SCOUT
KANSAS
TAX-EXEMPT
BOND FUND
A no-load mutual fund
that seeks current income
exempt from regular federal
income tax and Kansas state
personal income taxes by
investing in municipal
bonds or debt instruments.
Annual Report
June 30, 1998
TO THE SHAREHOLDERS
Scout Kansas Tax-Exempt Bond Fund's share price was $9.94 for the
quarter ended June 30, 1998, and investors earned a total return (price
change and reinvested distributions) of 0.96% for the quarter. The share
price remained fixed during the quarter and our goal is to keep this
value constant over time as we look for credits that can add value to
the Fund without compromising the safety of your investment. The Fund
seeks current income exempt from regular federal income tax and Kansas
state personal income taxes.
On April 1, 1998, the assets of UMB's Kansas Common Tax-Exempt Bond Fund
were merged into the mutual fund, increasing the Fund's market value to
approximately $6 million as of June 30, 1998. The increased asset size
has allowed us to purchase bonds in larger block sizes and capture
greater yields.
The competitive and negotiated municipal bond new-issue calendar was
very active during the quarter. Municipalities traditionally borrow
during the second quarter of the calendar year so they will have funds
to complete projects during the summer months.
The refunding of outstanding bonds also has been active since the 30-
year Treasury bond has been in the 5.50% to 5.75% range and the
municipalities are able to realize a cost savings. We expect the supply
of Kansas municipal bonds to be constant over the next three months as
issuers take advantage of low market rates.
The Fund has added several new general obligation municipal bonds to its
holdings: Bonner Springs temporary notes, City of Derby, Miami County
Unified School District 367 (Osawatomie), Riley County Unified School
District 383 (Manhattan), and a revenue bond for the City of
Wellington's Electric, Waterworks and Sewage Utility needs.
The yields on municipal bonds have held constant during the quarter and
are cheap in relation to the comparable U.S. Treasury maturity. The
Kansas municipal market remains attractive to those investors in the 28%
Federal tax bracket and above.
We appreciate your participation in Scout Kansas Tax-Exempt Bond Fund.
Please feel free to call us if you have any questions regarding your
investments.
Sincerely,
/s/M. Kathryn Gellings
M. Kathryn Gellings
/s/Rex W. Matlack
Rex W. Matlack
UMB Investment Advisors
CHART - FUND DIVERSIFICATION
Kansas 96.6%
Other 3.4%
CHART - COMPARATIVE RATES OF RETURN
as of June 30, 1998
Month Quarter Inception
Scout Kansas Tax-Exempt Bond Fund 0.24% 0.96% 0.62%
Lehman Brothers 5-Year Municipals* 0.34% 1.12% 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.
*Unmanaged index of stocks, bonds 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
Face Market
Amount Description Value
KANSAS
$ 100,000 Atchison Kansas, Water & Sewer Rev.,
4.35%, due September 1, 1998 $ 100,119
115,000 Bonner Springs Kansas, Series A,
4.125%, due October 1, 1999 115,246
250,000 Cloud County Kansas, Unified School District 333,
5.10%, due September 1, 2004 259,688
25,000 Derby Kansas G.O., Series A,
4.65%, due June 1, 2009 25,156
100,000 Douglas County Kansas, Unified School District 497,
4.50%, due September 1, 2002 101,000
10,000 Ellsworth Kansas, Public Building Rev., 4
.50%, due June 1, 2005 9,962
20,000 Ellsworth Kansas, Public Building Rev.,
4.70%, due June 1, 2007 19,925
5,000 Eudora Kansas, Water & Sewer Rev.,
3.90% due October 1, 1999 4,994
100,000 Johnson County Kansas, Series A,
4.80%, due September 1, 1998 100,194
100,000 Johnson County Kansas, Series A,
5.10%, due September 1, 2000 102,375
100,000 Johnson County Kansas, Unified School District 229,
Series A,
5.20%, due October 1, 2003 104,750
100,000 Johnson County Kansas, Unified School District 229,
Series A,
5.50%, due October 1, 2005 105,500
50,000 Johnson County Kansas, Unified School District 229,
Series A,
5.125%, due October 1, 2006 52,563
25,000 Johnson County Kansas, Unified School District 231,
Refinance & Improvement, Series A,
5.25%, due October 1, 2002 26,094
300,000 Johnson County Kansas, Unified School District 231,
Refinance & Improvement, Series A,
5.10%, due October 1, 2004 312,000
5,000 Johnson County Kansas, Unified School District 231,
Refinance & Improvement, Series A,
4.35%, due October 1, 2005 5,012
5,000 Johnson County Kansas, Unified School District 512
(Shawnee Mission) Series C,
6.00%, due October 1, 2007 5,106
100,000 Johnson County Kansas, Unified School District 512,
5.00%, due October 1, 2009 103,125
5,000 Junction City Kansas, Water & Sewer Rev.,
Series A,
4.50%, due September 1, 2003 5,056
10,000 Kansas City Kansas, Series A,
3.80%, due July 31, 1998 10,000
5,000 Kansas City Kansas, Series A,
5.625%, due September 1, 2009 5,319
200,000 Kansas State Dept. of Transportation
Highway Rev.,
4.25%, due September 1, 2001 201,250
5,000 Kansas State Dept. of Transportation
Highway Rev.,
4.80%, due March 1, 2002 5,119
200,000 Kansas State Dept. of Transportation
Highway Rev.,
5.10%, due March 1, 2005 208,750
50,000 Kansas State Dev. Finance Auth.,
Board of Regents Rev.,
4.70%, due March 1, 2002 50,625
100,000 Kansas State Dev. Finance Auth.,
Board of Regents Rev.,
4.80%, due March 1, 2003 101,250
100,000 Kansas State Dev. Finance Auth.,
Board of Regents Rev.,
4.875%, due March 1, 2004 100,750
5,000 Kansas State Dev. Finance Auth.,
Comprehensive Rehab. Project Rev.,
4.60%, due October 1, 2002 5,100
250,000 Kansas State Dev. Finance Auth.,
Skills Program Rev.,
5.30%, due June 1, 2000 255,635
5,000 Kansas State Highway Rev., Series A,
4.50%, due July, 1, 2003 5,075
5,000 Kansas State Turnpike Auth.,
4.50%, due September 1, 2000 5,050
75,000 Lawrence Kansas,
5.10%, due September 1, 2001 76,031
150,000 Lawrence Kansas, Series P,
5.20%, due September 1, 2002 153,375
275,000 Leawood Kansas, Series A,
4.90%, due September 1, 2001 282,219
5,000 Leawood Kansas, Series A,
5.00%, due September 1, 2002 5,138
100,000 Leawood Kansas,
4.35%, due September 1, 2004 100,375
100,000 Miami County Kansas, Unified School District 367,
4.35%, due September 1, 2005 100,000
100,000 Overland Park Kansas,
6.45%, due September 1, 1999 100,412
200,000 Overland Park Kansas, Internal Improvements,
4.20%, due September 1, 2002 201,000
5,000 Overland Park Kansas, Series B,
5.20%, due September 1, 2002 5,162
100,000 Prairie Village Kansas, Series B,
5.10%, due September 1, 2005 102,375
5,000 Riley County Kansas, Series A,
4.35%, due September 1, 2007 4,981
35,000 Riley County Kansas, Unified School District 383,
5.00%, due November 1, 1998 35,162
5,000 Riley County Kansas, Unified School District 383,
4.70%, due November 1, 2003 5,131
5,000 Sedgwick County Kansas, Series B,
4.20%, due August 1, 1999 5,028
300,000 Sedgwick County Kansas, Series A,
5.00%, due August 1, 2002 307,500
5,000 Sedgwick County Kansas, Unified School District 260,
4.60%, due October 1, 2010 4,975
200,000 Sedgwick County Kansas, Unified School District 263,
5.30%, due September 1, 2003 210,250
340,000 Sedgwick County Kansas, Unified School District 265,
5.40%, due October 1, 2005 359,975
180,000 Shawnee County Kansas, Series C,
5.30%, due September 1, 2001 186,525
200,000 Shawnee County Kansas, Series A,
4.30%, due December 1, 2004 199,750
145,000 Topeka Kansas, Series C,
5.00%, due August 15, 2000 148,081
5,000 Topeka Kansas, Series A,
5.25%, due August 15, 2011 5,144
50,000 Topeka Kansas, Water Works Improvement & Rev.,
4.30%, due August 1, 2007 49,250
30,000 Wellington Kansas, Electric Water Works &
Sewer Utility Rev.,
4.60%, due May 1, 2007 30,300
100,000 Wichita Kansas, Series A,
5.35%, due September 1, 1998 100,271
75,000 Wichita Kansas, Series 724,
6.10%, due September 1, 1999 75,661
75,000 Wichita Kansas, Series 728,
5.50%, due September 1, 2001 77,250
300,000 Wyandotte County Kansas,
Unified School District 204,
5.20%, due September 1, 2004 307,875
5,750,984
NEW JERSEY
200,000 New Jersey Economic Dev. Auth.,
Industrial Rev. (Toys R Us),
Var. Rate, due April 1, 2019 200,000
TOTAL INVESTMENTS (Cost $5,820,121) - 98.59% $ 5,950,984
Other assets less liabilities - 1.41% 84,973
TOTAL NET ASSETS - 100.00%
(equivalent to $9.94 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
607,234 shares outstanding) $ 6,035,957
For federal income tax purposes, the identified cost of investments owned at
June 30, 1998 was $5,820,121.
Net unrealized appreciation for federal income tax purposes was $130,864,
which is comprised of unrealized appreciation of $131,914 and unrealized
depreciation of $1,050.
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 1998
ASSETS:
Investment securities, at market value
(identified cost $5,820,121) $ 5,950,984
Cash 2,827
Interest receivable 82,146
Total assets 6,035,957
NET ASSETS $ 6,035,957
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 5,905,093
Net unrealized appreciation on investments 130,864
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 6,035,957
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 607,234
NET ASSET VALUE PER SHARE $ 9.94
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:
Interest $ 68,845
Expenses:
Management fees 7,129
Net investment income 61,716
UNREALIZED GAIN ON INVESTMENTS:
Increase in net unrealized appreciation of investments 130,864
Net unrealized gain on investments 130,864
Net increase in net assets resulting from operations $ 192,580
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
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 61,716
Increase in net unrealized appreciation of investments 130,864
Net increase in net assets resulting from operations 192,580
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (61,716)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 638,344 shares sold 6,213,178
Net asset value of 200 shares issued for reinvestment of
distributions 1,986
6,215,164
Cost of 31,310 shares redeemed (310,071)
Net increase in net assets from capital share transactions 5,905,093
Net increase in net assets 6,035,957
NET ASSETS:
Beginning of period -
End of period $ 6,035,957
*Distributions to shareholders:
Income dividends per share $ 0.13
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 non-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 - Debt securities (other than short-term obligations),
including listed issues, are valued at market on the basis of valuations
furnished by an independent pricing service which utilizes both dealer-
supplied valuations and formula-based techniques. Short-term obligations
are valued at amortized cost, which approximates market value.
Investment transactions are recorded on the trade date. Investment
income is recorded daily 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
short-term securities), were as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 4,900,001 $ -
Proceeds from sales 4,024,585 -
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 .50 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. subsequent event - Subsequent to the Fund's year-end, the Fund name
will change to UMB Scout Kansas Tax-Exempt Bond Fund, Inc.
5. MERGER - On April 2, 1998, the assets of the UMB Common Kansas Tax-
Exempt Fund were merged into the Scout Kansas Tax-Exempt Bond Fund, Inc.
This merger resulted in an increase in net assets of $5,250,731 and an
increase in outstanding shares of 527,405.
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 0.13
Net realized and unrealized loss on securities (0.06)
Total from investment operations 0.07
Distributions from:
Net investment income (0.13)
Net asset value, end of period $ 9.94
Total return 2%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 6
Ratio of expenses to average net assets 0.50%
Ratio of net investment income to average net assets 4.33%
Portfolio turnover rate 4%
*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.
See accompanying Notes to Financial Statements.
INDEPENDENT ACCOUNTANTS' REPORT
To the Shareholders and Board of Directors
of Scout Kansas Tax-Exempt Bond Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Scout Kansas Tax-Exempt Bond 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 Kansas Tax-Exempt Bond 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 Kansas Tax-Exempt Bond 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
JB154B 8/98
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