SCOUT
REGIONAL
FUND
A no-load mutual fund
that seeks long-term
growth of both capital
and income by investing
in smaller regional
companies.
Semiannual Report
December 31, 1996
TO THE SHAREHOLDERS
Scout Regional Fund's total return (price change and reinvested distributions)
for the six months ended December 31, 1996, was 4.56% in comparison with the
unmanaged Value Line Composite index and Lipper Small Co. Fund index, which
earned 6.92% and 0.37%, respectively for the same time 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.
During the first two months of the fourth quarter, the equity markets
continued to climb and set new records. In December, Greenspan warned that
equities were overvalued which caused a mild correction in the large
capitalization market. Small capitalization stocks, on the other hand, never
completely recovered from the summer correction and lagged the broad market
during October and November. Because Greenspan's valuation comments had little
impact on small capitalization stocks, they outperformed large capitalization
issues in December.
The dramatic gains in the equity markets have been generated by a small number
of stocks with very large market capitalizations which dominate the most
widely known indices. The influence of these few large capitalization stocks
has given a distorted view of the market and created false expectations for
all. The narrowness of the market advance is of concern to many analysts
because they know these same stocks can drive the indices down just as quickly
as they have pushed them up.
As Greenspan said, the valuation of many stocks has risen much more than that
of the overall market. The Scout Regional Fund continues to seek stocks with
strong fundamental values. The Fund is well diversified and its holdings
equally weighted to reduce volatility. It's security holdings are
underweighted in comparison with the Standard & Poor's 500 Index in sectors
considered to be the most overvalued such as consumer staples, technology and
finance. The portfolio is overweighted in utilities which are expected to
benefit from the merger activity associated with industry consolidation, and
meanwhile, provide high dividend income.
We appreciate you as a valued shareholder of Scout Regional Fund and
continually welcome your questions or comments.
Top 10 Equity Holdings
Market Percent
Value of Total
Petrolite Corp. $ 864,000 1.82%
Layne Christensen Co. 815,000 1.72%
Southwestern Energy Co. 756,250 1.59%
Kerr McGee Corp. 720,000 1.52%
Bandag Inc. 710,625 1.50%
NPC International Inc. 709,500 1.49%
Kellwood Co. 700,000 1.47%
Brunswick Corp. 696,000 1.47%
Lawter International Inc. 694,375 1.46%
Outboard Marine Corp. 660,000 1.39%
Top 10 Equity Holdings Total: $7,325,750 15.43%
NOTE: All market values based on 12/31/96 statement of assets.
GRAPH -- Pie Chart
Historical Distributions
Total
Calendar Dividends Capital Gains Distribution
Year per Share per Share per Share
1992 0.040 - 0.040
1993 0.138 - 0.138
1994 0.180 0.171 0.351
1995 0.190 0.705 0.895
1996 0.205 0.396 0.601
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 or any other applicable deposit
insurance. These shares involve investment risks, including the possible loss
of the principal amount invested.
FINANCIAL STATEMENTS
Statement of Net Assets
December 31, 1996 (unaudited)
Market
Shares Company Value
COMMON STOCKS - 76.55%
BASIC MATERIALS - 7.84%
50,000 Amax Gold, Inc. $ 318,750
15,000 Atchison Casting Co.. 270,000
18,000 Cyprus Amax Minerals Co. 420,750
40,000 Fansteel, Inc. 250,000
40,000 Huntco, Inc. Cl. A 590,000
30,000 Laclede Steel Co. 97,500
25,000 Midwest Grain Products, Inc. 425,000
18,000 Petrolite Corp. 864,000
30,000 Santa Fe Pacific Gold 461,250
3,697,250
Capital Goods - 10.03%
15,000 Baldor Electric 369,375
15,000 Bandag, Inc. 710,625
27,500 BHA Group, Inc. 443,438
60,000 Green (A.P.) Industries Inc. 585,000
18,000 Harmon Industries, Inc. 335,250
3,000 HON Industries Inc. 99,000
60,000 Instituform Technologies Inc., Cl. A 442,500
60,000 Layne Inc. 915,000
50,000 MYR Group, Inc. 643,750
5,000 Paul Mueller Co. 187,500
4,731,438
Consumer Cyclical - 21.39%
30,000 Angelica Corp. 573,750
10,000 Block (H & R), Inc. 290,000
15,000 Brown Group, Inc. 275,625
29,000 Brunswick Corp. 696,000
38,000 CPI Corp. 636,500
15,000 Caseys General Stores, Inc. 281,250
6,000 Dillards Dept. Stores, Inc. Cl. A 185,250
16,000 Donnelley (R.R.) & Sons 502,000
20,000 First Alert, Inc. 67,500
35,000 Flexsteel Industries, Inc. 455,000
35,000 Kellwood Co. 700,000
20,000 Lee Enterprises, Inc. 465,000
10,000 Mallinckrodt Group, Inc. 441,250
1,500 May Department Stores Co. 70,125
Consumer Cyclical (Continued)
24,000 Maytag Corp. 474,000
18,150 Medpartners, Inc. 381,150
86,000 NPC International, Inc. Cl. B 709,500
35,000 O'Sullivan Industries Holdings, Inc. 490,000
40,000 Outboard Marine Corp. 660,000
20,000 Republic Group, Inc. 312,500
40,000 Safety-Kleen Corp. 655,000
80,000 Sanfilippo (John B & Son), Inc. 400,000
34,000 Stuart Entertainment, Inc. 153,000
58,000 Toastmaster Inc. 217,500
10,091,900
Consumer Staples - 11.36%
15,000 Alberto-Culver Co. Cl. A 618,750
20,000 Beverly Enterprises, Inc. 255,000
5,000 Celestial Seasonings, Inc. 98,750
25,000 Clarcor Inc. 553,125
35,000 Exabyte Corp. 468,125
60,000 Isco, Inc. 540,000
55,000 Lawter International, Inc. 694,375
18,000 Rival Co. 447,750
22,000 Sealright Co. 231,000
3,500 Sigma-Aldrich Corp. 218,531
85,000 TCBY Enterprises, Inc. 340,000
40,000 VICORP Restaurants, Inc. 530,000
50,000 Winnebago Industries, Inc. 362,500
5,357,906
Energy - 8.49%
7,500 Helmerich & Payne Inc. 390,937
10,000 Kerr-McGee Corp. 720,000
20,000 Laclede Gas Co. 482,500
15,000 Mapco, Inc. 510,000
35,000 Maverick Tube Corp. 446,250
11,000 Murphy Oil Corp. 611,875
30,000 St Joseph Light & Power Co. 461,250
7,000 St Mary Land & Exploration Co. 174,125
20,000 Total Petroleum North America Ltd. 207,500
4,004,437
Financial - 1.86%
1,000 Boatmen's Bancshares 64,500
10,000 Brenton Banks 276,250
1,260 Commerce Bancshares Inc. 58,275
1,000 Kansas City Life Insurance Co. 63,500
1,000 Magna Group, Inc 29,500
10,000 Old Republic International Corp. 267,500
2,500 Reinsurance Group of America, Inc. 117,813
877,338
Miscellaneous - 3.30%
15,000 ACX Technologies 298,125
65,000 B.I. Inc. 455,000
10,000 Lawson Products 218,750
6,000 Molex Inc. 234,750
50,000 Stimsonite Corp. 306,250
10,000 Trion Inc. 41,250
1,554,125
Technology - 0.17%
3,500 DII Group Inc 81,375
Transportation & Service - 0.86%
22,500 Werner Enterprises, Inc. 407,812
Utilities - 11.25%
38,000 Aliant Communications, Inc 646,000
12,000 Calenergy, Inc. 403,500
35,000 Empire District Electric Co. 656,250
15,000 IES Industries, Inc. 448,125
15,000 Interstate Power Co. 435,000
8,000 Kansas City Power & Light Co. 228,000
50,000 Southwestern Energy Co. 756,250
15,000 Union Electric Co. 577,500
20,000 Utilicorp United, Inc. 540,000
20,000 Western Resources, Inc. 617,500
5,308,125
TOTAL COMMON STOCK - 76.55% 36,111,706
Face Market
Amount Company Value
Convertible Corporate Bonds - 0.79%
375,000 Beverly Enterprises, Inc. CV. Sub. Deb.,
7.625% due March 15, 2003 371,250
Short-Term Corporate Notes - 17.96%
500,000 AIG Funding, Inc.,
5.23%, due January 15, 1997 498,892
500,000 American Greetings Corp.,
5.42%, due January 22, 1997 498,344
500,000 American Tel & Telegraph Co.,
5.20%, due January 10, 1997 499,278
500,000 American Tel & Telegraph Co.,
5.28%, due January 31, 1997 497,727
500,000 Bell Atlantic Network Fdg.,
5.33%, due January 23, 1997 498,297
500,000 Disney Walt Co.,
5.33%, due January 8, 1997 499,408
500,000 Dover Corp.,
5.54%, due January 17, 1997 498,692
500,000 du Pont (E.I.) de Nemours & Co.,
5.30%, due February 4, 1997 497,424
625,000 Flour Corp.,
5.58%, due January 29, 1997 622,191
375,000 Gannett Co. Inc.,
5.85%, due January 6, 1997 374,634
500,000 International Business Machines Corp.,
5.30%, due February 14, 1997 496,687
500,000 Kellogg Co.,
5.33%, due January 3, 1997 499,778
500,000 Motorola Inc.,
5.30%, due February 14, 1997 496,687
500,000 Penny (J.C.) Funding Corp.,
5.34%, due January 21, 1997 498,442
500,000 Philip Morris Cos., Inc.,
5.25%, due January 7, 1997 499,490
500,000 Raytheon Co.,
5.34%, due January 9, 1997 499,332
500,000 Snap On Tools Corp.,
5.60%, due January 21, 1997 498,367
TOTAL SHORT-TERM CORPORATE NOTES - 17.96% 8,473,670
GOVERNMENT SPONSORED ENTERPRISES - 4.19%
500,000 Federal Home Loan Banks,
5.25%, due April 17, 1997 492,198
500,000 Federal National Mortgage Association,
5.19%, due January 13, 1997 499,063
500,000 Federal National Mortgage Association,
5.27%, due March 4, 1997 495,389
500,000 Federal National Mortgage Association,
5.29%, due April 30, 1997 491,183
TOTAL GOVERNMENT SPONSORED ENTERPRISES - 4.19% 1,977,833
REPURCHASE AGREEMENT - 1.08%
510,000 Northern Trust Co.,
6.375%, due January 2, 1997
(Collateralized by U.S. Treasury Notes,
6.50%, due May 15, 1997) 510,000
TOTAL INVESTMENTS - 100.57% $ 47,444,459
Other assets less liabilities - ( 0.57%) (273,395)
TOTAL NET ASSETS - 100.00%
(equivalent to $10.43 per share;
10,000,000 shares of $1.00 par value
value capital shares authorized;
4,524,616 shares outstanding) $ 47,171,064
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 1996 (unaudited)
ASSETS:
Investment securities, at market value
(identified cost $43,700,594) $ 47,444,459
Cash (375,548)
Dividends receivable 77,563
Interest receivable 8,340
Securities sold receivable 16,250
Total assets 47,171,064
LIABILITIES AND NET ASSETS:
Payable for investments purchased -
Total liabilities -
NET ASSETS $ 47,171,064
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in surplus of capital) $ 43,438,902
Accumulated undistributed income:
Undistributed net investment income 9,052
Accumulated net realized gain on investment transactions 5,907
Net unrealized appreciation in value of investments 3,717,203
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 47,171,064
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 4,524,616
NET ASSET VALUE PER SHARE $ 10.43
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Operations
Six Months Ended December 31, 1996 (unaudited)
INVESTMENT INCOME:
Income:
Dividends $ 394,760
Interest 264,886
659,646
Expenses:
Withholding fees 450
Management fees (Note 3) 187,181
Registration fees and other expenses 10,251
197,882
Net investment income 461,764
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 1):
Realized gain from investment transactions
(excluding commercial paper
and repurchase agreements):
Proceeds from sales of investments 2,890,891
Cost of investments sold 2,118,689
Net realized gain from investment transactions 772,202
Unrealized appreciation of investments:
Beginning of period 2,926,042
End of period 3,717,203
Increase in net unrealized appreciation
on investments 791,161
Net gain on investments 1,563,363
Net increase in net assets resulting
from operations $ 2,025,127
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Six Months Ended January 1, 1996
December 31, 1996 to
(unaudited) June 30, 1996
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 461,764 $ 389,089
Net realized gain from investment activities 772,202 1,587,947
increase (decrease) in net unrealized
appreciation of investments 791,161 964,658
Net increase in net assets resulting from
operations 2,025,127 2,941,694
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (445,695) (397,201)
Net realized gain from investment transactions (1,416,497) (1,512,894)
Total distributions to shareholders (1,862,192) (1,910,095)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 723,673 and
812,923 shares sold 7,551,476 8,467,334
Net asset value of 109,993 and
115,106 shares issued for
reinvestment of distributions 1,142,833 1,190,193
8,694,309 9,657,527
Cost of 344,717 and 469,494 shares redeemed (3,587,340) (4,955,644)
Net increase from capital share transactions 5,106,969 4,701,883
Total increase in net assets 5,269,904 5,733,482
NET ASSETS:
Beginning of period 41,901,160 36,167,678
End of period (including undistributed
net investment income
of $9,051 and $257,761) $ 47,171,064 $ 41,901,160
*Distributions to shareholders:
Income dividends per share $ .101 $ .10
Capital gains distribution per share $ .321 $ .40
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. Effective on April 24,
1996, the Fund's shareholders approved a change in the fiscal year-end. A
summary of significant accounting policies that the Fund uses in the
preparation of its financial statements follows. The policies are in
conformity with generally accepted accounting principles.
Investments - Common stocks traded on a national securities exchange are
valued at the last reported sales price on the last business day of the period
or, if no sale was reported on that date, at the average of the last reported
bid and asked prices. Investment transactions are recorded on the date
securities are purchased or sold. Dividend income 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. Short-term investments
are valued at cost with interest income recorded on the accrual basis.
Federal Income Taxes - The Fund has complied with the Internal Revenue Code
requirements applicable to regulated investment companies and will distribute
all income to its shareholders. Therefore, no Federal income tax provision is
required.
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 six months ended December 31, 1996 (excluding
repurchase agreements and short-term securities), are as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 3,468,688 $ 0,000,000
Proceeds from sales 2,890,891 0,000,000
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 shareholders 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 they are sufficient to
protect the Fund in the event of default by the seller.
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
Elizabeth L. Allwood, Vice President
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
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