SCOUT
BOND FUND
A no-load mutual fund
with primary emphasis
on maximum current
income consistent with
its quality and maturity
standards.
Quarterly Report
September 30, 1997
TO THE SHAREHOLDERS
Scout Bond Fund's total return (price change and reinvested distributions) for
the quarter ended September 30, 1997, was 2.54%. In comparison, the unmanaged
Lehman Brothers Intermediate Government/Corporate Index had a return of 2.70%.
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.
Throughout the last quarter, institutional bond investors slowly began to
discount the likelihood of further increases by the Federal Reserve in the key
Fed Funds rate, now at 5.50%. Economic indicators continued to show an economy
that is healthy, but not overheating. As investors became more comfortable
with this unusual scenario, many fund managers moved more aggressively into
bonds, driving prices up and yields down.
The 5-year Treasury note, which began the quarter with a yield of 6.37%,
finished with a yield of 5.98%. The entire yield curve shifted down an average
of 35 basis points, indicating an expectation among investors that the next
change in the Fed Funds rate also will be down. As is usually the case when
the market is anticipating lower interest rates, the yield curve flattened as
market rates dropped. At the quarter's end, the yield difference between 5-
and 10-year Treasury issues was only 10 basis points.
The drop in rates has not occurred smoothly. Recent quarters have recorded
rapid increases in the volatility of interest rate changes, a reflection of
the difficulty investors are having interpreting the current economic
situation. This uncertainty, combined with the flatness of the yield curve,
has prompted the Scout Bond Fund to maintain its moderate average maturity.
The Fund is investing more heavily in the 5-year range to capture most of the
yield that is available in 10-year bonds, without taking on the additional
risk associated with the longer securities. Corporate bonds will continue to
be used when attractive opportunities arise. The Fund maintains core positions
in Treasury and Agency issues.
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. We welcome your
comments and questions.
Sincerely,
/S/George W. Root
George W. Root
UMB Investment Advisors
GRAPH - PIE CHART
Government & Agency 53%
Corporate 45%
Less than 1 Year 2%
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.
GRAPH - TAXABLE YIELD CURVES
FINANCIAL STATEMENTS
Statement of Net Assets
September 30, 1997
Principal Market
Amount Description Value
CORPORATE BONDS - 44.58%
$ 500,000 Albertson's Incorporated,
Medium Term Notes,
5.71%, due March 23, 1998 $ 499,520
500,000 Albertson's Incorporated,
Medium Term Notes,
6.18%, due March 22, 2000 499,700
500,000 Albertson's Incorporated Notes,
6.375%, due June 1, 2000 501,780
500,000 Amoco Canada Petroleum Company Notes,
7.25%, due December 1, 2002 520,275
500,000 Baltimore Gas & Electric Company,
1st & Refunding Mortgage,
6.50%, due February 15, 2003 501,500
500,000 BellSouth Telecommunications
Incorporated Notes,
6.25%, due May 15, 2003 498,535
500,000 BellSouth Telecommunications
Incorporated Notes,
6.375%, due June 15, 2004 500,225
500,000 British Petroleum America,
Incorporated Notes,
8.875%, due December 1, 1997 502,540
500,000 Carolina Power & Light Company,
1st Mortgage,
5.00%, due September 15, 1998 495,275
500,000 Carolina Power & Light Company,
1st Mortgage,
5.875%, due January 15, 2004 484,505
500,000 Chevron Canada Financial
Limited Guaranteed Notes,
5.60%, due April 1, 1998 500,000
500,000 Consolidated Edison Company New York,
Incorporated Debentures,
6.625%, due February 1, 2002 504,295
500,000 Delmarva Power & Light Company,
Medium Term Notes,
7.50%, due May 1, 1999 510,990
1,000,000 Dillard Department Stores Incorporated,
6.875%, due June 1, 2005 1,010,520
500,000 duPont (E.I.) deNemours & Company Notes,
6.75%, due October 15, 2002 508,365
500,000 Duke Power Company, 1st & Refunding Mortgage,
5.17%, due September 1, 1998 496,230
500,000 Duke Power Company, 1st & Refunding Mortgage,
7.00%, due June 1, 2000 510,295
500,000 Duke Power Company,
1st & Refunding Mortgage,
5.875%, due June 1, 2001 491,895
500,000 Emerson Electric Company Notes,
6.30%, due November 1, 2005 494,830
500,000 Engelhard Corporation, Senior Note,
7.00%, due August 1, 2001 510,840
750,000 Florida Power & Light Company,
1st Mortgage,
5.50%, due July 1, 1999 743,550
500,000 Florida Power & Light Company,
Secured Medium Term Notes,
6.20%, due February 2, 1998 500,285
500,000 Florida Power & Light Company,
Secured Medium Term Notes,
5.70%, due March 5, 1998 499,545
500,000 General Mills Incorporated,
Medium Term Notes,
7.50%, due June 5, 2000 514,770
500,000 General Mills Incorporated,
Medium Term Notes,
5.98%, due July 9, 2001 492,435
500,000 GTE California Incorporated,
Debentures, Series A,
5.625%, due February 1, 2001 490,500
500,000 GTE Southwest Incorporated, Debentures,
6.00%, due January 15, 2006 480,560
500,000 GTE Southwest Incorporated, Debentures,
6.00%, due February 15, 2008 473,550
500,000 Honeywell Incorporated,
6.75%, due March 15, 2002 507,595
500,000 International Business Machines
Corporation Notes,
5.65%, due January 22, 1998 499,415
500,000 International Business Machines
Corporation Notes,
6.375%, due June 15, 2000 503,035
500,000 International Business Machines
Corporation Notes,
7.25%, due November 1, 2002 519,330
500,000 International Paper Company,
Medium Term Notes,
8.05%, due March 25, 1999 512,965
500,000 Kansas City Power & Light Company,
Medium Term Notes,
6.50%, due January 2, 2001 501,495
1,000,000 May Department Stores Incorporated,
6.875%, due November 1, 2005 1,014,860
250,000 McDonald's Corporation, Series C,
Medium Term Notes,
8.75%, due November 15, 2000 267,232
500,000 McDonald's Corporation,
Medium Term Notes,
7.375%, due July 15, 2002 508,620
500,000 Minnesota Mining & Manufacturing Company,
Medium Term Notes,
6.25%, due March 29, 1999 503,120
750,000 Monongahela Power Company, 1st Mortgage,
5.625%, due April 1, 2000 739,643
500,000 Monongahela Power Company, 1st Mortgage,
7.375%, due July 1, 2002 518,795
1,000,000 New York Telephone Company Notes,
5.875%, due September 1, 2003 969,230
500,000 Newell Company, Medium Term Notes,
6.18%, due July 11, 2000 496,655
500,000 Northwest Natural Gas Company,
Secured Medium Term Notes,
5.98%, due December 15, 2000 495,505
500,000 Pacific Bell Telephone Company Notes,
7.25%, due July 1, 2002 517,510
500,000 Pacific Bell Telephone Company Notes,
6.25%, due March 1, 2005 490,535
500,000 Pacific Gas & Electric Company, 1st Mortgage,
6.25%, due March 1, 2004 494,005
500,000 PepsiCo Incorporated Notes,
7.625%, due November 1, 1998 508,400
1,000,000 Public Service Company of Oklahoma,
Medium Term Notes
6.02%, due March 1, 2001 990,920
500,000 Sara Lee Corporation, Series C,
Medium Term Notes,
6.45%, due September 26, 2005 493,935
500,000 Southwestern Bell Capital Corporation,
Medium Term Notes,
7.80%, due November 5, 1998 510,495
500,000 Southwestern Bell Telephone Company,
Medium Term Notes,
6.125%, due March 12, 2001 497,775
500,000 Southwestern Bell Telephone Company,
Medium Term Notes,
5.77%, due October 14, 2003 483,290
500,000 Sysco Corporation Notes,
7.00%, due May 1, 2006 514,445
500,000 Texaco Capital Incorporated,
Medium Term Notes,
8.24%, due October 15, 2001 533,310
1,000,000 Texas Instruments Incorporated,
Unsecured Note,
6.125%, due February 1, 2006 965,780
500,000 Tribune Company, Medium Term Notes,
5.30%, due April 17, 2000 488,250
500,000 Tribune Company, Medium Term Notes,
5.75%, due September 15, 2003 480,665
500,000 Union Electric Company, 1st Mortgage,
6.75%, due October 15, 1999 504,710
500,000 Union Pacific Corporation Notes,
6.25%, due March 15, 1999 500,565
500,000 Union Pacific Corporation Notes,
7.875%, due February 15, 2002 524,830
500,000 Union Pacific Railroad Company,
Equipment Trust, Series C.,
7.01%, due June 1, 2004 515,615
500,000 Wal-Mart Stores, Incorporated Notes,
6.125%, due October 1, 1999 500,650
500,000 Wisconsin Electric Power Company,
6.625%, due November 15, 2006 502,050
34,250,000 34,312,540
U.S. GOVERNMENTAL AGENCIES - 6.37%
$ 45,624 Government National Mortgage Association,
9.00%, due July 15, 2001 $ 47,073
65,242 Government National Mortgage Association,
8.00%, due February 20, 2002 66,618
113,945 Government National Mortgage Association,
8.50%, due February 20, 2002 116,620
38,127 Government National Mortgage Association,
8.00%, due January 15, 2004 39,487
144,523 Government National Mortgage Association,
9.50%, due April 15, 2005 153,556
171,797 Government National Mortgage Association,
9.75%, due May 15, 2005 182,534
88,901 Government National Mortgage Association,
9.00%, due October 20, 2005 92,905
134,400 Government National Mortgage Association,
7.50%, due February 15, 2006 137,670
70,944 Government National Mortgage Association,
7.50%, due March 15, 2006 72,925
134,405 Government National Mortgage Association,
8.00%, due June 20, 2006 138,658
152,827 Government National Mortgage Association,
8.50%, due July 15, 2006 159,869
58,184 Government National Mortgage Association,
8.00%, due August 15, 2006 60,636
175,842 Government National Mortgage Association,
8.00%, due August 15, 2006 183,252
225,801 Government National Mortgage Association,
7.50%, due August 20, 2006 230,565
157,274 Government National Mortgage Association,
7.50%, due September 15, 2006 161,666
81,611 Government National Mortgage Association,
7.50%, due April 15, 2007 83,891
180,404 Government National Mortgage Association,
7.50%, due March 20, 2009 184,809
414,681 Government National Mortgage Association,
6.00%, due May 15, 2009 408,552
350,265 Government National Mortgage Association,
7.00%, due May 15, 2009 357,067
564,674 Government National Mortgage Association,
7.00%, due August 20, 2011 570,168
464,091 Government National Mortgage Association,
7.00%, due October 20, 2011 467,883
488,183 Government National Mortgage Association,
6.50%, due February 15, 2012 486,987
491,581 Government National Mortgage Association,
7.00%, due April 20, 2012 495,597
4,813,326 4,898,988
U.S. GOVERNMENT SECURITIES - 14.42%
500,000 U.S. Treasury Notes,
5.125%, due March 31, 1998 499,375
1,500,000 U.S. Treasury Notes,
7.125%, due October 15, 1998 1,521,795
1,500,000 U.S. Treasury Notes,
6.375%, due January 15, 1999 1,511,490
500,000 U.S. Treasury Notes,
5.875%, due March 31, 1999 500,860
1,000,000 U.S. Treasury Notes,
6.00%, due October 15, 1999 1,004,220
1,500,000 U.S. Treasury Notes,
5.50%, due April 15, 2000 1,487,580
1,000,000 U.S. Treasury Notes,
7.50%, due November 15, 2001 1,053,910
1,500,000 U.S. Treasury Notes,
6.375%, due August 15, 2002 1,522,965
1,000,000 U.S. Treasury Notes,
6.25%, due February 15, 2003 1,009,530
1,000,000 U.S. Treasury Notes,
5.875%, due February 15, 2004 989,220
11,000,000 11,100,945
GOVERNMENT SPONSORED ENTERPRISES - 32.62%
$ 500,000 Federal Farm Credit Bank,
Medium Term Notes,
6.70%, due October 11, 2006 $ 507,265
250,000 Federal Home Loan Banks,
5.66%, due November 9, 1998 249,570
500,000 Federal Home Loan Banks
6.48%, due December 29, 2000 499,060
500,000 Federal Home Loan Banks
6.31%, due March 29, 2001 502,890
500,000 Federal Home Loan Banks
6.18%, due December 19, 2001 500,155
1,000,000 Federal Home Loan Mortgage Corporation,
6.75%, due May 30, 2006 1,024,530
1,000,000 Federal Home Loan Mortgage Corporation,
Deb.,
6.13%, due August 19, 1999 1,003,280
800,000 Federal National Mortgage Association,
Deb.,
8.20%, due March 10, 1998 807,624
1,000,000 Federal National Mortgage Association,
Series SM-98-G, Deb.,
7.85%, due September 10, 1998 1,016,410
500,000 Federal National Mortgage Association,
Deb.,
5.05%, due November 10, 1998 495,470
1,500,000 Federal National Mortgage Association,
Series H, Deb.,
7.05%, due December 10, 1998 1,521,330
1,000,000 Federal National Mortgage Association,
Series H, Deb.,
6.35%, due August 10, 1999 1,000,310
1,500,000 Federal National Mortgage Association,
Deb.,
6.10%, due February 10, 2000 1,504,215
1,000,000 Federal National Mortgage Association,
Series I, Deb.,
8.25%, due December 18, 2000 1,060,780
1,250,000 Federal National Mortgage Association,
Deb.,
7.50%, due February 11, 2002 1,313,087
1,000,000 Federal National Mortgage Association,
Series SM-E, Deb.,
7.55%, due April 22, 2002 1,052,660
500,000 Federal National Mortgage Association,
Series K., Deb.,
7.05%, due November 12, 2002 517,655
500,000 Federal National Mortgage Association,
Deb.,
6.80%, due January 10, 2003 513,905
500,000 Federal National Mortgage Association,
Medium Term Notes,
5.40%, due March 12, 1999 495,545
500,000 Federal National Mortgage Association,
Medium Term Notes,
6.36%, due August 16, 2000 504,685
500,000 Federal National Mortgage Association,
Medium Term Notes,
5.72%, due March 8, 2001 493,830
1,000,000 Federal National Mortgage Association,
Medium Term Notes,
6.45%, due April 23, 2001 1,011,250
500,000 Federal National Mortgage Association,
Medium Term Notes,
6.625%, due May 21, 2001 507,970
500,000 Federal National Mortgage Association,
Medium Term Notes,
6.41%, due February 6, 2002 505,080
500,000 Federal National Mortgage Association,
Medium Term Notes,
6.09%, due September 30, 2002 497,890
1,000,000 Federal National Mortgage Association,
Medium Term Notes,
6.38%, due April 29, 2003 986,090
1,000,000 Federal National Mortgage Association,
Medium Term Notes,
6.38%, due June 25, 2003 985,310
1,000,000 Federal National Mortgage Association,
Medium Term Notes,
6.82%, due August 23, 2005 1,025,620
500,000 Federal National Mortgage Association,
Medium Term Notes,
5.875%, due February 14, 2006 482,265
1,500,000 Federal National Mortgage Association,
Medium Term Notes
6.41%, due March 8, 2006 1,496,250
500,000 Federal National Mortgage Association,
Medium Term Notes
6.96%, due April 2, 2007 519,610
500,000 Federal National Mortgage Association,
Medium Term Notes
6.70%, due June 19, 2007 509,140
24,800,000 25,110,731
SHORT-TERM CORPORATE NOTES - 0.65%
$ 500,000 Disney, Walt, Co.,
5.52%, due October 9, 1997 $ 499,310
REPURCHASE AGREEMENT - 0.41%
315,000 Northern Trust Co.,
6.00%, due October 1, 1997,
(Collateralized by U.S. Treasury Notes,
6.00%, due November 30, 1997) 315,000
TOTAL INVESTMENTS - 99.05% $ 76,237,514
Other assets less liabilities - 0.95% 734,445
TOTAL NET ASSETS - 100.00%
(equivalent to $11.10 per share;
20,000,000 shares of $1.00 par value
capital shares authorized;
6,935,578 shares outstanding) $ 76,971,959
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
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
