SCOUT
BOND FUND
A no-load mutual fund
with primary emphasis
on maximum current
income consistent with
its quality and maturity
standards.
Semiannual Report
December 31, 1996
TO THE SHAREHOLDERS
Scout Bond Fund's total return (price change and reinvested distributions) for
the six months ended December 31, 1996, was 3.73%. In comparison, the
unmanaged Lehman Brothers Intermediate Government/Corporate index earned
4.26%.
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 December 31, 1996, Scout Bond Fund was diversified as follows: 44.3% in
high-grade corporate bonds, 51.9% in U.S. Government and Federal agency
issues, and 3.8% in cash equivalent reserves due in less than one year. The
average maturity was 5.1 years, the average yield to maturity was 6.4% and the
credit rating of the portfolio was AA or better.
Despite the daily interest rate volatility during the last six months of 1996,
overall rate changes were minimal. The interest rate on the long bond held
around 7.00% until late October, when economic releases suggesting moderation
in wage increases prompted market reaction which took the rate to 6.64% at
year end. The FOMC (Federal Open Market Committee) has remained content with
the current "soft landing" scenario, as GDP growth remains solid while
inflation appears to be under control. Although the FOMC has maintained the
Fed Funds rate at 5.25%, the Fed has recently voiced some concern over the low
unemployment rate and has expressed a willingness to raise rates if wage
pressure develops. Large foreign holdings of U.S. debt are an additional point
of concern.
Throughout the last half of 1996, the Fund focused most purchases in the 5
year range, capturing most of the yield available in long bonds without
assuming additional maturity risk. Because of overvaluation in the corporate
sector, our investments have been more heavily weighted in Treasury and Agency
debt securities. The threat of a Fed tightening, combined with poor valuations
in corporate bonds, will encourage the Fund to maintain its current position
of moderate duration and lower exposure to corporate bonds. These tactics
should help offset the risks of the current market environment.
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 -- Taxable Yield Curves February 4, 1997
Source: UMB Investments
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
December 31, 1996 (unaudited)
Principal Market
Amount Description Value
CORPORATE BONDS - 44.56%
500,000 Albertson's, Incorporated
Medium Term Notes,
5.71%, due March 23, 1998 499,010
500,000 Albertson's, Incorporated
Medium Term Notes,
6.18%, due March 22, 2000 496,145
500,000 Albertson's, Incorporated Notes,
6.375%, due June 1, 2000 499,380
500,000 Amoco Canada Petroleum Company Notes,
7.25%, due December 1, 2002 513,925
500,000 Baltimore Gas & Electric Company
1st & Refunding Mortgage,
6.50%, due February 15, 2003 494,515
500,000 BellSouth Telecommunications
Incorporated Notes,
6.25%, due May 15, 2003 489,965
500,000 BellSouth Telecommunications
Incorporated Notes,
6.375%, due June 15, 2004 490,865
500,000 British Petroleum America,
Incorporated Notes,
8.875%, due December 1, 1997 513,050
500,000 Carolina Power & Light Company
Secured Medium Term Notes,
5.00%, due September 15, 1998 490,825
500,000 Carolina Power & Light Company
1st Mortgage,
5.875%, due January 15, 2004 470,980
500,000 Central Power & Light Company
1st Mortgage, Series BB,
6.00%, due October 1, 1997 500,435
500,000 Chevron Canada Financial Limited
Guaranteed Notes,
5.60%, due April 1, 1998 496,450
500,000 Consolidated Edison Company New York,
Incorporated Debentures,
6.625%, due February 1, 2002 498,570
500,000 Delmarva Power & Light Company
Medium Term Notes,
7.50%, due May 1, 1999 511,375
500,000 duPont (E.I.) deNemours & Company Notes,
6.75%, due October 15, 2002 504,450
500,000 Duke Power Company
Medium Term Notes,
5.17%, due September 1, 1998 492,555
500,000 Duke Power Company
1st & Refunding Mortgage,
5.625%, due August 12, 1997 499,300
500,000 Duke Power Company
1st & Refunding Mortgage,
7.00%, due June 1, 2000 507,310
500,000 Duke Power Company
1st & Refunding Mortgage,
5.875%, due June 1, 2001 486,215
500,000 Emerson Electric Company Notes,
6.30%, due November 1, 2005 485,100
500,000 Engelhard Corporation Senior Note,
7.00%, due August 1, 2001 507,485
750,000 Florida Power & Light Company
1st Mortgage,
5.50%, due July 1, 1999 736,388
500,000 Florida Power & Light Company
Secured Medium Term Notes,
6.20%, due February 2, 1998 501,915
500,000 Florida Power & Light Company
Secured Medium Term Notes,
5.70%, due March 5, 1998 499,150
500,000 General Mills Incorporated
Medium Term Notes,
7.50%, due June 5, 2000 514,565
500,000 General Mills Incorporated
Medium Term Notes,
5.98%, due July 9, 2001 485,765
500,000 GTE California Incorporated Debentures,
Series A,
5.625%, due February 1, 2001 482,355
500,000 GTE Southwest Incorporated Debentures,
6.00%, due January 15, 2006 469,425
500,000 GTE Southwest Incorporated Debentures,
6.00%, due February 15, 2008 460,990
500,000 Houston Lighting & Power Company
1st Mortgage,
7.625%, due March 1, 1997 501,325
1,000,000 International Business Machines
Corporation Notes,
6.375%, due November 1, 1997 1,003,610
500,000 International Business Machines
Corporation Notes,
6.375%, due June 15, 2000 500,235
500,000 International Business Machines
Corporation Notes,
7.25%, due November 1, 2002 515,195
500,000 International Paper Company
Medium Term Notes,
8.05%, due March 25, 1999 515,545
500,000 Kansas City Power & Light Company
Medium Term Notes,
6.50%, due January 2, 2001 497,115
250,000 McDonald's Corporation,
Series C, Medium Term Notes,
8.75%, due November 15, 2000 268,912
500,000 McDonald's Corporation Medium Term Notes,
7.375%, due July 15, 2002 509,905
500,000 Minnesota Mining & Manufacturing Company
Medium Term Notes,
6.25%, due March 29, 1999 501,295
750,000 Monogahela Power Company 1st Mortgage,
5.625%, due April 1, 2000 732,458
500,000 Monogahela Power Company 1st Mortgage,
7.375%, due July 1, 2002 511,325
1,000,000 New York Telephone Company
Notes, 5.875%, due September 1, 2003 953,260
500,000 Newell Company Medium Term Notes,
6.18%, due July 11, 2000 492,035
500,000 Northern Illinois Gas Company
1st Mortgage,
5.50%, due February 1, 1997 499,830
500,000 Northwest Natural Gas Company
Secured Medium Term Notes,
5.98%, due December 15, 2000 490,090
500,000 Pacific Bell Telephone Company Notes,
7.25%, due July 1, 2002 512,915
500,000 Pacific Bell Telephone Company Notes,
6.25%, due March 1, 2005 480,475
500,000 Pacific Gas & Electric Company
1st Mortgage,
6.25%, due March 1, 2004 479,595
500,000 PepsiCo, Incorporated Notes,
7.625%, due November 1, 1998 512,725
1,000,000 Public Service Company of Oklahoma
Medium Term Notes
6.02%, due March 1, 2001 979,600
500,000 Sara Lee Corporation, Series C,
Medium Term Notes,
6.45%, due September 26, 2005 483,500
500,000 Sears Roebuck & Company
Senior Medium Term Notes,
7.17%, due January 15, 1997 500,190
500,000 Southern California Gas Company
1st Mortgage, Series AA,
6.50%, due December 15, 1997 501,975
500,000 Southwestern Bell Capital Corporation
Medium Term Notes,
7.80%, due November 5, 1998 514,375
500,000 Southwestern Bell Telephone Company
Medium Term Notes,
6.125%, due March 12, 2001 492,560
500,000 Southwestern Bell Telephone Company
Medium Term Notes,
5.77%, due October 14, 2003 473,995
500,000 Sysco Corporation Notes,
7.00%, due May 1, 2006 504,280
500,000 Texaco Capital Incorporated
Medium Term Notes,
8.24%, due October 15, 2001 528,465
500,000 Texas Instruments Incorporated,
Unsecured Note,
6.125%, due February 1, 2006 471,850
500,000 Tribune Company Medium Term Notes,
5.30%, due April 17, 2000 481,830
500,000 Tribune Company Medium Term Notes,
5.75%, due September 15, 2003 470,510
500,000 Union Electric Company 1st Mortgage,
6.75%, due October 15, 1999 503,995
500,000 Union Pacific Corporation Notes
6.25%, due March 15, 1999 497,245
500,000 Union Pacific Corporation Notes
7.875%, due February 15, 2002 523,890
500,000 Union Pacific Railroad Company
Equipment Trust Series C.,
7.01%, due June 1, 2004 509,335
CORPORATE BONDS (Continued)
500,000 Wal-Mart Stores, Incorporated Notes
5.50%, due September 15, 1997 498,755
500,000 Wal-Mart Stores, Incorporated Notes
6.125%, due October 1, 1999 498,460
500,000 Weyerhaeuser Company Medium Term Notes
8.53%, due April 21, 1997 504,115
500,000 Wisconsin Electric Power Company,
6.625%, due November 15, 2006 491,200
35,750,000 35,506,428
SHORT-TERM CORPORATE NOTES - 1.25%
500,000 American Greetings Corp.,
5.42%, due January 22, 1997 498,344
500,000 Duke Power Company,
5.65%, due January 14, 1997 498,901
1,000,000 997,245
U.S. GOVERNMENTAL AGENCIES - 4.77%
84,734 Government National Mortgage Association,
9.00%, due July 15, 2001 88,790
80,812 Government National Mortgage Association,
8.00%, due January 20, 2002 83,143
141,535 Government National Mortgage Association,
8.50%, due February 20, 2002 146,737
43,645 Government National Mortgage Association,
8.00%, due January 15, 2004 45,032
171,265 Government National Mortgage Association,
9.50%, due April 15, 2005 180,484
204,873 Government National Mortgage Association,
9.75%, due May 15, 2005 215,901
95,009 Government National Mortgage Association,
9.00%, due October 20, 2005 99,084
152,603 Government National Mortgage Association,
7.50%, due February 15, 2006 154,834
113,569 Government National Mortgage Association,
7.50%, due March 15, 2006 115,245
164,454 Government National Mortgage Association,
8.00%, due June 20, 2006 169,537
183,399 Government National Mortgage Association,
8.50%, due July 15, 2006 191,756
266,676 Government National Mortgage Association,
8.00%, due August 15, 2006 276,982
246,313 Government National Mortgage Association,
7.50%, due August 20, 2006 249,976
167,925 Government National Mortgage Association,
7.50%, due September 15, 2006 170,404
91,942 Government National Mortgage Association,
7.50%, due April 15, 2007 93,299
208,629 Government National Mortgage Association,
7.50%, due March 20, 2009 211,839
434,977 Government National Mortgage Association,
6.00%, due May 15, 2009 422,646
397,552 Government National Mortgage Association,
7.00%, due May 15, 2009 400,895
488,751 Government National Mortgage Association,
7.00%, due October 20, 2011 487,823
3,738,663 3,804,407
U.S. GOVERNMENT SECURITIES - 18.31%
500,000 U.S. Treasury Notes,
8.00%, due January 15, 1997 500,390
500,000 U.S. Treasury Notes,
8.50%, due July 15, 1997 508,045
500,000 U.S. Treasury Notes,
5.50%, due July 31, 1997 500,235
1,000,000 U.S. Treasury Notes,
5.50%, due September 30, 1997 999,840
500,000 U.S. Treasury Notes,
7.875%, due January 15, 1998 511,095
1,000,000 U.S. Treasury Notes,
5.125%, due March 31, 1998 993,280
1,000,000 U.S. Treasury Notes,
5.125%, due April 30, 1998 992,340
1,500,000 U.S. Treasury Notes,
7.125%, due October 15, 1998 1,531,87
1,500,000 U.S. Treasury Notes,
6.375%, due January 15, 1999 1,514,055
500,000 U.S. Treasury Notes,
5.875%, due March 31, 1999 499,530
1,000,000 U.S. Treasury Notes,
6.00%, due October 15, 1999 1,000,310
1,500,000 U.S. Treasury Notes,
5.50%, due April 15, 2000 1,473,285
1,000,000 U.S. Treasury Notes,
7.50%, due November 15, 2001 1,052,660
1,500,000 U.S. Treasury Notes,
6.375%, due August 15, 2002 1,509,840
1,000,000 U.S. Treasury Notes,
6.25%, due February 15, 2003 998,750
14,500,000 14,585,530
GOVERNMENT SPONSORED ENTERPRISES - 29.11%
250,000 Federal Home Loan Banks,
5.66%, due November 9, 1998 248,593
500,000 Federal Home Loan Banks
6.31%, due March 29, 2001 499,220
500,000 Federal Home Loan Banks,
6.18%, due December 19, 2001 496,015
500,000 Federal Home Loan Banks,
6.48%, due December 29, 2000 497,030
1,000,000 Federal Home Loan Mortgage Corporation,
6.75%, due May 30, 2006 1,004,370
1,000,000 Federal Home Loan Mortgage Corporation,
Deb., 6.13%, due August 19, 1999 1,000,000
1,000,000 Federal National Mortgage Association,
Series U, Deb.,
6.05%, due November 10, 1997 1,002,030
1,000,000 Federal National Mortgage Association,
Deb., 8.20%, due March 10, 1998 1,025,160
1,000,000 Federal National Mortgage Association,
Series SM-E, Deb.,
8.15%, due May 11, 1998 1,025,000
1,000,000 Federal National Mortgage Association,
Series SM-98-G, Deb.,
7.85%, due September 10, 1998 1,030,160
500,000 Federal National Mortgage Association,
Deb., 5.05%, due November 10, 1998 491,875
1,500,000 Federal National Mortgage Association,
Series H, Deb.,
7.05%, due December 10, 1998 1,528,830
1,000,000 Federal National Mortgage Association,
Series H, Deb.,
6.35%, due August 10, 1999 1,005,620
1,500,000 Federal National Mortgage Association,
Deb., 6.10%, due February 10, 2000 1,495,305
GOVERNMENT SPONSORED ENTERPRISES (Continued)
1,000,000 Federal National Mortgage Association,
Series I, Deb.,
8.25%, due December 18, 2000 1,068,120
1,250,000 Federal National Mortgage Association,
Deb., 7.50%, due February 11, 2002 1,307,425
1,000,000 Federal National Mortgage Association,
Series SM-E, Deb.,
7.55%, due April 22, 2002 1,049,530
500,000 Federal National Mortgage Association,
Series K., Deb.,
7.05%, due November 12, 2002 513,905
500,000 Federal National Mortgage Association,
Deb., 6.80%, due January 10, 2003 507,890
500,000 Federal National Mortgage Association
Medium Term Notes,
5.40%, due March 12, 1999 493,750
500,000 Federal National Mortgage Association
Medium Term Notes,
5.72%, due March 8, 2001 488,515
1,000,000 Federal National Mortgage Association
Medium Term Notes,
6.45%, due April 23, 2001 1,002,970
500,000 Federal National Mortgage Association
Medium Term Notes,
6.625%, due May 21, 2001 504,845
1,000,000 Federal National Mortgage Association
Medium Term Notes,
6.38%, due April 29, 2003 976,250
1,000,000 Federal National Mortgage Association
Medium Term Notes,
6.38%, due June 25, 2003 989,980
500,000 Federal National Mortgage Association
Medium Term Notes,
5.785%, due February 14, 2006 471,795
1,500,000 Federal National Mortgage Association
Medium Term Notes
6.41%, due March 8, 2006 1,470,930
23,000,000 23,195,113
REPURCHASE AGREEMENT - 1.07%
855,000 Northern Trust Co.,
6.375%, due January 2, 1997,
(Collateralized by U.S. Treasury Notes,
6.50%, due May 15, 1997) 855,000
TOTAL INVESTMENTS - 99.07% $ 78,943,723
Other assets less liabilities - 0.93% 739,011
TOTAL NET ASSETS - 100.00%
(equivalent to $11.02 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
7,233,733 shares outstanding) $ 79,682,734
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 1996 (unaudited)
ASSETS:
Investment securities, at market value
(identified cost $78,540,954) $ 78,943,723
Cash (521,420)
Dividends receivable -
Interest receivable 1,256,610
Securities sold receivable -
Total assets 79,678,913
LIABILITIES AND NET ASSETS:
Payable for investments purchased -
Accrued management fee expense (3,821)
Total liabilities (3,821)
NET ASSETS $ 79,682,734
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in surplus of capital) $ 78,976,474
Accumulated undistributed income:
Undistributed net investment income 448,731
Accumulated net realized loss on investment transactions (79,461)
Net unrealized appreciation in value of investments 336,990
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 79,682,734
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 7,233,733
NET ASSET VALUE PER SHARE $ 11.02
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Operations
Six Months Ended December 31, 1996 (unaudited)
INVESTMENT INCOME:
Income:
Interest $ 2,665,693
Expenses:
Management fees (Note 3) 348,095
Government fees and other expenses 6,131
354,226
Net investment income 2,311,467
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 1):
Realized gain from investment transactions
(excluding commercial paper and repurchase agreements):
Proceeds from sales of investments 5,503,398
Cost of investments sold 5,503,020
Net realized gain from investment transactions 378
Unrealized appreciation on investments:
Beginning of period (274,413)
End of period 336,990
Increase in net unrealized appreciation
on investments 611,403
Net gain on investments 611,781
Increase in net assets resulting from operations $ 2,923,248
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 $ 2,311,467 $ 4,442,720
Net realized gain from investment activities 378 (142,998)
Increase (decrease) in net unrealized
appreciation on investments 611,403 (1,033,608)
Net increase in net assets resulting
from operations 2,923,248 3,266,114
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (2,311,467) (4,442,720)
Net realized gain from investment transactions - (37,183)
Total distributions to shareholders (2,311,467) (4,479,903)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 892,153 and
1,547,000 shares sold 9,762,324 17,129,689
Net asset value of 45,437 and
85,740 shares issued for
reinvestment of distributions 499,001 951,111
10,261,325 18,080,800
Cost of 1,140,928 and
1,133,636 shares redeemed (12,503,765) (12,561,407)
Net increase from capital share transactions (2,242,440) 5,519,393
Total increase (decrease) in net assets (1,630,659) 4,305,604
NET ASSETS:
Beginning of period 81,313,393 77,007,789
End of period (including undistributed
net investment income of $4,199 and $7,319) $ 79,682,734 $ 81,313,393
*Distributions to shareholders:
Income dividends per share $ 0.31 $ 0.62
Capital gains distribution per share $ 0.00 $ 0.01
See accompanying Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIF-ICANT 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 six months ended December 31, 1996 (excluding
commercial paper and repurchase agreements), were as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 2,421,675 $ 3,446,421
Proceeds from sales 500,000 5,003,398
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 .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.
This report has been prepared for the information of the Shareholders of Scout
Bond Fund, Inc., and is not be construed as an offering of the shares of the
Fund. Shares of this Fund and of the other Scout Funds are offered only be 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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