SCOUT
BOND FUND
A no-load mutual fund
with primary emphasis
on maximum current
income consistent with
its quality and maturity
standards.
Quarterly Report
March 31, 1997
TO THE SHAREHOLDERS
Scout Bond Fund's total return (price change and reinvested distributions) for
the quarter ended March 31, 1997, was -0.24%. In comparison, the unmanaged
Lehman Brothers Intermediate Government/Corporate index had a return of -
0.11%.
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.
At March 31, 1997, Scout Bond Fund was diversified as follows: 44.6% in high-
grade corporate bonds, 53.1% in U.S. Government and Federal Agency issues, and
2.3% in cash equivalent reserves due in less than one year. The average
maturity was 4.1 years, the average yield to maturity was 6.89%, and the
credit rating of the portfolio was on average AA.
Interest rates rose steadily throughout the first quarter of 1997, as fixed
income investors positioned themselves for a tightening of the Fed Funds rate.
As various economic indicators began to show signs of possible inflationary
pressure, the Federal Open Market Committee warned that a tightening might be
necessary. On March 25th, the Federal Reserve raised the Fed Funds rate by 25
basis points to 5.50%. Although bond investors, in anticipation of the rate
increase, had already pushed bond yields up considerably from their lows in
early 1996, ongoing speculation as to the next rate increase continue to exert
upward pressure on rates across the maturity spectrum.
Throughout the first quarter, Scout Bond Fund increased its shorter maturity
positions as interest rates rose. The increase in the Fed Funds rate could
make fixed income investors overly pessimistic, creating investment
opportunities during upcoming months. Due to poor valuations in other sectors,
the Fund will continue to focus more heavily on the Treasury and Agency debt
markets. The 5-year sector continues to capture most of the yield available in
10-year securities, without the additional risk. In light of current yield
levels in the bond market and the continued threat of additional increases in
interest rates, the Fund will maintain its moderate duration as cash is
invested.
As always, we will continue to take advantage of any opportunities that meet
the high investment standards of the Fund. Your continued participation with
Scout Bond Fund as part of your investment portfolio is appreciated.
Graph --
Graph -- Taxable Yield Curves
March 31, 1997
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
March 31, 1997
Principal Market
Amount Description Value
CORPORATE BONDS - 44.52%
500,000 Albertson's, Incorporated Medium Term Notes,
5.71%, due March 23, 1998 497,350
500,000 Albertson's, Incorporated Medium Term Notes,
6.18%, due March 22, 2000 489,445
500,000 Albertson's, Incorporated Notes,
6.375%, due June 1, 2000 491,760
500,000 Amoco Canada Petroleum Company Notes,
7.25%, due December 1, 2002 503,805
500,000 Baltimore Gas & Electric Company 1st &
Refunding Mortgage,
6.50%, due February 15, 2003 482,345
500,000 BellSouth Telecommunications
Incorporated Notes,
6.25%, due May 15, 2003 479,225
500,000 BellSouth Telecommunications
Incorporated Notes,
6.375%, due June 15, 2004 478,205
500,000 British Petroleum America,
Incorporated Notes,
8.875%, due December 1, 1997 509,005
500,000 Carolina Power & Light Company
Secured Medium Term Notes,
5.00%, due September 15, 1998 489,115
500,000 Carolina Power & Light Company
1st Mortgage,
5.875%, due January 15, 2004 463,425
500,000 Central Power & Light Company
1st Mortgage, Series BB,
6.00%, due October 1, 1997 499,565
500,000 Chevron Canada Financial Limited
Guaranteed Notes,
5.60%, due April 1, 1998 494,525
500,000 Consolidated Edison Company New York,
Incorporated Debentures,
6.625%, due February 1, 2002 487,870
500,000 Delmarva Power & Light Company
Medium Term Notes,
7.50%, due May 1, 1999 506,255
500,000 duPont (E.I.) deNemours & Company Notes,
6.75%, due October 15, 2002 491,925
500,000 Duke Power Company Medium Term Notes,
5.17%, due September 1, 1998 490,965
500,000 Duke Power Company 1st & Refunding Mortgage,
5.625%, due August 12, 1997 499,470
500,000 Duke Power Company 1st & Refunding Mortgage,
7.00%, due June 1, 2000 501,265
500,000 Duke Power Company 1st & Refunding Mortgage,
5.875%, due June 1, 2001 477,345
500,000 Emerson Electric Company Notes,
6.30%, due November 1, 2005 470,275
500,000 Engelhard Corporation Senior Note,
7.00%, due August 1, 2001 496,940
750,000 Florida Power & Light Company 1st Mortgage,
5.50%, due July 1, 1999 730,673
500,000 Florida Power & Light Company
Secured Medium Term Notes,
6.20%, due February 2, 1998 499,655
500,000 Florida Power & Light Company
Secured Medium Term Notes,
5.70%, due March 5, 1998 497,485
500,000 General Mills Incorporated
Medium Term Notes,
7.50%, due June 5, 2000 506,200
500,000 General Mills Incorporated
Medium Term Notes,
5.98%, due July 9, 2001 477,290
500,000 GTE California Incorporated Debentures,
Series A,
5.625%, due February 1, 2001 474,835
500,000 GTE Southwest Incorporated Debentures,
6.00%, due January 15, 2006 454,965
500,000 GTE South Incorporated Debentures,
6.00%, due February 15, 2008 447,220
500,000 Honeywell Inc.,
6.75%, due March 15, 2002 492,470
1,000,000 International Business Machines
Corporation Notes,
6.375%, due November 1, 1997 1,001,130
500,000 International Business Machines
Corporation Notes,
5.65%, due January 22, 1998 496,960
500,000 International Business Machines
Corporation Notes,
6.375%, due June 15, 2000 492,595
500,000 International Business Machines
Corporation Notes,
7.25%, due November 1, 2002 502,290
500,000 International Paper Company
Medium Term Notes,
8.05%, due March 25, 1999 509,420
500,000 Kansas City Power & Light Company
Medium Term Notes,
6.50%, due January 2, 2001 488,935
250,000 McDonald's Corporation, Series C,
Medium Term Notes,
8.75%, due November 15, 2000 263,440
500,000 McDonald's Corporation Medium Term Notes,
7.375%, due July 15, 2002 503,405
500,000 Minnesota Mining & Manufacturing Company
Medium Term Notes,
6.25%, due March 29, 1999 496,585
750,000 Monogahela Power Company 1st Mortgage,
5.625%, due April 1, 2000 722,670
500,000 Monogahela Power Company 1st Mortgage,
7.375%, due July 1, 2002 500,015
1,000,000 New York Telephone Company Notes,
5.875%, due September 1, 2003 928,200
500,000 Newell Company Medium Term Notes,
6.18%, due July 11, 2000 484,985
500,000 Northwest Natural Gas Company
Secured Medium Term Notes,
5.98%, due December 15, 2000 482,350
500,000 Pacific Bell Telephone Company Notes,
7.25%, due July 1, 2002 502,200
500,000 Pacific Bell Telephone Company Notes,
6.25%, due March 1, 2005 467,140
500,000 Pacific Gas & Electric Company 1st Mortgage,
6.25%, due March 1, 2004 472,395
500,000 PepsiCo, Incorporated Notes,
7.625%, due November 1, 1998 507,410
1,000,000 Public Service Company of Oklahoma
Medium Term Notes,
6.02%, due March 1, 2001 963,320
500,000 Sara Lee Corporation, Series C,
Medium Term Notes,
6.45%, due September 26, 2005 468,755
500,000 Southern California Gas Company
1st Mortgage, Series AA,
6.50%, due December 15, 1997 500,645
500,000 Southwestern Bell Capital Corporation
Medium Term Notes,
7.80%, due November 5, 1998 509,215
500,000 Southwestern Bell Telephone Company
Medium Term Notes,
6.125%, due March 12, 2001 483,345
500,000 Southwestern Bell Telephone Company
Medium Term Notes,
5.77%, due October 14, 2003 459,295
500,000 Sysco Corporation Notes,
7.00%, due May 1, 2006 488,145
500,000 Texaco Capital Incorporated
Medium Term Notes, 8
.24%, due October 15, 2001 520,905
500,000 Texas Instruments Incorporated,
Unsecured Note,
6.125%, due February 1, 2006 456,685
500,000 Tribune Company Medium Term Notes,
5.30%, due April 17, 2000 475,905
500,000 Tribune Company Medium Term Notes,
5.75%, due September 15, 2003 458,810
500,000 Union Electric Company 1st Mortgage,
6.75%, due October 15, 1999 497,345
500,000 Union Pacific Corporation Notes,
6.25%, due March 15, 1999 494,840
500,000 Union Pacific Corporation Notes,
7.875%, due February 15, 2002 511,410
500,000 Union Pacific Railroad Company
Equipment Trust Series C.,
7.01%, due June 1, 2004 494,135
500,000 Wal-Mart Stores, Incorporated Notes,
5.50%, due September 15, 1997 498,780
500,000 Wal-Mart Stores, Incorporated Notes,
6.125%, due October 1, 1999 492,600
500,000 Weyerhaeuser Company Medium Term Notes,
8.53%, due April 21, 1997 500,690
500,000 Wisconsin Electric Power Company,
6.625%, due November 15, 2006 474,885
35,250,000 34,452,708
U.S. GOVERNMENTAL AGENCIES - 6.04%
80,803 Government National Mortgage Association,
9.00%, due July 15, 2001 83,975
73,797 Government National Mortgage Association,
8.00%, due January 20, 2002 74,800
130,963 Government National Mortgage Association,
8.50%, due February 20, 2002 133,426
42,462 Government National Mortgage Association,
8.00%, due January 15, 2004 43,386
161,931 Government National Mortgage Association,
9.50%, due April 15, 2005 170,376
199,021 Government National Mortgage Association,
9.75%, due May 15, 2005 209,400
92,698 Government National Mortgage Association,
9.00%, due October 20, 2005 96,518
148,483 Government National Mortgage Association,
7.50%, due February 15, 2006 148,422
103,307 Government National Mortgage Association,
7.50%, due March 15, 2006 103,264
156,153 Government National Mortgage Association,
8.00%, due June 20, 2006 159,236
179,101 Government National Mortgage Association,
8.50%, due July 15, 2006 186,426
251,981 Government National Mortgage Association,
8.00%, due August 15, 2006 257,956
236,016 Government National Mortgage Association,
7.50%, due August 20, 2006 236,604
164,575 Government National Mortgage Association,
7.50%, due September 15, 2006 164,507
87,108 Government National Mortgage Association,
7.50%, due April 15, 2007 86,981
203,915 Government National Mortgage Association,
7.50%, due March 20, 2009 204,327
428,297 Government National Mortgage Association,
6.00%, due May 15, 2009 406,565
383,518 Government National Mortgage Association,
7.00%, due May 15, 2009 380,576
580,743 Government National Mortgage Association,
7.00%, due August 20, 2011 569,756
484,093 Government National Mortgage Association,
7.00%, due October 20, 2011 474,934
498,236 Government National Mortgage Association,
6.50%, due February 15, 2012 480,808
4,687,201 4,672,243
U.S. GOVERNMENT SECURITIES - 17.34%
500,000 U.S. Treasury Notes,
8.50%, due July 15, 1997 504,060
1,000,000 U.S. Treasury Notes,
5.50%, due September 30, 1997 998,750
500,000 U.S. Treasury Notes,
7.875%, due January 15, 1998 507,030
1,000,000 U.S. Treasury Notes,
5.125%, due March 31, 1998 990,940
1,000,000 U.S. Treasury Notes,
5.125%, due April 30, 1998 989,690
1,500,000 U.S. Treasury Notes,
7.125%, due October 15, 1998 1,517,115
1,500,000 U.S. Treasury Notes,
6.375%, due January 15, 1999 1,500,000
500,000 U.S. Treasury Notes,
5.875%, due March 31, 1999 495,000
1,000,000 U.S. Treasury Notes,
6.00%, due October 15, 1999 988,120
1,500,000 U.S. Treasury Notes,
5.50%, due April 15, 2000 1,455,240
1,000,000 U.S. Treasury Notes,
7.50%, due November 15, 2001 1,028,280
1,500,000 U.S. Treasury Notes,
6.375%, due August 15, 2002 1,472,580
1,000,000 U.S. Treasury Notes,
6.25%, due February 15, 2003 972,810
13,500,000 13,419,615
GOVERNMENT SPONSORED ENTERPRISES - 30.05%
500,000 Federal Farm Credit Bank,
Medium Term Notes,
6.70%, due October 11, 2006 481,015
250,000 Federal Home Loan Banks,
5.66%, due November 9, 1998 246,915
500,000 Federal Home Loan Banks,
6.31%, due March 29, 2001 489,845
500,000 Federal Home Loan Banks,
6.18%, due December 19, 2001 484,845
500,000 Federal Home Loan Banks,
6.48%, due December 29, 2000 491,485
1,000,000 Federal Home Loan Mortgage Corporation,
6.75%, due May 30, 2006 970,310
1,000,000 Federal Home Loan Mortgage Corporation,
Deb., 6.13%, due August 19, 1999 988,440
1,000,000 Federal National Mortgage Association,
Series U, Deb., 6.05%, due November 10, 1997 999,690
1,000,000 Federal National Mortgage Association,
Deb., 8.20%, due March 10, 1998 1,017,340
1,000,000 Federal National Mortgage Association,
Series SM-E, Deb., 8.15%, due May 11, 1998 1,015,620
1,000,000 Federal National Mortgage Association,
Series SM-98-G, Deb.,
7.85%, due September 10, 1998 1,015,780
500,000 Federal National Mortgage Association,
Deb., 5.05%, due November 10, 1998 489,220
1,500,000 Federal National Mortgage Association,
Series H, Deb., 7.05%, due December 10, 1998 1,513,365
1,000,000 Federal National Mortgage Association,
Series H, Deb., 6.35%, due August 10, 1999 994,060
1,500,000 Federal National Mortgage Association,
Deb., 6.10%, due February 10, 2000 1,476,555
1,000,000 Federal National Mortgage Association,
Series I, Deb., 8.25%, due December 18, 2000 1,045,310
1,250,000 Federal National Mortgage Association,
Deb., 7.50%, due February 11, 2002 1,279,687
1,000,000 Federal National Mortgage Association,
Series SM-E, Deb., 7.55%, due April 22, 2002 1,023,280
500,000 Federal National Mortgage Association,
Series K., Deb., 7.05%, due November 12, 2002 500,470
500,000 Federal National Mortgage Association,
Deb., 6.80%, due January 10, 2003 495,545
500,000 Federal National Mortgage Association
Medium Term Notes, 5.40%, due March 12, 1999 488,905
500,000 Federal National Mortgage Association
Medium Term Notes, 5.72%, due March 8, 2001 479,920
1,000,000 Federal National Mortgage Association
Medium Term Notes, 6.45%, due April 23, 2001 985,620
500,000 Federal National Mortgage Association
Medium Term Notes, 6.625%, due May 21, 2001 494,845
1,000,000 Federal National Mortgage Association
Medium Term Notes, 6.38%, due April 29, 2003 958,910
1,000,000 Federal National Mortgage Association
Medium Term Notes, 6.38%, due June 25, 2003 957,340
500,000 Federal National Mortgage Association
Medium Term Notes, 5.785%, due February 14, 2006 456,095
1,500,000 Federal National Mortgage Association
Medium Term Notes, 6.41%, due March 8, 2006 1,420,545
23,500,000 23,260,957
REPURCHASE AGREEMENT - 1.17%
910,000 Northern Trust Co., 6.20%, due April 1, 1997,
(Collateralized by U.S. Treasury Notes,
6.50%, due May 15, 1997) 910,000
TOTAL INVESTMENTS - 99.12% $ 76,715,523
Other assets less liabilities - 0.88% 678,410
TOTAL NET ASSETS - 100.00%
(equivalent to $10.84 per share;
20,000,000 shares of $1.00 par value
capital shares authorized;
7,137,547 shares outstanding) $ 77,393,933
BASIS OF DETERMINING MARKET VALUE. 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. Short-term obligations are valued
at amortized cost.
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
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
