SCOUT
CAPITAL
PRESERVATION
FUND
A no-load mutual fund
that seeks long-term capital
growth by investing in
companies whose earnings
or tangible assets are
expected to outpace
inflation.
Annual Report
June 30, 1998
TO THE SHAREHOLDERS
Scout Capital Preservation Fund closed the quarter ended June 30, 1998,
at $9.74 per share. The Fund was approved by the Securities and Exchange
Commission on February 23, 1998. Its objective is to outpace commodity
or raw material inflation over the long-term by investing in common
stocks of companies whose business is related to the production and
distribution of raw materials. These investments may be in domestic or
foreign securities.
The stock market was extremely volatile during the quarter and moved
within a broad trading range after setting records in the first half of
the period. There were increasing doubts about whether the big price
gains earlier in the year were sustainable as the economic crisis in
Asia continued to worsen and profits managed only single-digit growth
for the third consecutive quarter.
Investors reacted by putting 33% less money into stock funds in May
compared with April. The market overall fell hard from its earlier
highs, with the oil and gas sector among the hardest hit. By mid-June,
80% of New York Stock Exchange listed stocks were down at least 10% from
their 52-week highs and 56% were down at least 15%.
The market rebounded in late June, and record levels of new funds poured
into the U.S. equity market from foreign investors in a "flight to
quality" based on continued concern about the financial situation in
Asia.
The volatility in stocks was matched by extremely depressed prices in
commodity markets. The Fund is taking this weakness as an opportunity to
build positions for the long term.
We have continued our investments in several key sectors including
energy, metals and mining, precious metals, water, agriculture and
timber. The Fund can work well in a balanced portfolio as a tool for
further diversification and risk reduction.
Thank you for your investment in the Scout Capital Preservation Fund. We
value you as a shareholder and welcome your questions and comments.
Sincerely,
/s/David R. Bagby
David R. Bagby
UMB Investment Advisors
CHART - FUND DIVERSIFICATION
Cash & Equivalents 40.5%
Basic Materials 26.1%
Capital Goods 15.3%
Energy 14.8%
Transportation 2.1%
Consumer Staples 1.2%
As of June 30, 1998, statment of assets.
CHART - TOP 10 EQUITY HOLDINGS
Market Percent
Value (000's) of Total
Valmont Industries, Inc. $ 18.0 3.20%
Layne Christensen Co. 17.3 3.09%
Barrick Gold Corp. 17.3 3.07%
Calgon Carbon Corp. 15.9 2.83%
Deere & Co. 15.9 2.83%
Homestake Mining Co. 15.6 2.77%
Maverick Tube Corp. 15.1 2.69%
Phelps Dodge Corp. 14.3 2.55%
Exxon Corp. 14.3 2.54%
Newmont Mining Corp. 14.2 2.53%
Top 10 Equity Holdings Total: $157.9 28.10%
NOTE: All market values based on June 30, 1998, statement of assets.
CHART - COMPARATIVE RATES OF RETURN
as of June 30, 1998
Quarter Inception
Scout Capital Preservation Fund -4.88% -2.60%
Goldman Sachs Commodity Index* -10.60% N.A.
Producer Price Index - Finished Goods* 0.31% N.A.
Consumer Price Index* 0.49% N.A.
Inception - February 23, 1998.
Performance data contained in this report are 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 the original cost. Along with the potential for higher
returns, international investments carry some additional risks from
currency fluctuations, economic and political factors, as well as
differences in accounting.
*Unmanaged index of stocks, bonds, commodities or mutual funds (there
are no direct investments or fees in these indices).
Shares of the Scout Funds are not deposits or obligations of, nor
guaranteed by, UMB Bank, n.a. or any other banking institution; nor are
they insured by the Federal Deposit Insurance Corporation ("FDIC").
These shares involve investment risks, including the possible loss of
the principal invested.
FINANCIAL STATEMENTS
Statement of Net Assets
June 30, 1998
Market
Shares Company Value
COMMON STOCKS - 59.46%
Basic Materials - 26.06%
600 ASA Ltd. $ 11,437
900 Barrick Gold Corp. 17,269
800 Broken Hill Propietary LTD 13,550
100 Deltic Timber Corp. 2,506
400 Georgia Pacific Corp. Timber Group 9,225
1,500 Homestake Mining Co 15,563
200 Nalco Chemical Co. 7,025
600 Newmont Mining Corp. 14,175
250 Phelps Dodge Corp. 14,297
900 Placer Dome, Inc. 10,575
300 Rio Tinto PLC 14,175
1,100 WMC Ltd. 13,200
142,997
Capital Goods - 15.29%
1,600 Calgon Carbon Corp. 15,900
300 Deere & Co. 15,863
350 Instituform Technologies, Inc., Cl. A* 4,845
1,500 Isco, Inc. 12,000
1,400 Layne Christensen Co.* 17,325
900 Valmont Industries, Inc. 17,972
83,905
Consumer Staples - 1.19%
450 Midwest Grain Products, Inc.* 6,525
Energy - 14.85%
200 Exxon Corp. 14,263
600 Helmerich & Payne, Inc. 13,350
600 Imperial Oil Ltd. 10,462
1,300 Maverick Tube Corp.* 15,112
200 Royal Dutch Petroleum Co. 10,963
500 Union Pacific Resources Group, Inc. 8,781
250 USX-Marathon Group 8,578
81,509
Transportation - 2.07%
400 Canadian Pacific LTD 11,350
TOTAL COMMON STOCKS (Cost $353,770) - 59.46% 326,286
Face Market
Amount Description Value
REPURCHASE AGREEMENT (Cost $235,000) - 42.83%
$ 235,000 Northern Trust Co., 5.55%, due July 1, 1998
(Collateralized by U.S. Treasury Notes,
5.75%, due September 30, 1999) 235,000
TOTAL INVESTMENTS (Cost $588,770) - 102.29% $ 561,286
Other assets less liabilities - (2.29)% (12,571)
TOTAL NET ASSETS - 100.00%
(equivalent to $9.74 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
56,362 shares outstanding) $ 548,715
For federal income tax purposes, the identified cost of investments owned at
June 30, 1998 was $588,770.
Net unrealized depreciation for federal income tax purposes was $27,484,
which is comprised of unrealized appreciation of $4,543 and unrealized
depreciation of $32,027.
*Non-income producing security
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 1998
ASSETS:
Investment securities, at market value
(identified cost $588,770) $ 561,286
Cash 1,130
Dividends receivable 504
Total assets 562,920
LIABILITIES:
Payable for investments purchased 14,205
Total liabilities 14,205
NET ASSETS $ 548,715
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 570,705
Accumulated undistributed income:
Net investment income 3,883
Net realized gain on investment transactions 1,611
Net unrealized depreciation on investments (27,484)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 548,715
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 56,362
NET ASSET VALUE PER SHARE $ 9.74
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Operations
For the Period January 13, 1998 (Capitalization) to June 30, 1998
INVESTMENT INCOME:
Income:
Dividends $ 1,247
Interest 3,647
4,894
Expenses:
Management fees 1,011
Net investment income 3,883
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized gain from investment transactions 1,611
Increase in net unrealized depreciation of investments (27,484)
Net realized and unrealized loss on investments (25,873)
Net decrease in net assets resulting from operations $ (21,990)
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Changes in Net Assets
For the Period January 13, 1998 (Capitalization) to June 30, 1998
DECREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 3,883
Net realized gain from investment transactions 1,611
Increase in net unrealized depreciation of investments (27,484)
Net decrease in net assets resulting from operations (21,990)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 56,610 shares sold 573,218
Cost of 248 shares redeemed (2,513)
Net increase in net assets from capital share transactions 570,705
Total increase in net assets 548,715
NET ASSETS:
Beginning of period -
End of period (including undistributed net investment
income of $3,883) $ 548,715
See accompanying Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
The Fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. A
summary of significant accounting policies that the Fund uses in the
preparation of its financial statements follows. The policies are in
conformity with generally accepted accounting principles.
Investments - Common stocks traded on a national securities exchange
are valued at the last reported sales price on the last business day of
the period or, if no sale was reported on that date, at the average of
the last reported bid and asked prices. Securities traded over-the-
counter are valued at the average of the last reported bid and asked
prices. Short-term obligations are valued at amortized cost, which
approximates market value. Investment transactions are recorded on the
trade date. Interest income is recorded daily. Dividend income and
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.
Federal Income Taxes - The Fund's policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of its taxable
income to its shareholders. Therefore, no federal income tax provision
is required.
Amortization - Discounts and premiums on securities purchased are
amortized over the life of the respective securities.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from
those estimates.
2. PURCHASES AND SALES OF SECURITIES - The aggregate amounts of
security transactions during the period ended June 30, 1998 (excluding
repurchase agreements and short-term securities), were as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 223,100 $ -
Proceeds from sales 11,726 -
3. MANAGEMENT FEES - UMB Bank, n.a. is the Fund's manager and
investment adviser and provides or pays the cost of all management,
supervisory and administrative services required in the normal operation
of the Fund. This includes investment management; fees of the custodian,
independent public accountants and legal counsel; remuneration of
officers and directors; rent; and shareholder services, including
maintenance of the shareholder accounting system and transfer agency.
Not considered normal operating expenses and therefore payable by the
Fund are taxes, interest, fees and the other charges of governments and
their agencies for qualifying the fund's shares for sale, special
accounting and legal fees and brokerage commissions. UMB Bank's
management fees are based on average daily net assets of the Fund at the
annual rate of .85 of one percent of net assets. Certain officers and/or
directors of the Fund are also officers and/or directors of Jones &
Babson, Inc., which serves as the Fund's underwriter and distributor.
4. REPURCHASE AGREEMENTS - Securities purchased under agreements to
resell are held by the Fund's custodian and investment counsel, UMB
Bank, n.a. The custodian monitors the market values of the underlying
securities which they have purchased on behalf of the Fund to ensure
that the collateral is sufficient to protect the Fund in the event of
default by the seller.
5. SUBSEQUENT EVENT - Subsequent to the Fund's year-end, the Fund name
will change to UMB Scout Capital Preservation Fund, Inc.
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share
outstanding throughout the period.
February 23, 1998
to
June 30, 1998*
Net asset value, beginning of period $ 10.00
Income from investment operations:
Net investment income 0.07
Net realized and unrealized loss on securities (0.33)
Total from investment operations (0.26)
Net asset value, end of period $ 9.74
Total return (7%)
Ratios/Supplemental Data
Net assets, end of year (in thousands) $ 549
Ratio of expenses to average net assets 0.85%
Ratio of net investment income to average net assets 3.26%
Portfolio turnover rate 7%
Average commission rate** $ .0694
*The Fund was capitalized on January 13, 1998 with $100,000, representing
10,000 shares at a net asset value of $10.00 per share. Initial public
offering was made on February 23, 1998, at which time net asset value was
$10.00 per share.
Ratios for this initial period of operation are annualized.
**For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for
security trades on which commissions are charged. This amount may vary from
period to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission rate structures may
differ.
See accompanying Notes to Financial Statements.
INDEPENDENT ACCOUNTANTS' REPORT
To the Shareholders and Board of Directors
of Scout Capital Preservation Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Scout Capital Preservation Fund, Inc., including the statement of net
assets, as of June 30, 1998, and the related statement of operations,
statement of changes in net assets and the financial highlights for the
period indicated thereon. These financial statements and financial
highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
and financial highlights based on our audit.
We conducted our audit 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
verification of securities owned as of June 30, 1998, by confirmation,
or by the application of alternative auditing procedures with respect to
unsettled portfolio security transactions. 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 audit provides 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 Scout Capital Preservation Fund, Inc. as of
June 30, 1998, the results of its operations, the changes in its net
assets and the financial highlights for the period indicated thereon in
conformity with generally accepted accounting principles.
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
July 24, 1998
This report has been prepared for the information of the Shareholders of
Scout Capital Preservation 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
Scout Funds are offered only by the Prospectus, a copy of which may be
obtained from Jones & Babson, Inc.
BOARD OF DIRECTORS
AND OFFICERS
Board of Directors
Larry D. Armel
William E. Hoffman, D.D.S.
Eric T. Jager
Stephen F. Rose
Stuart Wien
Officers
Larry D. Armel, President
P. Bradley Adams, Vice President & Treasurer
Martin A. Cramer, Vice President & Secretary
Constance E. Martin, Vice President
Investment Counsel
UMB Bank, n.a., Kansas City, Missouri
Auditors
Baird, Kurtz & Dobson, Kansas City, Missouri
Legal Counsel
Stradley, Ronon, Stevens & Young,
Philadelphia, Pennsylvania
Custodian
UMB Bank, n.a., Kansas City, Missouri
SCOUT FUNDS
P.O. Box 410498
Kansas City, MO 64141-0498
TOLL-FREE (800) 996-2862
www.umb.com
Underwriter & Distributor: Jones & Babson, Inc., Kansas City, Missouri
JB151B 8/98
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001050037
<NAME> SCOUT CAPITAL PRESERVATION FUND INC
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 588770
<INVESTMENTS-AT-VALUE> 561286
<RECEIVABLES> 504
<ASSETS-OTHER> 1130
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 562920
<PAYABLE-FOR-SECURITIES> 14205
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 14205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 570705
<SHARES-COMMON-STOCK> 56362
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3883
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1611
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (27484)
<NET-ASSETS> 548715
<DIVIDEND-INCOME> 1247
<INTEREST-INCOME> 3647
<OTHER-INCOME> 0
<EXPENSES-NET> 1011
<NET-INVESTMENT-INCOME> 3883
<REALIZED-GAINS-CURRENT> 1611
<APPREC-INCREASE-CURRENT> (27484)
<NET-CHANGE-FROM-OPS> (21990)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 56610
<NUMBER-OF-SHARES-REDEEMED> 248
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 548715
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1011
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1011
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> (.33)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.74
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
