Scout SM
Stock Fund
A no-load mutual fund
with primary emphasis
on long-term growth of
both capital and income.
Quarterly Report
March 31, 1998
TO THE SHAREHOLDERS
During the three months ended March 31, 1998, Scout Stock Fund rose to
$20.64 per share from $19.01 per share, providing investors with a total
return of 8.57%. For the year ended March 31, 1998, Fund investors
earned a total return (including capital gain and dividend
distributions) of 31.17%.
After a lackluster January, the bull market got back on track and soared
to the best first quarter since 1991. The stock-only portion of your
Fund rose 12.4% in the quarter, in line with other growth funds and
comparable to the popular market averages. However, total Fund results
were affected by the decision to maintain a 20% cash-equivalent reserve
to cushion Fund values in the event of a market decline.
By most measures of valuation, the market is excessively priced in
relation to usual fundamental expectations and historic norms. Over the
last year, stocks have risen about 30% while year-to-year earnings have
risen only 3%. The companies in the Standard & Poor's Industrials are
trading at 14 times cash flow, compared with 4.2 times cash flow at the
beginning of the bull market in 1982.
It is virtually impossible to determine when investor enthusiasm will
wane. The influences of foreign investors (who can be quite fickle) and
cash takeover activity have added fuel to the speculative fires. We
believe it is prudent to maintain opportunity reserves and not be
greedy, and we have positioned the Fund's stock holdings in industry
groups and individual securities that offer more reasonable prices. The
stocks in your Fund have an average price to book ratio of 3.5, about
2/3 the level of the overall market. Your Fund has an income yield of
2.8%, more than a full percentage point above the market. And most
importantly, the Fund's Beta (a statistical measure of volatility risk)
is less than 2/3 of the overall market.
Many other funds are becoming more concentrated in a narrow list of the
blue chip stocks. But we believe it is more important than ever to stay
broadly diversified and equally weighted to avoid a disproportionate
impact from unforeseen events or earnings surprises.
Over the long term, the Fund's investors have been well-rewarded during
up and down markets. The wisdom of our approach can be seen in the
annualized return statistics in this report.
The outlooks for profit growth in mid-capitalization stocks is stronger
and should improve the relative performance of this sector as 1998
progresses. This also should help the Fund, which holds a diversified
mix of large and mid-cap stocks.
It is not easy to find value in a market with such strong momentum. The
Fund benefited from its underweighting in technology and financial
stocks, as many stocks in those sectors were weak. The Fund also was
helped by its overweighting in retail stocks, one of the leading market
groups during the quarter. A cut in Asian orders weakened the basic
industries, which detracted from the Fund's relative performance.
Merger and acquisition activity continued at a torrid pace as large
companies with excess cash acquired small and mid-sized companies using
highly valued stock to buy market share. Examples of this action in the
Fund's portfolio were Compaq Computer Corp. buying Digital Equipment
Corp., and Williams Co. acquiring MAPCO.
The Fund's objective is to provide long-term growth of both capital and
dividend income. Current yield is secondary to the long-term growth
objective.
We appreciate you as a valued shareholder of Scout Stock Fund and
continually welcome your questions or comments.
Chart - Hypothetical Growth of $10,000
Chart - Comparative Rates of Return
5 1/4 Years 10 1/4 Years 15 1/4 Years
Scout Stock Fund 13.9% 13.0% 13.3%
Scout Stock Fund Equities 18.0% 16.3% 16.3%
Lipper Growth Funds* 18.8% 17.0% 15.6%
S&P 500* 22.2% 19.1% 18.2%
Value Line Composite* 15.0% 11.9% 10.7%
Scout Stock Fund's average annual compound returns for 1-, 5- and 10-year
periods ended March 31, 1998, are 31.2%, 13.8% and 12.7%, 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 flucuate,
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 indicies).
Chart - Fund Diversification
Cash Equivalents 19.84%
Utilities 14.80%
Capital Goods 5.45%
Technology 6.16%
Energy 8.29%
Basic Materials 11.23%
Transportation &
Services 3.40%
Consumer Staples 13.61%
Convertible Bonds 0.69%
Consumer Cyclical 15.43%
Financial 1.10%
Chart - Top 10 Equity Holdings
Market Percent
Value (000's) of Total
SBC Communications, Inc. $ 3,490 1.68%
Williams Companies, Inc. 2,664 1.28%
International Business Machines Corp. 2,597 1.25%
Bob Evans Farms, Inc. 2,437 1.17%
Brush Wellman, Inc. 2,423 1.17%
Comsat Corp 2,411 1.16%
USX-Marathon Group 2,258 1.09%
Alza Corp 2,241 1.08%
Basset Furniture Industries, Inc. 2,190 1.06%
Brinker International 2,188 1.05%
Top 10 Equity Holdings Total: $ 24,899 11.99%
NOTE: All market values based on 3/31/98 statement of assets.
Sincerely,
/s/David B. Anderson
David B. Anderson
UMB Investment Advisors
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 invested.
FINANCIAL STATEMENTS
Statement of Net Assets
March 31, 1998 (unaudited)
Market
Shares Company Value
COMMON STOCKS - 79.47%
Basic Materials - 11.23%
5,000 Aluminum Co. of America $ 344,062
85,000 Brush Wellman, Inc. 2,422,500
20,000 Carpenter Technology Corp. 1,080,000
12,000 Corning, Inc. 531,000
69,150 Cyprus Amax Minerals Co. 1,149,619
10,000 duPont (E.I.) deNemours & Co. 680,000
25,000 Eastman Chemical Co. 1,685,938
100,000 Engelhard Corp. 1,900,000
7,000 Georgia Pacific Corp. 453,250
7,000 Georgia Pacific Corp. Timber Group 179,812
7,000 Hercules, Inc. 345,625
35,000 International Paper Co. 1,638,438
52,000 Mallinckrodt Group, Inc. 2,054,000
48,000 Nalco Chemical Co. 1,947,000
15,000 Newmont Mining Co. 458,437
10,000 Rohm & Haas Co. 1,033,125
27,000 Union Camp Corp. 1,613,250
35,000 Weyerhaeuser Co. 1,977,500
100,000 Worthington Industries, Inc. 1,812,500
23,306,056
Capital Goods - 5.45%
30,000 Aeroquip-Vickers, Inc. 1,734,375
50,000 Browning Ferris Industries, Inc. 1,631,250
125,000 Calgon Carbon Corp. 1,460,937
33,000 Cooper Industries, Inc. 1,961,438
7,000 Deere & Co. 433,562
2,500 Fluor Corp. 124,375
18,000 Global Industries Technologies, Inc. 297,000
12,000 Grainger (W.W.), Inc. 1,233,750
40,000 Snap-On, Inc. 1,825,000
20,000 Waste Management International PLC 616,250
11,317,937
Consumer Cyclical - 15.43%
40,000 American Greetings Corp. 1,840,000
34,216 Ascent Entertainment Group 352,852
71,375 Bassett Furniture Industries, Inc. 2,190,320
12,000 Black & Decker Corp. 636,750
40,000 Block (H&R), Inc. 1,902,500
40,000 Brown Group, Inc. 575,000
15,000 Cognizant Corp. 860,625
50,000 Dillards, Inc. 1,846,875
45,000 Donnelley (R.R.) & Sons Co. 1,847,813
28,000 Dun & Bradstreet 957,250
5,000 Ford Motor Co. 324,062
14,000 Gannett Co., Inc. 1,006,250
18,000 General Motors Corp. 1,213,875
40,000 Genuine Parts Co. 1,525,000
30,000 Hillenbrand Industries, Inc. 1,846,875
50,000 Limited, Inc. 1,434,375
15,000 Masco Corp. 892,500
10,000 May Department Stores Co. 635,000
15,000 Media General, Inc., Class A 737,812
25,000 Mercantile Stores Co., Inc. 1,679,688
25,000 Penney (J.C.) & Co., Inc. 1,892,188
18,000 Pharmacia & Upjohn, Inc. 787,500
25,000 Readers Digest Assc. `A' 682,812
100,000 Sensormatic Electronics Corp. 1,637,500
120,000 Stride Rite Corp. 1,627,500
25,000 Toys `R' Us, Inc. 751,563
10,000 US West Media Group 347,500
32,031,985
Consumer Staples - 13.61%
10,000 Abbott Laboratories 753,125
50,000 Alza Corp. 2,240,625
10,000 American Home Products Corp. 953,750
10,000 Anheuser-Busch Companies, Inc. 463,125
95,000 Archer-Daniels-Midland Co. 2,084,062
50,000 Bard (C.R.), Inc. 1,837,500
115,000 Bob Evans Farms, Inc. 2,436,563
100,000 Brinker International 2,187,500
17,500 Bristol-Myers Squibb Co. 1,825,469
25,000 Covance, Inc. 614,062
70,000 Darden Restaurants, Inc. 1,089,375
10,000 Eastman Kodak Co. 648,750
25,000 Heinz H.J. Co. 1,459,375
40,000 International Flavors & Fragrances, Inc. 1,885,000
15,000 Kimberly Clark Corp. 751,875
95,000 Lance, Inc. 2,161,250
10,000 Merck & Co., Inc. 1,283,750
75,000 Mylan Laboratories, Inc. 1,725,000
65,000 Rubbermaid, Inc. 1,852,500
28,252,656
Energy - 8.29%
12,000 Amoco Corp. 1,036,500
17,000 Atlantic Richfield Co. 1,336,625
40,000 Baker Hughes, Inc. 1,610,000
10,000 Burlington Resources, Inc. 479,375
30,000 Dresser Industries, Inc. 1,441,875
30,000 Halliburton Co. 1,505,625
25,000 Kerr-McGee Corp. 1,739,062
75,000 Mitchell Energy & Development 1,992,188
25,000 Phillips Petroleum Co. 1,248,438
15,000 Schlumberger Limited 1,136,250
60,000 Union Pacific Resources Group, Inc. 1,432,500
60,000 USX-Marathon Group 2,257,500
17,215,938
Financial - 1.10%
6,000 AON Corp. 388,500
10,000 First Chicago NBD Corp. 881,250
20,000 Liberty Corp. S.C. 1,020,000
2,289,750
Technology - 6.16%
7,500 AMP, Inc. 328,594
40,000 Apple Computer, Inc. 1,100,000
20,000 Boeing Co. 1,042,500
1,000 Cisco Systems, Inc. 68,375
25,000 Digital Equipment Corp. 1,307,812
10,000 Electronic Data Systems Corp. 458,750
25,000 International Business Machines Corp. 2,596,875
5,000 Lucent Technologies, Inc. 639,375
30,000 Motorola, Inc. 1,818,750
40,000 Novell, Inc. 428,750
20,000 Perkin-Elmer Corp. 1,446,250
1,147 Raytheon Co. Class A 65,236
15,000 Telxon Corp. 397,500
20,000 Texas Instruments, Inc. 1,082,500
12,781,267
Transportation & Services - 3.40%
50,000 CNF Transportation, Inc. 1,796,875
20,000 Consolidated Freightways Corp. 340,000
3,000 Cotelligent Group, Inc. 88,875
8,000 CSX Corp. 476,000
24,000 FDX Corp. 1,707,000
15,000 Norfolk Southern Corp. 560,625
7,500 Roadway Express, Inc. 184,218
45,000 Southwest Airlines Co. 1,330,313
10,000 Union Pacific Corp. 561,875
7,045,781
Utilities - 14.80%
28,000 AT&T Corp. 1,837,500
40,000 Ameren Corp. 1,685,000
16,000 Bell Atlantic Corp. 1,640,000
25,000 Bell South Corp. 1,689,062
35,000 Central & South West Corp. 936,250
70,000 Comsat Corp. 2,410,625
40,000 Dominion Resources, Inc., VA 1,680,000
6,000 Duke Energy Corp. 357,375
60,000 Entergy Corp. 1,785,000
45,000 Florida Progress Corp. 1,875,938
12,000 GTE Corp. 718,500
75,000 Niagara Mohawk Power Corp. 975,000
80,000 SBC Communications, Inc. 3,490,000
50,000 Scana Corp. 1,546,875
40,000 Texas Utilities Co. 1,572,500
25,000 U. S. West Communication Group 1,368,750
62,000 Unicom Corporation 2,170,000
83,250 Williams Companies, Inc. 2,664,000
10,000 Wisconsin Energy Corp. 306,875
30,709,250
TOTAL COMMON STOCKS - 79.47% 164,950,620
Face Market
Amount Description Value
CONVERTIBLE CORPORATE BONDS - 0.69%
$ 500,000 Telxon Corp., Cv. Sub. Deb.,
7.50%, due June 1, 2012 $ 520,000
1,000,000 WMX Technologies, Inc., Cv. Sub. Notes,
2.00%, due January 24, 2005 914,370
TOTAL CONVERTIBLE CORPORATE BONDS - 0.69% 1,434,370
SHORT-TERM CORPORATE NOTES - 16.94%
$ 1,500,000 Abbott Laboratories,
5.47%, due April 22, 1998 $ 1,494,986
1,500,000 American Greetings Corp.,
5.54%, due April 3, 1998 1,499,307
1,500,000 Anheuser-Busch Cos., Inc.,
5.46%, due April 8, 1998 1,498,180
1,500,000 Archer-Daniels-Midland Co.,
5.47%, due April 1, 1998 1,499,772
1,500,000 Archer-Daniels-Midland Co.,
5.50%, due May 4, 1998 1,492,208
1,500,000 Atlantic Richfield Co.,
5.51%, due April 28, 1998 1,493,572
1,500,000 Bell Atlantic Network Funding,
5.51%, due April 21, 1998 1,495,179
1,500,000 Campbell Soup Co.,
5.48%, due May 22, 1998 1,488,127
1,500,000 Chevron USA, Inc.,
5.49%, due April 7, 1998 1,498,399
1,500,000 Coca-Cola Co.,
5.44%, due April 3, 1998 1,499,320
1,500,000 Coca-Cola Co.,
5.48%, due April 24 1998 1,494,520
1,500,000 Deere & Co.,
5.53%, due April 8, 1998 1,498,157
1,000,000 Disney Walt Co.,
5.46%, due April 13, 1998 998,028
1,500,000 Disney Walt Co.,
5.46%, due April 15, 1998 1,496,588
1,500,000 Duke Energy,
5.48%, due April 17, 1998 1,496,118
1,500,000 Eastman Kodak Co.,
5.50%, due April 23, 1998 1,494,729
1,500,000 Gannett Inc.,
5.44%, due April 9, 1998 1,497,960
1,500,000 Heinz Co.,
5.49%, due May 13, 1998 1,490,164
1,500,000 International Business Machines,
5.43%, due April 21, 1998 1,495,249
1,000,000 Monsanto Co.,
5.50%, due May 8, 1998 994,194
1,500,000 Penny's (J.C.) Co.,
5.54%, due April 14, 1998 1,496,768
1,000,000 Proctor & Gamble Co.,
5.50%, due April 1, 1998 999,847
1,500,000 Progress Capital Co.,
5.53%, due April 6, 1998 1,498,618
1,500,000 Shell Oil Company,
Series A, 5.45%, due May 1, 1998 1,492,960
750,000 Texaco, Inc.,
5.51%, due April 14, 1998 748,393
TOTAL SHORT-TERM CORPORATE NOTES - 16.94% 35,151,343
GOVERNMENT SPONSORED ENTERPRISES - 3.35%
$ 1,000,000 Federal Home Loan Bank Corp.
Discount Notes, 5.34%, due May 13, 1998 $ 993,622
2,000,000 Federal Home Loan Mortgage Corp.
Discount Notes, 5.30%, due May 29, 1998 1,982,628
2,000,000 Federal National Mortgage Assn.
Discount Notes, 5.43%, due April 29, 1998 1,991,252
2,000,000 Federal National Mortgage Assn.
Discount Notes, 5.40%, due June 12, 1998 1,978,100
TOTAL GOVERNMENT SPONSORED ENTERPRISES - 3.35% 6,945,602
REPURCHASE AGREEMENT - 0.03%
65,000 Northern Trust Co.,
5.88%, due April 1, 1998
(Collateralized by U.S. Treasury Notes,
6.25%, due April 30, 2001) 65,000
TOTAL INVESTMENTS - 100.48% $ 208,546,935
Other assets less liabilities - (0.48%) (995,696)
TOTAL NET ASSETS - 100.00%
(equivalent to $20.64 per share;
20,000,000 shares of $1.00 par value
capital shares authorized;
10,055,440 shares outstanding) $ 207,551,239
BASIS OF DETERMINING MARKET VALUE. Each investment is valued at the
latest sales price on March 31, 1998, 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 (800) 996-2862
www.umb.com
JB22A 5/98
