SCOUT
BOND FUND
A no-load mutual fund
with primary emphasis
on maximum current
income consistent with
its quality and maturity
standards.
Annual Report
June 30, 1996
TO THE SHAREHOLDERS
Scout Bond Fund's total return (price change and reinvested dividends)
was 4.20% for fiscal year ended June 30, 1996. In comparison, the
unmanaged Lehman Brothers Intermediate Government/Corporate index earned
5.01% for the same time period.
At the end of first quarter 1996, Scout Bond Fund was invested 38% in
high-grade corporate bonds, 48% in U.S. Government and Federal Agency
Issues, and 14% in issues due in less than one year. The average
maturity was 3.8 years, the average yield to maturity was 6.47% and the
credit rating of the portfolio was AA or better. The net assets as of
June 30, 1996, were $81.3 million.
The last year has been very volatile for the bond market as interest
rates fell throughout the last half of 1995
and rebounded in the first half of 1996 surpassing their June 30, 1995
levels. From June 30, 1995 to January 31, 1996 interest rates fell 60
basis points on the 30-year treasury bond. During this time period the
Federal Open Market Committee eased the Federal Funds rate 25 basis
points on November 15, 1995 from 5.75% to 5.50% and another 25 basis
points on January 31, 1996 from 5.50% to 5.25%. It appeared the economy
was slowing until economic reports in mid-February revealed a drop in
the unemployment rate indicating a stronger than expected economy. In
reaction, interest rates have since risen as investors fear of inflation
caused a dramatic upward shift in the yield curve.
The yields on the 5-year and 10-year bonds rose 1.23% and 1.14%,
respectively, from January 31, 1996 to March 31, 1996. The yield on the
30-year bond also rose from 6.02% to 6.89%, or 87 basis points, for the
same time period.
In general, it seems that the strength of the economy is exaggerated and
with the recent rise in interest rates, moderate inflation and
diminished money supply, a slowdown is inevitable. Although the Federal
Open Market CommitteeOs next scheduled meeting on August 20 could
determine the direction of interest rates in the near term, interest
rates seem likely to fall in the long-term if the economy continues to
weaken. Given the marketOs unpredictability, we will remain shorter in
our average maturity until the market begins to settle and higher
yielding bonds become available.
Your continued participation with Scout Bond Fund as part of your
investment portfolio is appreciated.
Graph -- Less than 1 Year 14%
Corporate 38%
Government & Agency 48%
Graph -- Taxable Yield Curves, July 15, 1996
Graph -- Scout Bond Fund versus Lipper Intermediate Investment Grade Funds
Hypothetical Growth of $10,000
Scout Bond Fund's average annual compounded total return for one,
five and ten year periods as of June 30, 1996, were 4.20%, 6.61%
and 7.08%, respectively. Performance data contained in this report
is for past periods only. Past performance is not predictive of
future performance. Investment return and share value will
fluctuate, and redemption value may be more or less than
original cost.
Sincerely,
/s/George W. Root
George W. Root
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
June 30, 1996
<TABLE>
<CAPTION>
Face Market
Amount Description Cost Value
</CAPTION>
<C> <C> <C> <C>
CORPORATE BONDS - 40.84%
$ 500,000 Albertson's, Incorporated Medium Term Notes,
5.71%, due March 23, 1998 $ 500,000 $ 495,330
500,000 Albertson's, Incorporated Medium Term Notes,
6.18%, due March 22, 2000 500,000 490,875
500,000 Albertson's, Incorporated Notes,
6.375%, due June 1, 2000 500,000 492,095
500,000 Amoco Canada Petroleum Company Notes,
7.25%, due December 1, 2002 498,230 505,785
500,000 Avery/Dennison Incorporated Medium Term Notes,
8.22%, due August 15, 1996 499,885 501,405
500,000 Baltimore Gas & Electric Company 1st
& Refunding Mortgage,
6.50%, due February 15, 2003 494,225 482,140
500,000 BellSouth Telecommunications Incorporated Notes,
6.25%, due May 15, 2003 498,293 476,695
500,000 British Petroleum America, Incorporated Notes,
8.875%, due December 1, 1997 497,800 517,530
500,000 Carolina Power & Light Company
Secured Medium Term Notes,
5.00%, due September 15, 1998 499,607 484,600
500,000 Carolina Power & Light Company 1st Mortgage,
5.875%, due January 15, 2004 491,407 461,210
500,000 Central Power & Light Company 1st Mortgage,
Series BB,
6.00%, due October 1, 1997 497,340 498,450
500,000 Chevron Canada Financial Limited
Guaranteed Notes,
5.60%, due April 1, 1998 499,625 493,090
500,000 Consolidated Edison Company New York,
Incorporated Debentures,
6.625%, due February 1, 2002 494,905 491,255
500,000 Delmarva Power & Light Company Medium Term Notes,
7.50%, due May 1, 1999 497,570 509,805
500,000 duPont (E.I.) deNemours & Company Notes,
6.75%, due October 15, 2002 490,678 495,250
500,000 Duke Power Company Medium Term Notes,
5.17%, due September 1, 1998 500,000 486,660
500,000 Duke Power Company 1st & Refunding Mortgage,
5.625%, due August 12, 1997 494,050 496,410
500,000 Duke Power Company 1st & Refunding Mortgage,
7.00%, due June 1, 2000 485,165 497,360
500,000 Duke Power Company 1st & Refunding Mortgage,
5.875%, due June 1, 2001 496,345 474,315
500,000 Emerson Electric Company Notes,
6.30%, due November 1, 2005 498,271 473,380
500,000 Florida Power & Light Company
Secured Medium Term Notes,
6.20%, due February 2, 1998 500,000 498,830
500,000 Florida Power & Light Company
Secured Medium Term Notes,
5.70%, due March 5, 1998 500,000 494,600
750,000 Florida Power & Light Company 1st Mortgage,
5.50%, due July 1, 1999 742,146 728,093
500,000 General Mills Incorporated Medium Term Notes,
7.50%, due June 5, 2000 500,000 511,270
500,000 General Mills Incorporated Medium Term Notes,
5.98%, due July 9, 2001 500,000 479,295
500,000 GTE California Incorporated Debentures, Series A,
5.625%, due February 1, 2001 495,979 474,945
500,000 GTE South Incorporated Debenetures,
6.00%, due February 15, 2008 481,751 452,605
500,000 GTE Southwest Incorporated Debentures,
6.00%, due January 15, 2006 495,165 460,145
500,000 Houston Lighting & Power Company 1st Mortgage,
7.625%, due March 1, 1997 499,755 504,910
1,000,000 International Business Machines
Corporation Notes,
6.375%, due November 1, 1997 990,715 1,001,660
500,000 International Business Machines
Corporation Notes,
6.375%, due June 15, 2000 499,030 493,520
500,000 International Business Machines
Corporation Notes,
7.25%, due November 1, 2002 496,185 508,370
500,000 International Paper Company
Medium Term Notes,
8.05%, due March 25, 1999 500,500 514,810
500,000 Kansas City Power & Light Company
Medium Term Notes,
6.50%, due January 2, 2001 500,000 491,085
250,000 McDonald's Corporation Medium Term Notes,
8.75%, due November 15, 2000 249,590 268,185
500,000 McDonald's Corporation Notes,
7.375%, due July 15, 2002 499,470 506,890
500,000 Minnesota Mining & Manufacturing Company
Medium Term Notes,
6.25%, due March 29, 1999 500,000 497,565
750,000 Monogahela Power Company 1st Mortgage,
5.625%, due April 1, 2000 731,030 721,703
500,000 Monogahela Power Company 1st Mortgage,
7.375%, due July 1, 2002 499,500 504,915
1,000,000 New York Telephone Company Notes,
5.875%, due September 1, 2003 989,488 933,910
500,000 Newell Company Medium Term Notes,
6.18%, due July 11, 2000 497,695 485,860
500,000 Northern Illinois Gas Company 1st Mortgage,
5.50%, due February 1, 1997 499,435 498,625
500,000 Northwest Natural Gas Company Secured
Medium Term Notes,
5.98%, due December 15, 2000 500,000 483,305
500,000 Pacific Bell Telephone Company Notes,
7.25%, due July 1, 2002 497,975 507,665
500,000 Pacific Bell Telephone Company Notes,
6.25%, due March 1, 2005 497,966 470,460
500,000 Pacific Gas & Electric Company 1st Mortgage,
6.25%, due March 1, 2004 500,000 472,510
500,000 PepsiCo, Incorporated Notes,
7.625%, due November 1, 1998 498,790 512,030
1,000,000 Public Service Company of Oklahoma
Medium Term Notes
6.02%, due March 1, 2001 984,816 965,680
10,648 Sears Mortgage Securities Corporation
Mortgage Pass Through Certificates,
Series 86 C,
9.00%, due July 25, 2001 10,381 10,861
500,000 Sears Roebuck & Company Senior
Medium Term Notes,
7.17%, due January 15, 1997 500,335 502,890
500,000 Southern California Gas Company 1st Mortgage,
Series AA,
6.50%, due December 15, 1997 499,700 500,320
500,000 Southwestern Bell Capital Corporation
Medium Term Notes,
7.80%, due November 5, 1998 500,000 514,330
500,000 Southwestern Bell Telephone Company
Medium Term Notes,
6.125%, due March 12, 2001 500,000 486,325
500,000 Southwestern Bell Telephone Company
Medium Term Notes,
5.77%, due October 14, 2003 500,000 464,830
500,000 Sysco Corporation Notes,
7.00%, due May 1, 2006 500,000 495,120
500,000 Texaco Capital Incorporated
Medium Term Notes,
8.24%, due October 15, 2001 500,500 527,825
500,000 Tribune Company Medium Term Notes,
5.30%, due April 17, 2000 500,000 474,885
500,000 Tribune Company Medium Term Notes,
5.75%, due September 15, 2003 500,000 461,015
500,000 Union Electric Company 1st Mortgage,
6.75%, due October 15, 1999 497,740 498,675
500,000 Union Pacific Corporation Notes,
6.25%, due March 15, 1999 500,000 492,245
500,000 Union Pacific Corporation Notes,
7.875%, due February 15, 2002 500,000 519,005
500,000 Union Pacific Railroad Company
Equipment Trust Ser. C.,
7.01%, due June 1, 2004 500,000 500,535
500,000 Wal-Mart Stores, Incorporated Notes,
5.50%, due September 15, 1997 499,675 495,680
500,000 Wal-Mart Stores, Incorporated Notes,
6.125%, due October 1, 1999 489,610 490,025
500,000 Weyerhaeuser Company Medium Term Notes,
8.53%, due April 21, 1997 500,000 509,360
33,760,648 33,578,318 33,211,007
SHORT-TERM CORPORATE NOTES - 4.29%
500,000 Air Products & Chemicals,
5.34%, due July 16, 1996 498,813 498,813
500,000 AON Corporation,
5.33%, due July 2, 1996 499,852 499,852
500,000 Deere & Company,
5.35%, due July 24, 1996 498,217 498,217
500,000 duPont (E.I.) deNemours & Company,
5.27%, due July 19, 1996 498,609 498,609
500,000 Heinz (H.J.) Company,
5.37%, due July 30, 1996 497,762 497,762
500,000 Lilly Eli & Company,
5.34%, due July 26, 1996 498,072 498,072
500,000 Toys ORO Us,
5.32%, due July 12, 1996 499,113 499,113
3,500,000 3,490,438 3,490,438
U.S. GOVERNMENTAL AGENCIES - 4.53%
92,992 Government National Mortgage Association,
9.00%, due July 15, 2001 92,673 97,113
97,142 Government National Mortgage Association,
8.00%, due January 20, 2002 96,717 99,363
167,872 Government National Mortgage Association,
8.50%, due February 20, 2002 171,020 173,306
48,288 Government National Mortgage Association,
8.00%, due January 15, 2004 48,288 49,550
197,534 Government National Mortgage Association,
9.50%, due April 15, 2005 197,982 207,214
222,674 Government National Mortgage Association,
9.75%, due May 15, 2005 222,674 233,585
112,993 Government National Mortgage Association,
9.00%, due October 20, 2005 111,863 117,294
173,938 Government National Mortgage Association,
7.50%, due February 15, 2006 170,894 174,684
131,431 Government National Mortgage Association,
7.50%, due March 15, 2006 129,131 131,912
36,573 Government National Mortgage Association,
8.00%, due April 20, 2006 35,887 37,460
179,201 Government National Mortgage Association,
8.00%, due June 20, 2006 177,857 183,550
210,271 Government National Mortgage Association,
8.50%, due July 15, 2006 209,154 218,930
276,840 Government National Mortgage Association,
8.00%, due August 15, 2006 276,840 284,808
281,643 Government National Mortgage Association,
7.50%, due August 20, 2006 281,643 283,561
174,445 Government National Mortgage Association,
7.50%, due September 15, 2006 171,392 175,083
99,834 Government National Mortgage Association,
7.50%, due April 15, 2007 95,455 100,199
220,090 Government National Mortgage Association,
7.50%, due March 20, 2009 218,852 221,450
488,607 Government National Mortgage Association,
6.00%, due May 15, 2009 487,080 467,353
429,485 Government National Mortgage Association,
7.00%, due May 15, 2009 434,183 426,307
3,641,853 3,629,585 3,682,722
U.S. GOVERNMENT SECURITIES - 19.67%
1,000,000 U.S. Treasury Notes, 6.125%,
due December 31, 1996 996,328 1,003,750
1,000,000 U.S. Treasury Notes, 8.00%,
due January 15, 1997 998,516 1,012,660
500,000 U.S. Treasury Notes, 8.50%,
due July 15, 1997 495,391 513,045
500,000 U.S. Treasury Notes, 5.50%,
due July 31, 1997 494,297 498,125
1,000,000 U.S. Treasury Notes, 5.50%,
due September 30, 1997 1,028,359 995,310
500,000 U.S. Treasury Notes, 7.875%,
due January 15, 1998 496,406 513,435
1,000,000 U.S. Treasury Notes, 5.125%,
due March 31, 1998 996,719 984,370
1,000,000 U.S. Treasury Notes, 5.125%,
due April 30, 1998 996,172 983,120
1,500,000 U.S. Treasury Notes, 7.125%,
due October 15, 1998 1,526,719 1,529,535
1,500,000 U.S. Treasury Notes, 6.375%,
due January 15, 1999 1,483,750 1,504,920
500,000 U.S. Treasury Notes, 5.875%,
due March 31, 1999 496,275 495,000
1,000,000 U.S. Treasury Notes, 6.00%,
due October 15, 1999 1,005,195 989,530
1,500,000 U.S. Treasury Notes, 5.50%,
due April 15, 2000 1,497,925 1,455,000
1,000,000 U.S. Treasury Notes, 7.50%,
due November 15, 2001 1,053,516 1,043,910
1,500,000 U.S. Treasury Notes, 6.375%,
due August 15, 2002 1,527,926 1,488,045
1,000,000 U.S. Treasury Notes, 6.25%,
due February 15, 2003 996,209 982,340
16,000,000 16,089,703 15,992,095
GOVERNMENT SPONSORED ENTERPRISES - 29.04%
500,000 Federal Home Loan Banks,
4.73%, due December 23, 1996 500,000 498,280
250,000 Federal Home Loan Banks,
5.66%, due November 9, 1998 249,938 246,405
500,000 Federal Home Loan Banks
6.31%, due March 29, 2001 500,000 494,150
500,000 Federal Home Loan Banks
6.48%, due December 29, 2000 500,000 492,735
500,000 Federal Home Loan Mortgage Corporation,
6.75%, due May 30, 2006 483,538 499,685
1,000,000 Federal Home Loan Mortgage Corporation, Deb.,
6.13%, due August 19, 1999 996,797 989,530
1,500,000 Federal National Mortgage Association,
Series D, Deb.,
8.00%, due July 10, 1996 1,491,797 1,500,930
1,000,000 Federal National Mortgage Association, Deb.,
7.05%, due October 10, 1996 1,015,469 1,003,750
500,000 Federal National Mortgage Association,
8.20%, due December 23, 1996 499,375 505,935
1,000,000 Federal National Mortgage Association,
Series CC, Deb.,
6.05%, due November 10, 1997 995,391 998,910
1,000,000 Federal National Mortgage Association, Deb.,
8.20%, due March 10, 1998 996,562 1,032,340
1,000,000 Federal National Mortgage Association,
Series SM-E, Deb.,
8.15%, due May 11, 1998 994,375 1,032,500
1,000,000 Federal National Mortgage Association,
Series SM-98-G, Deb.,
7.85%, due September 10, 1998 1,016,875 1,031,720
500,000 Federal National Mortgage Association, Deb.,
5.05%, due November 10, 1998 497,229 488,595
1,500,000 Federal National Mortgage Association,
Series H, Deb.,
7.05%, due December 10, 1998 1,494,687 1,524,615
1,000,000 Federal National Mortgage Association,
Series H, Deb.,
6.35%, due August 10, 1999 998,750 995,780
1,500,000 Federal National Mortgage Association, Deb.,
6.10%, due February 10, 2000 1,545,469 1,487,805
1,000,000 Federal National Mortgage Association,
Series I, Deb.,
8.25%, due December 18, 2000 1,018,672 1,069,220
1,250,000 Federal National Mortgage Association, Deb.,
7.50%, due February 11, 2002 1,238,516 1,293,750
1,000,000 Federal National Mortgage Association,
Series SM-E, Deb.,
7.55%, due April 22, 2002 993,437 1,039,060
500,000 Federal National Mortgage Association,
Series K., Deb.,
7.05%, due November 12, 2002 499,062 506,330
500,000 Federal National Mortgage Association
Medium Term Notes,
5.40%, due March 12, 1999 485,577 488,435
1,000,000 Federal National Mortgage Association
Medium Term Notes,
6.45%, due April 23, 2001 992,455 992,520
500,000 Federal National Mortgage Association
Medium Term Notes,
6.625%, due May 21, 2001 497,032 498,205
1,000,000 Federal National Mortgage Association
Medium Term Notes,
6.38%, due April 29, 2003 1,000,000 963,280
1,000,000 Federal National Mortgage Association
Medium Term Notes,
6.38%, due June 25, 2003 999,756 974,190
1,000,000 Federal National Mortgage Association
Medium Term Notes
6.41%, due March 8, 2006 974,587 964,060
23,500,000 23,475,346 23,612,715
REPURCHASE AGREEMENT - 0.42%
340,000 Northern Trust Company, 5.30%, due July 1, 1996
(Collateralized by $340,000 par value
U.S. Treasury Notes,
6.125%, due March 31, 1998
delivery value $340,809) 340,000 340,000
TOTAL INVESTMENTS - 98.79% $ 80,603,390 $ 80,328,977
Other assets less liabilities - 1.21% 984,416
TOTAL NET ASSETS - 100.00%
(equivalent to $10.93 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
7,437,071 shares outstanding) $ 81,313,393
For federal income tax purposes, the identified cost of investments
owned at June 30, 1996 was $80,603,390.
Net unrealized depreciation for federal income tax purposes
was $274,413, which is comprised of unrealized
appreciation of $752,162 and unrealized depreciation of $1,026,575.
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 1996
ASSETS:
Investment securities, at market value
(identified cost $80,603,390) $ 80,328,977
Interest receivable 1,258,268
Total assets 81,587,245
LIABILITIES AND NET ASSETS:
Disbursements in excess of demand deposit cash 273,852
Total liabilities 273,852
NET ASSETS $ 81,313,393
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 81,218,914
Accumulated undistributed income:
Net investment income 448,731
Accumulated net realized loss
on investment transactions (79,839)
Net unrealized depreciation in value of investments (274,413 )
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 81,313,393
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 7,437,071
NET ASSET VALUE PER SHARE $ 10.93
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Operations
Year Ended June 30, 1996
INVESTMENT INCOME:
Income:
Interest $ 5,124,578
Expenses:
Management fees 671,153
Government fees 10,705
681,858
Net investment income 4,442,720
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Realized loss from investment transactions
(excluding commercial paper and repurchase agreements):
Proceeds from sales of investments 8,684,818
Cost of investments sold 8,827,816
Net realized loss from
investment transactions (142,998)
Unrealized appreciation (depreciation) on investments:
Beginning of year 759,195
End of year (274,413)
Increase in net unrealized depreciation
on investments (1,033,608)
Net loss on investments (1,176,606)
Increase in net assets resulting from operations $ 3,266,114
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
For The Two Years Ended June 30, 1996
1996 1995
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 4,442,720 $ 4,549,127
Net realized gain (loss) from
investment transactions (142,998) 57,569
Increase (decrease) in net unrealized
appreciation on investments (1,033,608) 2,302,213
Net increase (decrease) in net assets
resulting from operations 3,266,114 6,908,909
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (4,442,720) (4,549,127)
Net realized gain from
investment transactions (37,183) (21,636)
Total distributions to shareholders (4,479,903) (4,570,763)
INCREASE (DECREASE) FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 1,547,000
and 823,896 shares sold 17,129,689 8,821,921
Net asset value of 85,740
and 40,160 shares issued for
reinvestment of distributions 951,111 430,480
18,080,800 9,252,401
Cost of 1,133,636 and 1,532,198
shares redeemed (12,561,407) (16,336,469)
Net increase (decrease) from
capital share transactions 5,519,393 (7,084,068)
Total increase (decrease)
in net assets 4,305,604 (4,745,922)
NET ASSETS:
Beginning of year 77,007,789 81,753,711
End of year (including undistributed
net investment income
of $448,731 in 1996 and 1995) $ 81,313,393 $ 77,007,789
*Distributions to shareholders:
Income dividends per share $ 0.62 $ 0.63
Capital gains distribution per share $ 0.010 $ 0.003
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 - Debt securities (other than short-term
obligations), including listed issues, are valued at
market on the basis of valuations furnished by an
independent pricing service which utilizes both dealer-
supplied valuations and electronic data processing
techniques. Short-term obligations are valued at
amortized cost, which constitutes fair value as
determined by the Fund's Board of Directors. Investment
transactions are recorded on the trade date. Investment
income is recorded daily and distributions to
shareholders are recorded on the ex-dividend dates.
Realized gains and losses from investment transactions
and unrealized appreciation and depreciation of
investments are reported on the identified cost basis.
Federal 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
required.
Amortization - Discounts and premiums on securities
purchased are amortized over the life of the respective
securities.
Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities
and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported
amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
2. PURCHASES AND SALES OF SECURITIES - The aggregate
amounts of security transactions during the year ended
June 30, 1996 (excluding commercial paper and repurchase
agreements), were as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 3,434,937 $ 8,876,414
Proceeds from sales 350,933 8,333,885
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 BankOs
management fees are based on average daily net assets of
the Fund at the annual rate of .85 of one percent of net
assets. Certain officers and/or directors of the Fund are
also officers and/or directors of Jones & Babson, Inc.,
which serves as the Fund's underwriter and distributor.
4. REPURCHASE AGREEMENTS - Securities purchased under
agreements to resell are held by the Fund's custodian and
investment counsel, UMB Bank, n.a. The custodian monitors
the market values of the underlying securities which they
have purchased on behalf of the Fund to ensure that they
are sufficient to protect the Fund in the event of
default by the seller.
FINANCIAL HIGHLIGHTS
The following table sets forth information as to capital
and income changes for a share outstanding for each of the five years
in the period ended June 30, 1996:
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.10 $ 10.75 $ 11.53 $ 11.14 $ 10.68
Income from investment operations:
Net investment income 0.62 0.63 0.62 0.68 0.75
Net gains or losses on securities
(both realized and unrealized) (0.16) 0.35 (0.74) 0.39 0.43
Total from Investment Operations 0.46 0.98 (0.12) 1.07 1.18
Less distributions:
Dividends from net investment income (0.62) (0.63) (0.62) (0.68) (0.72)
Distributions from capital gains (0.01) -* (0.04) - -
Total Distributions (0.63) (0.63) (0.66) (0.68) (0.72)
Net asset value, end of year $ 10.93 $ 11.10 $ 10.75 $ 11.53 $ 11.14
Total Return 4% 10% (1%) 10% 11%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 81 $ 77 $ 82 $ 87 $ 63
Ratio of expenses to average net assets 0.86% 0.86% 0.87% 0.87% 0.87%
Ratio of net investment income to
average net assets 5.63% 5.91% 5.50 % 5.95 % 6.77%
Portfolio turnover rate 12% 2% 9% 19% 24%
</TABLE>
See accompanying Notes to Financial Statements.
*Capital gain distribution of .003 not significant for per share table.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Scout Bond Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Scout Bond Fund, Inc., including the statement of net assets, as of June
30, 1996, and the related statement of operations, statement of changes
in net assets and the financial highlights for the most recent period
presented (prior periods presented were audited by other independent
accountants whose reports thereon expressed unqualified opinions). These
financial statements and financial highlights are the responsibility of
the CompanyOs management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
verification of securities owned as of June 30, 1996 by confirmation, or
by the application of alternative auditing procedures with respect to
unsettled portfolio security transactions. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Scout Bond Fund, Inc. as of June 30, 1996, the
results of its operations, the changes in its net assets and the
financial highlights for the period indicated in the first paragraph, in
conformity with generally accepted accounting principles.
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
July 23, 1996
This report has been prepared for the information of the Shareholders of
Scout Bond Fund, Inc., and is not to be construed as an offering of the
shares of the Fund. Shares of this Fund and of the other Scout Funds are
offered only by the Prospectus, a copy of which may be obtained from
Jones & Babson, Inc.
BOARD OF DIRECTORS
AND OFFICERS
Board of Directors
Larry D. Armel
William E. Hoffman, D.D.S.
Eric T. Jager
Stephen F. Rose
Stuart Wien
Officers
Larry D. Armel, President
P. Bradley Adams, Vice President & Treasurer
Michael A. Brummel, Vice President
Martin A. Cramer, Vice President & Secretary
John G. Dyer, 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
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
Michael A. Brummel, Vice President
Martin A. Cramer, Vice President & Secretary
John G. Dyer, Vice President
Investment Counsel
UMB Bank, n.a., Kansas City, Missouri
Auditors
Geo. S. Olive & Co. LLC, Evansville, Indiana
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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Scout Balanced Fund, Inc.
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