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, 1998
TO THE SHAREHOLDERS
Scout Bond Fund's share price rose to $11.21 for the quarter ended June
30, 1998, up from $11.17 per share as of March 31, 1998. Investors
earned a total return from reinvested dividend distributions of 1.75%
for the quarter and 7.94% for the year ended on that date. The Fund
seeks to provide maximum current income consistent with its quality and
maturity standards by investing in fixed-income obligations.
The bond markets endured continued turbulence throughout the quarter,
with yields trading in a wide range but ultimately drifting lower. For
example, the 10-year Treasury note began the quarter at a yield of 5.65%
and ended at 5.44%. The benchmark Fed Funds rate remained at 5.50%
during the period.
These rates also illustrate the most noteworthy change in the bond
markets for the quarter. The significant drop in longer rates caused a
flattening of the yield curve, with the 10- and 30-year Treasury
securities ultimately trading at yields below short-term rates. This
indicates profound bullishness among market participants who are
positioning for significantly lower interest rates. While measured
inflation continues to remain low, there is some risk that the markets
may be jumping the gun, given the fact that the policy-making Federal
Open Market Committee has maintained a bias toward raising the Fed Funds
rate.
Your Fund continues to avoid the higher risk sectors of the corporate
market, such as financial companies and BBB-rated companies. We enhanced
yields during the quarter by replacing those sectors with greater
exposure to the Government National Mortgage Association (GNMA) market,
capturing higher yields without additional credit risk. We feel current
economic conditions make it virtually impossible to predict the
direction of the interest rates.
We believe the Fund is an outstanding choice for investors seeking a
stable fixed-income return while avoiding the volatility associated with
interest rate speculation or aggressive exposure to credit risk.
Your continued participation in the 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
CHART - HYPOTHETICAL GROWTH OF $10,000
as of June 30, 1998
SCOUT BOND FUND vs Lehman Bros/Gov./Corp Int*
SOURCE: UMB Investment Advisors
*Unmanged index of stocks, bonds or mutual funds (there are no direct
investments or fees in these indices).
For illustrative purposes only; may not represent your returns.
CHART - TAXABLE YIELD CURVES
as of June 30, 1998
Treasuries
Agencies
AA Industrials
SOURCE: UMB Investment Advisors
CHART - COMPARATIVE RATES OF RETURN
as of June 30, 1998
1 1/2 3 1/2 7 1/2 15 1/2
Years Years Years Years
Scout Bond Fund 6.98% 7.94% 6.96% 8.16%
Lipper Int. Inv. Grade Fund Index* 8.13% 9.10% 8.14% N.A.
Lehman Bros. Gov./Corp. Int.* 7.60% 8.71% 7.79% 9.29%
Scout Bond Fund's average annual compound returns for 1-, 5- and
10-year periods ended June 30, 1998, are 7.94%, 5.30% and 7.31%, respectively.
Performance data contained in this report are 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 the original cost.
*Unmanaged index of stocks, bonds or mutual funds (there are no direct
investments or fees in these indices).
CHART - FUND DIVERSIFICATION
Short-Term 1.4%
Corporate 42.1%
Government & Agency 56.5%
As of June 30, 1998
CHART - HISTORICAL PER SHARE RECORD
INCOME & CUMULATIVE**
NET SHORT-TERM LONG-TERM VALUE PER
ASSET GAINS GAINS SHARE PLUS
VALUE DISTRIBUTION DISTRIBUTION DISTRIBUTIONS
12/31/82 $10.05 $0.03 $ - $10.08
12/31/83 9.59 0.94 - 10.56
12/31/84 10.37 0.45 - 11.79
12/31/85 10.94 0.98 0.02 13.36
12/31/86 11.37 0.83 0.03 14.64
12/31/87 10.42 1.25 0.01 14.95
12/31/88 10.19 0.81 0.03 15.56
12/31/89 10.50 0.82 - 16.69
12/31/90 10.54 0.79 - 17.52
12/31/91 11.19 0.71 - 18.88
12/31/92 11.20 0.71 - 19.60
12/31/93 11.44 0.64 0.04 20.52
12/31/94 10.46 0.63 0.00 20.17
12/31/95 11.26 0.63 0.01 21.60
12/31/96 11.02 0.62 - 21.90
12/31/97 11.17 0.63 - 22.76
6/30/98* 11.21 0.31 - 23.11
*Six-month only. Distributions typically occur in June
and December.
**Does not assume any compounding of reinvested distributions.
Table shows calendar year distributions and net asset
values; may differ from fiscal year annual reports.
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 ("FDIC").
These shares involve investment risks, including the possible loss of
the principal amount invested.
FINANCIAL STATEMENTS
Statement of Net Assets
June 30, 1998
<TABLE>
<CAPTION>
Face Market
Amount Description Value
</CAPTION>
<S> <C>
CORPORATE BONDS - 42.09%
$ 500,000 Albertson's Incorporated, Medium Term Notes,
6.18%, due March 22, 2000 $ 503,225
500,000 Albertson's Incorporated Notes,
6.375%, due June 1, 2000 504,850
500,000 Amoco Canada Petroleum Company Notes,
7.25%, due December 1, 2002 524,655
500,000 Baltimore Gas & Electric Company 1st &
Refunding Mortgage,
6.50%, due February 15, 2003 507,990
500,000 BellSouth Telecommunications Incorporated Notes,
6.25%, due May 15, 2003 505,470
500,000 BellSouth Telecommunications Incorporated Notes,
6.375%, due June 15, 2004 507,165
500,000 Carolina Power & Light Company 1st Mortgage,
5.00%, due September 15, 1998 499,105
500,000 Carolina Power & Light Company 1st Mortgage,
5.875%, due January 15, 2004 496,210
500,000 Consolidated Edison Company New York,
Incorporated Debentures,
6.625%, due February 1, 2002 508,190
500,000 Cooper Industries Inc., Medium Term Notes,
5.88%, due February 20, 2003 498,970
500,000 Delmarva Power & Light Company Medium Term Notes,
7.50%, due May 1, 1999 506,065
1,000,000 Dillard Department Stores Inc.,
6.875%, due June 1, 2005 1,036,660
500,000 duPont (E.I.) deNemours & Company Notes,
6.75%, due October 15, 2002 513,995
500,000 Duke Power Company 1st & Refunding Mortgage,
5.17%, due September 1, 1998 499,345
500,000 Duke Power Company 1st & Refunding Mortgage,
7.00%, due June 1, 2000 509,215
500,000 Duke Power Company 1st & Refunding Mortgage,
5.875%, due June 1, 2001 498,135
500,000 Emerson Electric Company Notes,
6.30%, due November 1, 2005 507,420
500,000 Engelhard Corporation Senior Note,
7.00%, due August 1, 2001 510,590
750,000 Florida Power & Light Company 1st Mortgage,
5.50%, due July 1, 1999 747,833
500,000 General Mills Incorporated Medium Term Notes,
7.50%, due June 5, 2000 514,430
500,000 General Mills Incorporated Medium Term Notes,
5.98%, due July 9, 2001 499,945
500,000 GTE California Incorporated Debentures, Series A,
5.625%, due February 1, 2001 495,565
500,000 GTE Southwest Incorporated Debentures,
6.00%, due January 15, 2006 494,515
500,000 GTE Southwest Incorporated Debentures,
6.00%, due February 15, 2008 494,075
500,000 Honeywell Inc.,
6.75%, due March 15, 2002 512,095
500,000 International Business Machines Corporation Notes,
6.375%, due June 15, 2000 504,680
500,000 International Business Machines Corporation Notes,
7.25%, due November 1, 2002 524,870
500,000 International Paper Company Medium Term Notes,
8.05%, due March 25, 1999 506,440
500,000 Kansas City Power & Light Company
Medium Term Notes,
6.50%, due January 2, 2001 505,770
1,000,000 May Department Stores Inc.,
6.875%, due November 1, 2005 1,047,840
250,000 McDonald's Corporation, Series C,
Medium Term Notes,
8.75%, due November 15, 2000 265,550
500,000 McDonald's Corporation, Medium Term Notes,
7.375%, due July 15, 2002 506,265
500,000 Minnesota Mining & Manufacturing Company
Medium Term Notes,
6.25%, due March 29, 1999 501,775
750,000 Monongahela Power Company 1st Mortgage,
5.625%, due April 1, 2000 744,922
500,000 Monongahela Power Company 1st Mortgage,
7.375%, due July 1, 2002 524,505
1,000,000 New York Telephone Company Notes,
5.875%, due September 1, 2003 993,670
500,000 Newell Company Medium Term Notes,
6.18%, due July 11, 2000 501,365
500,000 Northwest Natural Gas Company
Secured Medium Term Notes,
5.98%, due December 15, 2000 501,115
500,000 Pacific Bell Telephone Company Notes,
7.25%, due July 1, 2002 522,135
500,000 Pacific Bell Telephone Company Notes,
6.25%, due March 1, 2005 506,225
500,000 Pacific Gas & Electric Company 1st Mortgage,
6.25%, due March 1, 2004 504,305
500,000 PepsiCo, Incorporated Notes,
7.625%, due November 1, 1998 502,770
1,000,000 Public Service Company of Oklahoma Medium Term Notes,
6.02%, due March 1, 2001 1,003,160
500,000 Sara Lee Corporation, Series C, Medium Term Notes,
6.45%, due September 26, 2005 511,025
500,000 Southwestern Bell Capital Corporation Medium Term Notes,
7.80%, due November 5, 1998 503,050
500,000 Southwestern Bell Telephone Company Medium Term Notes,
6.125%, due March 12, 2001 503,370
500,000 Southwestern Bell Telephone Company Medium Term Notes,
5.77%, due October 14, 2003 495,685
500,000 Sysco Corporation Notes,
7.00%, due May 1, 2006 530,330
500,000 Texaco Capital Incorporated Medium Term Notes,
8.24%, due October 15, 2001 534,295
1,000,000 Texas Instruments Incorporated, Unsecured Note,
6.125%, due February 1, 2006 999,990
500,000 Tribune Company Medium Term Notes,
5.30%, due April 17, 2000 494,170
500,000 Tribune Company Medium Term Notes,
5.75%, due September 15, 2003 494,615
500,000 Union Electric Company 1st Mortgage,
6.75%, due October 15, 1999 504,340
500,000 Union Pacific Corporation Notes,
6.25%, due March 15, 1999 500,735
500,000 Union Pacific Corporation Notes,
7.875%, due February 15, 2002 523,455
500,000 Union Pacific Railroad Company Equipment Trust,
Series Cl., 7.01%, due June 1, 2004 528,950
500,000 Wal-Mart Stores Incorporated Notes,
6.125%, due October 1, 1999 501,720
500,000 Wal-Mart Stores Incorporated Notes,
5.85%, due June 1, 2000 499,410
500,000 Wisconsin Electric Power Company,
6.625%, due November 15, 2006 515,045
TOTAL CORPORATE BONDS (Cost $31,986,833) - 42.09% 32,703,260
U.S. GOVERNMENTAL AGENCIES - 9.20%
$ 37,702 Government National Mortgage Association,
9.00%, due July 15, 2001 38,757
47,519 Government National Mortgage Association,
8.00%, due February 20, 2002 48,332
88,005 Government National Mortgage Association,
8.50%, due February 20, 2002 90,462
31,586 Government National Mortgage Association,
8.00%, due January 15, 2004 32,441
116,690 Government National Mortgage Association,
9.50%, due April 15, 2005 123,070
147,100 Government National Mortgage Association,
9.75%, due May 15, 2005 155,142
70,235 Government National Mortgage Association,
9.00%, due October 20, 2005 73,662
103,574 Government National Mortgage Association,
7.50%, due February 15, 2006 106,468
48,391 Government National Mortgage Association,
7.50%, due March 15, 2006 49,743
104,546 Government National Mortgage Association,
8.00%, due June 20, 2006 107,311
141,823 Government National Mortgage Association,
8.50%, due July 15, 2006 147,672
154,618 Government National Mortgage Association,
8.00%, due August 15, 2006 159,908
54,181 Government National Mortgage Association,
8.00%, due August 15, 2006 56,035
209,702 Government National Mortgage Association,
7.50%, due August 20, 2006 214,512
128,426 Government National Mortgage Association,
7.50%, due September 15, 2006 132,014
73,634 Government National Mortgage Association,
7.50%, due April 15, 2007 75,895
147,616 Government National Mortgage Association,
7.50%, due March 20, 2009 151,934
381,178 Government National Mortgage Association,
6.00%, due May 15, 2009 380,961
301,568 Government National Mortgage Association,
7.00%, due May 15, 2009 309,635
481,114 Government National Mortgage Association,
6.00%, due April 15, 2011 478,838
515,969 Government National Mortgage Association,
7.00%, due August 20, 2011 525,793
424,321 Government National Mortgage Association,
6.50%, due October 15, 2011 430,367
387,111 Government National Mortgage Association,
7.00%, due October 20, 2011 394,319
453,674 Government National Mortgage Association,
6.50%, due February 15, 2012 459,286
476,452 Government National Mortgage Association,
7.00%, due April 20, 2012 485,028
475,100 Government National Mortgage Association,
6.50%, due September 20, 2012 478,601
465,856 Government National Mortgage Association,
6.50%, due October 20, 2012 468,418
491,500 Government National Mortgage Association,
6.00%, due February 20, 2013 485,691
494,167 Government National Mortgage Association,
6.00%, due March 20, 2013 488,326
TOTAL U.S. GOVERNMENTAL AGENCIES (Cost $7,015,779) - 9.20% 7,148,621
U.S. GOVERNMENT SECURITIES - 13.09%
$ 500,000 U.S. Treasury Notes,
7.125%, due October 15, 1998 502,735
1,500,000 U.S. Treasury Notes,
6.375%, due January 15, 1999 1,507,740
500,000 U.S. Treasury Notes,
5.875%, due March 31, 1999 501,485
1,000,000 U.S. Treasury Notes,
6.00%, due October 15, 1999 1,005,620
500,000 U.S. Treasury Notes,
5.50%, due March 31, 2000 499,845
1,500,000 U.S. Treasury Notes,
5.50%, due April 15, 2000 1,499,535
1,000,000 U.S. Treasury Notes,
7.50%, due November 15, 2001 1,059,220
1,500,000 U.S. Treasury Notes,
6.375%, due August 15, 2002 1,545,930
1,000,000 U.S. Treasury Notes,
6.250%, due February 15, 2003 1,029,060
1,000,000 U.S. Treasury Notes,
5.875%, due February 15, 2004 1,018,440
TOTAL U.S. government SECURITIES (Cost $10,051,979) - 13.09% 10,169,610
GOVERNMENT SPONSORED ENTERPRISES - 34.23%
500,000 Federal Farm Credit Bank Medium Term Notes,
6.70%, due October 11, 2006 526,095
250,000 Federal Home Loan Banks,
5.66%, due November 9, 1998 250,117
500,000 Federal Home Loan Banks,
6.31%, due March 29, 2001 507,735
500,000 Federal Home Loan Banks,
6.18%, due December 19, 2001 507,110
1,000,000 Federal Home Loan Mortgage Corporation,
6.75%, due May 30, 2006 1,060,310
1,000,000 Federal Home Loan Mortgage Corporation, Deb.,
6.13%, due August 19, 1999 1,004,220
1,000,000 Federal Home Loan Mortgage Corporation,
6.05%, due March 12, 2003 1,001,870
1,000,000 Federal National Mortgage Association,
Series SM-98-G, Deb.,
7.85%, due September 10, 1998 1,005,000
500,000 Federal National Mortgage Association, Deb.,
5.05%, due November 10, 1998 498,360
1,500,000 Federal National Mortgage Association,
Series H, Deb.,
7.05%, due December 10, 1998 1,510,305
1,000,000 Federal National Mortgage Association,
Series H, Deb.,
6.35%, due August 10, 1999 1,003,280
1,500,000 Federal National Mortgage Association, Deb.,
6.10%, due February 10, 2000 1,510,080
500,000 Federal National Mortgage Association,
5.90%, due November 20, 2000 501,875
1,000,000 Federal National Mortgage Association,
Series I, Deb., 8.25%, due December 18, 2000 1,057,190
1,250,000 Federal National Mortgage Association, Deb.,
7.50%, due February 11, 2002 1,320,700
1,000,000 Federal National Mortgage Association,
Series SM-E, Deb.,
7.55%, due April 22, 2002 1,061,410
500,000 Federal National Mortgage Association,
Series K., Deb.,
7.05%, due November 12, 2002 525,705
500,000 Federal National Mortgage Association, Deb.,
6.80%, due January 10, 2003 521,170
496,579 Federal National Mortgage Association,
6.50%, due November 1, 2004 500,403
500,000 Federal National Mortgage Association
Medium Term Notes,
5.40%, due March 12, 1999 499,455
500,000 Federal National Mortgage Association
Medium Term Notes,
6.36%, due August 16, 2000 507,265
500,000 Federal National Mortgage Association
Medium Term Notes,
5.72%, due March 8, 2001 499,610
1,000,000 Federal National Mortgage Association
Medium Term Notes,
6.45%, due April 23, 2001 1,020,160
500,000 Federal National Mortgage Association
Medium Term Notes,
6.625%, due May 21, 2001 512,110
500,000 Federal National Mortgage Association
Medium Term Notes,
6.41%, due February 6, 2002 511,560
500,000 Federal National Mortgage Association
Medium Term Notes,
6.09%, due September 30, 2002 507,030
500,000 Federal National Mortgage Association
Medium Term Notes,
6.15%, due January 27, 2003 497,420
1,000,000 Federal National Mortgage Association
Medium Term Notes,
6.36%, due December 27, 2004 1,003,280
500,000 Federal National Mortgage Association
Medium Term Notes,
6.10%, due January 26, 2005 497,345
1,000,000 Federal National Mortgage Association
Medium Term Notes,
6.82%, due August 23, 2005 1,058,280
500,000 Federal National Mortgage Association
Medium Term Notes,
5.875%, due February 14, 2006 502,110
1,500,000 Federal National Mortgage Association
Medium Term Notes,
6.41%, due March 8, 2006 1,549,920
500,000 Federal National Mortgage Association
Medium Term Notes,
6.96%, due April 2, 2007 537,580
500,000 Federal National Mortgage Association
Medium Term Notes,
6.70%, due June 19, 2007 528,830
500,000 Federal National Mortgage Association
Medium Term Notes,
6.38%, due February 20, 2008 496,330
TOTAL U.S. government SPONSORED ENTERPRISES (Cost $25,918,654) - 34.23% 26,601,220
REPURCHASE AGREEMENT (Cost $160,000) - 0.21%
$ 160,000 Northern Trust Co.,
5.55%, due July 1, 1998
(Collateralized by U.S. Treasury Notes,
5.75%, due September 30, 1999) $ 160,000
TOTAL INVESTMENTS (Cost $75,133,245) - 98.82% $ 76,782,711
Other assets less liabilities - 1.18% 921,562
TOTAL NET ASSETS - 100.00%
(equivalent to $11.21 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
6,934,300 shares outstanding) $ 77,704,273
</TALBE>
For federal income tax purposes, the identified cost of investments owned at
June 30, 1998 was $75,133,245.
Net unrealized appreciation for federal income tax purposes was $1,649,466,
which is comprised of unrealized
appreciation of $1,745,784 and unrealized depreciation of $96,318.
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 1998
ASSETS:
Investment securities, at market value
(identified cost $75,133,245) $ 76,782,711
Interest receivable 1,178,402
Total assets 77,961,113
LIABILITIES:
Disbursements in excess of demand deposit cash 256,840
Total liabilities 256,840
NET ASSETS $ 77,704,273
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 75,656,310
Accumulated undistributed income:
Net investment income 448,731
Net realized loss on investment transactions (50,234)
Net unrealized appreciation on investments 1,649,466
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 77,704,273
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 6,934,300
NET ASSET VALUE PER SHARE $ 11.21
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Operations
Year Ended June 30, 1998
INVESTMENT INCOME:
Income:
Interest $ 5,120,925
Expenses:
Management fees 675,457
Government fees 10,813
686,270
Net investment income 4,434,655
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions 20,956
Increase in net unrealized appreciation on investments 1,602,921
Net realized and unrealized gain on investments 1,623,877
Net increase in net assets resulting from operations $ 6,058,532
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
For the Years Ended June 30, 1998 and 1997
</TABLE>
<TABLE>
<CAPTION>
1998 1997
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 4,434,655 $ 4,542,432
Net realized gain from investment transactions 20,956 8,649
Increase in net unrealized appreciation
(depreciation) on investments 1,602,921 320,957
Net increase in net assets resulting from operations 6,058,532 4,872,038
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (4,434,655) (4,542,432)
DECREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 1,414,139 and 1,691,400 shares sold 15,769,806 18,498,442
Net asset value of 89,801 and 89,096 shares issued for
reinvestment of distributions 1,002,078 976,474
16,771,884 19,474,916
Cost of 1,737,715 and 2,049,491 shares redeemed (19,362,930) (22,446,473)
Net decrease in net assets from capital share transactions (2,591,046) (2,971,557)
Net decrease in net assets (967,169) (2,641,951)
NET ASSETS:
Beginning of year 78,671,442 81,313,393
End of year (including undistributed net investment income
of $448,731 in 1998 and 1997) $ 77,704,273 $ 78,671,442
*Distributions to shareholders:
Income dividends per share $ 0.62 $ 0.62
</TABLE>
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. The policies
are in conformity with generally accepted accounting principles.
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 formula-based techniques. Short-term obligations
are valued at amortized cost, which approximates market value.
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 Income Taxes - The Fund's policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of its taxable
income to its shareholders. Therefore, no federal income tax provision
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, 1998 (excluding
commercial paper and repurchase agreements), were as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 995,185 $ 8,412,759
Proceeds from sales 2,611,420 7,421,484
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 shareholder 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 the collateral is sufficient to protect the Fund in the event of
default by the seller.
5. SUBSEQUENT EVENT - Subsequent to the Fund's year-end, the Fund name
will change to UMB Scout Bond Fund, Inc.
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share
outstanding through the period
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.98 $ 10.93 $ 11.10 $ 10.75 $ 11.53
Income from investment operations:
Net investment income 0.62 0.62 0.62 0.63 0.62
Net realized and unrealized gain (loss) on securities 0.23 0.05 (0.16) 0.35 (0.74)
Total from Investment Operations 0.85 0.67 0.46 0.98 (0.12)
Distributions from:
Net investment income (0.62) (0.62) (0.62) (0.63) (0.62)
Net realized gain on investment transactions - - (0.01) -* (0.04)
Total Distributions (0.62) (0.62) (0.63) (0.63) (0.66)
Net asset value, end of year $ 11.21 $ 10.98 $ 10.93 $ 11.10 $ 10.75
Total Return 8% 6% 4% 10% (1%)
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 78 $ 79 $ 81 $ 77 $ 82
Ratio of expenses to average net assets 0.87% 0.87% 0.86% 0.86% 0.87%
Ratio of net investment income to average net assets 5.61% 5.69% 5.63% 5.91% 5.50%
Portfolio turnover rate 12% 19% 12% 2% 9%
</TABLE>
*Capital gain distribution of .003 not significant for per share table.
See accompanying Notes to Financial Statements.
INDEPENDENT ACCOUNTANTS' REPORT
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, 1998, and the related statement of operations, statements of changes
in net assets and the financial highlights for the periods indicated
thereon (periods presented prior to June 30, 1996 were audited by other
independent accountants whose reports thereon expressed unqualified
opinions). These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits 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, 1998, 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 audits provide 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, 1998, the
results of its operations, the changes in its net assets and the
financial highlights for the periods indicated in the first paragraph,
in conformity with generally accepted accounting principles.
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
July 24, 1998
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
Martin A. Cramer, Vice President & Secretary
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
Custodian
UMB Bank, n.a., Kansas City, Missouri
SCOUT FUNDS
P.O. Box 410498
Kansas City, MO 64141-0498
TOLL-FREE (800) 996-2862
www.umb.com
Underwriter & Distributor: Jones & Babson, Inc., Kansas City, Missouri
JB27B 8/98
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