Scout SM
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.standards.
Quarterly Report
March 31, 1998
TO THE SHAREHOLDERS
Scout Balanced Fund rose to $11.22 per share from $10.62 per share,
earning investors a total return of 5.65% for the quarter ended March
31, 1998. The Fund seeks both long-term capital growth and high current
income by investing in both equities and fixed-income obligations.
The capital markets continued their unprecedented advance during the
first quarter of 1998. The Standard & Poor's 500 Index had a total
return of 13.95%; the Russell 2000 index of small capitalization stocks
returned 10.06%; and the Lehman Brothers Government/Corporate
Intermediate Index of fixed-income securities returned 1.56% as interest
rates declined. This was particularly seen at the short end of the yield
curve with the 3-month U.S. Treasury bill dropping to 5.13% from 5.34%.
The Fund's allocation to stocks has never exceeded 40%, although the
typical balanced fund has been more than 60% invested in the stock
market over the past 21/4 years. Our underweight position in stocks is
based on the belief that stock prices in general are overpriced compared
to underlying market fundamentals. By most measures, the stock market is
more expensive now than at any time in its history.
At historic market lows, stocks traded at less than one time the book
value of the company, and the median level is two times book value.
Today, the Standard & Poor's 500 companies are trading at six times book
value. At such price levels, these companies must grow profits at more
than 15% per year for at least 13 years to justify what we consider a
reasonable return on invested capital. Profits already have grown at
more than twice the rate of sales growth for more than 15 years, fueled
largely by cost cutting and stock buybacks. These companies now must
increase the rate of sales growth or see a decline in profit growth.
Given these and other factors, we believe a prudent allocation decision
keeps us away from being fully invested in stocks at this time and fits
with our long-term strategy that seeks to control risk.
During the quarter, the Fund eliminated its position in May Department
Stores common stock, reduced positions in Brinker International and Bob
Evans Farms, and added to its position in Murphy Oil Corp. The Fund also
initiated new positions in the common shares of Halliburton Company and
Schlumberger Ltd., two oil service firms whose share prices have
declined recently with the drastic drop in oil prices. These companies
should continue to prosper if oil exploration and production companies
continue to expend capital at current levels.
We welcome new shareholders to Scout Balanced Fund and appreciate your
continued support. Please feel free to call with questions or comments.
Chart - Hypothetical Growth of $10,000
Chart - Comparative Rates of Return
3 Mos. 1 1/4 Years
Scout Balanced Fund 5.65% 12.87%
Lipper Balanced Fund Index 7.90% 23.01%
Scout Balanced Fund's average annual compound returns for
1 year and the life of the fund for periods ended March 31, 1998,
are 16.2% and 9.8%, respectively. Inception-December 6, 1995.
Performance data contained in this report are for past periods
only. Past performance is not predictive of future
performance. Investment return and share value will flucuate,
and redemption value may be more or less than the original cost.
*Unmanaged index of stocks, bonds, or mutual funds (there are no
direct investments or fees in these indicies).
Chart - Fund Diversification
Bonds & Notes 51.03%
Cash Equivalents 10.86%
Consumer Staples 8.51%
Capital Goods 0.94%
Technology 3.60%
Energy 3.77%
Consumer Cyclical 6.79%
Basic Materials 7.15%
Utilities 7.35%
Chart - Top 10 Equity Holdings
Market Percent
Value (000's) of Total
Unicom Corp $ 158 1.74%
Basset Furniture Industries, Inc. 153 1.69%
Amax Gold, Inc. 153 1.69%
Cyprus Amax Minerals Co. 133 1.47%
Brush Wellman, Inc. 128 1.41%
O'Sullivan Industries, Inc. 128 1.41%
B.I., Inc. 126 1.39%
Dominion Resources, Inc. V.A. 126 1.39%
Florida Progress Corp. 125 1.38%
Myland Laboratories, Inc. 115 1.27%
Top 10 Equity Holdings Total: $ 1,345 14.84%
NOTE: All market values based on 3/31/98 statement of assets.
Sincerely,
/s/Christopher P. Bloomstran
Christopher P. Bloomstran, CFA
UMB Investment Advisors
FINANCIAL STATEMENTS
Statement of Net Assets
March 31, 1998 (unaudited)
Market
Shares Company Value
COMMON STOCKS - 38.11%
BASIC MATERIALS - 7.15%
50,000 Amax Gold, Inc. $ 153,125
4,500 Brush Wellman, Inc. 128,250
8,000 Cyprus Amax Minerals Co. 133,000
92 Deltic Timber Corp. 2,754
5,000 Huntco, Inc. Cl. A 71,875
3,500 Newmont Mining Corp. 106,969
1,500 Worthington Industries, Inc. 27,188
623,161
CAPITAL GOODS - 0.94%
7,000 Calgon Carbon Corp. 81,812
CONSUMER CYCLICAL - 6.79%
12,000 B. I., Inc. 126,000
5,000 Bassett Furniture Industries, Inc. 153,437
2,500 Dillards, Inc. 92,344
1,500 Fila Holdings SPA Sponsored ADR 35,156
2,000 Limited, Inc. 57,375
10,000 O'Sullivan Industries, Inc. 127,500
591,812
CONSUMER STAPLES - 8.51%
3,150 Archer-Daniels-Midland Co. 69,103
4,000 Bob Evans Farms, Inc. 84,750
3,000 Brinker International 65,625
1,500 Fuji Photo Film Unsponsored ADR 55,125
750 Hitachi LTD Sponsored ADR 55,125
4,000 Lance, Inc. 91,000
5,000 Mylan Laboratories, Inc. 115,000
4,000 Rubbermaid, Inc. 114,000
5,000 VICORP Restaurants, Inc. 91,875
741,603
ENERGY - 3.77%
1,200 Halliburton Co. 60,225
1,000 Kerr McGee Corp. 69,563
1,000 Murphy Oil Corp. 50,125
1,000 Phillips Petroleum Co. 49,937
500 Schlumberger LTD 37,875
1,600 USX-Marathon Group 60,200
327,925
TECHNOLOGY - 3.60%
3,000 Alcatel Alsthom Sponsored ADR 114,000
12,000 Exabyte Corp. 103,500
9,000 Novell, Inc. 96,469
313,969
UTILITIES - 7.35%
3,000 Dominion Resources, Inc., V.A. 126,000
2,000 Entergy Corp. 59,500
3,000 Florida Progress Corp. 125,062
4,150 Niagara Mohawk Power Corp. 53,950
2,000 Tele Danmark AS 91,250
4,500 Unicom Corp. 157,500
500 U. S. West Communication Group 27,375
640,637
TOTAL COMMON STOCKS - 38.11% 3,320,919
Face Market
Amount Description Value
SHORT-TERM CORPORATE NOTES - 5.72%
$ 100,000 Abbott Laboratories,
5.47%, due April 22, 1998 $ 99,666
100,000 Bell Atlantic Network Funding,
5.51%, due April 21, 1998 99,679
100,000 Coca-Cola Co.,
5.48%, due April 24 1998 99,635
100,000 Deere & Co.,
5.53%, due April 8, 1998 99,877
100,000 Disney Walt Co.,
5.46%, due April 15, 1998 99,772
TOTAL SHORT-TERM CORPORATE NOTES - 5.72% 498,629
GOVERNMENT SPONSORED ENTERPRISES - 39.51%
100,000 Federal Farm Credit Banks,
5.20%, due January 25, 1999 99,641
100,000 Federal Home Loan Banks,
6.055%, due April 17, 1998 100,016
150,000 Federal Home Loan Banks,
5.035%, due January 19, 1999 149,296
100,000 Federal Home Loan Banks,
5.86%, due April 2, 1999 100,125
100,000 Federal Home Loan Banks,
5.50%, due January 10, 2001 99,234
150,000 Federal Home Loan Banks,
6.75%, due April 5, 2004 156,212
100,000 Federal Home Loan Mortgage Corporation,
5.96%, due October 20, 2000 100,469
150,000 Federal Home Loan Mortgage Corporation,
6.745%, due August 1, 2001 154,125
150,000 Federal Home Loan Mortgage Corporation,
Debentures,
6.99%, due July 5, 2006 159,258
100,000 Federal National Mortgage Association,
5.43%, due April 29, 1998 99,563
200,000 Federal National Mortgage Association,
6.23%, due September 25, 1998 200,594
100,000 Federal National Mortgage Association,
5.55%, due March 12, 1999 99,906
50,106 Federal National Mortgage Association,
7.00%, due October 1, 1999 50,486
250,000 Federal National Mortgage Association,
5.83%, due December 10, 1999 250,352
250,000 Federal National Mortgage Association,
6.09%, due July 11, 2000 251,718
150,000 Federal National Mortgage Association,
6.29%, due October 4, 2000 151,518
67,317 Federal National Mortgage Association,
6.00%, due April 1, 2001 67,197
150,000 Federal National Mortgage Association,
7.05%, due November 12, 2002 157,171
57,049 Federal National Mortgage Association,
7.00%, due February 1, 2003 57,866
150,000 Federal National Mortgage Association,
6.71%, due May 21, 2003 155,484
150,000 Federal National Mortgage Association,
6.72%, due August 1, 2005 156,281
200,000 Federal National Mortgage Association,
6.14%, due November 25, 2005 201,656
169,777 Government National Mortgage Association,
7.00%, due September 15, 2010 173,458
100,000 Tennessee Valley Authority,
5.95%, due September 15, 1998 100,250
150,000 Tennessee Valley Authority,
6.00%, due November 1, 2000 150,516
TOTAL GOVERNMENT SPONSORED ENTERPRISES - 39.51% 3,442,392
U.S. GOVERNMENT SECURITIES - 11.52%
$ 250,000 U.S. Treasury Notes,
5.625%, due November 30, 1998 $ 250,195
250,000 U.S. Treasury Notes,
5.875%, due November 15, 1999 251,015
250,000 U.S. Treasury Notes,
5.75%, due October 31, 2000 250,742
250,000 U.S. Treasury Notes,
5.875%, due November 30, 2001 251,680
TOTAL U.S. GOVERNMENT SECURITIES - 11.52% 1,003,632
REPURCHASE AGREEMENT - 4.08%
355,000 Northern Trust Co., 5.88%, due April 1, 1998
(Collateralized by U.S. Treasury Notes,
6.25%, due April 30, 2001) 355,000
TOTAL INVESTMENTS - 98.94% $ 8,620,572
Other assets less liabilities - 1.06% 92,419
TOTAL NET ASSETS - 100.00%
(equivalent to $11.19 per share;
10,000,000 shares of $1.00 par value
capital shares authorized;
778,983 shares outstanding) $ 8,712,991
ADR - American Depository Receipt
BASIS OF DETERMINING MARKET VALUE. Each investment is valued at the
latest sales price on March 31, 1998, 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 (800) 996-2862
www.umb.com
JB28A 5/98
