Babson
Stewart
Ivory
International
Fund
Annual Report
June 30, 1995
MESSAGE
To Our Shareholders
At June 30, 1995 the net asset value of Babson-Stewart Ivory International
Fund was $15.96, representing a total return (price change and reinvested
distributions) of 3.59% for the quarter, and 2.54% for the fiscal year.
Comparisons against the unmanaged Morgan Stanley Capital International (MSCI)
EAFE and other indices are as follows:
Investment Results - Total Return
Periods Ended 6/30/95
Second Quarter Previous Twelve
1995 Months
BSIIF 3.59% 2.54%
MSCI EAFE* Index** 0.80% 1.95%
MSCI World Index** 4.40% 11.20%
S&P 500 Index** 9.53% 26.03%
Lipper International Funds
(avg. 263 funds) 4.04% 1.19%
*Europe, Australia, Far East
**unmanaged
The portfolio's performance in Australia, Japan and the UK was ahead of local
indices, but behind in Continental Europe, Asia (ex-Japan) and Latin America.
Overall performance was ahead of the EAFE index, primarily because of our
underweighted position in Japan. In Continental Europe performance suffered
from a lack of exposure to the larger electronic stocks, which rose strongly
as a result of their growing dominance of the world cellular phone industry.
Portfolio activity during the quarter included net
equity purchases of $341,055, and the portfolio's cash position increased
from 2.3% to 4.5%, largely reflecting new cash inflows.
The most significant developments during the quarter were a slowdown in
economic growth in both the U.S. and Japan (the latter after only a few months
of recovery). The 5.1% growth rate in the U.S. in the final quarter of 1994
was clearly not sustainable, but the pace of deceleration (to 2.7% in the
first quarter and near zero in the second) has been more rapid than expected.
Market reaction has not been terribly negative, with the focus on the prospect
of diminishing inflationary pressures, and on lower interest rates as the
government responds by relaxing monetary policy. Many investors have viewed
the situation as a short-term inventory-led adjustment, with economic growth
returning to a 2-3% per annum later in the year. The Federal Reserve's 0.25%
cut in overnight interest rates in early July seemed to confirm this
expectation.
The same sort of situation may exist in Japan, and the positive response to
the unexpected easing of monetary policy several weeks ago by the Bank of
Japan highlights the danger of being excessively pessimistic towards the
Japanese market. However, in the last quarter that market was under downward
pressure from a number of adverse influences, notably the evidence of a
slowing economy. With many companies showing only a few months recovery in
earnings after four years of decline, the prospect of an aborted take-off for
the economy is not reassuring. The economic news was not completely negative,
however, with pockets of growth in consumer electronics and household goods,
stronger machine tool and machinery order rates, and surprising strength in
exports in spite of the strong yen. We retain only a small exposure to the
financial sector of the Japanese market, but an above-index weighting in the
technology and retail areas, where we believe economic recovery will be
concentrated.
Growth in Europe seems to have been maintained at previous levels, but there
is evidence of a slowdown in the making, with weaker consumer spending and
slowing imports. Economic growth in Germany is moderating, but not sufficiently
to provoke further monetary easing. In France, there seems to be a
continuation of the previous government's commitment to reducing the budget
deficit, and only modest job creation measures. In the UK, however, Prime
Minister Major's reelection (by his own party) may bring pressure for tax
cuts to restore the Conservatives' lackluster showing by 1997, in time for
the next regular election.
The smaller Pacific economies continue to grow at an above-average rate, with
confidence returning to stock markets after a decline of the previous quarter
and calendar 1994. Fears persist about inflationary pressures in China, and
the impact of Hong Kong's real estate weakness on company earnings. There is
also concern that the growing new issue calendar in the capital-hungry parts
of the region (notably Malaysia and Indonesia) will affect the supply/demand
picture for investment in the region as a whole.
With local investors cautious as a result of political fears or institutional
pressures, market movements seemed to have been dictated more by the
preferences of the international investor, who is driven by different
influences, and can have a dramatic effect on relatively illiquid markets.
In these circumstances the larger market leaders, which have the capacity to
absorb foreign buying, can be the main beneficiaries in the short term, with
the local investors later seeking out unrecognized value in smaller stocks.
We will remain opportunistic for such buying opportunities.
Thank you for your continuing interest in Babson-Stewart Ivory International
Fund.
Sincerely,
LARRY D. ARMEL
Larry D. Armel
President
<PAGE>
Babson-Stewart Ivory International Fund versus Morgan Stanley Capital
International EAFE Index
Babson-Stewart Ivory International Fund's average annual compounded total
returns for one year, five years
and the life of the Fund (inception December 7, 1987) as of June 30, 1995,
were 2.54%, 6.68% and 8.85%, respectively. Performance data contained in this
report is for past periods only. Past performance is not predictive of future
performance. Investment return and share value will fluctuate, and redemption
value may be more or less than original cost.
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1995
Shares Company AND DESCRIPTION COST Market Value
COMMON STOCKS - 95.22%
AUSTRALIA - 4.45%
95,469 Brambles
(Transport, plant services) $ 925,171 $ 905,157
165,000 CSR
(Building materials/base metals) 521,339 515,991
61,033 Lend Lease
(Real estate) 643,269 779,938
123,750 Western Mining
(Diversified base metals) 649,839 681,636
2,739,618 2,882,722
BELGIUM - 1.53%
3,550 Colruyt
(Food retailer) 603,303 985,903
BRAZIL - 0.42%
24,000 Usiminas
(Steel producer) 383,875 273,120
CHILE - 0.54%
9,500 Genesis Chile Fund
(Investment in Chile) 87,638 346,750
DENMARK - 1.46%
10,000 Sophus Berendsen
(Environmental, industrial services) 592,081 942,505
FRANCE - 6.79%
1,800 Carrefour
(Food retailer) 720,781 922,021
5,000 Castorama Dubois
(DIY retailer) 753,556 828,644
2,585 Comptoirs Modernes
(Food retailer) 538,955 796,606
9,500 Guilbert
(Office supplies, paper) 675,878 951,704
8,000 SEB
(Electrical appliances) 681,497 888,834
3,370,667 4,387,809
GERMANY - 5.13%
1,800 Buderus*
(Heating systems) 936,209 865,572
1,680 Linde
(Engineering) 880,856 996,167
1,000 Plettac
(Scaffolding) 534,665 614,650
1,100 Rheinelektra
(Electric utility, machinery) 812,275 843,156
3,164,005 3,319,545
HONG KONG - 4.41%
1,201,625 CDL Hotels
(Regional hotel group) 441,567 586,231
2,000,000 Gold Peak*
(Batteries) 741,940 852,956
250,000 Johnson Electric
(Micro-motors) 556,146 504,019
350,000 Shaw Bros.
(T.V. network, film production
and distribution) 351,650 327,936
960,000 South China Morning Post
(Publishing) 535,025 576,908
2,626,328 2,848,050
INDONESIA - 0.59%
10,000 Indosat
(Telecommunications) 383,065 382,500
IRELAND - 1.03%
100,000 Kerry Group
(Food manufacturer) 560,245 664,069
ITALY - 2.87%
25,000 Luxottica
(Eyeglass frames) 659,815 928,125
28,000 Industrie Natuzzi
(Furniture manufacturer) 802,268 927,500
1,462,083 1,855,625
JAPAN - 30.94%
44,000 Amada Metrecs
(Machine tools, robotics) 717,282 565,866
8,600 Autobacs Seven
(Auto repair shops) 790,782 837,119
37,000 Canon Sales
(Distribution of Canon products) 904,211 1,025,898
117,000 Daicel Chemical
(Chemicals, plastics) 696,184 599,115
63,000 Hitachi Metals
(Specialty metals) 826,292 706,896
34,000 Hoya
(Optical/electronic products) 849,299 1,002,891
28,000 Kato Denki
(Electrical appliance retailer) 502,600 677,246
9,000 Keyence
(Sensors) 765,911 1,008,790
93,000 Komatsu
(Construction machinery) 763,098 709,940
68,000 Kurimoto
(Cast iron pipes) 775,022 717,267
12,000 Kyocera
(Electronic components) 872,326 988,260
37,000 Mori Seiki*
(Machine tools) 634,467 659,194
15,000 Murata
(Electronic components) 432,895 568,108
69,000 NGK Spark Plug
(Spark plugs, ceramic packaging) 587,369 765,265
10,000 Nichiei*
(Consumer finance) 656,348 617,073
105,000 NTN
(Bearings) 733,227 619,432
24,000 Nissen*
(Mail order retail) 657,982 722,081
26,400 Rinnai
(Gas appliances) 689,384 585,594
13,000 Rohm*
(Semiconductors) 667,155 671,819
10,000 Seven Eleven
(Convenience stores) 584,717 716,182
JAPAN (Continued)
15,000 Sony
(Consumer electronics) 854,252 720,311
76,000 Sumitomo Marine & Fire
(Fire & casualty insurance) 679,980 603,481
90,000 Sumitomo Warehouse
(Warehousing, transport) 682,809 544,747
70,000 SxL
(Housebuilder) 815,323 752,404
65,000 Topre
(Automotive steel) 417,605 475,488
97,000 Toshiba
(Integrated electronics) 552,063 614,583
22,000 Tostem
(Aluminum window frames) 748,284 677,482
24,800 Xebio
(Apparel, sportswear) 766,006 848,564
19,622,873 20,001,096
KOREA - 1.04%
18,000 Korea Electric Power
(Electric utility) 441,286 674,184
MALAYSIA - 1.23%
240,000 Perlis Plantations
(Trading, mining, agriculture) 570,831 797,375
NETHERLANDS - 5.69%
25,000 KPN
(Postal, telecom services) 864,359 898,677
4,200 Otra
(Technology wholesalers) 658,349 879,574
15,000 Polygram
(Recorded music) 583,213 885,770
11,500 Wolters Kluwer
(Publisher) 551,644 1,014,553
2,657,565 3,678,574
NEW ZEALAND - 0.80%
90,000 Wilson & Horton
(Newspapers) 410,018 514,440
SINGAPORE - 3.08%
140,000 Robinson
(Department store) 596,894 576,029
120,000 Trans-Island Bus Services
(Bus transport) 102,029 326,297
800,000 Utd Industrial
(Real estate) 784,066 772,809
160,000 United Overseas Land
(Real estate) 232,415 317,138
1,715,404 1,992,273
SPAIN - 1.11%
30,000 Continente Centros Commerciales
(Hypermarket) 620,889 720,743
SWEDEN - 2.28%
45,000 Arjo
(Healthcare services) 733,051 396,089
35,000 Astra
(Pharmaceuticals) 732,525 1,080,648
1,465,576 1,476,737
SWITZERLAND - 4.02%
3,000 Fust
(Household appliances) 507,860 872,775
1,800 Phoenix Meccano
(Customized electric casings) 344,876 742,510
1,400 Sandoz
(Pharmaceuticals and chemicals) 727,459 982,371
1,580,195 2,597,656
UNITED KINGDOM - 15.81%
120,000 Argos
(Mail order, retail) 659,935 824,559
150,000 Bowthorpe
(Electronics components, instruments) 660,440 885,160
190,000 British Sky Broadcast*
(Satellite TV broadcasting) 776,126 829,569
104,324 Cadbury Schweppes
(Food, soft drinks) 690,789 761,647
UNITED KINGDOM (Continued)
102,000 Electrocomponents Ents
(Electronics) 784,763 973,437
72,000 Granada
(Hotels, leisure) 434,919 698,584
161,000 Hays
(Business services) 698,885 806,665
237,000 MacFarlane
(Printing, packaging) 402,048 738,858
103,000 Marks & Spencer
(Retail) 649,981 661,874
343,000 Morrison Supermarket
(Supermarkets) 697,348 804,716
38,000 Reed International*
(Publishing) 523,035 533,704
103,000 Reuters
(News service) 766,222 857,651
93,000 SmithKline Beecham
(Pharmaceuticals) 775,434 841,689
8,519,925 10,218,113
TOTAL COMMON STOCKS - 95.22% 53,577,470 61,559,789
Short-Term Investments - 3.66% 2,335,981 2,364,466
TOTAL INVESTMENTS - 98.88% $ 55,913,451 63,924,255
Other assets less liabilities - 1.12% 722,644)
TOTAL NET ASSETS - 100.00%
(equivalent to $15.96 per share;
10,000,000 shares of
$1.00 par value capital shares authorized;
4,051,764 shares outstanding) $ 64,646,899
For federal income tax purposes, the identified cost of investments owned at
June 30, 1995 was $56,309,232.
Net unrealized appreciation for federal income tax purposes was $7,615,023,
which is comprised of
unrealized appreciation of $9,485,144 and unrealized depreciation of
$1,870,121.
*Securities on which no cash dividends were paid during the preceding year.
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1995
ASSETS:
Investments, at market value (identified cost $55,913,451) $ 63,924,255
Dividends receivable 216,602
Receivable for investments sold 660,246
Foreign tax receivable 87,778
Total assets 64,888,881
LIABILITIES AND NET ASSETS:
Cash overdraft 12,296
Payable for investments purchased 151,117
Accrued expenses 45,630
Foreign tax withholding liability 32,939
Total liabilities 241,982
NET ASSETS $ 64,646,899
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 56,867,610
Accumulated undistributed income (loss):
Undistributed net investment income 56,351
Accumulated net realized loss from investments and
foreign currency transactions (298,404)
Net unrealized appreciation on investments and
translation of assets and
liabilities in foreign currencies 8,021,342
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 64,646,899
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 4,051,764
NET ASSET VALUE PER SHARE $ 15.96
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1995
INVESTMENT INCOME:
Income:
Dividends (net of foreign taxes withheld) $ 1,329,427
Interest 82,519
Foreign exchange loss (34,633)
1,377,313
Expenses:
Custodian fees 158,250
Registration fees 38,325
Management fees (Note 3) 539,821
736,396
Net investment income 640,917
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY (Note 1):
Net realized gain (loss) from:
Investments (318,400)
Foreign currency transactions 1,402,664
Net increase (decrease) in unrealized appreciation on:
Investments (35,494)
Translation of assets and liabilities in foreign currencies 15,545
Net realized and unrealized gain from investments and
foreign currency 1,064,315
Increase in net assets resulting from operations $ 1,705,232
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
For The Two Years Ended June 30, 1995
1995 1994
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 640,917 $ 139,428
Net realized gain from investments and foreign
currency transactions 1,084,264 2,782,299
Net increase (decrease) in unrealized appreciation
on investments and translation of assets and
liabilities in foreign currencies (19,949) 4,508,984
Net increase in net assets resulting
from operations 1,705,232 7,430,711
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (666,630) (97,129)
Net realized gain from investment transactions (2,304,439) (1,536,425)
Total distributions to shareholders (2,971,069) (1,633,554)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 3,240,782 and 1,401,492 shares sold 51,468,851 22,456,928
Net asset value of 173,600 and 94,716 shares issued
for reinvestment of distributions 2,673,863 1,536,663
54,142,714 23,993,591
Cost of 2,251,582 and 917,391 shares redeemed (35,632,490) (14,668,048)
Net increase from capital share transactions 18,510,224 9,325,543
Total increase in net assets 17,244,387 15,122,700
NET ASSETS:
Beginning of year 47,402,512 32,279,812
End of year (including undistributed net
investment income of $56,351 in 1995
and $68,175 in 1994) $ 64,646,899 $ 47,402,512
*Distributions to shareholders:
Income dividends per share $ .17 $ .0358
Capital gains distribution per share $ .67 $ .5750
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund
in the preparation of its financial statements.
Investments - Common stocks are valued at the latest sales price or mean
between the bid and asked price on the last business day of the period as
reported by the principal securities exchange on which traded or, if no sale
was reported on that date, at the mean between the latest reported bid and
asked prices. Common stocks traded over-the-counter are valued at the mean
between the last reported bid and asked prices. Investment transactions are
recorded on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis net of unrecoverable
foreign taxes withheld at the applicable country rates. Distributions to
shareholders are recorded on the ex-dividend dates. Realized gains and losses
from investment transactions and unrealized appreciation and depreciation of
investments are reported on the identified cost basis.
The investments of the Fund are subject to the risk of restrictions imposed
by foreign governments and to political or economic uncertainties.
Federal and State Taxes - The Fund's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no provision for federal or state tax is required.
Foreign Currency Translation - All assets and liabilities expressed in
foreign currencies are converted into U.S. dollars at the exchange rate last
quoted by a major bank in London on the last business day of the period. The
cost of portfolio securities is translated at the rates of exchange
prevailing when acquired. Income is translated at the rate of exchange on
the ex-dividend date. The resulting transaction exchange gain or loss has
been included in the results of operations with the type of transaction
giving rise to the gain or loss.
2. PURCHASES AND SALES OF SECURITIES:
The aggregate amounts of security transactions (exclusive of short-term
investments and currency transactions) during the year ended June 30, 1995,
were as follows:
Purchases $ 36,086,921
Proceeds from sales 21,342,734
3. MANAGEMENT FEES:
Management fees, which include all normal expenses of the Fund other than
taxes, fees and other charges of governmental agencies (including State and
Federal registration fees), dues, interest, brokerage commissions, fees for
pricing services, custodian fees and any extraordinary costs, are paid to
Jones & Babson, Inc., an affiliated company. These fees are based on average
daily net assets of the Fund at the annual rate of 95/100 of 1% (0.95%).
A partnership formed by David L. Babson & Co. Inc. and Stewart Ivory &
Company, Ltd. is the investment counsel of the Fund. The investment counsel
of the Fund is compensated by Jones & Babson, Inc. at an annual rate of
475/1000 of 1% (0.475%) of the average daily total net assets of the Fund.
Certain officers and/or directors of the Fund are also officers and/or
directors of Jones & Babson, Inc., David L. Babson & Co. Inc. and/or Stewart
Ivory & Company, Ltd.
4. RECLASSIFICATION OF UNDISTRIBUTED NET
INVESTMENT INCOME:
During the year ended June 30, 1995, $13,889 was reclassified from capital
stock to undistributed net investment income. Net investment income and net
assets were not affected by this change.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
The following table sets forth information as to capital and income changes
for a share outstanding for each of the five years in the period ended
June 30, 1995:
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $16.41 $13.97 $13.68 $11.65 $13.18
Income from investment operations:
Net investment income 0.16 0.05 0.11 0.13 0.13
Net gains or losses on securities and
foreign currency transactions
(both realized and unrealized) 0.23 3.01 0.30 2.03 (1.39)
Total from Investment Operations 0.39 3.06 0.41 2.16 (1.26)
Less distributions:
Dividends from net investment income (0.17) (0.04) (0.09) (0.13) (0.12)
Distributions from capital gains (0.67) (0.58) (0.03) _* (0.15)
Total Distributions (0.84) (0.62) (0.12) (0.13) (0.27)
Net asset value, end of year $15.96 $16.41 $13.97 $13.68 $11.65
Total Return 3% 22% 3% 19% (10%)
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 65 $ 47 $ 32 $ 18 $ 12
Ratio of expenses to average net assets 1.30% 1.32% 1.57% 1.58% 1.75%
Ratio of net investment income to average
net assets 1.13% 0.34% 0.88% 1.16% 1.10%
Portfolio turnover rate 37% 60% 49% 44% 52%
</TABLE>
*Capital gain distribution of .0003 not significant for per share table.
See accompanying Notes to Financial Statements.
<PAGE>
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Babson-Stewart Ivory International Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the statement of net assets, of Babson-Stewart Ivory International
Fund, Inc. (a Maryland corporation), as of June 30, 1995, and the related
statement of operations for the year then ended, the statements of changes
in net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and the financial highlights. Our procedures
included confirmation of securities owned as of June 30, 1995, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement and the
financial highlights presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
the Babson-Stewart Ivory International Fund, Inc. as of June 30, 1995, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Kansas City, Missouri
August 4, 1995
This report has been prepared for the information of the Shareholders of
Babson-Stewart Ivory International Fund, Inc., and is not to be construed as
an offering of the shares of the Fund. Shares of this Fund and of the other
Babson Funds are offered only by the Prospectus, a copy of which may be
obtained from Jones & Babson, Inc.
