UMB SCOUT FUNDS
CAPITAL PRESERVATION FUND
ANNUAL REPORT
JUNE 30, 1999
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.
TO THE SHAREHOLDERS
The past 12 months have been especially noteworthy for the
global economy and financial markets. Attention was fixed
last fall on the financial contagion spreading from
Southeast Asia to Russia and elsewhere. Interest rates in
the developing world were rising or local currencies were
collapsing. There was widespread fear of an economic
slowdown because of slower demand and a flood of industrial
capacity.
In the U.S., the Federal Reserve lowered interest rates
three times in a relatively short period and long-term
interest rates moved to less than 5%. All but the "bluest"
of blue chip stocks declined sharply.
For the time being, the concerns of late 1998 no longer are
on investors' minds. Most indicators show the world's
economies are regaining their footing and many are growing
strongly. Interest rates have increased again, but
apparently not enough to stop this growth. The U.S. is
enjoying the lowest unemployment in decades with very low
inflation -
a scenario the textbooks say cannot happen.
Our economic environment has been called a "virtuous cycle,"
but some investors are wondering whether it will become a
"vicious cycle." We do not see such a change now, although
we continue to watch the economic indicators very closely.
There are few signs that the economy is entering a long-term
slowdown caused by economic excess. Some market watchers
point to the high valuation of U.S. stocks as one such
excess, but valuation alone usually is not enough to make
stock prices decline. We see no other catalyst at this point
that would cause a major stock price correction.
In this annual report, you will find more details about the
activity and holdings in the UMB Scout Capital Preservation
Fund during the period. I recently joined the UMB team, and
I want to thank each of you for your confidence in UMB
Investment Advisors and the UMB Scout Funds. We look forward
to helping you reach your financial goals.
Sincerely,
/S/William B. Greiner, CFA
William B. Greiner, CFA
Executive Vice President / Chief Investment Officer
UMB Investment Advisors
Shares of the UMB 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.
TO THE SHAREHOLDERS
The UMB Scout Capital Preservation Fund closed the quarter
ended June 30, 1999, at $9.76 per share and had a total
return (price change and reinvested distributions) of 9.58%
for the quarter and 2.70% for the year ended that date. The
Fund had a total return of 10.68% for the first six months
of 1999. The Fund seeks long-term capital growth by
investing primarily in common stocks of companies whose
earnings or tangible assets are expected to outpace the rate
of inflation.
The stock market reached record levels this year, mainly on
the strength of a relatively small group of large-
capitalization stocks. As we reported in the March 31
letter, gains in the Standard & Poor's 500 Index at that
time were based on the largest 15 issues in the index, with
the remaining 485 stocks combining for an overall negative
return.
Such a divergence within the stock market typically means a
change in leadership is due. This change occurred during
April as companies more sensitive to economic growth and
smaller capitalization issues outperformed their large-cap
counterparts. This met our expectation that the market focus
is returning to earnings and fundamental growth factors.
The commodities-related stocks are participating in the
overall market leadership change. Oil, lumber and copper
showed positive moves this quarter after years of negative
returns.
To take advantage of the increase in interest rates during
the past nine months, we reduced our holdings of 3-year U.S.
Treasury inflation-indexed notes and added a position in the
10-year Treasury inflation-indexed notes. The latter offered
a return that was 4% above the rate of inflation.
New equities holdings were added during the quarter in Shell
Transportation & Trading, Aracruz Celulosa, IRT Property Co.
and Newhall Land & Farming. We added to Fund holdings in ASA
Ltd., Deltic Timber Corp., Georgia Pacific Corp. Timber
Group, Caseys General Stores, Halliburton Co. and Royal
Dutch Petroleum Co. We reduced holdings in Homestake Mining
Co., Rio Tinto PLC and WMC Ltd.
For the six months ended June 30, 1999, shareholders
received an ordinary income dividend of $.10 per share and
no long-term capital gain. For corporate shareholders,
23.74% of ordinary income distributions qualify for the
corporate dividends received deduction.
Thank you for your investment in the UMB 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 23.5%
Transportation & Services 2.6%
Energy 15.9%
Capital Goods 4.7%
Basic Materials 18.5%
Consumer Staples 1.2%
Fixed Income 30.3%
Consumer Cyclical 3.3%
Based on total investments as of June 30, 1999. Subject to change.
CHART - TOP TEN EQUITY HOLDINGS
Market Percent
Value (000's) of Total
Caseys General Stores $ 30.0 3.29%
Barrick Gold Corp. 25.2 2.76%
Kerr McGee Corp. 25.1 2.75%
Newmont Mining Corp. 23.9 2.61%
Canadian Pacific Ltd. 23.8 2.61%
Placer Dome, Inc. 23.6 2.59%
Halliburton Co. 22.6 2.48%
Georgia Pacific Corp. Timber Group 20.2 2.21%
Helmerich & Payne, Inc. 19.1 2.09%
Valmont Industries, Inc. 17.0 1.87%
Top Ten Equity Holdings Total: $230.5* 25.26%
As of June 30, 1999, statement of assets. Subject to change.
*Market Values are rounded; may not equal total.
CHART - HYPOTHETICAL GROWTH OF $10,000
as of June 30, 1999
CHART - COMPARATIVE RATES OF RETURN
as of June 30, 1999
Quarter 1 Year Inception
UMB Scout Capital
Preservation Fund 9.58% 2.70% 0.02%
Goldman Sachs
Commodity Index* 4.78% -7.74% -13.29%
Consumer Price Index+ 0.73% 1.96% N.A.
Producer Price Index -
Finished Goods+ 0.53% 1.46% N.A.
Inception - February 23, 1998.
Performance data contained in this report are for past
periods only. Past performance is not indicative of future
results. Investment return and share value will fluctuate,
and redemption value may be more or less than original cost.
*Unmanaged index of stocks, bonds, commodities
or mutual funds (there are no direct investments or fees in
these indices).
+Index of average prices paid by various sectors of
the U.S. economy, as calculated by the U.S. Department of
Labor.
CHART - HISTORICAL PER SHARE RECORD
Income & Cumulative**
Net Short-Term Long-Term Value Per
Asset Gains Gains Share Plus
Value Distribution Distribution Distributions
12/31/98 $8.91 0.13 - $9.04
06/30/99* 9.76 0.10 - 9.99
*Six-month only. Distributions typically occur in June and
December.
**Does not assume any compounding of reinvested
distributions.
Table shows calendar year distributions and net asset
values; may differ from fiscal year annual reports.
FINANCIAL STATEMENTS
JUNE 30, 1999
STATEMENT OF NET ASSETS
MARKET
SHARES COMPANY VALUE
COMMON STOCKS - 45.65%
Basic Materials - 18.28%
1,000 ASA Ltd. $ 16,625
1,300 Barrick Gold Corp. 25,187
400 Deltic Timber Corp. 10,775
800 Georgia Pacific Corp. Timber Group 20,200
2,000 Homestake Mining Co. 16,375
1,200 Newmont Mining Corp. 23,850
100 Phelps Dodge Corp. 6,194
2,000 Placer Dome, Inc. 23,625
200 Rio Tinto PLC 13,450
700 WMC Ltd. 12,250
168,531
Capital Goods - 4.61%
1,000 IRT Property Co.* 9,875
2,500 Isco, Inc. 15,625
1,000 Valmont Industries, Inc. 17,031
42,531
Consumer Cyclical - 3.25%
2,000 Caseys General Stores 30,000
Consumer Staples - 1.21%
1,000 Midwest Grain Products, Inc.* 11,125
Energy - 15.72%
500 Aracruz Celulose SA* 11,000
300 Baker Hughes, Inc. 10,050
500 Halliburton Co. 22,624
800 Helmerich & Payne, Inc. 19,050
600 Imperial Oil Ltd. 11,363
500 Kerr McGee Corp. 25,094
200 Royal Dutch Petroleum Co. 12,050
200 Shell Transportation & Trading PLC* 9,274
1,000 Union Pacific Resources Group, Inc. 16,313
250 USX-Marathon Group 8,141
144,959
Transportation & Services - 2.58%
1,000 Canadian Pacific Ltd. 23,813
TOTAL COMMON STOCKS (Cost $397,978) - 45.65% 420,959
FACE MARKET
AMOUNT DESCRIPTION VALUE
U.S. GOVERNMENT SECURITIES - 30.07%
$ 101,098 U.S. Treasury Notes, 3.875%, due January 15, 2009 $ 99,897
179,202 U.S. Treasury Notes, 3.625%, due July 15, 2002 177,297
TOTAL U.S. GOVERNMENT SECURITIES (Cost $277,182) - 30.07% 277,194
REPURCHASE AGREEMENT (Cost $215,000) - 23.32%
215,000 Northern Trust Co., 4.79%, due July 1, 1999
(Collateralized by U.S. Treasury Notes,
7.125%, due September 30, 1999) 215,000
TOTAL INVESTMENTS (Cost $890,160) - 99.04% 913,153
Other assets less liabilities - 0.96% 8,803
TOTAL NET ASSETS - 100.00%
(equivalent to $9.76 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
94,423 shares outstanding) $ 921,956
For federal income tax purposes, the identified cost of investments
owned at June 30, 1999 was $898,719.
Net unrealized appreciation for federal income tax purposes was $31,552,
which is comprised of unrealized appreciation of $45,752 and unrealized
depreciation of $14,200.
*Non-income producing security
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
JUNE 30, 1999
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
</CAPTION>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $890,160) $ 913,153
Cash 3,437
Dividends receivable 591
Interest receivable 4,775
Total assets 921,956
NET ASSETS $ 921,956
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 917,579
Accumulated undistributed income:
Net investment income 2,914
Net realized loss on investment transactions (21,530)
Net unrealized appreciation on investments 22,993
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 921,956
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 94,423
NET ASSET VALUE PER SHARE $ 9.76
</TABLE>
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
STATEMENT OF OPERAITONS
</CAPTION>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends $ 6,526
Interest 18,390
24,916
Expenses:
Management fees 6,331
Net investment income 18,585
REALIZED and unrealized gain (LOSS) ON INVESTMENTS:
Net realized loss from investment transactions (21,530)
Decrease in net unrealized depreciation on investments 50,477
Net realized and unrealized gain on investments 28,947
Net increase in net assets resulting from operations $ 47,532
</TABLE>
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FEBRUARY 23, 1998
YEAR ENDED (INCEPTION)
JUNE 30, 1999 to JUNE 30, 1998
</CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 18,585 $ 3,883
Net realized gain (loss) from investment activities (21,530) 1,611
Decrease (increase) in net unrealized depreciation on investments 50,477
(27,484 )
Net increase (decrease) in net assets resulting from operations 47,532 (21,990)
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (19,554) -
Net realized gain from investment transactions (1,611) -
Decrease in net assets from distributions (21,165) -
INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 69,739 and 56,610 shares sold, respectively 645,264 573,218
Net asset value of 2,296 shares issued for
reinvestment of distributions 21,152 -
666,416 573,218
Cost of 33,974 and 248 shares redeemed (319,542) (2,513)
Net increase in net assets from capital share transactions 346,874 570,705
Net increase in net assets 373,241 548,715
NET ASSETS:
Beginning of period 548,715 -
End of period (including undistributed net investment income
of $2,914 and $3,883, respectively) $ 921,956 $ 548,715
*Distributions to shareholders:
Income dividends per share $ 0.21 $ -
Capital gains distribution per share $ 0.02 $ -
</TABLE>
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 year ended June 30, 1999
(excluding repurchase agreements and short-term securities),
were as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 374,448 $ 403,831
Proceeds from sales 308,560 127,144
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.
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share
outstanding throughout the period.
<TABLE>
<CAPTION>
FEBRUARY 23, 1998
YEAR ENDED TO
JUNE 30, 1999 JUNE 30, 1998*
</CAPTION>
<S> <C> <C>
Net asset value, beginning of period $ 9.74 $ 10.00
Income (loss) from investment operations:
Net investment income 0.17 0.07
Net realized and unrealized gain (loss) on securities 0.08 (0.33)
Total from investment operations 0.25 (0.26)
Distributions from:
Net investment income (0.21) -
Net realized gain on investment transactions (0.02) -
Total distributions (0.23) -
Net asset value, end of period $ 9.76 $ 9.74
Total return 3% (7%)
Ratios/Supplemental Data
Net assets, end of year (in thousands) $ 922 $ 549
Ratio of expenses to average net assets 0.83% 0.85%
Ratio of net investment income to average net assets 2.44% 3.26%
Portfolio turnover rate 95% 7%
Average commission rate** $ .0758 $ .0694
</TABLE>
*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 UMB Scout Capital Preservation Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities of UMB Scout Capital Preservation Fund, Inc.,
including the statement of net assets, as of June 30, 1999,
and the related statement of operations, statements of
changes in net assets and the financial highlights for the
periods 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 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 verification of securities owned as of
June 30, 1999, 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 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 UMB Scout Capital
Preservation Fund, Inc., as of June 30, 1999, the results of
its operations, the changes in its net assets and the
financial highlights for the periods indicated thereon in
conformity with generally accepted accounting principles.
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
July 24, 1999
This report has been prepared for the information of the
Shareholders of UMB 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
UMB Scout Funds are offered only by the Prospectus, a copy
of which may be obtained from Jones & Babson, Inc.
UMB SCOUT FUNDS
100% No-Load Mutual Funds
Stock Fund
Stock Select Fund
Regional Fund
WorldWide Fund
WorldWide Select Fund
Capital Preservation Fund
Balanced Fund
Bond Fund
Kansas Tax-Exempt Bond Fund*
Money Market Fund
Tax-Free Money Market Fund
*Available in Kansas and Missouri only.
MANAGER AND INVESTMENT COUNSEL
UMB Bank, n.a., Kansas City, Missouri
AUDITORS
Baird, Kurtz & Dobson, Kansas City, Missouri
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
Philadelphia, Pennsylvania
CUSTODIAN
UMB Bank, n.a., Kansas City, Missouri
UNDERWRITER, DISTRIBUTOR
AND TRANSFER AGENT
Jones & Babson, Inc.
Kansas City, Missouri
UMB Scout Funds
P.O. Box 219757
Kansas City, MO 64121-9757
TOLL FREE 800-996-2862
www.umb.com
"UMB" and "Scout" are registered service marks of UMB
Financial Corporation.
UMB Financial Corporation also claims service mark rights to
the Scout design.
JB151B(8/99) 508767
