UMB SCOUT FUNDS
BOND FUND
(UMBBX)
ANNUAL REPORT
JUNE 30, 1999
A no-load mutual fund with primary emphasis
on maximum current income consistent
with its quality and maturity standards.
TO THE SHAREHOLDERS
The past 12 months have been especially noteworthy for the
global economy and financial markets. Attention was fixed
last fall on the financial contagion spreading from
Southeast Asia to Russia and elsewhere. Interest rates in
the developing world were rising or local currencies were
collapsing. There was widespread fear of an economic
slowdown because of slower demand and a flood of industrial
capacity.
In the U.S., the Federal Reserve lowered interest rates
three times in a relatively short period and long-term
interest rates moved to less than 5%. All but the "bluest"
of blue chip stocks declined sharply.
For the time being, the concerns of late 1998 no longer are
on investors' minds. Most indicators show the world's
economies are regaining their footing and many are growing
strongly. Interest rates have increased again, but
apparently not enough to stop this growth. The U.S. is
enjoying the lowest unemployment in decades with very low
inflation - a scenario the textbooks say cannot happen.
Our economic environment has been called a "virtuous cycle,"
but some investors are wondering whether it will become a
"vicious cycle." We do not see such a change now, although
we continue to watch the economic indicators very closely.
There are few signs that the economy is entering a long-term
slowdown caused by economic excess. Some market watchers
point to the high valuation of U.S. stocks as one such
excess, but valuation alone usually is not enough to make
stock prices decline. We see no other catalyst at this point
that would cause a major stock price correction.
In this annual report, you will find more details about the
activity and holdings in the UMB Scout Bond Fund during the
period. I recently joined the UMB team, and I want to thank
each of you for your confidence in UMB Investment Advisors
and the UMB Scout Funds. We look forward to helping you
reach your financial goals.
Sincerely,
/s/William B. Greiner, CFA
William B. Greiner, CFA
Executive Vice President / Chief Investment Officer
UMB Investment Advisors
Shares of the UMB 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 invested.
TO THE SHAREHOLDERS
The UMB Scout Bond Fund closed the quarter ended June 30,
1999, at $10.95 per share with a total return (price change
and reinvested distributions) of -0.63% for the quarter and
3.13% for the fiscal year. The Fund's performance was better
than many comparable mutual funds, as shown by the Lipper
Intermediate Investment Grade Fund Index quarterly return of
- -1.02%. The Fund seeks to provide maximum current income
consistent with its quality and maturity standards by
investing in fixed-income obligations.
Interest rates continued their upward movement throughout
the quarter as a series of strong economic reports increased
inflation fears. Market participants became increasingly
convinced that the Federal Reserve would be forced to
restrict the availability of credit by increasing the
benchmark Fed Funds rate. As usually happens when this
opinion is prevalent, interest rates moved sharply higher in
order to "make room" for a rate hike.
The Consumer Price Index showed a surprise increase in mid-
May, based on the brisk economic activity of prior months,
and interest rates soared by 18 basis points (0.18
percentage point) in just one day. The 10-year U.S. Treasury
began the quarter at a yield of 5.23% and rose to 5.95% by
the quarter's end. On June 30, the Federal Reserve met
market predictions by increasing the Fed Funds rate to 5.00%
from 4.75%.
Relative values remained essentially stable among the
various bond market sectors throughout the quarter, but
liquidity was lacking in corporate bond markets. As
inflation fears pushed rates higher and the end of the
quarter loomed, market makers became increasingly reluctant
to position bonds in inventory. High-quality corporate bonds
continued to appear somewhat overpriced when compared to
values in the U.S. Agency sector.
As has been the case for several quarters, the Fund placed
more emphasis on Agency debt and replaced corporate bonds
with Agency issues whenever comparable yields were
available. The Fund's holdings of Government National
Mortgage Association (GNMA) issues again helped our returns
this quarter. GNMAs help improve returns when interest rates
are increasing in a volatile fashion.
We continue to avoid the higher-risk sectors of the
corporate market, such as financial companies and BBB-rated
companies. By replacing those sectors with greater exposure
to GNMA issues and callable Agency issues, we can capture
higher yields without exposing the Fund to additional credit
risk.
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.
For the six months ended June 30, 1999, shareholders
received an ordinary income dividend of $.30 per share and
no long-term capital gains.
Thank you for your confidence in the UMB Scout Bond Fund as
part of your investment portfolio. 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, 1999
CHART - COMPARATIVE RATES OF RETURN
as of June 30, 1999
2 1/2 Years 4 1/2 Years 10 1/2 Years
UMB Scout Bond Fund 5.42% 6.85% 7.10%
Lipper Intermed. Inv.
Grade Fund Index* 5.83% 7.59% 7.65%
Lehman Bros.
Govt./Corp. Intermed.* 6.22% 7.69% 8.03%
UMB Scout Bond Fund's average annual compound returns for 1-, 5- and
10-year periods ended June 30, 1999, are 3.13%, 6.21% and 6.78%,
respectively.
Performance data contained in this report are for past
periods only. Past performance is not indicative of future
results. Investment return and share value will fluctuate,
and redemption value may be more or less than original cost.
*Unmanaged index of stocks, bonds or mutual funds (there are
no direct investments or fees in these indices).
CHART - FUND DIVERSIFICATION
CHART -TAXABLE YIELD CURVES
as of June 30, 1999
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 - 20.17
12/31/95 11.26 0.63 0.01 21.60
12/31/96 11.02 0.62 - 21.99
12/31/97 11.17 0.63 - 22.76
12/31/98 11.33 0.62 - 23.54
06/30/99* 10.95 0.30 - 23.46
*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.
FINANCIAL STATEMENTS
June 30, 1999
STATEMENT OF NET ASSETS
FACE MARKET
AMOUNT DESCRIPTION VALUE
CORPORATE BONDS - 40.81%
$ 500,000 Alabama Power Company, Sr. Note,
5.49%, due November 1, 2005 $ 466,385
1,000,000 Alabama Power Company, Sr. Note,
6.25%, due September 30, 2010 929,447
500,000 Atlantic Richfield Company, Note,
5.55%, due April 15, 2003 489,200
500,000 Albertson's Incorporated, Notes,
6.375%, due June 1, 2000 502,090
500,000 Amoco Canada Petroleum Co., Notes,
7.25%, due December 1, 2002 504,305
500,000 Baltimore Gas & Electric Company, 1st
& Refunding Mortgage, 6.50%, due
February 15, 2003 503,040
500,000 BellSouth Telecommunications Incorporated,
Notes, 6.25%, due May 15, 2003 497,015
500,000 BellSouth Telecommunications Incorporated,
Notes, 6.375%, due June 15, 2004 497,685
500,000 Carolina Power & Light Company, 1st Mortgage,
5.875%, due January 15, 2004 490,465
500,000 Consolidated Edison Company New York Incorporated,
Debentures, 6.625%, due February 1, 2002 504,925
500,000 Cooper Industries Incorporated, Medium Term
Notes, 5.88%, due February 20, 2003 487,240
1,000,000 Dillard Department Stores Incorporated, Notes,
6.875%, due June 1, 2005 966,710
500,000 Duke Power Company, 1st & Refunding Mortgage,
7.00%, due June 1, 2000 504,995
500,000 Duke Power Company, 1st & Refunding Mortgage,
5.875%, due June 1, 2001 497,985
500,000 duPont (E.I.) de Nemours & Company, Notes,
6.75%, due October 15, 2002 509,115
500,000 Emerson Electric Company, Notes,
6.30%, due November 1, 2005 494,420
500,000 Englehard Corporation, Senior Notes,
7.00%, due August 1, 2001 506,345
500,000 General Mills Incorporated, Medium Term Notes,
5.98%, due July 9, 2001 495,575
500,000 General Mills Incorporated, Medium Term Notes,
7.50%, due June 5, 2000 507,245
500,000 GTE California Incorporated, Debentures,
Series A, 5.625%, due February 1, 2001 496,875
500,000 GTE Southwest Incorporated, Debentures,
6.00%, due January 15, 2006 484,365
500,000 GTE South Incorporated, Debentures,
6.00%, due February 15, 2008 475,450
500,000 Honeywell Incorporated, Bond,
6.75%, due March 15, 2002 505,525
500,000 International Business Machines Corporation, Notes,
7.25%, due November 1, 2002 515,770
500,000 International Business Machines Corporation,
Notes, 6.375%, due June 15, 2000 502,900
500,000 Kansas City Power & Light Company, Medium
Term Notes, 6.50%, due January 2, 2001 501,605
1,000,000 May Department Stores Incorporated, 6.875%,
due November 1, 2005 1,013,660
250,000 McDonald's Corporation, Series C, Medium
Term Notes, 8.75%, due November 15, 2000 259,345
500,000 McDonald's Corporation, Medium Term Notes,
7.375%, due July 15, 2002 500,400
750,000 Monongahela Power Company, 1st Mortgage,
5.625%, due April 1, 2000 748,830
500,000 Monongahela Power Company, 1st Mortgage,
7.375%, due July 1, 2002 511,450
1,000,000 New York Telephone Company, Notes,
5.875%, due September 1, 2003 979,430
500,000 Newell Company, Medium Term Notes,
6.18%, due July 11, 2000 500,460
500,000 Northwest Natural Gas Company, Secured Medium
Term Notes, 5.98%, due December 15, 2000 498,540
500,000 Pacific Bell Telephone Company, Notes,
7.25%, due July 1, 2002 513,635
500,000 Pacificorp, Notes, 5.65%, due November 1, 2006 467,365
500,000 Pacific Gas & Electric Company, 1st Mortgage,
6.25%, due March 1, 2004 497,485
1,000,000 Public Service Company of Oklahoma, Medium
Term Notes, 6.02%, due March 1, 2001 995,680
500,000 Sara Lee Corporation, Series C, Medium
Term Notes, 6.45%, due September 26, 2005 489,205
500,000 Southwestern Bell Telephone Company, Medium
Term Notes, 6.125%, due March 12, 2001 500,155
500,000 Southwestern Bell Telephone Company, Medium
Term Notes, 5.77%, due October 14, 2003 485,440
500,000 Stanley Works, Medium Term Notes,
5.75%, due March 1, 2004 482,310
CORPORATE BONDS (Continued)
$ 500,000 Sysco Corporation, Notes, 7.00%,
due May 1, 2006 $ 505,700
500,000 Texaco Capital Incorporated, Medium
Term Notes, 8.24%, due October 15, 2001 517,890
250,000 Texaco Capital Incorporated, Medium
Term Notes, 5.70%, due December 1, 2008 230,978
1,000,000 Texas Instruments Incorporated, Unsecured Note,
6.125%, due February 1, 2006 940,170
500,000 Tribune Company, Medium Term Notes,
5.30%, due April 17, 2000 498,165
500,000 Tribune Company, Medium Term Notes,
5.75%, due September 15, 2003 482,890
500,000 Union Electric Company, 1st Mortgage,
6.75%, due October 15, 1999 501,930
500,000 Union Pacific Corporation, Notes,
7.875%, due February 15, 2002 515,475
500,000 Union Pacific Railroad Company Equipment
Trust, Series Cl., 7.01%, due June 1, 2004 502,790
500,000 Wal-Mart Stores Incorporated, Notes,
5.85%, due June 1, 2000 500,840
500,000 Wisconsin Electric Power Company,
6.625%, due November 15, 2006 498,515
550,000 Xerox Corporation, Notes,
5.25%, due December 15, 2003 522,797
TOTAL CORPORATE BONDS (Cost $30,566,747) - 40.81% 29,498,207
U.S. GOVERNMENTAL AGENCIES - 12.32%
23,899 Government National Mortgage Association,
9.00%, due July 15, 2001 24,513
22,965 Government National Mortgage Association,
8.00%, due February 20, 2002 23,267
52,892 Government National Mortgage Association,
8.50%, due February 20, 2002 54,022
16,760 Government National Mortgage Association,
8.00%, due January 15, 2004 17,154
91,874 Government National Mortgage Association,
9.50%, due April 15, 2005 97,269
121,530 Government National Mortgage Association,
9.75%, due May 15, 2005 128,667
47,057 Government National Mortgage Association,
9.00%, due October 20, 2005 49,236
71,107 Government National Mortgage Association,
7.50%, due February 15, 2006 72,498
42,376 Government National Mortgage Association,
7.50%, due March 15, 2006 43,205
70,787 Government National Mortgage Association,
8.00%, due June 20, 2006 72,246
79,729 Government National Mortgage Association,
8.50%, due July 15, 2006 82,500
42,068 Government National Mortgage Association,
8.00%, due August 15, 2006 43,318
137,109 Government National Mortgage Association,
8.00%, due August 15, 2006 141,182
146,102 Government National Mortgage Association,
7.50%, due August 20, 2006 148,114
97,452 Government National Mortgage Association,
7.50%, due September 15, 2006 99,358
56,149 Government National Mortgage Association,
7.50%, due April 15, 2007 57,368
114,886 Government National Mortgage Association,
7.50%, due March 20, 2009 116,744
276,995 Government National Mortgage Association,
6.00%, due May 15, 2009 270,363
226,711 Government National Mortgage Association,
7.00%, due May 15, 2009 228,717
414,830 Government National Mortgage Association,
6.00%, due April 15, 2011 402,953
374,948 Government National Mortgage Association,
7.00%, due August 20, 2011 377,055
351,821 Government National Mortgage Association,
6.50%, due October 15, 2011 349,105
289,422 Government National Mortgage Association,
7.00%, due October 20, 2011 291,016
430,058 Government National Mortgage Association,
6.50%, due February 15, 2012 426,201
363,095 Government National Mortgage Association,
7.00%, due April 20, 2012 364,947
U.S. GOVERNMENTAL AGENCIES (Continued)
$ 440,808 Government National Mortgage Association,
6.50%, due September 20, 2012 $ 435,200
348,085 Government National Mortgage Association,
6.50%, due October 20, 2012 343,549
454,896 Government National Mortgage Association,
6.00%, due February 20, 2013 439,739
441,060 Government National Mortgage Association,
6.00%, due March 20, 2013 426,364
481,501 Government National Mortgage Association,
6.00%, due August 15, 2013 466,810
458,801 Government National Mortgage Association,
6.00%, due August 20, 2013 443,514
483,750 Government National Mortgage Association,
6.00%, due December 20, 2013 467,177
489,326 Government National Mortgage Association,
6.00%, due January 20, 2014 472,562
490,084 Government National Mortgage Association,
6.00%, due February 15, 2014 475,132
490,349 Government National Mortgage Association,
6.00%, due February 20, 2014 473,549
498,144 Government National Mortgage Association,
6.00%, due May 15, 2014 482,946
TOTAL U.S. GOVERNMENTAL AGENCIES (Cost $8,994,880) - 12.32% 8,907,560
U.S. GOVERNMENT SECURITIES - 6.36%
1,000,000 U.S. Treasury Notes, 7.50%,
due November 15, 2001 1,041,720
1,500,000 U.S. Treasury Notes, 6.375%,
due August 15, 2002 1,530,240
1,000,000 U.S. Treasury Notes, 6.25%,
due February 15, 2003 1,017,970
1,000,000 U.S. Treasury Notes, 5.875%,
due February 15, 2004 1,006,410
TOTAL U.S. GOVERNMENT SECURITIES (Cost $4,549,746) - 6.36% 4,596,340
GOVERNMENT SPONSORED ENTERPRISES - 39.53%
500,000 Federal Farm Credit Bank Medium Term Note,
6.70%, due October 11, 2006 506,250
500,000 Federal Home Loan Banks,
6.31%, due March 29, 2001 504,455
500,000 Federal Home Loan Banks,
6.18%, due December 19, 2001 504,765
500,000 Federal Home Loan Banks,
5.125%, due February 26, 2002 492,185
500,000 Federal Home Loan Banks,
5.65%, due March 3, 2003 492,185
1,000,000 Federal Home Loan Banks,
5.28%, due December 10, 2003 962,810
1,000,000 Federal Home Loan Banks,
6.525%, due June 17, 2009 992,340
1,000,000 Federal Home Loan Mortgage Corporation,
6.13%, due August 19, 1999 1,000,780
1,000,000 Federal Home Loan Mortgage Corporation,
6.05%, due March 12, 2003 988,750
1,000,000 Federal Home Loan Mortgage Corporation,
6.75%, due May 30, 2006 1,014,370
1,500,000 Federal National Mortgage Association,
Deb., 6.10%, due February 10, 2000 1,505,160
500,000 Federal National Mortgage Association,
5.90%, due November 20, 2000 500,860
1,000,000 Federal National Mortgage Association,
Series I, Deb., 8.25%, due December 18, 2000 1,034,370
1,250,000 Federal National Mortgage Association,
Deb., 7.50%, due February 11, 2002 1,301,763
1,000,000 Federal National Mortgage Association, Series
SM-E, Deb., 7.55%, due April 22, 2002 1,045,620
500,000 Federal National Mortgage Association, Series
K, Deb., 7.05%, due November 12, 2002 515,545
500,000 Federal National Mortgage Association, Deb.,
6.80%, due January 10, 2003 512,655
430,614 Federal National Mortgage Association,
6.50%, due November 1, 2004 429,055
GOVERNMENT SPONSORED ENTERPRISES (Continued)
$ 500,000 Federal National Mortgage Association Medium
Term Notes, 6.36%, due August 16, 2000 $ 504,765
500,000 Federal National Mortgage Association Medium
Term Notes, 5.72%, due March 8, 2001 499,530
1,000,000 Federal National Mortgage Association Medium
Term Notes, 6.45%, due April 23, 2001 1,011,870
500,000 Federal National Mortgage Association Medium
Term Notes, 6.625%, due May 21, 2001 507,655
500,000 Federal National Mortgage Association Medium
Term Notes, 6.41%, due February 6, 2002 507,500
500,000 Federal National Mortgage Association Medium
Term Notes, 6.09%, due September 30, 2002 501,015
500,000 Federal National Mortgage Association Medium
Term Notes, 5.50%, due February 2, 2004 483,830
1,000,000 Federal National Mortgage Association Medium
Term Notes, 6.36%, due December 27, 2004 985,620
500,000 Federal National Mortgage Association Medium
Term Notes, 6.10%, due January 26, 2005 488,280
1,000,000 Federal National Mortgage Association Medium
Term Notes, 6.82%, due August 23, 2005 1,025,000
500,000 Federal National Mortgage Association Medium
Term Notes, 5.875%, due February 14, 2006 485,080
1,500,000 Federal National Mortgage Association Medium
Term Notes, 6.41%, due March 8, 2006 1,495,545
500,000 Federal National Mortgage Association Medium
Term Notes, 6.96%, due April 2, 2007 512,265
500,000 Federal National Mortgage Association Medium
Term Notes, 6.70%, due June 19, 2007 504,845
500,000 Federal National Mortgage Association Medium
Term Notes, 6.38%, due February 20, 2008 481,250
2,000,000 Federal National Mortgage Association Medium
Term Notes, 6.00%, due September 29, 2008 1,879,680
1,000,000 Federal National Mortgage Association Medium
Term Notes, 6.01%, due November 13, 2008 939,530
1,000,000 Federal National Mortgage Association Medium
Term Notes, 7.15%, due June 11, 2009 979,220
500,000 Federal National Mortgage Association Medium
Term Notes, 6.11%, due December 4, 2008 474,293
TOTAL GOVERNMENT SPONSORED ENTERPRISES
(Cost $27,621,566) - 39.53% 28,570,691
REPURCHASE AGREEMENT (Cost $295,000) - 0.41%
$ 295,000 Northern Trust Co., 4.79%, due July 1, 1999
(Collateralized by U.S. Treasury Notes,
7.125%, due September 30, 1999) $ 295,000
TOTAL INVESTMENTS (Cost $72,027,939) - 99.43% 71,867,798
Other assets less liabilities - 0.57% 412,177
TOTAL NET ASSETS - 100.00%
(equivalent to $10.95 per share; 10,000,000 shares
of $1.00 par value capital shares authorized;
6,598,978 shares outstanding) $ 72,279,975
For federal income tax purposes, the identified cost of investments owned at
June 30, 1999 was $72,027,939.
Net unrealized depreciation for federal income tax purposes was $160,142,
which is comprised of unrealized appreciation of $731,057 and unrealized
depreciation of $891,199.
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
June 30, 1999
STATEMENT OF ASSETS AND LIABILITIES
ASSETS:
Investment securities, at market value (identified
cost $72,027,939) $ 71,867,798
Interest receivable 1,006,124
Total assets 72,873,922
LIABILITIES:
Disbursements in excess of demand deposit cash 593,947
Total liabilities 593,947
NET ASSETS $ 72,279,975
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 71,984,937
Accumulated undistributed income:
Net investment income 448,731
Net realized gain on investment transactions 6,448
Net unrealized depreciation on investments (160,141)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 72,279,975
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 6,598,978
NET ASSET VALUE PER SHARE $ 10.95
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
YEAR ENDED June 30, 1999
STATEMENT OF OPERATIONS
INVESTMENT INCOME:
Income:
Interest $ 4,907,914
Expenses:
Management fees 660,955
Government fees 8,603
669,558
Net investment income 4,238,356
REALIZED and unrealized gain (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions 56,682
Decrease in net unrealized appreciation on investments (1,809,607)
Net realized and unrealized loss on investments (1,752,925 )
Net increase in net assets resulting from operations $ 2,485,431
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 4,238,356 $ 4,434,655
Net realized gain from investment
transactions 56,682 20,956
Increase (decrease) in net unrealized
appreciation on investments (1,809,607) 1,602,921
Net increase in net assets resulting
from operations 2,485,431 6,058,532
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (4,238,356) (4,434,655)
DECREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 1,622,279 and 1,414,139
shares sold 18,682,363 15,769,806
Net asset value of 94,852 and 89,801 shares
issued for reinvestment of distributions 1,062,771 1,002,078
19,745,134 16,771,884
Cost of 2,092,454 and 1,737,715 shares
redeemed (23,416,507) (19,362,930)
Net decrease in net assets from
capital share transactions (3,671,373) (2,591,046)
Net decrease in net assets (5,424,298) (967,169)
NET ASSETS:
Beginning of year 77,704,273 78,671,442
End of year (including undistributed net
investment income of $448,731 in 1999
and 1998) $72,279,975 $77,704,273
*Distributions to shareholders:
Income dividends per share $ 0.62 $ 0.62
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, 1999
(excluding commercial paper and repurchase agreements), were
as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 4,785,408 $ 11,974,904
Proceeds from sales 6,264,385 8,319,992
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.
<TABLE>
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share
outstanding throughout the period.
<CAPTION>
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.21 $ 10.98 $ 10.93 $ 11.10 $ 10.75
Income from investment operations:
Net investment income 0.62 0.62 0.62 0.62 0.63
Net realized and unrealized
gain (loss) on securities (0.26) 0.23 0.05 (0.16) 0.35
Total from investment operations 0.36 0.85 0.67 0.46 0.98
Distributions from:
Net investment income (0.62) (0.62) (0.62) (0.62) (0.63)
Net realized gain on investment
transactions - - - (0.01) -*
Total distributions (0.62) (0.62) (0.62) (0.63) (0.63)
Net asset value, end of year $ 10.95 $ 11.21 $ 10.98 $ 10.93 $ 11.10
Total return 3% 8% 6% 4% 10%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 72 $ 78 $ 79 $ 81 $ 77
Ratio of expenses to average net
assets 0.87% 0.87% 0.86% 0.86% 0.86%
Ratio of net investment income to
average net assets 5.48% 5.61% 5.69% 5.63% 5.91%
Portfolio turnover rate 23% 12% 19% 12% 2%
</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 UMB Scout Bond
Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities of UMB Scout Bond Fund, Inc., including the
statement of net assets, as of June 30, 1999, 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, 1999, 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 UMB Scout Bond Fund,
Inc., as of June 30, 1999, 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, 1999
This report has been prepared for the information of the
Shareholders of UMB 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 UMB Scout Funds are offered
only by the Prospectus, a copy of which may be obtained from
Jones & Babson, Inc.
UMB SCOUT FUNDS
100% No-Load Mutual Funds
Stock Fund
Stock Select Fund
Regional Fund
WorldWide Fund
WorldWide Select Fund
Capital Preservation Fund
Balanced Fund
Bond Fund
Kansas Tax-Exempt Bond Fund*
Money Market Fund
Tax-Free Money Market Fund
*Available in Kansas and Missouri only.
MANAGER AND INVESTMENT COUNSEL
UMB Bank, n.a., Kansas City, Missouri
AUDITORS
Baird, Kurtz & Dobson, Kansas City, Missouri
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
Philadelphia, Pennsylvania
CUSTODIAN
UMB Bank, n.a., Kansas City, Missouri
UNDERWRITER, DISTRIBUTOR
AND TRANSFER AGENT
Jones & Babson, Inc.
Kansas City, Missouri
UMB Scout Funds
P.O. Box 219757
Kansas City, MO 64121-9757
TOLL FREE 800-996-2862
www.umb.com
"UMB" and "Scout" are registered service marks of UMB
Financial Corporation.
UMB Financial Corporation also claims service mark rights to
the Scout design.
JB27B(8/98) 509763
