SCOUT
BALANCED
FUND
A no-load mutual
fund investing in both
equities and fixed income
obligations with emphasis
on both long-term growth
of capital and high
current income.
Quarterly Report
September 30, 1996
TO THE SHAREHOLDERS
Scout Balanced Fund's total return (price change and reinvested distributions)
for the quarter ended September 30, 1996 was 0.59% and since inception
(December 6, 1995) the Fund had a return of 3.94%.
Performance data contained in this report is for past periods only. Past
performance is not predictive of future performance. Investment returns and
share value will fluctuate, and redemption value may be more or less than
original cost.
The quarter ended September began with fireworks. The
S&P 500 lost nearly 10% of its value in the first two weeks of July. The bond
market had one of its worst days on record on July 5, 1996. Subsequent to
these declines, the bond market rebounded and stocks recovered all of their
losses and have gone on to record highs. Because we have established a
conservative posture, the Fund experienced much less volatility than the broad
capital markets during the declines in July.
As interest rates rose throughout the quarter, we lengthened the average
maturity of the Fund from 2.5 years to 3.2 years. Credit quality is still an
unblemished AAA and the yield to a maturity of the fixed income portion of the
Fund is 6.52%.
PIE CHART
Fundamental valuations in the equity markets, especially with large
capitalization U.S. stocks, are at record levels. These "blue chips" are
trading at lofty multiples to book value, sales, cash flow and adjusted
earnings, offering the lowest dividend yield of all time. We have continued to
maintain a defensive equity portfolio structure. Stocks accounted for 30.0% of
the Fund at quarter end. This portion of the Fund is invested in companies
with more favorable fundamental valuations than the "market" or the average
equity or balanced fund. This Graham and Dodd approach to equity investing has
empirically outperformed growth and momentum styles over full market cycles.
Top 10 Equity Holdings
Market Percent
Value of Total
O'Sullivan Industries, Inc. $ 88,750 1.70%
Novell Inc. 66,000 1.26%
Cyprus Amax Minerals Company 64,500 1.23%
Kerr McGee Corp. 60,875 1.16%
ACX Technologies 60,813 1.16%
B I Inc. 57,750 1.10%
Dominion Resources Inc. VA 56,625 1.08%
Bob Evans Farms Inc. 53,500 1.02%
Brinker International Inc. 51,000 0.98%
Alcatel Alsthom 50,625 0.97%
Top 10 Equity Holdings Total: $ 610,438 11.66%
Note: All market values based on 9/30/96 statement of assets.
Our philosophy, with equity price fully valued and interest rates at relative
lows, is one of capital preservation. To quote one of the Fund's directors,
"We are in the risk management business." Risk today is high. The typical
investor is taking on an excessive amount of risk to reap what we believe will
be inferior returns.
Should interest rates and the dollar continue to rise and unemployment rates
continue to fall, we think the capital markets would experience some
turbulence. We try to be cognizant of the risks in today's investment climate
and have built a portfolio that should withstand difficult times.
We welcome new shareholders and appreciate your support. Please feel free to
call with questions or comments.
Sincerely,
/s/Christopher P. Bloomstran
Christopher P. Bloomstran, CFA
UMB Investment Advisors
Shares of the Scout Funds are not deposits or obligations of, nor guaranteed
by, UMB Bank, n.a. or any other banking institution, nor are they insured by
the Federal Deposit Insurance Corporation or any other applicable deposit
insurance. These shares involve investment risks, including the possible loss
of the principal amount invested.
FINANCIAL STATEMENTS
Statement of Net Assets
September 30, 1996
Market
Shares Company Value
COMMON STOCKS - 30.00%
BASIC MATERIALS - 5.52%
8,200 Amax Gold Inc. $ 46,125
2,500 Brush Wellman, Inc. 48,125
4,500 Calgon Carbon Corp. 46,687
3,000 Cyprus Amax Minerals Co. 64,500
2,000 Huntco, Inc. Cl. A 35,500
425 International Paper Co. 18,063
50 Weyerhaeuser Co. 2,306
1,500 Worthington Industries, Inc. 30,000
291,306
CAPITAL GOODS - 1.05%
800 Browning Ferris Industries 20,000
3,000 Giddings & Lewis 35,625
55,625
CONSUMER CYCLICAL - 5.07%
2,000 Bassett Furniture Industries 47,500
800 Dillards Dept. Stores, Inc. Cl A 25,800
200 May Department Stores 9,725
10,000 O'Sullivan Industries, Inc. 88,750
425 Penney (J.C.) & Co., Inc. 23,003
2,500 Stride Rite Corp. 22,500
552 Limited (The), Inc. 10,557
1,500 Wal-Mart Stores, Inc. 39,563
267,398
CONSUMER STAPLES - 5.82%
525 Archer-Daniels-Midland Co. 10,106
4,000 Bob Evans Farms Inc. 53,500
3,000 Brinker International 51,000
1,500 Exabyte Corp. 22,500
3,000 Lance, Inc. 51,750
4,000 Mylan Laboratories 68,500
600 Rubbermaid, Inc. 14,700
2,400 VICORP Restaurants, Inc. 34,800
306,856
ENERGY - 2.71%
1,000 Kerr McGee Corp. 60,875
325 Murphy Oil Corp. 15,681
750 Phillips Petroleum Co. 32,063
1,600 USX-Marathon Group 34,600
143,219
FINANCE - 0.47%
1,000 Unicom Corp. 25,125
MISCELLANEOUS - 2.25%
3,500 ACX Technologies 60,813
7,000 B.I. Inc. 57,750
118,563
RAW MATERIALS - 0.45%
500 New Mont Mining Corp. 23,625
TECHNOLOGY - 2.51%
2,000 Apple Computer, Inc. 44,375
6,000 Novell, Inc.* 66,000
400 Texas Instruments Inc. 22,050
132,425
UTILITIES - 4.15%
3,000 Alcatel Alsthom Sponsored ADR 50,625
1,500 Dominion Resources Inc. V.A. 56,625
500 Florida Progress Corp. 17,000
4,150 Niagara Mohawk Power Corp. 33,200
1,050 Nokia Corp. Sponsored ADR 46,462
500 U.S. West Communication Group 14,875
218,787
TOTAL COMMON STOCKS - 30.00% 1,582,929
GOVERNMENT SPONSORED
ENTERPRISES - 53.13%
$ 150,000 Federal Farm Credit Bank,
5.40%, due March 6, 1998 148,593
100,000 Federal Farm Credit Bank,
Medium Term Notes,
5.20%, due January 25, 1999 97,656
100,000 Federal Home Loan Bank,
5.30%, due June 11, 1997 99,672
100,000 Federal Home Loan Bank,
6.055%, due April 17, 1998 99,891
150,000 Federal Home Loan Bank,
5.035%, due January 19, 1999 146,016
100,000 Federal Home Loan Bank,
5.86%, due April 2, 1999 99,078
100,000 Federal Home Loan Bank,
5.50%, due January 10, 2001 96,016
150,000 Federal Home Loan Bank,
6.75%, due April 5, 2004 148,617
150,000 Federal National Mortgage
Association,
6.745%, due August 1, 2001 150,750
75,416 Federal National Mortgage
Association,
7.00%, due October 1, 1999 75,342
67,236 Federal National Mortgage
Association,
7.00%, due February 1, 2003 67,170
81,098 Federal National Mortgage
Association,
6.00%, due April 1, 2001 78,470
100,000 Federal National Mortgage
Association, Deb.,
6.05% due January 12, 1998 99,984
100,000 Federal National Mortgage
Association, Deb.,
5.96%, due October 20, 2000 97,891
150,000 Federal National Mortgage
Association, Deb.,
6.99%, due July 5, 2006 149,766
5,000 Federal National Mortgage
Association, Deb., Series U,
6.05%, due November 10, 1997 5,000
150,000 Federal National Mortgage
Association, Deb., Series K,
7.05%, due November 12, 2002 151,992
100,000 Federal National Mortgage
Association, Medium Term Notes,
6.84%, due October 3, 1997 101,019
100,000 Federal National Mortgage
Association, Medium Term Notes,
5.55%, due March 12, 1999 97,766
150,000 Federal National Mortgage
Association, Medium Term Notes,
6.29%, due October 4, 2000 148,560
150,000 Federal National Mortgage
Association, Medium Term Notes,
6.71%, due May 21, 2003 149,578
150,000 Federal National Mortgage
Association, Medium Term Notes,
6.72%, due August 1, 2005 147,683
100,000 International Bank for
Reconstruction & Development,
5.875%, due July 16, 1997 100,000
100,000 Tennessee Valley Authority,
5.95%, due September 15, 1998 99,516
150,000 Tennessee Valley Authority, Series D,
6.00%, due November 1, 2000 146,930
TOTAL GOVERNMENT SPONSORED
ENTERPRISES - 53.13% 2,802,956
U.S. GOVERNMENT SECURITIES - 0.47%
$ 5,000 U.S. Treasury Notes, Series V,
4.75%, due February 15, 1997 4,985
5,000 U.S. Treasury Notes,
6.125%, due May 31, 1997 5,015
5,000 U.S. Treasury Notes,
5.625%, due August 31, 1997 4,991
5,000 U.S. Treasury Notes,
5.375%, due November 30, 1997 4,970
5,000 U.S. Treasury Notes,
5.125%, due February 28, 1998 4,942
TOTAL U.S. GOVERNMENT
SECURITIES - 0.47% 24,903
SHORT-TERM CORPORATE NOTES - 7.56%
100,000 AIG Funding Corp.,
5.30%, due October 10, 1996 99,853
100,000 duPont E.I. duNemours & Co.,
5.25%, due October 7, 1996 99,898
100,000 Toys "R" Us,
5.38%, due October 23, 1996 99,656
100,000 Wal-Mart Stores Inc.,
5.25%, due October 29, 1996 99,577
TOTAL SHORT-TERM
CORPORATE NOTES - 7.56% 398,984
REPURCHASE AGREEMENT - 8.15%
430,000 Northern Trust Co., 5.58%,
due October 1, 1996
(Collateralized by U.S.
Treasury Notes, 6.125%,
due August 31, 1998) 430,000
TOTAL INVESTMENTS - 99.31% $ 5,239,772
Other assets less liabilities - 0.69% 36,217
TOTAL NET ASSETS - 100.00%
(equivalent to $10.24 per share;
10,000,000 shares of $1.00 par value
capital shares authorized; 515,341.823
shares outstanding) $ 5,275,989
BASIS OF DETERMINING MARKET VALUE. Each investment is valued at the
latest sales price on September 30, 1996, as reported by the principal
exchange on which the issue is listed. If no sale is reported, or if
unlisted, the average of the latest
bid and asked price is used.
This report has been prepared for the information of the Shareholders of
Scout Balanced Fund, Inc., and is not to be construed as an offering of
the shares of the Fund. Shares of this Fund and of the other Scout Funds
are offered only by the Prospectus, a copy of which may be obtained from
Jones & Babson, Inc.
BOARD OF DIRECTORS
AND OFFICERS
Board of Directors
Larry D. Armel
William E. Hoffman, D.D.S.
Eric T. Jager
Stephen F. Rose
Stuart Wien
Officers
Larry D. Armel, President
P. Bradley Adams, Vice President & Treasurer
Michael A. Brummel, Vice President
Martin A. Cramer, Vice President & Secretary
John G. Dyer, Vice President
Investment Counsel
UMB Bank, n.a., Kansas City, Missouri
Legal Counsel
Stradley, Ronon, Stevens & Young,
Philadelphia, Pennsylvania
John G. Dyer, Kansas City, Missouri
Custodian
UMB Bank, n.a., Kansas City, Missouri
JONES & BABSON
MUTUAL FUNDS
P.O. Box 410498
Kansas City, MO 64141-0498
TOLL-FREE 1-800-996-2862
