | n | | The Fund remains overweight to European assets relative to the weighting of the global senior secured loan market as we believe Western European senior secured loans offered more attractive investment opportunities compared to the U.S. market recently. Looking forward though and given the market rally since the beginning of 2014, the number of discounted secondary opportunities has reduced. We believe the primary market will likely offer the most attractive source of investments for both markets in the near term, which has primarily been the case in the U.S. market recently. |
Describe portfolio positioning at period end.
| | n | | The Fund finished the fiscal year-end with an 86.0% weighting to global senior secured loans. The remaining balance of the portfolio was invested in global high yield bonds (12.6%), primarily focusing on senior secured bonds. A portion of the Fund is invested in floating rate, high yield bonds (6.8%) predominantly issued by European companies, which increases the total floating rate exposure of the portfolio to 92.8%. |
| 1. | Total return describes the return to an investor based on the Class Y net expense ratio and includes the reinvestment of dividends and capital gains. Performance results reflect past performance and are no guarantee of future results. Current performance may be lower or higher than the performance data quoted. The net asset value (NAV) will fluctuate with market conditions. All returns 1-year or less are cumulative. The Credit Suisse Global Loan Benchmark is a market capitalization weighted average of the Credit Suisse Leveraged Loan Index and the Credit Suisse Western European Leveraged Loan Index. The Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the US dollar-denominated leveraged loan market. The Credit Suisse Western European Leveraged Loan Index is designed to mirror the investible universe of the Western European leveraged loan market, with loans denominated in US and Western European currencies. Indices are unmanaged. It is not possible to invest directly in an index. |
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Babson Global Floating Rate Fund 2014 Annual Report
| 2. | A unit that is equal to 1/100th of 1% or 0.01%. |
| | n | | From an industry perspective, the Fund remains well-diversified across a number of sectors based on Moody’s Industry Classification, with higher concentrations in non-bank related Finance companies (12.7%), Healthcare, Education and Childcare (10.9%), and Diversified/Conglomerate Service (8.3%) as of fiscal year-end. Over the course of the past 6 months, there has been little change to the industry composition of the portfolio. |
| | n | | In terms of portfolio credit quality as of June 30, 2014, the Fund had the following credit quality breakdown excluding cash and accrued income: 17.1% in Ba assets, 48.0% in single-B credits and a small exposure to Caa and below at 8.1%. Approximately 25.9% of the Fund’s assets are not publicly rated, primarily consisting of European issuers that we believe have a similar ratings profile as other assets in the portfolio. Baa assets accounted for the remaining 0.9% of the portfolio assets.3 |
| | n | | The Top 5 countries in the portfolio has stayed relatively consistent and as of the fiscal year end is currently represented by the U.S. (57.0%), the U.K. (18.1%), Germany (5.8%), France (5.5%) and Canada (3.2%). Overall, the Fund has exposure to 16 different countries and supports our focus on building a well-diversified portfolio of global floating rate securities. |
Describe market and portfolio outlook.
| | n | | As we enter into the second half of 2014, the global senior secured loan market continues to benefit from accommodative global central bank policies, strong corporate fundamentals, and record Collateralized Loan Obligation (“CLO”) issuance meaning the technical picture remains strong. |
| | n | | Senior secured loan spreads in the U.S. and Europe contracted since the beginning of 2014 as demand has outweighed supply. Given the spread compression, we plan to focus on the primary market and select secondary market opportunities over the coming months as spreads across the Atlantic have aligned. |
| | n | | Furthermore, high yield corporate credit fundamentals should remain favorable, in our opinion, as we believe the current low default environment will continue resulting in attractive risk-adjusted performance for the asset class. |
| 3. | Ratings shown are the highest rating given by one of the following national rating agencies: S&P or Moody’s. Additional information about ratings can be found at www.moodys.com and www.standardandpoors.com. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below investment grade ratings. Bonds backed by U.S. Government or agency securities are given an implied rating equal to the rating of such securities. Holdings designated Not Publicly Rated are not rated by these national rating agencies. |
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Babson Global Floating Rate Fund 2014 Annual Report
PORTFOLIO COMPOSITION (% OF ASSETS*)
| * | The percentages shown above represent a percentage of the assets as of June 30, 2014. |
COUNTRY COMPOSITION (% OF ASSETS**)
| * | Percentage of assets are expressed by market value excluding cash and accrued income, and may vary over time. The percentages shown above represent a percentage of the assets as of June 30, 2014. |
4
Babson Global Credit Income Opportunities Fund 2014 Annual Report
Investment Objective
The investment objective of the Babson Global Credit Income Opportunities Fund (“Global Credit Income Opportunities Fund” or the “Fund”) is to seek an absolute return, primarily through current income and secondarily through capital appreciation.
Portfolio Management Commentary
How did the Fund perform?
| | n | | The Fund reported a net total rate of return year-to-date through June 30, 2014 of +4.16% and outperformed the 3 Month USD LIBOR + 500 basis points1 Benchmark which returned +2.62%. In addition, the Fund returned +7.59% on a net basis since the Fund’s inception date of September 16, 2013 and outperformed the Benchmark which returned +4.20%.2 |
What factors influenced performance of the Fund?
| | n | | U.S. senior secured loan spreads started the year tighter than in Europe therefore driving more price appreciation in European senior secured loans and contributing to Fund performance. U.S. high yield bonds, on the other hand, experienced more spread compression and capital appreciation than European high yield bonds since the beginning of 2014. Ultimately, good credit selection within each subset of the global high yield market helped influence Fund performance. |
| | n | | Generally, the U.S. senior secured loan market could be described as a par market (or coupon clipping market) since inception and the Fund focused on investments in the primary market, which typically allocated below par and subsequently gained 50 to 100 basis points2 post allocation. Within the European senior secured loan market, several investments in this region were purchased at a discount and helped drive Fund performance through capital appreciation. |
| | n | | With investors continuing to seek yield in this low interest rate environment, global high yield bond yields compressed significantly since the beginning of 2014, which led U.S. and European bonds to rally considerably. The Fund experienced a boost from its exposure to global high yield bonds relative to the performance of the global senior secured loans. |
| | n | | The Fund’s Collateralized Loan Obligation (“CLO”) holdings and special situation credits have had little influence on performance thus far; however, we believe these assets have some of the best yield potential and will contribute to the Fund’s performance in the future. |
Describe recent portfolio activity.
| | n | | The Fund has increased in size since the September 16, 2013 launch to a NAV of $63,825,458 as of June 30, 2014 and the portfolio managers have prudently been putting capital to work. The number of holdings in the portfolio has increased moderately while keeping our positioning across geographies fairly consistent and still building concentrated positions in high conviction credits. |
| | n | | Given the rally in high yield spreads and lower government yields year-to-date, the Fund recently reduced the fixed rate debt allocation and increased exposure to floating rate assets. |
| 1. | A unit that is equal to 1/100th of 1% or 0.01%. |
| 2. | Total return describes the return to an investor based on the Class Y net expense ratio and includes the reinvestment of dividends and capital gains. Performance results reflect past performance and are no guarantee of future results. Current performance may be lower or higher than the performance data quoted. The net asset value (NAV) will fluctuate with market conditions. All returns 1-year or less are cumulative. The 3 Month USD LIBOR (London Interbank Offered Rate) is an average interest rate, determined by the British Bankers Association, that banks charge one another for the use of short-term money (3 months) in England’s Eurodollar market. The return shown includes 3 Month USD LIBOR plus 500 bps, or 5% per annum. LIBOR is unmanaged. It is not possible to invest directly in LIBOR. No assurance can be given that the Fund’s performance will exceed that of LIBOR by any given increment, or at all. |
5
Babson Global Credit Income Opportunities Fund 2014 Annual Report
| | n | | In June, the Fund purchased a €18.5 million notional Put Option3 on the iTraxx CrossOver with an expiration date of December 2014. The Put Option can provide protection should spreads widen significantly in the near-term. |
Describe portfolio positioning at period end.
| | n | | The Fund finished the fiscal year-end with an allocation of 48.4%, 32.1%, and 13.4% to global high yield bonds, senior secured loans and CLOs, respectively. The remaining balance of the portfolio was invested in a few opportunistic special situation credits (0.4%) as well as one derivative (0.1%), a Put Option on the iTraxx Crossover. At this point in time, we continue to believe that global high yield bonds are more attractive than global senior secured loans from a relative value perspective. Additionally, a significant portion of the portfolio (53.4%) is senior secured in nature and can potentially mitigate principal loss in the event that default rates increase. |
| | n | | From an industry perspective, the Fund remains well-diversified across a number of sectors based on Moody’s Industry Classification, with higher concentrations in CLOs (13.4%), Oil and Gas (11.1%), and Healthcare, Education and Childcare (6.0%) as of fiscal year-end. Over the course of the past six months, the industry composition has remained relatively the same except for the build-out of its CLO position and a moderate increase in exposure to Oil and Gas companies. |
| | n | | In terms of portfolio credit quality as of June 30, 2014, the Fund had the following credit quality breakdown excluding cash and accrued income: 12.5% in Ba assets, 51.9% in single-B credits and a modest exposure to Caa and below at 15.3%. Approximately 18.9% of the Fund’s assets are not publicly rated, primarily consisting of European issuers that we believe have a similar ratings profile as other assets in the portfolio. Baa and above assets accounted for the remaining 1.4% of the portfolio assets.4 |
| | n | | The Top 5 countries in the portfolio has stayed relatively consistent and as of the fiscal year end is currently represented by the U.S. (42.2%), the U.K. (17.0%), Cayman Islands (13.6%), Germany (7.2%) and the Netherlands (4.7%). The Cayman Island exposure related to the Fund’s CLO holdings are predominantly invested in U.S. senior secured loans. Overall, the Fund has exposure to 19 different countries and supports our focus on building a well-diversified portfolio of global high yield securities. |
Describe market and portfolio outlook.
| | n | | As we enter into the second half of 2014, both the global high yield and loan markets continue to benefit from accommodative global central bank policies and record CLO issuance meaning the technical picture remains strong. |
| | n | | Furthermore, we believe the current low default rates will continue below their historical averages for the foreseeable future, as corporate fundamentals continue to remain strong. |
| | n | | Performance for these markets has remained positive for each month since the beginning of 2014, and we believe the overall market technicals will remain strong, which should lead to continued attractive opportunities for the Fund across the U.S. and European markets and across the capital structures of high yield issuers. |
| 3. | An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. |
| 4. | Ratings shown are the highest rating given by one of the following national rating agencies: S&P or Moody’s. Additional information about ratings can be found at www.moodys.com and www.standardandpoors.com. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below investment grade ratings. Bonds backed by U.S. Government or agency securities are given an implied rating equal to the rating of such securities. Holdings designated Not Publicly Rated are not rated by these national rating agencies. |
6
Babson Global Credit Income Opportunities Fund 2014 Annual Report
PORTFOLIO COMPOSITION (% OF ASSETS*)
| * | The percentages shown above represent a percentage of the assets as of June 30, 2014. |
COUNTRY COMPOSITION (% OF ASSETS**)
| ** | Percentage of assets are expressed by market value excluding cash and accrued income, and may vary over time. The percentages shown above represent a percentage of the assets as of June 30, 2014. |
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Babson Capital Funds Trust 2014 Annual Report
SHAREHOLDER EXPENSES (UNAUDITED)
As a shareholder of Babson Global Floating Rate Fund or Babson Global Credit Income Opportunities Fund, you incur ongoing expenses, such as management fees, shareholder service fees, distribution fees and other fund expenses. The following table is intended to help you understand your ongoing expenses (in dollars and cents) of investing in the Funds and to compare these expenses with the ongoing expenses of investing in other funds.
The table is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2014 to June 30, 2014.
Actual Expenses
The first line in the table below provides information about the actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for the Fund under the heading entitled “Operating Expenses Incurred” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line in the table below provides information about the hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account value and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Babson Global Floating Rate Fund
| | | | | | | | | | | | | | | | | | | | |
| | | EXPENSE
RATIO | | | BEGINNING
AMOUNT | | | ENDING
VALUE | | | AVERAGE
VALUE | | | OPERATING
EXPENSE
INCURRED* | |
Class A | | | | | | | | | | | | | | | | | | | | |
Actual | | | 1.05 | % | | $ | 1,000.00 | | | $ | 1,021.80 | | | $ | 1,010.90 | | | $ | 5.26 | |
Hypothetical | | | 1.05 | % | | | 1,000.00 | | | | 1,019.60 | | | | 1,009.80 | | | | 5.26 | |
| | | | | |
Class C | | | | | | | | | | | | | | | | | | | | |
Actual | | | 1.80 | % | | | 1,000.00 | | | | 1,018.30 | | | | 1,009.15 | | | | 9.01 | |
Hypothetical | | | 1.80 | % | | | 1,000.00 | | | | 1,015.90 | | | | 1,007.95 | | | | 9.00 | |
| | | | | |
Class I | | | | | | | | | | | | | | | | | | | | |
Actual | | | 0.75 | % | | | 1,000.00 | | | | 1,024.00 | | | | 1,012.00 | | | | 3.76 | |
Hypothetical | | | 0.75 | % | | | 1,000.00 | | | | 1,021.10 | | | | 1,010.55 | | | | 3.76 | |
| | | | | |
Class Y | | | | | | | | | | | | | | | | | | | | |
Actual | | | 0.75 | % | | | 1,000.00 | | | | 1,024.00 | | | | 1,012.00 | | | | 3.76 | |
Hypothetical | | | 0.75 | % | | | 1,000.00 | | | | 1,021.10 | | | | 1,010.55 | | | | 3.76 | |
| * | For each Class of the Fund, net expenses are equal to the annualized expense ratio for such class multiplied by the average account value over the period, multiplied by 181/365. |
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Babson Capital Funds Trust 2014 Annual Report
SHAREHOLDER EXPENSES (UNAUDITED) (CONTINUED)
Babson Global Credit Income Opportunities Fund
| | | | | | | | | | | | | | | | | | | | |
| | | EXPENSE
RATIO | | | BEGINNING
AMOUNT | | | ENDING
VALUE | | | AVERAGE
VALUE | | | OPERATING
EXPENSE
INCURRED* | |
Class A | | | | | | | | | | | | | | | | | | | | |
Actual | | | 1.20 | % | | $ | 1,000.00 | | | $ | 1,038.70 | | | $ | 1,019.35 | | | $ | 6.07 | |
Hypothetical | | | 1.20 | % | | | 1,000.00 | | | | 1,018.80 | | | | 1,009.40 | | | | 6.01 | |
| | | | | |
Class C | | | | | | | | | | | | | | | | | | | | |
Actual | | | 1.95 | % | | | 1,000.00 | | | | 1,036.40 | | | | 1,018.20 | | | | 9.85 | |
Hypothetical | | | 1.95 | % | | | 1,000.00 | | | | 1,015.10 | | | | 1,007.55 | | | | 9.74 | |
| | | | | |
Class I | | | | | | | | | | | | | | | | | | | | |
Actual | | | 0.95 | % | | | 1,000.00 | | | | 1,041.60 | | | | 1,020.80 | | | | 4.81 | |
Hypothetical | | | 0.95 | % | | | 1,000.00 | | | | 1,020.10 | | | | 1,010.05 | | | | 4.76 | |
| | | | | |
Class Y | | | | | | | | | | | | | | | | | | | | |
Actual | | | 0.95 | % | | | 1,000.00 | | | | 1,041.60 | | | | 1,020.80 | | | | 4.81 | |
Hypothetical | | | 0.95 | % | | | 1,000.00 | | | | 1,020.10 | | | | 1,010.05 | | | | 4.76 | |
| * | For each Class of the Fund, net expenses are equal to the annualized expense ratio for such class multiplied by the average account value over the period, multiplied by 181/365. |
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Babson Capital Funds Trust 2014 Annual Report
FINANCIAL REPORT
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Babson Capital Funds Trust 2014 Annual Report
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2014
| | | | | | | | |
| | | BABSON GLOBAL
FLOATING RATE FUND | | | BABSON GLOBAL
CREDIT INCOME
OPPORTUNITIES FUND | |
| | |
| Assets | | | | | | | | |
| Investments, at fair value (cost $125,431,812 and $67,231,965, respectively) | | $ | 126,431,978 | | | $ | 68,637,367 | |
| Foreign currency, at value (cost $5,919,101 and $676,538, respectively) | | | 5,976,757 | | | | 678,950 | |
| Receivable for investments sold | | | 1,362,720 | | | | 1,023,124 | |
| Receivable for Fund shares sold | | | 127,970 | | | | 83,717 | |
| Interest receivable | | | 523,010 | | | | 707,511 | |
| Receivable from adviser (see Note 3) | | | 107,793 | | | | 67,755 | |
| Foreign tax reclaims receivable | | | — | | | | 434 | |
| Unrealized appreciation on forward foreign currency exchange contracts | | | 15,454 | | | | 13,677 | |
| Prepaid expenses | | | 29,880 | | | | 25,136 | |
| | | | | | | | |
Total assets | | | 134,575,562 | | | | 71,237,671 | |
| | | | | | | | |
| Liabilities | | | | | | | | |
| Payable for investments purchased | | | 18,241,432 | | | | 6,772,251 | |
| Investments purchased on a when-issued basis | | | 1,166,405 | | | | 274,531 | |
| Investment advisery fee payable (see Note 3) | | | 59,724 | | | | 36,344 | |
| Distribution fees payable | | | 4,224 | | | | 1,070 | |
| Unrealized depreciation on forward foreign currency exchange contracts | | | 349,623 | | | | 230,142 | |
| Accrued expenses and other liabilities | | | 122,712 | | | | 97,875 | |
| | | | | | | | |
Total liabilities | | | 19,944,120 | | | | 7,412,213 | |
| | | | | | | | |
Total net assets | | $ | 114,631,442 | | | $ | 63,825,458 | |
| | | | | | | | |
| Composition of net assets | | | | | | | | |
| Shares of beneficial interest outstanding (par value $0.00001 per share), unlimited number of shares authorized | | $ | 112 | | | $ | 61 | |
| Additional paid-in capital | | | 113,581,148 | | | | 61,576,005 | |
| Undistributed net investment income | | | 334,169 | | | | 216,465 | |
| Accumulated net realized gain (loss) | | | (22 | ) | | | 850,470 | |
| Net unrealized appreciation | | | 716,035 | | | | 1,182,457 | |
| | | | | | | | |
Total net assets | | $ | 114,631,442 | | | $ | 63,825,458 | |
| | | | | | | | |
| Class A | | | | | | | | |
| Net assets applicable to outstanding shares | | $ | 12,464,353 | | | $ | 2,590,562 | |
| | | | | | | | |
| Shares of beneficial interest outstanding | | | 1,222,232 | | | | 247,784 | |
| | | | | | | | |
| Net asset value per share outstanding | | $ | 10.20 | | | $ | 10.45 | |
| | | | | | | | |
| Maximum offering price per share outstanding (Net asset value plus sales charge of 3.00% and 3.75%, respectively) | | $ | 10.52 | | | $ | 10.86 | |
| | | | | | | | |
| Class C | | | | | | | | |
| Net assets applicable to outstanding shares | | $ | 2,396,150 | | | $ | 944,197 | |
| | | | | | | | |
| Shares of beneficial interest outstanding | | | 235,796 | | | | 90,376 | |
| | | | | | | | |
| Net asset value per share outstanding | | $ | 10.16 | | | $ | 10.45 | |
| | | | | | | | |
| Class I | | | | | | | | |
| Net assets applicable to outstanding shares | | $ | 32,771,965 | | | $ | 26,405,814 | |
| | | | | | | | |
| Shares of beneficial interest outstanding | | | 3,209,873 | | | | 2,525,277 | |
| | | | | | | | |
| Net asset value per share outstanding | | $ | 10.21 | | | $ | 10.46 | |
| | | | | | | | |
| Class Y | | | | | | | | |
| Net assets applicable to outstanding shares | | $ | 66,998,974 | | | $ | 33,884,885 | |
| | | | | | | | |
| Shares of beneficial interest outstanding | | | 6,563,103 | | | | 3,240,351 | |
| | | | | | | | |
| Net asset value per share outstanding | | $ | 10.21 | | | $ | 10.46 | |
| | | | | | | | |
See accompanying Notes to Financial Statements
11
Babson Capital Funds Trust 2014 Annual Report
STATEMENTS OF OPERATIONS
Period from September 16, 2013 through June 30, 2014*
| | | | | | | | |
| | | BABSON GLOBAL
FLOATING RATE FUND | | | BABSON GLOBAL
CREDIT INCOME
OPPORTUNITIES FUND | |
| | |
| Investment Income | | | | | | | | |
Interest income | | $ | 2,616,825 | | | $ | 2,454,035 | |
Other income | | | 42,902 | | | | 43,535 | |
| | | | | | | | |
Total investment income | | | 2,659,727 | | | | 2,497,570 | |
| | | | | | | | |
| | |
| Operating Expenses | | | | | | | | |
Advisory fees | | | 381,129 | | | | 313,137 | |
12b-1 distribution and servicing plan | | | | | | | | |
Class A | | | 8,248 | | | | 2,121 | |
Class C | | | 6,648 | | | | 2,120 | |
Professional fees | | | 124,591 | | | | 124,591 | |
Administrator fees | | | 125,045 | | | | 96,433 | |
Custody fees | | | 104,608 | | | | 83,364 | |
Directors’ fees | | | 60,977 | | | | 57,199 | |
Transfer agent fees | | | 69,312 | | | | 64,418 | |
Printing and mailing expenses | | | 15,000 | | | | 15,000 | |
Registration fees | | | 15,938 | | | | 9,243 | |
Other operating expenses | | | 30,833 | | | | 36,733 | |
| | | | | | | | |
Total operating expenses | | | 942,329 | | | | 804,359 | |
Reimbursement of expenses | | | | | | | | |
Class A | | | (40,403 | ) | | | (23,291 | ) |
Class C | | | (21,097 | ) | | | (18,118 | ) |
Class I | | | (186,577 | ) | | | (177,924 | ) |
Class Y | | | (237,608 | ) | | | (184,145 | ) |
| | | | | | | | |
Net operating expenses | | | 456,644 | | | | 400,881 | |
| | | | | | | | |
Net investment income | | | 2,203,083 | | | | 2,096,689 | |
| | | | | | | | |
| | |
| Realized and Unrealized Gains (Losses) on Investments | | | | | | | | |
Net realized gain on investments | | | 451,960 | | | | 1,157,172 | |
Net realized loss on forward foreign currency exchange contracts | | | (365,754 | ) | | | (456,467 | ) |
Net realized loss on foreign currency and translation | | | (225,876 | ) | | | (158,863 | ) |
| | | | | | | | |
Net realized gain (loss) | | | (139,670 | ) | | | 541,842 | |
| | | | | | | | |
Net change in unrealized appreciation on investments | | | 1,000,166 | | | | 1,405,402 | |
Net change in unrealized depreciation on forward foreign currency exchange contracts | | | (334,169 | ) | | | (216,465 | ) |
Net change in unrealized appreciation (depreciation) on foreign currency and translation | | | 50,038 | | | | (6,480 | ) |
| | | | | | | | |
Net change in unrealized appreciation | | | 716,035 | | | | 1,182,457 | |
| | | | | | | | |
Net realized and unrealized gains on investments | | | 576,365 | | | | 1,724,299 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | $ | 2,779,448 | | | $ | 3,820,988 | |
| | | | | | | | |
| * | | Funds commenced operations on September 16, 2013. |
See accompanying Notes to Financial Statements
12
Babson Capital Funds Trust 2014 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | BABSON GLOBAL
FLOATING RATE FUND | | | BABSON GLOBAL
CREDIT INCOME
OPPORTUNITIES FUND | |
| | | PERIOD FROM
SEPTEMBER 16, 2013
THROUGH JUNE 30, 2014 (1) | | | PERIOD FROM
SEPTEMBER 16, 2013
THROUGH JUNE 30, 2014 (1) | |
| | |
| Operations | | | | | | | | |
Net investment income | | $ | 2,203,083 | | | $ | 2,096,689 | |
Net realized gain (loss) on investments | | | (139,670 | ) | | | 541,842 | |
Net change in unrealized appreciation on investments | | | 716,035 | | | | 1,182,457 | |
| | | | | | | | |
Net increase in net assets resulting from operations | | | 2,779,448 | | | | 3,820,988 | |
| | | | | | | | |
| | |
| Dividends to Common Shareholders | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | (140,982 | ) | | | (36,805 | ) |
| | | | | | | | |
Class C | | | (26,146 | ) | | | (10,571 | ) |
| | | | | | | | |
Class I | | | (610,026 | ) | | | (734,939 | ) |
| | | | | | | | |
Class Y | | | (1,014,718 | ) | | | (790,102 | ) |
| | | | | | | | |
Total dividends to common shareholders | | | (1,791,872 | ) | | | (1,572,417 | ) |
| | | | | | | | |
| | |
| Capital Share Transactions | | | | | | | | |
Net proceeds from sale of shares | | | 114,172,093 | | | | 60,160,874 | |
Net Asset Value of shares issued to shareholders in payment of distributions declared | | | 1,770,684 | | | | 1,559,384 | |
Cost of shares redeemed | | | (2,298,911 | ) | | | (143,371 | ) |
| | | | | | | | |
Net increase in net assets resulting from capital stock transactions | | | 113,643,866 | | | | 61,576,887 | |
| | | | | | | | |
Total increase in net assets | | | 114,631,442 | | | | 63,825,458 | |
| | | | | | | | |
| | |
| Net Assets | | | | | | | | |
Beginning of period | | | – | | | | – | |
| | | | | | | | |
End of period (includes undistributed net investment income of $334,169 and $216,465, respectively) | | $ | 114,631,442 | | | $ | 63,825,458 | |
| | | | | | | | |
| (1) | | Fund commenced operations on September 16, 2013. |
See accompanying Notes to Financial Statements
13
Babson Global Floating Rate Fund 2014 Annual Report
FINANCIAL HIGHLIGHTS
| | | | |
| | | CLASS A | |
| | | PERIOD FROM
SEPTEMBER 16, 2013
THROUGH JUNE 30, 2014 (1) | |
| |
| Per Common Share Data | | | | |
Net asset value, beginning of period | | $ | 10.00 | |
Income from investment operations: | | | | |
Net investment income (2) | | | 0.30 | |
Net realized and unrealized gain on investments | | | 0.08 | |
| | | | |
Total increase from investment operations | | | 0.38 | |
| | | | |
Less dividends and distributions: | | | | |
From net investment income | | | (0.18 | ) |
| | | | |
Net asset value, at end of period | | $ | 10.20 | |
| | | | |
Total investment return (3)(4) | | | 3.81 | % |
| | | | |
| |
| Supplemental Data and Ratios | | | | |
Net assets, end of period (000’s) | | $ | 12,464 | |
Ratio of total expenses (before reductions and reimbursements) to average net assets (5)(6) | | | 2.27 | % |
Ratio of net expenses to average net assets (5) | | | 1.05 | % |
Ratio of net investment income to average net assets (5) | | | 3.76 | % |
Portfolio turnover rate (4) | | | 49.51 | % |
| (1) | | Fund commenced operations on September 16, 2013. |
| (2) | | Calculated using average shares outstanding. |
| (3) | | Total investment return calculation does not consider the effects of sales loads and assumes the reinvestment of dividends at actual prices pursuant to the Fund’s dividend reinvestment plan. |
| (5) | | Annualized for periods less than one full year. |
| (6) | | The Adviser has agreed to waive and/or reimburse fees and/or expense so that, on an annualized basis, such expenses incurred will not exceed 1.05% as a percentage of average daily net assets. |
See accompanying Notes to Financial Statements
14
Babson Global Floating Rate Fund 2014 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
| | | | |
| | | CLASS C | |
| | | PERIOD FROM
SEPTEMBER 16, 2013
THROUGH JUNE 30, 2014 (1) | |
| |
| Per Common Share Data | | | | |
Net asset value, beginning of period | | $ | 10.00 | |
Income from investment operations: | | | | |
Net investment income (2) | | | 0.24 | |
Net realized and unrealized gain on investments | | | 0.07 | |
| | | | |
Total increase from investment operations | | | 0.31 | |
| | | | |
Less dividends and distributions: | | | | |
From net investment income | | | (0.15 | ) |
| | | | |
Net asset value, at end of period | | $ | 10.16 | |
| | | | |
Total investment return (3)(4) | | | 3.15 | % |
| | | | |
| |
| Supplemental Data and Ratios | | | | |
Net assets, end of period (000’s) | | $ | 2,396 | |
Ratio of total expenses (before reductions and reimbursements) to average net assets (5)(6) | | | 4.97 | % |
Ratio of net expenses to average net assets (5) | | | 1.80 | % |
Ratio of net investment income to average net assets (5) | | | 3.07 | % |
Portfolio turnover rate (4) | | | 49.51 | % |
| (1) | | Fund commenced operations on September 16, 2013. |
| (2) | | Calculated using average shares outstanding. |
| (3) | | Total investment return calculation does not consider the effects of sales loads and assumes the reinvestment of dividends at actual prices pursuant to the Fund’s dividend reinvestment plan. |
| (5) | | Annualized for periods less than one full year. |
| (6) | | The Adviser has agreed to waive and/or reimburse fees and/or expense so that, on an annualized basis, such expenses incurred will not exceed 1.80% as a percentage of average daily net assets. |
See accompanying Notes to Financial Statements
15
Babson Global Floating Rate Fund 2014 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
| | | | |
| | | CLASS I | |
| | | PERIOD FROM
SEPTEMBER 16, 2013
THROUGH JUNE 30, 2014 (1) | |
| |
| Per Common Share Data | | | | |
Net asset value, beginning of period | | $ | 10.00 | |
Income from investment operations: | | | | |
Net investment income (2) | | | 0.30 | |
Net realized and unrealized gain on investments | | | 0.10 | |
| | | | |
Total increase from investment operations | | | 0.40 | |
| | | | |
Less dividends and distributions: | | | | |
From net investment income | | | (0.19 | ) |
| | | | |
Net asset value, at end of period | | $ | 10.21 | |
| | | | |
Total investment return (3)(4) | | | 4.04 | % |
| | | | |
| |
| Supplemental Data and Ratios | | | | |
Net assets, end of period (000’s) | | $ | 32,772 | |
Ratio of total expenses (before reductions and reimbursements) to average net assets (5)(6) | | | 1.52 | % |
Ratio of net expenses to average net assets (5) | | | 0.75 | % |
Ratio of net investment income to average net assets (5) | | | 3.72 | % |
Portfolio turnover rate (4) | | | 49.51 | % |
| (1) | | Fund commenced operations on September 16, 2013. |
| (2) | | Calculated using average shares outstanding. |
| (3) | | Total investment return calculation assumes the reinvestment of dividends at actual prices pursuant to the Fund’s dividend reinvestment plan. |
| (5) | | Annualized for periods less than one full year. |
| (6) | | The Adviser has agreed to waive and/or reimburse fees and/or expense so that, on an annualized basis, such expenses incurred will not exceed .75% as a percentage of average daily net assets. |
See accompanying Notes to Financial Statements
16
Babson Global Floating Rate Fund 2014 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
| | | | |
| | | CLASS Y | |
| | | PERIOD FROM
SEPTEMBER 16, 2013
THROUGH JUNE 30, 2014 (1) | |
| |
| Per Common Share Data | | | | |
Net asset value, beginning of period | | $ | 10.00 | |
Income from investment operations: | | | | |
Net investment income (2) | | | 0.30 | |
Net realized and unrealized gain on investments | | | 0.10 | |
| | | | |
Total increase from investment operations | | | 0.40 | |
| | | | |
Less dividends and distributions: | | | | |
From net investment income | | | (0.19 | ) |
| | | | |
Net asset value, at end of period | | $ | 10.21 | |
| | | | |
Total investment return (3)(4) | | | 4.04 | % |
| | | | |
| |
| Supplemental Data and Ratios | | | | |
Net assets, end of period (000’s) | | $ | 66,999 | |
Ratio of total expenses (before reductions and reimbursements) to average net assets (5)(6) | | | 1.53 | % |
Ratio of net expenses to average net assets (5) | | | 0.75 | % |
Ratio of net investment income to average net assets (5) | | | 3.80 | % |
Portfolio turnover rate (4) | | | 49.51 | % |
| (1) | | Fund commenced operations on September 16, 2013. |
| (2) | | Calculated using average shares outstanding. |
| (3) | | Total investment return calculation assumes the reinvestment of dividends at actual prices pursuant to the Fund’s dividend reinvestment plan. |
| (5) | | Annualized for periods less than one full year. |
| (6) | | The Adviser has agreed to waive and/or reimburse fees and/or expense so that, on an annualized basis, such expenses incurred will not exceed .75% as a percentage of average daily net assets. |
See accompanying Notes to Financial Statements
17
Babson Global Credit Income Opportunities Fund 2014 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
| | | | |
| | | CLASS A | |
| | | PERIOD FROM
SEPTEMBER 16, 2013
THROUGH JUNE 30, 2014 (1) | |
| |
| Per Common Share Data | | | | |
Net asset value, beginning of period | | $ | 10.00 | |
Income from investment operations: | | | | |
Net investment income (2) | | | 0.40 | |
Net realized and unrealized gain on investments | | | 0.33 | |
| | | | |
Total increase from investment operations | | | 0.73 | |
| | | | |
Less dividends and distributions: | | | | |
From net investment income | | | (0.28 | ) |
| | | | |
Net asset value, at end of period | | $ | 10.45 | |
| | | | |
Total investment return (3)(4) | | | 7.30 | % |
| | | | |
| |
| Supplemental Data and Ratios | | | | |
Net assets, end of period (000’s) | | $ | 2,591 | |
Ratio of total expenses (before reductions and reimbursements) to average net assets (5)(6) | | | 3.95 | % |
Ratio of net expenses to average net assets (5) | | | 1.20 | % |
Ratio of net investment income to average net assets (5) | | | 4.88 | % |
Portfolio turnover rate (4) | | | 99.72 | % |
| (1) | | Fund commenced operations on September 16, 2013. |
| (2) | | Calculated using average shares outstanding. |
| (3) | | Total investment return calculation does not consider the effects of sales loads and assumes the reinvestment of dividends at actual prices pursuant to the Fund’s dividend reinvestment plan. |
| (5) | | Annualized for periods less than one full year. |
| (6) | | The Adviser has agreed to waive and/or reimburse fees and/or expense so that, on an annualized basis, such expenses incurred will not exceed 1.20% as a percentage of average daily net assets. |
See accompanying Notes to Financial Statements
18
Babson Global Credit Income Opportunities Fund 2014 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
| | | | |
| | | CLASS C | |
| | | PERIOD FROM
SEPTEMBER 16, 2013
THROUGH JUNE 30, 2014 (1) | |
| |
| Per Common Share Data | | | | |
Net asset value, beginning of period | | $ | 10.00 | |
Income from investment operations: | | | | |
Net investment income (2) | | | 0.35 | |
Net realized and unrealized gain on investments | | | 0.32 | |
| | | | |
Total increase from investment operations | | | 0.67 | |
| | | | |
Less dividends and distributions: | | | | |
From net investment income | | | (0.22 | ) |
| | | | |
Net asset value, at end of period | | $ | 10.45 | |
| | | | |
Total investment return (3)(4) | | | 6.75 | % |
| | | | |
| |
| Supplemental Data and Ratios | | | | |
Net assets, end of period (000’s) | | $ | 944 | |
Ratio of total expenses (before reductions and reimbursements) to average net assets (5)(6) | | | 10.50 | % |
Ratio of net expenses to average net assets (5) | | | 1.95 | % |
Ratio of net investment income to average net assets (5) | | | 4.39 | % |
Portfolio turnover rate (4) | | | 99.72 | % |
| (1) | | Fund commenced operations on September 16, 2013. |
| (2) | | Calculated using average shares outstanding. |
| (3) | | Total investment return calculation does not consider the effects of sales loads and assumes the reinvestment of dividends at actual prices pursuant to the Fund’s dividend reinvestment plan. |
| (5) | | Annualized for periods less than one full year. |
| (6) | | The Adviser has agreed to waive and/or reimburse fees and/or expense so that, on an annualized basis, such expenses incurred will not exceed 1.95% as a percentage of average daily net assets. |
See accompanying Notes to Financial Statements
19
Babson Global Credit Income Opportunities Fund 2014 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
| | | | |
| | | CLASS I | |
| | | PERIOD FROM
SEPTEMBER 16, 2013
THROUGH JUNE 30, 2014 (1) | |
| |
| Per Common Share Data | | | | |
Net asset value, beginning of period | | $ | 10.00 | |
Income from investment operations: | | | | |
Net investment income (2) | | | 0.41 | |
Net realized and unrealized gain on investments | | | 0.35 | |
| | | | |
Total increase from investment operations | | | 0.76 | |
| | | | |
Less dividends and distributions: | | | | |
From net investment income | | | (0.30 | ) |
| | | | |
Net asset value, at end of period | | $ | 10.46 | |
| | | | |
Total investment return (3)(4) | | | 7.59 | % |
| | | | |
| |
| Supplemental Data and Ratios | | | | |
Net assets, end of period (000’s) | | $ | 26,406 | |
Ratio of total expenses (before reductions and reimbursements) to average net assets (5)(6) | | | 1.83 | % |
Ratio of net expenses to average net assets (5) | | | 0.95 | % |
Ratio of net investment income to average net assets (5) | | | 5.02 | % |
Portfolio turnover rate (4) | | | 99.72 | % |
| (1) | | Fund commenced operations on September 16, 2013. |
| (2) | | Calculated using average shares outstanding. |
| (3) | | Total investment return calculation assumes the reinvestment of dividends at actual prices pursuant to the Fund’s dividend reinvestment plan. |
| (5) | | Annualized for periods less than one full year. |
| (6) | | The Adviser has agreed to waive and/or reimburse fees and/or expense so that, on an annualized basis, such expenses incurred will not exceed .95% as a percentage of average daily net assets. |
See accompanying Notes to Financial Statements
20
Babson Global Credit Income Opportunities Fund 2014 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
| | | | |
| | | CLASS Y | |
| | | PERIOD FROM
SEPTEMBER 16, 2013
THROUGH JUNE 30, 2014 (1) | |
| |
| Per Common Share Data | | | | |
Net asset value, beginning of period | | $ | 10.00 | |
Income from investment operations: | | | | |
Net investment income (2) | | | 0.41 | |
Net realized and unrealized gain on investments | | | 0.35 | |
| | | | |
Total increase from investment operations | | | 0.76 | |
| | | | |
Less dividends and distributions: | | | | |
From net investment income | | | (0.30 | ) |
| | | | |
Net asset value, at end of period | | $ | 10.46 | |
| | | | |
Total investment return (3)(4) | | | 7.59 | % |
| | | | |
| |
| Supplemental Data and Ratios | | | | |
Net assets, end of period (000’s) | | $ | 33,885 | |
Ratio of total expenses (before reductions and reimbursements) to average net assets (5)(6) | | | 1.84 | % |
Ratio of net expenses to average net assets (5) | | | 0.95 | % |
Ratio of net investment income to average net assets (5) | | | 5.04 | % |
Portfolio turnover rate (4) | | | 99.72 | % |
| (1) | | Fund commenced operations on September 16, 2013. |
| (2) | | Calculated using average shares outstanding. |
| (3) | | Total investment return calculation assumes the reinvestment of dividends at actual prices pursuant to the Fund’s dividend reinvestment plan. |
| (5) | | Annualized for periods less than one full year. |
| (6) | | The Adviser has agreed to waive and/or reimburse fees and/or expense so that, on an annualized basis, such expenses incurred will not exceed .95% as a percentage of average daily net assets. |
See accompanying Notes to Financial Statements
21
Babson Global Floating Rate Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Fixed Income — 98.3%*: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Bank Loans — 85.7%*§: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Aerospace and Defense — 1.1%*: | | | | | | | | | | | | | | | | | | | | |
DAE Aviation Holdings, Inc. | | | 7.75 | % | | | 8/5/2019 | | | | 142,982 | | | | $141,651 | | | | $145,127 | |
TransDigm Group, Inc. | | | 3.75 | | | | 2/28/2020 | | | | 496,222 | | | | 494,010 | | | | 494,361 | |
TransDigm Group, Inc. | | | 3.75 | | | | 6/4/2021 | | | | 660,582 | | | | 657,507 | | | | 657,279 | |
| | | | | | | | | | | | | | | | | | | | |
Total Aerospace and Defense | | | | | | | | | | | 1,299,786 | | | | 1,293,168 | | | | 1,296,767 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Automobile — 0.5%*: | | | | | | | | | |
Cooper Standard Automotive, Inc. | | | 4.00 | | | | 4/4/2021 | | | | 54,474 | | | | 54,209 | | | | 54,383 | |
Gates Global, Inc. | | | 4.25 | | | | 7/5/2021 | | | | 500,000 | | | | 494,618 | | | | 498,205 | |
| | | | | | | | | | | | | | | | | | | | |
Total Automobile | | | | | | | | | | | 554,474 | | | | 548,827 | | | | 552,588 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Beverage, Food and Tobacco — 2.4%*: | | | | | | | | | |
Acosta, Inc. | | | 4.25 | | | | 3/2/2018 | | | | 461,349 | | | | 463,030 | | | | 463,195 | |
CEC Entertainment Concepts LP | | | 4.25 | | | | 2/14/2021 | | | | 751,156 | | | | 747,461 | | | | 745,522 | |
Del Monte Foods, Inc. | | | 4.25 | | | | 2/18/2021 | | | | 249,375 | | | | 248,190 | | | | 247,869 | |
Del Monte Foods, Inc. | | | 8.25 | | | | 8/18/2021 | | | | 156,342 | | | | 154,847 | | | | 153,215 | |
Deoleo S.A.+ | | | 4.50 | | | | 5/12/2021 | | | | 500,000 | | | | 676,526 | | | | 679,090 | |
JBS USA Holdings, Inc. | | | 3.75 | | | | 9/18/2020 | | | | 496,250 | | | | 497,382 | | | | 493,977 | |
| | | | | | | | | | | | | | | | | | | | |
Total Beverage, Food and Tobacco | | | | | | | | | | | 2,614,472 | | | | 2,787,436 | | | | 2,782,868 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Broadcasting and Entertainment — 6.8%*: | | | | | | | | | |
All3Media International+ | | | 5.25 | | | | 6/30/2021 | | | | 500,000 | | | | 833,489 | | | | 851,421 | |
All3Media International+ | | | 8.25 | | | | 6/30/2022 | | | | 500,000 | | | | 670,554 | | | | 681,227 | |
Charter Communications Operating LLC | | | 3.00 | | | | 1/3/2021 | | | | 497,487 | | | | 496,312 | | | | 489,612 | |
Cumulus Media Holdings, Inc. | | | 4.25 | | | | 12/23/2020 | | | | 369,318 | | | | 365,885 | | | | 370,241 | |
Learfield Communications, Inc. | | | 4.50 | | | | 10/9/2020 | | | | 417,500 | | | | 416,996 | | | | 420,631 | |
Learfield Communications, Inc. | | | 8.75 | | | | 10/8/2021 | | | | 1,000,000 | | | | 1,021,347 | | | | 1,017,500 | |
Telecommunications Management LLC | | | 4.75 | | | | 4/30/2020 | | | | 69,992 | | | | 69,992 | | | | 70,429 | |
Tyrol Acquisitions 2 SAS+ | | | 3.23 | | | | 1/29/2016 | | | | 2,158,726 | | | | 2,847,990 | | | | 2,849,324 | |
Univision Communications, Inc. | | | 4.00 | | | | 3/2/2020 | | | | 993,725 | | | | 991,991 | | | | 993,039 | |
| | | | | | | | | | | | | | | | | | | | |
Total Broadcasting and Entertainment | | | | | | | | | | | 6,506,748 | | | | 7,714,556 | | | | 7,743,424 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Buildings and Real Estate — 1.5%*: | | | | | | | | | |
Alstom Auxiliary Components+ | | | 5.50 | | | | 6/15/2021 | | | | 297,257 | | | | 294,285 | | | | 294,657 | |
Autobahn Tank & Rast GmbH+ | | | 3.73 | | | | 12/4/2018 | | | | 250,000 | | | | 336,546 | | | | 341,801 | |
Autobahn Tank & Rast GmbH+ | | | 3.98 | | | | 12/10/2019 | | | | 200,000 | | | | 271,730 | | | | 274,279 | |
Interline Brands, Inc. | | | 4.00 | | | | 3/17/2021 | | | | 86,077 | | | | 85,870 | | | | 85,790 | |
Quikrete Holdings, Inc. | | | 4.00 | | | | 9/28/2020 | | | | 693,254 | | | | 690,186 | | | | 693,469 | |
| | | | | | | | | | | | | | | | | | | | |
Total Buildings and Real Estate | | | | | | | | | | | 1,526,588 | | | | 1,678,617 | | | | 1,689,996 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Cargo Transport — 0.7%*: | | | | | | | | | |
Direct ChassisLink, Inc.¤ | | | 8.25 | | | | 10/31/2019 | | | | 497,619 | | | | 490,872 | | | | 497,619 | |
Mirror Bidco Corp. | | | 4.25 | | | | 12/28/2019 | | | | 62,865 | | | | 62,570 | | | | 62,786 | |
Swift Transportation Co. LLC | | | 3.75 | | | | 6/9/2021 | | | | 230,453 | | | | 229,879 | | | | 230,453 | |
| | | | | | | | | | | | | | | | | | | | |
Total Cargo Transport | | | | | | | | | | | 790,937 | | | | 783,321 | | | | 790,858 | |
| | | | | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements
22
Babson Global Floating Rate Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Bank Loans (Continued) | | | | | | | | | |
| | |
Chemicals, Plastics and Rubber — 3.3%*: | | | | | | | | | |
Chromaflo Technologies Corp. | | | 4.50 | % | | | 12/2/2019 | | | | 623,274 | | | | $624,318 | | | | $624,832 | |
Colouroz Investment 1 GmbH+ | | | 4.75 | | | | 5/2/2021 | | | | 414,958 | | | | 410,809 | | | | 415,867 | |
Colouroz Investment 1 GmbH+ | | | 4.75 | | | | 5/3/2021 | | | | 231,534 | | | | 229,219 | | | | 232,042 | |
Flint Group SA+ | | | 5.48 | | | | 12/30/2016 | | | | 217,710 | | | | 216,406 | | | | 217,710 | |
Flint Group SA+ | | | 5.48 | | | | 12/31/2016 | | | | 782,290 | | | | 777,603 | | | | 782,290 | |
Univar, Inc. | | | 5.00 | | | | 6/30/2017 | | | | 994,854 | | | | 993,091 | | | | 998,585 | |
Vantage Specialties, Inc. | | | 5.00 | | | | 2/10/2019 | | | | 496,207 | | | | 495,130 | | | | 497,447 | |
| | | | | | | | | | | | | | | | | | | | |
Total Chemicals, Plastics and Rubber | | | | | | | | | | | 3,760,827 | | | | 3,746,576 | | | | 3,768,773 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Containers, Packaging and Glass — 4.3%*: | | | | | | | | | |
Ardagh Holdings USA, Inc. | | | 4.25 | | | | 12/17/2019 | | | | 73,649 | | | | 73,311 | | | | 73,864 | |
Chesapeake Corp. | | | 4.25 | | | | 9/30/2020 | | | | 1,149,753 | | | | 1,149,283 | | | | 1,149,397 | |
Chesapeake Corp.+ | | | 6.00 | | | | 9/30/2020 | | | | 496,250 | | | | 790,907 | | | | 855,473 | |
Consolidated Container Co. LLC | | | 7.75 | | | | 1/3/2020 | | | | 188,280 | | | | 184,516 | | | | 185,456 | |
Coveris | | | 5.25 | | | | 5/8/2019 | | | | 386,702 | | | | 384,974 | | | | 392,503 | |
Coveris | | | 5.75 | | | | 5/8/2019 | | | | 497,500 | | | | 683,476 | | | | 686,622 | |
Libbey Glass, Inc. | | | 3.75 | | | | 4/9/2021 | | | | 877,465 | | | | 875,292 | | | | 876,368 | |
Mauser Industrieverpackungen GmbH+ | | | 3.98 | | | | 6/25/2021 | | | | 500,000 | | | | 679,013 | | | | 685,937 | |
Mauser Industrieverpackungen GmbH+ | | | 4.25 | | | | 6/4/2021 | | | | 65,411 | | | | 65,084 | | | | 65,411 | |
| | | | | | | | | | | | | | | | | | | | |
Total Containers, Packaging and Glass | | | | | | | | | | | 4,235,010 | | | | 4,885,856 | | | | 4,971,031 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Diversified/Conglomerate Manufacturing — 1.9%*: | | | | | | | | | |
Applied Systems, Inc. | | | 4.25 | | | | 1/25/2021 | | | | 67,486 | | | | 67,327 | | | | 67,644 | |
Filtration Group Corp. | | | 4.50 | | | | 11/21/2020 | | | | 365,125 | | | | 363,444 | | | | 367,499 | |
Information Resources, Inc. | | | 4.75 | | | | 9/30/2020 | | | | 158,242 | | | | 157,529 | | | | 159,230 | |
Marine Acquisition Corp. | | | 5.25 | | | | 1/30/2021 | | | | 110,111 | | | | 109,591 | | | | 111,075 | |
Quality Home Brands Holdings LLC | | | 7.75 | | | | 5/25/2018 | | | | 262,354 | | | | 260,007 | | | | 264,322 | |
Rexnord LLC | | | 4.00 | | | | 8/21/2020 | | | | 924,052 | | | | 918,995 | | | | 922,666 | |
STS Operating, Inc. | | | 4.75 | | | | 2/19/2021 | | | | 316,100 | | | | 316,430 | | | | 317,285 | |
| | | | | | | | | | | | | | | | | | | | |
Total Diversified/Conglomerate Manufacturing | | | | | | | | | | | 2,203,470 | | | | 2,193,323 | | | | 2,209,721 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Diversified/Conglomerate Service — 8.3%*: | | | | | | | | | |
Aquilex Holdings LLC | | | 5.00 | | | | 12/31/2020 | | | | 199,142 | | | | 198,675 | | | | 198,146 | |
Atrium Innovations, Inc.+ | | | 4.25 | | | | 2/15/2021 | | | | 836,120 | | | | 834,565 | | | | 828,453 | |
Atrium Innovations, Inc.+ | | | 7.75 | | | | 8/13/2021 | | | | 598,409 | | | | 608,418 | | | | 597,661 | |
Bauer Performance Sports Ltd. | | | 4.50 | | | | 4/15/2021 | | | | 92,906 | | | | 92,453 | | | | 92,965 | |
Brickman Group Ltd. LLC | | | 7.50 | | | | 12/17/2021 | | | | 82,405 | | | | 82,016 | | | | 83,710 | |
EIG Investors Corp. | | | 5.00 | | | | 11/9/2019 | | | | 598,517 | | | | 600,947 | | | | 598,517 | |
Garda World Security Corp.+ | | | 4.00 | | | | 11/6/2020 | | | | 173,489 | | | | 172,698 | | | | 173,199 | |
Go Daddy Operating Company LLC | | | 4.75 | | | | 5/13/2021 | | | | 368,625 | | | | 366,766 | | | | 366,436 | |
Internet Brands, Inc. | | | 5.25 | | | | 7/8/2021 | | | | 151,623 | | | | 150,106 | | | | 151,074 | |
Internet Brands, Inc. | | | 8.50 | | | | 6/27/2022 | | | | 400,000 | | | | 396,000 | | | | 397,752 | |
MPH Acquisition Holdings LLC | | | 4.00 | | | | 3/31/2021 | | | | 866,761 | | | | 864,634 | | | | 863,900 | |
Northgate Information Solutions Ltd.+ | | | 4.23 | | | | 3/7/2018 | | | | 502,514 | | | | 671,579 | | | | 633,045 | |
Northgate Information Solutions Ltd.+ | | | 4.73 | | | | 3/6/2018 | | | | 501,257 | | | | 669,831 | | | | 631,462 | |
See accompanying Notes to Financial Statements
23
Babson Global Floating Rate Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Bank Loans (Continued) | | | | | | | | | |
| | |
Diversified/Conglomerate Service (Continued) | | | | | | | | | |
Power Team Services LLC | | | 8.25 | % | | | 11/6/2020 | | | | 500,000 | | | | $495,410 | | | | $487,500 | |
Protection One, Inc. | | | 4.25 | | | | 3/21/2019 | | | | 356,917 | | | | 355,948 | | | | 356,917 | |
RP Crown Parent LLC | | | 6.00 | | | | 12/21/2018 | | | | 553,768 | | | | 555,964 | | | | 553,535 | |
RP Crown Parent LLC | | | 11.25 | | | | 12/20/2019 | | | | 678,571 | | | | 693,001 | | | | 683,661 | |
Sabre, Inc. | | | 4.50 | | | | 2/19/2019 | | | | 496,250 | | | | 496,250 | | | | 497,491 | |
SkillSoft Corp. | | | 4.50 | | | | 4/28/2021 | | | | 449,713 | | | | 447,514 | | | | 449,434 | |
Triple Point Technology, Inc. | | | 5.25 | | | | 7/10/2020 | | | | 422,272 | | | | 386,066 | | | | 376,527 | |
Triple Point Technology, Inc.†† | | | 9.25 | | | | 7/9/2021 | | | | 182,877 | | | | 169,238 | | | | 161,389 | |
Vantiv LLC | | | 3.75 | | | | 5/12/2021 | | | | 206,042 | | | | 205,014 | | | | 207,072 | |
Vogue International, Inc. | | | 5.25 | | | | 2/14/2020 | | | | 145,111 | | | | 143,735 | | | | 145,565 | |
| | | | | | | | | | | | | | | | | | | | |
Total Diversified/Conglomerate Service | | | | | | | | | | | 9,363,289 | | | | 9,656,828 | | | | 9,535,411 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Ecological — 2.9%*: | | | | | | | | | |
ADS Waste Holdings, Inc. | | | 3.75 | | | | 10/9/2019 | | | | 724,939 | | | | 724,016 | | | | 720,988 | |
Biffa Waste Services Ltd.+ | | | 5.23 | | | | 1/30/2018 | | | | 1,000,000 | | | | 1,648,899 | | | | 1,673,749 | |
Emerald 3 Ltd.+ | | | 8.00 | | | | 5/9/2022 | | | | 390,426 | | | | 386,522 | | | | 388,962 | |
Emerald US, Inc.+ | | | 5.00 | | | | 5/9/2021 | | | | 492,511 | | | | 487,586 | | | | 488,512 | |
| | | | | | | | | | | | | | | | | | | | |
Total Ecological | | | | | | | | | | | 2,607,876 | | | | 3,247,023 | | | | 3,272,211 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Electronics — 2.6%*: | | | | | | | | | |
AI Avocado Holding B.V.+ | | | 4.98 | | | | 11/17/2020 | | | | 500,000 | | | | 681,600 | | | | 688,073 | |
Avago Technologies Cayman Ltd.+ | | | 3.75 | | | | 5/6/2021 | | | | 556,041 | | | | 553,316 | | | | 557,582 | |
Freescale Semiconductor, Inc. | | | 4.25 | | | | 2/28/2020 | | | | 995,000 | | | | 995,000 | | | | 994,174 | |
Kronos, Inc. | | | 4.50 | | | | 10/30/2019 | | | | 198,839 | | | | 197,496 | | | | 200,231 | |
Kronos, Inc. | | | 9.75 | | | | 4/30/2020 | | | | 221,994 | | | | 220,425 | | | | 230,041 | |
Magic Newco LLC+ | | | 5.00 | | | | 12/12/2018 | | | | 96,109 | | | | 96,109 | | | | 96,758 | |
Presidio, Inc. | | | 5.00 | | | | 3/31/2017 | | | | 137,011 | | | | 136,377 | | | | 137,525 | |
Renaissance Learning, Inc. | | | 4.50 | | | | 4/9/2021 | | | | 82,960 | | | | 82,555 | | | | 82,856 | |
| | | | | | | | | | | | | | | | | | | | |
Total Electronics | | | | | | | | | | | 2,787,954 | | | | 2,962,878 | | | | 2,987,240 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Farming and Agriculture — 0.1%*: | | | | | | | | | |
Dole Food Co., Inc. | | | 4.50 | | | | 11/1/2018 | | | | 150,524 | | | | 149,867 | | | | 150,649 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Finance — 11.2%*: | | | | | | | | | |
AssuredPartners Capital, Inc. | | | 4.50 | | | | 3/31/2021 | | | | 307,844 | | | | 306,350 | | | | 307,940 | |
AssuredPartners Capital, Inc. | | | 7.75 | | | | 4/4/2022 | | | | 136,864 | | | | 135,530 | | | | 136,864 | |
Confie Seguros Holdings II Co. | | | 5.75 | | | | 11/9/2018 | | | | 454,540 | | | | 452,592 | | | | 454,540 | |
Confie Seguros Holdings II Co. | | | 10.25 | | | | 5/8/2019 | | | | 297,015 | | | | 297,015 | | | | 298,687 | |
Cunningham Lindsey US, Inc. | | | 9.25 | | | | 6/10/2020 | | | | 748,546 | | | | 750,381 | | | | 748,082 | |
Evertec Group LLC | | | 3.50 | | | | 4/17/2020 | | | | 674,829 | | | | 662,984 | | | | 663,863 | |
First Data Corp. | | | 3.73 | | | | 3/24/2017 | | | | 500,000 | | | | 500,000 | | | | 499,585 | |
First Data Corp. | | | 4.23 | | | | 3/24/2018 | | | | 500,000 | | | | 497,365 | | | | 500,625 | |
GENEX Services, Inc. | | | 5.25 | | | | 5/21/2021 | | | | 184,978 | | | | 184,063 | | | | 185,903 | |
GENEX Services, Inc. | | | 8.75 | | | | 5/20/2022 | | | | 500,000 | | | | 495,038 | | | | 503,750 | |
Intertrust Group Holding B.V.+ | | | 8.00 | | | | 4/16/2022 | | | | 192,451 | | | | 191,039 | | | | 193,092 | |
See accompanying Notes to Financial Statements
24
Babson Global Floating Rate Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Bank Loans (Continued) | | | | | | | | | |
| | |
Finance (Continued) | | | | | | | | | |
Intertrust Group Holding B.V.+ | | | 8.00 | % | | | 4/16/2022 | | | | 500,000 | | | | $680,147 | | | | $690,470 | |
Moneygram International, Inc. | | | 4.25 | | | | 3/27/2020 | | | | 91,581 | | | | 91,470 | | | | 90,265 | |
NAB Holdings LLC | | | 4.75 | | | | 5/31/2021 | | | | 112,774 | | | | 111,938 | | | | 113,056 | |
National Financial Partners Corp. | | | 5.25 | | | | 7/1/2020 | | | | 132,862 | | | | 132,862 | | | | 133,459 | |
Nets Holding A/S+ | | | 3.73 | | | | 5/14/2021 | | | | 500,000 | | | | 680,953 | | | | 685,616 | |
Nuveen Investments, Inc. | | | 4.23 | | | | 5/15/2017 | | | | 500,000 | | | | 496,010 | | | | 500,625 | |
Nuveen Investments, Inc. | | | 6.50 | | | | 2/28/2019 | | | | 500,000 | | | | 491,217 | | | | 504,195 | |
P2 Newco Acquisition, Inc. | | | 5.50 | | | | 10/22/2020 | | | | 450,133 | | | | 446,055 | | | | 450,696 | |
P2 Newco Acquisition, Inc. | | | 9.50 | | | | 10/22/2021 | | | | 500,000 | | | | 495,411 | | | | 500,000 | |
SAM Finance Lux Sarl+ | | | 4.25 | | | | 12/17/2020 | | | | 497,500 | | | | 495,184 | | | | 499,057 | |
SAM Finance Lux Sarl+ | | | 5.00 | | | | 12/17/2020 | | | | 497,500 | | | | 802,726 | | | | 851,421 | |
Sedgwick, Inc. | | | 3.75 | | | | 3/1/2021 | | | | 498,750 | | | | 497,560 | | | | 490,645 | |
Sedgwick, Inc. | | | 6.75 | | | | 2/28/2022 | | | | 561,418 | | | | 560,723 | | | | 559,874 | |
Ship US Bidco, Inc.+ | | | 4.50 | | | | 11/30/2019 | | | | 374,888 | | | | 371,494 | | | | 376,200 | |
TransUnion LLC | | | 4.00 | | | | 4/9/2021 | | | | 498,750 | | | | 497,540 | | | | 498,571 | |
VFH Parent LLC | | | 5.75 | | | | 11/6/2019 | | | | 1,173,504 | | | | 1,165,563 | | | | 1,164,702 | |
Wall Street Systems Delaware, Inc. | | | 4.50 | | | | 4/30/2021 | | | | 296,789 | | | | 295,250 | | | | 296,976 | |
| | | | | | | | | | | | | | | | | | | | |
Total Finance | | | | | | | | | | | 12,183,516 | | | | 12,784,460 | | | | 12,898,759 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Healthcare, Education and Childcare — 10.2%*: | | | | | | | | | |
Accellent, Inc. | | | 4.50 | | | | 3/12/2021 | | | | 948,602 | | | | 946,109 | | | | 944,457 | |
Aenova Holding GmbH+ | | | 5.23 | | | | 9/27/2019 | | | | 600,000 | | | | 799,020 | | | | 822,098 | |
Britax US Holdings, Inc. | | | 4.50 | | | | 10/15/2020 | | | | 437,432 | | | | 435,454 | | | | 414,104 | |
CareCore National LLC | | | 5.50 | | | | 3/5/2021 | | | | 376,852 | | | | 378,812 | | | | 379,916 | |
CEVA Sante Animale+ | | | 4.50 | | | | 3/31/2021 | | | | 700,000 | | | | 960,478 | | | | 964,501 | |
Community Health Systems, Inc. | | | 4.25 | | | | 1/27/2021 | | | | 336,869 | | | | 335,276 | | | | 338,668 | |
Drumm Investors LLC | | | 6.75 | | | | 5/4/2018 | | | | 894,523 | | | | 886,113 | | | | 896,204 | |
Envision Healthcare Corp. | | | 4.00 | | | | 5/25/2018 | | | | 494,895 | | | | 494,895 | | | | 495,761 | |
Heartland Dental Care, Inc. | | | 5.50 | | | | 12/21/2018 | | | | 390,041 | | | | 388,304 | | | | 391,016 | |
Kindred Healthcare, Inc. | | | 4.00 | | | | 4/9/2021 | | | | 206,613 | | | | 206,112 | | | | 206,700 | |
Ortho-Clinical Diagnostics, Inc. | | | 4.75 | | | | 6/30/2021 | | | | 554,399 | | | | 548,857 | | | | 558,629 | |
PharMedium Healthcare Corp. | | | 4.25 | | | | 1/28/2021 | | | | 99,862 | | | | 99,391 | | | | 99,529 | |
PharMedium Healthcare Corp. | | | 7.75 | | | | 1/28/2022 | | | | 93,590 | | | | 93,145 | | | | 94,643 | |
Phibro Animal Health Corp. | | | 4.00 | | | | 4/16/2021 | | | | 178,608 | | | | 178,172 | | | | 178,533 | |
PRA Holdings, Inc. | | | 4.50 | | | | 9/23/2020 | | | | 859,697 | | | | 852,012 | | | | 854,505 | |
RadNet Management, Inc. | | | 4.25 | | | | 10/10/2018 | | | | 122,417 | | | | 121,984 | | | | 123,182 | |
Radnet Management, Inc. | | | 8.00 | | | | 3/25/2021 | | | | 71,927 | | | | 71,235 | | | | 72,107 | |
Rodenstock GmbH+ | | | 4.73 | | | | 5/31/2019 | | | | 500,000 | | | | 664,736 | | | | 678,659 | |
Synarc-Biocore Holdings LLC | | | 5.50 | | | | 3/5/2021 | | | | 498,750 | | | | 493,957 | | | | 497,503 | |
Synarc-Biocore Holdings LLC | | | 9.25 | | | | 3/4/2022 | | | | 500,000 | | | | 495,170 | | | | 495,000 | |
TriZetto Group, Inc. (The) | | | 4.75 | | | | 5/2/2018 | | | | 840,904 | | | | 794,770 | | | | 843,006 | |
Tunstall Group Holdings Ltd.+ | | | 5.23 | | | | 10/16/2020 | | | | 500,000 | | | | 792,213 | | | | 690,173 | |
Vitalia Holdco Sarl+ | | | 5.23 | | | | 7/27/2018 | | | | 500,000 | | | | 666,900 | | | | 692,353 | |
| | | | | | | | | | | | | | | | | | | | |
Total Healthcare, Education and Childcare | | | | | | | | | | | 10,705,981 | | | | 11,703,115 | | | | 11,731,247 | |
| | | | | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements
25
Babson Global Floating Rate Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Bank Loans (Continued) | | | | | | | | | |
| | |
Home and Office Furnishings, Housewares, and Durable Consumer Products — 0.5%*: | | | | | | | | | |
Leslie’s Poolmart, Inc. | | | 4.25 | % | | | 10/16/2019 | | | | 545,493 | | | | $545,493 | | | | $545,493 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Hotels, Motels, Inns and Gaming — 1.2%*: | | | | | | | | | |
Belmond Interfin Ltd. | | | 4.00 | | | | 3/21/2021 | | | | 84,080 | | | | 83,675 | | | | 84,238 | |
Gala Group Ltd.+ | | | 5.23 | | | | 5/28/2018 | | | | 500,000 | | | | 833,659 | | | | 860,946 | |
La Quinta Intermediate Holdings LLC | | | 4.00 | | | | 4/14/2021 | | | | 254,771 | | | | 253,532 | | | | 254,931 | |
Marina District Finance Co., Inc. | | | 6.75 | | | | 8/15/2018 | | | | 128,447 | | | | 127,040 | | | | 129,851 | |
| | | | | | | | | | | | | | | | | | | | |
Total Hotels, Motels, Inns and Gaming | | | | | | | | | | | 967,298 | | | | 1,297,906 | | | | 1,329,966 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Insurance — 2.1%*: | | | | | | | | | |
AmWINS Group LLC | | | 5.00 | | | | 9/6/2019 | | | | 152,921 | | | | 152,579 | | | | 153,048 | |
Asurion LLC | | | 5.00 | | | | 5/24/2019 | | | | 985,366 | | | | 984,437 | | | | 990,913 | |
Asurion LLC | | | 8.50 | | | | 3/3/2021 | | | | 52,738 | | | | 51,981 | | | | 54,663 | |
Hub International Ltd. | | | 4.25 | | | | 10/2/2020 | | | | 992,512 | | | | 988,062 | | | | 993,197 | |
USI, Inc. | | | 4.25 | | | | 12/27/2019 | | | | 239,559 | | | | 237,217 | | | | 239,710 | |
| | | | | | | | | | | | | | | | | | | | |
Total Insurance | | | | | | | | | | | 2,423,096 | | | | 2,414,276 | | | | 2,431,531 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Leisure, Amusement, Entertainment — 0.2%*: | | | | | | | | | |
Jacobs Entertainment, Inc. | | | 5.25 | | | | 10/29/2018 | | | | 58,415 | | | | 58,416 | | | | 58,707 | |
Town Sports International, Inc. | | | 4.50 | | | | 11/16/2020 | | | | 150,812 | | | | 150,123 | | | | 139,124 | |
| | | | | | | | | | | | | | | | | | | | |
Total Leisure, Amusement, Entertainment | | | | | | | | | | | 209,227 | | | | 208,539 | | | | 197,831 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Machinery Non-Agriculture, Non-Construction, Non-Electronic — 2.6%*: | | | | | | | | | |
Capital Safety North America Holdings, Inc. | | | 4.00 | | | | 3/29/2021 | | | | 380,796 | | | | 380,330 | | | | 378,256 | |
Capital Safety North America Holdings, Inc. | | | 6.50 | | | | 3/28/2022 | | | | 251,661 | | | | 251,353 | | | | 252,396 | |
Doncasters Finance US LLC+ | | | 4.50 | | | | 4/9/2020 | | | | 997,479 | | | | 995,051 | | | | 1,000,601 | |
Doosan Infracore International, Inc. | | | 4.50 | | | | 5/28/2021 | | | | 381,386 | | | | 379,493 | | | | 384,247 | |
Husky Injection Molding Systems Ltd.+ | | | 4.25 | | | | 6/30/2021 | | | | 195,048 | | | | 194,073 | | | | 194,073 | |
Husky Injection Molding Systems Ltd.+ | | | 7.25 | | | | 6/30/2022 | | | | 89,262 | | | | 88,816 | | | | 89,597 | |
Intelligrated, Inc. | | | 4.50 | | | | 7/30/2018 | | | | 120,803 | | | | 120,538 | | | | 120,954 | |
Silver II US Holdings LLC | | | 4.00 | | | | 12/13/2019 | | | | 481,231 | | | | 481,231 | | | | 479,686 | |
TCH-2 Holding LLC | | | 5.50 | | | | 5/6/2021 | | | | 109,237 | | | | 108,161 | | | | 109,237 | |
| | | | | | | | | | | | | | | | | | | | |
Total Machinery Non-Agriculture, Non-Construction, Non-Electronic | | | | | | | | | | | 3,006,903 | | | | 2,999,046 | | | | 3,009,047 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Mining, Steel, Iron and Non-Precious Metals — 1.4%*: | | | | | | | | | |
Boomerang Tube LLC†† | | | 11.00 | | | | 10/11/2017 | | | | 256,140 | | | | 250,878 | | | | 230,526 | |
H.C. Starck GmbH+ | | | 2.98 | | | | 5/30/2016 | | | | 500,000 | | | | 679,250 | | | | 683,651 | |
Metal Services LLC | | | 6.00 | | | | 6/30/2017 | | | | 106,352 | | | | 106,352 | | | | 107,017 | |
Murray Energy Corp. | | | 5.25 | | | | 12/5/2019 | | | | 396,707 | | | | 394,907 | | | | 401,169 | |
TMS International Corp. | | | 4.50 | | | | 10/16/2020 | | | | 215,639 | | | | 214,667 | | | | 216,584 | |
| | | | | | | | | | | | | | | | | | | | |
Total Mining, Steel, Iron and Non-Precious Metals | | | | | | | | | | | 1,474,838 | | | | 1,646,054 | | | | 1,638,947 | |
| | | | | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements
26
Babson Global Floating Rate Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Bank Loans (Continued) | | | | | | | | | |
| | |
Oil and Gas — 6.2%*: | | | | | | | | | |
Alfred Fueling Systems, Inc. | | | 5.00 | % | | | 6/20/2021 | | | | 74,200 | | | | $73,828 | | | | $74,261 | |
Caelus Energy Alaska O3 LLC | | | 8.75 | | | | 4/2/2021 | | | | 1,000,000 | | | | 980,529 | | | | 983,330 | |
Chief Exploration & Development LLC | | | 7.50 | | | | 5/12/2021 | | | | 1,000,000 | | | | 990,126 | | | | 1,020,000 | |
Drillships Financing Holding, Inc. | | | 6.00 | | | | 3/31/2021 | | | | 76,513 | | | | 77,239 | | | | 77,709 | |
Energy Transfer Equity LP | | | 3.25 | | | | 12/2/2019 | | | | 425,857 | | | | 421,738 | | | | 421,228 | |
Equipower Resources Holdings LLC | | | 4.25 | | | | 12/31/2019 | | | | 108,053 | | | | 107,804 | | | | 108,661 | |
Fieldwood Energy LLC | | | 8.38 | | | | 9/30/2020 | | | | 700,000 | | | | 722,750 | | | | 721,350 | |
Floatel International Ltd. | | | 6.00 | | | | 5/2/2020 | | | | 411,613 | | | | 407,497 | | | | 413,931 | |
Quicksilver Resources, Inc. | | | 7.00 | | | | 6/21/2019 | | | | 500,000 | | | | 491,010 | | | | 487,815 | |
Sabine Oil & Gas LLC | | | 8.75 | | | | 12/31/2018 | | | | 700,000 | | | | 711,333 | | | | 713,125 | |
Seadrill Partners Finco LLC | | | 4.00 | | | | 2/21/2021 | | | | 1,693,994 | | | | 1,679,855 | | | | 1,682,254 | |
UTEX Industries, Inc. | | | 5.00 | | | | 5/22/2021 | | | | 113,290 | | | | 112,730 | | | | 114,565 | |
Western Refining, Inc. | | | 4.25 | | | | 11/12/2020 | | | | 284,114 | | | | 284,114 | | | | 285,179 | |
| | | | | | | | | | | | | | | | | | | | |
Total Oil and Gas | | | | | | | | | | | 7,087,634 | | | | 7,060,553 | | | | 7,103,408 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Personal, Food and Miscellaneous — 0.4%*: | | | | | | | | | |
Redtop Acquisitions Ltd.+ | | | 8.25 | | | | 6/3/2021 | | | | 158,365 | | | | 156,532 | | | | 162,720 | |
Shearer’s Foods, Inc. | | | 8.00 | | | | 5/29/2022 | | | | 300,000 | | | | 297,000 | | | | 302,250 | |
| | | | | | | | | | | | | | | | | | | | |
Total Personal, Food and Miscellaneous | | | | | | | | | | | 458,365 | | | | 453,532 | | | | 464,970 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Printing and Publishing — 1.6%*: | | | | | | | | | |
Emap B2B+ | | | 5.13 | | | | 10/31/2017 | | | | 221,928 | | | | 344,118 | | | | 372,211 | |
Emap B2B+ | | | 5.13 | | | | 10/31/2017 | | | | 334,745 | | | | 456,809 | | | | 453,782 | |
EMI Music Publishing Ltd. | | | 3.75 | | | | 6/29/2018 | | | | 268,107 | | | | 268,107 | | | | 267,571 | |
Springer Science and Business Media GmbH+ | | | 5.00 | | | | 8/14/2020 | | | | 496,250 | | | | 493,987 | | | | 496,717 | |
SuperMedia, Inc. | | | 11.60 | | | | 12/30/2016 | | | | 290,075 | | | | 227,045 | | | | 244,823 | |
| | | | | | | | | | | | | | | | | | | | |
Total Printing and Publishing | | | | | | | | | | | 1,611,105 | | | | 1,790,066 | | | | 1,835,104 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Retail Stores — 5.0%*: | | | | | | | | | |
Advantage Sales and Marketing, Inc. | | | 4.25 | | | | 12/17/2017 | | | | 120,249 | | | | 119,717 | | | | 120,193 | |
Alliance Boots Holdings Ltd.+ | | | 4.98 | | | | 7/9/2018 | | | | 277,971 | | | | 382,914 | | | | 381,946 | |
Alliance Boots Holdings Ltd.+ | | | 4.98 | | | | 7/9/2018 | | | | 800,000 | | | | 1,319,618 | | | | 1,373,871 | |
BJ’s Wholesale Club, Inc. | | | 4.50 | | | | 9/26/2019 | | | | 135,661 | | | | 135,053 | | | | 135,732 | |
FleetPride Corp. | | | 5.25 | | | | 11/19/2019 | | | | 993,070 | | | | 977,399 | | | | 988,105 | |
Hudson’s Bay Co.+ | | | 4.75 | | | | 11/4/2020 | | | | 735,668 | | | | 728,971 | | | | 744,599 | |
J Crew Group, Inc. | | | 4.00 | | | | 3/5/2021 | | | | 938,252 | | | | 933,754 | | | | 924,910 | |
Michaels Stores, Inc. | | | 4.00 | | | | 1/28/2020 | | | | 189,251 | | | | 188,305 | | | | 189,183 | |
Smart and Final Stores LLC | | | 4.75 | | | | 11/15/2019 | | | | 277,612 | | | | 276,973 | | | | 277,958 | |
The Talbots, Inc. | | | 4.75 | | | | 3/19/2020 | | | | 498,750 | | | | 496,337 | | | | 493,762 | |
The Talbots, Inc. | | | 8.25 | | | | 3/19/2021 | | | | 80,326 | | | | 79,551 | | | | 79,121 | |
| | | | | | | | | | | | | | | | | | | | |
Total Retail Stores | | | | | | | | | | | 5,046,810 | | | | 5,638,592 | | | | 5,709,380 | |
| | | | | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements
27
Babson Global Floating Rate Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Bank Loans (Continued) | | | | | | | | | |
| | |
Telecommunications — 6.1%*: | | | | | | | | | |
Altice Financing SA+ | | | 5.50 | % | | | 7/15/2019 | | | | 264,297 | | | | $266,866 | | | | $270,162 | |
CDS Holdco III B.V.+ | | | 4.98 | | | | 9/30/2020 | | | | 500,000 | | | | 672,427 | | | | 688,080 | |
Custom Sensors & Technologies, Inc. | | | 4.50 | | | | 5/30/2021 | | | | 293,721 | | | | 292,987 | | | | 295,190 | |
Eircom Finco Sarl+ | | | 4.73 | | | | 9/30/2019 | | | | 2,000,000 | | | | 2,659,468 | | | | 2,679,912 | |
ION Trading Technologies Sarl+ | | | 3.73 | | | | 6/10/2021 | | | | 500,000 | | | | 682,825 | | | | 686,608 | |
M/A-COM Technology Solutions Holdings, Inc. | | | 4.50 | | | | 5/7/2021 | | | | 385,458 | | | | 382,601 | | | | 387,386 | |
Numericable US LLC+ | | | 4.50 | | | | 5/21/2020 | | | | 669,198 | | | | 662,608 | | | | 673,066 | |
Sungard Availability Services Capital, Inc. | | | 6.00 | | | | 3/31/2019 | | | | 373,980 | | | | 372,087 | | | | 371,411 | |
Virgin Media Investment Holdings Ltd.+ | | | 4.25 | | | | 6/30/2023 | | | | 500,000 | | | | 828,489 | | | | 858,823 | |
Websense, Inc. | | | 4.50 | | | | 6/25/2020 | | | | 93,209 | | | | 92,984 | | | | 93,442 | |
| | | | | | | | | | | | | | | | | | | | |
Total Telecommunications | | | | | | | | | | | 5,579,863 | | | | 6,913,342 | | | | 7,004,080 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Utilities — 0.6%*: | | | | | | | | | |
Bayonne Energy Center LLC | | | 5.00 | | | | 6/30/2021 | | | | 102,895 | | | | 102,380 | | | | 103,666 | |
Calpine Construction Finance Co. LP | | | 3.00 | | | | 5/3/2020 | | | | 497,487 | | | | 496,293 | | | | 487,951 | |
Exgen Renewables I LLC | | | 5.25 | | | | 2/8/2021 | | | | 63,104 | | | | 62,806 | | | | 63,972 | |
| | | | | | | | | | | | | | | | | | | | |
Total Utilities | | | | | | | | | | | 663,486 | | | | 661,479 | | | | 655,589 | |
| | | | | | | | | | | | | | | | | | | | |
Total Bank Loans | | | | | | | | | | | 90,365,570 | | | | 97,764,729 | | | | 98,306,889 | |
| | | | | | | | | | | | | | | | | | | | |
Corporate Bonds — 12.6%*: | | | | | | | | | |
| | |
Automobile — 0.1%*: | | | | | | | | | |
Grupo Antolin Dutch B.V.+ | | | 4.75 | | | | 4/1/2021 | | | | 100,000 | | | | 138,615 | | | | 142,407 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Beverage, Food and Tobacco — 0.3%*: | | | | | | | | | |
Albain Bidco Norway AS+ | | | 6.77 | # | | | 11/1/2020 | | | | 1,000,000 | | | | 166,716 | | | | 163,030 | |
Findus Bondco SA+ | | | 9.13 | | | | 7/1/2018 | | | | 100,000 | | | | 140,918 | | | | 148,911 | |
| | | | | | | | | | | | | | | | | | | | |
Total Beverage, Food and Tobacco | | | | | | | | | | | 1,100,000 | | | | 307,634 | | | | 311,941 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Broadcasting and Entertainment — 0.1%*: | | | | | | | | | |
CET 21 Spol Sro+ | | | 9.00 | | | | 11/1/2017 | | | | 100,000 | | | | 141,523 | | | | 144,119 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Buildings and Real Estate — 0.3%*: | | | | | | | | | |
Forestar USA Real Estate Group, Inc.^ | | | 8.50 | | | | 6/1/2022 | | | | 110,000 | | | | 110,000 | | | | 113,850 | |
Paroc Group Oy+ | | | 5.59 | # | | | 5/15/2020 | | | | 100,000 | | | | 137,565 | | | | 137,491 | |
Paroc Group Oy+ | | | 6.25 | | | | 5/15/2020 | | | | 100,000 | | | | 137,565 | | | | 141,092 | |
| | | | | | | | | | | | | | | | | | | | |
Total Buildings and Real Estate | | | | | | | | | | | 310,000 | | | | 385,130 | | | | 392,433 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Chemicals, Plastics and Rubber — 0.7%*: | | | | | | | | | |
Monitchem HoldCo 3 SA+ | | | 5.02 | # | | | 6/15/2021 | | | | 100,000 | | | | 136,455 | | | | 137,964 | |
Novacap International SAS+ | | | 5.34 | # | | | 5/1/2019 | | | | 100,000 | | | | 138,655 | | | | 138,423 | |
Pinnacle Operating Corp.^ | | | 9.00 | | | | 11/15/2020 | | | | 500,000 | | | | 538,702 | | | | 542,500 | |
| | | | | | | | | | | | | | | | | | | | |
Total Chemicals, Plastics and Rubber | | | | | | | | | | | 700,000 | | | | 813,812 | | | | 818,887 | |
| | | | | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements
28
Babson Global Floating Rate Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Corporate Bonds (Continued) | | | | | | | | | |
| | |
Containers, Packaging and Glass — 0.6%*: | | | | | | | | | |
Innovia Group Finance PLC+ | | | 5.24 | %# | | | 3/31/2020 | | | | 500,000 | | | | $685,184 | | | | $690,127 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Diversified/Conglomerate Manufacturing — 0.6%*: | | | | | | | | | |
Appvion, Inc.^ | | | 9.00 | | | | 6/1/2020 | | | | 460,000 | | | | 469,002 | | | | 457,700 | |
Galapagos SA+ | | | 5.06 | # | | | 6/15/2021 | | | | 200,000 | | | | 272,630 | | | | 276,599 | |
| | | | | | | | | | | | | | | | | | | | |
Total Diversified/Conglomerate Manufacturing | | | | | | | | | | | 660,000 | | | | 741,632 | | | | 734,299 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Finance — 1.4%*: | | | | | | | | | |
Equiniti Newco 2 PLC+ | | | 6.31 | # | | | 12/15/2018 | | | | 750,000 | | | | 1,214,061 | | | | 1,289,968 | |
Galaxy Bidco Ltd.+ | | | 5.53 | # | | | 11/15/2019 | | | | 100,000 | | | | 160,933 | | | | 172,509 | |
Lowell Group Financing PLC+ | | | 5.88 | | | | 4/1/2019 | | | | 100,000 | | | | 166,730 | | | | 170,926 | |
| | | | | | | | | | | | | | | | | | | | |
Total Finance | | | | | | | | | | | 950,000 | | | | 1,541,724 | | | | 1,633,403 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Grocery — 0.2%*: | | | | | | | | | |
Premier Foods Finance PLC+ | | | 5.56 | # | | | 3/15/2020 | | | | 100,000 | | | | 167,370 | | | | 171,140 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Healthcare, Education and Childcare — 0.7%*: | | | | | | | | | |
Care UK Health & Social Care PLC+ | | | 9.75 | | | | 8/1/2017 | | | | 100,000 | | | | 164,597 | | | | 179,911 | |
Unilabs Subholding AB+ | | | 7.58 | # | | | 7/15/2018 | | | | 400,000 | | | | 551,332 | | | | 557,250 | |
| | | | | | | | | | | | | | | | | | | | |
Total Healthcare, Education and Childcare | | | | | | | | | | | 500,000 | | | | 715,929 | | | | 737,161 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Insurance — 1.1%*: | | | | | | | | | |
Hastings Insurance Group Finance PLC+ | | | 6.53 | # | | | 10/21/2019 | | | | 150,000 | | | | 237,714 | | | | 257,993 | |
Hastings Insurance Group Finance PLC+ | | | 8.00 | | | | 10/21/2020 | | | | 100,000 | | | | 159,915 | | | | 183,120 | |
Towergate Finance PLC+ | | | 6.03 | # | | | 2/15/2018 | | | | 500,000 | | | | 796,762 | | | | 833,238 | |
| | | | | | | | | | | | | | | | | | | | |
Total Insurance | | | | | | | | | | | 750,000 | | | | 1,194,391 | | | | 1,274,351 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Leisure, Amusement, Entertainment — 2.2%*: | | | | | | | | | |
Allegiant Travel Co. | | | 5.50 | | | | 7/15/2019 | | | | 265,000 | | | | 265,000 | | | | 269,306 | |
Carlson Travel Holdings, Inc. PIK^† | | | 7.50 | | | | 8/15/2019 | | | | 470,000 | | | | 476,250 | | | | 479,400 | |
Travelex Financing PLC+ | | | 6.53 | # | | | 8/1/2018 | | | | 700,000 | | | | 1,120,228 | | | | 1,209,960 | |
Travelex Financing PLC+ | | | 8.00 | | | | 8/1/2018 | | | | 100,000 | | | | 158,328 | | | | 183,548 | |
Vougeot Bidco PLC+ | | | 5.58 | # | | | 7/15/2020 | | | | 250,000 | | | | 338,510 | | | | 345,748 | |
| | | | | | | | | | | | | | | | | | | | |
Total Leisure, Amusement, Entertainment | | | | | | | | | | | 1,785,000 | | | | 2,358,316 | | | | 2,487,962 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Oil and Gas — 0.8%*: | | | | | | | | | |
Niska Gas Storage Canada ULC/Niska Gas Storage Canada Finance Corp.+^ | | | 6.50 | | | | 4/1/2019 | | | | 1,000,000 | | | | 970,602 | | | | 960,000 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Personal, Food and Miscellaneous — 1.3%*: | | | | | | | | | |
Brakes Capital+ | | | 5.32 | # | | | 12/15/2018 | | | | 100,000 | | | | 136,645 | | | | 137,012 | |
Brakes Capital+ | | | 7.13 | | | | 12/15/2018 | | | | 300,000 | | | | 517,117 | | | | 525,023 | |
Financiere Quick SAS+ | | | 5.08 | # | | | 4/15/2019 | | | | 500,000 | | | | 688,282 | | | | 684,719 | |
See accompanying Notes to Financial Statements
29
Babson Global Floating Rate Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Corporate Bonds (Continued) | | | | | | | | | |
| | |
Personal, Food and Miscellaneous (Continued) | | | | | | | | | |
TeamSystem Holding SpA+ | | | 7.38 | % | | | 5/15/2020 | | | | 100,000 | | | | $132,471 | | | | $145,831 | |
| | | | | | | | | | | | | | | | | | | | |
Total Personal, Food and Miscellaneous | | | | | | | | | | | 1,000,000 | | | | 1,474,515 | | | | 1,492,585 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Retail Stores — 1.3%*: | | | | | | | | | |
Brighthouse Group PLC+ | | | 7.88 | | | | 5/15/2018 | | | | 150,000 | | | | 244,634 | | | | 271,471 | |
Guitar Center, Inc.^ | | | 6.50 | | | | 4/15/2019 | | | | 500,000 | | | | 495,196 | | | | 495,000 | |
HSS Financing PLC+ | | | 6.75 | | | | 8/1/2019 | | | | 100,000 | | | | 165,525 | | | | 179,483 | |
New Look Bondco I PLC+ | | | 8.75 | | | | 5/14/2018 | | | | 200,000 | | | | 324,444 | | | | 365,384 | |
Takko Luxembourg 2 S.C.A.+ | | | 9.88 | | | | 4/15/2019 | | | | 100,000 | | | | 131,818 | | | | 131,466 | |
| | | | | | | | | | | | | | | | | | | | |
Total Retail Stores | | | | | | | | | | | 1,050,000 | | | | 1,361,617 | | | | 1,442,804 | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Telecommunications — 0.9%*: | | | | | | | | | |
Numericable Group SA+ | | | 5.38 | | | | 5/15/2022 | | | | 100,000 | | | | 138,295 | | | | 145,317 | |
Numericable Group SA+ | | | 5.63 | | | | 5/15/2024 | | | | 100,000 | | | | 138,165 | | | | 146,344 | |
Wind Acquisition Finance SA+† | | | 4.00 | | | | 7/15/2020 | | | | 200,000 | | | | 271,930 | | | | 273,175 | |
Wind Acquisition Finance SA+† | | | 4.21 | # | | | 7/15/2020 | | | | 300,000 | | | | 407,895 | | | | 413,830 | |
| | | | | | | | | | | | | | | | | | | | |
Total Telecommunications | | | | | | | | | | | 700,000 | | | | 956,285 | | | | 978,666 | |
| | | | | | | | | | | | | | | | | | | | |
Total Corporate Bonds | | | | | | | | | | | 11,305,000 | | | | 13,954,279 | | | | 14,412,285 | |
| | | | | | | | | | | | | | | | | | | | |
Total Fixed Income | | | | | | | | | | | 101,670,570 | | | | 111,719,008 | | | | 112,719,174 | |
| | | | | | | | | | | | | | | | | | | | |
Short-Term Investment — 12.0%*: | | | | | | | | | |
| | |
Bank Deposit — 12.0%*: | | | | | | | | | |
State Street Bank & Trust Co. Euro Time Deposit | | | 0.01 | | | | 7/1/2014 | | | | 13,712,804 | | | | 13,712,804 | | | | 13,712,804 | |
| | | | | | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | 115,383,374 | | | | 125,431,812 | | | | 126,431,978 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Other assets and liabilities — (10.3%)* | | | | | | | | | | | | | | | | | | | (11,800,536 | ) |
| | | | | |
Net Assets — 100.0% | | | | | | | | | | | | | | | | | | | $114,631,442 | |
| | | | | | | | | | | | | | | | | | | | |
PIK Payment-in-kind
| ‡ | The effective interest rates are based on settled commitment amount. |
| * | Calculated as a percentage of net assets applicable to common shareholders. |
| ‡‡ | Unless otherwise indicated, all principal amounts are denominated in United States Dollars. |
See accompanying Notes to Financial Statements
30
Babson Global Floating Rate Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
Distributions of investments by country of issue (excluding temporary cash investments) as a percentage of total investments in securities, is as follows:
| | | | | | |
| | United States | | | 57.1% | |
| | United Kingdom | | | 17.9% | |
| | Germany | | | 5.8% | |
| | France | | | 5.6% | |
| | Canada | | | 3.2% | |
| | Ireland | | | 3.0% | |
| | Netherlands | | | 2.0% | |
| | Spain | | | 1.9% | |
| | Other (Individually less than 1%) | | | 3.5% | |
| | | | | | |
| | Total | | | 100.0% | |
| | | | | | |
| ^ | Security acquired in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold in transactions exempt from registration, normally to qualified institutional buyers. |
| § | Bank loans are exempt from registration under the Securities Act of 1933, as amended, but contain certain restrictions on resale and cannot be sold publicly. These loans pay interest at rates which adjust periodically. The interest rates shown for bank loans are the current interest rates at June 30, 2014. Bank loans are also subject to mandatory and/or optional prepayment which cannot be predicted. As a result, the remaining maturity may be substantially less than the stated maturity shown. |
| ¤ | For fair value measurement disclosure purposes, security is categorized as Level 3 (see Note 2). |
| # | Variable rate security. The interest rate shown is the rate in effect at June 30, 2014. |
A summary of outstanding financial instruments at June 30, 2014 is as follows:
Forward Foreign Currency Exchange Contracts to Sell
| | | | | | | | | | | | | | | | | | | | | | |
EXPIRATION
DATE | | COUNTERPARTY | | LOCAL CURRENCY | | | VALUE IN USD | | | IN EXCHANGE
FOR USD | | | NET UNREALIZED
DEPRECIATION | |
| 07/14/14 | | State Street Bank & Trust Co. | | | EUR | | | | 11,971,615 | | | | 16,393,476 | | | | 16,324,212 | | | $ | (69,264 | ) |
| 07/14/14 | | State Street Bank & Trust Co. | | | GBP | | | | 9,141,761 | | | | 15,643,745 | | | | 15,363,386 | | | | (280,359 | ) |
| 07/14/14 | | State Street Bank & Trust Co. | | | NOK | | | | 1,036,797 | | | | 168,954 | | | | 174,003 | | | | 5,049 | |
| 07/14/14 | | State Street Bank & Trust Co. | | | SEK | | | | 10,166,122 | | | | 1,521,302 | | | | 1,531,707 | | | | 10,405 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net unrealized depreciation on forward foreign exchange contracts to sell | | | | | | | $ | (334,169 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Currency Legend
| | | | |
| EUR | | – | | Euro |
| GBP | | – | | British Pound Sterling |
| NOK | | – | | Norwegian Krona |
| SEK | | – | | Swedish Krona |
See accompanying Notes to Financial Statements
31
Babson Global Credit Income Opportunities Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Fixed Income — 94.3%*: | | | | | | | | | | | | | |
| | | |
Asset-Backed Securities — 13.4%*: | | | | | | | | | | | | | |
| | | |
CDO/CLO — 13.4%*: | | | | | | | | | | | | | |
Apidos CLO XII^ | | | 5.13 | %# | | | 4/15/2025 | | | | 500,000 | | | | $444,819 | | | | $434,249 | |
Apidos CLO XV^ | | | 5.73 | # | | | 10/20/2025 | | | | 500,000 | | | | 460,521 | | | | 447,585 | |
Avery Point CLO Ltd. 2014-1 AE^ | | | 4.84 | # | | | 4/25/2026 | | | | 500,000 | | | | 459,740 | | | | 449,515 | |
BlueMountain CLO Ltd.^ | | | Zero Coupon | | | | 4/30/2026 | | | | 250,000 | | | | 237,677 | | | | 243,875 | |
BlueMountain CLO Ltd.^ | | | 4.82 | # | | | 5/15/2025 | | | | 1,100,000 | | | | 998,250 | | | | 1,001,560 | |
Carlyle Global Market Strategies CLO 2013-4 Ltd.^ | | | 4.73 | # | | | 10/15/2025 | | | | 500,000 | | | | 460,677 | | | | 448,253 | |
Carlyle Global Market Strategies CLO 2013-4 Ltd.^ | | | 5.43 | # | | | 10/15/2025 | | | | 500,000 | | | | 452,646 | | | | 443,692 | |
Dryden 30 Senior Loan Fund^ | | | 5.22 | # | | | 11/15/2025 | | | | 725,000 | | | | 698,696 | | | | 676,136 | |
Dryden Senior Loan Fund^ | | | 5.62 | # | | | 4/18/2026 | | | | 500,000 | | | | 461,264 | | | | 440,653 | |
Eaton Vance CDO VII PLC+ | | | 0.89 | # | | | 3/25/2026 | | | | 300,000 | | | | 355,035 | | | | 368,233 | |
Flatiron CLO 2013-1 Ltd.^ | | | 5.64 | # | | | 1/17/2026 | | | | 500,000 | | | | 458,583 | | | | 444,405 | |
GoldenTree Loan Opportunities VII Ltd.^ | | | 5.48 | # | | | 4/25/2025 | | | | 500,000 | | | | 464,774 | | | | 452,954 | |
ING IM CLO 2013-2 Ltd.^ | | | 5.73 | # | | | 4/25/2025 | | | | 500,000 | | | | 464,343 | | | | 448,225 | |
ING IM CLO 2013-3 Ltd.^ | | | 4.74 | # | | | 1/18/2026 | | | | 500,000 | | | | 449,560 | | | | 445,965 | |
LCM XV LP^ | | | 4.68 | # | | | 8/25/2024 | | | | 500,000 | | | | 463,516 | | | | 445,839 | |
Madison Park Funding XIII Ltd.^ | | | 3.58 | # | | | 1/19/2025 | | | | 500,000 | | | | 480,521 | | | | 475,766 | |
Pinnacle Park CLO Ltd.^ | | | 5.18 | # | | | 4/15/2026 | | | | 500,000 | | | | 468,474 | | | | 459,706 | |
Tyron Park CLO Ltd.^ | | | 4.63 | # | | | 7/15/2025 | | | | 500,000 | | | | 461,115 | | | | 446,069 | |
| | | | | | | | | | | | | | | | | | | | |
Total CDO/CLO | | | | | | | | | | | 9,375,000 | | | | 8,740,211 | | | | 8,572,680 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Total Asset-Backed Securities | | | | | | | | | | | 9,375,000 | | | | 8,740,211 | | | | 8,572,680 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Bank Loans — 32.5%*§: | | | | | | | | | | | | | |
| | | |
Aerospace and Defense — 0.1%*: | | | | | | | | | | | | | |
TransDigm Group, Inc. | | | 3.75 | | | | 6/4/2021 | | | | 81,041 | | | | 80,438 | | | | 80,636 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Automobile — 0.4%*: | | | | | | | | | | | | | |
Gates Global, Inc. | | | 4.25 | | | | 7/5/2021 | | | | 250,000 | | | | 247,500 | | | | 249,103 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Broadcasting and Entertainment — 3.3%*: | | | | | | | | | | | | | |
All3Media International+ | | | 5.25 | | | | 6/30/2021 | | | | 500,000 | | | | 833,403 | | | | 851,422 | |
Tyrol Acquisitions 2 SAS+ | | | 3.23 | | | | 1/29/2016 | | | | 926,981 | | | | 1,215,984 | | | | 1,223,530 | |
| | | | | | | | | | | | | | | | | | | | |
Total Broadcasting and Entertainment | | | | | | | | | | | 1,426,981 | | | | 2,049,387 | | | | 2,074,952 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Buildings and Real Estate — 0.8%*: | | | | | | | | | | | | | |
Alstom Auxiliary Components+ | | | 5.50 | | | | 6/15/2021 | | | | 148,629 | | | | 147,142 | | | | 147,329 | |
Paroc Group Holding OY+ | | | 9.98 | | | | 6/18/2015 | | | | 287,032 | | | | 390,493 | | | | 393,033 | |
| | | | | | | | | | | | | | | | | | | | |
Total Buildings and Real Estate | | | | | | | | | | | 435,661 | | | | 537,635 | | | | 540,362 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Cargo Transport — 0.8%*: | | | | | | | | | | | | | |
Direct ChassisLink, Inc.¤ | | | 8.25 | | | | 10/31/2019 | | | | 497,619 | | | | 490,872 | | | | 497,619 | |
| | | | | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements
32
Babson Global Credit Income Opportunities Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Bank Loans (Continued) | | | | | | | | | | | | | |
| | | |
Chemicals, Plastics and Rubber — 2.1%*: | | | | | | | | | | | | | |
Colouroz Investment 1 GmbH+ | | | 4.75 | % | | | 5/2/2021 | | | | 207,479 | | | | $205,404 | | | $ | 207,933 | |
Colouroz Investment 1 GmbH+ | | | 4.75 | | | | 5/3/2021 | | | | 115,767 | | | | 114,610 | | | | 116,021 | |
Flint Group SA+ | | | 5.48 | | | | 12/30/2016 | | | | 217,710 | | | | 216,406 | | | | 217,710 | |
Flint Group SA+ | | | 5.48 | | | | 12/31/2016 | | | | 782,290 | | | | 777,603 | | | | 782,290 | |
| | | | | | | | | | | | | | | | | | | | |
Total Chemicals, Plastics and Rubber | | | | | | | | | | | 1,323,246 | | | | 1,314,023 | | | | 1,323,954 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Containers, Packaging and Glass — 3.7%*: | | | | | | | | | | | | | |
Chesapeake Corp.+ | | | 6.00 | | | | 9/30/2020 | | | | 496,250 | | | | 790,907 | | | | 855,474 | |
Consolidated Container Co. LLC | | | 7.75 | | | | 1/3/2020 | | | | 94,140 | | | | 92,258 | | | | 92,728 | |
Coveris | | | 5.25 | | | | 5/8/2019 | | | | 64,450 | | | | 64,162 | | | | 65,417 | |
Coveris | | | 5.75 | | | | 5/8/2019 | | | | 497,500 | | | | 683,476 | | | | 686,622 | |
Mauser Industrieverpackungen GmbH+ | | | 3.98 | | | | 6/25/2021 | | | | 500,000 | | | | 679,013 | | | | 685,937 | |
| | | | | | | | | | | | | | | | | | | | |
Total Containers, Packaging and Glass | | | | | | | | | | | 1,652,340 | | | | 2,309,816 | | | | 2,386,178 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Diversified/Conglomerate Manufacturing — 0.3%*: | | | | | | | | | | | | | |
Marine Acquisition Corp. | | | 5.25 | | | | 1/30/2021 | | | | 55,056 | | | | 54,795 | | | | 55,537 | |
Quality Home Brands Holdings LLC | | | 7.75 | | | | 5/25/2018 | | | | 131,177 | | | | 130,004 | | | | 132,161 | |
| | | | | | | | | | | | | | | | | | | | |
Total Diversified/Conglomerate Manufacturing | | | | | | | | | | | 186,233 | | | | 184,799 | | | | 187,698 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Diversified/Conglomerate Service — 2.8%*: | | | | | | | | | | | | | |
Aquilex Holdings LLC | | | 5.00 | | | | 12/31/2020 | | | | 99,571 | | | | 99,337 | | | | 99,073 | |
Internet Brands, Inc. | | | 5.25 | | | | 7/8/2021 | | | | 75,812 | | | | 75,053 | | | | 75,537 | |
Internet Brands, Inc. | | | 8.50 | | | | 6/27/2022 | | | | 150,000 | | | | 148,500 | | | | 149,157 | |
Power Team Services LLC | | | 8.25 | | | | 11/6/2020 | | | | 300,000 | | | | 298,595 | | | | 292,500 | |
RP Crown Parent LLC | | | 6.00 | | | | 12/21/2018 | | | | 553,768 | | | | 555,964 | | | | 553,535 | |
RP Crown Parent LLC | | | 11.25 | | | | 12/20/2019 | | | | 178,571 | | | | 183,995 | | | | 179,911 | |
Triple Point Technology, Inc. | | | 5.25 | | | | 7/10/2020 | | | | 422,272 | | | | 386,066 | | | | 376,528 | |
Triple Point Technology, Inc.†† | | | 9.25 | | | | 7/9/2021 | | | | 63,830 | | | | 58,698 | | | | 56,330 | |
| | | | | | | | | | | | | | | | | | | | |
Total Diversified/Conglomerate Service | | | | | | | | | | | 1,843,824 | | | | 1,806,208 | | | | 1,782,571 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Ecological — 0.7%*: | | | | | | | | | | | | | |
Emerald 3 Ltd.+ | | | 8.00 | | | | 5/9/2022 | | | | 196,488 | | | | 194,523 | | | | 195,751 | |
Emerald US, Inc.+ | | | 5.00 | | | | 5/9/2021 | | | | 246,256 | | | | 243,793 | | | | 244,256 | |
| | | | | | | | | | | | | | | | | | | | |
Total Ecological | | | | | | | | | | | 442,744 | | | | 438,316 | | | | 440,007 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Electronics — 1.2%*: | | | | | | | | | | | | | |
AI Avocado Holding B.V.+ | | | 4.98 | | | | 11/17/2020 | | | | 500,000 | | | | 681,600 | | | | 688,073 | |
Kronos, Inc. | | | 9.75 | | | | 4/30/2020 | | | | 53,533 | | | | 53,273 | | | | 55,474 | |
| | | | | | | | | | | | | | | | | | | | |
Total Electronics | | | | | | | | | | | 553,533 | | | | 734,873 | | | | 743,547 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Finance — 2.3%*: | | | | | | | | | | | | | |
AssuredPartners Capital, Inc. | | | 7.75 | | | | 4/4/2022 | | | | 68,432 | | | | 67,765 | | | | 68,432 | |
Confie Seguros Holdings II Co. | | | 5.75 | | | | 11/9/2018 | | | | 227,270 | | | | 226,296 | | | | 227,270 | |
Confie Seguros Holdings II Co. | | | 10.25 | | | | 5/8/2019 | | | | 148,508 | | | | 148,508 | | | | 149,344 | |
GENEX Services, Inc. | | | 5.25 | | | | 5/21/2021 | | | | 92,489 | | | | 92,031 | | | | 92,951 | |
See accompanying Notes to Financial Statements
33
Babson Global Credit Income Opportunities Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Bank Loans (Continued) | | | | | | | | | | | | | |
| | | |
Finance (Continued) | | | | | | | | | | | | | |
GENEX Services, Inc. | | | 8.75 | % | | | 5/20/2022 | | | | 300,000 | | | $ | 297,023 | | | $ | 302,250 | |
Intertrust Group Holding B.V.+ | | | 8.00 | | | | 4/16/2022 | | | | 96,225 | | | | 95,516 | | | | 96,546 | |
NAB Holdings LLC | | | 4.75 | | | | 5/31/2021 | | | | 56,387 | | | | 55,969 | | | | 56,528 | |
National Financial Partners Corp. | | | 5.25 | | | | 7/1/2020 | | | | 66,431 | | | | 66,431 | | | | 66,730 | |
P2 Newco Acquisition, Inc. | | | 9.50 | | | | 10/22/2021 | | | | 103,373 | | | | 102,424 | | | | 103,373 | |
Sedgwick, Inc. | | | 3.75 | | | | 3/1/2021 | | | | 297,905 | | | | 297,194 | | | | 293,064 | |
| | | | | | | | | | | | | | | | | | | | |
Total Finance | | | | | | | | | | | 1,457,020 | | | | 1,449,157 | | | | 1,456,488 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Healthcare, Education and Childcare — 3.7%*: | | | | | | | | | | | | | |
Aenova Holding GmbH+ | | | 5.23 | | | | 9/27/2019 | | | | 600,000 | | | | 798,931 | | | | 822,097 | |
DaVita HealthCare Partners, Inc. | | | 3.50 | | | | 6/24/2021 | | | | 106,786 | | | | 106,252 | | | | 107,222 | |
Heartland Dental Care, Inc. | | | 5.50 | | | | 12/21/2018 | | | | 97,510 | | | | 97,076 | | | | 97,754 | |
Kindred Healthcare, Inc. | | | 4.00 | | | | 4/9/2021 | | | | 103,306 | | | | 103,056 | | | | 103,350 | |
PRA Holdings, Inc. | | | 4.50 | | | | 9/23/2020 | | | | 319,622 | | | | 318,823 | | | | 317,692 | |
Radnet Management, Inc. | | | 8.00 | | | | 3/25/2021 | | | | 35,964 | | | | 35,615 | | | | 36,054 | |
Synarc-Biocore Holdings LLC | | | 5.50 | | | | 3/5/2021 | | | | 399,878 | | | | 396,035 | | | | 398,879 | |
Synarc-Biocore Holdings LLC | | | 9.25 | | | | 3/4/2022 | | | | 500,000 | | | | 495,170 | | | | 495,000 | |
| | | | | | | | | | | | | | | | | | | | |
Total Healthcare, Education and Childcare | | | | | | | | | | | 2,163,066 | | | | 2,350,958 | | | | 2,378,048 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Hotels, Motels, Inns and Gaming — 0.1%*: | | | | | | | | | | | | | |
Marina District Finance Co., Inc. | | | 6.75 | | | | 8/15/2018 | | | | 32,112 | | | | 31,742 | | | | 32,463 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Machinery Non-Agriculture, Non-Construction, Non-Electronic — 1.1%*: | | | | | | | | | | | | | |
Capital Safety North America Holdings, Inc. | | | 4.00 | | | | 3/29/2021 | | | | 190,398 | | | | 190,035 | | | | 189,128 | |
Capital Safety North America Holdings, Inc. | | | 6.50 | | | | 3/28/2022 | | | | 125,830 | | | | 125,676 | | | | 126,198 | |
Doncasters Finance US LLC+ | | | 4.50 | | | | 4/9/2020 | | | | 249,370 | | | | 248,763 | | | | 250,150 | |
Husky Injection Molding Systems Ltd.+ | | | 4.25 | | | | 6/30/2021 | | | | 97,524 | | | | 97,036 | | | | 97,036 | |
TCH-2 Holding LLC | | | 5.50 | | | | 5/6/2021 | | | | 54,619 | | | | 54,081 | | | | 54,619 | |
| | | | | | | | | | | | | | | | | | | | |
Total Machinery Non-Agriculture, Non-Construction, Non-Electronic | | | | | | | | | | | 717,741 | | | | 715,591 | | | | 717,131 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Mining, Steel, Iron and Non-Precious Metals — 0.5%*: | | | | | | | | | | | | | |
Boomerang Tube LLC†† | | | 11.00 | | | | 10/11/2017 | | | | 256,140 | | | | 250,877 | | | | 230,526 | |
Murray Energy Corp. | | | 5.25 | | | | 12/5/2019 | | | | 99,177 | | | | 98,727 | | | | 100,293 | |
| | | | | | | | | | | | | | | | | | | | |
Total Mining, Steel, Iron and Non-Precious Metals | | | | | | | | | | | 355,317 | | | | 349,604 | | | | 330,819 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Oil and Gas — 2.8%*: | | | | | | | | | | | | | |
Caelus Energy Alaska O3 LLC | | | 8.75 | | | | 4/2/2021 | | | | 500,000 | | | | 490,245 | | | | 491,665 | |
Chief Exploration & Development LLC | | | 7.50 | | | | 5/12/2021 | | | | 500,000 | | | | 495,063 | | | | 510,000 | |
Fieldwood Energy LLC | | | 8.38 | | | | 9/30/2020 | | | | 324,231 | | | | 315,512 | | | | 334,120 | |
Floatel International Ltd. | | | 6.00 | | | | 5/2/2020 | | | | 205,807 | | | | 203,749 | | | | 206,965 | |
Jonah Energy LLC | | | 7.50 | | | | 5/12/2021 | | | | 173,566 | | | | 171,007 | | | | 174,724 | |
UTEX Industries, Inc. | | | 5.00 | | | | 5/22/2021 | | | | 56,645 | | | | 56,365 | | | | 57,282 | |
| | | | | | | | | | | | | | | | | | | | |
Total Oil and Gas | | | | | | | | | | | 1,760,249 | | | | 1,731,941 | | | | 1,774,756 | |
| | | | | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements
34
Babson Global Credit Income Opportunities Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Bank Loans (Continued) | | | | | | | | | | | | | |
| | | |
Personal, Food and Miscellaneous — 0.4%*: | | | | | | | | | | | | | |
Shearer’s Foods, Inc. | | | 8.00 | % | | | 5/29/2022 | | | | 250,000 | | | | $247,500 | | | | $251,875 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Printing and Publishing — 1.6%*: | | | | | | | | | | | | | |
Emap B2B+ | | | 5.13 | | | | 10/31/2017 | | | | 334,745 | | | | 456,809 | | | | 453,782 | |
Emap B2B+ | | | 5.13 | | | | 10/31/2017 | | | | 221,927 | | | | 344,118 | | | | 372,211 | |
SuperMedia, Inc. | | | 11.60 | | | | 12/30/2016 | | | | 249,062 | | | | 195,522 | | | | 210,208 | |
| | | | | | | | | | | | | | | | | | | | |
Total Printing and Publishing | | | | | | | | | | | 805,734 | | | | 996,449 | | | | 1,036,201 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Retail Stores — 1.5%*: | | | | | | | | | | | | | |
FleetPride Corp. | | | 5.25 | | | | 11/19/2019 | | | | 220,543 | | | | 218,044 | | | | 219,440 | |
Maxeda DIY B.V.+ | | | 13.73 | | | | 6/30/2018 | | | | 500,000 | | | | 662,921 | | | | 664,111 | |
Michaels Stores, Inc. | | | 4.00 | | | | 1/28/2020 | | | | 94,625 | | | | 94,153 | | | | 94,591 | |
| | | | | | | | | | | | | | | | | | | | |
Total Retail Stores | | | | | | | | | | | 815,168 | | | | 975,118 | | | | 978,142 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Telecommunications — 2.3%*: | | | | | | | | | | | | | |
Altice Financing SA+ | | | 5.50 | | | | 7/15/2019 | | | | 264,297 | | | | 266,865 | | | | 270,162 | |
CDS Holdco III B.V.+ | | | 4.98 | | | | 9/30/2020 | | | | 500,000 | | | | 672,427 | | | | 688,080 | |
Numericable US LLC+ | | | 4.50 | | | | 5/21/2020 | | | | 334,598 | | | | 331,304 | | | | 336,533 | |
Sungard Availability Services Capital, Inc. | | | 6.00 | | | | 3/31/2019 | | | | 186,990 | | | | 186,044 | | | | 185,705 | |
| | | | | | | | | | | | | | | | | | | | |
Total Telecommunications | | | | | | | | | | | 1,285,885 | | | | 1,456,640 | | | | 1,480,480 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Total Bank Loans | | | | | | | | | | | 18,335,514 | | | | 20,498,567 | | | | 20,743,030 | |
| | | | | | | | | | | | | | | | | | | | |
Corporate Bonds — 48.4%*: | | | | | | | | | | | | | | | | | | | | |
| | | |
Aerospace and Defense — 1.8%*: | | | | | | | | | | | | | |
AAR Corp. | | | 7.25 | | | | 1/15/2022 | | | | 500,000 | | | | 522,124 | | | | 547,500 | |
Aguila 3 SA+ | | | 7.88 | | | | 1/31/2018 | | | | 250,000 | | | | 286,879 | | | | 297,417 | |
TransDigm Group, Inc.^ | | | 6.50 | | | | 7/15/2024 | | | | 315,000 | | | | 315,000 | | | | 327,994 | |
| | | | | | | | | | | | | | | | | | | | |
Total Aerospace and Defense | | | | | | | | | | | 1,065,000 | | | | 1,124,003 | | | | 1,172,911 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Automobile — 3.5%*: | | | | | | | | | | | | | |
Allied Specialty Vehicles, Inc.^ | | | 8.50 | | | | 11/1/2019 | | | | 1,000,000 | | | | 1,033,418 | | | | 1,052,500 | |
International Automotive Components Group SA^ | | | 9.13 | | | | 6/1/2018 | | | | 619,000 | | | | 638,452 | | | | 657,688 | |
JB Poindexter & Co., Inc.^ | | | 9.00 | | | | 4/1/2022 | | | | 500,000 | | | | 526,867 | | | | 556,250 | |
| | | | | | | | | | | | | | | | | | | | |
Total Automobile | | | | | | | | | | | 2,119,000 | | | | 2,198,737 | | | | 2,266,438 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Beverage, Food and Tobacco — 0.4%*: | | | | | | | | | | | | | |
Albain Bidco Norway AS+ | | | 6.75 | | | | 11/1/2020 | | | | 200,000 | | | | 274,177 | | | | 285,527 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Broadcasting and Entertainment — 1.5%*: | | | | | | | | | | | | | |
CET 21 Spol Sro+ | | | 9.00 | | | | 11/1/2017 | | | | 200,000 | | | | 283,045 | | | | 288,238 | |
RCN Telecom Services LLC/RCN Capital Corp.^ | | | 8.50 | | | | 8/15/2020 | | | | 500,000 | | | | 497,716 | | | | 535,000 | |
See accompanying Notes to Financial Statements
35
Babson Global Credit Income Opportunities Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Corporate Bonds (Continued) | | | | | | | | | | | | | |
| | | |
Broadcasting and Entertainment (Continued) | | | | | | | | | | | | | |
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH+ | | | 6.25 | % | | | 1/15/2029 | | | | 100,000 | | | | $133,825 | | | | $156,374 | |
| | | | | | | | | | | | | | | | | | | | |
Total Broadcasting and Entertainment | | | | | | | | | | | 800,000 | | | | 914,586 | | | | 979,612 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Buildings and Real Estate — 2.6%*: | | | | | | | | | | | | | |
Deutsche Raststaetten Gruppe IV GmbH+ | | | 6.75 | | | | 12/30/2020 | | | | 100,000 | | | | 135,605 | | | | 147,200 | |
Paroc Group Oy+ | | | 5.59 | # | | | 5/15/2020 | | | | 100,000 | | | | 137,565 | | | | 137,491 | |
Paroc Group Oy+ | | | 6.25 | | | | 5/15/2020 | | | | 100,000 | | | | 137,565 | | | | 141,092 | |
Roofing Supply Group LLC/Roofing Supply Finance, Inc.^ | | | 10.00 | | | | 6/1/2020 | | | | 350,000 | | | | 379,385 | | | | 372,750 | |
William Lyon Homes, Inc.^ | | | 5.75 | | | | 4/15/2019 | | | | 310,000 | | | | 310,000 | | | | 317,750 | |
William Lyon Homes, Inc. | | | 8.50 | | | | 11/15/2020 | | | | 500,000 | | | | 529,724 | | | | 559,375 | |
| | | | | | | | | | | | | | | | | | | | |
Total Buildings and Real Estate | | | | | | | | | | | 1,460,000 | | | | 1,629,844 | | | | 1,675,658 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Cargo Transport — 1.7%*: | | | | | | | | | | | | | |
Kenan Advantage Group, Inc. (The)^ | | | 8.38 | | | | 12/15/2018 | | | | 500,000 | | | | 522,715 | | | | 535,000 | |
Moto Finance PLC+ | | | 10.25 | | | | 3/15/2017 | | | | 300,000 | | | | 519,902 | | | | 551,926 | |
| | | | | | | | | | | | | | | | | | | | |
Total Cargo Transport | | | | | | | | | | | 800,000 | | | | 1,042,617 | | | | 1,086,926 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Chemicals, Plastics and Rubber — 2.3%*: | | | | | | | | | | | | | |
Ciech Group Financing AB+ | | | 9.50 | | | | 11/30/2019 | | | | 200,000 | | | | 295,661 | | | | 312,201 | |
INEOS Group Holdings SA | | | 5.75 | | | | 2/15/2019 | | | | 100,000 | | | | 136,400 | | | | 141,380 | |
Monitchem HoldCo 2 SA+ | | | 6.88 | | | | 6/15/2022 | | | | 250,000 | | | | 341,138 | | | | 346,604 | |
Pinnacle Operating Corp.^ | | | 9.00 | | | | 11/15/2020 | | | | 600,000 | | | | 617,913 | | | | 651,000 | |
| | | | | | | | | | | | | | | | | | | | |
Total Chemicals, Plastics and Rubber | | | | | | | | | | | 1,150,000 | | | | 1,391,112 | | | | 1,451,185 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Containers, Packaging and Glass — 2.3%*: | | | | | | | | | | | | | |
Ardagh Finance Holdings SA^ | | | 8.63 | | | | 6/15/2019 | | | | 330,000 | | | | 326,728 | | | | 339,900 | |
GCS Holdco Finance I SA+ | | | 6.50 | | | | 11/15/2018 | | | | 100,000 | | | | 133,495 | | | | 145,146 | |
Innovia Group Finance PLC+ | | | 5.24 | # | | | 3/31/2020 | | | | 100,000 | | | | 136,011 | | | | 138,025 | |
Mustang Merger Corp.^ | | | 8.50 | | | | 8/15/2021 | | | | 750,000 | | | | 745,651 | | | | 817,500 | |
| | | | | | | | | | | | | | | | | | | | |
Total Containers, Packaging and Glass | | | | | | | | | | | 1,280,000 | | | | 1,341,885 | | | | 1,440,571 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Diversified/Conglomerate Manufacturing — 2.0%*: | | | | | | | | | | | | | |
Appvion, Inc.^ | | | 9.00 | | | | 6/1/2020 | | | | 500,000 | | | | 514,998 | | | | 497,500 | |
CTP Transportation Products LLC/CTP Finance, Inc.^ | | | 8.25 | | | | 12/15/2019 | | | | 448,000 | | | | 460,433 | | | | 482,720 | |
Galapagos Holding SA+ | | | 7.00 | | | | 6/15/2022 | | | | 200,000 | | | | 274,148 | | | | 278,379 | |
| | | | | | | | | | | | | | | | | | | | |
Total Diversified/Conglomerate Manufacturing | | | | | | | | | | | 1,148,000 | | | | 1,249,579 | | | | 1,258,599 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Farming and Agriculture — 1.6%*: | | | | | | | | | | | | | |
Chiquita Brands International, Inc. | | | 4.25 | | | | 8/15/2016 | | | | 500,000 | | | | 502,458 | | | | 503,438 | |
Chiquita Brands International, Inc./Chiquita Brands LLC | | | 7.88 | | | | 2/1/2021 | | | | 488,000 | | | | 519,253 | | | | 531,310 | |
| | | | | | | | | | | | | | | | | | | | |
Total Farming and Agriculture | | | | | | | | | | | 988,000 | | | | 1,021,711 | | | | 1,034,748 | |
| | | | | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements
36
Babson Global Credit Income Opportunities Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Corporate Bonds (Continued) | | | | | | | | | | | | | |
| | | |
Finance — 1.5%*: | | | | | | | | | | | | | |
Galaxy Bidco Ltd.+ | | | 6.38 | % | | | 11/15/2020 | | | | 100,000 | | | | $161,665 | | | | $173,793 | |
Galaxy Finco Ltd.+ | | | 7.88 | | | | 11/15/2021 | | | | 100,000 | | | | 165,554 | | | | 176,188 | |
Lowell Group Financing PLC+ | | | 5.88 | | | | 4/1/2019 | | | | 100,000 | | | | 166,730 | | | | 170,926 | |
TMF Group Holding BV+ | | | 9.88 | | | | 12/1/2019 | | | | 300,000 | | | | 422,401 | | | | 456,059 | |
| | | | | | | | | | | | | | | | | | | | |
Total Finance | | | | | | | | | | | 600,000 | | | | 916,350 | | | | 976,966 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Grocery — 0.5%*: | | | | | | | | | | | | | |
Premier Foods PLC+ | | | 6.50 | | | | 3/15/2021 | | | | 200,000 | | | | 340,031 | | | | 344,847 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Healthcare, Education and Childcare — 2.3%*: | | | | | | | | | | | | | |
Care UK Health & Social Care PLC+ | | | 9.75 | | | | 8/1/2017 | | | | 300,000 | | | | 494,435 | | | | 539,733 | |
Priory Group No. 3 PLC+ | | | 8.88 | | | | 2/15/2019 | | | | 500,000 | | | | 807,941 | | | | 915,599 | |
| | | | | | | | | | | | | | | | | | | | |
Total Healthcare, Education and Childcare | | | | | | | | | | | 800,000 | | | | 1,302,376 | | | | 1,455,332 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Hotels, Motels, Inns and Gaming — 0.5%*: | | | | | | | | | | | | | |
Gala Electric Casinos PLC+ | | | 11.50 | | | | 6/1/2019 | | | | 100,000 | | | | 179,217 | | | | 186,720 | |
NH Hoteles SA+ | | | 6.88 | | | | 11/15/2019 | | | | 100,000 | | | | 135,775 | | | | 149,870 | |
| | | | | | | | | | | | | | | | | | | | |
Total Hotels, Motels, Inns and Gaming | | | | | | | | | | | 200,000 | | | | 314,992 | | | | 336,590 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Insurance — 1.0%*: | | | | | | | | | | | | | |
Hastings Insurance Group Finance PLC+ | | | 8.00 | | | | 10/21/2020 | | | | 100,000 | | | | 159,915 | | | | 183,120 | |
Towergate Finance PLC+ | | | 8.50 | | | | 2/15/2018 | | | | 250,000 | | | | 419,348 | | | | 432,214 | |
| | | | | | | | | | | | | | | | | | | | |
Total Insurance | | | | | | | | | | | 350,000 | | | | 579,263 | | | | 615,334 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Leisure, Amusement, Entertainment — 3.8%*: | | | | | | | | | | | | | |
Allegiant Travel Co. | | | 5.50 | % | | | 7/15/2019 | | | | 265,000 | | | | 265,000 | | | | 269,306 | |
Carlson Travel Holdings, Inc. PIK^ | | | 7.50 | % | | | 8/15/2019 | | | | 665,000 | | | | 676,125 | | | | 678,300 | |
Dometic Group AB+ | | | 9.50 | % | | | 6/26/2019 | | | | 400,000 | | | | 547,320 | | | | 544,434 | |
Vougeot Bidco PLC+ | | | 7.88 | % | | | 7/15/2020 | | | | 500,000 | | | | 849,112 | | | | 930,642 | |
| | | | | | | | | | | | | | | | | | | | |
Total Leisure, Amusement, Entertainment | | | | | | | | | | | 1,830,000 | | | | 2,337,557 | | | | 2,422,682 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Machinery Non-Agriculture, Non-Construction, Non-Electronic — 1.7%*: | | | | | | | | | | | | | |
KraussMaffei Group GmbH+ | | | 8.75 | | | | 12/15/2020 | | | | 100,000 | | | | 145,273 | | | | 153,361 | |
Novafives SAS+ | | | 4.50 | | | | 6/30/2021 | | | | 100,000 | | | | 136,335 | | | | 138,642 | |
Xerium Technologies, Inc. | | | 8.88 | | | | 6/15/2018 | | | | 720,000 | | | | 742,211 | | | | 765,000 | |
| | | | | | | | | | | | | | | | | | | | |
Total Machinery Non-Agriculture, Non-Construction, Non-Electronic | | | | | | | | | | | 920,000 | | | | 1,023,819 | | | | 1,057,003 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Oil and Gas — 8.3%*: | | | | | | | | | | | | | |
Calumet Specialty Products Partners LP/Calumet Finance Corp.^ | | | 6.50 | | | | 4/15/2021 | | | | 500,000 | | | | 500,000 | | | | 510,000 | |
Halcon Resources Corp. | | | 9.75 | | | | 7/15/2020 | | | | 365,000 | | | | 374,417 | | | | 398,306 | |
Midstates Petroleum Co., Inc./Midstates Petroleum Co. LLC | | | 9.25 | | | | 6/1/2021 | | | | 500,000 | | | | 497,683 | | | | 548,750 | |
See accompanying Notes to Financial Statements
37
Babson Global Credit Income Opportunities Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | EFFECTIVE
INTEREST RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Corporate Bonds (Continued) | | | | | | | | | | | | | |
| | | |
Oil and Gas (Continued) | | | | | | | | | | | | | |
Millennium Offshore Services Superholdings LLC+^ | | | 9.50 | % | | | 2/15/2018 | | | | 500,000 | | | | $522,437 | | | | $532,500 | |
Niska Gas Storage Canada ULC/Niska Gas Storage Canada Finance Corp.+^ | | | 6.50 | | | | 4/1/2019 | | | | 1,000,000 | | | | 1,000,000 | | | | 960,000 | |
Rice Energy, Inc.^ | | | 6.25 | | | | 5/1/2022 | | | | 445,000 | | | | 445,000 | | | | 456,125 | |
Rose Rock Midstream LP/Rose Rock Finance Corp.^ | | | 5.63 | | | | 7/15/2022 | | | | 575,000 | | | | 575,000 | | | | 582,188 | |
Sabine Oil & Gas LLC/Sabine Oil & Gas Finance Corp. | | | 9.75 | | | | 2/15/2017 | | | | 500,000 | | | | 520,695 | | | | 522,500 | |
Seventy Seven Energy, Inc.^ | | | 6.50 | | | | 7/15/2022 | | | | 440,000 | | | | 440,000 | | | | 451,000 | |
Shelf Drilling Holdings Ltd.+^ | | | 8.63 | | | | 11/1/2018 | | | | 285,000 | | | | 300,604 | | | | 304,950 | |
| | | | | | | | | | | | | | | | | | | | |
Total Oil and Gas | | | | | | | | | | | 5,110,000 | | | | 5,175,836 | | | | 5,266,319 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Personal, Food and Miscellaneous — 2.3%*: | | | | | | | | | | | | | |
Brakes Capital+ | | | 7.13 | | | | 12/15/2018 | | | | 400,000 | | | | 669,078 | | | | 700,031 | |
Cerved Group SpA+ | | | 8.00 | | | | 1/15/2021 | | | | 150,000 | | | | 203,152 | | | | 230,042 | |
TeamSystem Holding SpA+ | | | 7.38 | | | | 5/15/2020 | | | | 350,000 | | | | 476,997 | | | | 510,407 | |
| | | | | | | | | | | | | | | | | | | | |
Total Personal, Food and Miscellaneous | | | | | | | | | | | 900,000 | | | | 1,349,227 | | | | 1,440,480 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Retail Stores — 3.8%*: | | | | | | | | | | | | | |
Brighthouse Group PLC+ | | | 7.88 | | | | 5/15/2018 | | | | 150,000 | | | | 244,634 | | | | 271,471 | |
Chinos Intermediate Holdings A, Inc.^ | | | 7.75 | | | | 5/1/2019 | | | | 207,000 | | | | 209,069 | | | | 207,517 | |
Guitar Center, Inc.^ | | | 6.50 | | | | 4/15/2019 | | | | 498,000 | | | | 492,513 | | | | 493,020 | |
HSS Financing PLC+ | | | 6.75 | | | | 8/1/2019 | | | | 100,000 | | | | 165,525 | | | | 179,483 | |
New Look Bondco I PLC+ | | | 8.75 | | | | 5/14/2018 | | | | 450,000 | | | | 731,366 | | | | 822,114 | |
Pendragon PLC+ | | | 6.88 | | | | 5/1/2020 | | | | 100,000 | | | | 172,208 | | | | 182,906 | |
Takko Luxembourg 2 S.C.A.+ | | | 9.88 | | | | 4/15/2019 | | | | 200,000 | | | | 257,094 | | | | 262,933 | |
| | | | | | | | | | | | | | | | | | | | |
Total Retail Stores | | | | | | | | | | | 1,705,000 | | | | 2,272,409 | | | | 2,419,444 | |
| | | | | | | | | | | | | | | | | | | | |
| | | |
Telecommunications — 3.0%*: | | | | | | | | | | | | | |
eircom Finance Ltd.+ | | | 9.25 | | | | 5/15/2020 | | | | 100,000 | | | | 149,122 | | | | 154,731 | |
Manutencoop Facility Management SpA+ | | | 8.50 | | | | 8/1/2020 | | | | 100,000 | | | | 131,856 | | | | 148,911 | |
Numericable Group SA+ | | | 5.63 | | | | 5/15/2024 | | | | 100,000 | | | | 138,165 | | | | 146,344 | |
Numericable Group SA+^ | | | 6.00 | | | | 5/15/2022 | | | | 315,000 | | | | 315,000 | | | | 327,600 | |
Play Finance 2 SA+ | | | 5.25 | | | | 2/1/2019 | | | | 100,000 | | | | 136,855 | | | | 143,640 | |
Telenet Finance V Luxembourg SCA+ | | | 6.75 | | | | 8/15/2024 | | | | 200,000 | | | | 276,459 | | | | 308,092 | |
UPC Holding BV+ | | | 6.75 | | | | 3/15/2023 | | | | 200,000 | | | | 213,142 | | | | 250,000 | |
Wind Acquisition Finance SA+† | | | 4.00 | | | | 7/15/2020 | | | | 100,000 | | | | 135,965 | | | | 136,588 | |
Wind Acquisition Finance SA+† | | | 4.21 | # | | | 7/15/2020 | | | | 100,000 | | | | 135,965 | | | | 137,943 | |
Wind Acquisition Finance SA+ | | | 7.00 | | | | 4/23/2021 | | | | 100,000 | | | | 137,975 | | | | 147,371 | |
| | | | | | | | | | | | | | | | | | | | |
Total Telecommunications | | | | | | | | | | | 1,415,000 | | | | 1,770,504 | | | | 1,901,220 | |
| | | | | | | | | | | | | | | | | | | | |
Total Corporate Bonds | | | | | | | | | | | 25,040,000 | | | | 29,570,615 | | | | 30,888,392 | |
| | | | | | | | | | | | | | | | | | | | |
Total Fixed Income | | | | | | | | | | | 52,750,514 | | | | 58,809,393 | | | | 60,204,102 | |
| | | | | | | | | | | | | | | | | | | | |
See accompanying Notes to Financial Statements
38
Babson Global Credit Income Opportunities Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | STRIKE
PRICE | | | EXPIRATION
DATE | | | NOTIONAL | | | COST | | | FAIR VALUE | |
Purchased Option — 0.1%*: | | | | | | | | | | | | | |
| | | |
Put Option — 0.1%*: | | | | | | | | | | | | | |
OTC—iTraxx Swaption with Credit Suisse | | | $4.35 | | | | 12/17/2014 | | | | $18,500,000 | | | | $75,183 | | | | $85,876 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | EFFECTIVE
INTEREST
RATE ‡ | | | DUE DATE | | | PRINCIPAL ‡‡ | | | COST | | | FAIR VALUE | |
Short-Term Investment — 13.1%*: | | | | | | | | | | | | | |
| | | |
Bank Deposit — 13.1%*: | | | | | | | | | | | | | |
State Street Bank & Trust Co. Euro Time Deposit | | | 0.01 | % | | | 7/1/2014 | | | | 8,347,389 | | | | 8,347,389 | | | | 8,347,389 | |
| | | | | | | | | | | | | | | | | | | | |
Total Investments | | | | | | | | | | | 79,597,903 | | | | 67,231,965 | | | | 68,637,367 | |
| | | | | | | | | | | | | | | | | | | | |
| |
Other assets and liabilities – (7.5%)* | | | | (4,811,909 | ) |
| | | | | |
Net Assets – 100.0% | | | | | | | | | | | | | | | | | | | $63,825,458 | |
| | | | | | | | | | | | | | | | | | | | |
| ‡ | The effective interest rates are based on settled commitment amount. |
| ‡‡ | Unless otherwise indicated, all principal amounts are denominated in United States Dollars. |
| * | Calculated as a percentage of net assets applicable to common shareholders. |
Distributions of investments by country of issue (excluding temporary cash investments) as a percentage of total investments in securities, is as follows:
| | | | | | |
| | United States | | | 42.2% | |
| | United Kingdom | | | 17.0% | |
| | Cayman Islands | | | 13.6% | |
| | Germany | | | 7.2% | |
| | Netherlands | | | 4.7% | |
| | France | | | 3.6% | |
| | Italy | | | 2.2% | |
| | Canada | | | 1.8% | |
| | United Arab Emirates | | | 1.4% | |
| | Finland | | | 1.1% | |
| | Other (Individually less than 1%) | | | 5.2% | |
| | | | | | |
| | Total | | | 100.0% | |
| | | | | | |
| ^ | Security acquired in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold in transactions exempt from registration, normally to qualified institutional buyers. |
| § | Bank loans are exempt from registration under the Securities Act of 1933, as amended, but contain certain restrictions on resale and cannot be sold publicly. These loans pay interest at rates which adjust periodically. The interest rates shown for bank loans are the current interest rates at June 30, 2014. Bank loans are also subject to mandatory and/or optional prepayment which cannot be predicted. As a result, the remaining maturity may be substantially less than the stated maturity shown. |
See accompanying Notes to Financial Statements
39
Babson Global Credit Income Opportunities Fund 2014 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED)
June 30, 2014
| ¤ | For fair value measurement disclosure purposes, security is categorized as Level 3 (see Note 2). |
| # | Variable rate security. The interest rate shown is the rate in effect at June 30, 2014. |
A summary of outstanding financial instruments at June 30, 2014 is as follows:
Forward Foreign Currency Exchange Contracts to Buy
| | | | | | | | | | | | | | | | | | | | | | |
EXPIRATION
DATE | | COUNTERPARTY | | LOCAL CURRENCY | | | VALUE IN USD | | | IN EXCHANGE
FOR USD | | | NET UNREALIZED
APPRECIATION | |
| 07/14/14 | | State Street Bank & Trust Co. | | | EUR | | | | 280,399 | | | | 383,967 | | | | 381,833 | | | $ | 2,134 | |
| 07/14/14 | | State Street Bank & Trust Co. | | | GBP | | | | 580,866 | | | | 994,001 | | | | 982,458 | | | | 11,543 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net unrealized appreciation on forward foreign exchange contracts to buy | | | | | | | $ | 13,677 | |
| | | | | | | | | | | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts to Sell
| | | | | | | | | | | | | | | | | | | | | | |
EXPIRATION
DATE | | COUNTERPARTY | | LOCAL CURRENCY | | | VALUE IN USD | | | IN EXCHANGE
FOR USD | | | NET UNREALIZED
DEPRECIATION | |
| 07/14/14 | | State Street Bank & Trust Co. | | | CHF | | | | 500,925 | | | | 564,924 | | | | 560,432 | | | $ | (4,492 | ) |
| 07/14/14 | | State Street Bank & Trust Co. | | | EUR | | | | 8,570,104 | | | | 11,735,575 | | | | 11,685,058 | | | | (50,517 | ) |
| 07/14/14 | | State Street Bank & Trust Co. | | | GBP | | | | 5,847,240 | | | | 10,006,030 | | | | 9,830,897 | | | | (175,133 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Net unrealized depreciation on forward foreign exchange contracts to sell | | | | | | | $ | (230,142 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Currency Legend
| | | | |
| CHF | | – | | Swiss Franc |
| EUR | | – | | Euro |
| GBP | | – | | British Pound Sterling |
See accompanying Notes to Financial Statements
40
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
Babson Capital Funds Trust (the “Trust”) was organized as a business trust under the laws of the Commonwealth of Massachusetts on May 3, 2013 and commenced operations on September 16, 2013. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a non-diversified, open-end management investment company. The Trust currently consists of two funds (separately, a “Fund” and collectively, the “Funds”): Babson Global Floating Rate Fund (“Global Floating Rate Fund”) and Babson Global Credit Income Opportunities Fund (“Global Credit Income Opportunities Fund”).
Babson Capital Management LLC (the “Adviser”), a wholly-owned indirect subsidiary of Massachusetts Mutual Life Insurance Company, is a registered investment adviser under the Investment Advisers Act of 1940, as amended, and serves as investment adviser to the Funds.
Babson Capital Global Advisors Limited (“Sub-Adviser”), an indirect wholly-owned subsidiary of the Adviser, serves as a sub-adviser with respect to the Funds’ European investments.
The primary investment objective of the Global Floating Rate Fund is to seek a high level of current income. The Fund seeks preservation of capital as a secondary investment objective. The primary investment objective of the Global Credit Income Opportunities Fund is to seek an absolute return, primarily through current income and secondarily through capital appreciation.
There can be no assurance that the Funds will achieve their investment objectives. The Funds will seek to take advantage of inefficiencies between geographies, primarily the North American and European high yield bond, loan and other debt markets. Under normal market conditions, the Global Floating Rate Fund will invest at least 80% of its net assets in income-producing floating rate debt securities, consisting of floating rate loans, bonds and notes, issued primarily by North American and Western European companies that are, at the time of purchase, rated below investment grade (below Baa3 by Moody’s Investors Service, Inc. (“Moody’s”) or below BBB- by either Standard & Poor’s Rating Services, a division of the McGraw-Hill Company, Inc. (“S&P”) or Fitch, Inc. (“Fitch”)) or unrated but judged by the Adviser or Sub-Adviser to be of comparable quality. Under normal market conditions, the Global Credit Income Opportunities Fund will invest at least 80% of its net assets in debt instruments, consisting of loans, bonds and notes, based in U.S. and non-U.S. markets, as well as over-the-counter and exchange-traded derivatives. Investments may be issued or guaranteed by governments and their agencies, corporations,
financial institutions and supranational organizations that the Funds believe have the potential to provide a high total return over time. A significant portion of the Funds’ investments in debt instruments will be denominated in a currency other than the U.S. dollar. Although the investments in non-U.S. dollar denominated assets may be on a currency hedged or unhedged basis, the Funds expect that, under current market conditions, they will seek to hedge substantially all of their exposure to foreign currencies.
Each Fund has four classes of shares: Class A, C, I, and Y, each with different expenses and dividends. A front-end sales charge is normally added to the net asset value (“NAV”) for Class A shares. There is no front-end sales charge in the case of Class C, I, and Y shares. There may be a contingent deferred sales charge (“CDSC”) in certain cases as follows: Class A shares purchased without an initial sales charge and redeemed within the first year of purchase (subject to certain exceptions as set forth in each Fund’s prospectus) and Class C shares redeemed within the first year of purchase. All classes of shares have equal voting rights, with the exception of matters that relate solely to one class.
Prior to commencement of operations on September 16, 2013, the Trust had no operations other than those relating to organizational matters and the sale of 10,000 Common Shares on August 20, 2013 to the Adviser, an affiliate of the Trust, for $100,000.
| 2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed consistently by the Funds in the preparation of their financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
| | A. | Valuation of Investments |
The Funds’ investments in fixed income securities are generally valued using the prices provided directly by independent third party services or provided directly from one or more broker dealers or market makers, each in accordance with the valuation policies and procedures approved by the Funds’ Board of Trustees (the “Board”).
The pricing services may use valuation models or matrix pricing, which consider yield or prices with respect to comparable bond quotations from bond dealers or by reference to other securities that are considered comparable in such characteristics as credit rating, interest rates and maturity date to determine the current value. The Funds’ investments in bank loans are normally valued at the bid quotation obtained from dealers in loans by an independent
41
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
pricing service in accordance with the Funds’ valuation policies and procedures approved by the Board. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value. Over-the-counter (“OTC”) options are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.
The Board has determined that it is in the best interest of the Funds and their shareholders to delegate the Board’s responsibility to a Valuation Committee, made up of officers of the Trust and employees of the Adviser, for: (1) determining whether market quotations are readily available for investments held by the Fund; and (2) determining the fair value of investments held by the Fund for which market quotations are not readily available or are deemed not reliable by the Adviser. In certain cases, authorized pricing service vendors may not provide prices for a security held by the Funds, or the price provided by such pricing service vendor is deemed unreliable by the Adviser. In such cases, the Funds may use market maker quotations provided by an established market maker for that security (i.e., broker quotes) to value the security if the Adviser has experience obtaining quotations from the market maker and the Adviser determines that quotations obtained from the market maker in the past have generally been reliable (or, if the Adviser has no such experience with respect to a market maker, it determines based on other information available to it that quotations to be obtained by it from the market maker are reasonably likely to be reliable). In any such case, the Adviser will review any market quotations so obtained in light of other information in its possession for their general liability.
Bond investments are valued on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Bank loan positions are valued at the bid price from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche-specific spread to the benchmark yield based on the unique attributes of the tranche.
Bank loans in which the Funds may invest have similar risks to lower-rated fixed income securities. Changes in the financial condition of the borrower or economic conditions or other circumstances may reduce the capacity of the borrower to make principal and interest payments on such instruments and may lead to defaults. Senior secured bank loans are supported by collateral; however the value of the collateral may be insufficient to cover the amount owed to the Funds. By relying on a third party to administer a loan, the Funds are subject to the risk that the third party will fail to perform its obligations. The loans in which the Funds will invest are largely floating rate instruments; therefore, the interest rate risk generally is lower than for fixed-rate debt obligations. However, from the perspective of the borrower, an increase in interest rates may adversely affect the borrower’s financial condition. Due to the unique and customized nature of loan agreements evidencing loans and the private syndication thereof, loans are not as easily purchased or sold as publicly traded securities. Although the range of investors in loans has broadened in recent years, there can be no assurance that future levels of supply and demand in loan trading will provide the degree of liquidity which currently exists in the market. In addition, the terms of the loans may restrict their transferability without borrower consent. These factors may have an adverse effect on the market price and the Funds’ ability to dispose of particular portfolio investments. A less liquid secondary market also may make it more difficult for the Funds to obtain precise valuations of the high yield loans in its portfolio.
The Funds may invest in collateralized debt obligations (“CDOs”), which include collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”). CBOs and CLOs are types of asset-backed securities. A CDO is an entity that is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.
42
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
Fair value is defined as the price that the Funds would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy is utilized to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. For example, market participants would consider the risk inherent in a particular valuation technique used to measure fair value, such as a pricing model, and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
Level 1 – quoted prices in active markets for identical securities
Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments)
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The following is a summary of the inputs used as of June 30, 2014 in valuing the Funds’ investments:
Global Floating Rate Fund
| | | | | | | | | | | | | | | | |
| DESCRIPTION | | LEVEL 1 | | | LEVEL 2 | | | LEVEL 3 | | | TOTAL INVESTMENTS | |
| Assets:* | | | | | | | | | | | | | | | | |
| Fixed Income: | | | | | | | | | | | | | | | | |
Bank Loans | | $ | – | | | $ | 97,809,270 | | | $ | 497,619 | | | $ | 98,306,889 | |
Corporate Bonds | | | – | | | | 14,412,285 | | | | – | | | | 14,412,285 | |
| | | | | | | | | | | | | | | | |
| Total Fixed Income | | | – | | | | 112,221,555 | | | | 497,619 | | | | 112,719,174 | |
| | | | | | | | | | | | | | | | |
| | | | |
Short-Term Investment: | | | | | | | | | | | | | | | | |
Bank Deposit | | | – | | | | 13,712,804 | | | | – | | | | 13,712,804 | |
| | | | | | | | | | | | | | | | |
| Total Short-Term Investment | | | – | | | | 13,712,804 | | | | – | | | | 13,712,804 | |
| | | | | | | | | | | | | | | | |
| | | | |
Derivative Securities: | | | | | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts | | | – | | | | 15,454 | | | | – | | | | 15,454 | |
| | | | | | | | | | | | | | | | |
| Total Derivative Securities | | | – | | | | 15,454 | | | | – | | | | 15,454 | |
| | | | | | | | | | | | | | | | |
| Total Investments | | | – | | | | 125,949,813 | | | | 497,619 | | | | 126,447,432 | |
| | | | | | | | | | | | | | | | |
| | | | |
Liabilities:* | | | | | | | | | | | | | | | | |
| Derivative Securities: | | | | | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts | | | – | | | | (349,623 | ) | | | – | | | | (349,623 | ) |
| | | | | | | | | | | | | | | | |
| Total Derivative Securities | | | – | | | | (349,623 | ) | | | – | | | | (349,623 | ) |
| | | | | | | | | | | | | | | | |
| Total Investments | | $ | – | | | $ | 125,600,190 | | | $ | 497,619 | | | $ | 126,097,809 | |
| | | | | | | | | | | | | | | | |
| | * | There were no transfers between levels during the period ended June 30, 2014. |
43
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
The following is a reconciliation of investments with unobservable inputs (Level 3) that were used in determining fair value:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
INVESTMENTS
IN
SECURITIES | | BALANCE
AS OF
SEPTEMBER 16,
2013* | | | REALIZED
GAIN (LOSS) | | | CHANGE IN
UNREALIZED
APPRECIATION
(DEPRECIATION) | | | NET
TRANSFERS
IN (OUT) OF
LEVEL 3 | | | ACCRUED
PREMIUMS/
DISCOUNTS | | | PURCHASES | | | SALES | | | BALANCES
AS OF
JUNE 30,
2014 | | | CHANGE IN
UNREALIZED
APPRECIATION
(DEPRECIATION)
FROM
INVESTMENTS
HELD
AT JUNE 30,
2014 | |
| | | | | | | | | |
Fixed
Income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Bank
Loans | | $ | – | | | $ | 33 | | | $ | 6,747 | | | $ | – | | | $ | 720 | | | $ | 492,500 | | | $ | (2,381 | ) | | $ | 497,619 | | | $ | 6,747 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | – | | | $ | 33 | | | $ | 6,747 | | | $ | – | | | $ | 720 | | | $ | 492,500 | | | $ | (2,381 | ) | | $ | 497,619 | | | $ | 6,747 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | * | Fund commenced operations on September 16, 2013. |
Global Credit Income Opportunities Fund
| | | | | | | | | | | | | | | | |
| DESCRIPTION | | LEVEL 1 | | | LEVEL 2 | | | LEVEL 3 | | | TOTAL INVESTMENTS | |
| Assets:* | | | | | | | | | | | | | | | | |
Fixed Income: | | | | | | | | | | | | | | | | |
Asset-Backed Securities | | $ | – | | | $ | 8,572,680 | | | $ | – | | | $ | 8,572,680 | |
Bank Loans | | | – | | | | 20,245,411 | | | | 497,619 | | | | 20,743,030 | |
Corporate Bonds | | | – | | | | 30,888,392 | | | | – | | | | 30,888,392 | |
| | | | | | | | | | | | | | | | |
| Total Fixed Income | | | – | | | | 59,706,483 | | | | 497,619 | | | | 60,204,102 | |
| | | | | | | | | | | | | | | | |
| | | | |
Purchased Option: | | | | | | | | | | | | | | | | |
Put Option | | | – | | | | 85,876 | | | | – | | | | 85,876 | |
| | | | | | | | | | | | | | | | |
Total Purchased Option | | | – | | | | 85,876 | | | | – | | | | 85,876 | |
| | | | | | | | | | | | | | | | |
| | | | |
Short-Term Investment: | | | | | | | | | | | | | | | | |
Bank Deposit | | | – | | | | 8,347,389 | | | | – | | | | 8,347,389 | |
| | | | | | | | | | | | | | | | |
Total Short-Term Investment | | | – | | | | 8,347,389 | | | | – | | | | 8,347,389 | |
| | | | | | | | | | | | | | | | |
| | | | |
Derivative Securities: | | | | | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts | | | – | | | | 13,677 | | | | – | | | | 13,677 | |
| | | | | | | | | | | | | | | | |
Total Derivative Securities | | | – | | | | 13,677 | | | | – | | | | 13,677 | |
| | | | | | | | | | | | | | | | |
Total Investments | | | – | | | | 68,153,425 | | | | 497,619 | | | | 68,651,044 | |
| | | | | | | | | | | | | | | | |
| | | | |
Liabilities:* | | | | | | | | | | | | | | | | |
Derivative Securities: | | | | | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts | | | – | | | | (230,142 | ) | | | – | | | | (230,142 | ) |
| | | | | | | | | | | | | | | | |
Total Derivative Securities | | | – | | | | (230,142 | ) | | | – | | | | (230,142 | ) |
| | | | | | | | | | | | | | | | |
Total Investments | | $ | – | | | $ | 67,923,283 | | | $ | 497,619 | | | $ | 68,420,902 | |
| | | | | | | | | | | | | | | | |
| | * | There were no transfers between levels during the period ended June 30, 2014. |
44
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
The following is a reconciliation of investments with unobservable inputs (Level 3) that were used in determining fair value:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
INVESTMENTS
IN
SECURITIES | | BALANCE
AS OF
SEPTEMBER 16,
2013* | | | REALIZED
GAIN
(LOSS) | | | CHANGE IN
UNREALIZED
APPRECIATION
(DEPRECIATION) | | | NET
TRANSFERS
IN (OUT) OF
LEVEL 3 | | | ACCRUED PREMIUMS/
DISCOUNTS | | | PURCHASES | | | SALES | | | BALANCES
AS OF
JUNE 30,
2014 | | | CHANGE IN
UNREALIZED
APPRECIATION
(DEPRECIATION)
FROM
INVESTMENTS
HELD
AT JUNE 30,
2014 | |
| | | | | | | | | |
Fixed
Income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Bank
Loans | | $ | – | | | $ | 33 | | | $ | 6,747 | | | $ | – | | | $ | 720 | | | $ | 492,500 | | | $ | (2,381 | ) | | $ | 497,619 | | | $ | 6,747 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | – | | | $ | 33 | | | $ | 6,747 | | | $ | – | | | $ | 720 | | | $ | 492,500 | | | $ | (2,381 | ) | | $ | 497,619 | | | $ | 6,747 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | * | Fund commenced operations on September 16, 2013. |
| | B. | Forward Commitments and When-Issued Delayed Delivery Securities |
The Funds may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. The Funds may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the Funds may be required to pay more at settlement than the security is worth. In addition, the Funds are not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, the Funds’ maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions, which is shown in the Schedule of Investments.
| | C. | Cash and Short-Term Investments |
Cash and cash equivalents consist principally of short-term investments that are readily convertible into cash and have original maturities of three months or less. At June 30, 2014, all cash and cash equivalents are held by the custodian.
| | D. | Investment Transactions, Related Investment Income and Expenses |
Investment transactions are accounted for on a trade date basis. Interest income is recorded on the accrual basis, including the amortization of premiums and accretion of discounts on bonds held using the yield-to-maturity method.
Realized gains and losses on investment transactions and unrealized appreciation and depreciation of investments are
reported for financial statement and Federal income tax purposes on the identified cost method.
Expenses are recorded on the accrual basis as incurred.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
| | F. | Federal Income Taxation |
The Funds have elected to be taxed as a Regulated Investment Company (“RIC”) under sub-chapter M of the U.S. Internal Revenue Code of 1986, as amended, and intend to maintain this qualification and to distribute substantially all of their net taxable income to their shareholders. As of June 30, 2014, the Funds had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Funds file a U.S. federal income tax return annually after their fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of the filings.
| | G. | Dividends and Distributions |
The Funds declare and pay dividends monthly from net investment income. To the extent that these distributions exceed net investment income, they may be classified as return of capital. The Funds also pay a distribution at least annually from their net realized capital gains, if any. Dividends and distributions are recorded on the ex-dividend date. All common shares have equal dividend and other
45
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
distribution rights. A notice disclosing the source(s) of a distribution will be provided if payment is made from any source other than net investment income. Any such notice would be provided only for informational purposes in order to comply with the requirements of Section 19(a) of the 1940 Act and not for tax reporting purposes. The tax composition of the Funds’ distributions for each calendar year is reported on Internal Revenue Service Form 1099-DIV.
Dividends from net investment income and distributions from realized gains from investment transactions have been determined in accordance with Federal income tax regulations and may differ from net investment income and realized gains recorded by the Funds for financial reporting purposes. These differences, which could be temporary or permanent in nature may result in reclassification of distributions; however, net investment income, net realized gains and losses, and net assets are not affected.
The Funds may invest in bank loans, which usually take the form of loan participations and assignments. Loan participations and assignments are agreements to make money available to U.S. or foreign corporations, partnerships or other business entities (the “Borrower”) in a specified amount, at a specified rate and within a specified time. A loan is typically originated, negotiated and structured by a U.S. or foreign bank, insurance company or other financial institution (the “Agent”) for a group of loan investors (“Loan Investors”). The Agent typically administers and enforces the loan on behalf of the other Loan Investors in the syndicate and may hold any collateral on behalf of the Loan Investors. Such loan participations and assignments are typically senior, secured and collateralized in nature. The Funds record an investment when the Borrower withdraws money and records interest as earned. These loans pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or London InterBank Offered Rate (“LIBOR”).
The loans in which the Funds invest may be subject to some restrictions on resale. For example, the Funds may be contractually obligated to receive approval from the Agent and/or Borrower prior to the sale of these investments. The Funds generally have no right to enforce compliance with the terms of the loan agreement with the Borrower. As a result, the Funds assume the credit risk of the Borrower, the selling participant and any other persons interpositioned
between the Funds and the Borrower (“Intermediate Participants”). In the event that the Borrower, selling participant or Intermediate Participants become insolvent or enter into bankruptcy, the Funds may incur certain costs and delays in realizing payment or may suffer a loss of principal and/or interest.
Unfunded commitments represent the remaining obligation of the Funds to the Borrower. At any point in time, up to the maturity date of the issue, the Borrower may demand the unfunded portion. Until demanded by the Borrower, unfunded commitments are not recognized as an asset on the Statements of Assets and Liabilities. Unrealized appreciation/depreciation on unfunded commitments presented on the Statements of Assets and Liabilities represents mark to market of the unfunded portion of the Funds’ bank loans. As of June 30, 2014, the Funds did not have unfunded loan commitments.
The following is a description of the derivative instruments that the Funds utilize as part of their investment strategy, including the primary underlying risk exposures related to the instrument.
Forward Foreign Currency Exchange Contracts – The Funds are subject to foreign currency exchange rate risk in the normal course of pursuing their investment objectives. The Funds may use forward foreign currency exchange contracts to hedge against changes in the value of foreign currencies. The Funds may enter into forward foreign currency exchange contracts obligating the Funds to deliver or receive a currency at a specified future date. Forward contracts are valued daily and unrealized appreciation or depreciation is recorded daily as the difference between the contract exchange rate and the closing forward rate applied to the face amount of the contract. A realized gain or loss is recorded at the time the forward contract expires. Credit risk may arise as a result of the failure of the counterparty to comply with the terms of the contract. The Funds consider the creditworthiness of each counterparty to a contract in evaluating potential credit risk quarterly. The Funds are also subject to credit risk with respect to the counterparties to derivative contracts that are not cleared through a central counterparty but instead are traded over-the-counter between two counterparties. If a counterparty to an over-the-counter derivative becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Funds may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding.
46
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
The Funds may obtain only a limited recovery or may obtain no recovery in such circumstances. The counterparty risk for cleared derivatives is generally lower than for uncleared over-the-counter derivative transactions since generally a clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing house for performance of financial obligations. However, there can be no assurance that the clearing house, or its members, will satisfy its obligations to the Funds. In addition, in the event of a bankruptcy of a clearing house, the Funds could experience a loss of the funds deposited with such clearing house as margin and of any profits on its open positions. The counterparty risk to the Funds is limited to the net unrealized gain, in any, on the contract.
The use of forward foreign currency exchange contracts does not eliminate fluctuations in the underlying prices of the Funds’ investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign currency exchange contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign currency exchange contract would limit the risk of loss due to a decline in the value of a particular currency; however it would also limit any potential gain that might result should the value of the currency increase instead of decrease. These contracts may involve market risk in excess of the amount of receivable or payable reflected on the Statement of Assets and Liabilities.
The Funds may purchase call or put options. When a Fund purchases an option, the premium paid by the Fund is recorded as an asset and is subsequently adjusted to the current fair value of the option purchased. Purchasing call options tends to increase the Fund’s exposure to the underlying instrument. Purchasing put options tends to decrease the Fund’s exposure to the underlying instrument. Premiums paid for purchasing options that expire are treated as realized losses. Premiums paid for purchasing options that are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying security to determine the realized gain or loss. The risks associated with purchasing put and call options are potential loss of the premium paid and, in the instances of OTC derivatives, the failure of the counterparty to honor its obligation under the contract.
The Funds may enter into swap options (“swaptions”). A swaption is an option to enter into a pre-defined swap
agreement by some specified date in the future. The writer of the swaption becomes the counterparty to the swap if the buyer exercises. The interest rate swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed rate buyer. Depending on the terms of the particular option agreement, a Fund generally will incur a greater degree of risk when the Fund writes a swaption than the Fund will incur when it purchases a swaption. When a Fund purchases a swaption, the Fund’s risk of loss is limited to the amount of the premium it has paid should it decide to let the swaption expire unexercised.
During the period from September 16, 2013 through June 30, 2014, the Funds’ direct investment in derivatives consisted of forward foreign currency exchange contracts and purchased options.
The following is a summary of the fair value of derivative instruments held directly by the Funds as of June 30, 2014:
Global Floating Rate Fund
| | | | | | |
ASSET
DERIVATIVES | | STATEMENT OF ASSETS
AND LIABILITIES
LOCATION | | FOREIGN
EXCHANGE
CONTRACTS
RISK | |
Forward Foreign Currency Exchange Contracts | | Unrealized appreciation on forward foreign currency exchange contracts | | $ | 15,454 | |
| | | | | | |
Total | | | | $ | 15,454 | |
| | | | | | |
| | | | | | |
LIABILITY
DERIVATIVES | | STATEMENT OF ASSETS
AND LIABILITIES
LOCATION | | FOREIGN
EXCHANGE
CONTRACTS
RISK | |
Forward Foreign Currency Exchange Contracts | | Unrealized depreciation
on forward foreign
currency exchange
contracts | | $ | 349,623 | |
| | | | | | |
Total | | | | $ | 349,623 | |
| | | | | | |
Global Credit Income Opportunities Fund
| | | | | | | | | | | | | | |
ASSET
DERIVATIVES | | STATEMENT OF ASSETS
AND LIABILITIES
LOCATION | | FOREIGN
EXCHANGE
CONTRACTS
RISK | | | INTEREST
RATE
RISK | | | TOTAL | |
Forward Foreign Currency Exchange Contracts | | Unrealized appreciation
on forward foreign
currency exchange
contracts | | $ | 13,677 | | | $ | – | | | $ | 13,677 | |
| | | | | | | | | | | | | | |
Purchased Options | | Investments, at fair
value | | | – | | | | 85,876 | | | | 85,876 | |
| | | | | | | | | | | | | | |
Total | | | | $ | 13,677 | | | $ | 85,876 | | | $ | 99,553 | |
| | | | | | | | | | | | | | |
47
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
| | | | | | |
LIABILITY
DERIVATIVES | | STATEMENT OF ASSETS
AND LIABILITIES
LOCATION | | FOREIGN
EXCHANGE
CONTRACTS
RISK | |
Forward Foreign Currency Exchange Contracts | | Unrealized depreciation
on forward foreign
currency exchange
contracts | | $ | 230,142 | |
| | | | | | |
Total | | | | $ | 230,142 | |
| | | | | | |
Amount of Realized Gain/(Loss) on Derivatives:
Global Floating Rate Fund
| | | | |
| | | FOREIGN
EXCHANGE
CONTRACTS
RISK | |
Derivatives | | | | |
Forward Foreign Currency Exchange Contracts | | $ | (365,754 | ) |
| | | | |
Total | | $ | (365,754 | ) |
| | | | |
Global Credit Income Opportunities Fund
| | | | | | | | | | | | |
| | | FOREIGN
EXCHANGE
CONTRACTS
RISK | | | INTEREST
RATE
RISK | | | TOTAL | |
Derivatives | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts | | $ | (456,467 | ) | | $ | – | | | $ | (456,467 | ) |
| | | | | | | | | | | | |
Purchased Options | | | – | | | | – | | | | – | |
| | | | | | | | | | | | |
Total | | $ | (456,467 | ) | | $ | – | | | $ | (456,467 | ) |
| | | | | | | | | | | | |
Change in Unrealized Appreciation/(Depreciation) on Derivatives:
Global Floating Rate Fund
| | | | |
| | | FOREIGN
EXCHANGE
CONTRACTS
RISK | |
Derivatives | | | | |
Forward Foreign Currency Exchange Contracts | | $ | (334,169 | ) |
| | | | |
Total | | $ | (334,169 | ) |
| | | | |
Global Credit Income Opportunities Fund
| | | | | | | | | | | | |
| | | FOREIGN
EXCHANGE
CONTRACTS
RISK | | | INTEREST
RATE
RISK | | | TOTAL | |
Derivatives | | | | | | | | | | | | |
Forward Foreign Currency Exchange Contracts | | $ | (216,465 | ) | | $ | – | | | $ | (216,465 | ) |
| | | | | | | | | | | | |
Purchased Options | | | – | | | | 10,693 | | | | 10,693 | |
| | | | | | | | | | | | |
Total | | $ | (216,465 | ) | | $ | 10,693 | | | $ | (205,772 | ) |
| | | | | | | | | | | | |
Global Floating Rate Fund
| | | | |
NUMBER OF CONTRACTS, NOTIONAL AMOUNTS OF SHARES/UNITS | | FOREIGN
EXCHANGE
CONTRACT
RISK | |
Forward Foreign Currency Exchange Contracts(1) | | | 20,821,684 | |
| | | | |
| | (1) | Volume of derivative activity is based on an average of month-end notional amounts outstanding during the period. |
Global Credit Income Opportunities Fund
| | | | | | | | | | | | |
NUMBER OF CONTRACTS,
NOTIONAL AMOUNTS OF SHARES/UNITS | | FOREIGN
EXCHANGE
CONTRACTS
RISK | | | INTEREST
RATE
RISK | | | TOTAL | |
Forward Foreign Currency Exchange Contracts(1) | | | 19,656,136 | | | | – | | | | 19,656,136 | |
| | | | | | | | | | | | |
Purchased Options(1) | | | – | | | | 1,850,000 | | | | 1,850,000 | |
| | | | | | | | | | | | |
Total | | | 19,656,136 | | | | 1,850,000 | | | | 21,506,136 | |
| | | | | | | | | | | | |
| | (1) | Volume of derivative activity is based on an average of month-end notional amounts outstanding during the period. |
| | J. | Disclosures about Offsetting Assets and Liabilities |
The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-11 “Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). These disclosure requirements are intended to help better assess the effect or potential effect of offsetting arrangements on a fund’s financial position. In addition, FASB issued Accounting Standards Update No. 2013-01 “Clarifying the Scope of Offsetting Assets and Liabilities” (“ASU 2013-01”), specifying which transactions are subject to disclosures about offsetting.
48
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
The following tables illustrate gross and net information about recognized assets eligible for offset in the Statement of Assets and Liabilities; and disclose such amounts subject to an enforceable master netting agreement or similar agreement, by counterparty. A master netting agreement is
an agreement between two counterparties who have multiple contracts with each other that provides for the net settlement of all contracts, as well as cash collateral, through a single payment in the event of default on or termination of any one contract:
Global Floating Rate Fund
| | | | | | | | | | | | |
DESCRIPTION | | GROSS AMOUNTS OF
RECOGNIZED ASSETS | | | GROSS AMOUNTS OFFSET
IN THE STATEMENTS OF
ASSETS AND LIABILITIES | | | NET AMOUNTS OF
ASSETS PRESENTED
IN THE STATEMENTS OF
ASSETS AND LIABILITIES | |
Forward Foreign Currency Exchange Contracts | | $ | 15,454 | | | $ | – | | | $ | 15,454 | |
| | | | | | | | | | | | |
Total | | $ | 15,454 | | | $ | – | | | $ | 15,454 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | GROSS AMOUNTS NOT OFFSET IN THE
STATEMENTS OF ASSETS AND LIABILITIES | | | | | | | |
| COUNTERPARTY | | NET AMOUNTS OF ASSETS
PRESENTED IN THE STATEMENTS
OF ASSETS AND LIABILITIES | | | FINANCIAL
INSTRUMENT (a) | | | CASH
COLLATERAL
RECEIVED (a) | | | NET
AMOUNT (b) | |
State Street Bank & Trust Co. | | $ | 15,454 | | | $ | (15,454 | ) | | $ | – | | | $ | – | |
| | | | | | | | | | | | | | | | |
Total | | $ | 15,454 | | | $ | (15,454 | ) | | $ | – | | | $ | – | |
| | | | | | | | | | | | | | | | |
| | (a) | Collateral disclosed is limited to an amount not to exceed 100% of the net amount of assets presented in the Statements of Assets and Liabilities, for each respective counterparty. |
| | (b) | Net Amount represents the amount that is subject to loss in the event of a counterparty failure as of June 30, 2014. |
| | | | | | | | | | | | |
DESCRIPTION | | GROSS AMOUNTS OF
RECOGNIZED LIABILITIES | | | GROSS AMOUNTS OFFSET
IN THE STATEMENTS OF
ASSETS AND LIABILITIES | | | NET AMOUNTS OF
LIABILITIES PRESENTED
IN THE STATEMENTS OF
ASSETS AND LIABILITIES | |
Forward Foreign Currency Exchange Contracts | | $ | 349,623 | | | $ | – | | | $ | 349,623 | |
| | | | | | | | | | | | |
Total | | $ | 349,623 | | | $ | – | | | $ | 349,623 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | GROSS AMOUNTS NOT OFFSET IN THE
STATEMENTS OF ASSETS AND LIABILITIES
| | | | | | | |
| COUNTERPARTY | | NET AMOUNTS OF LIABILITIES
PRESENTED IN THE STATEMENTS
OF ASSETS AND LIABILITIES | | | FINANCIAL
INSTRUMENT (a) | | | CASH
COLLATERAL
PLEDGED (a) | | | NET
AMOUNT (b) | |
State Street Bank & Trust Co. | | $ | 349,623 | | | $ | (15,454 | ) | | $ | – | | | $ | 334,169 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 349,623 | | | $ | (15,454 | ) | | $ | – | | | $ | 334,169 | |
| | | | | | | | | | | | | | | | |
| | (a) | Collateral disclosed is limited to an amount not to exceed 100% of the net amount of assets presented in the Statements of Assets and Liabilities, for each respective counterparty. |
| | (b) | Net Amount represents the amount that is subject to loss in the event of a counterparty failure as of June 30, 2014. |
49
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
Global Credit Income Opportunities Fund
| | | | | | | | | | | | |
| DESCRIPTION | | GROSS AMOUNTS OF
RECOGNIZED ASSETS | | | GROSS AMOUNTS OFFSET
IN THE STATEMENTS OF
ASSETS AND LIABILITIES | | | NET AMOUNTS OF
ASSETS PRESENTED
IN THE STATEMENTS OF
ASSETS AND LIABILITIES | |
Forward Foreign Currency Exchange Contracts | | $ | 13,677 | | | $ | – | | | $ | 13,677 | |
Purchased Options | | | 85,876 | | | | – | | | | 85,876 | |
| | | | | | | | | | | | |
Total | | $ | 99,553 | | | $ | – | | | $ | 99,553 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | GROSS AMOUNTS NOT OFFSET IN THE
STATEMENTS OF ASSETS AND LIABILITIES
| | | | | | | |
| COUNTERPARTY | | NET AMOUNTS OF ASSETS
PRESENTED IN THE STATEMENTS
OF ASSETS AND LIABILITIES | | | FINANCIAL INSTRUMENT (a) | | | CASH
COLLATERAL
RECEIVED (a) | | | NET
AMOUNT (b) | |
State Street Bank & Trust Co. | | $ | 13,677 | | | $ | (13,677 | ) | | $ | – | | | $ | – | |
Credit Suisse | | | 85,876 | | | | – | | | | – | | | | 85,876 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 99,553 | | | $ | (13,677 | ) | | $ | – | | | $ | 85,876 | |
| | | | | | | | | | | | | | | | |
| | (a) | Collateral disclosed is limited to an amount not to exceed 100% of the net amount of assets presented in the Statements of Assets and Liabilities, for each respective counterparty. |
| | (b) | Net Amount represents the amount that is subject to loss in the event of a counterparty failure as of June 30, 2014. |
| | | | | | | | | | | | |
| DESCRIPTION | | GROSS AMOUNTS OF
RECOGNIZED LIABILITIES | | | GROSS AMOUNTS OFFSET
IN THE STATEMENTS OF
ASSETS AND LIABILITIES | | | NET AMOUNTS OF
LIABILITIES PRESENTED
IN THE STATEMENTS OF
ASSETS AND LIABILITIES | |
Forward Foreign Currency Exchange Contracts | | $ | 230,142 | | | $ | – | | | $ | 230,142 | |
| | | | | | | | | | | | |
Total | | $ | 230,142 | | | $ | – | | | $ | 230,142 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | GROSS AMOUNTS NOT OFFSET IN THE
STATEMENTS OF ASSETS AND LIABILITIES
| | | | | | | |
| COUNTERPARTY | | NET AMOUNTS OF LIABILITIES
PRESENTED IN THE STATEMENTS
OF ASSETS AND LIABILITIES | | | FINANCIAL INSTRUMENT (a) | | | CASH
COLLATERAL
PLEDGED (a) | | | NET
AMOUNT (b) | |
State Street Bank & Trust Co. | | $ | 230,142 | | | $ | (13,677 | ) | | $ | – | | | $ | 216,465 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 230,142 | | | $ | (13,677 | ) | | $ | – | | | $ | 216,465 | |
| | | | | | | | | | | | | | | | |
| | (a) | Collateral disclosed is limited to an amount not to exceed 100% of the net amount of assets presented in the Statements of Assets and Liabilities, for each respective counterparty. |
| | (b) | Net Amount represents the amount that is subject to loss in the event of a counterparty failure as of June 30, 2014. |
50
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and the U.S. government. These risks include valuation of currencies and adverse political and economic developments. Moreover, securities of many foreign companies, foreign governments, and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. government.
| | L. | Foreign Currency Translation |
The books and records of the Funds are maintained in U.S. dollars. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. For financial reporting purposes, the Funds do not isolate changes in the exchange rate of investment securities from the fluctuations arising from changes in the market prices of securities. However, for Federal income tax purposes, the Funds do isolate and treat as ordinary income the effect of changes in foreign exchange rates on realized gain or loss from the sale of investment securities and payables and receivables arising from trade-date and settlement-date differences.
The Funds seek to manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations. The Adviser monitors the financial stability of the Funds’ counterparties.
The Funds have entered into an Investment Management Agreement (the “Agreement”) with the Adviser. Pursuant to the Agreement, the Global Floating Rate Fund agrees to pay the Adviser a fee payable at the end of each calendar month, at an annual rate of 0.65% of the Fund’s average daily net assets during such month. The Global Credit Income Opportunities Fund agrees to pay the Adviser a fee payable at the end of each calendar month, at an annual rate of 0.75% of the Fund’s average daily net assets during such month.
The Adviser has contractually agreed to waive and/or reimburse a portion of its fees and/or reimburse expenses (excluding 12b-1 fees, interest expenses, taxes, fees incurred in acquiring and disposing of securities and extraordinary expenses) such that total net annual operating expenses for each class do not exceed the following rates:
| | | | | | | | | | | | | | | | |
| | | CLASS A | | | CLASS C | | | CLASS I | | | CLASS Y | |
Global Floating Rate Fund | | | 1.05 | % | | | 1.80 | % | | | 0.75 | % | | | 0.75 | % |
Global Credit Income Opportunities Fund | | | 1.20 | % | | | 1.95 | % | | | 0.95 | % | | | 0.95 | % |
Pursuant to the expense waiver/reimbursement agreement, the Adviser is entitled to be reimbursed for any fees the Adviser waives and Fund expenses that the Adviser reimburses for a period of three years following such fee waivers and expense reimbursements, to the extent that such reimbursement of the Adviser by a Fund will not cause the Fund to exceed any applicable expense limitation that is in place for the Fund.
The contractual management fee waiver and expense reimbursement agreements between the Funds and the Adviser may be terminated only upon the approval of the Funds’ Board of Trustees.
Subject to the supervision of the Adviser and the Board, the Sub-Adviser manages the investment and reinvestment of a portion of the assets of the Funds, as allocated from time to time to the Sub-Adviser. The Adviser (not the Funds) will pay a portion of the fees it receives to the Sub-Adviser in return for its services.
| 4. | 12b-1 Distribution and Service Plan |
ALPS Distributors, Inc. (the “Distributor”) is the Distributor of the Funds’ shares as of June 30, 2014.
The Funds have adopted a Distribution and Shareholder Services Plan (the “Plan”), pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, each Fund’s Class A and Class C shares may compensate certain financial institutions, including the Distributor, for certain distribution and shareholder servicing activities. The Funds’ Class A shares may expend an aggregate amount, on an annual basis, not to exceed 0.25% of the value of the average daily net assets of a Fund attributable to Class A shares and 1.00% of the value of the average daily net assets of a Fund attributable to Class C shares. The Plan provides that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Funds’ shares and service activities.
51
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
Under its terms, the Funds’ Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of the Boards’ members and a majority of those Boards’ members who are not “interested persons” of the Funds and who have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan.
| 5. | Administrator, Custody, and Transfer Agent Fees |
The Funds have engaged State Street Bank and Trust (“SSB”) to serve as the Funds’ administrator, custodian, fund accountant, and transfer agent. For each of these services, the Funds have agreed to pay SSB a fee payable at the end of each calendar month pursuant to fee agreements between SSB and the Funds. For the period ended June 30, 2014, the aggregate effective fee for these services was at an annual rate of 0.51% and 0.58% of Global Floating Rate Fund and Global Credit Income Opportunities Fund’s average daily managed assets, respectively.
It is the Funds’ intention to qualify as a RIC under subchapter M of the Internal Revenue Code and distribute all of its taxable income. Accordingly, no provision for Federal income taxes is required in the financial statements.
The tax character of dividends paid to shareholders during the tax year ended June 30, 2014 was as follows:
Global Floating Rate Fund
| | | | |
Ordinary income | | $ | 1,730,080 | |
Return of Capital | | | 61,792 | |
| | | | |
Total distributions paid | | $ | 1,791,872 | |
| | | | |
Global Credit Income Opportunities Fund
| | | | |
Ordinary income | | $ | 1,572,417 | |
Total distributions paid | | $ | 1,572,417 | |
| | | | |
As of June 30, 2014, the components of distributable earnings on a tax-basis were as follows:
Global Floating Rate Fund
| | | | |
Net unrealized gains | | $ | 1,050,182 | |
| | | | |
Total distributable earnings | | $ | 1,050,182 | |
| | | | |
Global Credit Income Opportunities Fund
| | | | |
Undistributed ordinary income | | $ | 851,778 | |
Net unrealized gains | | | 1,397,614 | |
| | | | |
Total distributable earnings | | $ | 2,249,392 | |
| | | | |
In accordance with the Regulated Investment Company Modernization Act of 2010, the Funds will carryforward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) indefinitely. Post-enactment losses will also retain their character as either short-term or long-term and be utilized before any pre-enactment losses.
As of June 30, 2014, the aggregate unrealized security gains and losses based on cost for U.S. federal income tax purposes were as follows:
Global Floating Rate Fund
| | | | |
Cost of investments | | $ | 125,431,834 | |
Gross unrealized appreciation | | | 1,390,650 | |
Gross unrealized depreciation | | | (390,506 | ) |
| | | | |
Net unrealized appreciation | | $ | 1,000,144 | |
| | | | |
Global Credit Income Opportunities Fund
| | | | |
Cost of investments | | $ | 67,233,273 | |
Gross unrealized appreciation | | | 1,717,809 | |
Gross unrealized depreciation | | | (313,715 | ) |
| | | | |
Net unrealized appreciation | | $ | 1,404,094 | |
| | | | |
The difference between book-basis and tax-basis unrealized gains (losses) is attributable to wash sales and mark-to-market on forward foreign currency contracts.
Permanent items identified during the period ended June 30, 2014 have been reclassified among the components of net assets based on their tax basis treatment as follows:
| | | | | | | | | | | | |
| | | UNDISTRIBUTED
NET
INVESTMENT
INCOME | | | ACCUMULATED NET REALIZED GAIN (LOSS) | | | PAID-IN
CAPITAL | |
Global Floating Rate Fund | | $ | (77,042 | ) | | $ | 139,648 | | | $ | (62,606 | ) |
Global Credit Income Opportunities Fund | | | (307,807 | ) | | | 308,628 | | | | (821 | ) |
52
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
The permanent differences are primarily attributable to foreign currency gains (losses) and the tax treatment of certain distributions.
| 7. | Investment Transactions |
Purchases and sales of securities (excluding short-term debt securities) for the period from September 16, 2013 through June 30, 2014 were as follows:
| | | | | | | | |
| | | PURCHASES | | | SALES | |
Global Floating Rate Fund | | $ | 146,777,131 | | | $ | 35,574,837 | |
Global Credit Income Opportunities Fund | | | 108,968,762 | | | | 51,218,245 | |
Transactions in common stock for the period September 16, 2013 through June 30, 2014 were as follows:
Global Floating Rate Fund
| | | | | | | | |
| CLASS A | | SHARES | | | AMOUNT | |
Shares sold | | | 1,222,507 | | | $ | 12,481,232 | |
Shares sold through reinvestments of distributions | | | 13,651 | | | | 139,125 | |
Shares redeemed | | | (13,926 | ) | | | (142,258 | ) |
| | | | | | | | |
Net increase | | | 1,222,232 | | | $ | 12,478,099 | |
| | | | | | | | |
CLASS C | | | | | | | | |
Shares sold | | | 233,502 | | | $ | 2,379,349 | |
Shares sold through reinvestments of distributions | | | 2,446 | | | | 24,864 | |
Shares redeemed | | | (152 | ) | | | (1,544 | ) |
| | | | | | | | |
Net increase | | | 235,796 | | | $ | 2,402,669 | |
| | | | | | | | |
CLASS I | | | | | | | | |
Shares sold | | | 3,150,134 | | | $ | 31,550,060 | |
Shares sold through reinvestments of distributions | | | 59,739 | | | | 610,026 | |
Shares redeemed | | | – | | | | – | |
| | | | | | | | |
Net increase | | | 3,209,873 | | | $ | 32,160,086 | |
| | | | | | | | |
CLASS Y | | | | | | | | |
Shares sold | | | 6,676,274 | | | $ | 67,761,452 | |
Shares sold through reinvestments of distributions | | | 97,618 | | | | 996,669 | |
Shares redeemed | | | (210,789 | ) | | | (2,155,109 | ) |
| | | | | | | | |
Net increase | | | 6,563,103 | | | $ | 66,603,012 | |
| | | | | | | | |
Global Credit Income Opportunities Fund
| | | | | | | | |
| CLASS A | | SHARES | | | AMOUNT | |
Shares sold | | | 250,892 | | | $ | 2,588,194 | |
Shares sold through reinvestments of distributions | | | 3,520 | | | | 36,805 | |
Shares redeemed | | | (6,628 | ) | | | (69,594 | ) |
| | | | | | | | |
Net increase | | | 247,784 | | | $ | 2,555,405 | |
| | | | | | | | |
CLASS C | | | | | | | | |
Shares sold | | | 89,635 | | | $ | 933,045 | |
Shares sold through reinvestments of distributions | | | 900 | | | | 9,400 | |
Shares redeemed | | | (159 | ) | | | (1,661 | ) |
| | | | | | | | |
Net increase | | | 90,376 | | | $ | 940,784 | |
| | | | | | | | |
CLASS I | | | | | | | | |
Shares sold | | | 2,455,000 | | | $ | 24,550,000 | |
Shares sold through reinvestments of distributions | | | 70,277 | | | | 734,939 | |
Shares redeemed | | | – | | | | – | |
| | | | | | | | |
Net increase | | | 2,525,277 | | | $ | 25,284,939 | |
| | | | | | | | |
CLASS Y | | | | | | | | |
Shares sold | | | 3,172,809 | | | $ | 32,089,635 | |
Shares sold through reinvestments of distributions | | | 74,417 | | | | 778,240 | |
Shares redeemed | | | (6,875 | ) | | | (72,116 | ) |
| | | | | | | | |
Net increase | | | 3,240,351 | | | $ | 32,795,759 | |
| | | | | | | | |
During the period ended June 30, 2014, the Trust (the “Borrower”) entered into a Credit Agreement (the “Credit Agreement”) with State Street Bank and Trust Company (the “Bank”). The Credit Agreement provides for a revolving credit facility of $20,000,000 (the “Facility Amount”) to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. Per the Credit Agreement, outstanding principal on the loan shall bear interest at a variable rate per annum equal to the higher of (a) the Federal Funds Rate as in effect on the day of borrowing plus 1.25% and (b) the Overnight LIBOR rate as in effect on the day of borrowing plus 1.25%. In addition, the Borrower shall pay to the Bank a commitment fee at the rate of ..009% per annum on the daily unused portion of the Facility Amount. As of June 30, 3014, there were no loans outstanding pursuant to the Credit Agreement.
53
Babson Capital Funds Trust 2014 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2014
Management has considered the circumstances under which the Funds should recognize or make disclosures regarding events or transactions occurring subsequent to June 30, 2014 through the date the financial statements were issued. Adjustments or additional disclosures, if any, have been included in these financial statements.
The Funds paid a net investment income dividend in the following amounts per share on July 31, 2014 to shareholders of record on July 29, 2014:
Global Floating Rate Fund
| | | | |
Class A | | | .05 | |
Class C | | | .04 | |
Class I | | | .05 | |
Class Y | | | .05 | |
Global Credit Income Opportunities Fund
| | | | |
Class A | | | .05 | |
Class C | | | .04 | |
Class I | | | .05 | |
Class Y | | | .05 | |
54
Babson Capital Funds Trust 2014 Annual Report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Babson Capital Funds Trust and Shareholders of Babson Global Floating Rate Fund and Babson Global Credit Income Opportunities Fund:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Babson Capital Funds Trust, comprising Babson Global Floating Rate Fund and Babson Global Credit Income Opportunities Fund (collectively, the “Funds”) as of June 30, 2014, and the related statements of operations, and changes in net assets and the financial highlights for the period from the commencement of operations, September 16, 2013, through June 30, 2014.. These financial statements and financial highlights are the responsibility of the Funds’ 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2014, by correspondence with the custodian, brokers, and agent banks; where replies were not received from brokers and agent banks, we performed other auditing procedures. 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 Funds as of June 30, 2014, and the results of their operations, the changes in their net assets and the financial highlights for the period from the commencement of operations, September 16, 2013, through June 30, 2014, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Boston, Massachusetts
August 22, 2014
55
Babson Capital Funds Trust 2014 Annual Report
INTERESTED TRUSTEE
| | | | | | | | | | |
| NAME (AGE), ADDRESS | | POSITION(S)
HELD WITH
FUND | | TERM OF
OFFICE AND
LENGTH OF
TIME
SERVED | | PRINCIPAL OCCUPATION(S) DURING
THE PAST 5 YEARS | | NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
OVERSEEN
BY
TRUSTEE | | OTHER DIRECTORSHIPS HELD BY
TRUSTEE DURING PAST 5 YEARS |
Thomas M. Finke (50) 550 South Tryon Street Charlotte, NC 28202 | | Trustee | | Term expires 2016; Trustee since 2013 | | Chairman and Chief Executive Officer (since 2008), Member of the Board of Managers (since 2006), President (2007-2008), Managing Director (2002-2008), Babson Capital; Chief Investment Officer and Executive Vice President (2008-2011), Massachusetts Mutual Life Insurance Company | | 3 | | Trustee (since 2013), Babson Capital Funds Trust (open-end investment company advised by Babson Capital); Chairman (since 2012), Director (since 2008), Babson Capital Europe Limited (investment advisory firm); Chairman and Director (since 2012), Babson Capital Global Advisors Limited (investment advisory firm); Director (since 2008), Babson Capital Guernsey Limited (holding company); Vice Chairman and Manager (since 2011), MM Asset Management Holding LLC (holding company); Manager (since 2011), Wood Creek Capital Management, LLC (investment advisory firm); Chairman and Director (since 2007), Cornerstone Real Estate Advisers LLC (real estate advisory firm); Director (since 2004), Jefferies Finance LLC (finance company); Manager (since 2007), Credit Strategies Management LLC (general partner of an investment fund); Manager (since 2005), Loan Strategies Management, LLC (general partner of an investment fund); Manager (since 2005), Jefferies Finance CP Funding LLC (investment company); Manager (2004-2012), Class C Member LLC (equity holding company); Chairman, Chief Executive Officer and Director (2009-2011), MassMutual Capital Partners, LLC (investment company); Director (2007-2011), Scottish Re Group Limited (reinsurance specialist); and Director (2000-2009), Babson Capital Japan KK (investment advisory firm). |
56
Babson Capital Funds Trust 2014 Annual Report
INDEPENDENT TRUSTEES
| | | | | | | | | | |
| NAME (AGE), ADDRESS | | POSITION(S)
HELD WITH
FUND | | TERM OF
OFFICE AND
LENGTH OF
TIME SERVED | | PRINCIPAL OCCUPATION(S) DURING
THE PAST 5 YEARS | | NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
OVERSEEN
BY
TRUSTEE | | OTHER DIRECTORSHIPS HELD BY
TRUSTEE DURING PAST 5 YEARS |
Rodney J. Dillman (61) 550 South Tryon Street Charlotte, NC 28202 | | Trustee | | Term expires 2015; Trustee since 2012 | | Deputy General Counsel (2011-2012), Senior Vice President (2008-2012), Vice President (2000-2008), Massachusetts Mutual Life Insurance Company; Member of the Board of Directors and President (2008-2011), MassMutual International LLC; General Counsel (2006-2008), Babson Capital Management LLC (the "Adviser") | | 3 | | Trustee (since 2013), Babson Capital Funds Trust (an open-end investment company advised by the Adviser); Director (2008-2011), Compania de Seguros CorpVida S.A. (insurance company); Director (2009-2011), MassMutual Europe S.A. (insurance company); Director (2009-2010), Yingda Taihe Life Insurance Co.; Director (2008-2011), MassMutual Asia Limited (insurance company); Director (2008-2011), MassMutual Life Insurance Company; Director (2008-2010), MassMutual Mercuries Life Insurance Company; Director (2005-2010), The MassMutual Trust Company; Director (2006-2008), Jefferies Finance LLC (finance company); Director, Vice President and Secretary (2005-2008), MMHC Investment LLC (passive investor). |
Thomas W. Bunn (60) 550 South Tryon Street Charlotte, NC 28202 | | Trustee | | Term expires 2014; Trustee since 2013 | | Retired (since 2009); Vice Chairman (2005-2009), Head of National Banking (2006-2009), Head of Corporate and Investment Banking (2002-2006), KeyCorp (commercial and investment banking firm) | | 3 | | Trustee (since 2013), Babson Capital Funds Trust (an open-end investment company advised by the Adviser); Director (since 2010), SquareTwo Financial (asset recovery and management firm); Director (since 2010), Southern Weaving Co. (webbing and sleeving design and manufacturing company); Trustee (since 2010), Wake Forest University Board of Trustees; Member (since 1998), Babcock School of Business Board of Visitors; Senior Operating Advisor (since 2010), Sound Harbor Partners (investment management firm); Director (since 2009), Kiawah Island Conservancy; Director (since 2009), Nature Conservancy of North Carolina; Director (2007-2009), Victory Asset Management (mutual fund complex). |
Dr. Bernard A. Harris, Jr. (57) 550 South Tryon Street Charlotte, NC 28202 | | Trustee | | Term expires 2016; Trustee since 2012 | | Chief Executive Officer and Managing Partner (since 2002),Vesalius Ventures, Inc.; Director and President (since 1998), The Space Agency; President (since 1999), The Harris Foundation; Clinical Scientist, Flight Surgeon and Astronaut (1986-1996), NASA. | | 3 | | Trustee (since 2013), Babson Capital Funds Trust (an open-end investment company advised by the Adviser); Trustee (since 2011), Salient Midstream & MLP Fund and Salient MLP & Energy Infrastructure Fund; Trustee (since 2010), Salient Absolute Return Fund; Director (since 2009), Monebo Technologies Inc. (medical technology design company); Director (since 2008), US Physical Therapy (USPH: NYSE); Director (since 2012), E-Cardio, Inc. (provides services for cardiac monitoring). |
Thomas W. Okel (51) 550 South Tryon Street Charlotte, NC 28202 | | Trustee | | Term expires 2014; Trustee since 2012 | | Executive Director (since 2011), Catawba Lands Conservancy; Global Head of Syndicated Capital Markets (1989-2010), Bank of America Merrill Lynch. | | 3 | | Trustee (since 2013), Babson Capital Funds Trust (an open-end investment company advised by the Adviser). |
Martin A. Sumichrast (47) 550 South Tryon Street Charlotte, NC 28202 | | Trustee | | Term expires 2015; Trustee since 2012 | | Vice Chairman & Principal of Siskey Capital, a Charlotte based merchant bank (since 2013), Board member of Kure, Inc. (since 2014), Director of the Jadeveon Clowney Help-In-Time Foundation, a non-for-profit corporation (since 2014), Manager (since 2013), Washington Capital, LLC; Managing Director (2002-2013), Lomond International, Inc. | | 3 | | Trustee (since 2013), Babson Capital Funds Trust (an open-end investment company advised by the Adviser). |
57
Babson Capital Funds Trust 2014 Annual Report
OFFICERS
| | | | | | |
| NAME (AGE), ADDRESS | | POSITION(S) HELD
WITH FUND | | TERM OF OFFICE AND
LENGTH OF TIME SERVED* | | PRINCIPAL OCCUPATION(S)
DURING THE PAST 5 YEARS |
Anthony J. Sciacca (42) 550 South Tryon Street Charlotte, NC 28202 | | President and Chief Executive Officer | | Since 2013 | | Managing Director and Head of Babson Capital’s Global Business Development Group (since 2006). |
| | | |
Russell D. Morrison (49) 550 South Tryon Street Charlotte, NC 28202 | | President and Principal Executive Officer | | Since 2013 | | Head of the Global High Yield Investments Group (since 2009), Co-Head of U.S. Loan Team (2002-2009), Managing Director (since 2002), Babson Capital; Senior Vice President (since 2013), Babson Capital Funds Trust (an open-end investment company advised by the Adviser). |
| | | |
Paul J. Thompson (42) 550 South Tryon Street Charlotte, NC 28202 | | Vice President | | Since 2013 | | Chief Operating Officer and Head of Global Investment Services, Babson Capital (since 2010); previously, Head of Operations and Portfolio/Client Services (2002-2010). |
| | | |
Patrick Hoefling (34) 550 South Tryon Street Charlotte, NC 28202 | | Chief Financial Officer and Principal Financial and Accounting Officer | | Since 2013 | | Director (since 2008), Babson Capital; Chief Financial Officer (since 2013), Babson Capital Funds Trust (an open-end investment company advised by the Adviser); Manager (2005-2008), Deloitte and Touche. |
| | | |
Andrew Lennon (39) 550 South Tryon Street Charlotte, NC 28202 | | Treasurer | | Since 2013 | | Managing Director (since 2008), Babson Capital; Treasurer (since 2013), Babson Capital Funds Trust (an open-end investment company advised by the Adviser). |
| | | |
Paul Gehrig (46) 550 South Tryon Street Charlotte NC, 28202 | | Vice President | | Since 2013 | | Managing Director and member of Babson Capital’s Global Business Development Group (since 2008). |
| | | |
Brian W. Pope (35) 550 South Tryon Street Charlotte, NC 28202 | | Vice President | | Since 2013 | | Director and member of Babson Capital’s Global Business Development Group (since 2009); Associate, Edgeview Partners (before 2009). |
| | | |
Melissa LaGrant (40) 550 South Tryon Street Charlotte, NC 28202 | | Chief Compliance Officer | | Since 2013 | | Managing Director (since 2005), Babson Capital; Chief Compliance Officer (since 2013), Babson Capital Finance LLC; Chief Compliance Officer (since 2013), Babson Capital Funds Trust (an open-end investment company advised by the Adviser); Chief Compliance Officer (since 2006), Babson Capital Corporate Investors and Babson Capital Participation Investors (closed-end investment companies advised by the Adviser). |
| | | |
Janice M. Bishop (49) 550 South Tryon Street Charlotte, NC 28202 | | Secretary and Chief Legal Officer | | Since 2013 | | Managing Director and Senior Counsel (since 2014), Counsel (since 2007), Babson Capital; Associate Secretary (since 2008), Babson Capital Corporate Investors and Babson Capital Participation Investors (closed-end investment companies advised by Babson Capital); Vice President, Secretary and Chief Legal Officer (since 2013), Babson Capital Funds Trust (an open-end investment company advised by the Adviser). |
58
Babson Capital Funds Trust 2014 Annual Report
OFFICERS (CONTINUED)
| | | | | | |
| NAME (AGE), ADDRESS | | POSITION(S) HELD
WITH FUND | | TERM OF OFFICE AND
LENGTH OF TIME SERVED* | | PRINCIPAL OCCUPATION(S)
DURING THE PAST 5 YEARS |
Michelle Manha (41) 550 South Tryon Street Charlotte, NC 28202 | | Assistant Secretary | | Since 2013 | | Managing Director and Associate General Counsel (since 2014), Counsel (since 2008), Babson Capital; Assistant Secretary (since 2013), Babson Capital Funds Trust (an open-end investment company advised by the Adviser). |
| | | |
Jesse D. Hallee (37)
550 South Tryon Street Charlotte, NC 28202 | | Assistant Secretary | | Since 2013 | | Vice President and Senior Counsel, State Street Bank and Trust Company, March 2013 to present; Vice President and Counsel, Brown Brothers Harriman & Co., March 2007 to February 2013. |
| * | Officers will hold their position with the Fund until a successor has been elected and qualified. Officers are generally elected annually by the Board. The officers were last elected on July 29, 2013. |
59
Babson Capital Funds Trust 2014 Annual Report
APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT AND SUB-ADVISORY AGREEMENT
The Board of Trustees of the Trust approved the Investment Management Agreement between the Trust and Babson Capital Management LLC (“Babson Capital”) (the “Investment Management Agreement”) and the Sub-Advisory Agreement between Babson Capital and Babson Capital Global Advisors Limited (“BCGA”) (the “Sub-Advisory Agreement” and, together with the Management Agreement, the “Agreements”) at a meeting held on July 29, 2013 (the “Meeting”). In making their decision to approve the Agreements, the Trustees considered a number of factors, though they did not identify any particular factor that they considered determinative, and individual Trustees may have attributed different weights to the various factors. The factors considered by the Trustees are described below.
At their meeting, the Trustees heard from representatives of Babson Capital regarding the nature, extent and quality of the respective services to be provided to the Funds by Babson Capital under the Investment Management Agreement and to Babson Capital by BCGA under the Sub-Advisory Agreement. The Board noted that, as two series in a newly organized trust, the Funds had no historical performance information or operating history at the time of the Meeting for the Board to consider in its evaluation of the Investment Management Agreement and the Sub-Advisory Agreement. As such, the Funds’ performance history was not a factor in the Board’s deliberations in this regard.
The Board reviewed the proposed investment objectives, policies and restrictions of each Fund with Babson Capital and the qualifications, backgrounds and responsibilities of the senior personnel of the Trust and the portfolio management team of Babson Capital that would be primarily responsible for the day-to-day portfolio management of the Funds. The Board discussed with representatives of Babson Capital the track record, experience and capabilities of Babson Capital in the management of other investment vehicles, including other public and private funds, and the extent to which the investment programs of such vehicles were comparable to those of the Funds. The Board and representatives of Babson Capital also discussed Babson Capital’s compliance capabilities and the financial resources available to be employed by Babson Capital and its affiliates for the benefit of the Trust. The Board further considered the responsibilities of Babson Capital under the Investment Management Agreement and the Sub-Advisory Agreement, including Babson Capital’s coordination and oversight of services provided to the Trust by others.
The Board concluded that the nature, extent and quality of the respective services expected to be provided by Babson Capital under the Investment Management Agreement and BCGA under the Sub-Advisory Agreement supported the approval of the Investment Management Agreement and the Sub-Advisory Agreement.
In light of the nature, extent and quality of the management and services expected to be provided by Babson Capital to the Trust, the Board discussed the management fee (the “Management Fee”) payable monthly by the Trust on behalf of each Fund to Babson Capital under the Investment Management Agreement at an annual rate of 0.65% of the Global Floating Rate Fund’s average daily net assets and at an annual rate of 0.75% of the Global Credit Income Opportunities Fund’s average daily net assets. The Board noted that, under the Investment Management Agreement, in addition to providing investment management services, Babson Capital would provide the Trust with necessary offices, facilities and equipment and would coordinate and oversee the provision of services to the Trust by other fund service providers.
The Board considered information comparing the Management Fee with the advisory fees of a group of registered open-end funds believed by Babson Capital to have comparable investment objectives and strategies to those of each Fund (the “Peer Groups”) and also with other public and private funds managed by Babson Capital (or its affiliates). The Trustees and representatives of Babson Capital reviewed Babson Capital’s analysis and selection of the Peer Group in detail. They discussed that the proposed fees for the Global Floating Rate Fund and the Global Credit Income Opportunities Fund were in-line with the management fees in each Fund’s Peer Group, despite that the Funds were global funds, while most of the funds in each Peer Group emphasized domestic investments, and that Babson Capital typically charges higher fees on its global accounts than on accounts that are invested primarily in domestic securities.
The Board also considered the expected expense ratio of each Fund and each Fund’s costs of organization. The Trustees considered that Babson Capital had contractually agreed to waive and/or reimburse certain fees and/or expenses so that, on an annualized basis, such expenses incurred by Class A and Class C shares of Global Floating Rate Fund would not exceed 0.80% as a percentage of average daily net assets allocated to each such class, such expenses incurred by Class Y and Class I shares of Global Floating Rate Fund would not exceed 0.75% as a percentage of average daily net assets allocated to each such class, and such expenses incurred by Class A, Class C, Class Y and Class I shares of Global Credit Income Opportunities Fund would not exceed 0.95% as a percentage of average daily net assets allocated to each such class.
60
Babson Capital Funds Trust 2014 Annual Report
APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT AND SUB-ADVISORY AGREEMENT (CONTINUED)
The Board noted that because the Funds were newly organized, Babson Capital did not have historical profitability information with respect to the Trust available for the Board to consider at the time of the Meeting, but Babson Capital had provided the Trustees with pro forma information regarding the projected profitability to Babson Capital of its services to each Fund. The Trustees discussed the pro forma information provided by Babson Capital and noted that Babson Capital’s revenues were expected to be offset by Fund operating expenses until the Funds achieved scale. The Trustees concluded that the expected profitability of the Fund to Babson Capital and BCGA did not appear to be unreasonable in light of the services to be rendered.
The Board considered that, as each Fund’s assets increase over time, each Fund and its shareholders would be expected to realize economies of scale as certain expenses, such as fixed operating costs, become a smaller percentage of overall assets. Babson Capital acknowledged that it may realize economies of scale in its management of the Trust as the Trust increases in size, and that it would consider proposing breakpoints in the Management Fee payable by each Fund once the Funds were approaching the breakeven point. The Board concluded that, at this time, and in light of the nature, extent and quality of the respective services expected to be provided by Babson Capital, the Management Fee rates and expenses of each Fund supported the approval of the Investment Management Agreement and the Sub-Advisory Agreement.
The Board considered potential “fall-out” benefits to Babson Capital and its affiliates as a result of Babson Capital’s relationship with the Trust. The Board concluded that, in light of the expected costs of providing investment management and other services to the Trust and Babson Capital’s commitment to cap the expenses of each Fund, the other ancillary benefits that Babson Capital and its affiliates expect to receive supported the approval of the Investment Management Agreement and the Sub-Advisory Agreement.
Based on their evaluation of the factors that they deemed to be material, including those factors described above, the Board of Trustees, including a majority of the non-interested Trustees, concluded that the Funds’ Investment Management Agreement and the Sub-Advisory Agreement should be approved for an initial two-year period, commencing on the effective dates set forth in the Agreements.
61
Babson Capital Funds Trust 2014 Annual Report
JOINT PRIVACY NOTICE OF BABSON CAPITAL MANAGEMENT LLC AND
BABSON CAPITAL FUNDS TRUST
When you use Babson Capital Management LLC (“Babson Capital”) as your investment adviser or invest in the Babson Capital Funds Trust (the “Trust”), you entrust us not only with your hard-earned assets but also with your personal and financial data. We consider your data to be private and confidential, and protecting its confidentiality is important to us. Our policies and procedures regarding your personal information are summarized below.
We may collect non-public personal information about you from:
| | n | | Applications or other forms, interviews, or by other means; |
| | n | | Consumer or other reporting agencies, government agencies, employers or others; |
| | n | | Your transactions with us, our affiliates, or others; and |
We may share the financial information we collect with our financial service affiliates, such as insurance companies, investment companies and securities broker-dealers. Additionally, so that we may continue to offer you products and services that best meet your investment needs and to effect transactions that you request or authorize, we may disclose the information we collect, as described above, to companies that perform administrative or marketing services on our behalf, such as transfer agents, custodian banks, service providers or printers and mailers that assist us in the distribution of investor materials or that provide operational support to Babson Capital entities. These companies are required to protect this information and will use this information only for the services for which we hire them, and are not permitted to use or share this information for any other purpose. Some of these companies may perform such services in jurisdictions other than the United States. We may share some or all of the information we collect with other financial institutions with whom we jointly market products. This may be done only if it is permitted in the state in which you live. Some disclosures may be limited to your name, contact and transaction information with us or our affiliates.
Any disclosures will be only to the extent permitted by federal and state law. Certain disclosures may require us to get an “opt-in” or “opt-out” from you. If this is required, we will do so before information is shared. Otherwise, we do not share any personal information about our customers or former customers unless authorized by the customer or as permitted by law.
We restrict access to personal information about you to those employees who need to know that information to provide products and services to you. We maintain physical, electronic and procedural safeguards that comply with legal standards to guard your personal information. As an added measure, we do not include personal or account information in non-secure e-mails that we send you via the Internet without your prior consent. We advise you not to send such information to us in non-secure e-mails.
This joint notice describes the privacy policies of Babson Capital and the Trust. It applies to all Babson Capital and the Trust accounts you presently have, or may open in the future, using your social security number or federal taxpayer identification number – whether or not you remain a shareholder of our Funds or as an advisory client of Babson Capital. As mandated by rules issued by the Securities and Exchange Commission, we will be sending you this notice annually, as long as you own shares in the Trust or have an account with Babson Capital.
62
Babson Capital Funds Trust
ANNUAL REPORT
June 30, 2014
The Registrant adopted a Code of Ethics for Principal Executive and Senior Financial Officers (the “Code”) on July 29, 2013, which is available on the Registrant’s website at www.babsoncapital.com. During the period covered by this Form N-CSR, there were no amendments to, or waivers from, the Code.
| Item 3. | Audit Committee Financial Expert. |
The Registrant’s Board of Trustees has determined that Dr. Bernard A. Harris, Jr., Mr. Thomas W. Okel and Mr. Martin A. Sumichrast, constituting all the members of the Registrant’s Audit Committee, are audit committee financial experts. Dr. Harris, Mr. Okel and Mr. Sumichrast are “independent” for purposes of this Item 3 as required by applicable regulation.
| Item 4. | Principal Accountant Fees and Services. |
The Registrant has engaged its principal accountant, Deloitte & Touche LLP (“Deloitte”), to perform audit services, audit-related services, tax services and other services since the Registrant’s launch in September 2013. The following tables detail the aggregate fees billed or expected to be billed since the Registrant’s launch by Deloitte.
Fees Billed to the Registrant:
| | | | |
| | | Year Ended
June 30,
2014 | |
Audit Fees | | $ | 120,000 | |
Audit-Related Fees | | | 0 | |
Tax Fees | | | 18,000 | |
All Other Fees | | | 0 | |
Total Fees | | $ | 138,000 | |
| | | | |
Non-Audit Fees Billed to Babson Capital and MassMutual:
| | | | | | | | |
| | | Year Ended
June 30,
2014 | | | Year Ended
June 30,
2013 | |
Audit Fees | | $ | 2,982,385 | | | $ | 2,837,955 | |
Audit-Related Fees | | | 0 | | | | 0 | |
Tax Fees | | | 1,944,907 | | | | 1,836,269 | |
All Other Fees | | | 4,880,709 | | | | 2,744,878 | |
| | | | | | | | |
Total Fees | | $ | 9,858,001 | | | $ | 7,419,102 | |
| | | | | | | | |
The category “Audit Fees” refers to performing an audit of the Registrant’s, Babson Capital’s or Massachusetts Mutual Life Insurance Company’s (“MassMutual”) annual financial statements or services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements for those fiscal years. The category “Audit-Related Fees” reflects fees billed by Deloitte for various non-audit and non-tax services rendered to the Registrant, Babson Capital, and MassMutual. Preparation of Federal, state and local income tax and tax compliance work are representative of the fees reported in the “Tax Fees” category. The category “All Other Fees” represents fees billed by Deloitte for a SAS 70 review and consulting rendered to the Registrant, Babson Capital, and MassMutual.
The Sarbanes-Oxley Act of 2002 and its implementing regulations allow the Registrant’s Audit Committee to establish a pre-approval policy for certain services rendered by the Registrant’s principal accountant. During the fiscal year ended June 30, 2014, the Registrant’s Audit Committee approved all of the services rendered to the Registrant by Deloitte and did not rely on such a pre-approval policy for any such services.
| Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
| Item 6. | Schedule of Investments. |
| (a) | The Registrant’s Consolidated Schedule of Investments as of the close of the reporting period is included in the Report to Stockholders filed under item 1 of this form. |
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
| Item 8. | Portfolio Managers of Closed-End Investment Management Companies. |
Not applicable.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
| Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to procedures by which the shareholders may recommend nominees to the Registrant’s Board of Trustees.
| Item 11. | Controls and Procedures. |
| (a) | The Registrant’s principal executive officer and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”), are effective as of the date within 90 days of the filing date of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended. |
| (b) | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| | |
| (a)(1) | | The Registrant has posted its Code of Ethics on its website at www.babsoncapital.com. |
| |
| (a)(2) | | Certifications pursuant to Rule 30a-2(a) are attached hereto. |
| |
| | Attached hereto as Exhibit 99.1 Cert |
| | Attached hereto as Exhibit 99.2 Cert |
| |
| (a)(3) | | Not applicable. |
| |
| (b) | | Certification pursuant to Rule 30a-2(b) are attached hereto. |
| |
| | Attached hereto as Exhibit 99.906 Cert |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | |
(Registrant) | | Babson Capital Funds Trust |
| | | | |
| |
| By (Signature and Title) | | /s/ Anthony J. Sciacca |
| | Anthony J. Sciacca, President (Principal Executive Officer) |
Date September 5, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| | |
| By (Signature and Title) | | /s/ Anthony J. Sciacca |
| | Anthony J. Sciacca, President (Principal Executive Officer) |
Date September 5, 2014
| | |
| |
| By (Signature and Title) | | /s/ Patrick Hoefling |
| | Patrick Hoefling, Chief Financial Officer (Principal Financial Officer) |
Date September 5, 2014
