SCOUT
STOCK FUND
A no-load mutual fund
with primary emphasis
on long-term growth of
both capital and income.
Quarterly Report
September 30, 1997
TO THE SHAREHOLDERS
Scout Stock Fund earned a total return (price change and reinvested
distributions) of 7.75% for the quarter ended September 30, 1997. By
comparison, the unmanaged Standard & Poor's 500 Index earned 7.49% and the
Lipper Growth Funds Index earned 10.25% for the same period.
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.
Small and mid-sized capitalization stocks led the market in the third quarter
as leadership rotated away from the blue chips. Although these stocks
continued to advance for the quarter, the small and mid-cap sectors
outperformed them and set repeated records in the benchmark Russell 2000
index. Three stocks gained for each that declined, showing the breadth of this
advance.
The advance in the stock market was fueled by the strong U.S. economy, low
inflation and falling interest rates. Despite a drop in August, net investment
into equity mutual funds for the quarter remained strong. This provided
additional support for the market.
Investors were attracted to the low price/earnings ratios of cyclical issues,
many of which are mid-cap stocks. This benefited Scout Stock Fund which is
overweighted in this sector. Some also feared slower profit gains in large-
capitalization stocks as the benefits were lost from one-time actions such as
cost cutting or restructuring. Investors were not willing to pay a premium for
less reliable growth, which prompted a correction in that group of stocks in
August.
Although the two-tier market that has existed for the last
2 1/2 years began to disintegrate during the quarter, some major segments
remain overvalued. This caused extreme volatility and steep day-to-day moves
in the indices, especially on the release of negative earnings or economic
news.
The top 50 giant multinational companies in the Standard & Poor's 500 now
boast a P/E ratio of 21.5 times next year's predicted earnings. In contrast,
the other 450 stocks in the index are priced at just 17.5 times those
earnings. Small and mid-cap companies are even cheaper than the smaller of the
large-cap stocks in the index. The P/E ratio of the large caps now stands at a
rich 1.36 times future (3-5 years) earnings growth, but the mid-caps are
priced at just 1.11 times future earnings growth.
As we look ahead, Scout Stock Fund appears positioned to deal with major
market changes with lower average volatility because of the Fund's
diversification, equal weighting and cash reserve. This was demonstrated in
August, when the Fund was down 1.20% while the S&P 500 Index dropped 5.60% and
the 50 largest S&P 500 stocks were down 8.30%.
The Scout Stock Fund's blend of large and mid-cap stocks should allow it to
benefit from the change of market leadership, favoring small and mid-cap
stocks at the expense of the most well-known of blue chips.
We appreciate you as a valued shareholder of Scout Stock Fund and continually
welcome your questions or comments.
Sincerely,
/S/David B. Anderson
David B. Anderson
UMB Investment Advisors
Top 10 Equity Holdings
Market Percent
Value (000's) of Total
USX-Marathon Group $ 2,789 1.42%
SBC Communications, Inc. 2,716 1.38%
International Business
Machines Corp. 2,648 1.35%
Bristol-Myers Squibb Co. 2,483 1.27%
Archer-Daniels-Midland Co. 2,274 1.16%
Bob Evans Farms 2,185 1.11%
Brush Wellman, Inc. 2,183 1.11%
CNF Transportation, Inc. 2,178 1.11%
Union Camp Corp. 2,159 1.10%
Motorola, Inc. 2,156 1.10%
Top 10 Equity Holdings Total: $ 23,771 12.11%
Note: All market values based on 9/30/97 statement of assets.
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 deposit insurance.
These shares involve investment risks, including the possible loss of the
principal amount invested.
FINANCIAL STATEMENTS
Statement of Net Assets
September 30, 1997
Market
Shares Company Value
COMMON STOCKS - 81.13%
Basic Materials - 11.90%
85,000 Brush Wellman, Inc. $ 2,183,438
25,000 Carpenter Technology Corp. 1,237,500
12,000 Corning, Inc. 567,000
65,000 Cyprus Amax Minerals Co. 1,560,000
10,000 duPont (E.I.) deNemours & Co. 615,625
25,000 Eastman Chemical Co. 1,550,000
80,000 Engelhard Corp. 1,725,000
10,000 Georgia Pacific Corp. 1,043,750
35,000 International Paper Co. 1,927,188
50,000 Mallinckrodt Group, Inc. 1,800,000
48,000 Nalco Chemical Co. 1,923,000
10,000 Rohm & Haas Co. 959,375
35,000 Union Camp Corp. 2,159,062
35,000 Weyerhaeuser Co. 2,078,125
100,000 Worthington Industries, Inc. 2,025,000
23,354,063
Capital Goods - 6.03%
40,000 Aeroquip-Vickers, Inc. 1,960,000
50,000 Browning Ferris Industries, Inc. 1,903,125
125,000 Calgon Carbon Corp. 1,632,813
33,000 Cooper Industries, Inc. 1,784,062
10,000 Deere & Co. 537,500
2,500 Fluor Corp. 134,063
15,000 Grainger (W.W.), Inc. 1,335,000
53 Morrison Knudsen Warrants 265
40,000 Snap-On, Inc. 1,842,500
20,000 Waste Management
International PLC 698,750
11,828,078
Consumer Cyclical - 15.40%
50,000 American Greetings Corp. 1,843,750
34,216 Ascent Entertainment Group 393,484
71,375 Bassett Furniture Industries, Inc. 2,034,188
20,000 Black & Decker Corp. 745,000
40,000 Block (H&R), Inc. 1,545,000
40,000 Brown Group, Inc. 727,500
35,000 Cognizant Corp. 1,426,250
40,000 Dillards, Inc. 1,752,500
45,000 Donnelley (R.R.) & Sons Co. 1,605,938
28,000 Dun & Bradstreet 794,500
12,000 Ford Motor Co. 543,000
7,000 Gannett Co., Inc. 755,562
25,000 General Motors Corp. 1,673,438
40,000 Genuine Parts Co. 1,232,500
40,000 Hillenbrand Industries, Inc. 1,802,500
50,000 Limited, Inc. 1,221,875
25,000 Masco Corp. 1,145,312
10,000 May Department Stores Co. 545,000
15,000 Media General, Inc., Class A 594,375
25,000 Mercantile Stores Co., Inc. 1,573,437
25,000 Penney (J.C.) & Co., Inc. 1,456,250
25,000 Readers Digest Assc. `A' 750,000
90,000 Sensormatic Electronics Corp. 1,271,250
120,000 Stride Rite Corp. 1,627,500
20,000 Toys `R' Us, Inc. 710,000
20,000 US West Media Group 446,250
30,216,359
Consumer Staples - 13.76%
15,000 Abbott Laboratories 959,063
60,000 Alza Corp. 1,740,000
12,000 American Home Products Corp. 876,000
95,000 Archer-Daniels-Midland Co. 2,274,062
45,000 Bard (C.R.), Inc. 1,527,187
115,000 Bob Evans Farms, Inc. 2,185,000
100,000 Brinker International 1,781,250
30,000 Bristol-Myers Squibb Co. 2,482,500
10,000 Covance, Inc. 216,250
70,000 Darden Restaurants, Inc. 809,375
2,500 Eastman Kodak Co. 162,344
45,000 Heinz H.J. Co. 2,078,438
38,000 International Flavors &
Fragrances, Inc. 1,862,000
15,000 Kimberly Clark Corp. 734,063
95,000 Lance, Inc. 1,971,250
20,000 Merck & Co., Inc. 1,998,750
75,000 Mylan Laboratories, Inc. 1,682,812
65,000 Rubbermaid, Inc. 1,661,562
27,001,906
Energy - 9.28%
12,000 Amoco Corp. 1,156,500
20,000 Atlantic Richfield Co. 1,708,750
34,000 Baker Hughes, Inc. 1,487,500
40,000 Dresser Industries, Inc. 1,720,000
30,000 Halliburton Co. 1,560,000
25,000 Kerr-McGee Corp. 1,720,313
75,000 Mitchell Energy & Development 2,123,437
25,000 Phillips Petroleum Co. 1,290,625
16,000 Schlumberger Limited 1,347,000
50,000 Union Pacific Resources
Group, Inc. 1,309,375
75,000 USX-Marathon Group 2,789,062
18,212,562
Financial - 1.44%
10,500 AON Corp. 555,188
15,000 First Chicago NBD Corp. 1,128,750
25,000 Liberty Corp. S.C. 1,131,250
2,815,188
Technology - 6.58%
6,300 AMP, Inc. 337,444
50,000 Apple Computer, Inc. 1,084,375
35,000 Digital Equipment Corp. 1,515,937
25,000 International Business
Machines Corp. 2,648,438
8,000 Lucent Technologies, Inc. 651,000
30,000 Motorola, Inc. 2,156,250
60,000 Novell, Inc. 538,125
20,000 Perkin-Elmer Corp. 1,461,250
20,000 Telxon Corp. 490,000
15,000 Texas Instruments, Inc. 2,026,875
12,909,694
Transportation & Services - 3.62%
30,000 Caliber Systems, Inc. 1,627,500
50,000 CNF Transportation, Inc. 2,178,125
20,000 Consolidated Freightways Corp. 352,500
8,000 CSX Corp. 468,000
5,000 Norfolk Southern Corp. 516,250
7,500 Roadway Express, Inc. 205,313
35,000 Southwest Airlines Co. 1,117,812
10,000 Union Pacific Corp. 626,250
7,091,750
Utilities - 13.12%
28,000 AT&T Corp. 1,240,750
18,000 Bell Atlantic Corp. 1,447,875
32,000 Bell South Corp. 1,480,000
50,000 Central & South West Corp. 1,109,375
70,000 Comsat Corp. 1,666,875
40,000 Dominion Resources, Inc. VA 1,515,000
15,666 Duke Energy Corp. 774,488
60,000 Entergy Corp. 1,563,750
50,000 Florida Progress Corp. 1,650,000
5,000 FPL Group, Inc. 256,250
60,000 Mapco, Inc. 1,976,250
75,000 Niagara Mohawk Power Corp. 717,188
44,258 SBC Communications, Inc. 2,716,335
50,000 Scana Corp. 1,253,125
40,000 Texas Utilities Co. 1,440,000
37,000 U. S. West Communication
Group 1,424,500
65,000 Unicom Corporation 1,519,375
45,000 Union Electric Co. 1,729,687
10,000 Wisconsin Energy Corp. 260,000
25,740,823
TOTAL COMMON STOCKS - 81.13% 159,170,423
Face Market
Amount Description Value
CONVERTIBLE CORPORATE BONDS - 1.31%
$ 300,000 Computervision Corp.,
Cv. Sub. Deb., 8.00%,
due December 1, 2009 181,500
800,000 Masco Corp.,
Cv. Sub. Deb., 5.25%,
due February 15, 2012 896,000
500,000 Telxon Corp.,
Cv. Sub. Deb., 7.50%,
due June 1, 2012 517,500
1,000,000 WMX Technologies, Inc.,
Cv. Sub. Notes, 2.00%,
due January 24, 2005 966,250
TOTAL CONVERTIBLE
CORPORATE BONDS - 1.31% 2,561,250
SHORT-TERM CORPORATE NOTES - 12.19%
1,500,000 American Greetings Corp.,
5.50%, due October 16, 1997 1,496,333
1,000,000 Ameritech Corp.,
5.47%, due October 8, 1997 998,784
1,000,000 American Tel. & Telegraph,
5.50%, due October 14, 1997 997,861
1,500,000 Atlantic Richfield Co.,
5.49%, due November 7, 1997 1,491,308
1,500,000 duPont (E.I.) deNemours & Co.,
5.46%, due October 17, 1997 1,496,132
1,500,000 duPont (E.I.) deNemours & Co.,
5.48%, due October 22, 1997 1,494,977
1,000,000 Emerson Electric Co.,
5.47%, due October 10, 1997 998,481
1,500,000 Gillette Co.,
5.47%, due October 31, 1997 1,492,935
1,500,000 Monsanto Co.,
5.51%, due October 3, 1997 1,499,311
1,500,000 Penney's (J.C.) Co.,
5.48%, due October 7, 1997 1,498,402
1,000,000 Penney's (J.C.) Co.,
5.49%, due November 4, 1997 994,663
1,000,000 PepsiCo.,
5.49%, due October 6, 1997 999,085
1,000,000 Progress Capital Co.,
5.50%, due October 15, 1997 997,708
1,000,000 Progress Capital Co.,
5.52%, due October 24, 1997 996,320
1,500,000 Toys `R' US,
5.50%, due October 28, 1997 1,493,583
1,000,000 Xerox Corp.,
5.48%, due October 3, 1997 999,543
1,000,000 Xerox Corp.,
5.48%, due October 21, 1997 996,803
1,500,000 Xerox Corp.,
5.52%, due October 29, 1997 1,493,330
1,500,000 Xerox Corp.,
5.51%, due December 4, 1997 1,485,077
TOTAL SHORT-TERM
CORPORATE NOTES - 12.19% 23,920,636
GOVERNMENT SPONSORED ENTERPRISES - 4.82%
1,500,000 Federal Agricultural Mortgage Corp.
Discount Notes, 5.40%,
due October 1, 1997 1,499,775
2,000,000 Federal Home Loan Bank
Discount Notes, 5.44%,
due October 2, 1997 1,999,396
2,000,000 Federal National Mortgage
Assn. Discount Notes, 5.42%,
due October,16, 1997 1,995,182
1,000,000 Federal National Mortgage Assn.
Discount Notes, 5.40%,
due October 30, 1997 995,500
1,000,000 Federal National Mortgage Assn.
Discount Notes, 5.35%,
due November 10, 1997 993,907
2,000,000 Federal National Mortgage Assn.
Discount Notes, 5.37%,
due December 9, 1997 1,979,116
TOTAL GOVERNMENT SPONSORED
ENTERPRISES - 4.82% 9,462,876
REPURCHASE AGREEMENT - 0.39%
765,000 Northern Trust Co.,
6.00%, due October 1, 1997
(Collateralized by U.S.
Treasury Notes, 6.00%,
due November 30, 1997) 765,000
TOTAL INVESTMENTS - 99.84% $ 195,880,185
Other assets less liabilities - 0.16% 304,879
TOTAL NET ASSETS - 100.00%
(equivalent to $19.75 per share;
20,000,000 shares of $1.00 par
value capital shares authorized;
9,932,259 shares outstanding) $ 196,185,064
BASIS OF DETERMINING MARKET VALUE. Each investment is valued at the
latest sales price on September 30, 1997, as reported by the principal
exchange on which the issue is listed. If no sale is reported, or if
unlisted, the average of the latest bid and asked price is used.
This report has been prepared for the information of the Shareholders of
Scout Stock 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
JB22C
