SCOUT
TAX-FREE
MONEY MARKET
FUND
A no-load mutual fund
principally invested in
short-term municipal
securities seeking to provide
maximum income exempt
from federal income tax
consistent with safety of
principal and maintenance
of liquidity.
Semiannual Report
December 31, 1996
TO THE SHAREHOLDERS
Scout Tax-Free Money Market Fund earned 1.49% for the six months ended
December 31, 1996. The Fund's 30-day current yield on December 31, 1996 was
3.19%.
Money market funds are neither insured nor guaranteed by the U.S. Government.
There is no assurance that the fund will maintain a stable net asset value of
one dollar per share. Income from the fund may be subject to the federal
Alternative Minimum Tax as well as state and local taxes.
On a year over year basis, the 1996 Consumer Price Index (CPI) was up 3.30%.
Federal Funds remained steady at 5.25%. One through thirty year treasury
issues were all higher by year end. Intermediate and longer bonds as measured
by the Lehman Brothers Government Corporate Index, a ten year average life
index, returned 4.05% and 2.90%, respectively.
As we enter 1997, the Treasury, in late January, will offer the first
inflation-protection bond to investors. The key question for money market
investors this year remains as it was in 1996; will the Fed raise interest
rates? The debate continues to rage over the strength of the economy. Those
who believe it is stronger than the data suggests predict long rates as high
as 8.00%. Those who believe the economy is weak, or at least very moderate in
its growth potential, believe long rates can decline to below 6.00%. In our
view, we believe the moderate growth argument will ultimately prevail.
However, until the data itself resolves the issue, the long bond will continue
to be volatile and will trade in a 6.75% to 7.00% range.
We appreciate your continued interest in Scout
Tax-Free Money Market Fund, Inc.
Sincerely,
/s/William A. Faust
William A. Faust
UMB Investment Advisors
Shares of the Scout Funds are not deposits or obligations of, nor guaranteed
by, UMB Bank, n.a. or any other banking institution, nor are they insured by
the Federal Deposit Insurance Corporation or any other applicable deposit
insurance. These shares involve investment risks, including the possible loss
of the principal amount invested.
FINANCIAL STATEMENTS
Statement of Net Assets
December 31, 1996 (unaudited)
Principal Market
State Amount Description Value
ALABAMA
2,600,000 Columbia Alabama Industrial
Development Board,
Pollution Control Revenue
(Alabama Power Co.), Series D,
Var. Rate, due October 1, 2022 $ 2,600,000
ALASKA
500,000 Alaska State Housing Finance Corp.,
Series C,
Var. Rate, due June 1, 2026 500,000
ARIZONA
2,500,000 Maricopa County Arizona
(Southern California Edison ),
Tax-Exempt Commercial Paper,
3.60%, due January 3, 1997 2,500,000
2,000,000 Maricopa County Arizonia
(Southern California Edison),
Tax-Exempt Commercial Paper,
3.70%, due January 8, 1997 2,000,000
1,600,000 Mesa Arizona, Municipal Development Corp.,
Series A,
Tax-Exempt Commercial Paper,
3.55%, due January 8, 1997 1,600,000
3,000,000 Salt River Project Agricultural
Improvement & Power District,
Arizonia Tax-Exempt Commercial Paper,
3.45%, due January 29, 1997 3,000,000
FLORIDA
2,000,000 Jacksonville Florida,
Tax-Exempt Commercial Paper,
3.50%, due January 2, 1997 2,000,000
1,000,000 Jacksonville Florida,
Pollution Control Revenue, Series 94,
Tax-Exempt Commercial Paper,
3.45%, due February 4, 1997 1,000,000
1,000,000 Jacksonville Florida, Electric Auth.,
Series A,
Tax-Exempt Commercial Paper,
3.55%, due February 13, 1997 1,000,000
1,200,000 Palm Beach County Florida Housing
Finance Auth.
(Cotton Bay Apartments) Series D,
Var. Rate, due November 1, 2007 1,200,000
GEORGIA
500,000 Burke County Georgia,
Pollution Control Revenue
(Georgia Power Co.),
Var. Rate, due July 1, 2024 500,000
2,600,000 Burke County Georgia,
Pollution Control Revenue
(Georgia Power Co. Vogtle Project),
Series 5,
Var. Rate, due September 1, 2025 2,600,000
1,000,000 Heard County Georgia Development Auth.,
Pollution Control Revenue
(Georgia Power Co. Wansley Proj.),
Var. Rate, due September 1, 2026 1,000,000
ILLINOIS
1,000,000 Illinois Educational Facilities Auth.
Revenue
(National Louis University),
Var. Rate, May 1, 2022 1,000,000
INDIANA
2,500,000 Indianapolis Indiana Local Pub. Impt.,
Series A,
4.25%, due January 9, 1997 2,500,400
4,000,000 Sullivan County Indiana,
Pollution Control Revenue
(Natural Rural/Hoosiers), Series L1,
Tax-Exempt Commercial Paper,
3.70%, due January 6, 1997 4,000,000
500,000 Sullivan County Indiana,
Pollution Control Revenue
(Natural Rural Utility), Series 85L3,
Tax-Exempt Commercial Paper,
3.40%, due January 28 1997 500,000
KANSAS
3,000,000 Salina Kansas Municipal Temp. Note,
Series 1,
3.50%, due March 1, 1997 3,000,009
MARYLAND
2,764,000 Maryland Health Education Finance Auth.
(John Hopkins),
Tax-Exempt Commercial Paper,
3.50%, due January 14, 1997 2,764,000
2,000,000 Maryland Health Education Finance Auth.
(John Hopkins),
Tax-Exempt Commercial Paper,
3.65%, due January 21, 1997 2,000,000
MINNESOTA
1,500,000 Rochester Minnesota (Mayo Clinic),
Tax-Exempt Commercial Paper,
3.60%, due January 9, 1997 1,500,000
MISSOURI
1,150,000 Columbia Missouri, Series A,
Var. Rate, due June 1, 2008 1,150,000
1,100,000 Missouri Environment Improvement Revenue
Tax-Exempt Commercial Paper
3.50%, due January 13, 1997 1,100,000
2,000,000 Missouri State Health & Education Auth.
(Washington University), Series A,
Var. Rate, due September 1, 2030 2,000,000
2,000,000 Missouri State Health & Education Auth.
(Washington University), Series C,
Var. Rate, due September 1, 2030 2,000,000
500,000 Missouri State Health & Education Auth.
(Washington University), Series D,
Var. Rate, due September 1, 2030 500,000
200,000 Missouri State Health & Education Auth.
(Sisters Of Saint Mary), Series C,
Var. Rate, due June 1, 2022 200,000
1,400,000 St Charles County Missouri,
Industrial Development Auth.
(Monsanto Co.),
Var. Rate, due July 1, 2021 1,400,000
NEW JERSEY
5,000,000 New Jersey T/Ran, Series 97A,
Tax-Exempt Commercial Paper,
3.50%, due January 7, 1997 5,000,000
NEBRASKA
1,550,000 Omaha Public Power District
Electric Revenue,
Tax-Exempt Commercial Paper,
3.50%, due January 14, 1997 1,550,000
NORTH CAROLINA
2,700,000 Winston Salem North Carolina Water &
Sewer System Revenue
Var. Rate, due June 1, 2014 2,700,000
SOUTH CAROLINA
5,000,000 South Carolina Public Service Auth.
Tax-Exempt Commercial Paper,
3.40%, due January 28, 1997 5,000,000
1,000,000 York County South Carolina (Duke Power),
Tax-Exempt Commercial Paper,
3.55%, due January 2, 1997 1,000,000
1,500,000 York County South Carolina (Duke Power),
Tax-Exempt Commercial Paper,
3.55%, due January 8, 1997 1,500,000
1,200,000 York County South Carolina (Duke Power),
Tax-Exempt Commercial Paper,
3.50%, due January 15, 1997 1,200,000
1,300,000 York County South Carolina (Duke Power),
Tax-Exempt Commercial Paper,
3.40%, due January 16, 1997 1,300,000
TEXAS
2,400,000 Austin Texas Combined Utility Revenue,
Series A,
Tax-Exempt Commercial Paper,
3.40%, due February 5, 1997 2,400,000
1,400,000 Dallas Texas G.O.S., Tax-Exempt
Commercial Paper,
3.60%, due January 13, 1997 1,400,000
1,900,000 Grapevine Texas Industrial Dev. Auth.
(American Airlines), Series A-3,
Var. Rate, due December 1, 2024 1,900,000
400,000 Grapevine Texas Industrial Dev. Auth.
(American Airlines), Series A-4,
Var. Rate, due December 1, 2024 400,000
1,400,000 Grapevine Texas Industrial Dev. Auth.
(American Airlines), Series B-2,
Var. Rate, due December 1, 2024 1,400,000
900,000 Grapevine Texas Industrial Dev. Auth.
(American Airlines), Series B-4,
Var. Rate, due December 1, 2024 900,000
TEXAS (Continued)
1,800,000 Gulf Coast Waste Disposal Auth. Texas,
Pollution Control Revenue Bond
(Monsanto Co.),
Var. Rate, due July 1, 2001 1,800,000
1,600,000 Gulf Coast Waste Disposal Auth. Texas,
Pollution Control Revenue Bond
(Monsanto Co.),
Var. Rate, due April 1, 2013 1,600,000
1,000,000 Harris County Texas G.O., Series A,
3.45%, due January 16, 1997 1,000,000
1,700,000 Lower Neches Valley Texas Auth.,
Pollution Control Revenue
(River Treatment Industrial Dev. Corp.),
Var. Rate, due February 1, 2004 1,700,000
1,000,000 San Antonio Texas Water Systems,
Tax-Exempt Commercial Paper,
3.40%, due January 23, 1997 1,000,000
750,000 Texas A&M University Board of Regents,
Series B,
Tax-Exempt Commercial Paper,
3.65%, due January 2, 1997 750,000
2,000,000 Texas A&M University Board of Regents,
Series B,
Tax-Exempt Commercial Paper,
3.50%, due January 27, 1997 2,000,000
2,000,000 Texas A&M University Board of Regents,
Series B,
Tax-Exempt Commercial Paper,
3.50%, due February 4, 1997 2,000,000
1,800,000 University of Texas Permanent Fund,
Tax-Exempt Commercial Paper,
3.45%, due January 15, 1997 1,800,000
1,500,000 University of Texas Permanent Fund,
Tax-Exempt Commercial Paper,
3.40%, due January 22, 1997 1,500,000
1,000,000 University of Texas Sys. Revenue,
Tax-Exempt Commercial Paper,
3.55%, due February 11, 1997 1,000,000
1,025,000 University of Texas University Fund,
Tax-Exempt Commercial Paper,
3.50%, due January 22, 1997 1,025,000
VERMONT
500,000 Vermont State, Series I,
Tax Exempt Commercial Paper,
3.55%, due January 21, 1997 500,000
2,000,000 Vermont State, Series I,
Tax Exempt Commercial Paper,
3.50%, due January 23, 1997 2,000,000
WASHINGTON
1,000,000 Seattle Municipal Power & Light,
Tax-Exempt Commercial Paper,
3.60%, due January 6, 1997 1,000,000
6,250,000 Seattle Municipal Power & Light,
Tax-Exempt Commercial Paper,
3.625%, due January 7, 1997 6,250,000
2,000,000 Washington State, Series VR-96A,
Var. Rate, due June 1, 2020 2,000,000
WISCONSIN
1,400,000 Oak Creek Wisconsin,
Pollution Control Revenue
(Wisconsin Electric Power Co.),
Var. Rate, due August 1, 2016 1,400,000
1,500,000 Sheboygan Wisconsin,
Pollution Control Revenue
(Wisconsin Electric Power Co.),
Var. Rate, due September 1, 2015 1,500,000
1,600,000 Sheboygan Wisconsin,
Pollution Control Revenue
(Wisconsin Power & Light Co.),
Var. Rate, due August 1, 2014 1,600,000
TOTAL INVESTMENTS - 99.64% $ 108,189,409
Other assets less liabilities - 0.36% 386,611
TOTAL NET ASSETS - 100.00%
(Equivalent to $1.00 per share;
1,000,000,000 shares of $0.01 par value
capital shares authorized;
108,675,854 shares outstanding) $ 108,576,020
Line (Line of Credit)
LOC (Letter of Credit)
SBPA (Stand by Purchase Agreement)
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 1996 (unaudited)
ASSETS:
Investment securities, at market value $ 108,189,409
Cash (215,179)
Interest receivable 589,237
Total assets 108,563,467
LIABILITIES AND NET ASSETS:
Accrued management fee expense (13,001)
Income payable 448
Total liabilities (12,553)
NET ASSETS $ 108,576,020
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in surplus of capital) $ 108,676,991
Accumulated net realized loss on investment transactions (100,971)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 108,576,020
Capital shares, $1.00 par value
Authorized 750,000,000
Outstanding 108,675,854
NET ASSET VALUE PER SHARE $ 1.00
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Operations
Six Months Ended December 31, 1996 (unaudited)
INVESTMENT INCOME:
Income:
Interest $ 2,123,454
Expenses:
Management fees (Note 3) 308,024
Registration fees and other expenses 12,019
320,043
Net investment income 1,803,411
REALIZED gain (LOSS) ON INVESTMENTS (Note 1):
Realized gain (loss) from investment transactions
(excluding commerical paper and repurchase agreements):
Proceeds from sales of investments 381,204,922
Cost of investments sold 381,228,101
Net realized gain from investment transactions (23,179)
Increase in net assets resulting from operations $ 1,780,232
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Six Months Ended
December 31, 1996 Year Ended
(unaudited) June 30, 1996
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,803,411 $ 3,214,827
Net realized loss from investment activities (23,179) 1,290
Net increase in net assets resulting
from operations 1,780,232 3,216,117
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,803,411) (3,214,827)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ($1.00 per share) 135,143,325 264,590,658
Net asset value of shares issued for reinvestment
of distributions ($1.00 per share) 160,542 265,245
135,303,867 264,855,903
Cost of shares redeemed ($1.00 per share) (154,712,950) (214,873,971)
Net increase from capital share transactions (19,409,083) 49,981,932
Total increase (decrease) in net assets (19,432,262) 49,983,222
NET ASSETS:
Beginning of perod 128,008,282 78,025,060
End of period (including undistributed
net investment income of $4,199 and $7,319) $ 108,576,020 $ 128,008,282
See accompanying Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The Fund is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company. The following is a summary
of significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Investments - Valuation of securities is on the basis of amortized cost which
approximates market value. Investment transactions are recorded on the trade
date. Investment income and dividends to shareholders are recorded daily and
dividends are distributed monthly. Realized gains and losses from investment
transactions are reported on the amortized cost basis.
Federal and State Taxes - The Fund's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no provision for federal or state tax is provided. At December 31,
1996, the Fund has an accumulated net realized loss on sale of investments for
federal income tax purposes of $100,971, which is available to offset future
tax-able gains.
Amortization - Discounts and premiums on securities purchased are amortized
over the life of the respective securities.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
2. PURCHASES AND SALES OF SECURITIES -The aggregate amounts of security
transactions during the six months ended December 31, 1996, were as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 361,686,434 $ 000,000,000
Proceeds from sales 381,204,922 000,000,000
3. MANAGEMENT FEES - UMB Bank, n.a. is the Fund's manager and investment
adviser and provides or pays the cost of all management, supervisory and
administrative services required in the normal operation of the Fund. This
includes investment management; fees of the custodian, independent public
accountants and legal counsel; remuneration of officers and directors; rent;
and shareholder services, including maintenance of the shareholders accounting
system and transfer agency. Not considered normal operating expenses and
therefore payable by the Fund are taxes, interest, fees and the other charges
of governments and their agencies for qualifying the Fund's shares for sale,
special accounting and legal fees and brokerage commissions. UMB Bank's
management fees are based on average daily net assets of the Fund at the
annual rate of .50 of one percent of net assets. Certain officers and/or
directors of the Fund are also officers and/or directors of Jones & Babson,
Inc., which serves as the Fund's underwriter and distributor.
This report has been prepared for the information of the Shareholders of Scout
Tax-Free Money Market Fund, Inc., and is not to be construed as an offering of
the shares of the Fund. Shares of this Fund and of the other Scout Funds are
offered only by the Prospectus, a copy of which may be obtained from Jones &
Babson, Inc.
BOARD OF DIRECTORS
AND OFFICERS
Board of Directors
Larry D. Armel
William E. Hoffman, D.D.S.
Eric T. Jager
Stephen F. Rose
Stuart Wien
Officers
Larry D. Armel, President
P. Bradley Adams, Vice President & Treasurer
Elizabeth L. Allwood, Vice President
Michael A. Brummel, Vice President
Martin A. Cramer, Vice President & Secretary
John G. Dyer, Vice President
Constance E. Martin, Vice President
Investment Counsel
UMB Bank, n.a., Kansas City, Missouri
Auditors
Baird, Kurtz & Dobson, Kansas City, Missouri
Legal Counsel
Stradley, Ronon, Stevens & Young,
Philadelphia, Pennsylvania
John G. Dyer, Kansas City, Missouri
Custodian
UMB Bank, n.a., Kansas City, Missouri
JONES & BABSON
MUTUAL FUNDS
P.O. Box 410498
Kansas City, MO 64141-0498
TOLL-FREE 1-800-996-2862
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