Scout SM
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
March 31, 1998
TO THE SHAREHOLDERS
During the three months ended March 31, 1998, Scout Regional Fund rose
to $12.68 per share from $11.89 per share, providing investors with a
total return of 6.6%. For the year ended March 31, 1998, the Fund earned
a total return (including capital gain and dividend distributions) of
30.4%.
After a lackluster January, the bull market got back on track in
February and March, pushing the overall stock market to historically
unprecedented heights. And while smaller capitalization stocks
participated in this rise, they were relatively less exuberant than
their large-cap counterparts. Your Fund's first-quarter return lagged
the overall market because we deemed it prudent to maintain 18% of the
Fund's assets in opportunity reserves to provide buying liquidity if a
market retracement occurs. In addition, our individual stock positions
have emphasized those neglected, undervalued equities that are trading
at price to cash flow ratios below 10 versus the overall market level of
14.
While stocks in general and large-cap stocks in particular have risen
because of investor enthusiasm, the smaller cap sectors are still
trading at price to earnings ratios that prevailed in 1983. Small-cap
stocks thus have risen in concert with their underlying earnings, but
have yet to become as fully priced as the wider market. We believe this
relationship is beginning to change as U.S. companies spent $10 billion
more on cash acquisitions in the first quarter of this year than in
first-quarter 1997. The relative valuations of small-cap to large-cap
stocks make takeover activity attractive as long as interest rates do
not rise substantially.
The Fund is just beginning to benefit from this takeover activity.
Acquisition activity in the first quarter produced significant gains in
Fund holdings of A.P. Green, 360 Communications, Mapco, First Alert and
Safety Kleen. Earnings growth of companies in your Fund now exceeds that
of the overall economy, as these companies are not as dramatically
affected by Asian financial problems or currency exchange rates.
The longer term returns that investors in the Fund have earned have been
generally favorable versus the comparison index and other managers, as
the chart in this report shows.
We continue to believe there is substantial value in the stocks of
smaller companies ($1 billion in market cap or less) headquartered in
the eight state midwestern region of Missouri, Kansas, Iowa, Arkansas,
Oklahoma, Illinois, Colorado and Nebraska. Our concentration is on these
stocks, which we believe are not widely followed or fully appreciated by
most on Wall Street.
We appreciate you as a valued shareholder of Scout Regional Fund and
continually welcome your questions or comments.
Chart - Hypothetical Growth of $10,000
Chart - Comparative Rates of Return
1 1/4 Years 2 1/4 Years 4 1/4 Years Obj.Chg.
Scout Regional Fund 24.3% 18.9% 14.6% 11.7%
Scout Regional Fund Equities 30.2% 23.8% 18.1% 16.6%
Lipper Small Co. Fund Index* 20.6% 17.9% 16.3% 16.5%
Russell 2000* 26.9% 22.2% 17.4% 18.0%
Scout Regional Fund's average annual compound returns for 1-, 5- and
10-year periods ended March 31, 1998, are 30.4%, 13.4% and 8.8%,
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 18.21%
Consumer Staples 17.16%
Transportation &
Services 0.97%
Basic Materials 10.49%
Energy 6.06%
Financial 1.59%
Capital Goods 12.37%
Utilities 13.65%
Technology 2.14%
Consumer Cyclical 17.36%
Chart - Top 10 Equity Holdings
Market Percent
Value (000's) of Total
Safety-Kleen Corp. $ 1,192 2.27%
Aliant Communicaitons, Inc. 1,088 2.07%
NPC International, Inc. Cl. B. 994 1.89%
CPI Corp. 962 1.83%
Williams Companies, Inc. 959 1.83%
Instituform Technologies Inc, Cl. A. 951 1.81%
Kellwood Co. 926 1.76%
Angelica Corp. 923 1.75%
Harmon Industries, Inc. 917 1.75%
Bandag, Inc. 884 1.68%
Top 10 Equity Holdings Total: $ 9,796 18.65%
NOTE: All market values based on 3/31/98 statement of assets.
Sincerely,
/s/Dave B. Anderson
Dave 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 - 81.79%
Basic Materials - 10.49%
17,000 ACX Technologies $ 406,937
50,000 Amax Gold, Inc. 153,125
25,000 Cyprus Amax Minerals Co. 415,625
2,500 Deltic Timber Corp. 74,844
15,000 Falcon Products, Inc. 196,875
40,000 Huntco, Inc. Cl. A 575,000
20,000 Laclede Steel Co. 103,750
60,000 Lawter International, Inc. 667,500
20,000 Mallinckrodt Group, Inc. 790,000
18,500 Republic Group, Inc. 376,938
42,000 Safety-Kleen Corp. 1,191,750
15,000 Sigma-Aldrich Corp. 558,750
5,511,094
Capital Goods - 12.37%
15,000 Atchison Casting Co. 234,375
15,000 Baldor Electric 404,062
48,400 BHA Group, Inc. 865,150
28,000 Federal Signal Corp. 637,000
45,000 Harmon Industries, Inc. 916,875
85,000 Instituform Technologies Inc., Cl. A 950,938
75,000 Isco, Inc. 656,250
50,000 Layne Christensen Co. 756,250
68,333 MYR Group, Inc. 773,017
5,000 Paul Mueller Co. 195,000
10,000 Trion, Inc. 60,000
2,000 Valmont Industries Inc. 48,500
6,497,417
Consumer Cyclical - 17.36%
70,000 B.I., Inc. 735,000
15,000 Bandag, Inc. 884,063
10,000 Belden, Inc. 418,750
Consumer Cyclical (Continued)
10,000 Block (H & R), Inc. 475,625
15,000 Brown Group, Inc. 215,625
24,000 Caseys General Stores, Inc. 384,000
25,000 Clarcor, Inc. 831,250
6,000 Dillards, Inc. 221,625
15,000 Donnelley (R.R.) & Sons 615,937
37,925 Flexsteel Industries, Inc. 526,209
30,000 Kellwood Co. 926,250
30,000 Lawson Products 802,500
10,000 Lee Enterprises, Inc. 335,625
10,000 Maytag Corp. 478,125
35,000 O'Sullivan Industries Holdings, Inc. 446,250
8,000 Pharmerica, Inc. 119,000
18,000 Rival Co. 310,500
60,000 Stimsonite Corp. 393,750
9,120,084
Consumer Staples - 17.16%
20,000 Alberto-Culver Co. Cl. A 538,750
40,000 Angelica Corp. 922,500
35,000 Beverly Enterprises, Inc. 465,938
21,000 Brunswick Corp. 732,375
38,000 CPI Corp. 961,875
3,500 Celestial Seasonings, Inc. 143,500
25,000 I B P, Inc. 560,937
14,000 Medpartners, Inc. 143,500
25,000 Midwest Grain Products, Inc. 337,500
75,000 NPC International, Inc., Cl. B 993,750
85,000 Sanfilippo (John B & Son), Inc. 648,125
22,000 Sealright Co. 302,500
35,000 Stuart Entertainment, Inc. 65,625
85,000 TCBY Enterprises, Inc. 850,000
41,300 VICORP Restaurants, Inc. 758,888
50,000 Winnebago Industries, Inc. 590,625
9,016,388
Energy - 6.06%
10,000 Helmerich & Payne, Inc. 312,500
10,000 Kerr-McGee Corp. 695,625
18,000 Maverick Tube Corp. 318,375
11,000 Murphy Oil Corp. 551,375
72,000 Southwestern Energy Co. 765,000
5,000 St. Mary Land & Exploration Co. 191,094
10,000 Ultramar Diamond Sharmock Corp. 352,500
3,186,469
Financial - 1.59%
15,000 Brenton Banks 318,750
1,500 Commerce Bancshares, Inc. 71,625
700 Kansas City Life Insurance Co. 60,550
7,500 Old Republic International Corp. 332,344
1,000 Reinsurance Group of America, Inc. 50,000
833,269
Technology - 2.14%
7,000 DII Group, Inc. 150,500
35,000 Exabyte Corp. 301,875
40,000 Fansteel, Inc. 302,500
8,000 Molex, Inc. 220,000
4,717 360 Communication, Co. 147,406
1,122,281
Transportation & Service - 0.97%
20,000 Werner Enterprises, Inc. 510,000
Utilities - 13.65%
32,000 Aliant Communications, Inc. 1,088,000
12,000 Ameren Corp. 505,500
8,000 Calenergy, Inc. 226,000
40,000 Empire District Electric Co. 865,000
7,500 IES Industries, Inc. 278,906
8,000 Interstate Power Co. 286,500
10,000 Kansas City Power & Light Co. 315,000
30,000 Laclede Gas Co. 751,875
35,000 St. Joseph Light & Power Co. 625,625
16,000 Utilicorp United, Inc. 631,000
15,000 Western Resources, Inc. 641,250
29,970 Williams Companies, Inc. 959,040
7,173,696
TOTAL COMMON STOCKS - 81.79% 42,970,698
Face Market
Amount Description Value
Short-Term Corporate Notes - 13.48%
$ 500,000 Abbott Laboratories,
5.47%, due April 22, 1998 498,329
500,000 American Greetings Corp.,
5.54%, due April 3, 1998 499,769
500,000 Archer-Daniels-Midland Co.,
5.47%, due April 1, 1998 499,924
500,000 Campbell Soup Co.,
5.48%, due May 22, 1998 496,042
500,000 Chevron USA Inc.,
5.49%, due April 7, 1998 499,466
500,000 Deere & Co.,
5.53%, due April 8, 1998 499,386
500,000 Disney Walt Co.,
5.46%, due April 13, 1998 499,014
500,000 Disney Walt Co.,
5.46%, due April 15, 1998 498,863
500,000 Eastman Kodak Co.,
5.50%, due April 23, 1998 498,243
500,000 Gannett, Inc.,
5.44%, due April 9, 1998 499,320
500,000 International Business Machines,
5.43%, due April 21, 1998 498,416
500,000 Monsanto Co.,
5.50%, due May 8, 1998 497,097
600,000 Proctor & Gamble Co.,
5.50%, due April 1, 1998 599,908
500,000 Progress Capital Co.,
5.53%, due April 6, 1998 499,539
TOTAL SHORT-TERM CORPORATE NOTES - 13.48% 7,083,316
GOVERNMENT SPONSORED ENTERPRISES - 2.83%
1,000,000 Federal National Mortgage Association,
5.43%, due April 29, 1998 995,626
500,000 Federal National Mortgage Association,
5.40%, due June 12, 1998 494,525
TOTAL GOVERNMENT SPONSORED ENTERPRISES - 2.83% 1,490,151
REPURCHASE AGREEMENT - 0.42%
220,000 Northern Trust Co.,
5.88%, due April 1, 1998
(Collateralized by U.S. Treasury Notes,
6.25%, due April 30, 2001) 220,000
TOTAL INVESTMENTS - 98.52% $ 51,764,165
Other assets less liabilities - 1.48% 775,239
TOTAL NET ASSETS - 100.00%
(equivalent to $12.68 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
4,143,134 shares outstanding) $ 52,539,404
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.
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.
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
JB23A 5/98
