UMB SCOUT FUNDS
Kansas Tax-Exempt Bond Fund
Annual Report June 30, 1999
A no-load mutual fund that seeks current income exempt from
regular federal income tax and Kansas state personal income
tax by investing in municipal bonds or debt instruments.
TO THE SHAREHOLDERS
The UMB Scout Kansas Tax-Exempt Bond Fund closed the quarter
ended June 30, 1999, at $9.80 per share. Investors had a
total return (price change and reinvested distributions) of
- -0.91% for the quarter and 2.62% for the fiscal year. The
Fund seeks current income exempt from regular federal income
tax and Kansas state personal income tax.
Income from the Fund may be subject to the federal
Alternative Minimum Tax as well as certain state and local
taxes. Capital gains are not exempt from federal income tax.
The municipal bond market followed the lead of the U.S.
Treasury market during the quarter, as it typically does,
with the trend for higher yields in both markets. This
increase in yields meant a matching drop in prices (bond
prices go down as yields go up). The price decline of the
individual bonds within the Fund produced a lower quarterly
return despite our positive return for the year ended June
30. The Fund also outperformed the relevant market indexes.
For example, the Lehman Brothers Municipal Bond Index showed
a -1.77% return for the quarter.
There was activity in the Fund during the quarter that
produced proceeds to reinvest. A bond with a coupon/interest
rate of 5.30% for $250,000 Kansas Development Finance Board
- - Skill Program Project was called, and a bond matured for
Leavenworth County Unified School District 469 (Lansing)
3.90% and paid off June 1, 1999. As the bond market yields
have moved higher, we will be able to reinvest these
proceeds with higher current rates, although the market has
not returned to the rates seen in 1972 when the called bonds
were issued and purchased.
The demand for Kansas bonds at current rates has been
steady. Individual bondholders have increased their
purchases because of the good supply, and the fixed income
buyer/holder has enjoyed the larger coupons on the bond
issues. Institutional buyers (i.e. insurance companies) have
been out of the municipal market during the last 30 to 60
days because the timing of their cash flows has not allowed
them to take advantage of the markets. This contributed to
the increase in yields as dealers priced the new issues for
the consumer to buy instead of holding them in their supply
inventory.
The Fund purchased several new bonds during the quarter:
Salina Water and Sewer, Finney County, Sedgwick County
Unified School District 265 (Goddard), City of Hays, City of
Topeka, and Johnson County Water District #1.
The average life of the Fund on June 30, 1999, was 6.4 years
to maturity. We have worked to keep some spacing in the
Fund's maturity schedule to take advantage of the market
changes when they occur. This "laddered" approach in the
Fund means the bonds mature at staggered intervals and we
then can reinvest at current rates. The Fund keeps some
short-term reserves at all times in order to take advantage
of market movements.
For the six months ended June 30, 1999, shareholders
received an ordinary income dividend of $.20 per share and
no long-term capital gains.
During the past fiscal year, 100% of total regular income
dividends declared are exempt from interest for federal
income tax purposes.
We appreciate your participation in the UMB Scout Kansas Tax-
Exempt Bond Fund. Please feel free to call us if you have
any questions or comments.
Sincerely,
/s/M. Kathryn Gellings
M. Kathryn Gellings
/s/Rex W. Matlack
Rex W. Matlack
UMB Investment Advisors
CHART - FUND DIVERSIFICATION
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 $10.01 $0.33 - $10.34
06/30/99* 9.80 0.20 - 10.32
* 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.
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 Kansas Tax-Exempt
Bond Fund -0.91% 2.62% 2.41%
Lehman Brothers
5-Year Municipals Index* -1.24% 3.25% 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 or mutual funds (there are no direct
investments or fees in these indices).
FINANCIAL STATEMENTS JUNE 30, 1999
Statement of Net Assets
FACE MARKET
AMOUNT DESCRIPTION VALUE
KANSAS
$ 165,000 Barton County Kansas, Series A,
4.75%, due September 1, 2011 $ 160,256
115,000 Bonner Springs Kansas, Series A,
4.125%, due October 1, 1999 115,177
100,000 Bonner Springs Kansas, Series B,
4.125%, due August 1, 2000 100,001
100,000 City of Wichita Kansas G.O.,
4.50%, due September 1, 2009 95,875
250,000 Cloud County Kansas, Unified School
District 333, 5.10%, due September 1, 2004 255,625
55,000 Concordia Kansas, Water & Sewer Rev.,
4.70%, due November 1, 2007 53,419
25,000 Derby Kansas G.O., Series A,
4.65%, due June 1, 2009 24,500
100,000 Desoto Kansas Temp. Notes,
3.85%, due September 1, 1999 100,047
100,000 Douglas County Kansas, Unified School
District 497, 4.50%, due September 1, 2002 100,500
200,000 Douglas County Kansas, Unified School District
497, Series A, 4.30%, due September 1, 2005 196,750
10,000 Ellsworth Kansas, Public Building Rev.,
4.50%, due June 1, 2005 9,825
20,000 Ellsworth Kansas, Public Building Rev.,
4.70%, due June 1, 2007 19,575
5,000 Eudora Kansas Water & Sewer Rev.,
3.90%, due October 1, 1999 4,997
85,000 Finney County Kansas, Unified School District
457, 5.50%, due October 1, 1999 85,414
50,000 Finney County Kansas G.O., 4.30%,
due December 1, 2011 46,250
50,000 Garden City Kansas,
4.10%, due November 1, 2004 48,875
50,000 Hays Kansas,
4.40%, due September 1, 2010 47,250
30,000 Haysville Kansas, Water & Sewer Rev.,
4.50%, due October 1, 1999 30,084
100,000 Johnson County Kansas, Series A,
5.10%, due September 1, 2000 101,625
100,000 Johnson County Kansas Park Facility,
4.90%, due September 1, 2009 97,375
125,000 Johnson County Kansas, Unified School District
229, Series B, 4.00%, due September 1, 2003 123,281
100,000 Johnson County Kansas, Unified School District
229, Series A, 5.20%, due October 1, 2003 103,125
100,000 Johnson County Kansas, Unified School District
229, Series A, 5.50%, due October 1, 2005 103,500
50,000 Johnson County Kansas, Unified School District
229, Series A, 5.125%, due October 1, 2006 51,563
25,000 Johnson County Kansas, Unified School District
231, Refinance & Improvement, Series A, 5.25%,
due October 1, 2002 25,750
300,000 Johnson County Kansas, Unified School District
231, Refinance & Improvement, Series A,
5.10%, due October 1, 2004 307,500
5,000 Johnson County Kansas, Unified School District
231, Refinance & Improvement, Series A, 4.35%,
due October 1, 2005 4,944
5,000 Johnson County Kansas, Unified School District
512, Shawnee Mission, Series C, 6.00%, due
October 1, 2007 5,031
100,000 Johnson County Kansas, Unified School District
512, 5.00%, due October 1, 2009 100,250
100,000 Johnson County Kansas, Water District,
4.90%, due June 1, 2012 97,375
50,000 Johnson County Kansas, Unified School District
512, 4.95%, due October 1, 2009 50,000
5,000 Junction City Kansas, Water & Sewer Rev.,
Series A, 4.50%, due September 1, 2003 5,019
5,000 Kansas City Kansas, Series A, 5.625%, due
September 1, 2009 5,181
KANSAS (Continued)
$ 200,000 Kansas State Dept. of Transportation Highway
Rev., Series A, 4.25%, due September 1, 2001 $ 200,750
5,000 Kansas State Dept. of Transportation Highway
Rev., 4.80%, due March 1, 2002 5,068
200,000 Kansas State Dept. of Transportation Highway
Rev., 5.10%, due March 1, 2005 206,000
50,000 Kansas State Dev. Finance Auth., Board of
Regents Rev., Series A, 4.70%, due March 1, 2002 50,125
100,000 Kansas State Dev. Finance Auth., Board of
Regents Rev., Series A, 4.80%, due March 1, 2003 100,250
100,000 Kansas State Dev. Finance Auth., Board of
Regents Rev., Series A, 4.875%, due March 1, 2004 99,875
5,000 Kansas State Dev. Finance Auth., Comprehensive
Rehab Project Rev., Series KII, 4.60%, due
October 1, 2002 5,031
5,000 Kansas State Highway Rev., Series A,
4.50%, due July, 1, 2003 5,019
5,000 Kansas State Turnpike Auth.,
4.50%, due September 1, 2000 5,044
75,000 Lawrence Kansas, 5
.10%, due September 1, 2001 75,109
30,000 Lawrence Kansas G.O.,
4.35%, due September 1, 2002 30,112
150,000 Lawrence Kansas, Series P,
5.20%, due September 1, 2002 151,688
275,000 Leawood Kansas, Series A, 4
.90%, due September 1, 2001 279,813
5,000 Leawood Kansas, Series A,
5.00%, due September 1, 2002 5,087
100,000 Leawood Kansas,
4.35%, due September 1, 2004 99,500
100,000 Lyons County Kansas, Sales Tax Rev.,
4.70%, due September 1, 2009 98,375
100,000 Miami County Kansas, Unified School District
367, Series A, 4.35%, due September 1, 2005 98,875
100,000 Overland Park Kansas,
6.45%, due September 1, 1999 100,483
200,000 Overland Park Kansas, Internal Improvements,
4.20%, due September 1, 2002 200,000
5,000 Overland Park Kansas, Series B,
5.20%, due September 1, 2002 5,100
100,000 Prairie Village Kansas, Series B,
5.10%, due September 1, 2005 101,750
5,000 Riley County Kansas, Series A,
4.35%, due September 1, 2007 4,863
5,000 Riley County Kansas, Unified School District
383, 4.70%, due November 1, 2003 5,068
80,000 Sabetha Kansas, Electric Rev.,
4.00%, due September 1, 2004 77,000
155,000 Salina Kansas Water & Sewer, Series B,
4.05%, due October 1, 2001 154,225
KANSAS (Continued)
$ 50,000 Salina Kansas Water & Sewer, Series B,
4.10%, due October 1, 2002 $ 49,688
100,000 Salina Kansas Water & Sewer, Series B,
4.40%, due October 1, 2008 96,250
5,000 Sedgwick County Kansas, Series B,
4.20%, due August 1, 1999 5,003
300,000 Sedgwick County Kansas, Series A,
5.00%, due August 1, 2002 304,500
5,000 Sedgwick County Kansas, Unified School
District 260, 4.60%, due October 1, 2010 4,831
200,000 Sedgwick County Kansas, Unified School
District 263, 5.30%, due September 1, 2003 207,000
340,000 Sedgwick County Kansas, Unified School
District 265, 5.40%, due October 1, 2005 354,025
50,000 Sedgwick County Kansas, Unified School
District 265, 4.25%, due October 1, 2008 47,563
50,000 Sedgwick County Kansas, Unified School
District 261, 4.10%, due November 1, 2009 46,563
180,000 Shawnee County Kansas, Series C,
5.30%, due September 1, 2001 184,275
35,000 Shawnee County Kansas, Series D,
4.15%, due September 1, 2005 34,169
50,000 Shawnee County Kansas, Unified School
District 501, 4.30%, due February 1, 2005 49,188
50,000 Shawnee County Kansas, Unified School
District 501, 4.00%, due August 1, 2006 47,875
200,000 Shawnee Kansas, Series A,
4.30%, due December 1, 2004 198,250
145,000 Topeka Kansas, Series C,
5.00%, due August 15, 2000 146,638
100,000 Topeka Kansas, Refunding & Improvement
Rev., Series A, 4.30%, due August 15, 2005 98,250
5,000 Topeka Kansas, Series A,
5.25%, due August 15, 2011 5,025
70,000 Topeka Kansas, Water Works Improvement
& Rev., 4.30%, due August 1, 2007 67,113
30,000 Wellington Kansas, Electric Water Works
& Sewer Utility Rev., 4.60%, due May 1, 2007 29,437
100,000 Wichita Kansas Sales Tax, 4.50%, due June 1, 2000 100,949
20,000 Wichita Kansas, Water & Sewer Utilities,
3.85%, due April 1, 2001 19,900
75,000 Wichita Kansas, Series 728,
5.50%, due September 1, 2001 75,990
25,000 Winfield Kansas, Electric Rev.,
4.65%, due September 1, 2001 25,155
300,000 Wyandotte County Kansas, Unified School
District 204, 5.20%, due September 1, 2004 304,500
50,000 Wyandotte County Kansas, Utility Service
Rev., 4.25%, due September 1, 2009 47,000
7,389,286
ALABAMA
$ 240,000 Columbia Alabama P.C.R. (Alabama Power
Project), Var. Rate, due October 1, 2022 $ 240,000
GEORGIA
200,000 Burke County Georgia P.C.R. (Georgia
Power Project), Var. Rate, due July 1, 2024 200,000
TOTAL INVESTMENTS (Cost $7,814,967) - 100.43% 7,829,286
Other assets less liabilities - (0.43%) (33,551)
TOTAL NET ASSETS - 100.00%
(equivalent to $9.80 per share; 10,000,000 shares of
$1.00 par value capital shares authorized; 795,102
shares outstanding) $ 7,795,735
For federal income tax purposes, the identified cost of investments owned at
June 30, 1999, was $7,814,967.
Net unrealized appreciation for federal income tax purposes was $14,319,
which is comprised of unrealized appreciation of $76,852 and unrealized
depreciation of $62,533.
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS JUNE 30, 1999
Statement of assets and liabilities
ASSETS:
Investment securities, at market value (identified cost
$7,814,967) $ 7,829,286
Cash 2,529
Interest receivable 113,118
Receivable for investments sold 100,000
Total assets 8,044,933
LIABILITIES:
Payable for investments purchased 249,198
Total liabilities 249,198
NET ASSETS $ 7,795,735
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 7,778,676
Accumulated undistributed income:
Net realized gain on investment transactions 2,740
Net unrealized appreciation on investments 14,319
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 7,795,735
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 795,102
NET ASSET VALUE PER SHARE $ 9.80
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS Year Ended June 30, 1999
Statement of operations
INVESTMENT INCOME:
Income:
Interest $ 337,450
Expenses:
Management fees 37,146
Net investment income 300,304
realized and unrealized gain (loss) ON INVESTMENTS:
Net realized gain from investment transactions 2,740
Decrease in net unrealized appreciation of investments (116,545)
Net realized and unrealized loss on investments (113,805)
Net increase in net assets resulting from operations $ 186,499
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statements of changes in net assets
JANUARY 13, 1998
YEAR ENDED (CAPITALIZATION) TO
JUNE 30, 1999 JUNE 30, 1998
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 300,304 $ 61,716
Net realized gain from investment
transactions 2,740 -
Increase (decrease) in net unrealized
appreciation on investments (116,545) 130,864
Net increase in net assets
resulting from operations 186,499 192,580
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (300,304) (61,716)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 352,878 and 638,344 shares
sold 3,526,358 6,213,178
Net asset value of 2,641 and 200 shares
issued for reinvestment of distributions 26,318 1,986
3,552,676 6,215,164
Cost of 167,651 and 31,310 shares
redeemed (1,679,093) (310,071)
Net increase in net assets from
capital share transactions 1,873,583 5,905,093
Net increase in net assets 1,759,778 6,035,957
NET ASSETS:
Beginning of period 6,035,957 -
End of period $ $ 7,795,735 $ 6,035,957
*Distributions to shareholders:
Income dividends per share $ 0.40 $ 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 year ended June 30, 1999
(excluding short-term securities), were as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 12,228,017 $ -
Proceeds from sales 10,232,175 -
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.
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share
outstanding throughout the period.
FEBRUARY 23, 1998
YEAR ENDED TO
JUNE 30, 1999 JUNE 30, 1998*
Net asset value, beginning of period $ 9.94 $ 10.00
Income from investment operations:
Net investment income 0.40 0.13
Net realized and unrealized loss
on securities (0.14) (0.06)
Total from investment operations 0.26 0.07
Distributions from:
Net investment income (0.40) (0.13)
Net asset value, end of period $ 9.80 $ 9.94
Total return 3% 2%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 8 $ 6
Ratio of expenses to average net assets 0.50% 0.50%
Ratio of net investment income to average
net assets 4.01% 4.33%
Portfolio turnover rate 12% 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 UMB Scout Kansas Tax-Exempt Bond Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities of UMB Scout Kansas Tax-Exempt Bond 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 Kansas Tax-
Exempt Bond 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 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 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
"UMB" and "Scout" are registered service marks of UMB
Financial Corporation.
UMB Financial Corporation also claims service mark rights to
the Scout design.
JB154B(8/99) 508770
