Babson-
Stewart Ivory
International
Fund
Semiannual Report
December 31, 1998
MESSAGE
To Our Shareholders
At December 31, 1998, the net asset value of shares of Babson-Stewart Ivory
International Fund was $19.11, representing a total return (price change and
reinvested distributions) of 16.69% for the quarter and 13.30% 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 12/31/98
Fourth Quarter Previous Twelve
1998 Months
BSIIF 16.69% 13.30%
MSCI EAFE* Index** 20.76% 20.35%
MSCI World Index** 21.22% 24.79%
S&P 500 Index** 21.28% 28.58%
Lipper International Funds
(avg. funds 589 and
529, respectively) 16.46% 13.02%
*Europe, Australia, Far East
**unmanaged
The Fund's average annual compounded total returns for five and ten year
periods ended December 31, 1998, were 8.34% and 9.99%, 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.
Recent performance lagged the market rise in Europe and the Far East, which
was mainly paced by a recovery in the large cap and financial sectors, which
had suffered in the previous quarter. Continental markets remained dominated
by large cap stocks which are believed to be the prime beneficiaries of the
introduction of Euro. Although smaller companies are also likely to benefit
from greater exchange rate stability in the long run, the sentiment in favor
of larger companies in Europe seems likely to predominate in the near term.
We also lagged the recovery in the index in Asia, which mainly reflected the
rise in the Japanese yen (20.7%), and a recovery in depressed domestic stocks
in Japan and the Far East.
In the past six months new holdings were added in Nokia (telecom equipment)
in Finland; Valeo (automotive components) and Vivendi (diversified utilities)
in France; CBT (computer software) in Ireland; Assicurazioni Generali
(insurance) in Italy; Nintendo (electricals), Nippon Telegraph & Telephone
(telecommunications), Taiyo Yuden (electronic component manufacturer) and
Toshiba (electronic equipment) in Japan; Aegon (insurance) and Getronics
(support services) in the Netherlands; Overseas Union Enterprise (hotels and
property investment) in Singapore; Endesa (electric utility) and Telefonica
(telephone utility) in Spain; L.M. Ericsson (telecom equipment) in Sweden;
and BAA (airport operator), Boots (chemists), Cable & Wireless
(telecommunications) and Kingfisher (diversified retailing) in the UK.
Portfolio eliminations included Companhia Energetica de Minas (Brazil);
Andina and Quinenco (Chile); Linde, Veba, SKW Trostberg (Germany); Dickson
Concepts (Hong Kong); CBT (Ireland); Banca di Roma (Italy); Mitsubishi Trust,
Nippon Telegraph & Telephone, Ricoh and Rohm (Japan); SK Telecom (Korea);
Grupo Modelo and Kimberly Clark de Mexico (Mexico); Philips (the
Netherlands); LUKoil (Russia); Banco Santander (Spain); Phoenix Mecano
(Switzerland); Thai Farmers Bank (Thailand); and Granada (UK). The holding of
Comptoirs Modernes (France) was subject to a takeover offer by Carrefour, and
we exercised the option of taking cash.
Economic Overview
Global growth estimates have been revised downward since fall, with a
manufacturing slowdown now developing in the U.S. and Europe and continuing
recession in Japan and Asia. U.S. forecasts have been revised downward to
2.1% in 1999, although early indications suggest that the U.S. economy
remains stronger than these forecasts would imply. Growth in the Euro-11
group is also expected to decrease, from 2.8% in 1998 to 2.1% in 1999, with
the UK predicted to see a more pronounced reduction. Japan remains in
recession, with GDP expected to contract by 2.8% in 1998, and estimates for a
less severe decline in 1999.
Emerging markets remain under pressure from the continuing crisis in Russia,
with Brazil resurfacing in January as a source of renewed currency
instability in Latin America. By contrast, Asia has seen signs that the worst
may be over, with countries such as Korea and Thailand showing a return to
current account surplus and China showing stronger then expected levels of
growth in 1998.
The successful introduction of the Euro in January 1, 1999 has the effect of
eliminating exchange rate fluctuations between the eleven founder-members of
the European Monetary Union, creating a more stable background for
crossborder investment within Continental Europe.
Summary and Conclusion
Despite some concerns about long term structural problems, Western Europe
remains the principal focus of interest among international investors seeking
diversification from the U.S. With the arrival of the Euro, corporate
activity and financial restructuring among major European companies is
expected to continue to support stock market investment. Japan and Asia may
present interesting investment opportunities in 1999, provided that
governments can introduce the necessary reforms to enable them to emerge from
their current economic difficulties. The Brazilian crisis which came to a
head in January is a reminder that risks remain high in emerging
markets, and can have the potential to unsettle markets 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, 1998 (unaudited)
SHARES COMPANY AND DESCRIPTION MARKET VALUE
COMMON STOCKS - 96.89%
AUSTRALIA - 2.50%
55,000 Brambles
(Transport, plant services) $ 1,339,696
80,000 Lend Lease
(Real estate) 1,078,497
2,418,193
BELGIUM - 1.16%
1,350 Colruyt
(Food retailer) 1,124,674
CROATIA - 0.54%
32,000 Pliva
(Pharmaceuticals) 523,200
DENMARK - 3.18%
11,000 Novo Nordisk
(Pharmaceuticals) 1,451,849
12,000 TeleDanmark
(Telecoms) 1,619,660
3,071,509
FINLAND - 0.38%
3,000 Nokia
(Telecom equipment) 364,777
FRANCE - 8.81%
11,000 AXA-UAP
(Insurance, financial services) 1,593,633
4,000 Danone
(Food products) 1,144,697
2,000 LO Oreal
(Cosmetics) 1,445,180
6,000 St. Gobain
(Building materials) 846,718
13,000 Total
(Oil major) 1,316,044
13,000 Valeo
(Automotive components) 1,024,003
4,400 Vivendi
(Diversified utilities) 1,141,120
8,511,395
GERMANY - 5.04%
15,000 Bayerische Vereinsbank
(Banking) 1,174,547
6,500 Fresenius
(Pharmaceuticals, medical equipment) 1,368,955
14,000 Mannesmann
(Telecoms and engineering) 1,604,464
1,500 SAP
(Computer software) 715,709
4,863,675
HONG KONG - 3.09%
2,200,000 CDL Hotels
(Regional hotel group) 565,078
1,700,000 Gold Peak
(Batteries) 482,730
2,200,000 Shaw Bros.
(T.V. network, film production and
distribution) 951,262
230,000 V-Tech
(Electronic learning aids) 985,596
2,984,666
HUNGARY - 0.70%
16,000 Gedeon Richter
(Pharmaceuticals) 676,800
IRELAND - 2.04%
70,000 Irish Life
(Insurance) 657,942
100,000 Kerry Group
(Food manufacturer) 1,312,510
1,970,452
ITALY - 6.81%
28,000 Assicurazioni Generali
(Insurance) 1,168,466
250,000 Credito Italiano
(Financial services) 1,480,994
114,000 Luxottica
(Eyeglass frames) 1,368,000
320,000 Telecom Italia
(Telecoms) 2,556,473
6,573,933
JAPAN - 14.34%
29,000 Bridgestone
(Tires) 657,983
13,400 Circle K
(Convenience stores) 589,102
17,000 Fuji Photo
(Film) 631,579
18,000 Ito-Yokado
(Supermarket chain) 1,257,851
300 Kurita Water
(Water treatment equipment) 4,400
16,000 Matsushita Communication
(Industrial electronics) 754,356
8,800 Nintendo
(Electricals) 852,366
23 Nippon Telegraph & Telephone
(Telecommunications) 946,042
88,000 Olympus Optical
(Precision instruments, cameras) 1,011,163
18,700 Promise
(Consumer lending) 972,632
300 Santen Pharmaceutical
(Ophthalmic drugs) 5,759
11,000 Sony
(Consumer electronics) 800,796
53,000 Suzuki
(Cars, motorcycles) 628,218
60,000 Taiyo Yuden
(Electronic component manufacturer) 710,128
29,000 Takeda
(Pharmaceuticals, chemicals) 1,115,878
14,000 TDK
(Electronic components) 1,279,257
40,000 Terumo
(Medical equipment) 941,176
117,000 Toshiba
(Electronic equipment) 696,515
13,855,201
MALAYSIA - 0.43%
400,000 Perlis Plantations
(Trading, mining, agriculture) 410,526
NETHERLANDS - 9.91%
11,000 Aegon
(Insurance) 1,350,189
40,000 Ahold
(Supermarkets) 1,477,618
25,000 Getronics
(Support services) 1,237,558
25,000 ING Group
(Financial services) 1,523,660
20,000 Numico
(Nutrition and health care products) 952,786
35,000 VNU
(Publishing) 1,318,997
8,000 Wolters Kluwer
(Publisher) 1,710,970
9,571,778
PHILIPPINES - 0.33%
100,800 Benpres
(Infrastructure-related holding company) 322,560
POLAND - 0.43%
32,000 Bank Handlowy
(Banking) 416,000
PORTUGAL - 1.25%
22,000 Jeronimo Martins
(Food distributors) 1,204,067
SINGAPORE - 0.62%
82,000 Overseas Union Enterprise
(Hotels, property investment) 162,907
120,000 Robinson
(Department store) 268,928
274,000 Trans-Island Bus Services
(Bus transport) 169,279
601,114
SPAIN - 4.10%
20,000 Banco Popular
(Banking) 1,505,770
600 Banco Santander
(Banking) 11,905
30,000 Endesa
(Electric utility) 793,695
15,000 Mapfre Vida Seguro
(Insurance) 563,608
24,000 Telefonica 24,000 rts.
(Telephone utility) 1,086,856
3,961,834
SWEDEN - 3.68%
18,700 Hennes & Mauritz
(Retailing) 1,523,656
31,500 L.M. Ericsson
(Telecom equipment) 748,265
200,000 Nordbanken Holding
(Swedish/Finnish banking) 1,280,031
3,551,952
SWITZERLAND - 2.76%
500 Nestle
(Food products) 1,088,302
800 Novartis
(Pharmaceuticals and chemicals) 1,572,396
2,660,698
UNITED KINGDOM - 24.79%
102,000 BAA
(Airport operator) 1,198,106
71,000 Boots
(Chemists) 1,213,806
151,000 Bowthorpe
(Electronics components, instruments) 870,527
130,000 Cable & Wireless
(Telecommunications) 1,185,745
115,000 Cattles
(Consumer loans) 1,213,241
192,000 Electrocomponents
(Electronics) 1,266,390
54,000 Glaxo Wellcome
(Pharmaceuticals) 1,858,913
146,000 Hays
(Business services) 1,285,596
118,000 Kingfisher
(Diversified retailing) 1,278,219
115,000 Lloyds TSB
(Banking) 1,637,398
282,000 Morrison Supermarkets
(Supermarkets) 1,297,790
150,000 Northern Rock
(Mortgage bank) 1,398,073
65,000 Reckitt & Colman
(Household goods) 860,151
87,000 Scottish & Newcastle
(Brewing, hotels and leisure) 1,011,796
162,000 Shell
(Oil major) 995,846
103,774 SmithKline Beecham
(Pharmaceuticals) 1,438,233
97,000 Smiths Industries
(Instrumentation) 1,390,779
92,000 Spirax-Sarco Engineering
(Steam controls) 790,231
108,000 Vodafone
(Cellular telephone network) 1,754,843
23,945,683
TOTAL COMMON STOCKS - 96.89% 93,584,687
Short-Term Investments - 2.93% 2,832,000
TOTAL INVESTMENTS - 99.82% $ 96,416,687
Other assets less liabilities - 0.18% 170,212
TOTAL NET ASSETS - 100.00%
(equivalent to $19.11 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
5,053,864 shares outstanding) $ 96,586,899
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1998 (unaudited)
ASSETS:
Investments, at market value (identified cost $72,574,342) $ 96,416,687
Cash 31,052
Dividends receivable 111,208
Interest receivable 256
Receivable for fund shares sold 23,343
Foreign tax receivable 73,502
Total assets 96,656,048
LIABILITIES AND NET ASSETS:
Accrued expenses 55,305
Foreign tax withholding liability 13,844
Total liabilities 69,149
NET ASSETS $ 96,586,899
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 72,892,904
Accumulated undistributed income (loss):
Undistributed net investment income (77,337)
Accumulated net realized loss from investments and
foreign currency transactions (74,374)
Net unrealized appreciation on investments and
translation of assets and liabilities in foreign currencies 23,845,706
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 96,586,899
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 5,053,864
NET ASSET VALUE PER SHARE $ 19.11
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Six Months Ended December 31, 1998 (unaudited)
INVESTMENT INCOME:
Income:
Dividends (net of foreign taxes withheld) $ 595,560
Interest 54,378
Foreign exchange loss (65,856)
584,082
Expenses:
Management fees (Note 3) 589,473
Custodian fees 59,104
Registration fees -
648,577
Net investment income loss (64,495)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY (Note 1):
Net realized gain (loss) from:
Investment transactions 2,659,804
Foreign currency transactions (96,093)
Net increase (decrease) in unrealized appreciation on:
Investments (215,800)
Translation of assets and liabilities in foreign currencies 1,986
Net loss on investments and foreign currency 2,349,897
Increase in net assets resulting from operations $ 2,285,402
See accompanying Notes to Financial Statements.
STATEMENTS OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, 1998 JUNE 30,
(UNAUDITED) 1998
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ (64,495) $ 388,663
Net realized gain from investments and foreign currency transactions
2,563,711 6,390,530
Net increase (decrease) in unrealized appreciation on investments and
translation of assets and liabilities in foreign currencies
(213,814) (404,239)
Net increase in net assets resulting from operations 2,285,402 6,374,954
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (195,918) (346,648)
Net realized gain from investment transactions (4,016,340) (5,120,557)
Total distributions to shareholders (4,212,258) (5,467,205)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 3,621,521 and 2,160,509 shares sold 64,098,040 41,329,883
Net asset value of 194,043 and 262,117 shares issued for
reinvestment of distributions 3,578,154 4,600,016
67,676,194 45,929,899
Cost of (4,075,616) and 2,772,555 shares redeemed (73,566,834) (53,065,614)
Net increase (decrease) from capital share transactions (5,890,640) (7,135,715)
Total increase (decrease) in net assets (7,817,496) (6,227,966)
NET ASSETS:
Beginning of period 104,404,395 110,632,361
End of period (including undistributed net investment income
of ($77,337) and $183,077, respectively) $ 96,586,899 $ 104,404,395
*Distributions to shareholders:
Income dividends per share $ .04 $ .065
Capital gains distribution per share $ .82 $ .957
</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.
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,
1998, were as follows:
Purchases $ 19,315,931
Proceeds from sales 29,081,229
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.
Babson Funds
Jones & Babson Distributors
A member of the Generali Group
BMA Tower
700 Karnes Blvd.
Kansas City, MO 64108-3306
816-751-5900
1-800-4-BABSON
(1-800-422-2766)
www.babsonfunds.com
JB3C-1(2/00) 505498
