Edgar Filing: BABSON CAPITAL GLOBAL SHORT DURATION HIGH YIELD FUND

babson_ncsrs.htm

As filed with the Securities and Exchange Commission on September 6, 2013

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 811-22562

Babson Capital Global Short Duration High Yield Fund

(Exact name of registrant as specified in charter)

550 South Tryon Street, Charlotte, NC 28202

(Address of principal executive offices) (Zip code)

Janice M. Bishop

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)

704-805-7200

Registrant’s telephone number, including area code

Date of fiscal year end: December 31

Date of reporting period: June 30, 2013

Item 1. Reports to Stockholders.




	Babson Capital Global Short Duration High Yield Fund
	c / o Babson Capital Management LLC
	550 South Tryon St.
	Charlotte, NC 28202
	704.805.7200
	http://www.BabsonCapital.com/bgh

	ADVISER
	Babson Capital Management LLC
	550 South Tryon St.
	Suite 3300
	Charlotte, NC 28202

	SUB-ADVISOR
	Babson Capital Global Advisors Limited
	61 Aldwych
	London, UK
	WC2B 4AE

	COUNSEL TO THE FUND
	Ropes & Gray LLP
	Prudential Tower
	800 Boylston Street
	Boston, Massachusetts 02110

	CUSTODIAN
	US Bank
	MK-WI-S302
	1555 N. River Center Drive
	Milwaukee, WI 53212

	TRANSFER AGENT & REGISTRAR
	U.S. Bancorp Fund Services, LLC
	615 E. Michigan St.
	Milwaukee, WI 53202

	FUND ADMINISTRATION/ACCOUNTING
	U.S. Bancorp Fund Services, LLC
	615 E. Michigan St.
	Milwaukee, WI 53202







	PROXY VOTING POLICIES & PROCEDURES
	The Trustees of Babson Capital Global Short Duration High Yield Fund (the “Fund”) have delegated proxy voting responsibilities relating to the voting of securities held by the Fund 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 1-866-399-1516; (2) on the Fund’s website at http://www.BabsonCapital.com/bgh; and (3) on the U.S. Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

	FORM N-Q
	The Fund 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/bgh or upon request by calling, toll-free, 1-866-399-1516.

OFFICERS OF THE FUND

Russell Morrison

President and Principal

Executive Officer

Patrick Hoefling

Chief Financial Officer and

Principal Financial and

Accounting Officer

Andrew Lennon

Treasurer

Michael Freno

Vice President

Sean Feeley

Vice President

Scott Roth

Vice President

Melissa LaGrant

Chief Compliance Officer

Janice Bishop

Secretary/Chief Legal Officer

Michele Manha

Assistant Secretary

BABSON CAPITAL GLOBAL SHORT DURATION HIGH YIELD FUND

Babson Capital Global Short Duration High Yield Fund is a closed-end investment company, first offered to the public in 2012, whose shares are traded on the New York Stock Exchange.

INVESTMENT OBJECTIVE & POLICY

Babson Capital Global Short Duration High Yield Fund (the “Fund”) was organized as a business trust under the laws of the Commonwealth of Massachusetts on May 20, 2011, and commenced operations on October 26, 2012. The Fund is registered under the Investment Company Act of 1940, as amended, as a non-diversified, closed-end management investment company with its own investment objective. The Fund’s common shares are listed on the New York Stock Exchange under the symbol “BGH”.

The Fund’s primary investment objective is to seek as high a level of current income as the Adviser (as defined herein) determines is consistent with capital preservation. The Fund seeks capital appreciation as a secondary investment objective when consistent with its primary investment objective. There can be no assurance that the Fund will achieve its investment objectives.

The Fund will seek to take advantage of inefficiencies between geographies, primarily the North American and Western European high yield bond and loan markets and within capital structures between bonds and loans. For example, the Fund will seek to take advantage of differences in pricing between bonds and loans of an issuer denominated in U.S. dollars and substantially similar bonds and loans of the same issuer denominated in Euros, potentially allowing the Fund to achieve a higher relative return for the same credit risk exposure.

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

DEAR FELLOW SHAREHOLDERS,

It is our pleasure to provide you with the 2013 Semi-Annual Report for the Babson Capital Global Short Duration High Yield Fund (the “Fund”). We continue to believe our Global High Yield Investments Group at Babson Capital has a unique capability to offer investors a portfolio consisting of attractive yield opportunities in the global high yield market. We believe the recent performance of the Fund is a testament to the strength and collaboration of our global investment team and our expertise in the global markets. The global high yield asset class provided investors an adequate risk-reward premium during the first half of 2013 and we expect this trend to continue into the back half of the year.

We believe the global nature of the portfolio, primarily focusing on North American and Western European credits, provides investors with additional benefits compared to a U.S. only portfolio such as higher quality, increased yield, and lower duration credits. By leveraging our experienced team of investment professionals in the U.S. and U.K., we are able to primarily focus on North American and Western European credits with a fundamental bottom-up research approach and provide investors with what we believe to be our best relative value opportunities across jurisdictions, industries, credit quality and within the corporate capital structure. We continue to believe this approach and our seasoned team of investment professionals should provide investors with the opportunity for an attractive dividend yield in the future.

Market Review

The first of half of 2013 had a similar story to 2012, with investors searching for yield in the current low interest rate environment. This caused yields in both the U.S. and European markets to approach near all-time lows during the first quarter as investors entered the high yield market looking for attractive yields. Global high yield bond issuance also reached record highs mainly due to refinancing activity as companies took advantage of issuing lower coupon debt to refinance higher coupon payments. For the most part, the first quarter of 2013, could be characterized by healthy corporate earnings, accommodative central bank policies and modest economic improvement that helped support the global high yield asset class.

In the second quarter though, in light of concerns regarding the Federal Reserve’s tapering plans and the eventual increase of interest rates, volatility increased in the global high yield markets. In the U.S. high yield market, record outflows from retail investors put significant pressure on the market. With treasury rates stabilizing and more tempered enthusiasm from the Fed about growth, the high yield market rallied towards the tail end of the quarter. The Western European market experienced similar macro-economic headwinds in the second quarter as well. Market volatility increased and investor sentiment swayed mainly due to mixed economic reports and speculation regarding future U.S. Federal Reserve actions, Japan’s economic stimulus program and concerns over liquidity matters in China.

While yields fluctuated during the second quarter of 2013, we continue to see what we believe are attractive spreads for the current risk in the market despite the recent yield movements. The global fundamental picture remains healthy, with strong balance sheets, historically high EBTIDA margins, and prudent deployment of capital. Issuance volumes from M&A related activity remain at low levels compared to pre-financial crisis levels. We also expect that currently low default rates will continue for the foreseeable future.

We continue to expect modest volatility in the near-term as the markets sort out ever-changing views of global economic growth and central bank policies. However, the Fund continues to emphasize a fundamental approach to credit selection in order to identify good quality credits in the global high yield bond and loan markets. As a result, we believe the Fund will continue to offer attractive opportunities to our shareholders, particularly in light of the recent spike in yields.

Babson Capital Global Short Duration High Yield Fund Overview and Performance

The Fund ended June with a portfolio of 139 issuers, which is slightly more than the 121 issuers at the end of last year. A majority of the issuers are still domiciled in the U.S. (64.8%) followed by the U.K. (13.6%) and Canada (3.0%) - see Country Composition chart on page [4]. Over the course of the first half of the year, the U.K. market experienced the largest increase in exposure primarily due to attractive opportunities in the secondary market. The secondary market in Europe has proved to be an attractive market to pick up compelling opportunities that supplement the yield profile of the portfolio. In addition, these opportunities may help improve the credit profile of the Fund and reduce duration at the same time, as the European market is generally one notch higher in ratings and has shorter durations, on average, when compared to the U.S. market.

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

As of June month-end, the Fund was well positioned from a quality standpoint: 72.1% B-rated, 12.1% BB-rated, and 11.3% CCC-rated, with almost 60% of the portfolio consisting of secured obligations. Within the CCC-rated and below category, the majority of these assets are senior secured 2nd lien loans. Based on our experience within the current market environment, we believe these senior secured 2nd lien loan assets offer a tremendous amount of value and being senior secured offers additional protection to investors.

The portfolio composition gravitated more towards global high yield bonds at the end of the second quarter. The Fund sold lower yielding bank loans and redeployed the proceeds into higher yielding bonds that had traded down as a result of the recent technical pressure on the global high yield bond market from mutual fund outflows.

The Fund paid a dividend payment of $0.1677 per share during each of the past six months comprised of net investment income. Based on the Fund’s initial public offering price of $25.00 per share, the distribution represents an annualized yield of 8.05% per share. Assets acquired through leverage, which represented 21% as of June 30, 2013, were accretive to net investment income and benefitted shareholders. We expect to stay in this range for the foreseeable future and do not anticipate any need to increase the level of leverage in the portfolio based on the current market environment. From an NAV performance standpoint, the Fund increased +4.26% year-to-date.

In Conclusion

It is still our opinion that the Central Banks’ recent comments about maintaining low interest rates over the near term will help sustain solid performance in the global high yield market. At the same time, we are aware that the credit markets remain subject to volatility due to the unsettled political and economic situation in Europe, domestic policy concerns, and low global growth rates. In general, we believe global high yield credit fundamentals are likely to remain relatively stable, following significant balance sheet improvements over the last three years. We also expect global default rates to continue to remain below their historical averages.

We believe that our bottom-up fundamental approach to investing has allowed us to build a solid portfolio of our best ideas covering the entire global high yield market over the past 6 months. Thus far, the Fund has performed as expected, even during the most recent period of market volatility, and we believe the Fund will continue to offer an attractive dividend to our shareholders through the end of 2013.

From all of us at Babson Capital Management LLC, we appreciate your continued support for the Fund and our Global High Yield Investments Group.

Sincerely,

Russell Morrison

President and Principal Executive Officer

Babson Capital Global Short Duration High Yield Fund

Cautionary Notice: Certain statements contained in this report may be “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 any time 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 Fund’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.

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

*	Percentage of assets are expressed by market value and may vary over time. The percentages shown above represent a percentage of the Fund’s invested assets as of June 30, 2013.

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Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)


	June 30, 2013

Assets
Investments, at fair value (cost $603,851,929)	$	604,344,571
Cash		11,165,780
Foreign currency, at fair value (cost $5,599,334)		5,580,483
Receivable for investments sold		17,404,046
Interest receivable		11,246,316
Unrealized appreciation on forward foreign exchange contracts		46,814
Prepaid expenses and other assets		28,315
Total assets		649,816,325

Liabilities
Payable for investments purchased		19,877,562
Payable to adviser		533,911
Dividend payable		3,363,701
Accrued expenses and other liabilities		486,600
Note payable		138,000,000
Total liabilities		162,261,774
Total net assets	$	487,554,551

Net Assets
Common stock, $0.00001 par value; 20,057,849 shares issued and outstanding (unlimited shares authorized)	$	201
Additional paid-in capital		477,890,815
Undistributed net investment income		401,164
Accumulated net realized gain		8,720,155
Net unrealized appreciation		542,216
Total net assets	$	487,554,551
Net asset value per share	$	24.31

See accompanying Notes to Financial Statements

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

STATEMENT OF OPERATIONS (UNAUDITED)

	Period from
	January 1, 2013
	through
	June 30, 2013

Investment Income
Interest income	$	25,230,493
Total investment income		25,230,493

Operating Expenses
Advisory fees		3,129,533
Administrator fees		930,177
Interest expense		776,334
Directors’ fees		146,173
Professional fees		73,917
Printing and mailing expense		43,122
Registration fees		14,876
Other operating expenses		756
Total operating expenses		5,114,888
Net investment income		20,115,605

Realized and Unrealized Gains (Losses) on Investments
Net realized gain on investments		5,315,817
Net realized gain on forward foreign exchange contracts		2,681,571
Net realized gain on foreign currency and translation		419,947
Net realized gain on investments		8,417,335
Net unrealized depreciation of investments		(10,868,157	)
Net unrealized appreciation of forward foreign exchange contracts		2,758,044
Net unrealized depreciation of foreign currency and translation		(20,590	)
Net unrealized depreciation on investments		(8,130,703	)
Net realized and unrealized gains on investments		286,632
Net increase in net assets resulting from operations	$	20,402,237

See accompanying Notes to Financial Statements

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

STATEMENT OF CASH FLOWS (UNAUDITED)

	Period from
	January 1, 2013
	through
	June 30, 2012

Reconciliation of net increase in net assets applicable to common stockholders resulting from operations to net cash used in operating activities
Net increase in net assets applicable to common stockholders resulting from operations	$	20,402,237
Adjustments to reconcile net increase in net assets applicable to common stockholders resulting from operations to net cash used in operating activities:
Purchases of long-term investments		(228,602,127	)
Proceeds from sales of long-term investments		203,373,381
Purchases of foreign currency, net		448,365
Forward currency exchange contracts, net		(2,758,043	)
Net unrealized depreciation		10,878,470
Net realized gain		(5,978,383	)
Amortization and acretion		615,304
Changes in operating assets and liabilities:
Increase in interest receivable		(2,567,213	)
Decrease in prepaid expenses and other assets		(8,655	)
Increase in receivable for investments sold		(15,371,110	)
Decrease in payable for investments purchased		(21,335,447	)
Decrease in payable to Adviser		(308,183	)
Decrease in accrued expenses and other liabilities		27,830
Net cash used in operating activities		(41,183,574	)

Cash Flows From Financing Activities
Advances from note payable		38,000,000
Distributions paid to common stockholders		(19,850,097	)
Net cash provided by financing activities		18,149,903

Net change in cash		(23,033,671	)
Cash--beginning of period		34,199,451
Cash--end of period	$	11,165,780

Non-Cash Financing Activities
Reinvestment of distributions by common stockholders in additional common shares	$	324,847

(1)	Commencement of operations.

See accompanying Notes to Financial Statements

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)

	Period from January 1, 2013 through June 30, 2013			Period from October 26, 2012 (1) through December 31, 2012
Operations
Net investment income	$	20,115,605		$	3,668,210
Net realized gain on investments		8,417,335			458,814
Net unrealized depreciation on investments		(8,130,703	)		8,672,919
Net increase in net assets resulting from operations		20,402,237			12,799,943

Dividends to Common Shareholders
Net investment income		(20,177,140	)		(3,361,505	)
Total dividends to common shareholders		(20,177,140	)		(3,361,505	)

Capital Share Transactions
Net proceeds from sale of shares		-			477,466,104	(2)
Issuance of 13,099 common shares from reinvestment of
distributions to stockholders		324,847			-
Net increase in net assets capital stock transactions		324,847			477,466,104
Total increase in net assets		549,944			486,904,542

Net Assets
Beginning of period		487,004,607			100,065
End of period (includes undistributed net investment income of 401,164)	$	487,554,551		$	487,004,607

(1) Commencement of operations.

(2) Proceeds from sale of shares of $501,013,750 net of sales load paid and offering costs of $23,547,646.

See accompanying Notes to Financial Statements

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

FINANCIAL HIGHLIGHTS (UNAUDITED)

	Period From January 1, 2013 through June 30, 2013			Period From October 26, 2012 (1) through December 31, 2012
Per Common Share Data (2)
Net asset value, beginning of period	$	24.30			23.82	(3)
Income from investment operations:
Net investment income		1.01			0.18
Net realized and unrealized gains on investments		0.01			0.47
Total decrease from investment operations		1.02			0.65
Less distributions to common stockholders:
Net investment income		(1.01	)		(0.17	)
Total distributions to common stockholders		(1.01	)		(0.17	)
Net asset value, end of period	$	24.31		$	24.30
Per common share market value, end of period	$	22.95		$	23.77
Total investment return based on net asset value (2)(4)		4.26	%		2.69	%
Total investment return based on market value (2)(4)		0.58	%		(4.27	)%

Supplemental Data and Ratios
Net assets, end of period (000’s)	$	487,555		$	487,005

Ratio of expenses to average net assets(5)		2.07	%		1.85	%
Ratio of net investment income to average net assets(5)		8.15	%		4.70	%
Portfolio turnover rate(2)		33.21	%		4.74	%

(1)	Commencement of operations.
(2)	Not annualized.
(3)	Net asset value at the beginning of the period reflects the deduction of the sales load and offering costs of $1.18 per share paid by the shareholder from the $25.00 offering price.
(4)	Total investment return calculation assumes reinvestment of dividends at actual prices pursuant to the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions.
(5)	Annualized for periods less than one full year.

See accompanying Notes to Financial Statements

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

SCHEDULE OF INVESTMENTS (UNAUDITED)

June 30, 2013

	Effective
	Interest Rate ‡		Due Date	Principal		Cost		Fair Value

Fixed Income — 123.95%*:

Bank Loans — 20.77%*:
Beverage, Food and Tobacco — 0.34%*:
Performance Food Group Company	6.25	%	11/30/2019		1,678,736	$	1,670,349	$	1,661,949
Total Beverage, Food and Tobacco					1,678,736		1,670,349		1,661,949

Broadcasting and Entertainment — 1.46%*:
Deluxe Entertainment Services Group, Inc.	8.75		7/3/2017		5,452,390		5,254,043		5,270,662
TWCC Holding Corp.	7.00		12/11/2020		1,822,860		1,804,632		1,831,975
Total Broadcasting and Entertainment					7,275,250		7,058,675		7,102,637

Buildings and Real Estate — 0.79%*:
Tomkins Air Distribution	9.25		5/11/2020		3,773,513		3,716,929		3,877,285
Total Buildings and Real Estate					3,773,513		3,716,929		3,877,285

Chemicals, Plastics and Rubber — 2.25%*:
Cytec Monarch	8.25		3/20/2020		6,000,000		6,176,127		6,000,000
Pinnacle Operating Corp.	11.50		5/13/2019		4,856,269		4,659,755		4,953,394
Total Chemicals, Plastics and Rubber					10,856,269		10,835,882		10,953,394

Diversified/Conglomerate Manufacturing — 1.67%*:
Allflex Holdings, Inc.	8.00		6/11/2020		2,232,322		2,209,999		2,230,938
Alliance Laundry Systems LLC	9.50		11/30/2019		1,728,930		1,711,655		1,752,702
Northern Tool & Equipment Company, Inc.	7.00		12/6/2018		4,135,714		4,053,511		4,156,393
Total Diversified/Conglomerate Manufacturing					8,096,966		7,975,165		8,140,033

Diversified/Conglomerate Service — 2.41%*:
Endurance International Group Inc.	6.25		10/18/2017		5,970,000		5,910,319		5,992,388
Redprarie Corporation	6.75		12/14/2018		2,985,000		2,928,031		2,993,716
Redprarie Corporation	11.25		12/14/2019		2,702,244		2,650,308		2,783,311
Total Diversified/Conglomerate Service					11,657,244		11,488,658		11,769,415

Diversified Natural Resources, Precious Metals and Minerals — 0.73%*:
Osmose Holdings, Inc.	4.75		5/2/2018		3,598,426		3,562,455		3,587,920
Total Diversified Natural Resources, Precious Metals and Minerals					3,598,426		3,562,455		3,587,920

Electronics — 1.58%*:
Kronos, Inc.	9.75		4/26/2020		7,500,000		7,425,012		7,687,500
Total Electronics					7,500,000		7,425,012		7,687,500

Finance — 1.49%*:
Confie Seguros Holding	10.25		5/8/2019		1,880,257		1,859,599		1,899,059
Cunningham Lindsey Group, Inc.	9.25		4/18/2020		2,338,636		2,373,235		2,362,023
Transfirst Holdings Inc.	11.00		6/30/2018		1,004,072		975,474		1,021,644
Wall Street Systems Inc.	9.25		4/24/2020		1,980,000		1,980,000		1,987,425
Total Finance					7,202,965		7,188,308		7,270,151

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)

June 30, 2013

	Effective
	Interest Rate ‡		Due Date	Principal		Cost		Fair Value
Bank Loans (Continued)

Healthcare, Education and Childcare — 3.02%*:
Air Medical Group Holdings	6.50		6/20/2018		2,244,874		2,222,438		2,267,322
Gentiva Health Services Inc.	6.50		8/17/2016		3,934,426		3,888,139		3,929,508
PRA International	10.50		11/30/2019		1,844,428		1,811,515		1,867,484
Sage Products Holdings Iii, LLC	9.25		5/31/2020		3,325,292		3,275,431		3,383,484
TriZetto Group	8.50		3/27/2019		3,325,000		3,309,161		3,291,750
Total Healthcare, Education and Childcare					14,674,020		14,506,684		14,739,548

Mining, Steel, Iron and Non-Precious Metals — 0.66%*:
Boomerang Tube, LLC	11.00		10/8/2017		3,256,298		3,227,675		3,207,454
Total Mining, Steel, Iron and Non-Precious Metals					3,256,298		3,227,675		3,207,454

Oil and Gas — 2.36%*:
Chesapeake Energy Corporation	5.75		12/2/2017		2,000,000		1,968,532		2,024,580
NFR Energy LLC	8.75		12/31/2018		7,008,901		7,099,685		6,973,856
Rice Energy	8.50		9/26/2018		2,503,689		2,501,345		2,497,430
Total Oil and Gas					11,512,590		11,569,562		11,495,866


Retail Store — 2.01%*:
BJ’s Wholesale Club, Inc.	9.75		3/13/2020		4,000,000		4,118,769		4,070,000
FleetPride	9.25		5/8/2020		3,000,000		2,942,212		2,842,500
Smart & Final Holdings Corp.	10.50		11/8/2020		2,871,795		2,786,096		2,886,154
Total Retail Store					9,871,795		9,847,077		9,798,654

Total Bank Loans					100,954,072		100,072,431		101,291,806

Corporate Bonds — 103.18%*:

Aerospace and Defense — 0.50%*:
Ducommun Inc.	9.75	%	7/15/2018		2,230,000	$	2,395,448	$	2,436,275
Total Aerospace and Defense					2,230,000		2,395,448		2,436,275

Automobile — 5.64%*:
Accuride Corp	9.50		8/1/2018		6,800,000		6,694,948		6,919,000
J.B. Poindexter & Co. Inc.^	9.00		4/1/2022		4,500,000		4,620,643		4,725,000
International Automotive Components Group, S.A.^	9.13		6/1/2018		4,866,000		4,886,246		4,866,000
Meritor Inc.	10.63		3/15/2018		3,000,000		3,061,709		3,247,500
Meritor Inc.^	7.88		3/1/2026		2,010,000		1,993,045		2,443,406
UCI International, Inc.	8.63		2/15/2019		5,215,000		5,175,888		5,319,300
Total Automobile					26,391,000		26,432,479		27,520,206

Broadcasting and Entertainment — 1.88%*:
Arqiva Finance+^	9.50		3/31/2020		5,000,000		7,952,243		7,832,938
CET 21 Spol Sro+^	9.00		11/1/2017		950,000		1,319,200		1,349,088
Total Broadcasting and Entertainment					5,950,000		9,271,443		9,182,026

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)

June 30, 2013

	Effective
	Interest Rate ‡	Due Date	Principal		Cost		Fair Value
Corporate Bonds (Continued)

Buildings and Real Estate — 5.12%*:
Ainsworth Lumber Ltd^	7.50	12/15/2017		4,250,000		4,269,223		4,505,000
Brookfield Residential Properties+^	6.13	7/1/2022		1,620,000		1,620,000		1,589,625
Builders FirstSource Inc.^	7.63	6/1/2021		1,020,000		1,020,000		986,850
Cemex International Capital LLC+^	9.88	4/30/2019		2,890,000		3,812,822		4,213,157
Lyon Williams Homes, Inc.^	8.50	11/15/2020		8,000,000		8,055,979		8,700,000
Roofing Supply LLC^	10.00	6/1/2020		4,605,000		5,070,160		4,984,913
Total Buildings and Real Estate				22,385,000		23,848,184		24,979,545

Cargo Transport — 2.80%*:
Kenan Advantage Group, Inc.^	8.38	12/15/2018		8,000,000		8,000,000		8,320,000
Moto Hospitality Limited+^	10.25	3/15/2017		2,000,000		3,100,342		3,125,570
Quality Distribution Inc.	9.88	11/1/2018		2,040,000		2,186,636		2,218,500
Total Cargo Transport				12,040,000		13,286,978		13,664,070

Chemicals, Plastics and Rubber — 7.51%*:
Associated Asphalt Partners LLC^	8.50	2/15/2018		2,300,000		2,300,000		2,311,500
Ciech Group Finance+^	9.50	11/30/2019		1,200,000		1,538,876		1,663,499
Cornerstone Chemical Co.^	9.38	3/15/2018		7,975,000		8,229,588		8,373,750
Ineos+^	6.13	8/15/2018		970,000		970,000		926,350
Ineos+	6.50	8/15/2018		1,450,000		1,894,558		1,805,356
Omnova Solutions, Inc.	7.88	11/1/2018		1,630,000		1,668,700		1,695,200
Perstorp Holding AB+^	9.00	5/15/2017		3,130,000		4,071,933		4,114,883
TPC Group, Inc.^	8.75	12/15/2020		7,065,000		7,151,399		7,223,963
Tronox Worldwide LLC^	6.38	8/15/2020		9,000,000		8,935,548		8,482,500
Total Chemicals, Plastics and Rubber				34,720,000		36,760,602		36,597,001

Containers, Packaging and Glass — 1.78%*:
Bormioli Rocco & Figlio S.P.A.+^	10.00	8/1/2018		1,500,000		1,993,361		1,981,751
Pretium Packaging, LLC	11.50	4/1/2016		6,265,000		6,428,208		6,703,550
Total Containers, Packaging and Glass				7,765,000		8,421,569		8,685,301

Diversified/Conglomerate Manufacturing — 0.60%*:
StoneMor Partners L.P.^	7.88	6/1/2021		3,000,000		2,935,512		2,940,000
Total Diversified/Conglomerate Manufacturing				3,000,000		2,935,512		2,940,000

Diversified/Conglomerate Service — 4.39%*:
Bravida+	5.21	6/15/2019		650,000		850,396		846,068
Bravida+	6.60	6/15/2019		5,500,000		837,999		820,149
Brickman Group Holdings, Inc.^	9.13	11/1/2018		6,670,000		6,819,368		7,136,900
Equiniti Group Ltd.+	7.13	12/15/2018		1,460,000		2,222,582		2,215,492
Ista 2007+	6.88	4/30/2021		900,000		1,183,946		1,159,764
Teamsystem S.P.A.+	7.38	5/15/2020		2,180,000		2,769,368		2,681,514
Verisure Holdings+^	6.71	9/1/2018		3,500,000		4,476,657		4,544,360
Verisure Holdings+^	8.75	9/1/2018		1,440,000		1,971,574		2,014,943
Total Diversified/Conglomerate Service				22,300,000		21,131,890		21,419,190

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)

June 30, 2013


	Effective Interest Rate ‡	Due Date	Principal		Cost		Fair Value
Corporate Bonds (Continued)

Diversified Natural Resources, Precious Metals and Minerals — 0.92%*:
Lecta S.A.+^	8.88	5/15/2019		1,090,000		1,431,858		1,340,757
Lecta S.A.+^	5.70	5/15/2018		2,600,000		3,240,273		3,130,451
Total Diversified Natural Resources, Precious Metals and Minerals				3,690,000		4,672,131		4,471,208

Ecological — 0.18%*:
ENCE+	7.25	2/15/2020		650,000		874,938		862,989
Total Ecological				650,000		874,938		862,989

Electronics — 1.68%*:
International Wire Group, Inc.^	8.50	10/15/2017		8,086,000		8,254,781		8,207,290
Total Electronics				8,086,000		8,254,781		8,207,290

Farming and Agriculture — 0.94%*:
Chiquita Brands International Inc.^	7.88	2/1/2021		4,350,000		4,318,419		4,556,625
Total Farming and Agriculture				4,350,000		4,318,419		4,556,625

Finance — 5.30%*:
Arrow Global Finance+^	7.88	3/1/2020		500,000		791,653		739,718
Brighthouse Group PLC+	7.88	5/15/2018		2,000,000		3,116,052		3,027,316
Cabot Financial+^	10.38	10/1/2019		5,000,000		8,421,220		8,336,755
First Data Corp.^	11.25	1/15/2021		6,000,000		5,992,500		5,985,000
Lowell Group Financing PLC+^	10.75	4/1/2019		2,000,000		3,407,234		3,327,097
TMF Group Holding+^	5.59	12/1/2018		1,400,000		1,802,552		1,827,912
TMF Group Holding+^	9.88	12/1/2019		2,000,000		2,687,237		2,603,285
Total Finance				18,900,000		26,218,448		25,847,083

Healthcare, Education and Childcare — 4.87%*:
Care UK Health+	9.75	8/1/2017		4,000,000		6,590,157		6,175,093
Cerba European Lab+^	7.00	2/1/2020		450,000		599,464		578,417
Crown Newco PLC+^	8.88	2/15/2019		5,100,000		8,320,362		7,601,752
Prospect Medical Holdings Inc^	8.38	5/1/2019		5,000,000		5,092,647		5,225,000
Valeant+^	7.50	7/15/2021		3,260,000		3,260,000		3,374,100
Voyage Care+^	6.50	8/1/2018		500,000		800,077		764,282
Total Healthcare, Education and Childcare				18,310,000		24,662,707		23,718,644

Hotels, Motels, Inns and Gaming — 1.97%*:
Elior+	6.50	5/1/2020		600,000		783,085		792,700
Gala Group Finance+	8.88	9/1/2018		5,500,000		8,829,067		8,833,729
Total Hotels, Motels, Inns and Gaming				6,100,000		9,612,152		9,626,429

Insurance — 0.19%*:
Towergate Finance PLC+	8.50	2/15/2018		600,000		942,052		938,200
Total Insurance				600,000		942,052		938,200

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)

June 30, 2013


	Effective Interest Rate ‡	Due Date	Principal		Cost		Fair Value
Corporate Bonds (Continued)

Leisure, Amusement, Motion Pictures and Entertainment — 1.38%*:
Odeon & Uci Finco+	9.00	8/1/2018		4,200,000		6,958,456		6,723,398
Total Leisure, Amusement, Motion Pictures and Entertainment				4,200,000		6,958,456		6,723,398

Machinery (Non-Agriculture, Non-Construct, Non-Electronic) — 3.25%*:
Cleaver-Brooks, Inc.^	8.75	12/15/2019		4,740,000		4,875,829		4,977,000
KM Germany Holding+^	8.75	12/15/2020		1,450,000		1,876,585		1,936,454
Milacron LLC^	8.38	5/15/2019		5,800,000		5,951,682		5,916,000
Xerium Technologies	8.88	6/15/2018		3,000,000		2,878,840		3,015,000
Total Machinery (Non-Agriculture, Non-Construct, Non-Electronic)				14,990,000		15,582,936		15,844,454

Mining, Steel, Iron and Non-Precious Metals — 4.79%*:
Ausdrill Finance Pty Ltd.+^	6.88	11/1/2019		6,000,000		6,000,000		5,730,000
Barminco Finance Pty Ltd.+	9.00	6/1/2018		6,000,000		5,930,804		5,280,000
Fortescue Metals Group Ltd.+^	8.25	11/1/2019		2,000,000		2,065,703		2,060,000
Hecla Mining Company^	6.88	5/1/2021		4,925,000		4,929,966		4,567,938
Kaiser Aluminum Corporation	8.25	6/1/2020		800,000		868,256		886,000
New World Resources N.V.+^	7.88	5/1/2018		3,350,000		4,314,207		2,583,598
Rain CII Carbon LLC^	8.25	1/15/2021		1,390,000		1,390,000		1,390,000
Rain CII Carbon LLC	8.50	1/15/2021		650,000		855,139		846,068
Total Mining, Steel, Iron and Non-Precious Metals				25,115,000		26,354,075		23,343,604

Oil and Gas — 28.02%*:
Alta Mesa Holdings, LP	9.63	10/15/2018		4,275,000		4,374,097		4,435,312
Calumet Specialty Products	9.38	5/1/2019		7,365,000		7,901,988		7,880,550
CHC Helicopter+	9.25	10/15/2020		4,620,000		4,737,224		4,735,500
CHC Helicopter+^	9.38	6/1/2021		3,000,000		3,000,000		2,970,000
Chesapeake Oilfield Operating LLC^	6.63	11/15/2019		6,000,000		5,768,559		5,940,000
Era Group Inc.^	7.75	12/15/2022		3,000,000		2,949,330		3,000,000
Ferrellgas Partners LP	8.63	6/15/2020		7,135,000		6,996,321		7,259,863
Gibson Energy Holdings+^	6.75	7/15/2021		1,915,000		1,885,815		1,910,213
Halcon Resources Corporation^	9.75	7/15/2020		8,000,000		8,451,259		7,980,000
Headwaters, Inc.	7.63	4/1/2019		3,000,000		3,124,792		3,135,000
Hercules Offshore, Inc.^	10.25	4/1/2019		6,865,000		7,210,302		7,482,850
Magnum Hunter Resources, Corp^	9.75	5/15/2020		3,000,000		3,057,349		3,045,000
Midstates Petroleum Company Inc.^	10.75	10/1/2020		5,800,000		6,121,746		5,829,000
Midstates Petroleum Company Inc.^	9.25	6/1/2021		6,065,000		6,023,778		5,701,100
Millennium Offshore+^	9.50	2/15/2018		6,000,000		6,000,000		6,150,000
Niska Gas Storage	8.88	3/15/2018		6,500,000		6,726,005		6,743,750
Northern Tier Energy LLC^	7.13	11/15/2020		6,000,000		6,000,000		6,060,000
Pbf Holding Company LLC	8.25	2/15/2020		6,000,000		6,281,246		6,285,000
Penn Virginia Corp^	8.50	5/1/2020		4,000,000		4,000,000		3,880,000
Resolute Energy Corp.^	8.50	5/1/2020		7,285,000		7,441,683		7,412,488
Samson Investment Company^	10.00	2/15/2020		7,000,000		7,383,135		7,376,250

Babson Capital Global Short Duration High Yield Fund June 2013 Semi-Annual Report

SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)

June 30, 2013


	Effective Interest Rate ‡	Due Date	Principal		Cost			Fair Value
Corporate Bonds (Continued)

Oil and Gas (Continued)
Seven Generations Energy Ltd.+^	8.25	5/15/2020		3,645,000		3,645,000			3,626,775
Shelf Drilling Holdings Ltd+^	8.63	11/1/2018		6,000,000		6,078,139			6,240,000
Venoco, Inc.	11.50	10/1/2017		5,500,000		5,562,686			5,816,250
Welltec+^	8.00	2/1/2019		5,500,000		5,730,855			5,720,000
Total Oil and Gas				133,470,000		136,451,309			136,614,901
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