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, 1997
TO THE SHAREHOLDERS
Scout Regional Fund earned a total return (price change and reinvested
distributions) of -0.76% for the quarter ended December 31, 1997. By
comparison, the unmanaged Value Line Composite Index and Lipper Small Company
Fund Index had returns of -2.13% and -5.43%, respectively, for the same
period.
Performance data contained in this report is for past periods only. Past
performance is not indicative of future performance. Investment return
and share value will fluctuate, and redemption value may be more or less
than original cost.
On October 27, 1997, the U.S. equity markets - already nervous about
the 10th anniversary of the October 1987 crash - fell sharply in
response to major financial problems in Southeast Asia. The Dow Jones
Industrial Average fell 554 points, a record single-day point loss, for
a 7.2% decline. This was a smaller percentage than in 1987's crash and
the decline was less significant overall because of record high stock
values.
There was an initial sell-off, but the large-capitalization stocks
staged a strong recovery the next day. The stocks of large-sized
companies regained most of their loss in November, dipped in December
and then finished the year with a strong rally in the final week.
The stocks of small-sized companies did not recover as well as those of
larger companies. Market leadership narrowed again after broadening in
the third quarter, when it favored small and mid-sized companies. This
shift was caused by a "flight to quality" and liquidity by investors
concerned about the financial situation in Southeast Asia. Small-cap
stocks with high price/earnings ratios were especially hard hit as
problems in Asia raised doubts about continuing high performance and
growth. The Fund was helped by its portfolio, which is largely limited
to companies from an eight-state Midwest area, and by its value
management style.
Utilities and financial services were the best performing economic
sectors during the quarter. Utilities rose because of industry
restructuring, cheaper fossil fuels and falling interest rates. The Fund
is heavily weighted in utilities and profited from this market move. It
is underweighted in financial services because of concerns about
overvaluation due to a lack of revenue growth, high consumer debt and
credit quality problems in Southeast Asia.
The poorest performing sectors were technology and energy. The Fund is
dramatically underweighted in technology because of valuation concerns
due to demand problems in Southeast Asia, overstated earnings estimates
and intense competition.
Small-cap stocks should regain their relative momentum when events in
Southeast Asia stabilize and earnings are again the focus. The tumbling
market has created great values in the small-cap sector. If these stocks
do resume market leadership, the Fund should benefit along with the rest
of the group.
Economic fundamentals still appear strong entering 1998, with the
exception of the Southeast Asian situation. However, valuations,
especially of large company stocks, remain higher than corporate
earnings seem to justify. This makes small-cap stocks attractive by
comparison. We can expect even higher market volatility, which will test
the self-discipline of investors whose expectations are too high. We
believe the Fund, with its diversification, equal weighting and cash
reserves, will perform well in this situation.
For the six months ended December 31, 1997, shareholders received an
ordinary income dividend of $.14 per share, a short-term capital gain of
$.03 per share and a long-term capital gain of $.43 per share.
For corporate shareholders, 91.70% of ordinary income distributions
qualify for the corporate dividends received deduction.
We appreciate you as a valued shareholder of Scout Regional Fund and
continually welcome your questions or comments.
Sincerely,
/s/Dave B. Anderson
Dave B. Anderson
UMB Investment Advisors
TOP 10 EQUITY HOLDINGS
Market Percent
Value (000's) of Total
Safety-Kleen Corp. $1,152 2.31%
Aliant Communications, Inc. 1,098 2.20%
BHA Group, Inc. 944 1.89%
Mapco, Inc. 925 1.86%
NPC International, Inc. Cl. B 909 1.83%
Angelica Corp. 905 1.82%
Kellwood Co. 900 1.81%
Laclede Gas Co. 898 1.80%
MYR Group, Inc. 876 1.76%
CPI Corp. 860 1.73%
Top 10 Equity Holdings Total: $9,467 19.00%
NOTE: All market values based on 12/31/97 statement of assets.
PIE CHART - SECTOR DIVERSIFICATION
Basic Materials 11.6%
Capital Goods 16.6%
Consumer Cyclical 20.5%
Consumer Staples 19.5%
Energy 7.6%
Financial 2.0%
Technology 2.4%
Transporation
& Service 1.0%
Utilities 18.8%
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
December 31, 1997 (unaudited)
Market
Shares Company Value
COMMON STOCKS - 81.93%
Basic Materials - 9.46%
15,000 ACX Technologies $ 366,563
50,000 Amax Gold, Inc. 115,625
25,000 Cyprus Amax Minerals Co. 384,375
2,500 Deltic Timber Corp. 68,437
40,000 Huntco, Inc. Cl. A 675,000
25,000 Laclede Steel Co. 100,000
55,000 Lawter International, Inc. 598,125
18,000 Mallinckrodt Group, Inc. 684,000
18,500 Republic Group, Inc. 302,937
42,000 Safety-Kleen Corp. 1,152,375
7,000 Sigma-Aldrich Corp. 278,250
4,725,687
Capital Goods - 13.59%
15,000 Atchison Casting Co. 243,750
20,000 Baldor Electric 433,750
48,400 BHA Group, Inc. 943,800
25,000 Federal Signal Corp. 540,625
65,000 Green (A.P.) Industries Inc. 751,562
30,000 Harmon Industries, Inc. 832,500
85,000 Instituform Technologies Inc., Cl. A 658,750
65,000 Isco, Inc. 576,875
50,000 Layne Christensen Co. 650,000
68,333 MYR Group, Inc. 875,517
5,000 Paul Mueller Co. 192,500
10,000 Trion Inc. 48,750
2,000 Valmont Industries Inc. 39,000
6,787,379
Consumer Cyclical - 16.78%
70,000 B.I. Inc. 625,625
15,000 Bandag, Inc. 801,563
10,000 Belden Inc. 352,500
10,000 Block (H & R), Inc. 448,125
15,000 Brown Group, Inc. 199,687
15,000 Caseys General Stores, Inc. 380,625
25,000 Clarcor Inc. 740,625
6,000 Dillards Inc. 211,500
15,000 Donnelley (R.R.) & Sons 558,750
20,000 First Alert, Inc. 42,500
37,925 Flexsteel Industries, Inc. 535,691
30,000 Kellwood Co. 900,000
25,000 Lawson Products 743,750
10,000 Lee Enterprises, Inc. 295,625
15,000 Maytag Corp. 559,688
35,000 O'Sullivan Industries Holdings, Inc. 350,000
9,102 Pharmerica Inc. 94,433
18,000 Rival Co. 236,250
60,000 Stimsonite Corp. 303,750
8,380,687
Consumer Staples - 15.98%
20,000 Alberto-Culver Co. Cl. A 540,000
40,000 Angelica Corp. 905,000
20,000 Beverly Enterprises, Inc. 260,000
21,000 Brunswick Corp. 636,562
38,000 CPI Corp. 859,750
5,000 Celestial Seasonings, Inc. 157,500
15,000 I B P Inc. 314,063
14,000 Medpartners, Inc. 313,250
25,000 Midwest Grain Products, Inc. 312,500
75,000 NPC International, Inc. Cl. B 909,375
80,000 Sanfilippo (John B & Son), Inc. 630,000
22,000 Sealright Co. 272,250
35,000 Stuart Entertainment, Inc. 59,062
85,000 TCBY Enterprises, Inc. 642,813
41,300 VICORP Restaurants, Inc. 722,750
50,000 Winnebago Industries, Inc. 443,750
7,978,625
Energy - 6.21%
5,000 Helmerich & Payne Inc. 339,375
10,000 Kerr-McGee Corp. 633,125
10,425 Maverick Tube Corp. 263,883
11,000 Murphy Oil Corp. 596,062
60,000 Southwestern Energy Co. 772,500
5,000 St. Mary Land & Exploration Co. 175,000
10,000 Ultramar Diamond Sharmock Corp. 318,750
3,098,695
Financial - 1.65%
8,000 Brenton Banks 320,000
1,050 Commerce Bancshares Inc. 71,138
700 Kansas City Life Insurance Co. 69,300
7,500 Old Republic International Corp. 278,906
2,000 Reinsurance Group of America, Inc. 85,125
824,469
Technology - 2.00%
7,000 DII Group Inc. 190,750
35,000 Exabyte Corp. 225,312
40,000 Fansteel, Inc. 340,000
7,500 Molex Inc. 240,938
997,000
Transportation & Service - 0.82%
20,000 Werner Enterprises, Inc. 410,000
Utilities - 15.44%
35,000 Aliant Communications, Inc. 1,098,125
8,000 Calenergy, Inc. 230,000
40,000 Empire District Electric Co. 785,000
10,000 IES Industries, Inc. 368,125
10,000 Interstate Power Co. 374,375
7,000 Kansas City Power & Light Co. 206,937
32,000 Laclede Gas Co. 898,000
20,000 Mapco, Inc. 925,000
35,000 St. Joseph Light & Power Co. 623,438
15,000 Union Electric Co. 648,750
20,000 Utilicorp United, Inc. 776,250
18,000 Western Resources, Inc. 774,000
7,708,000
TOTAL COMMON STOCK - 81.93% 40,910,542
Face Market
Amount Description Value
Short-Term Corporate Notes - 12.97%
$ 500,000 American Tel. & Telegraph,
5.54%, due January 5, 1998 $ 499,615
500,000 Bell Atlantic Network Funding,
5.85%, due January 13, 1998 498,944
500,000 BP America,
5.87%, due January 20, 1998 498,369
500,000 Disney Walt Co.,
5.65%, due February 13, 1998 496,547
500,000 Dun & Bradstreet Corp.,
5.78%, due January 21, 1998 498,314
500,000 Emerson Electric Co.,
5.63%, due January 29, 1998 497,732
500,000 Emerson Electric Co.,
5.75%, due February 10, 1998 496,726
500,000 Engelhard Corp.,
5.72%, due February 3, 1998 497,299
500,000 General Mills Inc.,
5.77%, due January 5, 1998 499,599
500,000 Kimberly-Clark Corp.,
5.73%, due January 23, 1998 498,170
500,000 Monsanto Co.,
5.68%, due January 7, 1998 499,448
500,000 Nalco Chemical Co.,
6.00%, due January 12, 1998 499,000
500,000 Wisconsin Electric Power Co.,
5.77%, due January 16, 1998 498,718
TOTAL SHORT-TERM CORPORATE NOTES - 12.97% 6,478,481
GOVERNMENT SPONSORED ENTERPRISES - 2.96%
500,000 Federal National Mortgage Association,
5.60%, due March 13, 1998 494,400
1,000,000 Federal National Mortgage Association,
5.43%, due April 29, 1998 982,051
TOTAL GOVERNMENT SPONSORED ENTERPRISES - 2.96% 1,476,451
REPURCHASE AGREEMENT - 1.91%
$ 955,000 Northern Trust Co.,
6.40%, due January 2, 1998
(Collateralized by U.S. Treasury Notes,
5.875%, due February 28, 1999) 955,000
TOTAL INVESTMENTS - 99.77% $ 49,820,474
Other assets less liabilities - 0.23% 115,130
TOTAL NET ASSETS - 100.00%
(equivalent to $11.89 per share;
10,000,000 shares of $1.00 par value
value capital shares authorized;
4,198,465 shares outstanding) $ 49,935,604
See accompanying Notes to Financial Statements.
Statement of Assets and Liabilities
December 31, 1997 (unaudited)
ASSETS:
Investment securities, at market value
(identified cost $41,113,111) $ 49,820,474
Cash 32,139
Dividends receivable 82,991
Interest receivable -
Securities sold receivable -
Total assets 49,935,604
LIABILITIES AND NET ASSETS:
Payable for investments purchased -
Total liabilities -
NET ASSETS $ 49,935,604
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in surplus of capital) $ 39,923,901
Accumulated undistributed income:
Undistributed net investment income 4,316
Accumulated net realized gain on investment transactions 1,300,024
Net unrealized appreciation in value of investments 8,707,363
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 49,935,604
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 4,198,465
NET ASSET VALUE PER SHARE $ 11.89
See accompanying Notes to Financial Statements.
Statement of Operations
Six Months Ended December 31, 1997 (unaudited)
INVESTMENT INCOME:
Income:
Dividends $ 415,625
Interest 206,082
621,707
Expenses:
Withholding fees 225
Management fees (Note 3) 209,650
Registration fees and other expenses 9,812
219,687
Net investment income 402,020
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 1):
Realized gain from investment transactions
(excluding commercial paper and repurchase agreements):
Proceeds from sales of investments 5,173,823
Cost of investments sold 2,414,078
Net realized gain from investment transactions 2,759,745
Unrealized appreciation of investments:
Beginning of period 6,610,704
End of period 8,707,363
Increase in net unrealized appreciation on investments 2,096,659
Net gain on investments 4,856,404
Net increase in net assets resulting from operations $ 5,258,424
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended
(unaudited) June 30, 1997
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 402,020 $ 962,801
Net realized gain from investment activities 2,759,745 2,069,833
Increase (decrease) in net unrealized appreciation
of investments 2,096,659 3,684,662
Net increase in net assets resulting from operations 5,258,424 6,717,296
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (558,815) (794,637)
Net realized gain from investment transactions (1,847,455) (2,332,298)
Total distributions to shareholders (2,406,270) (3,126,935)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 710,833 and 1,395,435 shares sold 9,380,992 14,709,173
Net asset value of 27,433 and 176,123 shares issued for
reinvestment of distributions 318,688 1,875,551
9,699,680 16,584,724
Cost of 951,324 and 1,278,012 shares redeemed (11,133,250) (13,559,225)
Net increase from capital share transactions (1,433,570) 3,025,499
Total increase in net assets 1,418,584 6,615,860
NET ASSETS:
Beginning of period 48,517,020 41,901,160
End of period (including undistributed net investment income
of $4,315 and $166,958) $ 49,935,604 $ 48,517,020
*Distributions to shareholders:
Income dividends per share $ .139 $ .18
Capital gains distribution per share $ .461 $ .53
</TABLE>
See accompanying 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, 1997
(excluding repurchase agreements and short-term securities), are as
follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 2,019,368 $ -
Proceeds from sales 5,173,823 -
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
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
www.umb.com
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