JONES & BABSON
THREE CROWN CENTER
2440 PERSHING ROAD SUITE G-15
KANSAS CITY, MO 64108
October 12, 1995
Securities and Exchange Commission
450 5th Street N. W.
Washington, D. C. 20549
Re: SCOUT BALANCED FUND, INC.
File No. 33-61123
File No. 811-07323
Pre-effective Amendment Number 1 to
Registration Statement on Form N-1A
-----------------------------------------
Ladies and Gentlemen:
Transmitted herewith is the first pre-effective amendment to
the initial Registration Statement on Form N-1A for Scout
Balanced Fund, Inc. in response to your comment letter dated
August 17, 1995 For your convenience, responses are numbered
the same as your comments.
PART A-PROSPECTUS:
1. In response to your comment number 1, there will be no
preliminary distribution of the prospectus
2. In response to your comment number 2, the first paragraph
under the caption "General Information and History" in the
prospectus has been modified to include the information
required by Item 4(a)(i) of Form N-1A.
3. In response to your comment number 3, the statement required
by Rule 481(b) under the 1933 Act and Item 1(a)(ii) of Form N-1a
will appear on the outside front cover of the final printed
prospectus.
4. In response to your comment number 4, the second sentence of
the final paragraph under the caption "Fund Expenses" has
been deleted.
5. In response to your comment number 5, the final two sentences
of the final paragraph under "Fund Expenses" will be made prominent
in the final printed prospectus by use of distinctive type
(either bold-face or italic).
<PAGE>
Scout Balanced Fund, Inc.
October 12, 1995
Page 2
6. In response to your comment number 6, the second paragraph uncer
the caption "Investment Objective and Portfolio Management Policy"
has been modified.
7. In response to your comment number 7, the percentage of Fund
assets which may be held in securites rated below investment grade
has been limited to 5% and the requested disclosure has been added
to the paragraph numbered 3 under the discussion regarding fixed
income securities under the caption "Investment Objective and
Portfolio Management Policy"
8. In response to your comment number 8, an additional paragraph
has been added immediately following the paragraph numbered 3
regarding average maturity of fixed income obligations.
9. In response to your comment number 9, the paragraph has
been clarified to state that the Fund will not invest more
than 25% of its assets instead of 25% of its equity position
in a single industry.
10. In response to your comment number 10, it is anticipated
that during the initial period of operations, it will take some
time for the Fund to accumulate enough assets to take advantage
of certain "economies of scale" with regard to buying or selling
securites, or to negotiate favorable prices or commission rates,
and that during this period, in order to maximize the return and
keep the fund fully invested, it may be necessary to maintain a
relative large percentage of the portfolio in repurchase
agreements.
11. In response to your comment number 11 the reason for the
language regarding approval by all participating banks is that
the Fund has no control over the banks or their procedures and
some banks may not be willing to allow telephone redemptions or
may not be equipped to handle them.
12. In response to your comment number 12, the requested language
has been added to the last paragraph under the caption "How to
Redeem Shares."
PART B-STATEMENT OF ADDITIONAL INFORMATION
13. In response to your comment number 13, the SAI has been
modified to comply with the comments above.
<PAGE>
Scout Balanced Fund, Inc.
October 12, 1995
Page 3
14. In response to your comment number 14, a discussion of
portfolio turnover has been added as the last paragraph under
the caption "Portfolio Transactions."
15. In response to your comment number 15, restriction two
has been modified to include futures contracts.
16. In response to your comment number 16, there is no intent
on the part of this Fund to write coverd call options, and the
language regarding covered call options has been deleted from
restriction number seven.
Part C-OTHER INFORMATION
17. In response to your comment number 17, the initial financial
statements for the Fund dated October 2, 1995 are also included
in Part B of Form N-1A.
Thank you very much for your consideration in this matter.
Sincerely,
John G> Dyer
John G. Dyer
Attorney
JGD:com
Encl.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. ______ File No. 33-61123 [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1 File No. 811-07323 [ ]
SCOUT BALANCED FUND, INC.
______________________________________________________________
(Exact Name of Registrant as Specified in Charter)
2440 Pershing Road, G-15, Kansas City, MO 64108
______________________________________________________________
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code (816) 471-5200
Larry D. Armel, President, SCOUT BALANCED FUND, INC.
2440 Pershing Road, G-15, Kansas City, Missouri 64108
______________________________________________________
(Name and Address of Agent for Service)
The registrant hereby amends this Registration statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective on
such date as the Commission acting pursuant to said Section 8(a) may
determine.
Please address inquiries and a carbon copy of all
and communications to: communications to:
John G. Dyer, Esq. Mark H. Plafker, Esq.
UMB WorldWide Fund, Inc. Stradley, Ronon, Stevens & Young
2440 Pershing Road, G-15 2600 One Commerce Square
Kansas City, MO 64108 Philadelphia, PA 19103-7098
Telephone: (816) 471-5200 Telephone: (215) 564-8024
<PAGE>
SCOUT BALANCED FUND, INC.
CROSS REFERENCE SHEET
Form N-1A Item Number Location in Prospectus
Item 1. Cover Page . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . Not Applicable
Item 3. Condensed Financial Information . . Per Share Capital and
Income Changes
Item 4. General Description of Registrant. . Investment Objective
and Portfolio
Management Policy
Item 5. Management of the Fund . . . . . . . Officers and Directors;
Management and
Investment Counsel
Item 6. Capital Stock and Other Securities . How to Purchase Shares;
How to Redeem Shares;
How Share Price is
Determined; General
Information and
History; Dividends,
Distributions and
their Taxation
Item 7. Purchase of Securities . . . . . . . Cover Page; How to
being Offered Purchase Shares;
Shareholder Services
Item 8. Redemption or Repurchase . . . . . How to Redeem Shares
Item 9. Pending Legal Proceedings . . . . . Not Applicable
SCOUT BALANCED FUND, INC.
CROSS REFERENCE SHEET (Continued)
Location in Statement
of Additional
Form N-1A Item Number Information
Item 10. Cover Page . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . . Cover Page
Item 12. General Information and History . . Investment Objectives
and Policies;
Management and
Investment Counsel
Item 13. Investment Objectives and Policies . Investment Objectives
and Policies;
Investment Restrictions
Item 14. Management of the Fund . . . . . . . Management and
Investment Counsel
Item 15. Control Persons and Principal . . . Management and
Holders of Securities Investment Counsel;
Officers and Directors
Item 16. Investment Advisory and other . . . Management and
Services Investment Counsel
Item 17. Brokerage Allocation . . . . . . . . Portfolio Transactions
Item 18. Capital Stock and Other Securities . General Information and
History (Prospectus);
Financial Statements
Item 19. Purchase, Redemption and Pricing . . How Share Purchases
of Securities Being Offered are Handled; Redemption
of Shares
Financial Statements
Item 20. Tax Status . . . . . . . . . . . . . Dividends,
Distributions and their
Taxation (Prospectus)
Item 21. Underwriters . . . . . . . . . . . . How the Fund's Shares
are Distributed
Item 22. Calculation of Yield Quotations . . Not Applicable
of Money Market Fund
Item 23. Financial Statements . . . . . . . .Included in Part B
<PAGE>
PROSPECTUS
(DATE)
SCOUT
BALANCED
FUND, INC.
Managed by:
UMB Bank, n.a.
Kansas City, Missouri
Toll-Free 1-800-996-2862
In the Kansas City area
471-5200
Distributed By:
JONES & BABSON, INC.
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, Missouri 64108
INVESTMENT OBJECTIVE
The Scout Balanced Fund seeks both long-term
capital growth and high current income. Long-
term capital growth is intended to be achieved
primarily by the Fund's investment in a
diversified portfolio of equity securities (common
stocks and securities convertible into common
stocks). High current income is intended to be
achieved by the fund's investment in a diversified
portfolio of fixed-income obligations.
PURCHASE INFORMATION
Minimum Investment
Initial Purchase $
Initial IRA and Uniform Transfers (Gifts)
to Minors Purchases $
Subsequent Purchase:
By Mail $
By Telephone or Wire $
All Automatic Purchases $
Shares are purchased and redeemed at net asset
value. There are no sales, redemption or Rule 12b-
1 distribution charges. If you need further
information, please call the Fund at the telephone
number indicated.
ADDITIONAL INFORMATION
This prospectus should be read and retained for
future reference. It contains the information that
you should know before you invest. A "Statement
of Additional Information" of the same date as
this prospectus has been filed with the Securities
and Exchange Commission and is incorporated by
reference. Investors desiring additional
information about the Fund may obtain a copy
without charge by writing or calling the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
Fund Expenses
Investment Objective and Portfolio Management Policy
Repurchase Agreements
Risk Factors
Investment Restrictions
Performance Measures
How to Purchase Shares
Initial Investments
Investments Subsequent to Initial Investment
Telephone Investment Service
Automatic Monthly Investment Plan
How to Redeem Shares
Systematic Redemption Plan
How to Exchange Shares Between Scout Funds
How Share Price is Determined
Officers and Directors
Management and Investment Counsel
General Information and History
Dividends, Distributions an their Taxation
Shareholder Services
Shareholder Inquiries
SCOUT BALANCED FUND, INC.
FUND EXPENSES
Shareholder Transaction Expenses
Maximum sales load imposed on purchases None
Maximum sales load imposed on reinvested dividends None
Deferred sales load None
Redemption fee None
Exchange fee None
Annual Fund Operation Expenses
(as a percentage of average net assets)
Management fees ____%
12b-1 fees None
Other expenses .08%
Total Fund operating expenses ____%
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Year
$__ $__
The above information is provided in order to assist you in understanding
the various costs and expenses that a shareholder of the Fund will bear
directly or indirectly. "Other Expenses" is based on estimated amounts
for the current fiscal year. The example should not be considered a
representation of past or future expenses. Actual expenses may be
greater or less than those shown.
INVESTMENT OBJECTIVE AND
PORTFOLIO MANAGEMENT POLICY
The Scout Balanced Fund seeks both long term
capital growth and high current income. Long-
term capital growth Is intended to be achieved
primarily by the fund's investment in a diversified
portfolio of equity securities (common stocks and
securities convertible into common stocks). High
current income is intended to be achieved by the
fund's investment in a diversified portfolio of
fixed-income obligations
The Scout Balanced Fund will normally invest
in a diversified portfolio of securities. The Fund
has the flexibility to pursue its objective through
any type or quality of domestic or foreign security.
The manager will shift the proportions of each
type of investment based on interpretation of
economic conditions and underlying security
valuations. Normally the fund will invest at least
25% of its total assets in equity securities and a
minimum of 25% of its total assets In fixed
income senior obligations. When, in the
manager's judgment, market conditions warrant, the
Fund, for defensive purposes, may make substantial
temporary investments in high quality money market
securities.
The fund will normally invest in the following
fixed income securities:
1. Direct obligations of the U.S. Government
such as bills, notes, bonds and other debt
securities issued by the U.S. treasury.
2. Obligations of U.S. government agencies and
instrumentalities which are secured by the
full faith and credit of the U.S. treasury, such
as securities of the Government National
Mortgage Association, the Export-import
Bank, or the Student Loan Marketing
Association; or which are secured by the
right of the issuer to borrow from the
Treasury, such as securities issued by the
Federal Financing Bank or the U.S. Postal
Service; or are supported by the credit of the
government agency or instrumentality itself,
such as securities of Federal Home Loan
Banks, Federal Farm Credit Banks, or the
Federal National Mortgage Association.
3. Securities issued by corporations or other
business organizations. The fund will
generally invest in securities that, at the time
of purchase, are classified as investment
grade by Moody's or by Standard & Poor's.
Securities that are subsequently downgraded
to non-investment grade may continue to be
held by the fund, as long as such securities do
not exceed 5% of the portfolio, and will be sold,
only if the manager believes it would be advantageous
to do so.
It is anticipated that the average maturity of the fixed
income obligations in the Fund's portfolio will be between
five and seven years.
The fund will normally invest in the following
equity securities, securities convertible into equity
securities, preferred stocks and warrants:
1. Domestic companies listed on an exchange or
over-the-counter.
2. Foreign companies with shares listed on a
U.S. exchange or over-the-counter or foreign
companies with American Depository
Receipts (ADR's), which represent foreign
securities and are traded on U. S. exchanges
or over-the-counter. The fund may also
invest directly In foreign securities.
The fund will not be restricted as to market
capitalizatlon. However, under normal
circumstances, the fund will not invest more than
25% of Its assets in a sIngle industry.
Also the fund may not own more than 10% of the
outstanding voting securities of a single issuer.
The fund may not invest more than 5% of its
equity assets in any one issuer.
Investments in money market securities shall
include government securities, government
agency securities, commercial paper, banker's
acceptances, bank certificates of deposit and
repurchase agreements. Investment In
commercial paper is restricted to companies rated
A2P2 or higher by Moody's and Standard &
Poor's.
The fund cannot guarantee that its objectives
will be achieved because there are inherent risks
in the ownership of the investments made by the
fund. The value of the fund's shares will reflect
changes in the market value of its investments.
Dividends paid by the fund win vary with the
income it receives from these investments.
Through careful management and
diversification, the fund will seek to reduce risk
and enhance the opportunities for long-term
growth of capital and income. The flexibility to
realize relative value between asset classes,
markets and individual securities offers investors
the opportunity to access undervalued securities
around the globe. The total return approach
employed by the fund is ideal for investors seeking
to diversify assets and move money to areas of
attractive valuation.
Securities rated Baa or higher by Moody's or
BBB by Standard & Poor's or higher are classified
as investment grade securities. Although
securities rated Baa by Moody's and BBB by
Standard & Poor's have speculative
characteristics, they are considered to be
investment grade. Such securities carry a lower
degree of risk than lower rated securities.
Securities that are subsequently downgraded in
quality below Baa by Moody's or BBB by
Standard & Poor's may continue to be held by the
Fund, and will be sold only if the Fund's adviser
believes it would be advantageous to do so. In
addition, the credit quality of unrated securities
purchased by the Fund must be, in the opinion of
the Fund's adviser, at least equivalent to a Baa
rating by Moody's or a BBB rating by Standard &
Poor's.
REPURCHASE AGREEMENTS
A repurchase agreement involves the sale of
securities to the Fund with the concurrent
agreement by the seller to repurchase the
securities at the Fund's cost plus interest at an
agreed rate upon demand or within a specified
time, thereby determining the yield during the
purchaser's period of ownership. The result is a
fixed rate of return insulated from market
fluctuations during such period. Under the
Investment Company Act of 1940, repurchase
agreements are considered loans by the Fund.
The Fund will enter into such repurchase
agreements only with United States banks having
assets in excess of $1 billion which are members
of the Federal Deposit Insurance Corporation, and
with certain securities dealers who meet the
qualifications set from time to time by the Board
of Directors of the Fund. The term to maturity of a
repurchase agreement normally will be no longer
than a few days. Repurchase agreements,
maturing in more than seven days and other
illiquid securities will not exceed 10% of the total
assets of the Fund.
During the initial month of operations, it is
anticipated that the Fund may be invested up to
100% in repurchase agreement, however under
normal circumstances, the Fund may invest up to
25% of its assets in repurchase agreements. See
"Risk Factors Applicable to Repurchase
Agreements."
RISK FACTORS APPLICABLE TO
REPURCHASE AGREEMENTS
The use of repurchase agreements involves
certain risks. For example, if the seller of the
agreement defaults on its obligation to repurchase
the underlying securities at a time when the value
of these securities has declined, the Fund may
incur a loss upon disposition of them. If the seller
of the agreement becomes insolvent and subject to
liquidation or reorganization under the
Bankruptcy Code or other laws, disposition of the
underlying securities may be delayed pending
court proceedings. Finally, it is possible that the
Fund may not be able to perfect its interest in the
underlying securities. While the Fund's
management acknowledges these risks, it is
expected that they can be controlled through
stringent security selection criteria and careful
monitoring procedures.
INVESTMENT RESTRICTIONS
In addition to the investment objective and
portfolio management policies set forth under the
caption "Investment Objective and Portfolio
Management Policy," the Fund is subject to
certain other restrictions which may not be
changed without approval of the lesser of: (1) at
least 67% of the voting securities present at a
meeting if the holders of more than 50% of the
outstanding securities of the Fund are present or
represented by proxy, or (2) more than 50% of the
outstanding voting securities of the Fund. Among
these restrictions, the more important ones are
that the Fund will not purchase the securities of
any issuer if more than 5% of the Fund's total
assets would be invested in the securities of such
issuer, or the Fund would hold more than 10% of
any class of securities of such issuer; the Fund will
not make any loan (the purchase of a security
subject to a repurchase agreement or the purchase
of a portion of an issue of publicly distributed debt
securities is not considered the making of a loan);
and the Fund will not borrow or pledge its credit
under normal circumstances, except up to 10% of
its total assets (computed at the lower of fair
market value or cost) for temporary or emergency
purposes, and not for the purpose of leveraging its
investments; and provided further that any
borrowings shall have asset coverage of at least 3
to 1. The Fund will not buy securities while
borrowings are outstanding. The full text of these
restrictions are set forth in the "Statement of
Additional Information."
PERFORMANCE MEASURES
From time to time, the Fund may advertise its
performance in various ways, as summarized
below. Further discussion of these matters also
appears in the "Statement of Additional
Information." A discussion of Fund performance
will be included in the Fund's Annual Report to
Shareholders which is available from the Fund
upon request at no charge.
Total Return
The Fund may advertise "average annual total
return" over various periods of time. Such total
return figures show the average percentage
change in value of an investment in the Fund
from the beginning date of the measuring period
to the end of the measuring period. These figures
reflect changes in the price of the Fund's shares
and assume that any income dividends and/or
capital gains distributions made by the Fund
during the period were reinvested in shares of the
Fund. Figures will be given for recent one-, five-
and ten-year periods (if applicable), and may be
given for other periods as well (such as from
commencement of the Fund's operations, or on a
year-by-year basis). When considering "average"
total return figures for periods longer than one
year, it is important to note that a Fund's annual
total return for any one year in the period might
have been greater or less than the average for the
entire period.
Performance Comparisons
In advertisements or in reports to shareholders,
the Fund may compare its performance to that of
other mutual funds with similar investment
objectives and to stock or other relevant indices.
For example, it may compare its performance to
rankings prepared by Lipper Analytical Services,
Inc. (Lipper), a widely recognized independent
service which monitors the performance of mutual
funds. The Fund may compare its performance to
the Standard & Poor's 500 Stock Index (S&P
500), an index of unmanaged groups of common
stocks, the Dow Jones Industrial Average, a
recognized unmanaged index of common stocks of
30 industrial companies listed on the NYSE, or
the Consumer Price Index. Performance
information, rankings, ratings, published editorial
comments and listings as reported in national
financial publications such as Kiplinger's
Personal Finance Magazine, Business Week,
Morningstar Mutual Funds, Investor's Business
Daily, Institutional Investor, The Wall Street
Journal, Mutual Fund Forecaster, No-Load
Investor, Money, Forbes, Fortune and Barron's
may also be used in comparing performance of the
Fund. Performance comparisons should not be
considered as representative of the future
performance of any Fund. Further information
regarding the performance of the Fund is
contained in the "Statement of Additional
Information."
Performance rankings, recommendations,
published editorial comments and listings
reported in Money, Barron's, Kiplinger's
Personal Finance Magazine, Financial World,
Forbes, U.S. News & World Report, Business
Week, The Wall Street Journal, Investors Business
Daily, USA Today, Fortune and Stanger's may
also be cited (if the Fund is listed in any such
publication) or used for comparison, as well as
performance listings and rankings from
Morningstar Mutual Funds, Personal Finance,
Income and Safety, The Mutual Fund Letter, No-
Load Fund Investor, United Mutual Fund
Selector, No-Load Fund Analyst, No Load Fund
X, Louis Rukeyser's Wall Street Newsletter,
Donoghue's Money Letter, CDA Investment
Technologies, Inc., Wiesenberger Investment
Company Service and Donoghue's Mutual Fund
Almanac.
HOW TO PURCHASE SHARES
Shares are purchased at net asset value (no sales
charge) next computed after a purchase order has
become effective from the Fund through its agent,
Jones & Babson, Inc., P.O. Box 410498 Kansas
City, MO 64141-0498. For information call toll
free 1-800-996-2862. If an investor wishes to
engage the services of any other broker to
purchase (or redeem) shares of the Fund, a fee
may be charged by such broker. The Fund will not
be responsible for the consequences of delays
including delays in the banking or Federal
Reserve wire systems.
You do not pay a sales commission when you
buy shares of the Fund. Shares are purchased at
the Fund's net asset value (price) per share next
effective after a purchase order and payment have
been received by the Fund. In the case of certain
institutions which have made satisfactory payment
arrangements with the Fund, orders may be
processed at the net asset value per share next
effective after a purchase order has been received
by the Fund.
The Fund reserves the right in its sole discretion
to withdraw all or any part of the offering made by
this prospectus or to reject purchase orders when,
in the judgment of management, such withdrawal
or rejection is in the best interest of the Fund and
its shareholders. The Fund also reserves the right
at any time to waive or increase the minimum
requirements applicable to initial or subsequent
investments with respect to any person or class of
persons, which include shareholders of the Fund's
special investment programs. The Fund reserves
the right to refuse to accept orders for Fund shares
unless accompanied by payment, except when a
responsible person has indemnified the Fund
against losses resulting from the failure of
investors to make payment. In the event that the
Fund sustains a loss as the result of failure by a
purchaser to make payment, the Fund's
underwriter, Jones & Babson, Inc. will cover the
loss.
INITIAL INVESTMENTS
Initial investments - By mail. You may open
an account and make an investment by completing
and signing the application which accompanies
this prospectus. Make your check ($______
minimum unless your purchase is pursuant to an
IRA or the Uniform Transfers (Gifts) to Minors
Act in which case the minimum initial purchase is
$____) payable to UMB Bank, n.a. Mail your
application and check to:
Scout Balanced Fund, Inc.
P.O. Box 410498
Kansas City, Missouri 64141-0498
Initial investments - By wire. You may
purchase shares of the Fund by wiring funds
($2,500 minimum) through the Federal Reserve
Bank to the custodian, UMB Bank, n.a. Prior to
sending your money, you must call the Fund toll
free 1-800-996-2862, and provide it with the
identity of the registered account owner, the
registered address, the Social Security or
Taxpayer Identification Number of the registered
owner, the amount being wired, the name and
telephone number of the wiring bank and the
person to be contacted in connection with the
order. You will then be provided a Fund account
number, after which you should instruct your bank
to wire the specified amount, along with the
account number and the account registration to:
UMB Bank, n.a.
Kansas City, Missouri, ABA #_________
For Scout Balanced Fund, Inc./
AC=
OBI=(assigned Fund number and name in
which registered.)
A completed application must be sent to the
Fund as soon as possible so the necessary
remaining information can be recorded in your
account. Payment of redemption proceeds will be
delayed until the completed application is
received by the Fund.
INVESTMENTS SUBSEQUENT TO
INITIAL INVESTMENT
You may add to your Fund account at any time
in amounts of $100 or more if purchases are made
by mail, or $1,000 or more if purchases are made
by wire or telephone. Automatic monthly
investments must be in amounts of $100 or more.
Checks should be mailed to the Fund at its
address, but make them payable to UMB Bank,
n.a. Always identify your account number or
include the detachable reminder stub which
accompanies each confirmation.
Wire share purchases should include your
account registration, your account number and the
Scout Fund in which you are purchasing shares. It
also is advisable to notify the Fund by telephone
that you have sent a wire purchase order to the
bank.
TELEPHONE INVESTMENT
SERVICE
To use the Telephone Investment Service, you
must first establish your Fund account and
authorize telephone orders in the application
form, or, subsequently, on a special authorization
form provided upon request. If you elect the
Telephone Investment Service, you may purchase
Fund shares by telephone and authorize the Fund
to draft your checking account for the cost of the
shares so purchased. You will receive the next
available price after the Fund has received your
telephone call. Availability and continuance of
this privilege is subject to acceptance and
approval by the Fund and all participating banks.
During periods of increased market activity, you
may have difficulty reaching the Fund by
telephone, in which case you should contact the
Fund by mail or telegraph. The Fund will not be
responsible for the consequences of delays
including delays in the banking or Federal
Reserve wire systems.
The Fund will employ reasonable procedures to
confirm that instructions communicated by
telephone are genuine, and if such procedures are
not followed, the Fund may be liable for losses
due to unauthorized or fraudulent instructions.
Such procedures may include, but are not limited
to, requiring personal identification prior to acting
upon instructions received by telephone, providing
written confirmations of such transactions, and/or
tape recording of telephone instructions.
The Fund reserves the right to initiate a charge
for this service and to terminate or modify any or
all of the privileges in connection with this service
at any time upon 15 days written notice to
shareholders, and to terminate or modify the
privileges without prior notice in any
circumstances where such termination or
modification is in the best interest of the Fund and
its investors.
AUTOMATIC MONTHLY
INVESTMENT PLAN
You may elect to make monthly investments in
a constant dollar amount from your checking
account ($100 minimum). The Fund will draft
your checking account on the same day each
month in the amount you authorize in your
application, or, subsequently, on a special
authorization form provided upon request.
Availability and continuance of this privilege is
subject to acceptance and approval by the Fund
and all participating banks. If the date selected
falls on a day upon which the Fund shares are not
priced, investment will be made on the first date
thereafter upon which Fund shares are priced. The
Fund will not be responsible for the consequences
of delays including delays in the banking or
Federal Reserve wire systems.
The Fund reserves the right to initiate a charge
for this service and to terminate or modify any or
all of the privileges in connection with this service
at any time upon 15 days written notice to
shareholders, and to terminate or modify the
privileges without prior notice in any
circumstances where such termination or
modification is in the best interest of the Fund and
its investors.
HOW TO REDEEM SHARES
The Fund will redeem shares at the price (net
asset value per share) next computed after receipt
of a redemption request in "good order." (See
"How Share Price is Determined."
A written request for redemption, together with
an endorsed share certificate where a certificate
has been issued, must be received by the Fund in
order to constitute a valid tender for redemption.
For authorization of redemptions by a corporation,
it will also be necessary to have an appropriate
certified copy of resolutions on file with the Fund
before a redemption request will be considered in
"good order." In the case of certain institutions
which have made satisfactory redemption
arrangements with the Fund, redemption orders
may be processed by facsimile or telephone
transmission at net asset value per share next
effective after receipt by the Fund. If an investor
wishes to engage the services of any other broker
to redeem (or purchase) shares of the Fund, a fee
may be charged by such broker.
To be in "good order" the request must include
the following:
(1) A written redemption request or stock
assignment (stock power) containing the
genuine signature of each registered owner
exactly as the shares are registered, with
clear identification of the account by
registered name(s) and account number
and the number of shares or the dollar
amount to be redeemed;
(2) any outstanding stock certificates
representing shares to be redeemed;
(3) signature guarantees as required; and (See
Signature Guarantees)
(4) any additional documentation which the
Fund may deem necessary to insure a
genuine redemption.
Where additional documentation is normally
required to support redemptions as in the case of
corporations, fiduciaries, and others who hold
shares in a representative or nominee capacity
such as certified copies of corporate resolutions, or
certificates of incumbency, or such other
documentation as may be required under the
Uniform Commercial Code or other applicable
laws or regulations, it is the responsibility of the
shareholder to maintain such documentation on
file and in a current status. A failure to do so will
delay the redemption. If you have questions
concerning redemption requirements, please write
or telephone the Fund well ahead of an anticipated
redemption in order to avoid any possible delay.
Requests which are subject to special conditions
or which specify an effective date other than as
provided herein cannot be accepted. All
redemption requests must be transmitted to the
Fund at P.O. Box 410498, Kansas City, Missouri
64141-0498. The Fund will redeem shares at the
price (net asset value per share) next computed
after receipt of a redemption request in "good
order." (See "How Share Price is Determined.")
The Fund will endeavor to transmit redemption
proceeds to the proper party, as instructed, as soon
as practicable after a redemption request has been
received in "good order" and accepted, but in no
event later than the fifth day thereafter.
Transmissions are made by mail unless an
expedited method has been authorized and
specified in the redemption request. The Fund will
not be responsible for the consequences of delays
including delays in the banking or Federal
Reserve wire systems.
Redemptions will not become effective until all
documents in the form required have been
received. In the case of redemption requests made
within 15 days of the date of purchase, the Fund
will delay transmission of proceeds until such
time as it is certain that unconditional payment in
federal funds has been collected for the purchase
of shares being redeemed or 15 days from the date
of purchase. You can avoid the possibility of
delay by paying for all of your purchases with a
transfer of federal funds.
Signature Guarantees are required in
connection with all redemptions by mail, or
changes in share registration, except as
hereinafter provided. These requirements may be
waived by the Fund in certain instances where it
appears reasonable to do so and will not unduly
affect the interests of other shareholders.
Signature(s) must be guaranteed by an "eligible
guarantor institution" as defined under Rule
17Ad-15 under the Securities Exchange Act of
1934. Eligible guarantor institutions include: (1)
national or state banks, savings associations,
savings and loan associations, trust companies,
savings banks, industrial loan companies and
credit unions; (2) national securities exchanges,
registered securities associations and clearing
agencies; or (3) securities broker/dealers which
are members of a national securities exchange or
clearing agency or which have a minimum net
capital of $100,000. A notarized signature will not
be sufficient for the request to be in proper form.
Signature guarantees will be waived for mail
redemptions of $10,000 or less, but they will be
required if the checks are to be payable to
someone other than the registered owner(s), or are
to be mailed to an address different from the
registered address of the shareholder(s), or where
there appears to be a pattern of redemp tions
designed to circumvent the signature guarantee
requirement, or where the Fund has other reason
to believe that this requirement would be in the
best interests of the Fund and its shareholders.
The right of redemption may be suspended or
the date of payment postponed beyond the normal
five-day period when the New York Stock
Exchange is closed or under emergency
circumstances as determined by the Securities and
Exchange Commission. Further, the Fund
reserves the right to redeem its shares in kind
under certain circumstances. If shares are
redeemed in kind, the shareholder may incur
brokerage costs when converting into cash.
Additional details are set forth in the "Statement
of Additional Information."
Due to the high cost of maintaining smaller
accounts, the Board of Directors has authorized
the Fund to close shareholder accounts where
their value falls below the current minimum
initial investment requirement at the time of
initial purchase as a result of redemptions and not
as the result of market action, and remains below
this level for 60 days after each such shareholder
account is mailed a notice of: (1) the Fund's
intention to close the account, (2) the minimum
account size requirement, and (3) the date on
which the account will be closed if the minimum
size requirement is not met. Since the minimum
investment amount and the minimum account size are
the same, any redemption from an account containing
only the minimum investment amount may result in
redemption of that account.
SYSTEMATIC REDEMPTION
PLAN
If you own shares in an open account valued at
$10,000 or more, and desire to make regular
monthly or quarterly withdrawals without the
necessity and inconvenience of executing a
separate redemption request to initiate each
withdrawal, you may enter into a Systematic
Withdrawal Plan by completing forms obtainable
from the Fund. For this service, the manager may
charge you a fee not to exceed $1.50 for each
withdrawal. Currently the manager assumes the
additional expenses arising out of this type of
plan, but it reserves the right to initiate such a
charge at any time in the future when it deems it
necessary. If such a charge is imposed,
participants will be provided 30 days notice.
Subject to a $50 minimum, you may withdraw
each period a specified dollar amount. Shares also
may be redeemed at a rate calculated to exhaust
the account at the end of a specified period of
time.
Dividends and capital gains distributions must
be reinvested in additional shares. Under all
withdrawal programs, liquidation of shares in
excess of dividends and distributions reinvested
will diminish and may exhaust your account,
particularly during a period of declining share
values.
You may revoke or change your plan or redeem
all of your remaining shares at any time.
Withdrawal payments will be continued until the
shares are exhausted or until the Fund or you
terminate the plan by written notice to the other.
HOW TO EXCHANGE SHARES
WITH OTHER SCOUT FUNDS
Shareholders may exchange their Fund shares,
which have been held in open account for 15 days
or more, and for which good payment has been
received, for identically registered shares of any
other Fund in the Scout Fund Group, which is
legally registered for sale in the state of residence
of the investor provided that the minimum amount
exchanged has a value of $1,000 or more and
meets the minimum investment requirement of
the Fund or Portfolio into which it is exchanged.
An exchange between two Scout Funds is treated
as a sale of the shares from which the exchange
occurs and a purchase of shares of the fund into
which the exchange occurs. Exchanging
shareholders will receive the next quoted prices
for their shares after the request is received in
"good order" (See "How Share Price is
Determined.")
To authorize the Telephone/Telegraph
Exchange Privilege, all registered owners must
sign the appropriate section on the original
application, or the Fund must receive a special
authorization form, provided upon request.
During periods of increased market activity, you
may have difficulty reaching the Fund by
telephone, in which case you should contact the
Fund by mail or telegraph. The Fund reserves the
right to initiate a charge for this service and to
terminate or modify any or all of the privileges in
connection with this service at any time and
without prior notice under any circumstances
where continuance of these privileges would be
detrimental to the Fund or its shareholders, or
under any other circumstances, upon 60 days
written notice to shareholders. The Fund will not
be responsible for the consequences of delays
including delays in the banking or Federal
Reserve wire systems.
The Fund will employ reasonable procedures to
confirm that instructions communicated by
telephone are genuine, and if such procedures are
not followed, the Fund may be liable for losses
due to unauthorized or fraudulent instructions.
Such procedures may include, but are not limited
to requiring personal identification prior to acting
upon instructions received by telephone, providing
written confirmations of such transactions, and/or
tape recording of telephone instructions.
Exchanges by mail may be accomplished by a
written request properly signed by all registered
owners identifying the account, the number of
shares or dollar amount to be redeemed for
exchange, and the Scout Fund into which the
account is being transferred.
If you wish to exchange part or all of your
shares in the Fund for shares of another Fund or
Portfolio in the Scout Fund Group, you should
review the prospectus of the Fund to be purchased,
which can be obtained from Jones & Babson, Inc.
Any such exchange will be based on the respective
net asset values of the shares involved. Any
exchange between Funds involves the sale of an
asset. Unless the shareholder account is tax-
deferred, this is a taxable event.
HOW SHARE PRICE IS
DETERMINED
In order to determine the price at which new
shares will be sold and at which issued shares
presented for redemption will be liquidated, the
net asset value per share is computed once daily,
Monday through Friday, at the specific time
during the day that the Board of Directors sets at
least annually, except on days on which changes
in the value of portfolio securities will not
materially affect the net asset value, or days
during which no security is tendered for
redemption and no order to purchase or sell such
security is received by the Fund, or customary
holidays. For a list of the holidays during which
the Fund is not open for business, see "How Share
Price is Determined" in the "Statement of
Additional Information."
The price at which new shares of the Fund will
be sold and at which issued shares presented for
redemption will be liquidated is computed once
daily at 4:00 P.M. (Eastern Time), except on those
days when the Fund is not open for business.
The per share calculation is made by
subtracting from the Fund's total assets any
liabilities and then dividing into this amount the
total outstanding shares as of the date of the
calculation.
Each security listed on an exchange is valued at
its last sale price on that exchange on the date as
of which assets are valued. Where the security is
listed on more than one exchange, the Fund will
use the price of that exchange which it generally
considers to be the principal Exchange on which
the security is traded. Lacking sales, the security
is valued at the mean between the current closing
bid and asked prices. An unlisted security for
which over-the-counter market quotations are
readily available is valued at the mean between
the last current bid and asked prices. When
market quotations are not readily available, any
security or other asset is valued at its fair value as
determined in good faith by the Board of
Directors.
OFFICERS AND DIRECTORS
The officers of the Fund manage its day-to-day
operations. The Fund's manager and its officers
are subject to the supervision and control of the
Board of Directors. A list of the officers and
directors of the Fund and a brief statement of their
present positions and principal occupations during
the past five years is set forth in the "Statement of
Additional Information."
MANAGEMENT AND
UNDERWRITER
Jones & Babson, Inc. organized the Fund in
1995, and acts as its principal underwriter at no
cost to the Fund. 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 and supervision; fees of the
custodian, independent public accountants and
legal counsel; remuneration of officers, directors
and other personnel; rent; shareholder services,
including the maintenance of the shareholder
accounting system and transfer agency; and such
other items as are incidental to corporate
administration.
Not considered normal operating expenses, and
therefore payable by the Fund, are taxes, interest,
governmental charges and fees, including
registration of the Fund and its shares with the
Securities and Exchange Commission and the
Securities Departments of the various States,
brokerage costs, dues, and all extraordinary costs
and expenses including but not limited to legal
and accounting fees incurred in anticipation of or
arising out of litigation or administrative
proceedings to which the Fund, its officers or
directors may be subject or a party thereto.
Jones & Babson, Inc. acts as principal
underwriter for the Fund at no cost to the Fund.
UMB Bank, n.a. employs at its own expense Jones
& Babson, Inc. to provide services to the Fund,
including the maintenance of the shareholder
accounting system and transfer agency; and such
other items as are incidental to corporate
administration.
The Bank serves a broad variety of individual,
corporate and other institutional clients by
maintaining an extensive research and analytical
staff. It has an experienced investment analysis
and research staff which eliminates the need for
the Fund to maintain an extensive duplicate staff,
with the consequent increase in the cost of
investment advisory service. The cost of the
services of Jones & Babson, Inc. is included in the
fee of UMB Bank, n.a. The Management
Agreement limits the liability of the manager, as
well as its officers, directors and personnel, to acts
or omissions involving willful malfeasance, bad
faith, gross negligence, or reckless disregard of
their duties. Christopher Bloomstran has been the
portfolio manager of Scout Balanced Fund since
its inception. He is a Chartered Financial Analyst
with over six years of experience.
As compensation for all the foregoing services,
the Fund pays UMB Bank, n.a. a fee at the annual
rate of 85/100 of one percent (.85%) of average
daily net assets from which UMB Bank pays Jones
& Babson, Inc. an administrative fee of
35/100 of 1% (.35%). The fees are computed daily and
paid semimonthly.
The annual fee charged by UMB Bank, n.a. is
higher than the fees of most other investment
advisers whose charges cover only investment
advisory services with all remaining operational
expenses absorbed directly by the Fund, however,
it is anticipated that the total expenses of the Fund
will compare favorably with those of other mutual
funds whose advisors' fees cover only investment
advisory services with all remaining operational
expenses absorbed by the Funds.
Certain officers and directors of the Fund are
also officers or directors or both of other Scout
Funds or Jones & Babson, Inc.
Jones & Babson, Inc. is a wholly-owned
subsidiary of Business Men's Assurance Company
of America, which is considered to be a
controlling person under the Investment Company
Act of 1940. Assicurazioni Generali S.p.A., an
insurance organization founded in 1831 based in
Trieste, Italy, is considered to be a controlling
person and is the ultimate parent of Business
Men's Assurance Company of America.
Mediobanca is a 5% owner of Generali.
The current Management Agreement between
the Fund and UMB Bank, n.a. will continue in
effect until October 31, 1996, and will continue
automatically for successive annual periods
ending each October 31 so long as such
continuance is specifically approved at least
annually by the Board of Directors of the Fund or
by the vote of a majority of the outstanding voting
securities of the Fund, and, provided also that
such continuance is approved by the vote of a
majority of the directors who are not parties to the
Agreements or interested persons of any such
party at a meeting held in person and called
specifically for the purpose of evaluating and
voting on such approval. Both Agreements
provide that either party may terminate by giving
the other 60 days written notice. The Agreements
terminate automatically if assigned by either
party.
GENERAL INFORMATION
AND HISTORY
The Fund, incorporated in Maryland on
July 13, 1995, has a present authorized
capitalization of 10,000,000 shares of
$1 par value common stock. It is a diversified
open-end management investment company.
All shares are of the same class with like
rights and privileges. Each full and fractional
share, when issued and outstanding, has:
(1) equal voting rights with respect to matters
which affect the Fund; and (2) equal dividend,
distribution and redemption rights to the assets
of the Fund. Shares when issued are fully paid
and non-assessable. The Fund may create other
series of stock but will not issue any senior
securities. Shareholders do not have pre-emptive
or conversion rights.
Non-cumulative voting - These shares have
non-cumulative voting rights, which means that
the holders of more than 50% of the shares voting
for the election of directors can elect 100% of the
directors, if they choose to do so, and in such
event, the holders of the remaining less than 50%
of the shares voting will not be able to elect any
directors.
The Maryland Statutes permit registered
investment companies, such as the Fund, to
operate without an annual meeting of
shareholders under specified circumstances if an
annual meeting is not required by the Investment
Company Act of 1940. There are procedures
whereby the shareholders may remove directors.
These procedures are described in the "Statement
of Additional Information" under the caption
"Officers and Directors." The Fund has adopted
the appropriate provisions in its By-Laws and may
not, at its discretion, hold annual meetings of
shareholders for the following purposes unless
required to do so: (1) election of directors; (2)
approval of any investment advisory agreement;
(3) ratification of the selection of independent
public accountants; and (4) approval of a
distribution plan. As a result, the Fund does not
intend to hold annual meetings.
The Fund may use the name "Scout" in its
name so long as UMB Bank, n.a. is continued as
its manager. Complete details with respect to the
use of the name are set out in the Management
Agreement between the Fund and UMB Bank,
n.a.
This prospectus omits certain of the information
contained in the registration statement filed with
the Securities and Exchange Commission,
Washington, D.C. These items may be inspected
at the offices of the Commission or obtained from
the Commission upon payment of the fee
prescribed.
DIVIDENDS, DISTRIBUTIONS AND
THEIR TAXATION
The Fund pays dividends from net investment
income _________, usually in _________ and
December. Distribution from capital gains
realized on the sale of securities, if any, will be
declared annually on or before December 31.
Dividend and capital gains distributions will be
reinvested automatically in additional shares at
the net asset value per share computed and
effective at the close of business on the day after
the record date, unless the shareholder has elected
on the original application, or by written
instructions filed with the Fund, to have them
paid in cash.
The Fund intends to qualify for taxation as a
"regulated investment company" under the
Internal Revenue Code so that the Fund will not
be subject to federal income tax to the extent that
it distributes its income to its shareholders.
Dividends, either in cash or reinvested in shares,
paid by the Fund from net investment income will
be taxable to shareholders as ordinary income,
and will generally qualify in part for the 70%
dividends-received deduction for corporations.
The portion of the dividends so qualified depends
on the aggregate taxable qualifying dividend
income received by the Fund from domestic (U.S.)
sources. The Fund will send to shareholders a
statement each year advising the amount of the
dividend income which qualifies for such
treatment.
Whether paid in cash or additional shares of the
Fund, and regardless of the length of time Fund
shares have been owned by the shareholder,
distributions from long-term capital gains are
taxable to shareholders as such, but are not
eligible for the dividends-received deduction for
corporations. Shareholders are notified annually
by the Fund as to federal tax status of dividends
and distributions paid by the Fund. Such
dividends and distributions may also be subject to
state and local taxes.
Exchange and redemption of Fund shares are
taxable events for federal income tax purposes.
Shareholders may also be subject to state and
municipal taxes on such exchanges and
redemptions. You should consult your tax adviser
with respect to the tax status of distributions from
the Fund in your state and locality.
The Fund intends to declare and pay dividends
and capital gains distributions so as to avoid
imposition of the federal excise tax. To do so, the
Fund expects to distribute during each calendar
year an amount equal to: (1) 98% of its calendar
year ordinary income; (2) 98% of its capital gains
net income (the excess of short- and long-term
capital gain over short- and long-term capital
loss) for the one-year period ending each October
31; and (3) 100% of any undistributed ordinary or
capital gain net income from the prior calendar
year. Dividends declared in October, November or
December and made payable to shareholders of
record in such a month are deemed to have been
paid by the Fund and received by shareholders on
December 31 of such year, so long as the
dividends are actually paid before February 1 of
the following year.
To comply with IRS regulations, the Fund is
required by federal law to withhold 31% of
reportable payments (which may include
dividends, capital gains distributions, and
redemptions) paid to shareholders who have not
complied with IRS regulations. In order to avoid
this withholding requirement, shareholders must
certify on their Application, or on a separate form
supplied by the Fund, that their Social Security or
Taxpayer Identification Number provided is
correct and that they are not currently subject to
backup withholding, or that they are exempt from
backup withholding.
The federal income tax status of all distributions
will be reported to shareholders each January as a
part of the annual statement of shareholder
transactions. Shareholders not subject to tax on
their income will not be required to pay tax on
amounts distributed to them.
THE TAX DISCUSSION SET FORTH
ABOVE IS INCLUDED HEREIN FOR
GENERAL INFORMATION ONLY.
PROSPECTIVE INVESTORS SHOULD
CONSULT THEIR OWN TAX ADVISERS
WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF AN
INVESTMENT IN THE FUND.
DESCRIPTION OF SECURITIES RATINGS
SHAREHOLDER SERVICES
The Fund and its manager offer shareholders a
broad variety of services described throughout this
prospectus. In addition, the following services are
available:
Prototype Retirement Plans - The UMB Bank,
n.a. has drafted several IRS-approved-as-to-form
prototype retirement plans to assist individuals,
sole proprietors, partnerships and corporations in
meeting their tax qualified retirement plan needs.
Individual Retirement Account (IRA) - The
Bank also makes available IRA accounts for
individuals.
For further information about these services,
please contact UMB Bank, n.a.
SHAREHOLDER INQUIRIES
Telephone inquiries may be made toll free to
the Fund, 1-800-996-2862.
Shareholders may address written inquiries to
the Fund at:
Scout Balanced Fund, Inc.
P.O. Box 410498
Kansas City, MO 64141-0498
For express delivery services:
The Scout Balanced Fund, Inc.
Three Crown Center
2440 Pershing Road, Suite G-15
Kansas City, MO 64108
INDEPENDENT AUDITORS
Arthur Andersen LLP
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
TRANSFER AGENT
JONES & BABSON, INC.
Kansas City, Missouri
<PAGE>
PART B
SCOUT BALANCED FUND, INC.
STATEMENT OF ADDITIONAL
INFORMATION
__________, 1995
This Statement is not a prospectus but should be read in conjunction
with the Fund's current Prospectus dated __________, 1995. To
obtain the Prospectus please call the Fund toll-free 1-800-4-BABSON
(1-800-422-2766), or in the Kansas City area 471-5200.
TABLE OF CONTENTS
Page
Investment Objective and Policies
Portfolio Transactions
Investment Restrictions
How the Fund's Shares are Distributed
How Share Purchases are Handled
Redemption of Shares
Signature Guarantees
Management and Investment Counsel
How Share Price is Determined
Officers and Directors
Custodian
Independent Auditors
Other Jones & Babson Funds
Fixed Income Securities Described and Ratings
Financial Statements
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the Fund's
investment objective and policies set forth in the
Prospectus.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Fund are
made by UMB Bank, n.a. Officers of the Fund and
UMB Bank, n.a.. are generally responsible for
implementing or supervising these decisions, including
allocation of portfolio brokerage and principal business
as well as the negotiation of commissions and/or the
price of the securities. In instances where securities
are purchased on a commission basis, the Fund will
seek competitive and reasonable commission rates
based on circumstances of the trade involved and to the
extent that they do not detract from the quality of the
execution.
The Fund, in purchasing and selling portfolio
securities, will seek the best available combination of
execution and overall price (which shall include the
cost of the transaction) consistent with the
circumstances which exist at the time. The Fund does
not intend to solicit competitive bids on each
transaction.
The Fund believes it is in its best interest and that of
its shareholders to have a stable and continuous
relationship with a diverse group of financially strong
and technically qualified broker-dealers who will
provide quality executions at competitive rates.
Broker-dealers meeting these qualifications also will be
selected for their demonstrated loyalty to the Fund,
when acting on its behalf, as well as for any research or
other services provided to the Fund. Substantially all
of the portfolio transactions are through brokerage
firms which are members of the New York Stock
Exchange because usually the most active market in
the size of the Fund's transactions and for the types of
securities predominant in the Fund's portfolio is to be
found there. When buying securities in the over-the-
counter market, the Fund will select a broker who
maintains a primary market for the security unless it
appears that a better combination of price and
execution may be obtained elsewhere. The Fund
normally will not pay a higher commission rate to
broker-dealers providing benefits or services to it than
it would pay to broker-dealers who do not provide it
such benefits or services. However, the Fund reserves
the right to do so within the principles set out in
Section 28(e) of the Securities Exchange Act of 1934
when it appears that this would be in the best interests
of the share-holders.
No commitment is made to any broker or dealer with
regard to placing of orders for the purchase or sale of
Fund portfolio securities, and no specific formula is
used in placing such business. Allocation is reviewed
regularly by both the Board of Directors of the Fund
and UMB Bank, n.a.
Since the Fund does not market its shares through
intermediary brokers or dealers, it is not the Fund's
practice to allocate brokerage or principal business on
the basis of sales of its shares which may be made
through such firms. However, it may place portfolio
orders with qualified broker-dealers who recommend
the Fund to other clients, or who act as agent in the
purchase of the Fund's shares for their clients.
Research services furnished by broker-dealers may
be useful to the Fund manager and its investment
counsel in serving other clients, as well as the Fund.
Conversely, the Fund may benefit from research
services obtained by the manager or its investment
counsel from the placement of portfolio brokerage of
other clients.
When it appears to be in the best interest of its
shareholders, the Fund may join with other clients of
the manager in acquiring or disposing of a portfolio
holding. Securities acquired or proceeds obtained will
be equitably distributed between the Fund and other
clients participating in the transaction. In some
instances, this investment procedure may affect the
price paid or received by the Fund or the size of the
position obtained by the Fund.
Portfolio Turnover. There are no fixed limitations
regarding portfolio turnover for either the equity
or fixed income portions of the Fund's portfolio.
Although the Fund does not trade for short-term profits,
securities may be sold without regard to the time they
have been held in the Fund when, in the opinion of the
Fund's management, investment considerations warrant
such action. As a result, while it is anticipated that
the portfolio turnover rates for the equity and fixed
income portions of the Fund's portfolio generally will
not exceed 100%, under certain market conditions, these
portfolio turnover rates may exceed 100%. Increased
portfolio turnover rates would cause the Fund to incur
greater brokerage costs than would otherwise be the case
and may result in the accelleration of capital gains which
are taxable when distributed to shareholders.
INVESTMENT RESTRICTIONS
In addition to the investment objective and portfolio
management policies set forth in the Prospectus under
the caption "Investment Objective and Portfolio
Management Policy," the following restrictions also
may not be changed without approval of the "holders of
a majority of the outstanding shares" of the Fund.
The Fund will not: (1) purchase the securities of any
one issuer, except the United States government, if
immediately after and as a result of such purchase (a)
the value of the holdings of the Fund in the securities
of such issuer exceeds 5% of the value of the Fund's
total assets, or (b) the Fund owns more than 10% of the
outstanding voting securities, or any other class of
securities, of such issuer; (2) engage in the purchase or
sale of real estate, commodities or futures contracts; (3)
underwrite the securities of other issuers; (4) make
loans to any of its officers, directors, or employees, or
to its manager, or general distributor, or officers or
directors thereof; (5) make any loan (the purchase of a
security subject to a repurchase agreement or the
purchase of a portion of an issue of publicly distributed
debt securities is not considered the making of a loan);
(6) invest in companies for the purpose of exercising
control of management; (7) purchase securities on
margin, or sell securities short; (8) purchase shares of
other investment companies except in the open market
at ordinary broker's commission or pursuant to a plan
of merger or consolidation; (9) invest in the aggregate
more than 5% of the value of its gross assets in the
securities of issuers (other than federal, state,
territorial, or local governments, or corporations, or
authorities established thereby), which, including
predecessors, have not had at least three years'
continuous operations; (10) except for transactions in its
shares or other securities through brokerage practices
which are considered normal and generally accepted
under circumstances existing at the time, enter into
dealings with its officers or directors, its manager or
underwriter, or their officers or directors, or any
organization in which such persons have a financial
interest; (11) purchase or retain securities of any
company in which any Fund officers or directors, or
Fund manager, its partner, officer, or director
beneficially owns more than 1/2 of 1% of said
company's securities, if all such persons owning more
than 1/2 of 1% of such company's securities, own in
the aggregate more than 5% of the outstanding
securities of such company; (12) borrow or pledge its
credit under normal circumstances, except up to 10%
of its gross assets (computed at the lower of fair market
value or cost) for temporary or emergency purposes,
and not for the purpose of leveraging its investments,
and provided further that any borrowing in excess of
5% of the total assets of the Fund shall have asset
coverage of at least 3 to 1; (13) make itself or its assets
liable for the indebtedness of others; or (14) invest in
securities which are assessable or involve unlimited
liability; (15) purchase any securities which would
cause 25% or more of the Fund's total assets at the
time of such purchase to be invested in any one
industry.
In addition to the fundamental investment restrictions
set out above, in order to comply with the law or
regulations of various States, the Fund will not engage
in the following practices: (1) invest in securities
which are not readily marketable or in securities of
foreign issuers which are not listed on a recognized
domestic or foreign securities exchange; (2) write put
or call options; (3) invest in oil, gas and other mineral
leases or arbitrage transactions; (4) purchase or sell
real estate (including limited partnership interests, but
excluding readily marketable interests in real estate
investment trusts or readily marketable securities of
companies which invest in real estate); or (5) purchase
securities, including 144(a) securities, of issuers which
the company is restricted from selling to the public
without registration under the Securities Act of 1933.
Certain States also require that the Fund's
investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of the Fund's
net assets. Included within that amount, but not to
exceed 2% of the value of the Fund's net assets may be
warrants which are not listed on the New York or
American Stock Exchange. Warrants acquired by the
Fund in units or attached to securities may be deemed
to be without value for purposes of this limitation. In
addition, the Fund has undertaken to the state of
California to comply with the expense limitations set
forth in Rule 260.140.84(a) of Title 10 of the
California Administrative Code.
HOW THE FUND'S SHARES ARE
DISTRIBUTED
Jones & Babson, Inc., as agent of the Fund, agrees to
supply its best efforts as sole distributor of the Fund's
shares and, at its own expense, pay all sales and
distribution expenses in connection with their offering
other than registration fees and other government
charges.
Jones & Babson, Inc. does not receive any fee or
other compensation under the distribution agreement
which continues in effect until October 31, 1996, and
which will continue automatically for successive
annual periods ending each October 31, if continued at
least annually by the Fund's Board of Directors,
including a majority of those Directors who are not
parties to such Agreements or interested persons of any
such party. It terminates automatically if assigned by
either party or upon 60 days written notice by either
party to the other.
Jones & Babson, Inc. also acts as sole distributor of
the shares of ., Scout Stock Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc., Scout
Tax-Free Money Market Fund, Inc., Scout Regional
Fund, Inc., Scout WorldWide Fund, Inc., David L.
Babson Growth Fund, Inc., D.L. Babson Bond Trust,
D.L. Babson Money Market Fund, Inc., D.L. Babson
Tax-Free Income Fund, Inc., Babson Enterprise Fund,
Inc., Babson Enterprise Fund II, Inc., Babson Value
Fund, Inc., Shadow Stock Fund, Inc., Babson-Stewart
Ivory International Fund, Inc., Buffalo Balanced Fund,
Inc., Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc. and Buffalo USA Global Fund, Inc.
HOW SHARE PURCHASES ARE HANDLED
Each order accepted will be fully invested in whole
and fractional shares, unless the purchase of a certain
number of whole shares is specified, at the net asset
value per share next effective after the order is
accepted by the Fund.
Each investment is confirmed by a year-to-date
statement which provides the details of the immediate
transaction, plus all prior transactions in your account
during the current year. This includes the dollar
amount invested, the number of shares purchased or
redeemed, the price per share, and the aggregate shares
owned. A transcript of all activity in your account
during the previous year will be furnished each
January. By retaining each annual summary and the
last year-to-date statement, you have a complete
detailed history of your account which provides
necessary tax information. A duplicate copy of a past
annual statement is available from Jones & Babson,
Inc. at its cost, subject to a minimum charge of $5 per
account, per year requested.
Normally, the shares which you purchase are held by
the Fund in open account, thereby relieving you of the
responsibility of providing for the safekeeping of a
negotiable share certificate. Should you have a special
need for a certificate, one will be issued on request for
all or a portion of the whole shares in your account.
There is no charge for the first certificate issued. A
charge of $3.50 will be made for any replacement
certificates issued. In order to protect the interests of
the other shareholders, share certificates will be sent to
those shareholders who request them only after the
Fund has determined that unconditional payment for
the shares represented by the certificate has been
received by its custodian, UMB Bank, n.a.
If an order to purchase shares must be canceled due
to non-payment, the purchaser will be responsible for
any loss incurred by the Fund arising out of such
cancellation. To recover any such loss, the Fund
reserves the right to redeem shares owned by any
purchaser whose order is canceled, and such purchaser
may be prohibited or restricted in the manner of
placing further orders.
The Fund reserves the right in its sole discretion to
withdraw all or any part of the offering made by the
prospectus or to reject purchase orders when, in the
judgment of management, such withdrawal or rejection
is in the best interest of the Fund and its shareholders.
The Fund also reserves the right at any time to waive
or increase the minimum requirements applicable to
initial or subsequent investments with respect to any
person or class of persons, which include shareholders
of the Fund's special investment programs.
REDEMPTION OF SHARES
The right of redemption may be suspended, or the
date of payment postponed beyond the normal seven-
day period by the Fund's Board of Directors under the
following conditions authorized by the Investment
Company Act of 1940: (1) for any period (a) during
which the New York Stock Exchange is closed, other
than customary weekend and holiday closing, or (b)
during which trading on the New York Stock
Exchange is restricted; (2) for any period during which
an emergency exists as a result of which (a) disposal by
the Fund of securities owned by it is not reasonably
practicable, or (b) it is not reasonably practicable for
the Fund to determine the fair value of its net assets; or
(3) for such other periods as the Securities and
Exchange Commission may by order permit for the
protection of the Fund's shareholders.
The Fund has elected to be governed by Rule 18f-1
under the Investment Company Act of 1940 pursuant
to which the Fund is obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the
Fund's net asset value during any 90-day period for any
one shareholder. Should redemptions by any
shareholder exceed such limitation, the Fund may
redeem the excess in kind. If shares are redeemed in
kind, the redeeming shareholder may incur brokerage
costs in converting the assets to cash. The method of
valuing securities used to make redemptions in kind
will be the same as the method of valuing portfolio
securities described under "How Share Price is
Determined" in the Prospectus, and such valuation will
be made as of the same time the redemption price is
determined.
SIGNATURE GUARANTEES
Signature guarantees normally reduce the possibility
of forgery and are required in connection with each
redemption method to protect shareholders from loss.
Signature guarantees are required in connection with
all redemptions by mail or changes in share
registration, except as provided in the Prospectus.
Signature guarantees must appear together with the
signature(s) of the registered owner(s), on:
(1) a written request for redemption,
(2) a separate instrument of assignment, which
should specify the total number of shares to be
redeemed (this "stock power" may be obtained
from the Fund or from most banks or stock
brokers), or
(3) all stock certificates tendered for redemption.
MANAGEMENT AND
INVESTMENT COUNSEL
UMB Bank, n.a. acts as the Fund's investment
counsel. The .85% annual fee charged by UMB Bank,
n.a. covers all normal operating costs of the Fund.
For its administrative services, UMB Bank, n.a. pays
Jones & Babson, Inc. a fee computed on an annual
basis at the rate of .35% of the average daily total net
assets of the Fund.
HOW SHARE PRICE IS DETERMINED
The net asset value per share of the Fund portfolio is
computed once daily, Monday through Friday, at the
specific time during the day that the Board of Directors
of the Fund sets at least annually, except on days on
which changes in the value of a Fund's portfolio
securities will not materially affect the net asset value,
or days during which no security is tendered for
redemption and no order to purchase or sell such
security is received by the Fund, or the following
holidays:
New Year's Day January 1
Presidents' Holiday Third Monday
in February
Good Friday Friday before Easter
Memorial Day Last Monday
in May
Independence Day July 4
Labor Day First Monday
in September
Thanksgiving Day Fourth Thursday
in November
Christmas Day December 25
OFFICERS AND DIRECTORS
The Fund is managed by UMB Bank, n.a., subject to
the supervision and control of its Board of Directors.
The following table lists the Officers and Directors of
the Funds Unless noted otherwise, the address of each
Officer and Director is Three Crown Center, 2440
Pershing Road, Suite G-15, Kansas City, Missouri
64108. Except as indicated, each has been an
employee of Jones & Babson, Inc. for more than five
years.
* Larry D. Armel, President and Director, Jones &
Babson, Inc., Scout Stock Fund, Inc., Scout Regional
Fund, Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money Market
Fund, Inc., Scout WorldWide Fund, Inc., Shadow
Stock Fund, Inc., David L. Babson Growth Fund, Inc.,
D.L. Babson Money Market Fund, Inc., D.L. Babson
Tax-Free Income Fund, Inc., Babson Value Fund,
Inc., Babson Enterprise Fund, Inc., Babson Enterprise
Fund II, Inc., Babson-Stewart Ivory International
Fund, Inc., Buffalo Balanced Fund, Inc., Buffalo
Equity Fund, Inc., Buffalo High Yield Fund, Inc.,
Buffalo USA Global Fund, Inc.; Trustee and President
of D. L. Babson Bond Trust.
William E. Hoffman, D.D.S., Director, Scout Stock
Fund, Inc., Scout Regional Fund, Inc., Scout Bond
Fund, Inc., Scout Money Market Fund, Inc., Scout
Tax-Free Money Market Fund, Inc., Scout WorldWide
Fund, Inc.; Orthodontist, 3700 West 83rd Street, Suite
206, Prairie Village, Kansas 66208.
Eric T. Jager, Director, Scout Stock Fund, Inc., Scout
Regional Fund, Inc., Scout Bond Fund, Inc., Scout
Money Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout WorldWide Fund, Inc.;
President and Director, Windcrest Investment
Management, Inc.; Director, Bartlett Futures, Inc.,
Nygaard Corporation, 4800 Main Street, Suite 600,
Kansas City, Missouri 64112; formerly Senior Vice
President, Eppler, Guerin & Turner, Dallas, Texas, a
securities brokerage firm.
Stephen F. Rose, Director, Scout Stock Fund, Inc.,
Scout Regional Fund, Inc., Scout Bond Fund, Inc.,
Scout Money Market Fund, Inc., Scout Tax-Free
Money Market Fund, Inc., Scout WorldWide Fund,
Inc.; President, Sun Publications, Inc., 7373 W. 107th
Street, Overland Park, Kansas 66212.
Stuart Wien, Director, Scout Stock Fund, Inc., Scout
Regional Fund, Inc., Scout Bond Fund, Inc., Scout
Money Market Fund, Inc., Scout Tax-Free Money
Market Fund, Inc., Scout WorldWide Fund, Inc.;
Retired, 4589 West 124th Place, Leawood, Kansas
66206, formerly Chairman of the Board, Milgram
Food Stores, Inc.
________________________________________
* Directors who are interested persons as that term
is defined in the Investment Company Act of 1940,
as amended.
P. Bradley Adams, Vice President and Treasurer,
Jones & Babson, Inc., Scout Stock Fund, Inc., Scout
Bond Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc.,
David L. Babson Growth Fund, Inc., D. L. Babson
Money Market Fund, Inc., D. L. Babson Tax-Free
Income Fund, Inc., Babson Enterprise Fund, Inc.,
Babson Enterprise Fund II, Inc., Babson Value Fund,
Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., D.L. Babson Bond Trust,
Buffalo Balanced Fund, Inc., Buffalo Equity Fund,
Inc., Buffalo High Yield Fund, Inc., Buffalo USA
Global Fund, Inc.
Michael A. Brummel, Vice President, Assistant
Secretary and Assistant Treasurer, Jones & Babson,
Inc., Scout Stock Fund, Inc., Scout Bond Fund, Inc.,
Scout Money Market Fund, Inc., Scout Tax-Free
Money Market Fund, Inc., Scout Regional Fund, Inc.,
Scout WorldWide Fund, Inc., David L. Babson Growth
Fund, Inc., D.L. Babson Money Market Fund, Inc.,
D.L. Babson Tax-Free Income Fund, Inc., Babson
Enterprise Fund, Inc., Babson Enterprise Fund II, Inc.,
Babson Value Fund, Inc., Shadow Stock Fund, Inc.,
Babson-Stewart Ivory International Fund, Inc., D.L.
Babson Bond Trust, Buffalo Balanced Fund, Inc.,
Buffalo Equity Fund, Inc., Buffalo High Yield Fund,
Inc., Buffalo USA Global Fund, Inc.
Martin A. Cramer, Vice President and Secretary,
Jones & Babson, Inc., Scout Stock Fund, Inc., Scout
Bond Fund, Inc., Scout Money Market Fund, Inc.,
Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc.,
David L. Babson Growth Fund, Inc., D.L. Babson
Money Market Fund, Inc., D.L. Babson Tax-Free
Income Fund, Inc., Babson Enterprise Fund, Inc.,
Babson Enterprise Fund II, Inc., Babson Value Fund,
Inc., Shadow Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., D.L. Babson Bond Trust,
Buffalo Balanced Fund, Inc., Buffalo Equity Fund,
Inc., Buffalo High Yield Fund, Inc., Buffalo USA
Global Fund, Inc.
John G. Dyer, Vice President and Legal Counsel,
Scout Stock Fund, Inc., Scout Regional Fund, Inc.,
Scout Bond Fund, Inc., Scout Money Market Fund,
Inc., Scout Tax-Free Money Market Fund, Inc. and
Scout WorldWide Fund, Inc., Buffalo Balanced Fund,
Inc., Buffalo Equity Fund, Inc., Buffalo High Yield
Fund, Inc., Buffalo USA Global Fund, Inc.
None of the officers or directors will be remunerated
by the Fund for their normal duties and services. Their
compensation and expenses arising out of normal
operations will be paid by Jones & Babson, Inc.
Messrs. Hoffman, Jager, Rose and Wien have no
financial interest in, nor are they affiliated with, either
Jones & Babson, Inc. or UMB Bank, n.a.
The Audit Committee of the Board of Directors is
composed of Messrs. Hoffman, Jager, Rose and Wien.
The Officers and Directors of the Fund as a group
own less than 1% of any of the Funds.
The Fund will not hold annual meetings except as
required by the Investment Company Act of 1940 and
other applicable laws. The Fund is a Maryland
corporation. Under Maryland law, a special meeting of
stockholders of the Fund must be held if the Fund
receives the written request for a meeting from the
stockholders entitled to cast at least 25 percent of all
the votes entitled to be cast at the meeting. The Fund
has undertaken that its Directors will call a meeting of
stockholders if such a meeting is requested in writing
by the holders of not less than 10% of the outstanding
shares of the Fund. To the extent required by the
undertaking, the Fund will assist shareholder
communications in such matters.
None of the officers or directors will be remunerated
by the Fund for their normal duties and services. Their
compensation and expenses arising out of normal
operations will be paid by Jones & Babson, Inc. under
the provisions of the Management Agreement.
Messrs. Rood, Russell and Rybolt have no financial
interest in, nor are they affiliated with, either Jones &
Babson, Inc. or Kornitzer Capital Management, Inc.
The Audit Committee of the Board of Directors is
composed of Messrs. Rood, Russell and Rybolt.
The Officers and Directors of the Fund as a group
own less than 1% of the Fund.
The Fund will not hold annual meetings except as
required by the Investment Company Act of 1940 and
other applicable laws. The Fund is a Maryland
corporation. Under Maryland law, a special meeting of
stockholders of the Fund must be held if the Fund
receives the written request for a meeting from the
stockholders entitled to cast at least 25 percent of all
the votes entitled to be cast at the meeting. The Fund
has undertaken that its Directors will call a meeting of
stockholders if such a meeting is requested in writing
by the holders of not less than 10% of the outstanding
shares of the Fund. To the extent required by the
undertaking, the Fund will assist shareholder
communications in such matters.
CUSTODIAN
The Fund's assets are held for safekeeping by the
custodian, United Missouri Bank, n.a. This means the
bank, rather than the Fund, has possession of the
Fund's cash and securities. As directed by the Fund's
officers, the Bank delivers cash to those who have sold
securities to the Fund in return for such securities, and
to those who have purchased portfolio securities from
the Fund, it delivers such securities in return for their
cash purchase price. It also collects income directly
from issuers of securities owned by the Fund and holds
this for payment to shareholders after deduction of the
Fund's expenses. The custodian is compensated for its
services by the manager. There is no charge to the
Fund.
INDEPENDENT PUBLIC ACCOUNTANTS
The Fund's financial statements are examined
annually by independent public accountants approved
by the directors each year, and in years in which an
annual meeting is held the directors may submit their
selection of independent public accountants to the
shareholders for ratification.
Reports to shareholders will be published at least
semiannually.
Arthur Andersen LLP, P.O. Box 13406, Kansas
City, Missouri 64199, is the present independent public
accountant for the Fund.
OTHER SCOUT FUNDS
UMB Bank,n.a., also manages six other mutual
funds which especially seek to provide services to
customers of affiliate banks of UMB Financial
Corporation (UMB). They are Scout Stock Fund,
Inc., Scout Bond Fund, Inc., Scout Money
Market Fund, Inc., Scout Tax-Free Money Market
Fund, Inc., Scout Regional Fund, Inc. and Scout
Worldwide Fund, Inc.
FIXED INCOME SECURITIES
DESCRIBED AND RATINGS
Description of Bond Ratings:
Standard & Poor's Corporation (S&P).
AAA - Highest Grade. These securities
possess the ultimate degree of protection
as to principal and interest. Marketwise,
they move with interest rates, and hence
provide the maximum safety on all
counts.
AA - High Grade. Generally, these bonds
differ from AAA issues only in a small
degree. Here too, prices move with the
long-term money market.
A - Upper-medium Grade. They have
considerable investment strength, but
are not entirely free from adverse
effects of changes in economic and
trade conditions. Interest and principal
are regarded as safe. They
predominately reflect money rates in
their market behavior but, to some
extent, also economic conditions.
BBB - Bonds rated BBB are regarded as
having an adequate capacity to pay
principal and interest. Whereas they
normally exhibit protection
parameters, adverse economic
conditions or changing circumstances
are more likely to lead to a weakened
capacity to pay principal and interest
for bonds in this category than for
bonds in the A category.
BB, B, CCC, CC - Bonds rated BB, B,
CCC and CC are regarded, on balance, as
predominantly speculative with respect to the
issuer's capacity to pay interest and repay
principal in accordance with the terms of the
obligations. BB indicates the lowest degree of
speculation and CC the highest degree of
speculation. While such bonds will likely have
some quality and protective characteristics, these
are outweighed by large uncertainties or major
risk exposures to adverse conditions.
Moody's Investors Service, Inc. (Moody's).
Aaa - Best Quality. These securities carry the
smallest degree of investment risk and
are generally referred to as "gilt-edge."
Interest payments are protected by a
large, or by an exceptionally stable
margin, and principal is secure. While
the various protective elements are likely
to change, such changes as can be
visualized are most unlikely to impair the
fundamentally strong position of such
issues.
Aa - High Quality by All Standards. They
are rated lower than the best bonds
because margins of protection may not be
as large as in Aaa securities, fluctuation
of protective elements may be of greater
amplitude, or there may be other
elements present which make the long-
term risks appear somewhat greater.
A - Upper-medium Grade. Factors giving
security to principal and interest are
considered adequate, but elements may
be present which suggest a susceptibility
to impairment sometime in the future.
Baa - Bonds which are rated Baa are
considered as medium grade obligations,
i.e., they are neither highly protected nor
poorly secured. Interest payments and
principal security appear adequate for the
present, but certain protective elements
may be lacking or may be
characteristically unreliable over any
great length of time. Such bonds lack
outstanding investment characteristics
and in fact have speculative
characteristics as well.
Ba - Bonds which are rated Ba are judged to
have predominantly speculative
elements; their future cannot be
considered as well assured. Often the
protection of interest and principal
payments may be very moderate and
thereby not well safeguarded during both
good and bad times over the future.
Uncertainty of position characterizes
bonds in this class.
B - Bonds which are rated B generally lack
characteristics of the desirable
investment. Assurance of interest and
principal payments or maintenance of
other terms of the contract over any long
period of time may be small.
Caa - Bonds which are rated Caa are of poor
standing. Such issues may be in default
or there may be present elements of
danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent
obligations which are speculative in a
high degree. Such issues are often in
default or have other marked
shortcomings.
DESCRIPTION OF COMMERCIAL
PAPER RATINGS
Moody's . . . Moody's commercial paper rating is an
opinion of the ability of an issuer to repay punctually
promissory obligations not having an original maturity
in excess of nine months. Moody's has one rating -
prime. Every such prime rating means Moody's
believes that the commercial paper note will be
redeemed as agreed. Within this single rating category
are the following classifications:
Prime - 1 Highest Quality
Prime - 2 Higher Quality
Prime - 3 High Quality
The criteria used by Moody's for rating a commercial
paper issuer under this graded system include, but are
not limited to the following factors:
(1) evaluation of the management of the issuer;
(2) economic evaluation of the issuer's industry or
industries and an appraisal of speculative type
risks which may be inherent in certain areas;
(3) evaluation of the issuer's products in relation to
competition and customer acceptance;
(4) liquidity;
(5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years;
(7) financial strength of a parent company and
relationships which exist with the issuer; and
(8) recognition by the management of obligations
which may be present or may arise as a result
of public interest questions and preparations to
meet such obligations.
S&P . . . Standard & Poor's commercial paper rating
is a current assessment of the likelihood of timely
repayment of debt having an original maturity of no
more than 270 days. Ratings are graded into four
categories, ranging from "A" for the highest quality
obligations to "D" for the lowest. The four categories
are as follows:
"A" Issues assigned this highest rating are
regarded as having the greatest capacity for
timely payment. Issues in this category are
further refined with the designations 1, 2, and
3 to indicate the relative degree of safety.
"A-1" This designation indicates that the degree of
safety regarding timely payment is very
strong.
"A-2" Capacity for timely payment on issues with
this designation is strong. However, the
relative degree of safety is not as
overwhelming.
"A-3" Issues carrying this designation have a
satisfactory capacity for timely payment.
They are, however, somewhat more vulnerable
to the adverse effects of changes in
circumstances than obligations carrying the
higher designations.
"B" Issues rated "B" are regarded as having only
an adequate capacity for timely payment.
Furthermore, such capacity may be damaged
by changing conditions or short-term
adversities.
"C" This rating is assigned to short-term debt
obligations with a doubtful capacity for
payment.
"D" This rating indicates that the issuer is either
in default or is expected to be in default upon
maturity.
<PAGE>
FINANCIAL STATEMENT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
I
To the Shareholders and
Board of Directors of
Scout Balanced Fund, Inc.:
We have audited the accompanying statement of assets and liabilities
of the Scout Balanced Fund, Inc. (a Maryland corporation), as of
October 2, 1995 (inception). This financial statement is the
responsibility of the Fund's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement
is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statement. Our procedures included confirmation of
securities owned as of October 2,1995, by correspondence with
the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the statement of assets and liabilities referred
to above presents fairly, in all material respects, the financial
position of Scout Balanced Fund, Inc., as of October 2,1995,
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Kansas City, Missouri,
October 4, 1995
<PAGE>
SCOUT BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 2. 1995
ASSETS:
Investment securities, at market
Repurchase agreement, 5.38%, due October 3,1995 (Note 2) $ 100,000
Total assets 100,000
LIABILITIES AND NET ASSETS-
Liabilities -
NET ASSETS $ 100,000
NET ASSETS APPLICABLE TO OUTSTANDING SHARES CONSIST OF:
Capital (capital stock and paid-in capital) $ 100,000
Capital shares, $1.00 par value:
Authorized 10,000,000
Outstanding 10,000
NET ASSET VALUE PER SHARE $ 10.00
See accompanying notes to this financial statement.
<PAGE>
SCOUT BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENT
OCTOBER 2, 1995
1. SIGNIFICANT ACCOUNTING POLICIES:
Scout Balanced Fund, Inc. (the Fund), was registered on July 3, 1995, under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company and capitalized on October 2, 1995, by
Jones & Babson, Inc., underwriter.
2. REPURCHASE AGREEMENTS:
Securities purchased under agreements to resell are held by the Fund's
custodian, UMB Bank, N.A. The Fund's adviser monitors the market values
of the underlying securities which they have purchased on behalf of the
Fund to ensure they are sufficient to protect the Fund in the event of
default by the seller. In the event of bankruptcy or other default of
the seller, the Fund could experience delays in liquidating the
underlying securities and possible loss to the extent the repurchase
agreement and accrued interest is more than proceeds received upon
liquidation of the underlying securities.
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
Included in Part B:
Report of Independent Public Accountants
Statement of Assets and Liabilities
Notes to Financial Statement
(b) *(1) Registrant's Articles of Incorporation
*(2) Form of Registrant's By-laws
(3) Not applicable, because there is no voting
trust agreement
*(4) Specimen copy of each security to be issued
by the registrant
*(5) Form of Management Agreement between
UMB Bank, n.a. and the Registrant
*(6) Form of principal Underwriting Agreement
between Jones & Babson, Inc. and the
Registrant
(7) Not applicable, because there are no pension,
bonus or other agreements for the benefit of
directors and officers
*(8) Form of Custodian Agreement between
Registrant and United Missouri Bank of Kansas
City, N.A.
(9) There are no other material contracts not
made in the ordinary course of business
between the Registrant and others
(10) Opinion and consent of counsel as to the
legality of the registrant's securities being
registered. (To be supplied annually pursuant
to Rule 24f-2 of the Investment Company Act
of 1940.)
(11) Not applicable. (To be supplied by further
amendment as necessary)
(12) Not applicable.
*(13) Form of letter from contributors of initial
capital to the Registrant that purchase was
made for investment purposes without any
present intention of redeeming or selling.
(14) Not applicable.
(15) Not applicable.
(16) Schedule for computation of performance
quotations. (To be supplied by further
amendment)
(17) Copies of Powers of Attorney pursuant to Rule
402(c).
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL OF THE
REGISTRANT.
NONE
Item 26. NUMBER OF HOLDERS OF SECURITIES.
The number of record holders of each class of
securities of the Registrant as of October 4, 1995,
is as follows:
(1) (2)
Title of class Number of Record Holders
Common Stock 1
$1.00 par value
Item 27. INDEMNIFICATION.
Under the terms of the Maryland General Corporation Law
and the company's By-laws, the company shall indemnify
any person who was or is a director, officer, or
employee of the company to the maximum extent permitted
by the Maryland General Corporation Law; provided
however, that any such indemnification (unless ordered
by a court) shall be made by the company only as
authorized in the specific case upon a determination
that indemnification of such persons is proper in the
circumstances. Such determination shall be made
(i) by the Board of Directors by a majority vote of a
quorum which consists of the directors who are neither
"interested persons" of the company as defined in
Section 2(a)(19) of the 1940 Act, nor parties to the
proceedings, or
(ii) if the required quorum is not obtainable or if a
quorum of such directors so directs, by
independent legal counsel in a written opinion.
No indemnification will be provided by the company to
any director or officer of the company for any
liability to the company or shareholders to which he
would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless
disregard of duty.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
UMB Bank, n.a. is a commercial bank
Item 29. PRINCIPAL UNDERWRITERS.
(a) Jones & Babson, Inc., the only principal
underwriter of the Registrant, also acts as
principal underwriter for the David L. Babson
Growth Fund, Inc., D.L. Babson Money Market Fund,
Inc., D.L. Babson Tax-Free Income Fund, Inc., D.L.
Babson Bond Trust, Babson Value Fund, Inc., Shadow
Stock Fund, Inc., Babson-Stewart Ivory
International Fund, Inc., Scout Stock Fund, Inc.,
Scout Bond Fund, Inc., Scout Money Market Fund, Inc.
Scout Tax-Free Money Market Fund, Inc., Scout
Regional Fund, Inc., Scout WorldWide Fund, Inc.
Buffalo Balanced Fund, Inc. Buffalo Equity Fund, Inc.
Buffalo USA Global Fund, Inc. and Buffalo High
Yield Fund, Inc.
(b) Herewith is the information required by the
following table with respect to each director,
officer or partner of the only underwriter named
in answer to Item 21 of Part B:
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
Stephen S. Soden Chairman and Director Director
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Larry D. Armel President and Director President and
Three Crown Center Director
2440 Pershing Road
Kansas City, MO 64108
Giorgio Balzer Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
J. William Sayler Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Edward S. Ritter Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Robert N. Sawyer Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
Vernon W. Voorhees Director None
BMA Tower
One Penn Valley Park
Kansas City, MO 64141
P. Bradley Adams Vice President Vice President
Three Crown Center and Treasurer and Treasurer
2440 Pershing Road, G-15
Kanasas City, Missouri 64108
Michael A Brummel Vice President Vice President
Three Crown Center
2440 Pershing Road, G-15
Kanasas City, Missouri 64108
Martin A. Cramer Vice President Vice President
Three Crown Center and Secretary and Secretary
2440 Pershing Road, G-15
Kanasas City, Missouri 64108
(c) The principal underwriter does not receive any
remuneration or compansation for the duties or
services rendered to the Registrant pursuant to
the principal underwriting Agreement.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
Each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the
Rules (17 CFR 270.31a-1 to 31a-3) promulgated
thereunder is in the physical possession of Jones &
Babson, Inc., at Three Crown Center, 2440 Pershing
Road, G-15, Kansas City, Missouri 64108.
Item 31. MANAGEMENT SERVICES.
All management services are covered in the management
agreement between the Registrant and Jones & Babson,
Inc., which are discussed in Parts A and B.
Item 32. UNDERTAKINGS.
Registrant undertakes to file a post-effective
amendment using uncertified financial statements within
four to six months from the effective date of
Registrant's 1933 Act Registration Statement.
Registrant undertakes that, if requested to do so by
the holders of at least 10% of the registrant's
outstanding shares, to call a meeting of shareholders
for the purpose of voting upon the question of removal
of a director or directors and to assist in
communications with other shareholders as required by
Section 16(c) of the Investment Company Act of 1940, as
amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this amendment to its registration statement to be signed
on its behalf by the undersigned, thereunto authorized, in the
City of Kansas City, and State of Missouri on the 12th day of
October, 1995.
SCOUT BALANCED FUND, INC.
________________________________________
(Registrant)
By _____________________________________
(Larry D. Armel, President)
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Larry D. Armel President, October 12, 1995
Larry D. Armel Principal Executive
Officer, and Director
*William E. Hoffman_ Director October 12, 1995
William E. Hoffman
*Eric T. Jager Director October 12, 1995
Eric T. Jager
*Stephen F. Rose Director October 12, 1995
Stephen F. Rose
*Stuart Wien Director October 12, 1995
Stuart Wien
P. Bradley Adams Treasurer and October 12, 1995
P. Bradley Adams Principal Financial
and Accounting Officer
*Signed pursuant to Power of Attorney
By Larry D. Armel
Attorney-in Fact
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> SCOUT BALANCED FUND, INC.
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