SCOUT
REGIONAL
FUND
A no-load mutual fund
that seeks long-term
growth of both capital
and income by investing
in smaller regional
companies.
Quarterly Report
September 30, 1997
TO THE SHAREHOLDERS
Scout Regional Fund earned a total return (price change and reinvested
distributions) of 12.40% for the quarter ended September 30, 1997. By
comparison, the unmanaged Value Line Composite Index and Lipper Small Company
Fund Index had returns of 11.70% and 15.25%, respectively, 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 quarter was extremely volatile, with steep day-to-day moves in
the indices.
Investors were attracted to the low price/earnings ratios of cyclical issues,
many of which are small and mid-cap stocks. Some also feared slower profit
gains in large-cap 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.
Historically, small-cap stocks have outperformed large-cap stocks in two out
of every three years. However, as shown in the chart comparing the Russell
2000 and Standard & Poor's 500 indices, large-cap stocks led the way during
the periods 1984-1990 and 1994-1997. The ability of small-cap stocks to
sustain their leadership will depend upon whether they can produce positive
earnings momentum relative to the large-cap stocks, as they have done
recently.
If they can do so, small-cap stocks should sell at premium P/E ratios, based
on typically higher historical growth rates. They are now priced at a small
discount to large-cap stocks, so this should create some opportunities for the
small-caps.
If small-cap stocks continue as market leadership, the Scout Regional Fund
should benefit. In the event of a market correction, the Fund's value
management style, high diversification, cash reserve and underweighting in
overvalued economic sectors should reduce the downside risk.
We appreciate you as a valued shareholder of Scout Regional Fund and
continually welcome your questions or comments.
Sincerely,
/s/David B. Anderson
Dave B. Anderson
UMB Investment Advisors
GRAPH - RUSSELL 2000 VS. S&P 500
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 - 87.66%
Basic Materials - 9.90%
15,000 ACX Technologies $ 399,375
50,000 Amax Gold, Inc. 331,250
25,000 Cyprus Amax Minerals Co. 600,000
2,500 Deltic Timber Corp. 81,719
40,000 Huntco, Inc. Cl. A 572,500
25,000 Laclede Steel Co. 129,688
55,000 Lawter International, Inc. 666,875
18,000 Mallinckrodt Group, Inc. 648,000
18,500 Republic Group, Inc. 346,875
42,000 Safety-Kleen Corp. 1,005,375
7,000 Sigma-Aldrich Corp. 230,562
5,012,219
Capital Goods - 15.42%
15,000 Atchison Casting Co. 318,750
15,000 Baldor Electric 456,562
48,400 BHA Group, Inc. 834,900
20,000 Federal Signal Corp. 507,500
65,000 Green (A.P.) Industries, Inc. 910,000
30,000 Harmon Industries, Inc. 795,000
85,000 Instituform Technologies, Inc., Cl. A 743,750
65,000 Isco, Inc. 536,250
60,000 Layne Christensen Co. 1,260,000
50,000 MYR Group, Inc. 1,178,125
5,000 Paul Mueller Co. 216,250
10,000 Trion, Inc. 50,625
7,807,712
Consumer Cyclical - 16.32%
70,000 B.I. Inc. 520,625
15,000 Bandag, Inc. 794,063
10,000 Block (H & R), Inc. 386,250
15,000 Brown Group, Inc. 272,813
15,000 Caseys General Stores, Inc. 369,375
25,000 Clarcor, Inc. 715,625
6,000 Dillards, Inc. 262,875
15,000 Donnelley (R.R.) & Sons 535,312
20,000 First Alert, Inc. 60,000
37,925 Flexsteel Industries, Inc. 464,581
30,000 Kellwood Co. 1,063,125
25,000 Lawson Products 737,500
10,000 Lee Enterprises, Inc. 283,750
20,000 Maytag Corp. 682,500
35,000 O'Sullivan Industries Holdings, Inc. 437,500
18,000 Rival Co. 288,000
60,000 Stimsonite Corp. 390,000
8,263,894
Consumer Staples - 16.13%
20,000 Alberto-Culver Co. Cl. A 517,500
40,000 Angelica Corp. 795,000
20,000 Beverly Enterprises, Inc. 347,500
21,000 Brunswick Corp. 740,250
5,000 Celestial Seasonings, Inc. 155,000
38,000 CPI Corp. 969,000
15,000 I B P, Inc. 354,375
14,000 Medpartners, Inc. 300,125
25,000 Midwest Grain Products, Inc. 350,000
75,000 NPC International, Inc. Cl. B 946,875
80,000 Sanfilippo (John B & Son), Inc. 660,000
22,000 Sealright Co. 288,750
35,000 Stuart Entertainment, Inc. 78,750
85,000 TCBY Enterprises, Inc. 595,000
41,300 VICORP Restaurants, Inc. 660,800
50,000 Winnebago Industries, Inc. 409,375
8,168,300
Energy - 10.51%
7,500 Helmerich & Payne, Inc. 600,000
10,000 Kerr-McGee Corp. 688,125
55,000 Maverick Tube Corp. 2,268,750
11,000 Murphy Oil Corp. 628,375
55,000 Southwestern Energy Co. 704,687
5,000 St. Mary Land & Exploration Co. 226,875
6,440 Ultramar Diamond Sharmock Corp. 208,093
5,324,905
Financial - 1.79%
11,000 Brenton Banks 357,500
1,260 Commerce Bancshares, Inc. 74,182
700 Kansas City Life Insurance Co. 58,450
7,500 Old Republic International Corp. 292,500
3,000 Reinsurance Group of America, Inc. 122,625
905,257
Technology - 2.51%
7,000 DII Group, Inc. 229,469
35,000 Exabyte Corp. 385,000
40,000 Fansteel, Inc. 395,000
6,000 Molex, Inc. 266,250
1,275,719
Transportation & Services - 1.08%
22,500 Werner Enterprises, Inc. 545,625
Utilities - 14.00%
40,000 Aliant Communications, Inc. 970,000
8,000 Calenergy, Inc. 266,000
40,000 Empire District Electric Co. 705,000
15,000 IES Industries, Inc. 478,125
15,000 Interstate Power Co. 474,375
7,000 Kansas City Power & Light Co. 205,625
32,000 Laclede Gas Co. 780,000
20,000 Mapco, Inc. 658,750
35,000 St. Joseph Light & Power Co. 570,938
15,000 Union Electric Co. 576,562
24,000 Utilicorp United, Inc. 723,000
20,000 Western Resources, Inc. 686,250
7,094,625
TOTAL COMMON STOCKS - 87.66% 44,398,256
Face Market
Amount Description Value
CONVERTIBLE COPRORATE BONDS - 0.75%
$ 371,000 Beverly Enterprises, Inc.
CV. Sub. Deb., 7.625%,
due March 15, 2003 $ 377,492
SHORT-TERM CORPORATE NOTES - 8.85%
500,000 Disney Walt Co.,
5.52%, due October 9, 1997 499,310
500,000 duPont (E.I.) deNemours & Co.,
5.48%, due October 22, 1997 498,326
500,000 Gillette Co.,
5.47%, due October 31, 1997 497,645
500,000 Monsanto Co.,
5.51%, due October 17, 1997 498,700
500,000 Penney's Co. (J.C.),
5.48%, due October 7, 1997 499,467
500,000 Penney's Co. (J.C.),
5.49%, due November 4, 1997 497,331
500,000 Progress Capital Co.,
5.52%, due October 24, 1997 498,160
500,000 Xerox Corp.,
5.48%, due October 3, 1997 499,772
500,000 Xerox Corp.,
5.51%, due December 4,1997 495,026
TOTAL SHORT-TERM
CORPORATE NOTES - 8.85% 4,483,737
GOVERNMENT SPONSORED
ENTERPRISES - 1.96%
$ 500,000 Federal Agricultural Mortgage Corp,
5.40%, due October 1, 1997 499,925
500,000 Federal National Mortgage Association,
5.37%, due December 9, 1997 494,779
TOTAL GOVERNMENT
SPONSORED ENTERPRISES - 1.96% 994,704
REPURCHASE AGREEMENT - 1.59%
805,000 Northern Trust Co.,
6.00%, due October 1, 1997
(Collateralized by U.S.
Treasury Notes, 6.00%,
due November 30, 1997) 805,000
TOTAL INVESTMENTS - 100.81% $ 51,059,189
Other assets less liabilities - (0.81%) (411,132)
TOTAL NET ASSETS - 100.00%
(equivalent to $12.60 per share;
10,000,000 shares of $1.00 par
value capital shares authorized;
4,018,942 shares outstanding) $ 50,648,057
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 Regional 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
JB23C
