PROSPECTUS
April 30, 1996
Scout Stock Fund, Inc.
Scout Regional Fund, Inc.
Scout Bond Fund, Inc.
Scout WorldWide Fund, Inc.
Scout Money Market Fund, Inc.
Scout Tax-Free Money Market Fund, Inc.
Scout Balanced Fund, Inc.
Toll-Free 1-800-996-2862
INVESTMENT OBJECTIVES
The Scout Funds were created especially for the benefit of
customers of affiliated banks of UMB Financial Corporation and
those investors who share the Funds' investment goals. All of the
Funds are no-load. Scout Stock Fund's investment objective is
long-term growth of both capital and dividend income. Scout
Regional Fund's objective is long-term growth of both capital and
dividend income through investment in smaller regional companies.
Scout Bond Fund's investment objective is maximum current income
consistent with its quality and maturity standards by investing in
a diversified list of fixed-income obligations. Scout Balanced
Fund seeks both long-term capital growth and high current income.
Long-term capital growth is intended to be achieved primarily by
the Fund's investment in a diversified portfolio of equity
securities (common stocks and securities convertible into common
stocks). High current income is intended to be achieved by the
Fund's investment in a diversified portfolio of fixed-income
obligations. Scout WorldWide Fund's objective is long-term growth
of both capital and dividend income through investment in a
diversified portfolio of equity securities of established
companies either located outside the United States, or whose
primary business is carried on outside the country. The Fund
initially intends to invest in the securities of foreign issuers
issued within the United States such as American Depository
Receipts (ADR's). The Fund intends to spread its investments among
various countries and a number of different industries. (See
"Investment Objective and Portfolio Management Policy" on page 14
of this prospectus. For a discussion of special risk consideration
see page 21 of this prospectus.) Scout Money Market Fund offers
two portfolios with the objective of maximizing income consistent
with safety of principal and liquidity. The Fund further seeks to
maintain a constant net asset value (price) of $1.00 per share.
Scout Tax-Free Money Market Fund's investment objective is
maximizing income free from federal income tax consistent with
safety of principal and liquidity. The Fund further seeks to
maintain a constant net asset value (price) of $1.00 per share by
investing in short-term investment-grade municipal securities
which are exempt from federal income tax. There are, however, no
guarantees that any of the Funds' objectives will be met, or that
the $1.00 per share price of the Money Market or Tax-Free Money
Market Funds will be maintained. THE SHARES OFFERED BY THIS
PROSPECTUS 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 (F.D.I.C.) OR
OTHER APPLICABLE DEPOSIT INSURANCE. THESE SHARES INVOLVE
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
PURCHASE INFORMATION
Minimum Investment (each Fund or Portfolio selected)
Initial Purchase................$1,000
Subsequent Purchase by check....$100
Subsequent Purchase by wire.....$500
Shares are purchased and redeemed at net asset value. There are no
sales, redemption or Rule 12b-1 distribution charges. If you need
further information, please call the Fund at the telephone number
indicated.
ADDITIONAL INFORMATION
This prospectus should be read and retained for future reference.
It contains the information that you should know before you
invest. A "Statement of Additional Information" of the same date
as this prospectus has been filed with the Securities and Exchange
Commission and is incorporated by reference. Investors desiring
additional information about the Funds may obtain a copy without
charge by writing or calling the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
Highlights 2
Fund Expenses 4
Financial Highlights 8
Investment Objective and Portfolio Management Policy 14
Repurchase Agreements 21
Risk Factors 21
Investment Restrictions 22
Performance Measures 22
How to Purchase Shares 24
Initial Investments 24
Investments Subsequent to Initial Investment 24
Telephone Investment Service 25
Automatic Monthly Investment Plan 25
How to Redeem Shares 25
Systematic Redemption Plan 28
How to Exchange Shares Between Scout Funds 28
How Share Price is Determined 29
Officers and Directors 30
Manager and Underwriter 30
General Information and History 32
Dividends, Distributions and Their Taxation 33
Shareholder Services 35
Shareholder Inquiries 35
Highlights For more infor-
mation on
this subject
see page.
The Funds - The Scout Funds are a group of seven open-end
diversified investment companies sponsored by
Jones & Babson, Inc. especially for customers of affiliate banks
of UMB Financial Corporation. .........................1
All of the Funds are incorporated in Maryland. Scout Stock Fund,
Scout Bond Fund and Scout Tax-Free Money Market Fund were
incorporated on July 29, 1982. Scout Money Market Fund was
incorporated on June 23, 1982. Scout Regional Fund was
incorporated on July 8, 1986, Scout WorldWide Fund was
incorporated on January 7, 1993, and Scout Balanced Fund was
incorporated on July 13, 1995. ........................32
Securities - Scout Stock Fund, Regional Fund, Bond Fund, Tax-Free
Money Market Fund, WorldWide Fund, and Balanced Fund each offer
one class of non-assessable common shares with equal voting
rights. Scout Money Market Fund offers its common shares in two
series-Federal and Prime. Both portfolios have the same objective
but vary as to the types of securities held. ..........32
Scout Stock Fund invests in common stocks of companies selected
for their promise of long-term growth of both capital and dividend
income. ...............................................14
Scout Regional Fund invests in common stocks of midwestern
regional companies selected for their promise of long-term growth
of both capital and dividend income. ..................14
Scout Bond Fund seeks maximum current income consistent with its
quality and maturity standards by investing in fixed income
obligations. ..........................................15
Scout Money Market Fund and Scout Tax-Free Money Market Fund are
convenient facilities for investors to manage their money over the
short-term for the purpose of maximizing income consistent with
safety of principal and liquidity. Maturities will not exceed one
year. Average-weighted maturity in each portfolio or fund will not
exceed 90 days. Scout Money Market Fund holdings will be limited
to domestic issues of high quality. Scout Tax-Free Money Market
Fund holdings will be primarily invested in domestic issues of
high quality municipal securities. ....................16
Scout WorldWide Fund invests in equity securities of established
companies either located outside the U.S. or whose primary
business is carried on outside the country. ...........18
Scout Balanced Fund seeks both long-term capital growth by
investment in equity securities and high current income by
investment in fixed-income obligations. ...............20
How to Invest - Fund shares can only be purchased directly from
the Funds through the underwriter, Jones & Babson, Inc. The
minimum initial purchase is $1,000. Subsequent purchases must be
at least $100, except wire purchases which must be in the amount
of $500 or more. ......................................24
Telephone Investment - You may make investments of $1,000 or more
by telephone if you have authorized such
investments. ..........................................25
Automatic Monthly Investment - You may elect to make monthly
investments in a constant dollar amount from your checking account
($100 minimum). .......................................25
Redemption - Shares of the Funds are redeemable at net asset
value next effective after receipt by the Fund of a
shareholder's request in good order. No redemption
charge is made. .......................................25
Exchange Privilege with Other Scout Funds - Shareholders may
transfer their investment without charge to any other Scout Fund.
Since this exchange involves the liquidation of shares from one
Fund and a purchase of shares in another Fund, the transaction may
or may not be taxable depending on the shareholder's tax
status. ...............................................28
Automatic Exchange - You may exchange shares from your account
($100 minimum) in any Scout Fund to an identically registered
account in any other Scout Fund according to your instructions.
Monthly exchanges will be continued until all shares have been
exchanged or you terminate the Automatic Exchanges
authorization.
Management of the Funds and Fees - The Funds are managed by UMB
Bank, n.a. which supplies all normal services necessary for the
Funds to function as open-end diversified investment companies.
The Management Fees charged by the Bank to each Fund cover all
normal operating costs, exclusive of taxes and other charges of
governments and their agencies (including the cost of qualifying
the Funds' shares for sale in any jurisdiction), certain fees,
dues, interest, brokerage commissions and extraordinary costs, if
any. Scout Money Market Fund and Scout Tax-Free Money Market Fund
are charged an annual fee of 50/100 of 1% (0.50%) of the Funds'
average daily net assets. Scout Stock Fund, Scout Regional Fund,
Scout Bond Fund, Scout WorldWide Fund, and Scout Balanced Fund are
charged annual fees of 85/100 of 1% (0.85%) of the Funds' average
daily net assets. Although these fees are higher than the fees of
most other managers whose charges cover only investment advisory
services with all remaining operational expenses absorbed directly
by the Fund, it is anticipated that UMB Bank's charges will
compare favorably with other managers when all expenses of Fund
shareholders are taken into account. ..................30
Dividend Policies - Scout Stock Fund, Regional Fund, WorldWide
Fund and Balanced Fund will pay substantially all of their net
investment income semiannually, usually in June and December. It
is contemplated that substantially all of any net capital gains
realized during a fiscal year will be distributed with the fiscal
year-end dividend, with any remaining balance paid in
December. .............................................33
Scout Tax-Free Money Market Fund and each Portfolio of Scout Money
Market Fund declare a dividend every business day, equal to
substantially all of their undistributed net investment income
which is pro-rated daily among the shares eligible to receive it.
Daily dividends are accumulated and paid monthly. These Funds'
policies relating to maturities make it unlikely that they will
have capital gains or losses. .........................33
Scout Bond Fund will declare a dividend every business day, equal
to substantially all of the Fund's undistributed net investment
income which is pro-rated daily among the shares eligible to
receive it. Daily dividends are accumulated and paid monthly.
Substantially all of any net capital gains realized during a
fiscal year will be distributed with the fiscal year-end dividend,
with any remaining balance paid in December. ..........33
Taxes - The Funds will distribute substantially all of their net
income each year in order to be exempt from federal income tax.
Dividend and capital gains distributions will be taxable to each
shareholder in accordance with the shareholder's tax
status. ................................................33
Risk Factors - Risk Factors generally include interest rate risk,
currency risk and general equity risk.
For a discussion of risk factors applicable to repurchase
agreements. ...........................................21
For a discussion of risk factors peculiar to money market
instruments. ..........................................21
For a discussion of risk factors applicable to concentration of
assets in the banking industry. .......................21
For a discussion of risk factors applicable to foreign
investments. ..........................................21
FUND EXPENSES
The following information is provided in order to assist you in
understanding the various costs and expenses that
a shareholder of a Scout Fund will bear directly or indirectly.
Scout Stock Fund
The expenses set forth below are based on the fiscal year ended
June 30, 1995.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees .85%
12b-1 fees None
Other expenses .01%
Total Fund operating expenses .86%
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period:
1 Year 3 Year 5 Year 10 Year
$9 $27 $48 $106
Scout Regional Fund
The expenses set forth below are based on the fiscal year ended
December 31, 1995.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees .85%
12b-1 fees None
Other expenses .04%
Total Fund operating expenses .89%
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period:
1 Year 3 Year 5 Year 10 Year
$9 $28 $49 $110
Scout Bond Fund
The expenses set forth below are based on the fiscal year ended
June 30, 1995.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees .85%
12b-1 fees None
Other expenses .01%
Total Fund operating expenses .86%
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period:
1 Year 3 Year 5 Year 10 Year
$9 $28 $48 $106
Scout Money Market Fund (Federal Portfolio)
The expenses set forth below are based on the fiscal year ended
June 30, 1995.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees .50%
12b-1 fees None
Other expenses .01%
Total Fund operating expenses .51%
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period:
1 Year 3 Year 5 Year 10 Year
$5 $16 $29 $64
Scout Money Market Fund (Prime Portfolio)
The expenses set forth below are based on the fiscal year ended
June 30, 1995.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees .50%
12b-1 fees None
Other expenses .01%
Total Fund operating expenses .51%
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period:
1 Year 3 Year 5 Year 10 Year
$5 $16 $29 $64
Scout Tax-Free Money Market Fund
The expenses set forth below are based on the fiscal year ended
June 30, 1995.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees .50%
12b-1 fees None
Other expenses .04%
Total Fund operating expenses .54%
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period:
1 Year 3 Year 5 Year 10 Year
$6 $17 $30 $68
Scout WorldWide Fund, Inc.
The expenses set forth below are based on the fiscal year ended
December 31, 1995.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees .85%
12b-1 fees None
Other expenses None
Total Fund operating expenses .85%
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period:
1 Year 3 Year 5 Year 10 Year
$9 $27 $47 $105
Scout Balanced Fund, Inc.
The expenses set forth below are an estimate only.
"Other Expenses" is based on estimated amounts for the current
fiscal year.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees .85%
12b-1 fees None
Other expenses .08%
Total Fund operating expenses .93%
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period:
1 Year 3 Year
$9 $30
The above examples should not be considered a representation of
past or future expenses as actual expenses may be greater or less
than those shown. The assumed 5% annual return is hypothetical and
should not be considered a representation of past or future annual
return. The actual return may be greater or less than the assumed
amount.
The purpose of the foregoing fee tables is to assist the investor
in understanding the various costs and expenses that an investor
in a Fund will bear directly or indirectly. The various costs and
expenses are explained in more detail in this prospectus.
Management fees are discussed in greater detail under "Management
and Investment Counsel."
FINANCIAL HIGHLIGHTS
Scout Stock Fund, Inc.
The following financial highlights for the ten years ended June
30, 1995, are from audited financial statements of Scout Stock
Fund, Inc. and should be read in conjunction with the
financial statements of the Fund and the report of Arthur
Andersen LLP, independent public accountants, appearing in the
June 30, 1995, Annual Report to Shareholders which is
incorporated by reference in this prospectus. The information
for each of the five years in the period ended June 30, 1990,
is not covered by the report of Arthur Andersen LLP.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 15.42 $ 15.74 $ 15.11 $ 14.16 $ 13.69 $ 13.30 $ 13.07 $ 15.26 $ 13.52 $ 12.29
Income from investment
operations:
Net investment income 0.48 0.35 0.36 0.44 0.54 0.58 0.54 0.45 0.43 0.48
Net gains or (losses)
on securities (both
realized and unrealized) 2.06 0.49 1.34 1.08 0.59 0.55 1.31 (1.09) 1.91 2.57
Total from investment
operations 2.54 0.84 1.70 1.52 1.13 1.13 1.85 (0.64) 2.34 3.05
Less distributions:
Dividends from net
investment income (0.47) (0.35) (0.35) (0.43) (0.54) (0.58) (0.76) (0.43) (0.20) (0.71)
Distributions from
capital gains (1.13) (0.81) (0.72) (0.14) (0.12) (0.16) (0.86) (1.12) (0.40) (1.11)
Total distributions (1.60) (1.16) (1.07) (0.57) (0.66) (0.74) (1.62) (1.55) (0.60) (1.82)
Net asset value,
end of year $ 16.36 $ 15.42 $ 15.74 $ 15.11 $ 14.16 $ 13.69 $ 13.30 $ 13.07 $ 15.26 $ 13.52
Total return 17% 5% 11% 11% 9% 9% 15% (4%) 18% 27%
Ratios/Supplemental Data
Net assets, end of
year (in millions) $ 137 $ 115 $ 102 $ 76 $ 53 $ 48 $ 41 $ 43 $ 42 $ 32
Ratio of expenses
to average net assets 0.86% 0.87% 0.87% 0.86% 0.85% 0.88% 0.87% 0.86% 0.87% 0.87%
Ratio of net
investment income
to average net assets 3.01% 2.22% 2.30% 2.91% 4.03% 4.23% 4.08% 3.41% 3.08% 3.75%
Portfolio turnover rate 52% 22% 21% 12% 8% 9% 17% 33% 50% 38%
</TABLE>
Scout Regional Fund, Inc.
The following financial highlights for each of the periods
presented from inception (November 17, 1986) to December 31, 1995,
are from audited financial statements of Scout Regional Fund, Inc.
and should be read in conjunction with the financial statements of
the Fund and the report of Baird, Kurtz & Dobson, independent
certified public accountants, appearing in the December 31, 1995,
Annual Report to Shareholders which is incorporated by reference
in this prospectus. The information for each of the periods ended
June 30, 1991, and prior is not covered by the report of Baird,
Kurtz & Dobson.
<TABLE>
<CAPTION>
July 1 to Nov. 17,
Years Ended Dec. 31, Dec. 31, Years Ended June 30, June 30, 1986 to
1995 1994 1993 1992 1991* 1991 1990 1989 1988 1987
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 9.20 $ 9.49 $ 9.09 $ 8.30 $ 8.28 $ 8.24 $ 8.27 $ 9.24 $ 10.03 $ 10.00
Income from
investment
operations:
Net invest-
ment income 0.19 0.18 0.12 0.12 0.03 0.60 0.64 0.68 0.67 0.32
Net gains or
(losses) on
securities
(both
realized and
unrealized) 1.62 (0.12) 0.42 0.79 (0.01) 0.04 (0.03) (0.97) (0.77) 0.03
Total from
investment
operations 1.81 0.06 0.54 0.91 0.02 0.64 0.61 (0.29) (0.10) 0.35
Less distri-
butions:
Dividends
from net
investment
income (0.19) (0.18) (0.14) (0.12) - (0.60) (0.64) (0.68) (0.67) (0.32)
Distributions
from capital
gains (0.71) (0.17) - - - - - - (0.02) -
Total distri-
butions (0.90) (0.35) (0.14) (0.12) - (0.60) (0.64) (0.68) (0.69) (0.32)
Net asset value,
end of period $ 10.11 $ 9.20 $ 9.49 $ 9.09 $ 8.30 $ 8.28 $ 8.24 $ 8.27 $ 9.24 $ 10.03
Total return 20% 1% 6% 11% .2% 8% 8% (3%) (1%) 4%
Ratios/Supple-
mental Data
Net assets,
end of period
(in millions) $ 36 $ 28 $ 25 $ 8 $ 2 $ .4 $ 2 $ 2 $ 5 $ 6
Ratio of
expenses to
average net
assets 0.89% 0.91% 0.92% 1.06% 2.93%** 1.04% 1.12% 1.06% 1.04% 1.13%*
Ratio of net
investment
income to
average net
assets 1.95% 1.95% 1.81% 1.91% 0.93% 7.13% 7.68% 7.66% 6.79% 6.18%*
Portfolio
turnover rate 37% 27% 17% 7% 14% 0% 0% 8% 12% 14%*
<FN>
<F1> *Ratios for these periods of operations are annualized.
<F2>**Includes fees to register Fund shares for sale in additional
States.
</FN>
</TABLE>
Scout Bond Fund, Inc.
The following financial highlights for the ten years ended June
30, 1995, are from audited financial statements of
Scout Bond Fund, Inc. and should be read in conjunction with the
financial statements of the Fund and the report of Arthur Andersen
LLP, independent public accountants, appearing in the June 30,
1995, Annual Report to Shareholders which is incorporated by
reference in this prospectus. The information for each of the five
years in the period ended June 30, 1990, is not covered by the
report of Arthur Andersen LLP.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 10.75 $ 11.53 $ 11.14 $ 10.68 $ 10.48 $ 10.44 $ 10.85 $ 10.98 $ 10.86 $ 10.79
Income from investment
operations:
Net investment income 0.63 0.62 0.68 0.75 0.80 0.81 0.80 0.80 0.82 0.88
Net gains or (losses)
on securities (both
realized and unrealized) 0.35 (0.74) 0.39 0.43 0.16 0.02 0.04 (0.07) (0.30) 0.56
Total from investment
operations 0.98 (0.12) 1.07 1.18 0.96 0.83 0.84 0.73 0.52 1.44
Less distributions:
Dividends from net
investment income (0.63) (0.62) (0.68) (0.72) (0.76) (0.79) (1.22) (0.85) (0.40) (1.29)
Distributions from
capital gains -* (0.04) - - - - (0.03) (0.01) - (0.08)
Total distributions (0.63) (0.66) (0.68) (0.72) (0.76) (0.79) (1.25) (0.86) (0.40) (1.37)
Net asset value,
end of year $ 11.10 $ 10.75 $ 11.53 $ 11.14 $ 10.68 $ 10.48 $ 10.44 $ 10.85 $ 10.98 $ 10.86
Total return 10% (1)% 10% 11% 9% 8% 8% 7% 5% 14%
Ratios/Supplemental Data
Net assets,
end of year
(in millions) $ 77 $ 82 $ 87 $ 63 $ 43 $ 34 $ 28 $ 30 $ 31 $ 19
Ratio of expenses
to average
net assets 0.86% 0.87% 0.87% 0.87% 0.87% 0.88% 0.88% 0.87% 0.87% 0.88%
Ratio of net
investment income
to average net assets 5.91% 5.50% 5.95% 6.77% 7.44% 7.61% 7.69% 7.47% 7.36% 8.11%
Portfolio turnover rate 2% 9% 19% 24% 21% 13% 8% 7% 12% 23%
<FN>
<F1>*Capital gain distribution of .003 not significant for per share
table.
</FN>
</TABLE>
Scout Money Market Fund, Inc.
The following financial highlights for the ten years ended June
30, 1995, are from audited financial statements of
Scout Money Market Fund, Inc. and should be read in conjunction
with the financial statements of the Fund and the report of Arthur
Andersen LLP, independent public accountants, appearing in the
June 30, 1995, Annual Report to Shareholders which is incorporated
by reference in this prospectus. The information for each of the
five years in the period ended June 30, 1990, is not covered by the
report of Arthur Andersen LLP.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIME PORTFOLIO
Net asset value,
beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.05 0.03 0.03 0.04 0.07 0.08 0.08 0.06 0.05 0.07
Less distributions:
Dividends from net
investment income (0.05) (0.03) (0.03) (0.04) (0.07) (0.08) (0.08) (0.06) (0.05) (0.07)
Net asset value,
end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 5% 3% 3% 5% 7% 8% 9% 7% 6% 7%
Ratios/Supplemental Data
Net assets, end of
year (in millions) $ 245 $ 172 $ 214 $ 209 $ 217 $ 142 $ 116 $ 91 $ 65 $ 61
Ratio of expenses
to average net assets 0.51% 0.51% 0.51% 0.51% 0.51% 0.51% 0.52% 0.51% 0.51% 0.50%
Ratio of net
investment income
to average net assets 5.10% 2.92% 2.87% 4.44% 6.85% 8.19% 8.58% 6.69% 5.76% 7.18%
FEDERAL PORTFOLIO
Net asset value,
beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.05 0.03 0.03 0.04 0.07 0.08 0.08 0.06 0.05 0.07
Less distributions:
Dividends from net
investment income (0.05) (0.03) (0.03) (0.04) (0.07) (0.08) (0.08) (0.06) (0.05) (0.07)
Net asset value,
end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 5% 3% 3% 5% 7% 8% 8% 7% 6% 7%
Ratios/Supplemental Data
Net assets, end of
year (in millions) $ 183 $ 195 $ 271 $ 250 $ 217 $ 139 $ 151 $ 129 $ 107 $ 104
Ratio of expenses
to average
net assets 0.51% 0.50% 0.50% 0.51% 0.51% 0.52% 0.50% 0.50% 0.50% 0.51%
Ratio of net
investment income
to average net assets 4.97% 2.81% 2.81% 4.43% 6.68% 8.19% 8.12% 6.31% 5.63% 7.06%
</TABLE>
Scout Tax-Free Money Market Fund, Inc.
The following financial highlights for the ten years ended June
30, 1995, are from audited financial statements of
Scout Tax-Free Money Market Fund, Inc. and should be read in
conjunction with the financial statements of the Fund and the
report of Arthur Andersen LLP, independent public accountants,
appearing in the June 30, 1995, Annual Report to Shareholders
which is incorporated by reference in this prospectus. The
information for each of the five years in the period ended June
30, 1990, is not covered by the report of Arthur Andersen LLP.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income 0.03 0.02 0.02 0.03 0.05 0.05 0.05 0.04 0.04 0.05
Less distributions:
Dividends from net
investment income (0.03) (0.02) (0.02) (0.03) (0.05) (0.05) (0.05) (0.04) (0.04) (0.05)
Net asset value,
end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 3% 2% 2% 3% 5% 6% 6% 4% 4% 5%
Ratios/Supplemental Data
Net assets, end
of year (in millions) $ 78 $ 94 $ 66 $ 77 $ 67 $ 57 $ 71 $ 67 $ 76 $ 60
Ratio of expenses
to average
net assets 0.54% 0.53% 0.52% 0.52% 0.53% 0.53% 0.52% 0.53% 0.53% 0.52%
Ratio of net
investment income to
average net assets 3.20% 2.06% 2.15% 3.32% 4.80% 5.54% 5.66% 4.39% 3.98% 4.91%
</TABLE>
Scout WorldWide Fund, Inc.
The following financial highlights for each of the periods
presented from inception (September 14, 1993) to December 31,
1995, are from audited financial statements of Scout WorldWide
Fund, Inc. and should be read in conjunction with the financial
statements of the Fund and the report of Baird, Kurtz & Dobson,
independent certified public accountants, appearing in the
December 31, 1995, Annual Report to Shareholders which is
incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
Years Ended December 31, September 14, 1993
1995 1994 to December 31, 1993*
</CAPTION>
<S> <C> <C> <C>
Net asset value,
beginning of period $ 10.84 $ 10.68 $ 10.13
Income from investment operations:
Net investment income 0.22 0.17 0.03
Net gains or losses on securities
(both realized and unrealized) 1.36 0.23 0.55
Total from investment operations 1.58 0.40 0.58
Less distributions:
Dividends from net
investment income (0.22) (0.17) (0.03)
Distributions from capital gains (0.12) (0.07) -
Total distributions (0.34) (0.24) (0.03)
Net asset value, end of period $ 12.08 $ 10.84 $ 10.68
Total return 15% 4% 21%
Ratios/Supplemental Data
Net assets, end of year
(in millions) $ 24 $ 18 $ 6
Ratio of expenses to average
net assets 0.85% 0.85% 0.85%
Ratio of net investment
income to average net assets 1.97% 1.87% 1.43%
Portfolio turnover rate 27% 24% 2%
<FN>
<F1>*The Fund was capitalized on March 5, 1993 with $100,000,
representing 10,000 shares at a net asset value of $10.00 per
share. Initial public offering was made on September 14, 1993,
at which time net asset value was $10.13 per share.
Ratios for this initial period of operation are annualized.
</FN>
</TABLE>
INVESTMENT OBJECTIVE and
PORTFOLIO MANAGEMENT POLICY
Each Fund's objectives and policies as described in this section
will not be changed without approval of a majority of the Fund's
outstanding shares.
Scout Stock Fund
Scout Stock Fund's objective is to provide investors with long-
term growth of both capital and dividend income. Current yield is
secondary to the long-term growth objective.
The Fund cannot guarantee that these objectives will be achieved
because there are inherent risks in the ownership of the
investments made by the Fund. The value of the Fund's shares will
reflect changes in the market value of its investments, and
dividends paid by the Fund will vary with the income it receives
from these investments. Through careful management and
diversification it will seek to reduce risk and enhance the
opportunities for long-term growth of capital and income.
Normally the Fund will invest at least 80% of its total assets
(exclusive of cash) in common stocks. There are no restrictions or
guidelines regarding investments of Fund assets in shares listed
on an exchange or traded over-the-counter.
The Fund believes the true value of a company's stock is
determined by its earning power, dividend-paying ability, and in
many cases, by its assets. Consequently, the primary emphasis will
be placed on progressive well-managed companies in growing
industries that have demonstrated both a consistent and an above-
average ability to increase their earnings and dividends and which
have favorable prospects of sustaining such growth.
The Fund also believes that the intrinsic worth and the consequent
value of the stock of most well-managed and successful companies
usually does not change rapidly, even though wide variations in
the price may occur. So normally, long-term positions in stocks of
the portfolio companies selected will be taken and maintained
while the company's record and prospects continue to meet with
management's approval. The Fund will change its investments when,
in management's judgment, economic and market conditions make such
a course desirable. But such changes will be no more than is
necessary to carry out the Fund's objectives.
Necessary reserves will be held in cash or short-term debt
obligations, including repurchase agreements (see below), readily
changeable to cash. The management believes, however, that there
may be times when the shareholders' interests are best served and
the objectives are most likely to be achieved, by investing in
securities convertible into common stocks, preferred stocks, high-
grade bonds or other defensive issues. It retains the freedom to
administer the portfolio of the Fund accordingly when, in its
judgment, economic and market conditions make such a course
desirable.
The Fund also may invest in issues of the United States Treasury
and United States government agencies subject to repurchase
agreements entered into with the seller of the issue. The use of
repurchase agreements by the Fund involves certain risks. For a
discussion of repurchase agreements and their risks see page 21.
Although the Fund does not intend to obtain short-term trading
profits, it is possible that holdings may be increased when a
stock is considered to be undervalued and decreased when it is
considered to be overvalued. Scout Stock Fund's annualized
turnover ratio for the fiscal year ended June 30, 1993, was 21%,
for June 30, 1994, it was 22%, and for June 30, 1995, it was 52%.
Commissions paid during the fiscal year ended June 30, 1995,
amounted to $75,000.
The Fund does not intend to concentrate its investments in any
particular industry. Without the approval of shareholders, it will
not purchase a security if as a result of such purchase more than
25% of its assets will be invested in a particular industry.
Scout Regional Fund
The Scout Regional Fund's objective is to provide long-term growth
of both capital and dividend income through investment in smaller
regional companies. Current yield is secondary to the long-term
growth objective. Scout Regional Fund invests in a diversified
list of common stocks representing such companies located in or
doing a substantial portion of their business in Missouri, Kansas,
Iowa, Nebraska, Arkansas, Oklahoma, Illinois, and Colorado. Such
stocks will be selected for their promise of long-term growth of
both capital and dividend income. There can be no assurance that
the Fund will achieve its objective. This objective may not be
changed without shareholder approval. The Fund will seek to
achieve its objective by investing at least 80% of its total
assets (exclusive of cash) in a diversified portfolio of common
stocks of smaller companies either located in or having a
substantial portion of their business in Missouri, Kansas, Iowa,
Nebraska, Arkansas, Oklahoma, Illinois, and Colorado. There are no
restrictions or guidelines regarding investment of Fund assets in
shares listed on an exchange or traded over-the-counter.
The Fund generally intends to invest in stocks of such regional
companies with market capitalization of $1 billion or less,
although there may be times when shareholders' interests are best
served by investing in preferred stocks, bonds or other defensive
issues. It is not anticipated that the Fund will invest in "penny
stocks" or other issues with very low prices although price alone
will not be a sole determining factor in the selection of
investments.
The Fund cannot guarantee that its investment objectives will be
achieved because there are inherent risks in the ownership of any
investments, particularly investments in smaller companies. The
value of the Fund's shares will reflect changes in the market
value of its investments, and dividends paid by the Fund will vary
with the income it receives from these investments. Through
careful management and diversification it will seek to reduce risk
and enhance the opportunities for long-term growth of capital and
income.
While the Fund's investments will be concentrated in the eight-
state region described above, it does not intend to concentrate
its investments in any particular industry. Without the approval
of shareholders, it will not purchase a security if as a result of
such purchase more than 25% of its assets will be invested in a
particular industry. Although there is no intention to concentrate
Fund investments in one or more of the states mentioned above,
there is no limitation upon investments in any particular state.
The Fund will normally invest at least 75% of its assets in
investment-grade common stocks, but reserves the right to
temporarily invest for defensive purposes less than 75% of its
assets in common stocks if, in the opinion of the Fund's manager,
prevailing market conditions warrant. The Fund may invest the
balance, up to 100% of its assets, in preferred stocks or
defensive issues such as short-term money market instruments,
commercial paper, bankers' acceptances, certificates of deposit
and other debt securities such as corporate bonds rated A or
better by Moody's or Standard & Poor's, or U.S. government issues
such as treasury bills, treasury notes and treasury bonds.
Necessary reserves will be held in cash or short-term debt
obligations, including repurchase agreements (see below), readily
changeable to cash. The management believes, however, that there
may be times when the shareholders' interests are best served and
the Fund's investment objectives are most likely to be achieved,
by investing in securities convertible into common stocks, or
defensive issues such as high-grade bonds or other defensive
issues. It retains the freedom to administer the portfolio of the
Fund accordingly when, in its judgment, economic and market
conditions make such a course desirable.
The Fund also may invest in issues of the United States Treasury
and United States government agencies subject to repurchase
agreements entered into with the seller of the issue. The use of
repurchase agreements by the Fund involves certain risks. For a
discussion of repurchase agreements and their risks see page 21.
Although the Fund does not intend to obtain short-term trading
profits, it is possible that holdings may be increased when a
stock is considered to be undervalued and decreased when it is
considered to be overvalued. Scout Regional Fund's annualized
turnover ratio for the fiscal year ended December 31, 1993, was
17%, for December 31, 1994, it was 27% and for December 31, 1995,
it was 37%. Commissions paid during the fiscal year ended December
31, 1995, amounted to $34,390.
Scout Bond Fund
Scout Bond Fund's investment objective is to provide shareholders
with maximum current income consistent with its quality and
maturity standards by investing in a diversified portfolio of
fixed-income obligations. The Fund cannot guarantee that its
objective will be achieved because there are inherent risks in the
ownership of fixed-income investments. The value of the Fund's
shares will reflect changes in the market value of its investments
which will vary inversely with changes in interest rates.
Dividends paid by the Fund will vary according to the income it
receives from its investments. However, the Fund will seek,
through careful management and diversification, to reduce these
risks and enhance the opportunities for maximizing current income.
The Fund will normally invest at least 80% of its assets in bonds
such as: (1) direct or guaranteed obligations of the U.S.
Government and its agencies, and (2) high-quality debt securities
including notes and bonds issued by corporations or other business
organizations.
The Fund will invest only in the following "U.S. Government
Securities":
1. Direct obligations of the U.S. Government, such as
bills, notes, bonds and other debt securities issued by the U.S.
Treasury.
2. Obligations of U.S. government agencies and instrumentalities
which are secured by the full faith and credit of the U.S.
Treasury, such as securities of the Government National Mortgage
Association, the Export-Import Bank, or the Student Loan Marketing
Association; or which are secured by the right of the issuer to
borrow from the Treasury, such as securities issued by the Federal
Financing Bank or the U.S. Postal Service; or are supported by the
credit of the government agency or instrumentality itself, such as
securities of Federal Home Loan Banks, Federal Farm Credit Banks,
or the Federal National Mortgage Association.
The Fund's investments in securities issued by corporations or
other business organizations will be rated at the time of purchase
within the top three classifications of Moody's Investors Service,
Inc. (Aaa, Aa, and A) or Standard & Poor's Corporation (AAA, AA
and A). The Fund will use obligations secured by specific assets
of the issuing corporation as well as unsecured debentures which
represent claims on the general credit of the issuer. (For a
description of ratings, see "Fixed Income Securities Described and
Ratings" in the "Statement of Additional Information.")
In order to enhance portfolio flexibility and to provide for
unexpected redemptions, the Fund may maintain a portion of its
assets in reserves. These reserves will be held in cash or short-
term debt obligations.
The Fund may invest in commercial paper, including variable rate
master demand notes, of companies whose commercial paper is rated
P-1 by Moody's or A-1 by Standard & Poor's. If not rated by either
Moody's or Standard & Poor's, a company's commercial paper,
including variable rate master demand notes, may be purchased by
the Fund if the company has an outstanding bond issue rated Aa or
higher by Moody's or AA or higher by S&P.
Variable rate master demand notes represent a borrowing
arrangement under a letter of agreement between a commercial paper
issuer and an institutional lender. Applicable interest rates are
determined on a formula basis and are adjusted on a monthly,
quarterly, or other term as set out in the agreement. They vary as
to the right of the lender to demand payment. It is not generally
contemplated that such instruments will be traded, and there is no
secondary market for these notes, although they are redeemable
(and thus immediately repayable by the borrower) at face value,
plus accrued interest, at any time. In connection with the Fund's
investment in variable rate master demand notes, the Fund's
manager will monitor on an ongoing basis the earning power, cash
flow and other liquidity ratios of the issuer, and the borrower's
ability to pay principal and interest on demand.
The Fund may invest in certificates of deposit, bankers'
acceptances, and other commercial bank short-term obligations
issued domestically by United States banks having assets of at
least $1 billion and which are members of the Federal Deposit
Insurance Corporation, or such securities which may be issued by
holding companies of such banks.
The Fund may also invest in issues of the United States Treasury
or United States government agencies subject to repurchase
agreements entered into with the seller of the issues. The use of
repurchase agreements by the Fund involves certain risks. For a
discussion of repurchase agreements and their risks see page 21.
Maturities of all Fund investments normally will not exceed 20
years at the date of purchase. However, management may extend
maturity limits or change portfolio holdings or vary portfolio mix
when in its judgment economic and market conditions make it
desirable in the best interests of the shareholders.
Although the Fund does not intend to obtain short-term trading
profits, it is possible that it may engage in trading activity in
order to take advantage of opportunities to enhance yield, protect
principal or improve liquidity. Scout Bond Fund's annualized
turnover ratio for the fiscal year ended June 30, 1993, was 19%,
for June 30, 1994, it was 9%, and for June 30, 1995, it was 2%.
The Fund paid no commissions during the fiscal year ended June 30,
1995.
Scout Money Market Fund
Scout Money Market Fund offers two separate Portfolios, Federal
and Prime, each of which invest in high quality short-term debt
instruments for the purpose of maximizing income consistent with
safety of principal and liquidity. Each Portfolio also seeks to
maintain a constant price of $1.00 per share. Neither Portfolio's
objective can be changed without the approval of a majority of its
outstanding shares. Each Portfolio will limit its holdings to the
types of securities hereinafter described.
Federal Portfolio
The Federal Portfolio will invest only in the following "U.S.
Government Securities":
1. Direct obligations of the U.S. Government, such as
bills, notes, bonds and other debt securities issued by the U.S.
Treasury.
2. Obligations of U.S. government agencies and
instrumentalities which are secured by the full faith and credit
of the U.S. Treasury, such as securities of the Government
National Mortgage Association; or which are secured by the right
of the issuer to borrow from the Treasury, such as securities
issued by the Federal Financing Bank or the U.S. Postal Service;
or are supported by the credit of the government agency or
instrumentality itself, such as securities of Federal Home Loan
Banks, or the Federal National Mortgage Association.
The Federal Portfolio also may invest in issues of the United
States Treasury or United States government agencies subject to
repurchase agreements entered into with the seller of the issues.
The use of repurchase agreements by the Fund involves certain
risks. For a discussion of repurchase agreements and their risks
see page 21.
Prime Portfolio
The Prime Portfolio may invest in any of the following in addition
to securities eligible for the Federal Portfolio:
1. Certificates of deposit, bankers' acceptances, and
other short-term obligations issued domestically by United States
commercial banks having assets of at least $1 billion and which
are members of the Federal Deposit Insurance Corporation, or
holding companies of such banks.
2. Commercial paper, including variable rate master
demand notes of companies whose commercial paper is rated P-2 or
higher by Moody's Investors Service, Inc. (Moody's) or A-2 or
higher by Standard and Poor's Corporation (S&P). If not rated by
either Moody's or S&P, a company's commercial paper, including
variable rate master demand notes, may be purchased by the Prime
Portfolio if the company has an outstanding bond issue rated Aa or
higher by Moody's or AA or higher by S&P. Variable rate master
demand notes represent a borrowing arrangement under a letter of
agreement between a commercial paper issuer and an institutional
lender. Applicable interest rates are determined on a formula
basis and are adjusted on a monthly, quarterly, or other term as
set out in the agreement. They vary as to the right of the lender
to demand payment. (For a description of money market securities
and their ratings, see "Fixed Income Securities Described and
Ratings" in the "Statement of Additional Information.")
3. Short-term debt securities which are non-convertible
and which have one year or less remaining to maturity at the date
of purchase and which are rated Aa or higher by Moody's or AA or
higher by S&P.
4. Negotiable certificates of deposit and other short-
term debt obligations of savings and loan associations having
assets of at least $1 billion and which are members of the Federal
Home Loan Banks Association and insured by Federal Deposit
Insurance Corporation.
To achieve its objectives the Fund may engage in trading activity
in order to take advantage of opportunities to enhance yield,
protect principal or improve liquidity. This trading activity
should not increase the Fund's expenses, since there are normally
no broker's commissions paid by the Fund for the purchase or sale
of money market instruments. However, a markup or spread may be
paid to a dealer from which the Fund purchases a security.
Pursuant to Rule 2a-7 of the Investment Company Act of 1940, as
amended, the Fund will price its shares according to a procedure
known as amortized cost, and will maintain 100% of its assets in
securities with remaining maturities of 397 days or less, and
limit its investments to those instruments which the Directors of
the Fund determine present minimal credit risks, and which are
eligible investments under the rule. Each Portfolio will maintain
a weighted average maturity of 90 days or less. Since securities
with maturities of one year or less are excluded from calculation
of portfolio turnover, Scout Money Market Fund has no portfolio
turnover ratio. The Fund paid no commissions during the fiscal
year.
Scout Tax-Free Money Market Fund
Scout Tax-Free Money Market Fund's objective is to provide
investors with the highest level of investment income exempt from
federal income tax consistent with its quality and maturity
standards. It also seeks to maintain liquidity and a constant
price of $1.00 per share. The Fund cannot guarantee that these
objectives will be achieved, but through careful management and
diversification it will seek to reduce risk and enhance the
opportunities for higher income and greater price stability. The
Fund will not purchase any security which at the time of purchase
has a maturity more than one year from the date of purchase.
During periods of normal market conditions, the Fund will invest
at least 80% of its total assets (exclusive of cash) in short-term
municipal securities, as defined in this Prospectus. This
fundamental policy will not be changed without shareholder
approval, except that the Fund reserves the right to deviate
temporarily from this policy during extraordinary circumstances
when, in the opinion of management, it is advisable to do so in
the best interest of shareholders, such as when market conditions
dictate a defensive posture in taxable obligations. During the
Fund's fiscal year ended June 30, 1995, 100% of income was exempt
from federal income taxes.
Investments in short-term municipal obligations and notes are
limited to those obligations which at the time of purchase: (1)
are backed by the full faith and credit of the United States; (2)
are rated MIG-1 or MIG-2 by Moody's; or (3) if the obligations or
notes are not rated, of comparable quality as determined by the
Board of Directors. Short-term discount notes are limited to those
obligations rated A-1 by S&P, or Prime-1 by Moody's or their
equivalents as determined by the Board of Directors. If the short-
term discount notes are not rated, they must be of comparable
quality as determined by the Board of Directors. (For a
description of municipal securities and their ratings, see
"Municipal Securities Described and Ratings" in the "Statement of
Additional Information.")
While the Fund normally maintains at least 80% of the portfolio in
municipal securities, it may invest any remaining balance in
taxable money market instruments on a temporary basis, if
management believes this action would be in the best interest of
shareholders. Included in this category are: obligations of the
United States of America, its agents or instrumentalities;
certificates of deposit; bankers' acceptances and other short-term
debt obligations of United States banks with total assets of $1
billion or more; and commercial paper rated A-2 or better by
Standard & Poor's Corp. or Prime-2 or better by Moody's Investors
Service, Inc., or certain rights to acquire these securities.
The Fund reserves the right to hold cash reserves as management
deems necessary for defensive or emergency purposes.
It is the policy of the Fund not to invest more than 25% of its
assets in any one classification of municipal securities, except
project notes or other tax-exempt obligations which are backed by
the U.S. Government.
Should the rating organizations used by the Fund cease to exist or
change their systems, the Fund will attempt to use other
comparable ratings as standards for its investments in municipal
securities in accordance with its investment policies.
To achieve its objectives the Fund may engage in trading activity
in order to take advantage of opportunities to enhance yield,
protect principal or improve liquidity. This trading activity
should not increase the Fund's expenses since there are normally
no brokers' commissions paid by the Fund for the purchase or sale
of money market instruments. However, a markup or spread may be
paid to a dealer from which the Fund purchases a security.
Scout Tax-Free Money Market Fund may invest in issues of the
United States Treasury or United States government agencies
subject to repurchase agreements entered into with the seller of
the issue. The use of repurchase agreements by the Fund involves
certain risks. For a discussion of repurchase agreements and their
risks see page 21.
Scout WorldWide Fund
Scout WorldWide Fund intends to invest in a diversified portfolio
of equity securities (common stocks and securities convertible
into common stocks) of established companies either located
outside the United States or whose primary business is carried on
outside the country. American Depository Receipts (ADR's), which
represent foreign securities and are traded on U.S. Exchanges or
in the over-the-counter market, will continue to represent the
bulk of the Fund's portfolio. However, the Fund reserves the right
to invest directly in foreign securities or to purchase European
Deposit Receipts (EDR's) and International Depository Receipts
(IDR's), in bearer form, which are designed for use in European
and other securities markets. Limiting the Fund investments to
ADR's, may have the effect of limiting the Fund's investment
alternatives and reducing the Fund's potential diversification
resulting in additional risk to the Fund, however, management
believes that use of ADR's in the initial period of operations
will be a cost-effective method of participating in international
securities, and will lessen the exposure of the Fund and its
shareholders to various special risks inherent in foreign
securities investments (See "Special Risk Considerations").
The Fund will use the portfolio management policies described
below to attempt to generate a favorable total return consisting
of interest, dividend and other income, if any, and appreciation
in the value of the Fund's portfolio securities by investing in
equity securities which in the opinion of the manager, offer good
growth potential and in many cases pay dividends. The Fund will
look at such factors as the company's assets, personnel, sales,
earnings and location of its corporate headquarters to determine
whether more than 50% of such assets, personnel, sales or earnings
are located outside the United States and therefore the company's
primary business is carried on outside the United States. The Fund
diversifies its investments among various countries and a number
of different industries.
There is no guarantee that the Fund's objective will be achieved.
Investments in international securities involve risks in addition
to those risks associated with investments in the United States
(See "Special Risk Considerations" ). Therefore, the Fund should
be considered only as a means for international diversification
and not as a complete investment program. The Fund is designed for
long-term investors who are able to accept the risks of
international investing. The investment objective of the Fund
cannot be changed without the approval of the holders of a
majority of the Fund's outstanding shares.
The Fund is designed to provide investors with a diversified
participation in international businesses. Over the years, some
foreign businesses have been especially successful in their
particular industries and some foreign stock markets have
outperformed the American markets. Foreign securities markets do
not always move in parallel with the U.S. securities markets, so
investing in international securities can provide diversification
advantages. Because the underlying securities of the ADRs' in
which the Fund invests trade primarily in foreign markets, any
rise or fall of the U.S. dollar in relation to foreign currencies
will affect their U.S. dollar value and thereby will affect the
investment performance of the Fund. A change in the value of any
foreign currency relative to the dollar will result in a
corresponding change in the dollar value of Fund assets whose
underlying securities are denominated or traded in that currency.
The Fund primarily invests in securities of seasoned companies
which are listed on U.S. stock exchanges and which the manager
considers to have attractive characteristics in terms of
profitability, growth and financial resources. "Seasoned" and
"established" companies are those companies which have been in
existence for at least 3 years and, in the opinion of the
investment counsel, are known for the quality and acceptance of
their products or services and for their ability to generate
profits and in many cases pay dividends. The Fund may invest in
fixed-income securities of foreign governments or companies when
the manager believes that prevailing market, economic, political
or currency conditions warrant such investments. While most
foreign securities are not subject to standard credit ratings, the
investment counsel intends to select "investment grade" issues of
foreign debt securities which are comparable to a Baa or higher
rating by Moody's Investors Service, Inc. or a BBB or higher
rating by Standard and Poor's Corporation, based on available
information, and taking into account liquidity and quality issues.
Securities rated BBB or Baa are considered to be medium grade and
have speculative characteristics. Equity securities of non-United
States companies will be selected on the same criteria as
securities of United States domestic companies. The Fund may
invest in securities which are not listed on an exchange.
Generally, the volume of trading in an unlisted common stock is
less than the volume of trading in a listed stock. This means that
the degree of market liquidity of some stocks in which the Fund
invests may be relatively limited. When the Fund disposes of such
a stock it may have to offer the shares at a discount from recent
prices or sell the shares in small lots over an extended period of
time. The Fund does not intend to hold assets in its portfolio in
excess of 5% of total assets in securities whose ratings have
dropped below investment grade. The manager will review such
securities and determine appropriate action to take with respect
to such securities.
In order to expedite settlement of portfolio transactions and to
minimize currency value fluctuations, the Fund may purchase
foreign currencies and/or engage in forward foreign currency
transactions. The Fund will not engage in forward foreign currency
exchange contracts for speculative purposes. A forward foreign
currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These
contracts may be bought or sold to protect the Fund, to some
degree, against a possible loss resulting from an adverse change
in the relationship between foreign currencies and the U.S.
dollar. This method of protecting the value of the Fund's
investment securities against a decline in the value of a currency
does not eliminate fluctuations in the underlying prices of the
securities. It establishes a rate of exchange which one can
achieve at some future point in time. Although such contracts tend
to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time, they tend to limit any
potential gain which might result should the value of such
currency increase.
The Fund's dealings in forward foreign exchange will be limited to
hedging involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of forward
foreign currency with respect to specific receivables or payables
of the Fund accruing in connection with the purchase and sale of
its portfolio securities, the sale and redemption of shares of the
Fund or the payment of dividends and distributions by the Fund.
Position hedging is the sale of forward foreign currency with
respect to portfolio security positions denominated or quoted in
such foreign currency. The Fund will not speculate in foreign
forward exchange. Moreover, it may not be possible for the Fund to
hedge against a devaluation that is so generally anticipated that
the Fund is not able to contract to sell the currency at a price
above the devaluation level it anticipates.
The Fund intends to diversify investments broadly among countries
and normally to have represented in the portfolio business
activities of not less than three foreign countries. Generally,
the Fund does not intend to invest more than 25% of its total
assets in any one particular country or securities issued by a
foreign government, its agencies or instrumentalities in the
foreseeable future. However, the Fund may, at times, temporarily
invest a substantial portion of its assets in one or more of such
countries if economic and business conditions warrant such
investments.
Necessary reserves will be held in cash or short-term debt
obligations, including repurchase agreements (see below), readily
changeable to cash. The management believes, however, that there
may be times when the shareholders' interests are best served and
the Fund's investment objectives are most likely to be achieved,
by investing in securities convertible into common stocks rated A
or better by Standard & Poor's or Moody's, or defensive issues
such as high-grade bonds or other defensive issues rated A or
better by Standard & Poor's or Moody's. It retains the freedom to
administer the portfolio of the Fund accordingly when, in its
judgment, economic and market conditions make such a course
desirable.
Scout WorldWide Fund's annualized turnover ratio for the fiscal
year ended December 31, 1993, was 2%, for December 31, 1994, it
was 24% and for December 31, 1995, it was 27%. Commissions paid
during the fiscal year ended December 31, 1995, amounted to
$15,852.
Scout Balanced Fund
Scout Balanced Fund seeks both long-term capital growth and high
current income. Long-term capital growth is intended to be
achieved primarily by the Fund's investment in a diversified
portfolio of equity securities (common stocks and securities
convertible into common stocks). High current income is intended
to be achieved by the Fund's investment in a diversified portfolio
of fixed-income obligations.
The Fund will normally invest in a diversified portfolio of
securities. The Fund has the flexibility to pursue its objective
through any type or quality of domestic or foreign security. The
manager will shift the proportions of each type of investment
based on interpretation of economic conditions and underlying
security valuations. Normally the Fund will invest at least 25% of
its total assets in equity securities and a minimum of 25% of its
total assets in fixed income senior obligations. When, in the
manager's judgment, market conditions warrant, the Fund, for
defensive purposes, may make substantial temporary investments in
high quality money market securities.
The Fund will normally invest in the following fixed income
securities:
1. Direct obligations of the U.S. Government, such as bills,
notes, bonds and other debt securities issued by the U.S.
Treasury.
2. Obligations of U.S. government agencies and
instrumentalities which are secured by the full faith and credit
of the U.S. Treasury; such as securities of the Government
National Mortgage Association; or which are secured by the right
of the issuer to borrow from the Treasury, such as securities
issued by the Federal Financing Bank or the U.S. Postal Service;
or are supported by the credit of the government agency or
instrumentality itself, such as securities of Federal Home Loan
Banks, Federal Farm Credit Banks, or the Federal National Mortgage
Association.
3. Securities issued by corporations or other business
organizations. The Fund will generally invest in securities that,
at the time of purchase, are classified as investment grade by
Moody's Investors Service, Inc. or by Standard & Poor's
Corporation. Securities that are subsequently downgraded to non-
investment grade may continue to be held by the Fund, as long as
such securities do not exceed 5% of the portfolio, and will be
sold only if the manager believes it would be advantageous to do
so.
It is anticipated that the average maturity of the fixed income
obligations in the Fund's portfolio will be between five and seven
years.
The Fund will normally invest in the following equity securities,
securities convertible into equity securities, preferred stocks
and warrants:
1. Domestic companies listed on an exchange or over-the-
counter.
2. Foreign companies with shares listed on U.S. Exchanges or
in the over-the-counter market, or foreign companies with American
Depository Receipts (ADR's) which represent foreign securities and
are traded on U.S. Exchanges or in the over-the-counter market.
The Fund may also invest directly in foreign securities.
The Fund will not be restricted as to market capitalization.
However, under normal circumstances, the Fund will not invest more
than 25% of its assets in a single industry. Also the Fund may not
own more than 10% of the outstanding voting securities of a single
issuer. The Fund may not invest more than 5% of its equity assets
in any one issuer.
Investments in money market securities shall include government
securities, government agency securities, commercial paper,
bankers' acceptances, bank certificates of deposit and repurchase
agreements. Investment in commercial paper is restricted to
companies rated P-2 or higher by Moody's or A-2 or higher by
Standard & Poor's.
The Fund cannot guarantee that its investment objectives will be
achieved because there are inherent risks in the ownership of the
investments made by the Fund. The value of the Fund's shares will
reflect changes in the market value of its investments, and
dividends paid by the Fund will vary with the income it receives
from these investments.
Through careful management and diversification, the Fund will seek
to reduce risk and enhance the opportunities for long-term growth
of capital and income. The flexibility to realize relative value
between asset classes, markets and individual securities offers
investors the opportunity to access undervalued securities around
the globe. The total return approach employed by the Fund is ideal
for investors seeking to diversify assets and move money to areas
of attractive valuation.
Securities rated Baa or higher by Moody's or BBB by Standard &
Poor's or higher are classified as investment grade securities.
Although securities rated Baa by Moody's and BBB by Standard &
Poor's have speculative characteristics, they are considered to be
investment grade. Such securities carry a lower degree of risk
than lower rated securities.
Securities that are subsequently downgraded in quality below Baa
by Moody's or BBB by Standard & Poor's may continue to be held by
the Fund, and will be sold only if the Fund's adviser believes it
would be advantageous to do so. In addition, the credit quality of
unrated securities purchased by the Fund must be, in the opinion
of the Fund's adviser, at least equivalent to a Baa rating by
Moody's or a BBB rating by Standard & Poor's.
REPURCHASE AGREEMENTS
A repurchase agreement involves the sale of securities to a Fund
with the concurrent agreement by the seller to repurchase the
securities at the Fund's cost plus interest at an agreed rate upon
demand or within a specified time, thereby determining the yield
during the purchaser's period of ownership. The result is a fixed
rate of return insulated from market fluctuations during such
period. Under the Investment Company Act of 1940, repurchase
agreements are considered loans by the Funds.
The Funds will enter into such repurchase agreements only with
United States banks (including affiliates of UMB Financial
Corporation) having assets in excess of $1 billion which are
members of the Federal Deposit Insurance Corporation, and with
certain securities dealers who meet the qualifications set from
time to time by the Board of Directors. In those cases where
securities issued by affiliate banks of UMB Financial Corporation
are purchased, no preference will be given to such issuers over
other issuers. The term to maturity of a repurchase agreement
normally will be no longer than a few days. Repurchase agreements
maturing in more than seven days, and other illiquid securities,
will not exceed 10% of the total assets of any Fund.
RISK FACTORS APPLICABLE TO
REPURCHASE AGREEMENTS
The use of repurchase agreements involves certain risks. For
example, if the seller of the agreement defaults on its obligation
to repurchase the underlying securities at a time when the value
of these securities has declined, the Fund may incur a loss upon
disposition of them. If the seller of the agreement becomes
insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, disposition of the underlying
securities may be delayed pending court proceedings. Finally, it
is possible that the Fund may not be able to perfect its interest
in the underlying securities. While the Fund's management
acknowledges these risks, it is expected that they can be
controlled through stringent security selection criteria and
careful monitoring procedures.
RISK FACTORS PECULIAR TO MONEY MARKET
INSTRUMENTS
The yield and the principal value of money market instruments are
sensitive to short-term lending conditions, and it is possible
that an issuer may default. The Fund will seek to minimize these
risks through portfolio diversification, careful portfolio
selection among securities considered to be high quality and by
maintaining short average maturities.
RISK FACTORS APPLICABLE TO
CONCENTRATION OF ASSETS IN
THE BANKING INDUSTRY
Concentration of assets in the banking industry may increase the
element of risk because banks are highly leveraged. The manager
believes this risk is reduced because purchases will be limited to
banks which are members of the Federal Deposit Insurance
Corporation, although securities purchased by the Fund may not be
FDIC insured deposits. Furthermore, the manager will carefully
evaluate the financial ratios and asset characteristics of banks
in which the Funds might invest, and reject those banks whose
financial ratios and asset characteristics are not, in the
manager's opinion, sufficiently strong.
RISK FACTORS APPLICABLE
TO FOREIGN INVESTMENTS
From time to time, Scout WorldWide Fund may invest in companies
located in developing countries. A developing country is generally
considered to be a country which is in the initial stages of its
industrialization cycle with a low per capita gross national
product. Compared to investment in the United States and other
developed countries, investing in the equity and fixed income
markets of developing countries involves exposure to relatively
unstable governments, economic structures that are generally less
mature and based on only a few industries and securities markets
which trade a small number of securities. Prices on securities
exchanges in developing countries generally will be more volatile
than those in developed countries. The Fund will not invest more
than 20% of its total assets in companies located in developing
countries.
The risks to which the Scout WorldWide Fund are exposed, as a
result of investing in companies located outside the United States
include currency risks such as fluctuations in the value of
foreign currencies and the performance of foreign currencies
relative to the U.S. dollar; exchange control regulations; costs
incurred in connection with conversions between various currencies
(fees may also be incurred when converting foreign investments to
U.S. dollars). As a result, the relative strength of the U.S.
dollar may be an important factor in the performance of the Fund.
Under normal circumstances the Fund will invest at least 65% of
its assets in equity securities of foreign issuers. However, to
meet the liquidity needs of the Fund or when the Fund believes
that investments should be deployed in a temporary defensive
posture because of economic or market conditions, the Fund may
invest all or a major portion of its assets in short-term debt
securities denominated in U.S. dollars, including U.S. treasury
bills and other securities of the U.S. government and its
agencies, bankers' acceptances and certificates of deposit rated
"A" or better by Standard & Poor's Corporation or Moody's
Investors Service as well as enter into repurchase agreements
maturing in seven days or less with U.S. banks and broker-dealers
which are collateralized by such securities. The Fund may also
hold cash and time deposits in foreign banks, denominated in any
major foreign currency.
INVESTMENT RESTRICTIONS
In addition to the policies set forth under the caption
"Investment Objective and Portfolio Management Policy" the Funds
are subject to certain other restrictions which may not be changed
without approval of the "holders of a majority of the outstanding
shares" of the Fund or the affected Portfolio. Among these
restrictions, the more important ones are that the Fund
(Portfolio) will not purchase the securities of any issuer if more
than 5% of the Fund's total assets would be invested in the
securities of such issuer, or the Fund would hold more than 10% of
any class of securities of such issuer; borrow money in excess of
10% of total assets taken at market value, and then only from
banks as a temporary measure for extraordinary or emergency
purposes; will not borrow to increase income (leveraging) but only
to facilitate redemption requests which might otherwise require
untimely dispositions of portfolio securities; will repay all
borrowings before making additional investments (interest paid on
such borrowings will reduce net income). The full text of these
restrictions is set forth in the "Statement of Additional
Information."
There is no limitation with respect to investments in U.S.
Treasury Bills, or other obligations issued or guaranteed by the
federal government, its agencies and instrumentalities.
PERFORMANCE MEASURES
From time to time, each of the Funds may advertise its performance
in various ways, as summarized below. Further discussion of these
matters also appears in the "Statement of Additional Information."
A discussion of Scout Stock Fund, Scout Regional Fund, Scout Bond
Fund and Scout WorldWide Fund performance is included in the
Fund's Annual Report to Shareholders which is available from the
Fund upon request at no charge. A discussion of Scout Balanced
Fund's performance will be included in the Fund's Annual Report to
Shareholders which will be available upon request at no charge.
Yield
From time to time, each portfolio of Scout Money Market Fund and
Scout Tax-Free Money Market Fund may advertise "yield" and
"effective yield." The "yield" of a Fund refers to the income
generated by an investment in a Fund over a seven-day period
(which period will be stated in the advertisement). This income is
then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly, but,
when annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of this
assumed reinvestment.
Each portfolio of Scout Money Market Fund, and Scout Tax-Free
Money Market Fund may quote their yields in advertisements or in
reports to shareholders. Yield information may be useful in
reviewing the performance of these Funds and in providing a basis
for comparison with other investment alternatives. However, since
the net investment income of these Funds changes in response to
fluctuations in interest rates and Fund expenses, any given yield
quotations should not be considered representative of the Fund's
yields for any future period. Current yield and price quotations
for the Scout Funds may be obtained by telephoning 1-800-996-2862.
Total Return
Scout Stock Fund, Scout Regional Fund, Scout Bond Fund, Scout
WorldWide Fund and Scout Balanced Fund may advertise "average
annual total return" over various periods of time. Such total
return figures show the average percentage change in value of an
investment in a Fund from the beginning date of the measuring
period to the end of the measuring period. These figures reflect
changes in the price of the Funds' shares and assume that any
income dividends and/or capital gains distributions made by the
Funds during the period were reinvested in shares of the Fund.
Figures will be given for recent one-, five- and ten-year periods
(if applicable), and may be given for other periods as well (such
as from commencement of a Fund's operations, or on a year-by-year
basis). When considering "average" total return figures for
periods longer than one year, it is important to note that a
Fund's annual total return for any one year in the period might
have been greater or less than the average for the entire period.
Performance Comparisons
In advertisements or in reports to shareholders, each of the Funds
may compare its performance to that of other mutual funds with
similar investment objectives and to stock or other relevant
indices. For example, Scout Stock, Scout Regional, Scout
WorldWide, Scout Bond and Scout Balanced Funds may compare their
performance to rankings prepared by Lipper Analytical Services,
Inc. (Lipper), a widely recognized independent service which
monitors the performance of mutual funds. Scout Stock Fund or
Scout Regional Fund may also compare its performance to the
Standard & Poor's 500 Stock Index (S&P 500), an index of unmanaged
groups of common stocks, the Dow Jones Industrial Average, a
recognized unmanaged index of common stocks of 30 industrial
companies listed on the NYSE, or the Consumer Price Index. Scout
Bond Fund may compare its performance to the Shearson/ Lehman
Government/ Corporate Index, an unmanaged index of government and
corporate bonds. Performance information, rankings, ratings,
published editorial comments and listings as reported in national
financial publications such as Kiplinger's Personal Finance
Magazine, Business Week, Morningstar Mutual Funds, Investor's
Business Daily, Institutional Investor, The Wall Street Journal,
Mutual Fund Forecaster, No-Load Investor, Money, Forbes, Fortune
and Barron's may also be used in comparing performance of Scout
Stock Fund, Scout Regional Fund, Scout Bond Fund, Scout WorldWide
Fund and Scout Balanced Fund. Similarly, each Portfolio of Scout
Money Market Fund, and Scout Tax-Free Money Market Fund may
compare their yields to the Donoghue's Money Fund Average and the
Donoghue's Government Money Fund Average which are averages
compiled by Donoghue's Money Fund Report, a widely recognized
independent publication that monitors the performance of money
market mutual funds, or to the average yield reported by the Bank
Rate Monitor for money market deposit accounts offered by the 50
leading banks and thrift institutions in the top five standard
metropolitan statistical areas. Performance comparisons should not
be considered as representative of the future performance of any
Fund. Further information regarding the performance of the Scout
Funds is contained in the "Statement of Additional Information."
Performance rankings, recommendations, published editorial
comments and listings reported in Money, Barron's, Kiplinger's
Personal Finance Magazine, Financial World, Forbes, U.S. News &
World Report, Business Week, The Wall Street Journal, Investors
Business Daily, USA Today, Fortune and Stanger's may also be cited
(if the Fund is listed in any such publication) or used for
comparison, as well as performance listings and rankings from
Morningstar Mutual Funds, Personal Finance, Income and Safety, The
Mutual Fund Letter, No-Load Fund Investor, United Mutual Fund
Selector, No-Load Fund Analyst, No- Load Fund X, Louis Rukeyser's
Wall Street newsletter, Donoghue's Money Letter, CDA Investment
Technologies, Inc., Wiesenberger Investment Companies Service, and
Donoghue's Mutual Fund Almanac.
HOW TO PURCHASE SHARES
You must specify the Fund in which you desire to invest on your
application form. Failure to do so will result in the application
and your check or bank wire being returned to you.
Shares are purchased from the Fund at net asset value (no sales
charge) next computed after a purchase order has become effective,
through its agent, Jones & Babson, Inc., P.O. Box 410498, Kansas
City, MO 64141-0498. For information call toll free 1-800-996-
2862.
Purchase orders for Scout Stock Fund, Scout Regional Fund, Scout
Bond Fund, Scout WorldWide Fund and Scout Balanced Fund become
effective upon receipt by the Fund. Purchase orders for Scout
Money Market Fund and Scout Tax-Free Money Market Fund become
effective when received in the form of federal funds or converted
to federal funds and accepted by the Fund. Payments transmitted by
federal funds wire can become effective upon receipt. Payments
transmitted by other bank wire may take longer to be converted to
federal funds. (Federal funds are deposits made by member banks of
the Federal Reserve System with the Federal Reserve Bank which can
be electronically transferred from one member bank to another.)
The Funds reserve the right in their sole discretion to withdraw
all or any part of the offerings made by the prospectus or to
reject purchase orders when, in the judgment of management, such
withdrawal or rejection is in the best interest of a Fund and its
shareholders. The Funds also reserve the right at any time to
waive or increase the minimum requirements applicable to initial
or subsequent investments with respect to any person or class of
persons, which includes shareholders of the Funds' special
investment programs. The Fund reserves the right to refuse to
accept orders for fund shares unless accompanied by payment,
except when a responsible person has indemnified the Fund against
losses resulting from the failure of investors to make payment. In
the event that the Fund sustains a loss as the result of failure
by a purchaser to make payment, the Fund's underwriter, Jones &
Babson, Inc. will cover the loss.
INITIAL INVESTMENTS
Initial investments - By mail. You may open an account and make
an investment by completing and signing the application which
accompanies this prospectus. Make your check ($1,000 minimum)
payable to UMB Bank, n.a. Mail your application and check to:
The Scout Fund Group
P.O. Box 410498
Kansas City, Missouri 64141-0498
Initial investments - By wire. You may purchase shares of the
Fund by wiring the purchase price ($1,000 minimum) through the
Federal Reserve Bank to the custodian, UMB Bank, n.a. Prior to
sending your money, you must call the Fund toll free 1-800-996-
2862 and provide it with the identity of the registered account
owner, the registered address, the Social Security or Tax
Identification Number of the registered owner, the amount being
wired, the name and telephone number of the wiring bank and the
person to be contacted in connection with the order. You will then
be provided a Fund account number, after which you should instruct
your bank to wire the specified amount, along with the account
number and the account registration to:
UMB Bank, n.a.
Kansas City, Missouri, ABA #101000695
For: Scout Money Market Fund, Inc.
Prime Portfolio/AC = 980118-6957
Federal Portfolio/AC = 980118-6965
Scout Stock Fund, Inc./AC = 980118-7023
Scout Regional Fund, Inc./
AC = 987007-7108
Scout Bond Fund, Inc./AC = 980118-7015
Scout Tax-Free Money Market Fund, Inc./
AC = 980118-6981
Scout WorldWide Fund, Inc./AC= 987047-5332
(As appropriate)
Scout Balanced Fund, Inc./AC = 987072-6971
For Account No. (insert assigned Fund account number and name in
which account is registered.)
A completed application must be sent to the Fund as soon as
possible so the necessary remaining information can be recorded in
your account. Payment of redemption proceeds will be delayed until
the completed application is received by the Fund.
INVESTMENTS SUBSEQUENT
TO INITIAL INVESTMENT
You may add to your Fund account at any time in amounts of $100 or
more if purchases are made by mail, or $500 or more if purchases
are made by wire. Automatic monthly investments must be in amounts
of $100 or more.
Checks should be mailed to the Funds at their address, but made
payable to UMB Bank, n.a. Always identify your account number or
include the detachable reminder stub which accompanies each
confirmation.
Wire share purchases should include your account registration,
your account number and the Scout Fund in which you are purchasing
shares. It also is advisable to notify the Fund by telephone that
you have sent a wire purchase order to the bank.
TELEPHONE INVESTMENT SERVICE
To use the Telephone Investment Service, you must first establish
your Fund account and authorize telephone orders in the
application form, or, subsequently, on a special authorization
form provided upon request. If you elect the Telephone Investment
Service and your request is received prior to 2:00 p.m. (Central
Time), you may purchase Fund shares ($1,000 minimum) by telephone
and authorize the Fund to draft your checking account for the cost
of the shares so purchased. You will receive the next available
price after the Fund has received your telephone call.
Availability and continuance of this privilege is subject to
acceptance and approval by the Fund and all participating banks.
During periods of increased market activity, you may have
difficulty reaching the Fund by telephone, in which case you
should contact the Fund by mail or telegraph. The Fund will not be
responsible for the consequences of delays, including delays in
the banking or Federal Reserve wire systems.
The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and if such
procedures are not followed, the Fund may be liable for losses due
to unauthorized or fraudulent instructions. Such procedures may
include, but are not limited to requiring personal identification
prior to acting upon instructions received by telephone, providing
written confirmations of such transactions, and/or tape recording
of telephone instructions.
The Funds reserve the right to initiate a charge for this service
and to terminate or modify any or all of the privileges in
connection with this service at any time upon 15 days written
notice to shareholders, and to terminate or modify the privileges
without prior notice in any circumstances where such termination
or modification is in the best interest of the Fund and its
investors.
AUTOMATIC MONTHLY
INVESTMENT PLAN
You may elect to make monthly investments in a constant dollar
amount from your checking account ($100 minimum). The Fund will
draft your checking account on the same day each month in the
amount you authorize in your application, or, subsequently, on a
special authorization form provided upon request. Availability and
continuance of this privilege is subject to acceptance and
approval by the Fund and all participating banks. If the date
selected falls on a day upon which the Fund shares are not priced,
investment will be made on the first date thereafter upon which
Fund shares are priced. The Fund will not be responsible for the
consequences of delays, including delays in the banking or Federal
Reserve wire systems.
The Funds reserve the right to initiate a charge for this service
and to terminate or modify any or all of the privileges in
connection with this service at any time upon 15 days written
notice to shareholders, and to terminate or modify the privileges
without prior notice in any circumstances where such termination
or modification is in the best interest of the Fund and its
investors.
HOW TO REDEEM SHARES
Shareholders registered in the stock records of the Funds may
withdraw all or part of their investment by redeeming shares for
which a Fund has received unconditional payment in the form of
federal funds or such payment has been converted to federal funds
and accepted by the Fund. For your convenience, and to enable your
account to continue earning daily dividends as long as possible,
Scout Money Market Fund and Scout Tax-Free Money Market Fund offer
expedited redemption procedures by telephone/telegraph and draft
("check"), in addition to normal mail procedures.
In each instance you must comply with the general requirements
relating to all redemptions as well as with specific requirements
set out for the particular redemption method you select. If you
wish to expedite redemptions by using the telephone/telegraph or
draft writing (check) privileges, for Scout Money Market or Scout
Tax-Free Money Market Fund, you should carefully note the special
requirements and limitations relating to these methods.
All redemption requests must be transmitted to the Funds, P.O. Box
410498, Kansas City, Missouri 64141-0498. Shareholders who have
authorized telephone redemption for Scout Money Market Fund or
Scout Tax-Free Money Market Fund may call toll free 1-800-996-
2862. The Funds will redeem shares at the price (net asset value
per share) next computed after receipt of a redemption request in
"good order." (See "How Share Price is Determined.")
The Funds will endeavor to transmit redemption proceeds to the
proper party, as instructed, as soon as practicable after a
redemption request has been received in "good order" and accepted,
but in no event later than the third business day thereafter.
Transmissions are made by mail unless an expedited method has been
authorized and specified in the redemption request. The Fund will
not be responsible for the consequences of delays including delays
in the banking or Federal Reserve wire systems.
Redemptions will not become effective until all documents in the
form required have been received. In the case of redemption
requests made within 15 days of the date of purchase, the Fund
will delay transmission of proceeds until such time as it is
certain that unconditional payment in federal funds has been
collected for the purchase of shares being redeemed or 15 days
from the date of purchase. You can avoid the possibility of delay
by paying for all of your purchases with a transfer of federal
funds.
Where additional documentation is normally required to support
redemptions as in the case of corporations, fiduciaries, and
others who hold shares in a representative or nominee capacity
such as certified copies of corporate resolutions, or certificates
of incumbency, or such other documentation as may be required
under the Uniform Commercial Code or other applicable laws or
regulations, it is the responsibility of the shareholder to
maintain such documentation on file and in a current status. A
failure to do so will delay the redemption. If you have questions
concerning redemption requirements, please write or telephone the
Funds well ahead of an anticipated redemption in order to avoid
any possible delay.
Requests which are subject to special conditions or which specify
an effective date other than as provided herein cannot be
accepted. Expedited redemption privileges are available for Scout
Money Market and Scout Tax-Free Money Market Funds only.
The right of redemption may be suspended or the date of payment
postponed beyond the normal three-day period when the New York
Stock Exchange is closed or under emergency circumstances as
determined by the Securities and Exchange Commission. Additional
details are set forth in the "Statement of Additional
Information."
With respect to Scout Money Market and Scout Tax-Free Money Market
Funds, shares redeemed will be entitled to receive all dividends
declared through the day preceding the date of redemption. If you
redeem all of the shares in your account, in addition to the share
redemption check, a separate check representing all dividends
declared but unpaid on the shares redeemed will be distributed on
the next dividend payment date. Any amount due you in your
declared but unpaid dividend account cannot be redeemed by draft.
Due to the high cost of maintaining smaller accounts, the
Directors have authorized the Funds to close shareholder accounts
where their value falls below the current minimum initial
investment requirement at the time of initial purchase as a result
of redemptions and not as the result of market action, and remains
below this level for 60 days after each such shareholder account
is mailed a notice of: (1) the Fund's intention to close the
account, (2) the minimum account size requirement, and (3) the
date on which the account will be closed if the minimum size
requirement is not met. Since the minimum investment amount and
the minimum account size are the same, any redemption from an
account containing only the minimum investment amount may result
in redemption of that account.
Withdrawal By Mail - Shares may be redeemed by mailing your
request to the Funds. To be in "good order" the request must
include the following:
(1) A written redemption request or stock assignment
(stock power) containing the genuine signature of each registered
owner exactly as the shares are registered, with clear
identification of the account by registered name(s), account
number and the number of shares or the dollar amount to be
redeemed;
(2) any outstanding stock certificates representing shares
to be redeemed;
(3) signature guarantees as required (see Signature
Guarantees); and
(4) any additional documentation which the Fund may deem
necessary to insure a genuine redemption such as an application if
one is not on file, or in the case of corporations, fiduciaries,
and others who hold shares in a representative or nominee capacity
(See below).
Where additional documentation is normally required to support
redemptions as in the case of corporations, fiduciaries, and
others who hold shares in a representative or nominee capacity,
such as certified copies of corporate resolutions, or certificates
or incumbency, or such other documentation as may be required
under the Uniform Commercial Code or other applicable laws or
regulations, it is the responsibility of the shareholder to
maintain such documentation on file and in a current status. A
failure to do so will delay the redemption. If you have questions
concerning redemption requirements, please write or telephone the
Fund well ahead of an anticipated redemption in order to avoid any
possible delay.
Signature Guarantees are required in connection with all
redemptions by mail, or changes in share registration, except as
hereinafter provided. These requirements may be waived by the Fund
in certain instances where it appears reasonable to do so and will
not unduly affect the interests of other shareholders.
Signature(s) must be guaranteed by an "eligible Guarantor
institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934. Eligible guarantor institutions include: (1)
national or state banks, savings associations, savings and loan
associations, trust companies, savings banks, industrial loan
companies and credit unions; (2) national securities exchanges,
registered securities associations and clearing agencies; or (3)
securities broker/dealers which are members of a national
securities exchange or clearing agency or which have a minimum net
capital of $100,000. A notarized signature will not be sufficient
for the request to be in proper form.
Signature guarantees will be waived for mail redemptions of
$10,000 or less, but they will be required if the checks are to be
payable to someone other than the registered owner(s), or are to
be mailed to an address different from the registered address of
the shareholder(s), or where there appears to be a pattern of
redemptions designed to circumvent the signature guarantee
requirement, or where the Funds have other reason to believe that
this requirement would be in the best interests of the Funds and
their shareholders.
Withdrawal By Telephone or Telegraph - (SCOUT MONEY MARKET AND
SCOUT TAX-FREE MONEY MARKET FUNDS ONLY) - you may withdraw any
amount of $500 or more by telephone toll free 1-800-996-2862, or
by telegram to the Fund's address. Telephone/telegraph redemption
authorizations signed by all registered owners with signatures
guaranteed must be on file with the Funds before you may redeem by
telephone or telegraph. The signature guarantee requirement may be
waived by the Funds if the request for this redemption method is
made at the same time the initial application to purchase shares
is submitted.
All communications must include the Fund's name, Portfolio name
(if applicable), your account number, the exact registration of
your shares, the number of shares or dollar amount to be redeemed,
and the identity of the bank and bank account (name and number) to
which the proceeds are to be wired. This procedure may only be
used for non-certificated shares held in open account. For the
protection of shareholders, your redemption instructions can only
be changed by filing with the Funds new instructions on a form
obtainable from the Funds which must be properly signed with
signature(s) guaranteed.
Telephone or telegraph redemption proceeds may be transmitted to
your pre-identified bank account either by wire or mail to a
domestic commercial bank which is a member of the Federal Reserve
System, or by credit to such account with UMB Bank, n.a. as
designated by you on your pre-authorization form. If you elect to
have proceeds wired to a bank other than UMB Bank, n.a., and your
request is received prior to 1:00 P.M. (Central Time), proceeds
normally will be wired the following business day. If your request
is received during the day thereafter, proceeds normally will be
wired on the second business day following the day of receipt of
your request. If you elect to have proceeds credited to your
account with UMB Bank, n.a., and your request is received prior to
1:00 P.M. (Central Time), proceeds normally will be credited that
day. Normally, your bank account will be credited on the following
business day if your request is received after 1:00 P.M. (Central
Time). The Funds reserve the right to change their policy or to
refuse a telephone or telegraph redemption request or require
additional documentation to assure a genuine redemption, and, at
their option, may pay such redemption by wire or check and may
limit the frequency or the amount of such request. The Funds
reserve the right to terminate or modify any or all of the
services in connection with this privilege at any time without
prior notice. Neither the Funds nor Jones & Babson, Inc. assumes
responsibility for the authenticity of withdrawal instructions,
and there are provisions on the authorization form limiting their
liability in this respect.
Withdrawal by Draft ("Check") - (SCOUT MONEY MARKET AND SCOUT
TAX-FREE MONEY MARKET FUNDS ONLY) - you may elect this method of
redemption on your original application, or on a form which will
be sent to you upon request. All signatures must be guaranteed
unless this method of redemption is elected on your original
application. The authorization form, which all registered owners
must sign, also contains a provision relieving the Funds, Jones &
Babson, Inc. and UMB Bank, n.a. from liability for loss, if any,
which you may sustain arising out of a non-genuine redemption
pursuant to this redemption feature. Any additional documentation
required to assure a genuine redemption must be maintained on file
with the Funds in such a current status as the Funds may deem
necessary. A new form properly signed and with the signature(s)
guaranteed must be received and accepted by the Funds before
authorized redemption instructions already on file with the Funds
can be changed.
You will be provided a supply of drafts ("checks") which may be
drawn on the Funds. Drafts must be deposited in a bank account of
the payee to be cleared through the banking system in order to be
presented to the Funds for payment through UMB Bank, n.a. An
additional supply of drafts will be furnished upon request. There
presently is no charge for these drafts or their clearance.
However, the Funds and UMB Bank, n.a. reserve the right to make
reasonable charges and to terminate or modify any or all of the
services in connection with this privilege at any time and without
prior notice.
These drafts may be signed by any joint owner unless otherwise
indicated on the account application. They may be made payable to
the order of any person in the amount of $500 or more. The bank of
the draft payee must present it for collection through UMB Bank,
n.a. which delivers it to the Fund for redemption of a sufficient
number of shares to cover the amount of the draft. Dividends will
be earned by the shareholder on the draft proceeds until the day
preceding the date it clears at UMB Bank, n.a. Drafts will not be
honored by the Funds and will be returned unpaid if there are
insufficient open account shares to meet the withdrawal amount.
The Funds reserve the right to withhold the bank's redemption
request until they determine that they have received unconditional
payment for at least the number of shares required to be redeemed
to make payment on the draft. If such a delay is necessary, the
bank may return the draft not accepted (by the Funds) because
there are not sufficient shares for which good payment has been
received in the shareholder account. Dividends declared but not
yet paid to you cannot be withdrawn by drafts. Drafts (checks) may
not be used as a redemption form.
SYSTEMATIC REDEMPTION PLAN
If you own shares in an open account valued at $10,000 or more,
and desire to make regular monthly or quarterly withdrawals
without the necessity and inconvenience of executing a separate
redemption request to initiate each withdrawal, you may enter into
a Systematic Withdrawal Plan by completing forms obtainable from
the Fund. For this service, the manager may charge you a fee not
to exceed $1.50 for each withdrawal. Currently the manager assumes
the additional expenses arising out of this type of plan, but it
reserves the right to initiate such a charge at any time in the
future when it deems it necessary. If such a change is imposed,
participants will be provided 30 days notice.
Subject to a $50 minimum, you may withdraw each period a specified
dollar amount. Shares also may be redeemed at a rate calculated to
exhaust the account at the end of a specified period of time.
Dividends and capital gains distributions must be reinvested in
additional shares. Under all withdrawal programs, liquidation of
shares in excess of dividends and distributions reinvested will
diminish and may exhaust your account, particularly during a
period of declining share values.
You may revoke or change your plan or redeem all of your shares
remaining at any time. Withdrawal payments will be continued until
the shares are exhausted or until the Fund or you terminate the
plan by written notice to the other.
HOW TO EXCHANGE SHARES
BETWEEN SCOUT FUNDS
Shareholders may exchange their Fund shares which have been held
in open account for 15 days or more, and for which good payment
has been received, for identically registered shares of any other
Scout Fund, or any other Portfolio in the Scout Fund Group, which
is legally registered for sale in the state of residence of the
investor, provided that the minimum amount exchanged from a Fund
or Portfolio has a value of $1,000 or more and meets the minimum
investment requirement of the Fund or Portfolio into which it is
exchanged. An exchange between two Scout Funds is treated as a
sale of the shares from which the exchange occurs and a purchase
of shares of the fund into which the exchange occurs. Exchanging
shareholders will receive the next quoted prices for their shares
after the request is received in "good order" (See "How Share
Price is Determined.")
To authorize the Telephone/Telegraph Exchange Privilege, all
registered owners must authorize this privilege on the original
application, or the Fund must receive a special authorization
form, provided upon request. During periods of increased market
activity, you may have difficulty reaching the Fund by telephone,
in which case you should contact the Fund by mail or telegraph.
The Fund reserves the right to initiate a charge for this service
and to terminate or modify any or all of the privileges in
connection with this service at any time and without prior notice
under any unforeseen circumstances where continuance of these
privileges would be detrimental to the Fund or its shareholders
such as an emergency, or where the volume of such activity
threatens the ability of the Fund to conduct business, or under
any other circumstances, upon 60 days written notice to
shareholders. The Fund will not be responsible for the
consequences of delays including delays in the banking or Federal
Reserve wire systems.
The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and if such
procedures are not followed, the Fund may be liable for losses due
to unauthorized or fraudulent instructions. Such procedures may
include, but are not limited to requiring personal identification
prior to acting upon instructions received by telephone, providing
written confirmations of such transactions, and/or tape recording
of telephone instructions.
Exchanges by mail may be accomplished by a written request
properly signed by all registered owners identifying the account
by name and number, the number of shares or dollar amount to be
redeemed for exchange, and the Scout Fund into which the account
is being transferred.
If you wish to exchange part or all of your shares in any Fund for
shares of another Fund or Portfolio in the Scout Fund Group, you
should review the prospectus carefully. Any such exchange will be
based upon the respective net asset values of the shares involved.
An exchange between Funds involves the sale of an asset. Unless
the shareholder account is tax-deferred, this is a taxable event.
HOW SHARE PRICE IS DETERMINED
The net asset value per share of each Fund (Portfolio) is computed
once daily, Monday through Friday, at the specific time during the
day that the Board of Directors of each Fund sets at least
annually, except on days on which changes in the value of a Fund's
portfolio securities will not materially affect the net asset
value, or days during which no security is tendered for redemption
and no order to purchase or sell such security is received by the
Fund, or customary holidays. For a list of the holidays during
which any of the Funds are not open for business, see "How Share
Price is Determined" in the "Statement of Additional Information."
The per share calculation is made by subtracting from total assets
any liabilities and then dividing this net amount by the total
outstanding shares as of the date of the calculation.
Stock, Regional, Bond, WorldWide
and Balanced Funds
The price at which new shares of Scout Stock Fund, Scout Regional
Fund, Scout Bond Fund, Scout WorldWide Fund and Scout Balanced
Fund will be sold and at which issued shares presented for
redemption will be liquidated is computed once daily at 3:00 P.M.
(Central Time), except on those days when these Funds are not open
for business.
Money market securities which on the date of valuation have 60
days or less to maturity, are valued on the basis of the amortized
cost valuation technique which involves valuing a security at its
cost and thereafter assuming a constant amortization to maturity
of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument.
For Scout Stock Fund, Scout Regional Fund, Scout WorldWide Fund
and Scout Balanced Fund, each security listed on an Exchange is
valued at its last sale price on that Exchange on the date as of
which assets are valued. Where the security is listed on more than
one Exchange, the Fund will use the price of that Exchange which
is generally considered to be the principal Exchange on which the
stock is traded. Lacking sales, the security is valued at the mean
between the current closing bid and asked prices. An unlisted
security for which over-the-counter market quotations are readily
available is valued at the mean between the last current bid and
asked prices. When market quotations are not readily available,
any security or other asset is valued at its fair value as
determined in good faith by the Board of Directors.
For Scout Bond Fund, debt securities (other than short-term
obligations), including listed issues, are valued on the basis of
valuations furnished by a pricing service which utilizes both
dealer-supplied valuations and electronic data processing
techniques which take into account appropriate factors such as
institution-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance
upon exchange or over-the-counter prices, since such valuations
are believed to reflect more accurately the fair value of such
securities. Use of the pricing service has been approved by Scout
Bond Fund's Board of Directors.
Money Market and Tax-Free Money Market Funds
The price at which new shares of each Portfolio of Scout Money
Market Fund and Scout Tax-Free Money Market Fund will be sold and
at which issued shares presented for redemption will be liquidated
is computed once daily at 12:00 P.M. (Central Time), except on
those days when these Funds are not open for business.
Normally the price of each Portfolio of Scout Money Market Fund
and the price of Scout Tax-Free Money Market Fund will be $1.00
because these Funds will adhere to a number of procedures
designed, but not guaranteed, to maintain a constant price of
$1.00 per share. Although unlikely, it still is possible that the
value of the shares you redeem may be more or less than your cost
depending on the market value of these Funds' securities at the
time a redemption becomes effective.
For the purpose of calculating each Fund's net asset value per
share, securities are valued by the "amortized cost" method of
valuation, which does not take into account unrealized gains or
losses. This involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any
discount or premium regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily
yield on shares of the Funds computed as described above may tend
to be higher than a like computation made by a fund with identical
investments utilizing a method of valuation based upon market
prices and estimates of market prices for its portfolio
instruments. Thus, if the use of amortized cost by the Funds
resulted in a lower aggregate value on a particular day, a
prospective investor in the Funds would be able to obtain a
somewhat higher yield than would result from investment in a fund
utilizing market values, and existing investors would receive less
investment income. The converse would apply in a period of rising
interest rates.
The use of amortized cost and the maintenance of each Fund's per
share net asset value at $1.00 is based on its election to operate
under the provisions of Rule 2a-7 under the Investment Company Act
of 1940. To assure compliance with adopted procedures pursuant to
Rule 2a-7 under the Investment Company Act of 1940 (the "1940
Act"), the Fund will only invest in U.S. dollar denominated
securities with remaining maturities of 397 days or less, maintain
the dollar weighted average maturity of the securities in the
Fund's portfolio at 90 days or less and limit its investments to
those instruments which the Directors of the Fund determines
present minimal credit risks and which are eligible investments
under the rule.
The Directors have established procedures designed to maintain the
Funds' price per share, as computed for the purpose of sales and
redemptions, at $1.00. These procedures include a review of the
Funds' holdings by the Directors at such intervals as they deem
appropriate to determine whether the Funds' net asset value
calculated by using available market quotations deviates from
$1.00 per share based on amortized cost. If any deviation exceeds
one-half of one percent, the Directors will promptly consider what
action, if any, will be initiated. In the event the Directors
determine that a deviation exists which may result in material
dilution or other unfair results to investors or existing
shareholders, they have agreed to take such corrective action as
they regard as necessary and appropriate, including the sale of
portfolio instruments prior to maturity to realize capital gains
or losses or to shorten average portfolio maturity; withhold
dividends; make a special capital distribution; redeem shares in
kind; or establish net asset value per share using available
market quotations.
There are various methods of valuing the assets and of paying
dividends and distributions from a money market fund. Each
Portfolio values its assets at amortized cost while also
monitoring the available market bid prices, or yield equivalents.
Since dividends from net investment income will be accrued daily
and paid monthly, the net asset value per share of each Portfolio
will ordinarily remain at $1.00, but the Portfolio's daily
dividends will vary in amount.
OFFICERS AND DIRECTORS
The officers of the Funds manage their day-to-day operations. The
Funds' manager and officers are subject to the supervision and
control of the Boards of Directors. A list of the officers and
directors of the Funds and a brief statement of their present
positions and principal occupations during the past five years is
set forth in the "Statement of Additional Information."
MANAGER AND UNDERWRITER
Jones & Babson, Inc. was founded in 1960. It organized Scout
Stock, Bond, Money Market and Tax-Free Money Market Funds in 1982,
Scout Regional Fund in 1986, Scout WorldWide Fund in 1993, and
Scout Balanced Fund in 1995, and acts as their principal
underwriter at no cost to the Funds.
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
Funds. This includes investment management and supervision; fees
of the custodian, independent public accountants and legal
counsel; remuneration of officers, directors and other personnel;
rent; shareholder services, including the maintenance of the
shareholder accounting system and transfer agency; and such other
items as are incidental to corporate administration.
Not considered normal operating expenses and therefore payable by
the Funds, are taxes, fees and other charges of governments and
their agencies including the cost of qualifying the Funds' shares
for sale in any jurisdiction, interest, brokerage costs, and all
costs and expenses including legal and accounting fees incurred in
anticipation of or arising out of litigation or administrative
proceedings to which the Funds, their officers or directors may be
subject or a party thereto. Per share expenses of any Portfolio or
Fund may differ due to differences in management or registration
fees.
Jones & Babson, Inc. acts as principal underwriter for the Funds
at no cost to the Funds. UMB Bank, n.a. employs at its own expense
Jones & Babson, Inc. to provide services to the Funds, including
the maintenance of the shareholder accounting system and transfer
agency; and such other items as are incidental to corporate
administration. The cost of the services of Jones & Babson, Inc.
is included in the fee of UMB Bank, n.a.
As compensation for all the foregoing services, Scout Stock Fund,
Scout Regional Fund, Scout Bond Fund, Scout WorldWide Fund and
Scout Balanced Fund pay UMB Bank, n.a. a fee at the annual rate of
85/100 of one percent (.85%) of their total net assets, which is
computed daily and paid semimonthly.
Under previous management agreements, the total expenses of Scout
Stock Fund for the fiscal year ended June 30, 1995, amounted to
.86% of the average net assets of that Fund which included the
following amounts paid to UMB Bank, n.a.: $187,308 for custodian
services, $439,315 for advisory services and $37,656 for portfolio
accounting services. The total expenses of Scout Bond Fund for the
fiscal year ended June 30, 1995, amounted to .86% of the average
net assets of that Fund which included the following amounts paid
to UMB Bank, n.a.: $113,650 for custodian services, $269,115 for
advisory services and $23,067 for portfolio accounting services.
The total expenses of Scout Regional Fund for the fiscal year
ended December 31, 1995, amounted to .89% of the average net
assets of that Fund which included the following amounts paid to
UMB Bank, n.a.: $46,305 for custodian services and $113,227 for
advisory services. The total expenses of Scout WorldWide Fund for
the fiscal year ended December 31, 1995, amounted to .85% of the
average net assets of that Fund which included the following
amounts paid to UMB Bank, n.a.: $29,402 for custodian services and
$71,819 for advisory services.
Scout Money Market Fund and Scout Tax-Free Money Market Fund pay
UMB Bank, n.a. a fee at the annual rate of 50/100 of one percent
(.50%) of their total net assets, which is computed daily and paid
semimonthly. Under previous management agreements, the total
expenses of the Federal Portfolio of Scout Money Market Fund for
the fiscal year ended June 30, 1995, amounted to .51% of the
average net assets of the Portfolio which included the following
amounts paid to UMB Bank, n.a.: $286,017 for custodian services
and $57,882 for portfolio accounting services. Advisory fees of
$31,765 (partial period) were paid to UMB Bank, n.a. and $127,938
(partial period) were paid to David L. Babson & Co. under a
previous Investment Counsel Agreement. Under previous management
agreements, the total expenses of the Prime Portfolio of Scout
Money Market Fund for the fiscal year ended June 30, 1995,
amounted to .51% of the average net assets of the Portfolio which
included the following amounts paid to UMB Bank, n.a.: $308,996
for custodian services and $60,638 for portfolio accounting
services. Advisory fees of $39,839 (partial period) were paid to
UMB Bank, n.a. and $132,670 (partial period) were paid to David L.
Babson & Co. under a previous Investment Counsel Agreement. Under
previous management agreements, the total expenses of Scout Tax-
Free Money Market Fund for the fiscal year ended June 30, 1995,
amounted to .54% of the average net assets of the Portfolio which
included the following amounts paid to UMB Bank, n.a.: $150,357
for custodian services and $28,614 for portfolio accounting
services. Advisory fees of $16,472 (partial period) were paid to
UMB Bank, n.a. and $61,196 (partial period) were paid to David L.
Babson & Co. under a previous Investment Counsel Agreement.
The annual fees charged by UMB Bank, n.a. are higher than the fees
of most other investment advisers whose charges cover only
investment advisory services with all remaining operational
expenses absorbed directly by the Fund, but it is anticipated that
they will compare favorably with these other advisers when all
expenses to Fund shareholders are taken into account.
The Bank serves a broad variety of individual, corporate and other
institutional clients by maintaining an extensive research and
analytical staff. It has an experienced investment analysis and
research staff which eliminates the need for the Fund to maintain
an extensive duplicate staff, with the consequent increase in the
cost of investment advisory service.
The Management Agreement limits the liability of the manager, as
well as its officers, directors and personnel, to acts or
omissions involving willful malfeasance, bad faith, gross
negligence, or reckless disregard of their duties.
David B. Anderson has been the portfolio manager of Scout Stock
Fund since 1982, and portfolio manager of Scout Regional Fund
since the change in the Fund's objective in 1991. He joined UMB
Investment Advisors in 1979, and has 23 years of investment
management experience. Eric Kelley has been the portfolio manager
of Scout Tax-Free Money Market Fund since 1996. He joined UMB
Investment Advisors in 1995, and has over four years of investment
management experience. James L. Moffett has been the portfolio
manager of Scout WorldWide Fund since its inception in September,
1993. He is a Chartered Financial Analyst. He joined UMB Bank
Kansas (previously Commercial National Bank) in 1979, and has more
than 27 years of experience in investment management. William A.
Faust has been the portfolio manager of both the Federal and Prime
Portfolios of Scout Money Market Fund since 1995. He joined UMB
Investment Advisors in 1983, and has over 24 years of investment
management experience. George W. Root has been the portfolio
manager of Scout Bond Fund since 1982. He joined UMB Investment
Advisors in 1978, and has 19 years of investment management
experience. Christopher Bloomstran has been the portfolio manager
of Scout Balanced Fund since its inception. He is a Chartered
Financial Analyst with over six years of experience.
Certain officers and directors of each Fund are also officers or
directors or both of other Scout Funds or Jones & Babson, Inc.
Jones & Babson, Inc. is a wholly-owned subsidiary of Business
Men's Assurance Company of America, which is considered to be a
controlling person under the Investment Company Act of 1940.
Assicurazioni Generali S.p.A., an insurance organization founded
in 1831 based in Trieste, Italy, is considered to be a controlling
person and is the ultimate parent of Business Men's Assurance
Company of America. Mediobanca is a 5% owner of Generali.
The current Management Agreements between the Funds and UMB Bank,
n.a. have been approved by the Funds' shareholders, will continue
in effect until October 31, 1997, and will continue automatically
for successive annual periods ending each October 31 so long as
such continuance is specifically approved at least annually by the
Boards of Directors of the Funds or by a vote of the majority of
the outstanding voting securities of the Funds, and, provided also
that such continuance is approved by the vote of a majority of the
Directors who are not parties to the Agreements or interested
persons of any such party at a meeting held in person and called
specifically for the purpose of evaluating and voting on such
approval. All of the Agreements provide that either party may
terminate by giving the other 60 days written notice. The
Agreements terminate automatically if assigned by either party.
GENERAL INFORMATION
AND HISTORY
On April 30, 1995, the name of the Fund group was changed from
"UMB" to "Scout." Scout Stock Fund and Scout Bond Fund, both of
which were incorporated in Maryland on July 29, 1982, as UMB Stock
Fund, Inc. and UMB Bond Fund, Inc., Scout Regional Fund, which was
incorporated in Maryland on July 11, 1986, as UMB Qualified
Dividend Fund, Inc., and changed its name to UMB Heartland Fund,
Inc. on July 30, 1991, Scout WorldWide Fund which was incorporated
in Maryland on January 7, 1993, as UMB WorldWide Fund, Inc., and
Scout Balanced Fund, Inc., which was incorporated on July 13,
1995, each have a present authorized capitalization of 10,000,000
shares of $1 par value common stock. All shares of each Fund are
of the same class with like rights and privileges. Each full and
fractional share, when issued and outstanding, has: (1) equal
voting rights with respect to matters which affect the Fund, and
(2) equal dividend, distribution and redemption rights to the
assets of the Fund. Shares when issued are fully paid and non-
assessable. The Funds will not issue any senior securities.
Shareholders do not have pre-emptive or conversion rights. The
Funds may issue additional series of stock with the approval of
the Fund's Board of Directors.
Scout Money Market Fund, incorporated in Maryland on June 23,
1982, as UMB Money Market Fund, Inc., has a present authorized
capitalization of 1,500,000,000 shares of $.01 par value common
stock. One-half of the shares are presently reserved for issuance
to shareholders invested in the Federal Portfolio and one-half is
reserved for the Prime Portfolio shareholders. Each full and
fractional share, when issued and outstanding, has: (1) equal
voting rights with respect to matters which affect the Fund in
general and with respect to matters relating solely to the
interests of the Portfolio for which issued, and (2) equal
dividend, distribution and redemption rights to the assets of the
Portfolio for which issued and to general assets, if any, of the
Fund which are not specifically allocated to a particular
Portfolio. Shares when issued are fully paid and non-assessable.
Except for the priority of each share in the assets of its
Portfolio, the Fund will not issue any class of securities senior
to any other class. Shareholders do not have pre-emptive or
conversion rights. The Fund may issue additional series of stock
with the approval of the Fund's Board of Directors.
Scout Tax-Free Money Market Fund, incorporated in Maryland on July
29, 1982 as UMB Tax-Free Money Market Fund, Inc., has a present
authorized capitalization of 1,000,000,000 shares of $.01 par
value common stock. All shares are of the same class with like
rights and privileges. Each full and fractional share, when issued
and outstanding, has: (1) equal voting rights with respect to
matters which affect the Fund, and (2) equal dividend,
distribution and redemption rights to the assets of the Fund.
Shares when issued are fully paid and non-assessable. The Fund
will not issue any senior securities. Shareholders do not have
pre-emptive or conversion rights. The Fund may issue additional
series of stock with the approval of the Fund's Board of
Directors.
Non-cumulative voting - All of the Funds' shares have non-
cumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of directors can
elect 100% of the directors, if they choose to do so, and in such
event, the holders of the remaining less than 50% of the shares
voting will not be able to elect any directors.
The Maryland Statutes permit registered investment companies, such
as the Funds, to operate without an annual meeting of shareholders
under specified circumstances if an annual meeting is not required
by the Investment Company Act of 1940. There are procedures
whereby the shareholders may remove directors. These procedures
are described in the "Statement of Additional Information" under
the caption "Officers and Directors." The Funds have adopted the
appropriate provisions in their By-Laws and will not hold annual
meetings of shareholders for the following purposes unless
required to do so: (1) election of directors; (2) approval of any
investment advisory agreement; (3) ratification of the selection
of independent public accountants; and (4) approval of a
distribution plan. As a result, the Fund does not intend to hold
annual meetings.
Federal Banking Laws - The Glass-Steagall Act is a federal law
that prohibits national banks from sponsoring, distributing or
controlling a registered open-end investment company. It is
possible that certain activities of UMB Bank, n.a. relating to the
Funds may be claimed to be comparable to the matters covered by
such provisions. It is not expected that any conclusions regarding
such activities of UMB Bank, n.a. would have any material effect
on the assets of the Funds or their shareholders, because the
Fund's distribution is under the control of Jones & Babson, Inc.,
the Funds' distributor, which is not subject to the Glass-Steagall
Act. Although it is not anticipated that decisions under the
Glass-Steagall Act adverse to UMB Bank, n.a. would have any
material effect on the conduct of the Fund's operations, if any
unanticipated changes affecting the Fund's operations were deemed
appropriate, the Board of Directors would promptly consider
suitable adjustments.
The Funds may use the name "Scout" in its name so long as UMB
Bank, n.a. is continued as its manager. Complete details with
respect to the use of the name are set out in a licensing
agreement between the Funds, Jones & Babson, Inc. and UMB Bank,
n.a.
This prospectus omits certain of the information contained in the
registration statement filed with the Securities and Exchange
Commission, Washington, D.C. These items may be inspected at the
offices of the Commission or obtained from the Commission upon
payment of the fee prescribed.
In the opinion of the staff of the Securities and Exchange
Commission, the use of this combined Prospectus may possibly
subject all Funds to a certain amount of liability for any losses
arising out of any statement or omission in this prospectus
regarding a particular Fund. In the opinion of the Funds'
management, however, the risk of such liability is not materially
increased by the use of a combined Prospectus.
DIVIDENDS, DISTRIBUTIONS
AND THEIR TAXATION
Scout Stock Fund, Inc., Scout Regional Fund, Inc., Scout WorldWide
Fund, Inc., and Scout Balanced Fund, Inc. will pay substantially
all of their net income semiannually, usually in June and
December. It is contemplated that substantially all of any net
capital gains realized during a fiscal year will be distributed
with the fiscal year-end dividend, with any remaining balance paid
in December. Dividends and capital gains distributions will be
reinvested automatically in additional shares at the net asset
value per share next computed and effective at the close of
business on the day after the record date, unless the shareholder
has elected on the original application or by written instructions
filed with the Fund, to have them paid in cash.
In the case of Scout Tax-Free Money Market Fund, Inc. and each
Portfolio of Scout Money Market Fund, Inc., at the close of each
business day, dividends consisting of substantially all of each
Portfolio's net investment income are declared payable to
shareholders of record at the close of that day, and credited to
their accounts. All daily dividends declared during a given month
will be distributed on the last day of the month.
In the case of Scout Bond Fund, at the close of each business day,
dividends consisting of substantially all of the Fund's net
investment income are declared payable to shareholders of record
at the close of the previous business day, and credited to their
accounts. All daily dividends declared during a given month will
be distributed on the last day of the month. It is contemplated
that substantially all of any net capital gains realized during a
fiscal year will be distributed with the fiscal year-end dividend,
with any remaining balance paid in December. Dividends and capital
gains distributions will be reinvested automatically in additional
shares at the net asset value per share next computed and
effective at the close of business on the day after the record
date, unless the shareholder has elected on the original
application or by written instructions filed with the Fund, to
have them paid in cash.
Each Fund and each Portfolio of Scout Money Market Fund has
qualified and intends to continue to qualify each year as "a
regulated investment company" under the Internal Revenue Code so
that each Fund (or Portfolio) will not be subject to federal
income tax to the extent it distributes its income to its
shareholders. Dividends, either in cash or reinvested in shares,
paid by the Funds from net investment income will be taxable to
shareholders as ordinary income. In the case of Scout Stock Fund
and Scout Regional Fund, dividends paid by such Funds will
generally qualify in part for the 70% dividends-received deduction
for corporations, but the portion of the dividends so qualified
depends on the aggregate taxable qualifying dividend income
received by such Fund from domestic (U.S.) sources. Each Fund will
send to shareholders a statement each year advising the amount and
treatment of the dividend income.
Dividends and capital gains distributions, if any, are
automatically reinvested in additional shares at net asset value,
unless the shareholder has elected in writing to receive cash. The
method of payment elected remains in effect until the Fund is
notified in writing to the contrary. If at the time of a complete
redemption and closing of a shareholder account, there is net
undistributed income to the credit of the shareholder, it will be
paid by separate check on the next dividend distribution date. In
the case of a partial redemption, any net undistributed credit
will be distributed on the next dividend date according to the
shareholder's instructions on file with the Fund.
Whether paid in cash or additional shares of a Fund, and
regardless of the length of time Fund shares have been owned by
the shareholder, distributions from long-term capital gains are
taxable to shareholders as such, but are not eligible for the
dividends-received deduction for corporations. Shareholders are
notified annually by each Fund as to federal tax status of
dividends and distributions paid by the Fund. In the case of Scout
Tax-Free Money Market Fund, shareholders who have not been in such
Fund for a full fiscal year may have designated as tax-exempt a
percentage of income which is not equivalent to the actual amount
applicable to the period for which they have held the shares. Such
dividends and distributions may also be subject to state and local
taxes.
Exchange and redemption of Fund shares are taxable events for
federal income tax purposes. Shareholders may also be subject to
state and municipal taxes on such exchanges and redemptions. You
should consult your tax adviser with respect to the tax status of
distributions from the Fund in your state and locality.
The Funds intend to declare and pay dividends and capital gains
distributions so as to avoid imposition of the federal excise tax.
To do so, each Fund (and in the case of Scout Money Market Fund,
each Portfolio) expects to distribute during the calendar year an
amount equal to: (1) 98% of its calendar year ordinary income; (2)
98% of its capital gains net income (the excess of short- and
long-term capital gain over short- and long-term capital loss) for
the one-year period ending each October 31; and (3) 100% of any
undistributed ordinary or capital gain net income from the prior
calendar year. Dividends declared in December of any year to
shareholders of record on any date in December will be deemed to
have been paid by the Fund (or Portfolio) and received by
shareholders on the record date provided that the dividends are
paid before February 1 of the following year.
To comply with IRS regulations, the Funds are required by federal
law to withhold 31% of reportable payments (which may include
dividends, capital gains distributions, and redemptions) paid to
shareholders who have not complied with IRS regulations. In order
to avoid this withholding requirement, shareholders must certify
on their Application or on a separate form supplied by the Fund,
that their Social Security or Taxpayer Identification Number
provided is correct and that they are not currently subject to
backup withholding, or that they are exempt from backup
withholding.
Exempt-Interest Dividends - Scout Tax-Free Money Market Fund
intends to invest a sufficient portion of its assets in municipal
securities so that it will qualify to pay "exempt-interest
dividends" (as defined in the Internal Revenue Code) to its
shareholders. The dividends payable by Scout Tax-Free Money Market
Fund from net tax-exempt interest from municipal securities will
qualify as exempt-interest dividends if, at the close of each
quarter of its taxable year, at least 50% of the value of the
total assets of such Fund consists of municipal securities.
Exempt-interest dividends distributed to shareholders are not
includable in the shareholder's gross income for federal income
tax purposes. Any insurance proceeds which represent maturing
interest on defaulted municipal securities held by Scout Tax-Free
Money Market Fund will be excludable from federal gross income.
Distributions of net investment income received by Scout Tax-Free
Money Market Fund from investments in debt securities other than
municipal securities, and any net realized short-term capital
gains distributed by Scout Tax-Free Money Market Fund, will be
taxable to its shareholders as ordinary income and will not be
eligible for the dividends-received deduction for corporations.
Further, any distribution of net realized capital gains will
generally be subject to taxation at the state and local level.
The Tax Reform Act of 1986 imposes certain additional restrictions
on the use of tax-exempt bond financing for nongovernmental
business activities such as industrial development bonds.
Accordingly, interest on certain types of non-essential, or
private activity bonds, may no longer be exempt from federal
income tax. Interest on other types of non-essential or private
activity bonds while still tax-exempt, will be treated as a tax
preference item for corporate and individual investors in
determining their liability in tax years beginning after 1986.
Pursuant to the Social Security Act Amendments of 1993, up to 85%
of a social security recipient's benefits may be included in
federal taxable income (including income from tax-exempt sources
such as tax-exempt bonds in Scout Tax-Free Money Market Fund) plus
50% of their benefits exceeding certain established amounts.
The federal income tax status of all distributions will be
reported to shareholders each January as a part of the annual
statement of shareholder transactions. Shareholders not subject to
tax on their income will not be required to pay tax on amounts
distributed to them.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN
TAX ADVISERS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF
INVESTMENT IN THE FUNDS.
SHAREHOLDER SERVICES
The Funds and their manager offer shareholders a broad variety of
services described throughout this prospectus. In addition, the
following services are available.
Prototype Retirement Plans - UMB Bank, n.a. has drafted several
IRS-approved-as-to-form prototype retirement plans to assist
individuals, sole proprietors, partnerships and corporations in
meeting their tax qualified retirement plan needs.
Individual Retirement Account (IRA) - The Bank also makes
available IRA accounts for individuals.
For further information about these services, please contact UMB
Bank, n.a.
SHAREHOLDER INQUIRIES
Telephone inquiries may be made toll free to the Funds, 1-800-996-
2862.
Shareholders may address written inquiries to the Funds at:
The Scout Fund Group
P.O. Box 410498
Kansas City, MO 64141-0498
For express delivery services:
The Scout Fund Group
2440 Pershing Road, Suite G-15
Kansas City, MO 64108
PART B
SCOUT STOCK FUND, INC.
SCOUT REGIONAL FUND, INC.
SCOUT BALANCED FUND, INC.
SCOUT BOND FUND, INC.
SCOUT WORLDWIDE FUND, INC.
SCOUT MONEY MARKET FUND, INC.
SCOUT TAX-FREE MONEY MARKET FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1996
This Statement is not a Prospectus but should be read in conjunction
with the Funds' current Prospectus dated April 30, 1996. To obtain
the Prospectus please call the Funds toll free 1-800-996-2862.
TABLE OF CONTENTS
Page
Investment Objectives and Policies 2
Portfolio Transactions 2
Investment Restrictions 3
Scout Stock Fund 3
Scout Regional Fund 4
Scout Balanced Fund 4
Scout Bond Fund 5
Scout WorldWide Fund 6
Scout Money Market Fund 7
Scout Tax-Free Money Market Fund 7
Performance Measures 9
How the Funds' Shares are Distributed 10
How Share Purchases are Handled 10
Redemption of Shares 11
Signature Guarantees 11
Dividends and Distributions 11
Manager and Underwriter 12
How Share Price is Determined 13
Officers and Directors 13
Custodian 15
Independent Certified Public Accountants 16
Fixed Income Securities Described and Ratings 16
Municipal Securities Described and Ratings 19
Financial Statements 21
INVESTMENT OBJECTIVES
AND POLICIES
The following policies supplement the Funds'
investment objectives and policies set forth in
the Prospectus.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the
Funds are made by UMB Bank, n.a. for all the
Scout Funds. Officers of the Funds and Jones &
Babson, Inc. are generally responsible for
implementing or supervising these decisions,
including allocation of portfolio brokerage and
principal business and the negotiation of
commissions and/or the price of the securities.
The Funds in purchasing and selling portfolio
securities will seek the best available
combination of execution and overall price
(which shall include the cost of the transaction)
consistent with the circumstances which exist at
the time. The Fund does not intend to solicit
competitive bids on each transaction.
Scout Money Market Fund and Scout Tax-
Free Money Market Fund expect that purchases
and sales of portfolio securities usually will be
principal transactions. Portfolio securities
normally will be purchased directly from the
issuer or in the over-the-counter market from a
principal market maker for the securities, unless
it appears that a better combination of price and
execution may be obtained elsewhere. Usually
there will be no brokerage commission paid by
these Funds for such purchases. Purchases from
underwriters of portfolio securities will include a
commission or concession paid by the issuer to
the underwriter, and purchases from dealers
serving as market makers will include the
spread between the bid and asked price. In
instances where securities are purchased on a
commission basis, the Funds will seek
competitive and reasonable commission rates
based on the circumstances of the trade involved
and to the extent that they do not detract from
the quality of the execution.
The Funds believe it is in their best interest
and that of their shareholders to have a stable
and continuous relationship with a diverse group
of financially strong and technically qualified
broker-dealers who will provide quality
executions at competitive rates. Broker-dealers
meeting these qualifications also will be selected
for their demonstrated loyalty to the Funds,
when acting on their behalf, as well as for any
research or other services provided to the Funds.
The Funds normally will not pay a higher
commission rate to broker-dealers providing
benefits or services to them than they would pay
to broker-dealers who do not provide such
benefits or services. However, the Funds reserve
the right to do so within the principles set out in
Section 28(e) of the Securities Act of 1934 when
it appears that this would be in the best interests
of the shareholders.
No commitment is made to any broker or
dealer with regard to placing of orders for the
purchase or sale of Fund portfolio securities, and
no specific formula is used in placing such
business. Allocation is reviewed regularly by
both the Boards of Directors of the Funds and by
UMB Bank, n.a.
Since the Funds do not market their shares
through intermediary brokers or dealers, it is not
their practice to allocate brokerage or principal
business on the basis of sales of their shares
which may be made through such firms.
However, they may place portfolio orders with
qualified broker-dealers who recommend a Fund
to other clients, or who act as agent in the
purchase of Fund shares for their clients.
Research services furnished by broker-dealers
may be useful to the Fund manager in serving
other clients, as well as a Fund. Conversely, a
Fund may benefit from research services
obtained by the manager from the placement of
portfolio brokerage of other clients.
When it appears to be in the best interests of
its shareholders, a Fund may join with other
clients of the manager in acquiring or disposing
of a portfolio holding. Securities acquired or
proceeds obtained will be equitably distributed
between the Fund and other clients
participating in the transaction. In some
instances, this investment procedure may affect
the price paid or received by the Fund or the
size of the position obtained by the Fund.
The Funds do not intend to purchase
securities solely for short-term trading; nor will
securities be sold for the sole purpose of
realizing gains. However, a security may be
sold and another of comparable quality
purchased at approximately the same time to
take advantage of what the Funds' manager
believes to be a disparity in the normal yield
relationship between the two securities. In
addition, a security may be sold and another
purchased when, in the opinion of management,
a favorable yield spread exists between specific
issues or different market sectors.
Short-term debt instruments with maturities of
less than one year are excluded from the
calculation of portfolio turnover.
Portfolio Turnover for Scout
Balanced Fund
There are no fixed limitations regarding
portfolio turnover for either the equity or fixed
income portions of Scout Balanced Fund's
portfolio. Although the Fund does not trade for
short-term profits, securities may be sold
without regard to the time they have been held
in the Fund when, in the opinion of the Fund's
management, investment considerations warrant
such action. As a result, while it is anticipated
that the portfolio turnover rates for the equity
and fixed income portions of the Fund's
portfolio generally will not exceed 100%, under
certain market conditions, these portfolio
turnover rates may exceed 100%. Increased
portfolio turnover rates would cause the Fund to
incur greater brokerage costs than would
otherwise be the case and may result in the
accelleration of capital gains which are taxable
when distributed to shareholders.
INVESTMENT RESTRICTIONS
In addition to the investment objectives and
portfolio management policy set forth in the
Prospectus under the caption "Investment
Objective and Portfolio Management Policy,"
the following restrictions also may not be
changed without approval of the "holders of a
majority of the outstanding shares" of the Funds
or the affected Portfolio series.
Scout Stock Fund will not: (1) purchase the
securities of any one issuer, except the United
States government, if immediately after and as a
result of such purchase (a) the value of the
holdings of the Fund in the securities of such
issuer exceeds 5% of the value of the Fund's
total assets, or (b) the Fund owns more than
10% of the outstanding voting securities, or any
other class of securities, of such issuer; (2)
engage in the purchase or sale of real estate or
commodities; (3) underwrite the securities of
other issuers; (4) make loans to any of its
officers, directors, or employees, or to its
manager, or general distributor, or officers or
directors thereof; (5) make loans to other
persons, except by the purchase of debt
obligations which are permitted under its
investment policy; (6) invest in companies for
the purpose of exercising control of
management; (7) purchase securities on margin,
or sell securities short; (8) purchase shares of
other investment companies except in the open
market at ordinary broker's commission or
pursuant to a plan of merger or consolidation;
(9) invest in the aggregate more than 5% of the
value of its gross assets in the securities of
issuers (other than federal, state, territorial, or
local governments, or corporations, or
authorities established thereby), which,
including predecessors, have not had at least
three years' continuous operations; (10) enter
into dealings with its officers or directors, its
manager or underwriter, or their officers or
directors, or any organization in which such
persons have a financial interest, except for
transactions in the Fund's own shares or other
securities through brokerage practices which are
considered normal and generally accepted under
the circumstances existing at the time; (11)
purchase or retain securities of any company in
which any Fund officers or directors, or Fund
manager, its partner, officer, or director
beneficially owns more than 1/2 of 1% of said
company's securities, if all such persons owning
more than 1/2 of 1% of said company's
securities own in the aggregate more than 5% of
the outstanding securities of such company; (12)
borrow or pledge its credit under normal
circumstances, except up to 10% of its gross
assets (computed at the lower of fair market
value or cost) for temporary or emergency
purposes, and not for the purpose of leveraging
its investments, and provided further that any
borrowing in excess of 5% of the total assets of
the Fund shall have asset coverage of at least 3
to 1; (13) make itself or its assets liable for the
indebtedness of others; (14) invest in securities
which are assessable or involve unlimited
liability; (15) invest in securities issued by UMB
Financial Corporation or affiliate banks of
UMB Financial Corporation; or (16) issue senior
securities except for those investment procedures
permissible under the Fund's other restrictions.
Scout Regional Fund will not: (1) purchase
the securities of any one issuer, except the
United States Government, if immediately after
and as a result of such purchase (a) the value of
the holdings of the Fund in the securities of such
issuer exceeds 5% of the value of the Fund's
total assets, or (b) the Fund owns more than
10% of the outstanding voting securities, or any
other class of securities, of such issuer; (2)
engage in the purchase or sale of real estate or
commodities; (3) underwrite the securities of
other issuers; (4) make loans to any of its
officers, directors, or employees, or to its
manager, or general distributor, or officers or
directors thereof; (5) make loans to other
persons, except by the purchase of debt
obligations which are permitted under its
investment policy; (6) invest in companies for
the purpose of exercising control of
management; (7) purchase securities on margin,
or sell securities short; (8) purchase shares of
other investment companies except in the open
market at ordinary broker's commission or
pursuant to a plan of merger or consolidation;
(9) invest in the aggregate more than 5% of the
value of its gross assets in the securities of
issuers (other than federal, state, territorial, or
local governments, or corporations, or
authorities established thereby), which,
including predecessors, have not had at least
three years' continuous operations; (10) enter
into dealings with its officers or directors, its
manager or underwriter, or their officers or
directors, or any organization in which such
persons have a financial interest, except for
transactions in the Fund's own shares or other
securities through brokerage practices which are
considered normal and generally accepted under
the circumstances existing at the time; (11)
purchase or retain securities of any company in
which any Fund officers or directors, or Fund
manager, its partner, officer, or director
beneficially owns more than 1/2 of 1% of said
company's securities, if all such persons owning
more than 1/2 of 1% of said company's
securities own in the aggregate more than 5% of
the outstanding securities of such company; (12)
borrow or pledge its credit under normal
circumstances, except up to 10% of its gross
assets (computed at the lower of fair market
value or cost) for temporary or emergency
purposes, and not for the purpose of leveraging
its investments, and provided further that any
borrowing in excess of 5% of the total assets of
the Fund shall have asset coverage of at least 3
to 1; (13) make itself or its assets liable for the
indebtedness of others; (14) invest in securities
which are assessable or involve unlimited
liability; (15) invest in securities issued by UMB
Financial Corporation or by affiliate banks of
UMB Financial Corporation; or (16) issue senior
securities except for those investment procedures
permissible under the Fund's other restrictions.
Scout Balanced Fund will not: (1) purchase
the securities of any one issuer, except the
United States government, if immediately after
and as a result of such purchase (a) the value of
the holdings of the Fund in the securities of such
issuer exceeds 5% of the value of the Fund's
total assets, or (b) the Fund owns more than
10% of the outstanding voting securities, or any
other class of securities, of such issuer; (2)
engage in the purchase or sale of real estate,
commodities or futures contracts; (3) underwrite
the securities of other issuers; (4) make loans to
any of its officers, directors, or employees, or to
its manager, or general distributor, or officers or
directors thereof; (5) make any loan (the
purchase of a security subject to a repurchase
agreement or the purchase of a portion of an
issue of publicly distributed debt securities is not
considered the making of a loan); (6) invest in
companies for the purpose of exercising control
of management; (7) purchase securities on
margin, or sell securities short; (8) purchase
shares of other investment companies except in
the open market at ordinary broker's
commission or pursuant to a plan of merger or
consolidation; (9) invest in the aggregate more
than 5% of the value of its gross assets in the
securities of issuers (other than federal, state,
territorial, or local governments, or
corporations, or authorities established thereby),
which, including predecessors, have not had at
least three years' continuous operations; (10)
except for transactions in its shares or other
securities through brokerage practices which are
considered normal and generally accepted under
circumstances existing at the time, enter into
dealings with its officers or directors, its
manager or underwriter, or their officers or
directors, or any organization in which such
persons have a financial interest; (11) purchase
or retain securities of any company in which any
Fund officers or directors, or Fund manager, its
partner, officer, or director beneficially owns
more than 1/2 of 1% of said company's
securities, if all such persons owning more than
1/2 of 1% of such company's securities, own in
the aggregate more than 5% of the outstanding
securities of such company; (12) borrow or
pledge its credit under normal circumstances,
except up to 10% of its gross assets (computed at
the lower of fair market value or cost) for
temporary or emergency purposes, and not for
the purpose of leveraging its investments, and
provided further that any borrowing in excess of
5% of the total assets of the Fund shall have
asset coverage of at least 3 to 1; (13) make itself
or its assets liable for the indebtedness of others;
(14) invest in securities which are assessable or
involve unlimited liability; (15) invest in
securities issued by UMB Financial Corporation
or by affiliate banks of UMB Financial
Corporation, (16) issue senior securities except
that borrowings from banks are permitted so
long as the requisite asset coverage under
restriction (12) above has been provided; or (17)
purchase any securities which would cause 25%
or more of the Fund's total assets at the time of
such purchase to be invested in any one
industry.
Scout Bond Fund will not: (1) purchase the
securities of any one issuer, except the United
States government, if immediately after and as a
result of such purchase (a) the value of the
holdings of the Fund in the securities of such
issuer exceeds 5% of the value of the Fund's
total assets, or (b) the Fund owns more than
10% of the outstanding voting securities, or any
other class of securities, of such issuer; (2)
engage in the purchase or sale of real estate or
commodities; (3) underwrite the securities of
other issuers; (4) make loans to any of its
officers, directors, or employees, or to its
manager, or general distributor, or officers or
directors thereof; (5) make loans to other
persons, except by the purchase of debt
obligations which are permitted under its
investment policy; (6) invest in companies for
the purpose of exercising control of
management; (7) purchase securities on margin,
or sell securities short; (8) purchase shares of
other investment companies except in the open
market at ordinary broker's commission or
pursuant to a plan of merger or consolidation;
(9) invest in the aggregate more than 5% of the
value of its gross assets in the securities of
issuers (other than federal, state, territorial, or
local governments, or corporations, or
authorities established thereby), which,
including predecessors, have not had at least
three years' continuous operations; (10) enter
into dealings with its officers or directors, its
manager or underwriter, or their officers or
directors, or any organization in which such
persons have a financial interest, except for
transactions in the Fund's own shares or other
securities through brokerage practices which are
considered normal and generally accepted under
the circumstances existing at the time; (11)
purchase or retain securities of any company in
which any Fund officers or directors, or Fund
manager, its partner, officer, or director
beneficially owns more than 1/2 of 1% of said
company's securities, if all such persons owning
more than 1/2 of 1% of said company's
securities own in the aggregate more than 5% of
the outstanding securities of such company; (12)
borrow or pledge its credit under normal
circumstances, except up to 10% of its gross
assets (computed at the lower of fair market
value or cost) for temporary or emergency
purposes, and not for the purpose of leveraging
its investments, and provided further that any
borrowing in excess of 5% of the total assets of
the Fund shall have asset coverage of at least 3
to 1; (13) make itself or its assets liable for the
indebtedness of others; (14) invest more than
25% of the value of its assets in any one
industry; (15) invest in securities which are
assessable or involve unlimited liability; (16)
invest in securities issued by UMB Financial
Corporation or by affiliate banks of UMB
Financial Corporation; or (17) issue senior
securities except for those investment procedures
permissible under the Fund's other restrictions.
Scout WorldWide Fund will not: (1) purchase
the securities of any one issuer, except the
United States Government, if immediately after
and as a result of such purchase (a) the value of
the holdings of the Fund in the securities of such
issuer exceeds 5% of the value of the Fund's
total assets, or (b) the Fund owns more than
10% of the outstanding voting securities, or any
other class of securities, of such issuer; (2)
engage in the purchase or sale of real estate or
commodities contracts, including futures
contracts; (3) underwrite the securities of other
issuers; (4) make loans to any of its officers,
directors, or employees, or to its manager, or
general distributor, or officers or directors
thereof; (5) make loans to other persons, except
by the purchase of debt obligations which are
permitted under its investment policy; (6) invest
in companies for the purpose of exercising
control of management; (7) purchase securities
on margin, or sell securities short; (8) purchase
shares of other investment companies except in
the open market at ordinary broker's
commission or pursuant to a plan of merger or
consolidation; (9) invest in the aggregate more
than 5% of the value of its gross assets in the
securities of issuers (other than federal, state,
territorial, or local governments, or
corporations, or authorities established thereby),
which, including predecessors, have not had at
least three years' continuous operations; (10)
enter into dealings with its officers or directors,
its manager or underwriter, or their officers or
directors, or any organization in which such
persons have a financial interest, except for
transactions in the Fund's own shares or other
securities through brokerage practices which are
considered normal and generally accepted under
the circumstances existing at the time; (11)
purchase or retain securities of any company in
which any Fund officers or directors, or Fund
manager, its partner, officer, or director benefi-
cially owns more than 1/2 of 1% of said
company's securities, if all such persons owning
more than 1/2 of 1% of said company's
securities own in the aggregate more than 5% of
the outstanding securities of such company; (12)
borrow or pledge its credit under normal
circumstances, except up to 10% of its gross
assets (computed at the lower of fair market
value or cost) for temporary or emergency
purposes, and not for the purpose of leveraging
its investments, and provided further that any
borrowing in excess of 5% of the total assets of
the Fund shall have asset coverage of at least 3
to 1, and provided further that the Fund will not
purchase securities when borrowings exceed 5%
of its total assets; (13) make itself or its assets
liable for the indebtedness of others; (14) invest
in securities which are assessable or involve
unlimited liability; (15) invest in securities
issued by UMB Financial Corporation or by
affiliate banks of UMB Financial Corporation;
or (16) issue senior securities except that
borrowings from banks are permitted so long as
the requisite asset coverage under restriction
(12) above has been provided.
Scout Money Market Fund will not: (1)
invest in equity securities or securities
convertible into equities; (2) purchase the
securities of any issuer (other than obligations
issued or guaranteed as to principal and interest
by the government of the United States, its
agencies or instrumentalities) if, as a result, (a)
more than 5% of either Portfolio's total assets
(taken at current value) would be invested in the
securities of such issuer, or (b) either Portfolio
would hold more than 10% of any class of
securities of such issuer (for this purpose, all
debts and obligations of an issuer maturing in
less than one year are treated as a single class of
securities); (3) borrow money in excess of 10%
of either Portfolio's total assets taken at market
value, and then only from banks as a temporary
measure for extraordinary or emergency
purposes; the Fund will not borrow to increase
income (leveraging) but only to facilitate
redemption requests which might otherwise
require untimely dispositions of Portfolio
securities; the Fund will repay all borrowings
before making additional investments, and
interest paid on such borrowings will reduce net
income; (4) mortgage, pledge or hypothecate its
assets except in an amount up to 15% (10% as
long as the Fund's shares are registered for sale
in certain states) of the value of its total assets
but only to secure borrowings for temporary or
emergency purposes; (5) issue senior securities,
as defined in the Investment Company Act of
1940, as amended; (6) underwrite securities
issued by other persons; (7) purchase or sell real
estate, but this shall not prevent investment in
obligations secured by real estate; (8) make
loans to other persons, except by the purchase of
debt obligations which are permitted under its
investment policy; the purchase of a security
subject to a repurchase agreement is not
considered making a loan; (9) purchase
securities on margin or sell short; (10) purchase
or retain securities of an issuer if to the
knowledge of the Fund's management and
directors of the Fund, each of whom owns more
than one-half of one percent (.5%) of such
securities, together own more than five percent
(5%) of the securities of such issuer; (11)
purchase or sell commodities or commodity
contracts; (12) write, or invest in, put, call,
straddle or spread options or invest in interests
in oil, gas or other mineral exploration or
development programs; (13) invest in companies
for the purpose of exercising control; (14) invest
in securities of other investment companies,
except as they may be acquired as part of a
merger, consolidation or acquisition of assets;
(15) invest more than 5% of the value of either
Portfolio's total assets at the time of investment
in the securities of any issuer or issuers which
have records of less than three years continuous
operation, including the operation of any
predecessor, but this limitation does not apply to
securities issued or guaranteed as to interest and
principal by the United States government or its
agencies or instrumentalities; (16) purchase any
securities which would cause more than 25% of
the value of a Portfolio's total net assets at the
time of such purchase to be invested in any one
industry; provided, however, that the Prime
Portfolio reserves freedom of action to invest up
to 100% of its assets in certificates of deposit or
bankers' acceptances of domestic branches of
U.S. banks; or (17) issue senior securities except
for those investment procedures permissible
under the Fund's other restrictions.
There is no limitation with respect to
investments in U.S. treasury bills, or other
obligations issued or guaranteed by the federal
government, its agencies and instrumentalities.
Scout Tax-Free Money Market Fund will
not: (1) invest in equity securities or securities
convertible into equities; (2) purchase more than
ten percent (10%) of the outstanding publicly
issued debt obligations of any issuer; (3) borrow
or pledge its credit under normal circumstances,
except up to 10% of its gross assets (computed at
the lower of fair market value or cost) for
temporary or emergency purposes (and not for
the purpose of leveraging its investments), and
provided further that any borrowing in excess of
5% of the total assets of the Fund shall have
asset coverage of at least 3 to 1; the Fund will
repay all borrowings before making additional
investments; (4) pledge, mortgage or
hypothecate its assets to an extent greater than
ten percent (10%) of the value of its net assets;
(5) issue senior securities, as defined in the
Investment Company Act of 1940, as amended;
(6) underwrite any issue of securities; (7)
purchase or sell real estate, but this shall not
prevent investment in municipal bonds secured
by a real estate interest therein; (8) make loans
to other persons, except by the purchase of
bonds, debentures or similar obligations which
are publicly distributed; the purchase of a
security subject to a repurchase agreement is not
considered making a loan; (9) purchase
securities on margin or sell short; (10) purchase
or retain securities of an issuer if those directors
of the Fund, each of whom owns more than one-
half of one percent (.5%) of such securities,
together own more than five percent (5%) of the
securities of such issuer; (11) purchase or sell
commodities or commodity contracts; (12)
invest in, put, call, straddle or spread options;
(13) purchase securities of any issuer (except the
United States government, its agencies and
instrumentalities, and any municipal bond
guaranteed by the United States government) if,
as a result, more than 5% of the total assets
would be invested in the securities of such
issuer; for purposes of this limitation,
identification of the "issuer" will be based on a
determination of the source of assets and
revenues committed to meeting interest and
principal payments of each security, and a
government entity which guarantees the
securities issued by another entity is also
considered an issuer of that security; (14) invest
in companies for the purpose of exercising
control; (15) invest in securities of other
investment companies, except as they may be
acquired as part of a merger, consolidation or
acquisition of assets; or (16) invest more than
5% of the value of its total assets at the time of
investment in the securities of any issuer or
issuers which have records of less than three
years continuous operation, including the
operation of any predecessor, but this limitation
does not apply to securities issued or guaranteed
as to interest and principal by the United States
government or its agencies or instrumentalities.
In addition to the fundamental investment
restrictions set out above, in order to comply
with the law or regulations of various states, the
Funds will not engage in the following
practices: (1) invest in securities which are not
readily marketable, or in securities of foreign
issuers which are not listed on a recognized
domestic or foreign securities exchange, (2)
write put or call options, (3) invest in oil, gas
and other mineral leases or arbitrage
transactions, (4) purchase or sell real estate
(including limited partnership interests, but
excluding readily marketable interests in real
estate investment trusts or readily marketable
securities of companies which invest in real
estate); or (5) purchase securities of issuers
which the company is restricted from selling to
the public without registration under the
Securities Act of 1933, including Rule 144(a)
securities.
Certain states also require that the Fund's
investments in warrants, valued at the lower of
cost or market, may not exceed 5% of the value
of the Fund's net assets. Included within that
amount, but not to exceed 2% of the value of the
Fund's net assets may be warrants which are not
listed on the New York or American Stock
Exchange. Warrants acquired by the Fund in
units or attached to securities may be deemed to
be without value for purposes of this limitation.
In addition, the Funds have undertaken to the
state of California to comply with the expense
limitations set forth in Rule 260.140.84(a) of
Title 10 of the California Administrative Code.
PERFORMANCE MEASURES
Yield of Scout Money Market Fund and
Scout Tax-Free Money Market Fund
From time to time, each Portfolio of the Scout
Money Market Fund and Scout Tax-Free Money
Market Fund may quote their yields in
advertisements, shareholder reports or other
communications to shareholders. Yield
information is generally available by calling the
Funds toll free 1-800-996-2862.
The current annualized yield for each
Portfolio of the Scout Money Market Fund and
Scout Tax-Free Money Market Fund is
computed by: (a) determining the net change in
the value of a hypothetical pre-existing account
in a Fund having a balance of one share at the
beginning of a seven calendar-day period for
which yield is to be quoted, (b) dividing the net
change by the value of the account at the
beginning of the period to obtain the base period
return, and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7).
The net change in value of the account reflects
the value of additional shares purchased with
dividends declared on the original share and any
such additional shares, but does not include
realized gains and losses or unrealized
appreciation and depreciation. In addition, each
Fund may calculate a compound effective yield
by adding 1 to the base period return (calculated
as described above, raising the sum to a power
equal to 365/7 and subtracting 1).
For the seven-day period ended June 30, 1995,
the current annualized yield of the Scout Money
Market Fund - Federal Portfolio was 5.58% and
the compound effective yield was 5.73%. At
June 30, 1995 that Portfolio's average maturity
was 31 days. For the seven-day period ended
June 30, 1995, the current annualized yield of
the Scout Money Market Fund - Prime Portfolio
was 5.58% and the compound effective yield
was 5.74%. At June 30, 1995 that Portfolio's
average maturity was 36 days. For the seven-
day period ended June 30, 1995, the current
annualized yield of the Scout Tax-Free Money
Market Fund was 3.66% and the compound
effective yield was 3.73%. At June 30, 1995,
that Fund's average portfolio maturity was 20
days.
Total Return
Scout Stock Fund, Scout Regional Fund,
Scout Bond Fund and Scout WorldWide Funds'
"average annual total return" figures described
and shown below are computed according to a
formula prescribed by the Securities and
Exchange Commission. The formula can be
expressed as follows:
P(1+T) n = ERV
Where: P = a hypothetical initial
payment of $1,000
T = average annual
total return
n = number of years
ERV = Ending Redeemable Value
of a hypothetical $1,000
payment made at the
beginning of the 1, 5, or
10 year (or other) periods
at the end of the 1,5, or 10
year (or other) periods (or
fractional portions
thereof);
The tables below show the average total return
for each of the Funds or Portfolios for the
specified periods.
STOCK BOND
For the one year
7/1/94-6/30/95 17.30% 9.56%
For the five years
7/1/90-6/30/95 10.63% 7.65%
For the ten years
7/1/85-6/30/95 11.49% 8.07%
From commencement
of operations to 6/30/95* 12.29% 8.63%
_____________________________________
* The Funds commenced operation on
November 18, 1982.
REGIONAL WORLD-
WIDE
For the one year
1/1/95-12/31/95 19.96% 14.66%
For the five years
1/1/91-12/31/95 9.93% N/A
From commencement
of operations to 12/31/95* 5.63% 10.54%
_____________________________________
* Scout Regional Fund commenced operation
on November 17, 1986, and Scout
WorldWide Fund commenced operation on
September 14, 1993.
Scout Balanced Fund commenced operation
on December 6, 1995.
HOW THE FUNDS' SHARES
ARE DISTRIBUTED
Jones & Babson, Inc., as agent of the Scout
Funds, agrees to supply its best efforts as sole
distributor of the Funds' shares and, at its own
expense, pay all sales and distribution expenses
in connection with their offering other than
registration fees and other government charges.
Jones & Babson, Inc. does not receive any fee
or other compensation under its distribution
agreements with the Funds which continue in
effect until October 31, 1997, and which will
continue automatically for successive annual
periods ending each October 31, if continued at
least annually by the Funds' Boards of Directors,
including a majority of those Directors who are
not parties to such Agreements or interested
persons of any such party. They terminate
automatically if assigned by either party or upon
60 days written notice by either party to the
other.
HOW SHARE PURCHASES
ARE HANDLED
Each order accepted will be fully invested in
whole and fractional shares, unless the purchase
of a certain number of whole shares is specified,
at the net asset value per share next effective
after an order is accepted by a Fund.
Each investment is confirmed by a year-to-
date statement which provides the details of the
immediate transaction, plus all prior
transactions in your account during the current
year. This includes the dollar amount invested,
the number of shares purchased or redeemed,
the price per share, and the aggregate shares
owned. A transcript of all activity in your
account during the previous year will be
furnished each January. By retaining each
annual summary and the last year-to-date
statement, you have a complete detailed history
of your account, which provides necessary tax
information. A duplicate copy of a past annual
statement is available from Jones & Babson, Inc.
at its cost, subject to a minimum charge of $5
per account, per year requested.
Normally, the shares which you purchase are
held by the Fund in open account, thereby
relieving you of the responsibility of providing
for the safekeeping of a negotiable share
certificate. Should you have a special need for a
certificate, one will be issued on request for all
or a portion of the whole shares in your account.
There is no charge for the first certificate issued.
A charge of $3.50 will be made for any
replacement certificates issued. In order to
protect the interests of the other shareholders,
share certificates will be sent to those
shareholders who request them only after the
Fund has determined that unconditional
payment for the shares represented by the
certificate has been received by its custodian,
UMB Bank, n.a.
If an order to purchase shares must be
canceled due to non-payment, the purchaser will
be responsible for any loss incurred by the Fund
involved arising out of such cancellation. To
recover any such loss, the Funds reserve the
right to redeem shares owned by any purchaser
whose order is canceled, and such purchaser
may be prohibited or restricted in the manner of
placing further orders.
The Funds reserve the right in their sole
discretion to withdraw all or any part of the
offering made by the prospectus or to reject
purchase orders when, in the judgment of
management, such withdrawal or rejection is in
the best interest of a Fund and its shareholders.
The Funds also reserve the right at any time to
waive or increase the minimum requirements
applicable to initial or subsequent investments
with respect to any person or class of persons,
which includes shareholders of the Funds'
special investment programs.
REDEMPTION OF SHARES
The right of redemption may be suspended, or
the date of payment postponed beyond the
normal three-day period by a Fund's Board of
Directors under the following conditions
authorized by the Investment Company Act of
1940: (1) for any period (a) during which the
New York Stock Exchange is closed, other than
customary weekend and holiday closing, or (b)
during which trading on the New York Stock
Exchange is restricted; (2) for any period during
which an emergency exists as a result of which
(a) disposal by the Fund of securities owned by it
is not reasonably practical, or (b) it is not
reasonably practicable for the Fund to determine
the fair value of its net assets; or (3) for such
other periods as the Securities and Exchange
Commission may by order permit for the
protection of the Fund's shareholders.
The Funds have elected to be governed by
Rule 18f-1 under the Investment Company Act
of 1940, pursuant to which the Funds are
obligated to redeem shares solely in cash up to
the lesser of $250,000 or 1% of a Fund's net
asset value during any 90-day period for any one
shareholder. Should redemptions by any
shareholder exceed such limitation, a Fund may
redeem the excess in kind. If shares are
redeemed in kind, the redeeming shareholder
may incur brokerage costs in converting the
assets to cash. The method of valuing securities
used to make redemptions in kind will be the
same as the method of valuing portfolio
securities described under "How Share Price is
Determined" in the Prospectus, and such
valuation will be made as of the same time the
redemption price is determined.
SIGNATURE GUARANTEES
Signature guarantees normally reduce the
possibility of forgery and are required in
connection with each redemption method to
protect shareholders from loss. Signature
guarantees are required in connection with all
redemptions by mail or changes in share
registration, except as provided in the
Prospectus.
Signature guarantees must appear together
with the signature(s) of the registered owner(s),
on:
(1) a written request for redemption;
(2) a separate instrument of assignment,
which should specify the total number of
shares to be redeemed (this "stock power"
may be obtained from the Fund or from
most banks or stock brokers); or
(3) all stock certificates tendered for
redemption.
DIVIDENDS AND DISTRIBUTIONS
The Funds' policy is to distribute substantially
all of their net investment income, if any,
together with any net realized capital gains in
the amount and at a date that will avoid both
income (including capital gains) taxes on them
and the imposition of the federal excise tax on
undistributed income and capital gains (see
discussion under "Dividends, Distributions and
their Taxation" in the Prospectus).
Unless the shareholder elects otherwise,
dividends and capital gains distributions are
reinvested in additional shares at net asset value.
Any dividend and distribution election will
remain in effect until the Fund is notified by the
shareholder in writing at least three days prior
to the record date to change the election. An
account statement is sent to shareholders
whenever an income dividend or capital gains
distribution is paid.
Any dividend or capital gains distribution
reduces the net asset value per share by the per
share amount of such distribution.
Shares of Scout Money Market Fund and
Scout Tax-Free Money Market Fund begin
earning income on the effective date of
purchase. Shares of Scout Bond Fund begin
earning income on the day subsequent to the
effective date of purchase (see "How to Purchase
Shares"). Income earned on weekends, holidays
and other days on which these Funds are closed
for business is declared as a dividend on the first
preceding business day.
MANAGER AND UNDERWRITER
Pursuant to Management Agreements, each
Fund employs at its own expense UMB Bank,
n.a. as its manager and investment counsel.
Jones & Babson, Inc. serves as principal
underwriter at no charge to the Funds.
The aggregate management fee paid to Jones
& Babson, Inc. by Scout Stock Fund during the
most recent fiscal year ended June 30, 1995,
under a previous management agreement from
which Jones & Babson, Inc. paid all the Fund's
expenses except those payable directly by the
Fund, was $1,066,903. The .85% annual fee
charged by UMB Bank, n.a. under the current
agreement covers all normal operating costs of
the Fund.
The aggregate management fee paid to Jones
& Babson, Inc. by Scout Regional Fund during
the most recent fiscal year ended December 31,
1995, under a previous management agreement
from which Jones & Babson, Inc. paid all the
Fund's expenses except those payable directly by
the Fund, was $274,973. The .85% annual fee
charged by UMB Bank, n.a. under the current
agreement covers all normal operating costs of
the Fund.
The aggregate management fee paid to Jones
& Babson, Inc. by Scout WorldWide Fund
during the most recent fiscal year ended
December 31, 1995, under a previous
management agreement from which Jones &
Babson, Inc. paid all the Fund's expenses except
those payable directly by the Fund, was
$174,413. The .85% annual fee charged by
UMB Bank, n.a. under the current agreement
covers all normal operating costs of the Fund.
The aggregate management fee paid to Jones
& Babson, Inc. by Scout Bond Fund during the
most recent fiscal year ended June 30, 1995,
under a previous management agreement from
which Jones & Babson, Inc. paid all the Fund's
expenses except those payable directly by the
Fund, was $653,572. The .85% annual fee
charged by UMB Bank, n.a. under the current
agreement covers all normal operating costs of
the Fund.
For its investment supervisory services and
counsel in connection with Scout Stock Fund,
Scout Regional Fund, Scout Bond Fund, and
Scout WorldWide Fund, under a previous
investment counsel agreement, Jones & Babson,
Inc. paid UMB Bank, n.a. a fee computed on an
annual basis at the rate of .35% of the average
daily total net assets of each of these Funds.
The aggregate management fees paid to Jones
& Babson, Inc. by Scout Money Market Fund
during the most recent fiscal year ended June
30, 1995, under a previous management
agreement from which Jones & Babson, Inc.
paid all the Fund's expenses except those
payable directly by the Fund, was $1,975,351.
The .50% annual fee charged by UMB Bank,
n.a. under the current agreement covers all
normal operating costs of the Fund.
The aggregate management fees paid to Jones
& Babson, Inc. by Scout Tax-Free Money
Market Fund during the most recent fiscal year
ended June 30, 1995, under a previous
management agreement from which Jones &
Babson, Inc. paid all the Fund's expenses except
those payable directly by the Fund, was
$516,916. The .50% annual fee charged by
UMB Bank, n.a. under the current agreement
covers all normal operating costs of the Fund.
For its investment supervisory services and
counsel in connection with Scout Money Market
Fund and Scout Tax-Free Money Market Fund,
under a previous investment counsel agreement,
Jones & Babson, Inc. paid UMB Bank, n.a. a fee
computed on an annual basis at the rate of 1/10
of 1% of the average daily total net assets of
each of these Funds.
For its investment supervisory services and
counsel in connection with Scout Balanced
Fund, Inc., the Fund pays UMB Bank, n.a. a fee
of .85% of its average daily total net assets.
HOW SHARE PRICE IS DETERMINED
The net asset value per share of each Fund
portfolio is computed once daily, Monday
through Friday, at the specific time during the
day that the Board of Directors of each Fund sets
at least annually, except on days on which
changes in the value of a Fund's portfolio
securities will not materially affect the net asset
value, or days during which no security is
tendered for redemption and no order to
purchase or sell such security is received by the
Fund, or the following holidays:
New Years Day January 1
Martin Luther Third Monday
King Day* in January
Presidents' Holiday Third Monday
in February
Good Friday Friday before Easter
Memorial Day Last Monday in May
Independence Day July 4
Labor Day First Monday
in September
Columbus Day* Second Monday
in October
Veterans' Day* November 11
Thanksgiving Day Fourth Thursday
in November
Christmas Day December 25
* Money Market and Tax-Free Money Market
Funds only.
OFFICERS AND DIRECTORS
The Funds are managed by UMB Bank, n.a.,
subject to the supervision and control of the
Boards of Directors. The following table lists
the Officers and Directors of the Funds. Unless
noted otherwise, the address of each Officer and
Director is 2440 Pershing Road, Suite G-15,
Kansas City, Missouri 64108. Except as
indicated, each has been an employee of Jones &
Babson, Inc. for more than five years.
* Larry D. Armel, President and Director,
Jones & Babson, Inc., Scout Stock Fund, Inc.,
Scout Regional Fund, Inc., Scout Bond Fund,
Inc., Scout Money Market Fund, Inc., Scout
Tax-Free Money Market Fund, Inc., Scout
WorldWide Fund, Inc., Scout Balanced Fund,
Inc., Shadow Stock Fund, Inc., David L.
Babson Growth Fund, Inc., D.L. Babson
Money Market Fund, Inc., D.L. Babson Tax-
Free Income Fund, Inc., Babson Value
Fund, Inc., Babson Enterprise Fund, Inc.,
Babson Enterprise Fund II, Inc., Babson-
Stewart Ivory International Fund, Inc.,
Buffalo Balanced Fund, Inc., Buffalo Equity
Fund, Inc., Buffalo High Yield Fund, Inc.,
Buffalo USA Global Fund, Inc.; Trustee and
President of D. L. Babson Bond Trust.
William E. Hoffman, D.D.S., Director,
Scout Stock Fund, Inc., Scout Regional Fund,
Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout WorldWide Fund,
Inc., Scout Balanced Fund, Inc.; Orthodontist,
3700 West 83rd Street, Suite 206, Prairie
Village, Kansas 66208.
Eric T. Jager, Director, Scout Stock Fund,
Inc., Scout Regional Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc.,
Scout WorldWide Fund, Inc., Scout Balanced
Fund, Inc.; President and Director, Windcrest
Investment Management, Inc.; Director,
Bartlett Futures, Inc., Nygaard Corporation,
4800 Main Street, Suite 600, Kansas City,
Missouri 64112; formerly Senior Vice
President, Eppler, Guerin & Turner, Dallas,
Texas, a securities brokerage firm.
_______________________________________
* Directors who are interested persons as
that term is defined in the Investment
Company Act of 1940, as amended.
Stephen F. Rose, Director, Scout Stock Fund,
Inc., Scout Regional Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout
WorldWide Fund, Inc., Scout Balanced Fund,
Inc.; President, Sun Publications, Inc., 7373 W.
107th Street, Overland Park, Kansas 66212.
Stuart Wien, Director, Scout Stock Fund, Inc.,
Scout Regional Fund, Inc., Scout Bond Fund,
Inc., Scout Money Market Fund, Inc., Scout
Tax-Free Money Market Fund, Inc., Scout
WorldWide Fund, Inc., Scout Balanced Fund,
Inc.; Retired, 4589 West 124th Place, Leawood,
Kansas 66206, formerly Chairman of the Board,
Milgram Food Stores, Inc.
P. Bradley Adams, Vice President and
Treasurer, Jones & Babson, Inc., Scout Stock
Fund, Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout Regional Fund, Inc.,
Scout WorldWide Fund, Inc., Scout Balanced
Fund, Inc., David L. Babson Growth Fund,
Inc., D. L. Babson Money Market Fund, Inc., D.
L. Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund
II, Inc., Babson Value Fund, Inc., Shadow Stock
Fund, Inc., Babson-Stewart Ivory International
Fund, Inc., D.L. Babson Bond Trust, Buffalo
Balanced Fund, Inc., Buffalo Equity Fund, Inc.,
Buffalo High Yield Fund, Inc., Buffalo USA
Global Fund, Inc.
Michael A. Brummel, Vice President,
Assistant Secretary and Assistant Treasurer,
Jones & Babson, Inc., Scout Stock Fund, Inc.,
Scout Bond Fund, Inc., Scout Money Market
Fund, Inc., Scout Tax-Free Money Market Fund,
Inc., Scout Regional Fund, Inc., Scout
WorldWide Fund, Inc., Scout Balanced Fund,
Inc., David L. Babson Growth Fund, Inc., D.L.
Babson Money Market Fund, Inc., D.L. Babson
Tax-Free Income Fund, Inc., Babson Enterprise
Fund, Inc., Babson Enterprise Fund II, Inc.,
Babson Value Fund, Inc., Shadow Stock Fund,
Inc., Babson-Stewart Ivory International Fund,
Inc., D.L. Babson Bond Trust, Buffalo Balanced
Fund, Inc., Buffalo Equity Fund, Inc., Buffalo
High Yield Fund, Inc., Buffalo USA Global
Fund, Inc.
Martin A. Cramer, Vice President and
Secretary, Jones & Babson, Inc., Scout Stock
Fund, Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout Regional Fund, Inc.,
Scout WorldWide Fund, Inc., Scout Balanced
Fund, Inc., David L. Babson Growth Fund,
Inc., D.L. Babson Money Market Fund, Inc.,
D.L. Babson Tax-Free Income Fund, Inc.,
Babson Enterprise Fund, Inc., Babson
Enterprise Fund II, Inc., Babson Value Fund,
Inc., Shadow Stock Fund, Inc., Babson-Stewart
Ivory International Fund, Inc., D.L. Babson
Bond Trust, Buffalo Balanced Fund, Inc.,
Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc., Buffalo USA Global Fund, Inc.
John G. Dyer, Vice President and Legal
Counsel, Scout Stock Fund, Inc., Scout
Regional Fund, Inc., Scout Bond Fund, Inc.,
Scout Money Market Fund, Inc., Scout Tax-Free
Money Market Fund, Inc., Scout WorldWide
Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo
Equity Fund, Inc., Buffalo High Yield Fund,
Inc., Buffalo USA Global Fund, Inc.
Remuneration of Officers and Directors.
None of the officers or directors will be
remunerated by the Funds for their normal
duties and services. Their compensation and
expenses arising out of normal operations will
be paid by Jones & Babson, Inc. under the
provisions of the Underwriting Agreements.
<TABLE>
<CAPTION>
COMPENSATION TABLE
Pension or Estimated Total
Aggregate Retirement Annual Compemsation
Name of Compensation Benefits Accrued Benefits From All Scout
Director From each As Part of Fund Upon Funds Paid to
Fund Expenses Retirement Directors**
______________ ____________ ________________ __________ _____________
</CAPTION>
<S> <C> <C> <C> <C>
Larry D. Armel* -- -- -- --
William E. Hoffman $7,000 -- -- $7,000
Eric T. Jager $7,000 -- -- $7,000
Stephen F. Rose $6,250 -- -- $6,250
Stuart Wien $7,000 -- -- $7,000
</TABLE>
* As an "interested director," Mr. Armel receives no compensation for
his services as a director.
** The amounts reported in this column reflect the total compensation
paid to each director for his services as a director of seven Scout
Funds during calendar year 1995. Directors fees are paid by the
Funds' manager and not by the Funds themselves.
Messrs. Hoffman, Jager, Rose and Wien have
no financial interest in, nor are they affiliated
with, either Jones & Babson, Inc. or UMB Bank,
n.a.
The Audit Committee of the Board of
Directors for all Scout Funds is composed of
Messrs. Hoffman, Jager, Rose and Wien.
The Officers and Directors of the Funds as a
group own less than 1% of any of the Funds.
The Funds will not hold annual meetings
except as required by the Investment Company
Act of 1940 and other applicable laws. The
Funds are Maryland corporations. Under
Maryland law, a special meeting of stockholders
of a Fund must be held if the Fund receives the
written request for a meeting from the
stockholders entitled to cast at least 25% of all
the votes entitled to be cast at the meeting. Each
Fund has undertaken that its Directors will call
a meeting of stockholders if such a meeting is
requested in writing by the holders of not less
than 10% of the outstanding shares of the Fund.
To the extent required by the undertaking, the
Fund will assist shareholder communications in
such matters.
CUSTODIAN
The Funds' portfolio assets are held for
safekeeping by UMB Bank, n.a. This means
the bank, rather than the Funds, has possession
of the Funds' cash and securities. But, as
directed by the Funds' officers, it delivers cash to
those who have sold securities to a Fund in
return for such securities, and to those who have
purchased portfolio securities from a Fund, it
delivers such securities in return for their cash
purchase price. It also collects income directly
from issuers of securities owned by a Fund and
holds this for payment to shareholders after
deduction of the Fund's expenses. UMB Bank,
n.a. also functions as manager and investment
adviser to the Funds (see "Manager and
Underwriter" in the Prospectus).
INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
The Funds' financial statements are examined
annually by independent certified public
accountants approved by the directors each year,
and in years in which an annual meeting is held
the directors may submit their selection of
independent public accountants to the
shareholders for ratification.
Reports to shareholders will be published at
least semiannually.
Baird, Kurtz & Dobson, City Center Square,
Suite 2700, 1100 Main Street, Kansas City,
Missouri 64105, is the present independent
certified public accountant for the Funds.
FIXED INCOME SECURITIES
DESCRIBED AND RATINGS
In evaluating investment suitability, each
investor must relate the characteristics of a
particular investment under consideration to
personal financial circumstances and goals.
Money market instruments are generally
described as short-term debt obligations issued
by governments, corporations and financial
institutions. Usually maturities are one year or
less. The yield from this type of instrument is
very sensitive to short-term lending conditions.
Thus, the income of money market funds will
follow closely the trend of short-term interest
rates, rising when those rates increase and
declining when they fall.
Because of the short maturities, fluctuation in
the principal value of money market-type
securities resulting from changes in short-term
interest rates normally will not be sufficient to
change the net asset value (price) per share.
Although the Fund's shareholders can anticipate
that this principal value stability will be
reflected in the price of the Fund's shares, it
cannot be guaranteed.
A money market security does not have the
characteristics usually associated with a long-
term investment. Long-term investors who
commit their assets to a money market security
must understand that short-term interest rates
have a history of sharp and frequent peaks and
valleys. Thus, there may be occasions when the
rates are sufficiently low as to be unattractive
when compared to the return on other types of
investments. The investor who commits long-
term funds to a short-term investment is exposed
to the risks associated with buying and selling
securities in anticipation of unpredictable future
market events.
Money market funds are neither insured nor
guaranteed by the U.S. Government, and there
can be no assurance that they will be able to
maintain a stable net asset value of $1.00 per
share.
Description of Bond Ratings:
Standard & Poor's Corporation (S&P).
AAA - Highest Grade. These securities
possess the ultimate degree of
protection as to principal and
interest. Marketwise, they move with
interest rates, and hence provide the
maximum safety on all counts.
AA - High Grade. Generally, these bonds
differ from AAA issues only in a
small degree. Here too, prices move
with the long-term money market.
A - Upper-medium Grade. They have
considerable investment strength, but
are not entirely free from adverse
effects of changes in economic and
trade conditions. Interest and
principal are regarded as safe. They
predominantly reflect money rates in
their market behavior but, to some
extent, also economic conditions.
BBB - Bonds rated BBB are regarded as
having an adequate capacity to pay
principal and interest. Whereas they
normally exhibit protection
parameters, adverse economic
conditions or changing
circumstances are more likely to lead
to a weakened capacity to pay
principal and interest for bonds in
this category than for bonds in the A
category.
BB, B, CCC, CC -.Bonds rated BB, B, CCC
and CC are regarded, on balance, as
predominantly speculative with respect to the
issuer's capacity to pay interest and repay
principal in accordance with the terms of the
obligations. BB indicates the lowest degree of
speculation and CC the highest degree of
speculation. While such bonds will likely have
some quality and protective characteristics, these
are outweighed by large uncertainties or major
risk exposures to adverse conditions.
Moody's Investors Service, Inc. (Moody's).
Aaa - Best Quality. These securities carry
the smallest degree of investment
risk and are generally referred to as
"gilt-edge". Interest payments are
protected by a large, or by an
exceptionally stable margin, and
principal is secure. While the
various protective elements are likely
to change, such changes as can be
visualized are most unlikely to
impair the fundamentally strong
position of such issues.
Aa - High Quality by All Standards.
They are rated lower than the best
bonds because margins of protection
may not be as large as in Aaa
securities, fluctuation of protective
elements may be of greater
amplitude, or there may be other
elements present which make the
long-term risks appear somewhat
greater.
A - Upper-medium Grade. Factors
giving security to principal and
interest are considered adequate, but
elements may be present which
suggest a susceptibility to
impairment sometime in the future.
Baa - Bonds which are rated Baa are
considered as medium grade
obligations, i.e., they are neither
highly protected nor poorly secured.
Interest payments and principal
security appear adequate for the
present, but certain protective
elements may be lacking or may be
characteristically unreliable over any
great length of time. Such bonds
lack outstanding investment
characteristics and in fact have
speculative characteristics as well.
Ba - Bonds which are rated Ba are judged
to have predominantly speculative
elements; their future cannot be
considered as well assured. Often the
protection of interest and principal
payments may be very moderate and
thereby not well safeguarded during
both good and bad times over the
future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally
lack characteristics of the desirable
investment. Assurance of interest
and principal payments or
maintenance of other terms of the
contract over any long period of time
may be small.
Caa - Bonds which are rated Caa are of
poor standing. Such issues may be in
default or there may be present
elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent
obligations which are speculative in a
high degree. Such issues are often in
default or have other marked
shortcomings.
Description of Commercial Paper Ratings:
Moody's . . . Moody's commercial paper rating
is an opinion of the ability of an issuer to repay
punctually promissory obligations not having an
original maturity in excess of nine months.
Moody's has one rating - prime. Every such
prime rating means Moody's believes that the
commercial paper note will be redeemed as
agreed. Within this single rating category are
the following classifications:
Prime - 1 Highest Quality
Prime - 2 Higher Quality
Prime - 3 High Quality
The criteria used by Moody's for rating a
commercial paper issuer under this graded
system include, but are not limited to the
following factors:
(1) evaluation of the management of the
issuer;
(2) economic evaluation of the issuer's
industry or industries and an appraisal
of speculative type risks which may be
inherent in certain areas;
(3) evaluation of the issuer's products in
relation to competition and customer
acceptance;
(4) liquidity;
(5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten
years;
(7) financial strength of a parent company
and relationships which exist with the
issuer; and
(8) recognition by the management of
obligations which may be present or
may arise as a result of public interest
questions and preparations to meet
such obligations.
S&P - Standard & Poor's commercial paper
rating is a current assessment of the likelihood
of timely repayment of debt having an original
maturity of no more than 270 days. Ratings are
graded into four categories, ranging from "A"
for the highest quality obligations to "D" for the
lowest. The four categories are as follows:
"A" - Issues assigned this highest rating
are regarded as having the greatest
capacity for timely payment. Issues
in this category are further refined
with the designations 1, 2, and 3 to
indicate the relative degree of
safety.
"A-1" - This designation indicates that the
degree of safety regarding timely
payment is very strong.
"A-2" - Capacity for timely payment on
issues with this designation is
strong. However, the relative degree
of safety is not as overwhelming.
"A-3" - Issues carrying this designation
have a satisfactory capacity for
timely payment. They are, however,
somewhat more vulnerable to the
adverse effects of changes in
circumstances than obligations
carrying the higher designations.
"B" - Issues rated "B" are regarded as
having only an adequate capacity
for timely payment. Furthermore,
such capacity may be damaged by
changing conditions or short-term
adversities.
"C" - This rating is assigned to short-term
debt obligations with a doubtful
capacity for payment.
"D" - This rating indicates that the issuer
is either in default or is expected to
be in default upon maturity.
MUNICIPAL SECURITIES
DESCRIBED AND RATINGS
Municipal securities include bonds and other
debt obligations issued by or on behalf of states,
territories and possessions of the United States
of America and the District of Columbia
including their political subdivisions or their
duly constituted authorities, agencies and
instrumentalities, the interest on which is
exempt from federal income tax.
Municipal securities are issued to obtain funds
for various public purposes, including the
construction of a wide range of public facilities,
such as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets,
waterworks and sewer systems. Municipal
securities also may be issued in connection with
the refunding of outstanding obligations and
obtaining funds to lend to other public
institutions and facilities or for general
operating expenses.
The two principal classifications of municipal
bonds are "general obligation" and "revenue."
General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest.
Revenue bonds are payable only from the
revenues derived from a particular facility or
class of facilities, or in some cases, from the
proceeds of a special excise tax or other specific
revenue source.
Scout Tax-Free Money Market Fund may
invest in industrial development bonds, the
interest from which is exempt from federal
income tax. Under certain circumstances,
"substantial users" of the facilities financed with
such obligations, or persons related to
"substantial users," may be required to pay
federal income tax on this otherwise exempted
interest. Such persons should consult the
Internal Revenue Code and their financial
adviser to determine whether or not this Fund is
an appropriate investment for them.
There are a variety of hybrid and special types
of municipal obligations, as well as numerous
differences in the security of municipal bonds,
both within and between the two principal
classifications of general obligation and revenue.
Municipal notes include tax, revenue and
bond anticipation notes of short maturity,
generally less than three years, which are issued
to obtain temporary funds for various public
purposes. Also included in this category are
Construction Loan Notes, Short-Term Discount
Notes and Project Notes issued by a state or local
housing agency but secured by the full faith and
credit of the United States.
Yields on municipal securities depend on a
variety of factors, such as the size of a particular
offering, the maturity and the rating of the
obligation, economic and monetary conditions,
and conditions of the municipal securities
market, including the volume of municipal
securities available. Market values of municipal
securities will vary according to the relation of
their yields available. Consequently, the net
asset value of Tax-Free Money Market Fund and
its shares can be expected to change as the level
of interest rates fluctuates.
Municipal obligations, like all other debt
obligations, carry the risk of default. Through
careful selection and supervision, and
concentration in the higher-quality investment
grade issues, management intends to reduce this
risk.
Prices of outstanding municipal securities will
fluctuate with changes in the interest rates on
new issues. Thus, the price of Tax-Free Money
Market Fund's shares will tend to increase as the
rates on new issues decline, and decrease
whenever the current rate is rising.
Management will seek to minimize such share
price fluctuation to the extent this can be
achieved without detracting from Scout Tax-
Free Money Market Fund's primary objective of
the highest quality and maturity characteristics
of the portfolio.
Municipal securities are not traded as actively
as other securities. Even though municipal
securities will be redeemed at face value upon
maturity, from time to time, when there has
been no active trading in a particular portfolio
holding, its interim pricing for the purpose of
the daily valuation of Scout Tax-Free Money
Market Fund's shares may have to be based on
other sources of information and methods
deemed fair and reasonable by the Board of
Directors. One principal method which is
commonly used by funds and other investors
who own municipal securities is called matrix
pricing.
From time to time, proposals have been
introduced in Congress to restrict or eliminate
the federal income tax exemption for interest on
municipal securities. Similar proposals may be
introduced in the future. If such proposals were
enacted, the availability of municipal securities
for investment by Tax-Free Money Market Fund
would be adversely affected. In such event, the
Fund would re-evaluate its investment objective
and policies and submit possible changes in the
structure of the Fund for the consideration of the
shareholders.
Income from the Tax-Free Money Market
Fund may be subject to the federal Alternative
Minimum Tax.
Ratings of Municipal Securities
The ratings of bonds by Moody's and Standard
and Poor's Corporation represent their opinions
of quality of the municipal bonds they undertake
to rate. These ratings are general and are not
absolute standards. Consequently, municipal
bonds with the same maturity, coupon and
rating may have different yields, while
municipal bonds of the same maturity and
coupon with different ratings may have the same
yield.
Both Moody's and S&P's Municipal Bond
Ratings cover obligations of states and political
subdivisions. Ratings are assigned to general
obligation and revenue bonds. General
obligation bonds are usually secured by all
resources available to the municipality and the
factors outlined in the rating definitions below
are weighted in determining the rating. Because
revenue bonds in general are payable from
specifically pledged revenues, the essential
element in the security for a revenue bond is the
quantity and quality of the pledged revenues
available to pay debt service.
Although an appraisal of most of the same
factors that bear on the quality of general
obligation bond credit is usually appropriate in
the rating analysis of a revenue bond, other
factors are important, including particularly the
competitive position of the municipal enterprise
under review and the basic security covenants.
Although a rating reflects S&P's judgment as to
the issuer's capacity for the timely payment of
debt service, in certain instances it may also
reflect a mechanism or procedure for an assured
and prompt cure of a default, should one occur,
i.e., an insurance program, federal or state
guaranty, or the automatic withholding and use
of state aid to pay the defaulted debt service.
S&P'S Ratings
AAA Prime - These are obligations of the
highest quality. They have the strongest capacity
for timely payment of debt service.
General Obligation Bonds - In a period of
economic stress, the issuers will suffer the
smallest declines in income and will be least
susceptible to autonomous decline. Debt burden
is moderate. A strong revenue structure appears
more than adequate to meet future expenditure
requirements. Quality of management appears
superior.
Revenue Bonds - Debt service coverage has
been, and is expected to remain, substantial.
Stability of the pledged revenues is also
exceptionally strong, due to the competitive
position of the municipal enterprise or to the
nature of the revenues. Basic security provisions
(including rate covenant, earnings test for
issuance of additional bonds, debt service,
reserve requirements) are rigorous. There is
evidence of superior management.
AA - High Grade - The investment
characteristics of general obligation and revenue
bonds in this group are only slightly less marked
than those of the prime quality issues. Bonds
rated "AA" have the second strongest capacity
for payment of debt service.
A - Good Grade - Principal and interest
payments on bonds in this category are regarded
as safe. This rating describes the third strongest
capacity for payment of debt service. It differs
from the two higher ratings because:
General Obligation Bonds - There is some
weakness, either in the local economic base, in
debt burden, in the balance between revenues
and expenditures, or in quality of management.
Under certain adverse circumstances, any one
such weakness might impair the ability of the
issuer to meet debt obligations at some future
date.
Revenue Bonds - Debt service coverage is good,
but not exceptional. Stability of the pledged
revenues could show some variations because
of increased competition or economic influences
on revenues. Basic security provisions, while
satisfactory, are less stringent. Management
performance appears adequate.
Moody's Ratings of Municipal Bonds
Aaa - Bonds which are rated Aaa are judged to
be of the best quality. These securities carry the
smallest degree of investment risk and are
generally referred to as "gilt-edge." Interest
payments are protected by a large, or by an
exceptionally stable margin, and principal is
secure. While the various protective elements
are likely to change, such changes as can be
visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be
of high quality by all standards. They are rated
lower than the best bonds because margins of
protection may not be as large as in Aaa
securities, fluctuation of protective elements may
be of greater amplitude, or there may be other
elements present which make the long-term
risks appear somewhat greater.
A - Bonds which are rated A possess many
favorable investment attributes and are to be
considered as upper medium grade obligations.
Factors giving security to principal and interest
are considered adequate, but elements may be
present which suggest a susceptibility to
impairment sometime in the future.
Moody's Ratings of Municipal Notes
MIG 1: The best quality, enjoying strong
protection from established cash flows of funds
for their servicing or from established and
broad-based access to the market for
refinancing, or both.
MIG 2: High quality, with margins of
protection ample, although not so large as in the
preceding group.
MIG 3: Favorable quality, with all security
elements accounted for, but lacking the
undeniable strength of the preceding grades.
Market access for refinancing, in particular, is
likely to be less well established.
FINANCIAL STATEMENTS
The audited financial statements of Scout
Stock Fund, Inc., Scout Bond Fund, Inc., Scout
Money Market Fund, Inc. and Scout Tax-Free
Money Market Fund, Inc. which are contained
in the June 30, 1995, Annual Reports to
Shareholders and the audited financial
statements of Scout Regional Fund, Inc. and
Scout WorldWide Fund, Inc. contained in the
December 31, 1995, Annual Reports to
Shareholders are incorporated herein by
reference.
The initial audited financial statements of
Scout Balanced Fund, Inc. are included below:
FINANCIAL STATEMENT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
I
To the Shareholders and
Board of Directors of
Scout Balanced Fund, Inc.:
We have audited the accompanying statement of assets and liabilities
of the Scout Balanced Fund, Inc. (a Maryland corporation), as of
October 2, 1995 (inception). This financial statement is the
responsibility of the Fund's management. Our responsibility is to
express an opinion on this financial statement 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 statement
is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statement. Our procedures included confirmation of
securities owned as of October 2,1995, by correspondence with
the custodian. 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 statement of assets and liabilities referred
to above presents fairly, in all material respects, the financial
position of Scout Balanced Fund, Inc., as of October 2,1995,
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Kansas City, Missouri,
October 4, 1995
SCOUT BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 2, 1995
ASSETS:
Investment securities, at market
Repurchase agreement, 5.38%, due October 3,1995 (Note 2) $ 100,000
Total assets 100,000
LIABILITIES AND NET ASSETS-
Liabilities -
NET ASSETS $ 100,000
NET ASSETS APPLICABLE TO OUTSTANDING SHARES CONSIST OF:
Capital (capital stock and paid-in capital) $ 100,000
Capital shares, $1.00 par value:
Authorized 10,000,000
Outstanding 10,000
NET ASSET VALUE PER SHARE $ 10.00
See accompanying notes to this financial statement.
SCOUT BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENT
OCTOBER 2, 1995
1. SIGNIFICANT ACCOUNTING POLICIES:
Scout Balanced Fund, Inc. (the Fund), was registered on July 3, 1995, under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company and capitalized on October 2, 1995, by
Jones & Babson, Inc., underwriter.
2. REPURCHASE AGREEMENTS:
Securities purchased under agreements to resell are held by the Fund's
custodian, UMB Bank, N.A. The Fund's adviser monitors the market values
of the underlying securities which they have purchased on behalf of the
Fund to ensure they are sufficient to protect the Fund in the event of
default by the seller. In the event of bankruptcy or other default of
the seller, the Fund could experience delays in liquidating the
underlying securities and possible loss to the extent the repurchase
agreement and accrued interest is more than proceeds received upon
liquidation of the underlying securities.
