BABSON
STEWART IVORY
INTERNATIONAL
FUND
Annual Report
December 31, 1997
JONES & BABSON
MUTUAL FUNDS
MESSAGE
TO OUR SHAREHOLDERS
At December 31, 1997, the net asset value of shares of Babson-Stewart
Ivory International Fund was $17.68, which represents a total return
(price change and reinvested distributions) of -4.33% for the previous
six months, and 1.75% for the calendar year. Comparisons against the
unmanaged Morgan Stanley Capital International (MSCI) EAFE and other
indices are as follows:
Investment Results - Total Return
Periods Ended 12/31/97
Fourth Quarter Previous Twelve
1997 Months
BSIIF -5.21% 1.75%
MSCI EAFE* Index** -7.77% 2.05%
MSCI World Index** -2.36% 16.24%
S&P 500 Index** 2.87% 33.35%
Lipper International Funds
(avg. funds 489 and
426, respectively) -7.67% 5.49%
*Europe, Australia, Far East
**unmanaged
The Fund's average annual compounded total returns for five and ten year
periods as of December 31, 1997, were 11.95% and 8.99%, 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.
New holdings were established in the following securities over the six
month period: L'Oreal (cosmetics) in France, Bayerische Vereinsbank
(banking), Fresenius (pharmaceuticals, medical equipment), Mannesmann
(telecoms and engineering) and SAP (computer software) in Germany,
Credito Italiano (financial services) and Telecom Italia (telecoms) in
Italy, Circle K (convenience stores), Fuji Photo (film), Rohm
(electronic components), Suzuki (cars, motorcycles) in Japan, Kimberly
Clark de Mexico (paper products) in Mexico, Philips (electronics) in the
Netherlands, LUKoil (oil) in Russia, Nordbanken Holding (Swedish/Finnish
banking) in Sweden, Cattles (consumer loans), Northern Rock (mortgage
bank), Scottish & Newcastle (brewing, hotels and leisure), Shell (oil
major) and Smiths Industries (instrumentation) in the UK.
Portfolio eliminations included: Quinsa (Argentina), Carrefour and Spir
(France), Buderus (Germany), Cheung Kong and New World Development (Hong
Kong), Industrie Natuzzi (Italy), Canon Sales, Denso, Jusco, NGK Spark
Plug, NEC, Rinnai and Shimamura (Japan), Cifra (Mexico), Polygram
(Netherlands), UIC and United Overseas Land (Singapore), Astra and
Ericsson (Sweden) and Adecco (Switzerland).
Economic Overview
The turmoil in Asia has been the main focus in the quarter, casting
doubt on other emerging economies and reinforcing the safe haven status
of North America and Europe. The crisis has probably reduced the
prospect of a rise in U.S. interest rates, and in the event of a
slowdown in Asian growth, an influx of cheap Asian imports into Western
markets may further help to reduce inflationary pressures. At an industry and
company level the effect may be less benign, with the prospect of Asian
order cancellations, excess inventories and possible dumping of Asian
goods in Western markets.
In Europe, the progress towards monetary union in 1999
continues as a dominant theme. Real GDP growth continues to strengthen,
led by consumption and exports, with estimates of around 2.5% for the
European union in 1997, compared with 1.6% in 1996. The tightening of
interest rates led by the Bundesbank in October may reduce growth in the
short term, but further acceleration is expected in 1998, although the
much higher 3.5% rate of growth in the UK is expected to slacken. Stock
markets continue to be encouraged by
corporate activity in anticipation of the opportunities offered by
European Monetary Union, and by positive trends in
corporate earnings.
The Japanese government's forecast of 1.9% GDP growth in 1998 is widely
discounted, with minimal growth expected and with recognition that the
economy may already be back in recession. Besides facing stagnant consumption,
Japan's economy is more heavily exposed than either the U.S. or Europe to
other Asian markets, and faces disruption to its own exports, which has been
a recent bright spot. High profile bankruptcies and the announcement of
financial industry support measures may indicate that a solution to the
banking crisis is in sight, and markets are now looking for a significant
stimulative package to lift the economy out of recessions, with pressure
being applied on Japan by other G-7 countries to play its part in containing
the Asian crisis.
Within Asia the currency and market falls have increased the risks at
both the industry and company levels, with the threat of major
bankruptcies and debt moratoria if the crisis is not successfully
addressed. In consequence of downgraded estimates for Asia and Japan in
1998, economic growth forecasts generally have been reduced from around 3%
to below 2.5%. Although further downward adjustment is possible, most
observers do not foresee that the Asian crisis will transform an economic
slowdown into a full-scale world recession.
Summary and Conclusion
With a bias in favor of the major developed markets, the Fund is
reasonably well placed to withstand the traumatic events in Asia during
the last quarter. In many cases good quality companies have suffered
excessively from the overall market decline, and the present turbulent
conditions could present attractive long-term buying opportunities in Asia
and elsewhere.
Thank you for your continuing interest in Babson-Stewart Ivory
International Fund.
Sincerely,
/s/Larry D. Armel
Larry D. Armel
President
STATEMENT OF NET ASSETS
December 31, 1997 (unaudited)
SHARES COMPANY AND DESCRIPTION MARKET VALUE
COMMON STOCKS - 96.43%
ARGENTINA - 0.25%
17,925 Quilmes
(Brewing) $ 245,348
AUSTRALIA - 2.06%
55,000 Brambles
(Transport, plant services) 1,091,518
47,500 Lend Lease
(Real estate) 928,744
2,020,262
BELGIUM - 1.30%
2,500 Colruyt
(Food retailer) 1,276,956
CHILE - 1.88%
70,000 Andina
(Coca-Cola franchisee) 1,360,625
42,000 Quinenco
(Holding company) 483,000
1,843,625
DENMARK - 1.90%
13,000 Novo Nordisk
(Pharmaceuticals) 1,859,338
FRANCE - 5.33%
2,500 Comptoirs Modernes
(Food retailer) 1,279,389
6,000 Guilbert
(Office supplies, paper) 855,362
2,500 L' Oreal
(Cosmetics) 978,234
5,000 SEB
(Electrical appliances) 697,017
13,000 Total
(Oil major) 1,414,804
5,224,806
GERMANY - 8.77%
19,700 Bayerische Vereinsbank
(Banking) 1,288,913
6,500 Fresenius
(Pharmaceuticals, medical equipment) 1,195,975
1,680 Linde
(Engineering) 1,025,398
2,500 Mannesmann
(Telecoms and engineering) 1,263,237
3,000 SAP
(Computer software) 981,406
40,000 SKW Trostberg
(Chemicals) 1,269,630
23,000 Veba
(Utility) 1,566,191
8,590,750
HONG KONG - 7.76%
3,071,625 CDL Hotels
(Regional hotel group) 931,516
414,000 Dickson Concepts
(Retailing) 603,717
1,700,000 Gold Peak
340,000 wts. (Batteries) 975,377
356,000 Johnson Electric
(Micro-motors) 1,024,493
820,000 Shaw Bros.
(T.V. network, film production and distribution) 608,466
1,300,000 South China Morning Post
(Publishing) 914,312
880,000 Swire Pacific
(Airline, trading, property) 891,470
560,000 V-Tech
(Electronic toys) 1,651,310
7,600,661
HUNGARY - 1.60%
13,500 Gedeon Richter
(Pharmaceuticals) 1,569,375
IRELAND - 1.08%
100,000 Kerry Group
(Food manufacturer) 1,059,413
ITALY - 3.97%
500,000 Credito Italiano
(Financial services) 1,541,832
22,800 Luxottica
(Eyeglass frames) 1,425,000
200,000 Telecom Italia
(Telecoms) 923,120
3,889,952
JAPAN - 17.00%
54,000 Bank of Tokyo-Mitsubishi
(City bank) 744,428
29,000 Bridgestone
(Tires) 628,552
12,200 Circle K
(Convenience stores) 583,978
17,000 Fuji Photo
(Film) 650,992
19,000 Hirose
(Electronic connectors) 970,590
16,000 Hoya
(Optical/electronic products) 502,412
7,700 Keyence
(Sensors) 1,138,163
37,300 Kurita Water
(Water treatment equipment) 379,942
86,000 Mitsubishi Trust
(Trust bank) 862,832
10,000 Nichiei
(Consumer finance) 1,064,563
166 Nippon Telegraph & Telephone
(Telecommunications) 1,423,910
36,000 Omron
(Industrial controls) 562,457
18,700 Promise
(Consumer lending) 1,036,900
69,000 Ricoh
(Office automation equipment) 856,092
2,000 Rohm
(Electronic components) 203,722
300 Santen Pharmaceutical
(Ophthalmic drugs) 3,446
11,000 Sony
(Consumer electronics) 977,254
49,000 Sumitomo Electric Industries
(Electric wire & cables) 667,994
124,000 Suzuki
(Cars, motorcycles) 1,120,625
43,000 Takeda
(Pharmaceuticals, chemicals) 1,225,090
14,000 TDK
(Electronic components) 1,055,066
16,659,008
KOREA - 0.84%
15,248 Samsung Electronics
(Semiconductors) 87,846
113,300 SK Telecom
(Cellular phone network) 736,450
824,296
MALAYSIA - 0.58%
400,000 Perlis Plantations
(Trading, mining, agriculture) 565,625
MEXICO - 0.55%
23,000 Kimberly Clark de Mexico
(Paper products) 540,500
NETHERLANDS - 6.35%
45,000 Ahold
(Supermarkets) 1,174,019
25,000 ING Group
(Financial services) 1,052,943
45,000 Nutricia
(Processed food) 1,364,880
18,000 Philips
(Electronics) 1,079,476
12,000 Wolters Kluwer
(Publisher) 1,549,972
6,221,290
PHILIPPINES - 0.26%
100,800 Benpres
(Infrastructure-related holding company) 252,720
PORTUGAL - 1.07%
13,200 Jeronimo Martins
19,800 rts. (Food distributors) 1,047,107
RUSSIA - 0.78%
8,300 LUKoil
(Oil) 759,450
SINGAPORE - 1.24%
500,000 Haw Par Brothers
17,000 wts. (Diversified manufacturing & services) 650,727
120,000 Robinson
(Department store) 427,173
274,000 Trans-Island Bus Services
(Bus transport) 138,178
1,216,078
SPAIN - 1.43%
20,000 Banco Popular
(Banking) 1,398,096
SWEDEN - 2.27%
25,600 Hennes & Mauritz
(Retailing) 1,128,478
193,600 Nordbanken Holding
(Swedish/Finnish banking) 1,094,805
2,223,283
SWITZERLAND - 6.03%
13,000 Ciba Specialty
(Specialty chemicals) 1,548,043
1,000 Novartis
(Pharmaceuticals and chemicals) 1,625,376
2,500 Phoenix Mecano
(Customized electric casings) 1,240,419
150 Roche
(Pharmaceuticals) 1,489,016
5,902,854
UNITED KINGDOM - 22.13%
140,000 Alumasc
(Engineering) 528,885
86,000 Argos
(Mail order, retail) 776,196
151,000 Bowthorpe
(Electronics components, instruments) 930,066
108,000 British Sky Broadcasting
(Satellite TV broadcasting) 808,898
125,000 Cattles
(Consumer loans) 831,516
122,000 Electrocomponents
(Electronics) 907,744
82,000 Granada
(Hotels, leisure) 1,252,571
96,000 Hays
(Business services) 1,278,044
129,000 Lloyds TSB
(Banking) 1,678,237
136,000 Marks & Spencer
(Retail) 1,344,949
442,000 Morrison Supermarkets
(Supermarkets) 1,669,766
120,000 Northern Rock
(Mortgage bank) 1,176,687
136,000 Reed International
(Publishing) 1,295,604
112,000 Scottish & Newcastle
(Brewing, hotels and leisure) 1,371,422
162,000 Shell
(Oil major) 1,136,183
148,774 SmithKline Beecham
(Pharmaceuticals) 1,533,367
57,000 Smiths Industries
(Instrumentation) 793,919
83,000 Spirax-Sarco Engineering
(Steam controls) 779,793
220,000 Vodafone
(Cellular telephone network) 1,589,940
21,683,787
TOTAL COMMON STOCKS - 96.43% 94,474,580
Short-Term Investments - 4.52% 4,430,891
TOTAL INVESTMENTS - 100.95% $ 98,905,471
Other assets less liabilities - (0.95%) (930,821)
TOTAL NET ASSETS - 100.00%
(equivalent to $17.68 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
5,541,459 shares outstanding) $ 97,974,650
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1997 (unaudited)
ASSETS:
Investments, at market value (identified cost $82,958,305) $ 98,905,471
Cash (944,619)
Dividends receivable 57,682
Interest receivable 489
Foreign tax receivable 71,667
Total assets 98,090,690
LIABILITIES AND NET ASSETS:
Accrued expenses 106,516
Foreign tax withholding liability 9,524
Total liabilities 116,040
NET ASSETS $ 97,974,650
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 83,220,734
Accumulated undistributed income (loss):
Undistributed net investment income (83,250)
Accumulated net realized loss from investments and
foreign currency transactions (1,107,141)
Net unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 15,944,307
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 97,974,650
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 5,541,459
NET ASSET VALUE PER SHARE $ 17.68
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six Months Ended December 31, 1997 (unaudited)
INVESTMENT INCOME:
Income:
Dividends (net of foreign taxes withheld) $ 556,818
Interest 75,489
Foreign exchange loss (109,571)
522,736
Expenses:
Management fees (Note 3) 496,152
Custodian fees 117,130
Registration fees -
613,282
Net investment income loss (90,546)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY (Note 1):
Net realized gain (loss) from:
Investment transactions 5,757,123
Foreign currency transactions (1,851,989)
Net increase (decrease) in unrealized appreciation on:
Investments (8,521,259)
Translation of assets and liabilities in foreign currencies 1,807
Net loss on investments and foreign currency (4,614,318)
Decrease in net assets resulting from operations $ (4,704,864)
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30,
(UNAUDITED) 1997
</CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ (90,546) $ 425,516
Net realized gain from investments and
foreign currency transactions 3,905,134 1,705,229
Net increase (decrease) in unrealized appreciation
on investments and translation of assets and
liabilities in foreign currencies (8,519,452) 7,320,962
Net increase (decrease) in net assets resulting
from operations (4,704,864) 9,451,707
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (133,766) (284,454)
Net realized gain from investment transactions (5,120,557) (1,107,773)
Total distributions to shareholders (5,254,323) (1,392,227)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 894,376 and 2,901,266 shares sold 17,042,733 52,703,314
Net asset value of 253,233 and 67,664 shares issued for
reinvestment of distributions 4,426,516 1,250,169
21,469,249 53,953,483
Cost of 1,269,995 and 1,753,176 shares redeemed (24,167,773) (31,634,433)
Net increase (decrease) from capital share transactions (2,698,524) 22,319,050
Total increase (decrease) in net assets (12,657,711) 30,378,530
NET ASSETS:
Beginning of period 110,632,361 80,253,831
End of period (including undistributed net
investment income of ($83,250) and
$141,062, respectively) $ 97,974,650 $ 110,632,361
*Distributions to shareholders:
Income dividends per share $ .025 $ .050
Capital gains distribution per share $ .957 $ .230
</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 exdividend 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 period ended December
31, 1997, were as follows:
Purchases $ 24,562,994
Proceeds from sales 31,256,814
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.
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
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
816-751-5900
1-800-4-BABSON
(1-800-422-2766)
http://www.jbfunds.com
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000823338
<NAME> BABSON-STEWART IVORY INTERNATIONAL FUND INC
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 82958305
<INVESTMENTS-AT-VALUE> 98905471
<RECEIVABLES> 58171
<ASSETS-OTHER> (944,619)
<OTHER-ITEMS-ASSETS> 71667
<TOTAL-ASSETS> 98090690
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 116040
<TOTAL-LIABILITIES> 116040
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 83220734
<SHARES-COMMON-STOCK> 5541459
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (83250)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1107141)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15944307
<NET-ASSETS> 97974650
<DIVIDEND-INCOME> 556818
<INTEREST-INCOME> 75489
<OTHER-INCOME> (109571)
<EXPENSES-NET> 613282
<NET-INVESTMENT-INCOME> (90546)
<REALIZED-GAINS-CURRENT> 3905134
<APPREC-INCREASE-CURRENT> (8519452)
<NET-CHANGE-FROM-OPS> (4704864)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 133776
<DISTRIBUTIONS-OF-GAINS> 5120557
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 894376
<NUMBER-OF-SHARES-REDEEMED> 1269995
<SHARES-REINVESTED> 253233
<NET-CHANGE-IN-ASSETS> (12657711)
<ACCUMULATED-NII-PRIOR> 141062
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 496152
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 613282
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .025
<PER-SHARE-DISTRIBUTIONS> .957
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.68
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
