UMB Scout Funds
BOND Fund
(UMBBX)
Annual Report June 30, 2000
A no-load mutual fund with primary emphasis
on maximum current income, consistent
with its quality and maturity standards.
TO THE SHAREHOLDERS
In the past year, the financial markets continued to capture the nation's
fancy. The major drivers regarding financial asset prices over the last 12
months have been earnings and interest rates, as is typically the case.
However, last fall we witnessed a temporary detour from the "norm" as we
saw what turned out to be a speculative "bubble" being created when
investors purchased anything labeled ".com." While that bubble has not
burst, it is fair to say that much of the speculative "froth" has since
been eliminated from asset valuation levels.
In an effort to get a handle on the economy, Alan Greenspan conducted a
series of six interest rate increases designed to slow the economic
environment and ease any upward pressure on inflation rates. We are
beginning to see signs that the growth rate in the economy is decreasing.
For the time being, it appears that Mr. Greenspan's efforts were successful.
But what about the future? Will the economy continue to slow? And if it
does slow, could we slip into a recession? These are very significant
questions on many investors' minds. While we do not know what the future
holds, history would suggest that the economy is going to slow during the
remainder of 2000. Keep in mind that historically, the Federal Reserve,
currently headed by Greenspan, has had difficulty "fine tuning" the
economy. It has been shown that once the economy starts to slow, keeping it
out of a recessionary environment can be difficult. In our minds, recession
poses a major potential risk which investors may have to wrestle with
during the next 12 months.
Longer term, we continue to look at the investment landscape in a positive
sense. Inflation is low, and the economy is growing nicely. As long as
these two trends are at work, we believe that financial assets will
generate satisfactory returns.
In closing, we at UMB Investment Advisors would like to thank you, our
shareholders, for your continued support of the UMB Scout Funds. We fully
understand and appreciate the trust you have placed in our hands. We will
work hard to maintain that trust.
Respectfully,
/s/William B. Greiner
William B. Greiner
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") or any
other government agency. 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, 2000 at $10.71
per share with a total return (price change and reinvested distributions)
of 1.49% for the quarter and 3.54% 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 1.30%.
The Fund seeks to provide maximum current income consistent with its
quality and maturity standards by investing in fixed-income obligations.
June 30 marked the end of an incredibly volatile fiscal year in the bond
markets during which the long-running "Goldilocks Economy" began to show
signs of inflationary pressure. For nearly three years, the U.S. had
enjoyed the optimal balance of brisk economic growth with little or no sign
of inflation. But the idyllic scenario couldn't go on forever, so in June
of 1999 the Federal Open Market Committee (FOMC) began to increase interest
rates to diminish the likelihood of runaway inflation. Fed Funds were
raised to 6.50% in a series of "tightenings" by the FOMC. This situation
was inevitable, in the opinion of some, and the Fund was properly
positioned to take advantage of the rise in interest rates.
We increased our exposure to Treasury issues in the last half of the fiscal
year, ultimately boosting this sector to 27% of portfolio assets (a fairly
dramatic shift from approximately 5% at year-end 1999). We reduced our
exposure to Agency and Corporate issues accordingly, with our primary focus
on the retail and electric utility sectors. This strategic move proved
timely, as the Treasury sector out-performed most other sectors throughout
the first half of 2000. We feel that this sector allocation will continue
to better serve investors during the possible turbulence ahead. We have
also continued to hold roughly 10% of the assets in GNMA mortgage-backed
issues. These holdings served the portfolio well during the long rise in
interest rates.
The past 12 months were marked by opportunities as well as surprises.
Specifically, there were two major events that caught the market by
surprise. A Federal budget surplus allowed the U.S. Treasury to begin
reducing the outstanding supply of long Treasury issues, causing the
Treasury yield curve to "invert," with 2-year issues trading above 10- and
30-year issues. We also endured a major shakeout in the Agency sector, as
Fannie Mae and Freddie Mac came under fire from Congressional Republicans
for allegedly deviating from their original charters as Government
Sponsored Entities (GSEs). These two events have dramatically increased the
difficulty of predicting the long-range outlook for the fixed-income markets.
The UMB Scout Bond Fund has been structured to neutralize the effect of
changes to the "shape" of the yield curve. Changes in the severity of the
Treasury inversion should have little effect on returns, relative to our
benchmark, the Lehman Intermediate Gov/Corp Index.
Some believe that the political assault on the GSEs is suspect, given that
2000 is an election year. In any case, it is unlikely that we will have a
decision on the outcome of the reform debate before mid-2001. Given the
likelihood that this sector will have a "cloud" hanging over it for at
least the next year, we will likely reduce our holdings of Agencies in
order to add to Treasury positions.
We also foresee a gradual slowing in the U.S. economy, as the FOMC
tightening cycle nears its end. This could lead to another significant drop
in interest rates. Accordingly, we will look for opportunities to swap
cyclical Corporate and Mortgage issues for less economically sensitive
issues. This strategy should help bolster returns in an environment of
falling interest rates.
We continue to believe that the Fund is an appropriate choice for investors
seeking a relatively stable fixed-income return, while avoiding the
volatility associated with severe interest rate speculation or aggressive
exposure to credit risk.
Thank you for your continued support of the UMB Scout Bond Fund. Your
questions and comments are appreciated.
Sincerely,
/s/George W. Root
George W. Root
UMB Investment Advisors
CHART - HYPOTHETICAL GROWTH OF $10,000
UMB Scout Bond Fund (UMBBX)
as of June 30, 2000
Chart - COMPARATIVE RATES OF RETURN
UMB Scout Bond Fund (UMBBX)
as of June 30, 2000
3 Years 5 Years 10 Years
UMB Scout Bond Fund 4.85% 5.01% 6.32%
Lipper Intermed. Inv.
Grade Fund Index* 5.25% 5.68% 7.17%
Lehman Brothers
Govt./Corp. Intermed.* 5.63% 5.82% 7.28%
UMB Scout Bond Fund's average annual compound return for the
one-year period ended June 30, 2000 was 3.54%.
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
UMB Scout Bond Fund (UMBBX)
Chart - taxable yield curves
UMB Scout Bond Fund (UMBBX)
as of June 30, 2000
Chart - HISTORICAL PER SHARE RECORD
UMB Scout Bond Fund (UMBBX)
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
12/31/99 10.74 0.61 - 23.56
06/30/00* 10.71 0.31 - 23.86
*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, 2000
Statement of Net Assets
FACE Market
AMOUNT DESCRIPTION Value
CORPORATE BONDS - 31.6%
$ 500,000 AT&T Corp., 5.625%, due March 15, 2004 $ 469,900
500,000 Alabama Power Co., 5.49%, due November 1, 2005 454,820
1,000,000 Alabama Power Co., 6.25%, due September 30, 2010 898,190
500,000 Amoco Canada Petroleum Co.,
7.25%, due December 1, 2002 502,125
500,000 Atlantic Richfield Co., 5.55%, due April 15, 2003 482,040
500,000 Baltimore Gas & Electric Co., 6.5%,
due February 15, 2003 490,275
500,000 BellSouth Telecommunications, 6.25%, due May 15, 2003 486,305
500,000 BellSouth Telecommunications, 6.375%, due June 15, 2004 483,390
500,000 Consolidated Edison Co. New York, Inc.,
6.625%, due February 1, 2002 494,410
500,000 Cooper Industries, Inc., 5.88%, due February 20, 2003 484,815
500,000 Du Pont, (E.I.), De Nemours & Co.,
6.75%, due October 15, 2002 496,630
500,000 Duke Power Co., 5.875%, due June 1, 2001 494,155
500,000 Emerson Electric Co., 6.3%, due November 1, 2005 479,040
500,000 Engelhard Corp., 7%, due August 1, 2001 497,855
500,000 GTE California, Inc., 5.625%, due February 1, 2001 495,525
500,000 GTE Corp., 6%, due February 15, 2008 450,700
500,000 GTE South, Inc., 6%, due January 15, 2006 464,725
500,000 General Mills, Inc., 5.98%, due July 9, 2001 494,125
500,000 Honeywell, Inc., 6.75%, due March 15, 2002 495,595
500,000 International Business Machines Corp.,
7.25%, due November 1, 2002 503,095
500,000 Kansas City Power & Light, 6.5%, due January 2, 2001 498,235
500,000 Monongahela Power Co., 7.375%, due July 1, 2002 499,605
1,000,000 New York Telephone Co., 5.875%, due September 1, 2003 956,140
500,000 Northwest Natural Gas Company,
5.98%, due December 15, 2000 497,490
500,000 Oneok, Inc., 7.75%, due August 15, 2006 499,410
500,000 Pacific Bell Telephone Co., 7.25%, due July 1, 2002 499,915
500,000 Pacific Gas & Electric Company, 6.25%, due March 1, 2004 480,465
500,000 Pacificorp, 5.65%, due November 1, 2006 442,280
500,000 Sara Lee Corp., 6.45%, due September 26, 2005 485,865
500,000 Southwestern Bell Telephone Co.,
6.125%, due March 12, 2001 496,765
500,000 Southwestern Bell Telephone Co.,
5.77%, due October 14, 2003 475,815
500,000 Stanley Works, 5.75%, due March 1, 2004 475,560
500,000 Sysco Corporation, 7%, due May 1, 2006 485,775
500,000 Texaco Capital, Inc., 8.24%, due October 15, 2001 508,595
250,000 Texaco Capital, Inc., 5.7%, due December 1, 2008 221,943
1,000,000 Texas Instruments, Inc., 6.125%, due February 1, 2006 916,510
500,000 Tribune Company, 5.75%, due September 15, 2003 478,475
500,000 Union Pacific Railroad Co., 7.01%, due June 1, 2004 485,230
500,000 Wisconsin Electric Power Co.,
6.625%, due November 15, 2006 474,240
550,000 Xerox Corp., 5.25%, due December 15, 2003 506,781
TOTAL CORPORATE BONDS (Cost $21,130,717) - 31.6% 20,502,809
U.S. Governmental Agencies - 29.5%
$ 500,000 Federal Farm Credit Banks, 6.7%, due October 11, 2006 488,830
500,000 Federal Home Loan Bank, 5.125%, due February 26, 2002 485,860
500,000 Federal Home Loan Bank, 5.65%, due March 3, 2003 483,045
500,000 Federal Home Loan Bank, 6.18%, due December 19, 2001 494,455
1,000,000 Federal Home Loan Bank, 6.525%, due June 17, 2009 954,060
1,000,000 Federal Home Loan Mortgage Corp.,
6.05%, due March 12, 2003 967,030
1,000,000 Federal Home Loan Mortgage Corp.,
6.75%, due May 30, 2006 981,560
1,000,000 Federal Home Loan Mortgage Corp.,
5.75%, due July 15, 2003 965,780
500,000 Federal National Mortgage Association,
5.875%, due February 14, 2006 471,720
2,000,000 Federal National Mortgage Association,
6%, due September 29, 2008 1,823,440
1,000,000 Federal National Mortgage Association,
6.01%, due November 13, 2008 910,940
500,000 Federal National Mortgage Association,
6.09%, due September 30, 2002 490,155
500,000 Federal National Mortgage Association,
6.1%, due January 26, 2005 477,580
500,000 Federal National Mortgage Association,
6.11%, due December 4, 2008 457,580
1,000,000 Federal National Mortgage Association,
6.36%, due December 27, 2004 963,440
500,000 Federal National Mortgage Association,
6.41%, due February 6, 2002 495,625
1,500,000 Federal National Mortgage Association,
6.41%, due March 8, 2006 1,450,545
500,000 Federal National Mortgage Association,
6.625%, due May 21, 2001 498,360
500,000 Federal National Mortgage Association,
6.7%, due June 19, 2007 487,185
500,000 Federal National Mortgage Association,
6.8%, due January 10, 2003 497,110
1,000,000 Federal National Mortgage Association,
6.82%, due August 23, 2005 988,750
500,000 Federal National Mortgage Association,
6.96%, due April 2, 2007 494,610
500,000 Federal National Mortgage Association,
7.05%, due November 12, 2002 500,155
1,000,000 Federal National Mortgage Association,
7.55%, due April 22, 2002 1,009,220
354,228 Federal National Mortgage Association,
6.5%, due November 1, 2004 345,245
500,000 Federal National Mortgage Association,
5.5%, due February 2, 2004 475,000
500,000 Small Business Administration,
7.46%, due March 1, 2010 500,000
TOTAL U.S. GOVERNMENTAL AGENCIES (Cost $19,758,487) - 29.5% 19,157,280
U.S. governmental Securities - 27.2%
1,000,000 U.S. Treasury Note, 5.875%, due November 15, 2005 982,810
1,000,000 U.S. Treasury Note, 6%, due August 15, 2004 990,620
1,250,000 U.S. Treasury Note, 6%, due August 15, 2009 1,240,038
2,000,000 U.S. Treasury Note, 6.25%, due February 15, 2003 1,992,820
2,250,000 U.S. Treasury Note, 6.25%, due February 15, 2007 2,251,755
5,000,000 U.S. Treasury Note, 6.375%, due August 15, 2002 4,995,300
2,500,000 U.S. Treasury Note, 6.5%, due February 28, 2002 2,501,550
2,250,000 U.S. Treasury Note, 6.5%, due May 15, 2005 2,274,255
400,000 U.S. Treasury Note, 7%, due July 15, 2006 414,500
TOTAL U.S. GOVERNMENTAL securities (Cost $17,592,277) - 27.2% 17,643,648
Government Sponsored Enterprises - 9.0%
$ 72,086 Government National Mortgage Association,
9.5%, due April 15, 2005 74,660
33,513 Government National Mortgage Association,
9%, due October 20, 2005 34,125
5,036 Government National Mortgage Association,
9%, due July 15, 2001 5,073
59,978 Government National Mortgage Association,
8.5%, due July 15, 2006 60,852
21,473 Government National Mortgage Association,
8.5%, due February 20, 2002 21,365
50,427 Government National Mortgage Association,
8%, due June 20, 2006 50,913
104,182 Government National Mortgage Association,
8%, due August 15, 2006 105,967
29,594 Government National Mortgage Association,
8%, due August 15, 2006 30,101
10,201 Government National Mortgage Association,
8%, due January 15, 2004 10,343
11,299 Government National Mortgage Association,
8%, due February 20, 2002 11,387
99,190 Government National Mortgage Association,
7.5%, due March 20, 2009 99,406
45,559 Government National Mortgage Association,
7.5%, due April 15, 2007 46,208
47,907 Government National Mortgage Association,
7.5%, due February 15, 2006 48,482
29,554 Government National Mortgage Association,
7.5%, due March 15, 2006 29,909
118,605 Government National Mortgage Association,
7.5%, due August 20, 2006 119,037
73,733 Government National Mortgage Association,
7.5%, due September 15, 2006 74,618
179,877 Government National Mortgage Association,
7%, due May 15, 2009 178,614
346,618 Government National Mortgage Association,
6.5%, due February 15, 2012 337,530
295,354 Government National Mortgage Association,
6.5%, due October 15, 2011 288,226
441,386 Government National Mortgage Association,
6%, due January 20, 2014 418,411
441,179 Government National Mortgage Association,
6%, due February 20, 2014 418,216
445,126 Government National Mortgage Association,
6%, due February 15, 2014 423,208
468,160 Government National Mortgage Association,
6%, due May 15, 2014 445,107
372,396 Government National Mortgage Association,
6%, due February 20, 2013 353,363
389,300 Government National Mortgage Association,
6%, due March 20, 2013 369,403
435,183 Government National Mortgage Association,
6%, due August 15, 2013 414,094
402,661 Government National Mortgage Association,
6%, due August 20, 2013 382,081
434,864 Government National Mortgage Association,
6%, due December 20, 2013 412,229
347,214 Government National Mortgage Association,
6%, due April 15, 2011 332,016
253,099 Government National Mortgage Association,
6%, due May 15, 2009 243,957
TOTAL GOVERNMENT SPONSORED ENTERPRISES (Cost $6,033,131) - 9.0% 5,838,901
REPURCHASE AGREEMENT (Cost $960,000) - 1.5%
$ 960,000 Northern Trust Co., 6.40%, due July 3, 2000
(Collateralized by U.S. Treasury Bonds,
11.875%, due November 15, 2003) 960,000
TOTAL INVESTMENTS (Cost $65,474,612) - 98.8% 64,102,638
Other assets less liabilities - 1.2% 751,514
TOTAL NET ASSETS - 100.0%
(equivalent to $10.71 per share; 10,000,000 shares of
$1.00 par value capital shares authorized;
6,054,218 shares outstanding) $64,854,152
For federal income tax purposes, the identified cost of investments owned
at June 30, 2000 was $65,474,612.
Net unrealized depreciation for federal income tax purposes was $1,371,974,
which is comprised of unrealized appreciation of $150,538 and unrealized
depreciation of $1,522,512.
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS JUNE 30, 2000
Statements of Assets and Liabilities
ASSETS:
Investment securities, at market value
(identified cost $65,474,612) $64,102,638
Interest receivable 1,010,322
Total assets 65,112,960
LIABILITIES:
Disbursements in excess of demand deposit cash 258,808
Total liabilities 258,808
NET ASSETS $64,854,152
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $66,629,606
Accumulated undistributed income:
Net realized loss on investment transactions (403,480)
Net unrealized depreciation on investments (1,371,974)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $64,854,152
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 6,054,218
NET ASSET VALUE PER SHARE $ 10.71
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS Year Ended June 30, 2000
StatementS of Operations
INVESTMENT INCOME:
Income:
Interest $ 4,454,098
Expenses:
Management fees 577,715
Government fees 8,813
586,528
Net investment income 3,867,570
REALIZED and unrealized LOSS ON INVESTMENTS:
Net realized loss from investment transactions (346,769)
Increase in net unrealized depreciation on investments (1,211,833)
Net realized and unrealized loss on investments (1,558,602)
Net increase in net assets resulting from operations $ 2,308,968
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 2000 June 30, 1999
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $3,867,570 $4,238,356
Net realized gain (loss) from investment transactions (346,769) 56,682
Increase in net unrealized depreciation on investments (1,211,833) (1,809,607)
Net increase in net assets resulting from operations 2,308,968 2,485,431
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,867,570) (4,238,356)
DECREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 943,837 and 1,622,279
shares sold, respectively 10,177,012 18,682,363
Net asset value of 88,004 and 94,852 shares issued for
reinvestment of distributions, respectively 943,846 1,062,771
11,120,858 19,745,134
Cost of 1,576,600 and 2,092,454 shares
redeemed, respectively (16,988,079) (23,416,507)
Net decrease in net assets from capital
share transactions (5,867,221) (3,671,373)
Net decrease in net assets (7,425,823) (5,424,298)
NET ASSETS:
Beginning of year 72,279,975 77,704,273
End of year (including undistributed
net investment income of $448,731 in 1999) $64,854,152 $72,279,975
</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. At June 30, 2000,
the Fund had a net capital loss carryover of $403,000 available to offset
future realized capital gains and thereby reduce further taxable gains
distributions.
Net investment income and net realized gains differ for financial statement
and tax purposes primarily because of the deferral of wash sale losses and
post-October losses.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes due to GAAP/tax
differences in the character of income recognition.
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, 2000 (excluding commercial
paper and repurchase agreements), were as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 954,435 $ 2,022,557
Proceeds from sales 10,241,735 12,709,257
3. MANAGEMENT FEES - UMB Bank, n.a. is the Fund's manager and investment
advisor 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 Funds' 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 ACCOUNTING POLICY CHANGE - The Financial Accounting Standards
Board ("FASB") has issued Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"). This statement, as amended by SFAS No. 137, requires all derivatives
to be recorded on the balance sheet date at fair value and establishes
standard accounting methodologies for hedging activities. The standard will
result in the recognition of offsetting changes in value or cash flows of
both the hedge and the hedged item in net investment income in the same
period. The statement is effective for the Fund's fiscal year ending June
30, 2001. Because the Fund does not normally hold derivative instruments,
the adoption of this statement is not expected to have a material impact on
the financial statements.
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share
outstanding throughout the period.
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.95 $11.21 $10.98 $10.93 $ 11.10
Income from investment operations:
Net investment income 0.55 0.62 0.62 0.62 0.62
Net realized and unrealized
gain (loss) on securities (0.18) (0.26) 0.23 0.05 (0.16)
Total from investment operations 0.37 0.36 0.85 0.67 0.46
Distributions from:
Net investment income (0.61) (0.62) (0.62) (0.62) (0.62)
Net realized gain on investment
transactions - - - - (0.01)
Total distributions (0.61) (0.62) (0.62) (0.62) (0.63)
Net asset value, end of year $10.71 $ 10.95 $ 11.21 $ 10.98 $ 10.93
Total return 3% 3% 8% 6% 4%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 65 $ 72 $ 78 $ 79 $ 81
Ratio of expenses to average net assets 0.87% 0.87% 0.87% 0.87% 0.86%
Ratio of net investment income to
average net assets 5.73% 5.48% 5.61% 5.69% 5.63%
Portfolio turnover rate 30% 23% 12% 19% 12%
</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, 2000, and the related statement of operations, statements of changes in
net assets and the financial highlights for the periods indicated thereon.
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, 2000, 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, 2000, 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 28, 2000
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
Balanced Fund
Bond Fund
Capital Preservation Fund
Equity Index Fund
Kansas Tax-Exempt Bond Fund*
Money Market Fund - Federal Portfolio
Money Market Fund - Prime Portfolio
Regional Fund
Stock Fund
Stock Select Fund
Tax-Free Money Market Fund
Technology Fund
WorldWide Fund
WorldWide Select Fund
*Available in Kansas and Missouri only.
Investment Advisors and Manager
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," "Scout" and the "Scout" design are registered
service marks of UMB Financial Corporation.
