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.
Annual Report
June 30, 1996
TO THE SHAREHOLDERS
Scout Balanced Fund's total return (price change and reinvested
distributions) since inception on December 6, 1995 was 3.33%.
Since February, we have seen intermediate and longer term interest
rates rise precipitously. The rise in rates placed considerable
pressure on bond prices. By keeping the average maturity of the
fund relatively short, the fixed-income portion of the Fund helped
preserve the fair market value of the portfolio. As fixed-income
prices fell during the quarter, we committed cash to longer dated
securities, increasing the fixed-income allocation from 54.08% on
March 31 to 58.24% on June 30. The average maturity increased from
2.0 years to 2.5 years during the quarter. Credit quality has not
been compromised and is still a solid AAA.
We have also maintained a defensive posture with the equity
portion of the Fund. The Fund was 32.80% invested in equities on
June 30 versus 31.91% on March 31. The equity position continues
to be concentrated in companies who benefit from a strong dollar
and moderately growing domestic economy. We have focused on
companies with attractive valuations relative to the broad market.
As an example, the average stock in Scout Balanced Fund is trading
at less than twice tangible book value versus over four times for
the S & P 500.
Should interest rates and the dollar continue to rise and
unemployment rates continue to fall, we think the capital markets
should 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.
For corporate shareholders, 8.77% of ordinary income distributions
qualify for the corporate dividends received deduction.
We welcome new shareholders and appreciate your support. Please
feel free to call with questions or comments.
Top 10 Equity Holdings
Market Percent
Value of Total
O'Sullivan Industries, Inc. $ 61,212 1.99%
Bassett Furniture Industries 42,131 1.37%
Wal Mart Stores, Inc. 38,063 1.24%
Novell, Inc. 37,462 1.22%
Bob Evans Farms, Inc. 34,000 1.11%
Giddings & Lewis, Inc. 33,719 1.10%
USX Marathon Group 32,200 1.05%
Brinker International 31,500 1.02%
Phillips Petroleum Co. 31,406 1.02%
Cyprus Amax Minerals Co. 30,544 0.99%
Top 10 Equity Holdings Total: 372,237 12.11%
NOTE: All market values based on 6/30/96 statement of assets.
GRAPH -- Equity-33%; Less than 1 Year-12%; Government,
Agency & Corporate Bonds-55%
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.
GRAPH -- Scout Balanced Fund versus S&P 500 and Lehman Brothers
Intermediate Government/Corporate Bonds
Hypothetical Growth of $10,000
Total return since inception of the Fund on December 6, 1995
was 3.33%. Performance data contained in this report is for
past periods only. Past performance is not predictive of
future performance. Investment return and share value will
fluctuate, and redemption value may be more or less than
original cost.
FINANCIAL STATEMENTS
Statement of Net Assets
June 30, 1996
<TABLE>
<CAPTION>
Market
Shares Company Cost Value
</CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 32.80%
BASIC MATERIALS - 4.97%
4,000 Amax Gold Inc. $ 26,700 $ 22,000
1,350 Brush Wellman, Inc. 24,732 25,650
2,000 Calgon Carbon Corp. 22,620 27,000
1,350 Cyprus Amax Minerals Co. 34,657 30,544
1,500 Huntco, Inc. Cl. A 22,277 27,750
425 International Paper Co. 16,668 15,672
50 Weyerhaeuser Co. 2,110 2,125
100 Worthington Industries, Inc. 1,900 2,087
151,664 152,828
CAPITAL GOODS - 1.85%
800 Browning Ferris Industries 24,177 23,200
2,075 Giddings & Lewis 32,441 33,719
56,618 56,919
CONSUMER CYCLICAL - 7.64%
1,575 Bassett Furniture Industries 38,213 42,131
800 Dillards Dept. Stores, Inc. Cl A 22,381 29,200
200 May Department Stores 7,668 8,750
8,300 O'Sullivan Industries, Inc.* 50,682 61,212
32 Payless Shoesource, Inc.* 771 1,016
425 Penney (J.C.) & Co., Inc. 19,761 22,313
2,500 Stride Rite Corp. 20,559 20,625
552 Limited (The), Inc. 9,078 11,868
1,500 Wal-Mart Stores, Inc. 30,527 38,063
199,640 235,178
CONSUMER STAPLES - 4.88%
500 Archer-Daniels-Midland Co. 9,272 9,562
2,000 Bob Evans Farms Inc. 31,250 34,000
1,500 Exabyte Corp.* 21,250 19,594
1,600 Lance, Inc. 26,163 26,400
1,000 Mylan Laboratories 19,060 17,250
600 Rubbermaid, Inc. 16,344 16,350
2,200 Vicorp Restaurants, Inc.* 22,575 26,950
145,914 150,106
ENERGY - 4.09%
300 Kerr McGee Corp. 18,021 18,263
325 Murphy Oil Corp. 13,479 14,747
750 Phillips Petroleum Co. 24,803 31,406
1,100 Rhone-Poulenc S.A. Sponsored ADR 23,589 29,150
1,600 USX-Marathon Group 30,687 32,200
110,579 125,766
FINANCE - 0.91%
1,000 Unicom Corp. 27,810 27,875
MISCELLANEOUS - 0.71%
1,100 ACX Technologies* 17,334 21,862
TECHNOLOGY - 3.84%
1,400 Apple Computer, Inc. 39,062 29,400
2,100 Brinker International* 28,185 31,500
2,700 Novell, Inc.* 34,175 37,462
400 Texas Instruments Inc. 20,628 19,950
122,050 118,312
UTILITIES - 3.91%
1,100 Alcatel Alsthom Sponsored ADR 19,286 19,387
700 Dominion Resources Inc. V.A. 27,174 28,000
500 Florida Progress Corp. 16,410 17,375
2,150 Niagara Mohawk Power Corp. 20,124 16,663
1,050 Nokia Corp. Sponsored ADR* 39,105 38,850
122,099 120,275
TOTAL COMMON STOCKS - 32.80% 953,708 1,009,121
<CAPTION>
Market
Face Amount Description Cost Value
</CAPTION>
GOVERNMENT SPONSORED ENTERPRISES - 57.43%
$ 150,000 Federal Farm Credit Banks, 5.40%, due March 6, 1998 150,000 148,465
100,000 Federal Farm Credit Banks, 5.20%, due January 25, 1999 99,929 97,412
100,000 Federal Home Loan Banks, 5.30%, due June 11, 1997 100,203 99,422
100,000 Federal Home Loan Banks, 6.055% due, April 17, 1998 99,803 99,781
150,000 Federal Home Loan Banks, 5.035%, due January 19, 1999 148,750 145,453
100,000 Federal Home Loan Banks, 5.86%, due April 2, 1999 98,618 98,856
100,000 Federal Home Loan Banks, 5.50%, due January 10, 2001 95,322 95,687
100,000 Federal Home Loan Banks, 5.96%, due October 20, 2000 97,426 97,594
100,000 Federal National Mortgage Association, 6.84%, due October 3, 1997 102,687 101,147
5,000 Federal National Mortgage Association, 6.05%, due November 10, 1997 5,051 4,995
100,000 Federal National Mortgage Association, 6.05%, due January 12, 1998 101,547 99,859
100,000 Federal National Mortgage Association, 5.55%, due March 12, 1999 97,662 97,477
81,719 Federal National Mortgage Association, 7.00%, due October 1, 1999 83,404 81,541
85,010 Federal National Mortgage Association, 6.00%, due April 1, 2001 85,541 81,982
71,304 Federal National Mortgage Association, 7.00%, due February 1, 2003 72,997 71,148
100,000 International Bank for Reconstruction & Development,
5.875%, due July 16, 1997 100,992 99,875
100,000 Tennessee Valley Authority, 5.95%, due September 15, 1998 101,734 99,328
150,000 Tennessee Valley Authority, 6.00%, due November 1, 2000 150,771 146,672
TOTAL GOVERNMENT SPONSORED ENTERPRISES - 57.43% 1,792,437 1,766,694
U.S. GOVERNMENT SECURITIES - 0.81%
5,000 U.S. Treasury Notes, 4.75%, due February 15, 1997 4,992 4,970
5,000 U.S. Treasury Notes, 6.125%, due May 31, 1997 5,071 5,016
5,000 U.S. Treasury Notes, 5.625%, due August 31, 1997 5,041 4,984
5,000 U.S. Treasury Notes, 5.375%, due November 30, 1997 5,025 4,959
5,000 U.S. Treasury Notes, 5.125%, due February 28, 1998 5,001 4,927
TOTAL U.S. GOVERNMENT SECURITIES - 0.81% 25,130 24,856
REPURCHASE AGREEMENT - 7.96%
245,000 Northern Trust Co., 5.30%, due July 1, 1996
(Collateralized by $245,000 par value U.S. Treasury Notes,
6.125%, due March 31, 1998 delivery value $245,583) 245,000 245,000
TOTAL INVESTMENTS - 99.00% $ 3,016,275 3,045,671
Other assets less liabilities - 1.00% 30,846
TOTAL NET ASSETS - 100%
(equivalent to $10.18 per share; 10,000,000 shares of $1.00 par value
capital shares authorized; 302,245 shares outstanding) $ 3,076,517
For federal income tax purposes, the identified cost of investments
owned at June 30, 1996 was $3,016,275.
Net unrealized appreciation for federal income tax purposes was
$29,396, which is comprised of unrealized appreciation of $85,182
and unrealized depreciation of $55,786.
ADR - American Depository Receipt
<FN>
<F1>* Non-income producing security
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 1996
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (identified cost $3,016,275) $ 3,045,671
Cash 597
Dividends receivable 1,657
Interest receivable 28,592
Total assets 3,076,517
NET ASSETS $ 3,076,517
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 3,038,463
Accumulated undistributed income:
Net investment income 7,319
Accumulated net realized gain on investment transactions 1,339
Net unrealized appreciation of investments 29,396
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 3,076,517
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 302,245
NET ASSET VALUE PER SHARE $ 10.18
</TABLE>
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statement of Operations
For the Period October 2, 1995 (Capitalization) to June 30, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends $ 7,027
Interest 47,516
54,543
Expenses:
Management fees 10,082
Withholding tax 100
10,182
Net investment income 44,361
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain from investment transactions (excluding repurchase agreements
and short-term corporate notes):
Proceeds from sales of investments 50,855
Cost of investments sold 49,516
Net realized gain from investment transactions 1,339
Unrealized appreciation of investments:
Beginning of year -
End of year 29,396
Net unrealized appreciation of investments 29,396
Net gain on investments 30,735
Net increase in net assets resulting from operations $ 75,096
</TABLE>
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
For the Period October 2, 1995 (Capitalization) to June 30, 1996
<TABLE>
<CAPTION>
1996
</CAPTION>
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 44,361
Net realized gain from investment transactions 1,339
Net unrealized appreciation (depreciation) of investments 29,396
Net increase in net assets resulting from operations 75,096
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net realized gain from investment transactions (37,042)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 349,299 shares sold 3,518,896
Net asset value of 3,648 shares issued for reinvestment of distributions 37,042
3,555,938
Cost of 50,702 shares redeemed (517,475)
Net increase from capital share transactions 3,038,463
Total increase in net assets 3,076,517
NET ASSETS:
Beginning of year -
End of year (including undistributed net investment income of $7,319) $ 3,076,517
*Distributions to shareholders:
Income dividends per share $ .24
</TABLE>
See accompanying Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The
Fund was capitalized on October 2, 1995 and initial public offering
was made on December 6, 1995. The Fund is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. A summary of significant accounting
policies that the Fund uses in the preparation of its financial state-
ments follows. The policies are in conformity with generally accepted
accounting principles.
Investments - Common stocks traded on a national securities
exchange are valued at the last reported sales price on the last
business day of the period or, if no sale was reported on that
date, at the average of the last reported bid and asked prices.
Debt securities (other than short-term obligations), including
listed issues, are valued at market on the basis of valuations
furnished by an independent pricing service which utilizes both
dealer-supplied valuations and electronic data processing
techniques. Investment transactions are recorded on the date
securities are purchased or sold. Dividend income and
distributions to shareholders are recorded on the ex-dividend
dates. Realized gains and losses from investment transactions and
unrealized appreciation and depreciation of investments are
reported on the identified cost basis. Short-term investments are
valued at cost with interest income recorded on the accrual basis.
Federal Income Taxes - The Fund has complied with the Internal
Revenue Code requirements applicable to regulated investment
companies and will distribute all income to its shareholders.
Therefore, no Federal income tax provision is required.
Amortization - Discounts and premiums on securities purchased are
amortized over the life of the respective securities.
Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amount
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
2. PURCHASES AND SALES OF SECURITIES - The aggregate amounts of
security transactions during the period October 2, 1995 to June
30, 1996 (excluding repurchase agreements and short-term
securities), are as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 1,225,421 $ 1,484,589
Proceeds from sales 19,760 31,095
3. MANAGEMENT FEES - UMB Bank, n.a. is the Fund's manager and
investment adviser and provides or pays the cost of all
management, supervisory and administrative services required in
the normal operation of the Fund. This includes investment
management; fees of the custodian, independent public accountants
and legal counsel; remuneration of officers and directors; rent;
and shareholder services, including maintenance of the
shareholders accounting system and transfer agency. Not considered
normal operating expenses and therefore payable by the Fund are
taxes, interests, fees and the other charges of governments and
their agencies for qualifying the fund's shares for sale, special
accounting and legal fees and brokerage commissions. UMB Bank's
management fees are based on average daily net assets of the Fund
at the annual rate of .85 of one percent of net assets. Certain
officers and/or directors of the Fund are also officers and/or
directors of Jones & Babson, Inc., which serves as the Fund's
underwriter and distributor.
4. REPURCHASE AGREEMENTS - Securities purchased under agreements
to resell are held by the Fund's custodian and investment counsel,
UMB Bank, n.a. The custodian monitors the market values of the
underlying securities which they have purchased on behalf of the
Fund to ensure that they are sufficient to protect the Fund in the
event of default by the seller.
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share
outstanding throughout the period.
<TABLE>
<CAPTION>
December 6, 1995
to
June 30, 1996*
</CAPTION>
<S> <C>
Net asset value, beginning of period $ 10.09
Income from investment operations:
Net investment income .27
Net gains or losses on securities (both realized and unrealized) .06
Total from investment operations .33
Less distributions:
Dividends from net investment income (.24)
Distributions from capital gains -
Total distributions (.24)
Net asset value, end of period $ 10.18
Total return 6%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 3
Ratio of expenses to average net assets .85%
Ratio of net investment income to average net assets 3.71%
Portfolio turnover rate 5%
Average commission rate** $ .0199
<FN>
<F1> *The Fund was capitalized on October 2, 1995 with $100,000, representing
10,000 shares at a net asset value of $10.00 per share. Initial public
offering was made on December 6, 1995, at which time net asset value
was $10.09 per share.
Ratios for this initial period of operation are annualized.
<F2>**For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for
security trades on which commissions are charged. This amount may vary
from period to period and fund to fund depending on the mix of trades
executed in various markets where trading practices and commission rate
structures may differ.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
INDEPENDENT ACCOUNTANTS' REPORT
To the Shareholders and Board of Directors
of Scout Balanced Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities of Scout Balanced Fund, Inc., including the statement
of net assets, as of June 30, 1996, and the related statement of
operations, statement of changes in net assets and the financial
highlights for the period indicated thereon. These financial
statements and financial highlights are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements and financial highlights 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 statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities
owned as of June 30, 1996 by confirmation, or by the application
of alternative auditing procedures with respect to unsettled
portfolio security transactions. 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 financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Scout Balanced Fund, Inc. as of June 30,
1996, the results of its operations, the changes in its net assets
and the financial highlights for the period indicated thereon in
conformity with generally accepted accounting principles.
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
July 23, 1996
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.
This page left blank intentionally.
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
Auditors
Baird, Kurtz & Dobson, Kansas City, Missouri
Legal Counsel
Stradley, Ronon, Stevens & Young,
Philadelphia, Pennsylvania
John G. Dyer, Kansas City, Missouri
Custodian
UMB Bank, n.a., Kansas City, Missouri
JONES & BABSON
MUTUAL FUNDS
P.O. Box 410498
Kansas City, MO 64141-0498
TOLL-FREE 1-800-996-2862
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Scout Balanced Fund, Inc.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 3016275
<INVESTMENTS-AT-VALUE> 3045671
<RECEIVABLES> 30246
<ASSETS-OTHER> 597
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3076517
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3038463
<SHARES-COMMON-STOCK> 302245
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 7319
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1339
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29396
<NET-ASSETS> 3076517
<DIVIDEND-INCOME> 7027
<INTEREST-INCOME> 47543
<OTHER-INCOME> 0
<EXPENSES-NET> 10182
<NET-INVESTMENT-INCOME> 44361
<REALIZED-GAINS-CURRENT> 1339
<APPREC-INCREASE-CURRENT> 29396
<NET-CHANGE-FROM-OPS> 75096
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 37042
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 349299
<NUMBER-OF-SHARES-REDEEMED> 50702
<SHARES-REINVESTED> 3648
<NET-CHANGE-IN-ASSETS> 3076517
<ACCUMULATED-NII-PRIOR> 7319
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10082
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10182
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> .06
<PER-SHARE-DIVIDEND> .24
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.18
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
