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, 1997
TO THE SHAREHOLDERS
Scout Balanced Fund earned a total return (price change and reinvested
distributions) of 5.22% for the quarter ended September 30, 1997. By
comparison, the Lipper Balanced Fund Index earned 6.42% for the same period.
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.
Small and mid-sized capitalization stocks led the market in the quarter.
Although blue chip stocks continued to advance and briefly surpassed 8000 on
the Dow Jones Industrials Average, the small and mid-cap sectors outperformed
them and set repeated records in the benchmark Russell 2000 index.
The stock market gains were fueled by the strong U.S. economy, low inflation
and falling interest rates. Despite a drop in August, net investment into
equity mutual funds for the quarter remained strong, providing additional
support for the market.
Institutional bond investors slowly began to discount the likelihood of
further increases by the Federal Reserve in the key Fed Funds rate, now at
5.50%. As investors became more comfortable with the healthy, but not
overheating, economy, many fund managers moved more aggressively into bonds,
driving prices up and yields down. The entire yield curve shifted down an
average of 35 basis points, indicating an expectation among investors that the
next change in the Fed Funds rate also will be down. As is usually the case
when the market is anticipating lower interest rates, the yield curve
flattened as market rates dropped. At the quarter's end, the yield difference
between 5- and 10-year Treasury issues was only 10 basis points.
The drop in rates did not occur smoothly. Recent quarters have recorded rapid
increases in the volatility of interest rate changes, a reflection of the
difficulty investors are having interpreting the current economic situation.
Scout Balanced Fund normally 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. In the latest quarter, the equity portion of the Fund was
56% of assets and generated a total return for the quarter of 10.99% versus
7.49% for the unmanaged Standard & Poor's 500 Index. The fixed-income portion
of the portfolio was 43% of assets, and is positioned at 4.7 years to maturity
and yielding 6.80%.
The Fund uses a wide range of tactics, strategies and allocations to achieve
this end, including a high-quality research effort. A disciplined approach to
ferret out value while identifying risks is one of our foremost
responsibilities. We always try to estimate and not overpay for future growth
in the core business of our holdings.
We welcome new shareholders to Scout Balanced Fund and appreciate your
continued support. Please feel free to call with questions or comments.
Sincerely,
/s/Christopher P. Bloomstran, CFA
Christopher P. Bloomstran, CFA
UMB Investment Advisors
PIE CHART - SECTOR DIVERSIFICATION
Basic Materials 17.1%
Capital Goods 3.1%
Energy 6.8%
Utilities 16.4%
Technology 8.1%
Consumer Staple 30.7%
Consumer Cyclical 17.8%
Shares of the Scout Funds are not deposits or obligations of, nor guaranteed
by, UMB Bank, n.a. or any other banking institution, nor are they insured by
the Federal Deposit Insurance Corporation or any other deposit insurance.
These shares involve investment risks, including the possible loss of the
principal amount invested.
FINANCIAL STATEMENTS
Statement of Net Assets
September 30, 1997
Market
Shares Company Value
COMMON STOCKS - 32.53%
BASIC MATERIALS - 5.56%
14,000 Amax Gold, Inc. $ 92,750
4,500 Brush Wellman, Inc. 115,594
4,000 Cyprus Amax Minerals Co. 96,000
4,000 Huntco, Inc. Cl. A 57,250
2,500 Newmont Mining Corp. 112,344
1,500 Worthington Industries, Inc. 30,375
504,313
CAPITAL GOODS - 1.01%
7,000 Calgon Carbon Corp. 91,437
CONSUMER CYCLICAL - 5.81%
12,000 B. I., Inc. 89,250
5,000 Bassett Furniture Industries, Inc. 142,500
2,500 Dillards, Inc. 109,531
2,000 Limited, Inc. 48,875
200 May Department Stores Co. 10,900
10,000 O'Sullivan Industries, Inc. 125,000
526,056
CONSUMER STAPLES - 9.97%
3,150 Archer-Daniels-Midland Co. 75,403
8,000 Bob Evans Farms, Inc. 152,000
7,000 Brinker International 124,687
1,500 Fuji Photo Film
Unsponsored ADR 62,063
4,000 Lance, Inc. 83,000
10,000 Mylan Laboratories, Inc. 224,375
4,000 Rubbermaid, Inc. 102,250
5,000 VICORP Restaurants, Inc. 80,000
903,778
ENERGY - 2.22%
92 Deltic Timber Corp. 3,007
1,000 Kerr McGee Corp. 68,813
325 Murphy Oil Corp. 18,566
1,000 Phillips Petroleum Co. 51,625
1,600 USX-Marathon Group 59,500
201,511
TECHNOLOGY - 2.64%
3,000 Alcatel Alsthom Sponsored ADR 79,687
8,000 Exabyte Corp. 88,000
8,000 Novell, Inc. 71,750
239,437
UTILITIES - 5.32%
3,000 Dominion Resources Inc. V.A. 113,625
2,000 Entergy Corp. 52,125
3,000 Florida Progress Corp. 99,000
4,150 Niagara Mohawk Power Corp. 39,684
2,000 Tele Danmark AS 53,375
4,500 Unicom Corp. 105,188
500 U.S. West Communication
Group 19,250
482,247
TOTAL COMMON STOCKS - 32.53% 2,948,779
Face Market
Amount Description Value
SHORT-TERM CORPORATE NOTES - 10.99%
$ 100,000 American Tel & Telegraph Co.,
5.50%, due October 14, 1997 $ 99,786
100,000 Ameritech Corp.,
5.47%, due October 8, 1997 99,878
100,000 Atlantic Richfield Co.,
5.49%, due November 7, 1997 99,421
100,000 duPont (E.I.) deNemours & Co.,
5.46%, due October 17, 1997 99,742
100,000 duPont (E.I.) deNemours & Co.,
5.48%, due October 22, 1997 99,665
100,000 Gillette Corp.,
5.47%, due October 31, 1997 99,529
100,000 Monsanto Co.,
5.51%, due October 3, 1997 99,954
100,000 Penney's (J.C.) Co.,
5.48%, due October 7, 1997 99,893
100,000 Toys `R' Us,
5.50%, due October 28, 1997 99,572
100,000 Xerox Corp.,
5.51%, due December 4, 1997 99,005
TOTAL SHORT TERM
CORPORATE NOTES - 10.99% 996,445
GOVERNMENT SPONSORED
ENTERPRISES - 39.16%
100,000 Federal Agricultural
Mortgage Corporation,
5.40%, due October 1, 1997 99,985
150,000 Federal Farm Credit Banks,
5.40%, due March 6, 1998 149,930
100,000 Federal Farm Credit Banks,
5.20%, due January 25, 1999 99,172
100,000 Federal Home Loan Banks,
6.055%, due April 17, 1998 100,250
150,000 Federal Home Loan Banks,
5.035%, due January 19, 1999 148,476
100,000 Federal Home Loan Banks,
5.86%, due April 2, 1999 99,906
100,000 Federal Home Loan Banks,
5.96%, due October 20, 2000 99,734
100,000 Federal Home Loan Banks,
5.50%, due January 10, 2001 98,312
150,000 Federal Home Loan Banks,
6.75%, due April 5, 2004 153,445
150,000 Federal Home Loan Mortgage Corporation,
6.745%, due August 1, 2001 153,071
200,000 Federal Home Loan Mortgage Corporation,
6.704%, due January 9, 2007 203,374
150,000 Federal Home Loan Mortgage Corporation,
Debentures,
6.99%, due July 5, 2006 154,968
200,000 Federal National Mortgage Association,
6.23%, due September 25, 1998 200,906
100,000 Federal National Mortgage Association,
5.55%, due March 12, 1999 99,578
61,232 Federal National Mortgage Association,
7.00%, due October 1, 1999 61,831
150,000 Federal National Mortgage Association,
6.29%, due October 4, 2000 150,933
72,811 Federal National Mortgage Association,
6.00%, due April 1, 2001 72,422
150,000 Federal National Mortgage Association,
7.05%, due November 12, 2002 155,297
57,583 Federal National Mortgage Association,
7.00%, due February 1, 2003 58,257
150,000 Federal National Mortgage Association,
6.71%, due May 21, 2003 153,351
150,000 Federal National Mortgage Association,
6.72%, due August 1, 2005 152,905
200,000 Federal National Mortgage Association,
6.14%, due November 25, 2005 194,248
250,000 Federal National Mortgage Association
Medium Term Note,
6.09%, due July 11, 2000 250,468
185,159 Government National Mortgage Association,
7.00%, due September 15, 2010 188,409
100,000 Tennessee Valley Authority,
5.95%, due September 15, 1998 100,172
150,000 Tennessee Valley Authority,
6.00%, due November 1, 2000 149,625
TOTAL GOVERNMENT
SPONSORED ENTERPRISES - 39.16% 3,549,025
U.S. GOVERNMENT SECURITIES - 11.01%
250,000 U.S. Treasury Notes,
5.625%, due November 30, 1998 249,765
250,000 U.S. Treasury Notes,
5.875%, due November 15, 1999 250,155
250,000 U.S. Treasury Notes,
5.75%, due October 31, 2000 248,790
250,000 U.S. Treasury Notes,
5.875%, due November 30, 2001 248,867
TOTAL U.S. GOVERNMENT
SECURITIES - 11.01% 997,577
REPURCHASE AGREEMENT - 4.85%
$ 440,000 Northern Trust Co., 6.00%,
due October 1, 1997
(Collateralized by U.S.
Treasury Notes,
6.00%, due November 30, 1997) 440,000
TOTAL INVESTMENTS - 98.54% $ 8,931,826
Other assets less liabilities - 1.46% 132,100
TOTAL NET ASSETS - 100.00%
(equivalent to $11.28 per share;
10,000,000 shares of $1.00 par value
capital shares authorized; 803,555
shares outstanding) $ 9,063,926
ADR - American Depository Receipt
BASIS OF DETERMINING MARKET VALUE. Each investment is valued at the latest
sales price on September 30, 1997, 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
Constance E. Martin, Vice President
Investment Counsel
UMB Bank, n.a., Kansas City, Missouri
Auditors
Baird, Kurtz & Dobson, Kansas City, Missouri
Legal Counsel
Stradley, Ronon, Stevens & Young,
Philadelphia, Pennsylvania
John G. Dyer, Kansas City, Missouri
Custodian
UMB Bank, n.a., Kansas City, Missouri
JONES & BABSON
MUTUAL FUNDS
P.O. Box 410498
Kansas City, MO 64141-0498
TOLL-FREE 1-800-996-2862
JB28C
