BABSON
STEWART IVORY
INTERNATIONAL
FUND
Annual Report
June 30, 1997
JONES & BABSON
MUTUAL FUNDS
MESSAGE
TO OUR SHAREHOLDERS
At June 30, 1997, the net asset value of Babson-Stewart Ivory International
Fund was $19.53, representing a total return (price change and reinvested
distributions) of 10.31% for the quarter, and 9.91% 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 6/30/97
Second Quarter Previous Twelve
1997 Months
BSIIF 10.31% 9.91%
MSCI EAFE* Index** 13.06% 13.15%
MSCI World Index** 15.20% 22.80%
S&P 500 Index** 17.44% 34.68%
Lipper International Funds
(avg. 446 funds) 11.05% 16.54%
*Europe, Australia, Far East
**unmanaged
The portfolio's overall performance was behind the benchmark index during the
quarter, mainly as a consequence of an underweighted position in Japan, which
showed the strongest move among the major markets (assisted by the 8.2%
recovery in the yen). Our above indexed Southeast Asia weighting, combined
with the Japanese position, adversely affected the overall Pacific portfolio.
Performance was below the index in the UK, where a narrow list of leading
stocks has dominated the market. Portfolio performance was ahead of the index
in Continental Europe and in Latin America.
Global economic expansion remains around the 3% level, with only minor
inflationary pressures, creating a benign stock market climate in most
countries. Growth rates are moving towards greater synchronization within the
developed economies. Europe and Japan are showing improvement, while the U.S.,
for the present maintaining its recent rate of expansion, could be expected to
experience some slowdown later in the year. Interest rates were raised by
0.25% in the U.S. in March and have also risen in Canada and the UK. Some
further tightening in North America and Europe is expected in the next six
months, with similar moves also possible in Japan. There the economic recovery
is at a less advanced stage, but fiscal pressures may also dictate some degree
of tightening.
The unexpected left-wing victory in the French general election in May has
cast doubts on the timetable for European Monetary Union and, specifically, on
France's willingness to adopt the stringent budgetary measures necessary to
qualify for membership. Similar pressures for relaxation of the entry criteria
for Germany suggests that a "soft" version of the EMU may be the outcome, or
that deadlines may be extended.
The emerging economies in Southeast Asia have fallen victim to currency
instability, with an earlier devaluation in Thailand, and one in the
Philippines since the end of the quarter. With the exception of the Czech
Republic, which also devalued, Eastern Europe and Latin America have remained
generally unaffected. Unlike the 1994-95 situation in Mexico and Latin
America, economic conditions in Thailand and Southeast Asia seem unlikely to
result in a prolonged crisis; and the currency adjustments have been fairly
well received and are unlikely to damage long-term confidence in the region.
With business conditions broadly favorable, equity markets have been mainly
influenced by the prospects for earnings growth, restructuring and corporate
activity, with large cap market leaders generally outperforming their smaller
counterparts. A broadening of market interests to include smaller companies
has been noticeable since May, particularly in the U.S., and is likely to
extend into the rest of the year. This trend is based on relative valuation
criteria, which now favor the smaller companies, and is contingent on their
present earnings progress being maintained. Larger companies continue to
attract major investor interest because of greater liquidity, and we have
added selectively in areas such as financial services, where the portfolio was
previously under represented. This has had the effect of raising the average
market capitalization of the Fund.
Thank you for your continuing interest in Babson-Stewart Ivory International
Fund.
Sincerely,
/S/Larry D. Armel
Larry D. Armel
President
GRAPH - Babson-Stewart Ivory International Fund versus Morgan Stanley Capital
International EAFE Index
Babson-Stewart Ivory International Fund's average annual componded returns
for one, five and life of the Fund (inception December 7, 1987) as of
June 30, 1997, were 9.91%, 10.94% and 9.95%, 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, redemption value may be more or less than
original cost.
STATEMENT OF NET ASSETS
June 30, 1997
SHARES COMPANY AND DESCRIPTION COST MARKET VALUE
COMMON STOCKS - 95.64%
ARGENTINA - 0.63%
63,550 Quilmes
(Brewing) $ 737,833 $ 700,681
AUSTRALIA - 2.90%
95,469 Brambles
(Transport, plant services) 925,171 1,889,699
62,406 Lend Lease
(Real estate) 660,971 1,320,573
1,586,142 3,210,272
BELGIUM - 1.28%
2,900 Colruyt
(Food retailer) 638,927 1,414,536
CHILE - 1.94%
76,000 Andina
(Coca-Cola franchisee) 1,271,197 1,607,875
29,000 Quinenco*
(Holding company) 522,000 536,500
1,793,197 2,144,375
DENMARK - 0.99%
10,000 Novo Nordisk
(Pharmaceuticals) 1,105,404 1,090,378
FRANCE - 7.72%
2,700 Carrefour
(Food retailer) 720,781 1,960,896
3,500 Comptoirs Modernes
(Food retailer) 822,380 1,846,274
9,000 Guilbert
(Office supplies, paper) 738,857 1,274,184
7,000 SEB
(Electrical appliances) 621,060 1,226,879
12,000 Spir
(Newssheets) 1,138,521 921,946
13,000 Total
(Oil major) 1,230,904 1,314,003
5,272,503 8,544,182
GERMANY - 4.80%
2,500 Buderus
(Heating systems) 1,228,990 1,376,068
1,680 Linde
(Engineering) 880,856 1,285,935
40,000 SKW Trostberg
(Chemicals) 1,334,360 1,350,840
23,000 Veba
(Utility) 1,288,788 1,292,357
4,732,994 5,305,200
HONG KONG - 10.13%
3,071,625 CDL Hotels
(Regional hotel group) 1,288,117 1,248,902
125,000 Cheung Kong
(Property) 1,080,137 1,234,301
344,000 Dickson Concepts
(Retailing ) 1,270,028 1,252,152
1,700,000 Gold Peak
(Batteries) 630,649 1,097,156
370,000 Johnson Electric
(Micro-motors) 824,701 1,103,223
160,000 New World Development
(Property) 1,026,429 954,139
820,000 Shaw Bros.
(T.V. network, film production
and distribution) 981,919 920,837
1,435,000 South China Morning Post
(Publishing) 847,085 1,407,716
880,000 Swire Pacific
(Airline, trading, property) 1,264,244 1,334,659
347,000 V-Tech
(Electronic toys) 631,013 653,931
9,844,322 11,207,016
HUNGARY - 1.12%
13,500 Gedeon Richter
(Pharmaceuticals) 789,647 1,242,000
IRELAND - 0.87%
100,000 Kerry Group
(Food manufacturer) 560,245 962,544
ITALY - 2.44%
22,800 Luxottica
(Eyeglass frames) 822,872 1,546,125
45,000 Industrie Natuzzi
(Furniture manufacturer) 999,234 1,153,125
1,822,106 2,699,250
JAPAN - 23.04%
54,000 Bank of Tokyo-Mitsubishi
(City bank) 975,913 1,083,581
29,000 Bridgestone
(Tires) 517,434 673,007
33,000 Canon Sales
(Distribution of Canon products) 700,687 768,714
37,000 Denso
(Auto components) 805,041 884,488
19,000 Hirose
(Electronic connectors) 1,072,543 1,302,914
16,000 Hoya
(Optical/electronic products) 384,836 711,918
41,000 Jusco
(Supermarkets) 1,466,618 1,384,313
7,700 Keyence
(Sensors) 614,030 1,142,035
37,300 Kurita Water
(Water treatment equipment) 958,325 992,541
86,000 Mitsubishi Trust
(Trust bank) 1,238,080 1,358,053
73,000 NEC
(Integrated electronics) 865,562 1,019,019
69,000 NGK Spark Plug
(Spark plugs, ceramic packaging) 587,369 752,487
12,000 Nichiei
(Consumer finance) 791,438 1,392,427
166 NTT
(Telecommunications) 1,393,993 1,593,090
36,000 Omron
(Industrial controls) 630,542 763,218
17,000 Promise
(Consumer lending) 778,237 972,954
99,000 Ricoh
(Office automation equipment) 1,098,198 1,295,585
26,400 Rinnai
(Gas appliances) 689,384 566,603
36,300 Santen Pharmaceutical
(Ophthalmic drugs) 775,578 731,574
21,000 Shimamura
(Womenswear retailing) 735,457 747,514
15,000 Sony
(Consumer electronics) 854,252 1,307,364
71,000 Sumitomo Electric Industries
(Electric wire & cables) 977,196 1,189,321
65,000 Takeda
(Pharmaceuticals, chemicals) 1,153,692 1,826,034
14,000 TDK
(Electronic components) 834,068 1,027,220
20,898,473 25,485,974
KOREA - 1.37%
15,000 Samsung Electronics
(Semiconductors) 544,817 405,000
110,000 SK Telecom*
(Cellular phone network) 1,029,739 1,106,875
1,574,556 1,511,875
MALAYSIA - 1.06%
400,000 Perlis Plantations
(Trading, mining, agriculture) 869,156 1,172,742
MEXICO - 0.83%
502,000 Cifra
(Department stores) 576,913 916,150
NETHERLANDS - 6.26%
20,000 Ahold
(Supermarkets) 1,161,479 1,687,299
25,000 ING Group
(Financial services) 1,055,952 1,152,631
9,000 Nutricia
(Processed food) 711,398 1,421,366
23,000 Polygram
(Recorded music) 1,070,500 1,206,888
12,000 Wolters Kluwer
(Publisher) 858,073 1,461,103
4,857,402 6,929,287
PHILIPPINES - 0.38%
60,000 Benpres*
(Infrastructure-related holding
company) 456,000 420,000
PORTUGAL - 0.83%
13,200 Jeronimo Martins
(Food distributors) 715,842 922,073
SINGAPORE - 2.83%
500,000 Haw Par Brothers*
17,000 wts. (Diversified manufacturing
& services) 1,137,191 1,140,617
100,000 Robinson
(Department store) 427,542 521,088
137,000 Trans-Island Bus Services
(Bus transport) 142,899 185,899
1,400,000 Utd Industrial*
(Real estate) 1,293,806 1,057,565
160,000 United Overseas Land
16,000 wts. (Real estate) 240,359 225,782
3,241,797 3,130,951
SPAIN - 1.33%
6,000 Banco Popular
(Banking) 1,080,738 1,469,969
SWEDEN - 3.41%
53,333 Astra `A' Free
(Pharmaceuticals) 594,240 992,819
35,000 Ericsson
(Telecom equipment) 1,188,066 1,377,739
40,000 Hennes & Mauritz
(Retailing) 705,006 1,406,503
2,487,312 3,777,061
SWITZERLAND - 6.24%
3,250 Adecco
(Employment agencies) 1,222,709 1,246,575
10,000 Ciba Specialty*
(Specialty chemicals) 849,404 924,658
1,300 Novartis
(Pharmaceuticals and chemicals) 675,498 2,076,438
2,500 Phoenix Mecano
(Customized electric casings) 698,278 1,301,370
150 Roche
(Pharmaceuticals) 1,332,252 1,356,678
4,778,141 6,905,719
UNITED KINGDOM - 13.24%
140,000 Alumasc
(Engineering) 811,879 582,855
101,133 Argos
Mail order, retail) 763,812 917,872
151,000 Bowthorpe
(Electronics components,
instruments) 786,376 812,217
108,000 British Sky Broadcasting
(Satellite TV broadcasting) 548,204 798,186
152,000 Electrocomponents
(Electronics) 584,726 1,131,472
53,000 Granada
(Hotels, leisure) 321,156 697,262
126,000 Hays
(Business services) 548,961 1,196,019
104,000 Lloyds TSB
(Banking) 874,312 1,068,590
136,000 Marks & Spencer
(Retail) 893,992 1,127,875
442,000 Morrison Supermarkets
(Supermarkets) 944,967 1,155,619
136,000 Reed International
(Publishing) 1,030,971 1,313,590
74,387 SmithKline Beecham
(Pharmaceuticals) 609,696 1,369,458
83,000 Spirax-Sarco Engineering
(Steam controls) 997,039 946,807
313,000 Vodafone
(Cellular telephone network) 1,202,997 1,527,231
10,919,088 14,645,053
TOTAL COMMON STOCKS - 95.64% 81,338,738 105,807,288
Short-Term Investments - 3.84% 4,248,371 4,248,245
TOTAL INVESTMENTS - 99.48% $ 85,587,109 110,055,533
Other assets less liabilities - 0.52% 576,828
TOTAL NET ASSETS - 100.00%
(equivalent to $19.53 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
5,663,845 shares outstanding) $110,632,361
For federal income tax purposes, the identified cost of investments owned at
June 30, 1997, was $87,167,536.
Net unrealized appreciation for federal income tax purposes was $22,887,997,
which is comprised of unrealized appreciation of $24,427,439 and unrealized
depreciation of $1,539,442.
*Securities on which no cash dividends were paid during the preceding year.
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1997
ASSETS:
Investments, at market value
(identified cost $85,587,109) $110,055,533
Cash 608,773
Receivable for investments sold 1,451,039
Dividends receivable 224,650
Interest receivable 459
Foreign tax receivable 105,095
Total assets 112,445,549
LIABILITIES AND NET ASSETS:
Payable for investments purchased 1,699,829
Accrued expenses 85,820
Foreign tax withholding liability 27,539
Total liabilities 1,813,188
NET ASSETS $110,632,361
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 85,919,259
Accumulated undistributed income (loss):
Undistributed net investment income 141,062
Accumulated net realized gain from
investments and
foreign currency transactions 597,456
Accumulated distributions in excess of
realized capital gains (489,174)
Net unrealized appreciation on investments
and translation of assets and
liabilities in foreign currencies 24,463,758
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $110,632,361
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 5,663,845
NET ASSET VALUE PER SHARE $ 19.53
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year Ended June 30, 1997
INVESTMENT INCOME:
Income:
Dividends (net of foreign taxes withheld) $ 1,441,707
Interest 123,479
Foreign exchange loss (64,134)
1,501,052
Expenses:
Management fees (Note 3) 857,963
Custodian fees 213,583
Registration fees 3,990
1,075,536
Net investment income 425,516
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY (Note 1):
Net realized gain (loss) from:
Investment transactions 3,738,484
Foreign currency transactions (2,033,255)
Net increase (decrease) in unrealized
appreciation on:
Investments 7,322,764
Translation of assets and liabilities
in foreign currencies (1,802)
Net gain on investments and foreign currency 9,026,191
Increase in net assets resulting from operations $ 9,451,707
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
For The Two Years Ended June 30, 1997
<TABLE>
<CAPTION>
1997 1996
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 425,516 $ 313,607
Net realized gain from investments and
foreign currency transactions 1,705,229 2,762,741
Net increase (decrease) in unrealized
appreciation on investments and
translation of assets and liabilities
in foreign currencies 7,320,962 9,121,455
Net increase in net assets resulting from operations 9,451,707 12,197,803
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (284,454) (369,958)
Net realized gain from investment transactions (1,107,773) (2,714,605)
Distributions in excess of realized capital gains - (461,885)
Total distributions to shareholders (1,392,227) (3,546,448)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 2,901,266 and
2,725,430 shares sold 52,703,314 46,635,073
Net asset value of 67,664 and
184,344 shares issued for
reinvestment of distributions 1,250,169 3,197,123
53,953,483 49,832,196
Cost of 1,753,176 and 2,513,447 shares redeemed (31,634,433) (42,876,619)
Net increase from capital share transactions 22,319,050 6,955,577
Total increase in net assets 30,378,530 15,606,932
NET ASSETS:
Beginning of year 80,253,831 64,646,899
End of year (including undistributed
net investment income
of $141,062 in 1997 and ($24,638) in 1996) $ 110,632,361 $ 80,253,831
*Distributions to shareholders:
Income dividends per share $ .050 $ .092
Capital gains distribution per share $ .230 $ .748
</TABLE>
See accompanying Notes to Financial Statements.
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 financial
statements have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and assumptions
at the date of the financial statements. 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. Unrealized appreciation
of certain foreign investments has resulted in distributions of taxable income
and are reflected in accumulated distributions in excess of realized capital
gains.
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.
Reclassifications - Certain reclassifications have been made to the prior
year financial statements to conform with current presentation.
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, 1997,
were as follows:
Purchases $ 54,232,825
Proceeds from sales 34,479,181
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.
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, 1997:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $18.04 $15.96 $16.41 $13.97 $13.68
Income from investment operations:
Net investment income 0.07 0.07 0.16 0.05 0.11
Net gains on securities and
foreign currency transactions
(both realized and unrealized) 1.70 2.85 0.23 3.01 0.30
Total from investment operations 1.77 2.92 0.39 3.06 0.41
Less distributions:
Dividends from net investment income (0.05) (0.08) (0.17) (0.04) (0.09)
Distributions from capital gains (0.23) (0.65) (0.67) (0.58) (0.03)
Distributions in excess of
realized capital gains - (0.11) - - -
Total distributions (0.28) (0.84) (0.84) (0.62) (0.12)
Net asset value, end of year $19.53 $18.04 $15.96 $16.41 $13.97
Total return 10% 19% 3% 22% 3%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 111 $ 80 $ 65 $ 47 $ 32
Ratio of expenses to average net assets 1.19% 1.26% 1.30% 1.32% 1.57%
Ratio of net investment income to
average net assets 0.47% 0.44% 1.13% 0.34% 0.88%
Portfolio turnover rate 40% 33% 37% 60% 49%
*Average commission paid per
equity share traded $.0242** - - - -
</TABLE>
*Disclosure required for fiscal years beginning after September 1, 1995.
**Represents total dollar amount of commissions paid on security transactions
divided by total number of security shares purchased and sold for which
commissions were paid.
See accompanying Notes to Financial Statements.
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 of
Babson-Stewart Ivory International Fund, Inc. (a Maryland corporation),
including the statement of net assets as of June 30, 1997, 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. Our procedures included confirmation of securities
owned as of June 30, 1997, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Babson-Stewart Ivory International Fund, Inc. as of June 30, 1997, 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
July 28, 1997
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.
EQUITIES
Growth Fund
Enterprise Fund*
Enterprise Fund II
Value Fund
Shadow Stock Fund
International Fund
FIXED INCOME
Bond Trust
Money Market Fund
Tax-Free Income Fund
* Closed to new investors.
JONES & BABSON
MUTUAL FUNDS
2440 Pershing Road
Kansas City, MO 64108-2561
816-471-5200
1-800-4-BABSON
(1-800-422-2766)
http://www.jbfunds.com
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</TABLE>
