UMB SCOUT FUNDS
BALANCED FUND
ANNUAL REPORT
JUNE 30, 1999
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.
TO THE SHAREHOLDERS
The past 12 months have been especially noteworthy for the
global economy and financial markets. Attention was fixed
last fall on the financial contagion spreading from
Southeast Asia to Russia and elsewhere. Interest rates in
the developing world were rising or local currencies were
collapsing. There was widespread fear of an economic
slowdown because of slower demand and a flood of industrial
capacity.
In the U.S., the Federal Reserve lowered interest rates
three times in a relatively short period and long-term
interest rates moved to less than 5%. All but the "bluest"
of blue chip stocks declined sharply.
For the time being, the concerns of late 1998 no longer are
on investors' minds. Most indicators show the world's
economies are regaining their footing and many are growing
strongly. Interest rates have increased again, but
apparently not enough to stop this growth. The U.S. is
enjoying the lowest unemployment in decades with very low
inflation - a scenario the textbooks say cannot happen.
Our economic environment has been called a "virtuous cycle,"
but some investors are wondering whether it will become a
"vicious cycle." We do not see such a change now, although
we continue to watch the economic indicators very closely.
There are few signs that the economy is entering a long-term
slowdown caused by economic excess. Some market watchers
point to the high valuation of U.S. stocks as one such
excess, but valuation alone usually is not enough to make
stock prices decline. We see no other catalyst at this point
that would cause a major stock price correction.
In this annual report, you will find more details about the
activity and holdings in the UMB Scout Balanced Fund during
the period. I recently joined the UMB team, and I want to
thank each of you for your confidence in UMB Investment
Advisors and the UMB Scout Funds. We look forward to helping
you reach your financial goals.
Sincerely,
/S/William B. Greiner, CFA
William B. Greiner, CFA
Executive Vice President / Chief Investment Officer
UMB Investment Advisors
Shares of the UMB 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 ("FDIC"). These shares
involve investment risks, including the possible loss of the
principal invested.
TO THE SHAREHOLDERS
The UMB Scout Balanced Fund closed the quarter ended June
30, 1999, at $10.17 per share and had a total return (price
change and reinvested distributions) of 4.59% for the
quarter and 1.89% for the year ended on that date. The Fund
seeks long-term capital growth and high current income by
investing in both equities and fixed-income obligations.
The stock market reached record levels this year, mainly on
the strength of a relatively small group of large-
capitalization stocks. As we reported in the March 31
letter, gains in the Standard & Poor's 500 Index at that
time were based on the largest 15 issues in the index, with
the remaining 485 stocks combining for an overall negative
return.
Such a divergence within the stock market typically means a
change in leadership is due. This change occurred during
April as companies more sensitive to economic growth and
smaller capitalization issues outperformed their large-cap
counterparts. This met our expectation that the market focus
is returning to earnings and fundamental growth factors.
Bond market yields increased (prices decreased) during the
quarter, with five-year U.S. Treasuries ending at 5.64% and
the 30-year Treasury bond at 5.97%. In the last nine months, the
yield on the five-year issue has risen 1.43 percentage
points, or 34%, and the 30-year bond yield has gained 1.01
percentage points, or 20%. With a steady slope up in the
yield curve, especially in the one- to five-year range, we
lengthened the portfolio's average maturity by eliminating
holdings of less than two years to maturity.
The Fund added new positions during the quarter in
Agribrands International, Intel Corp. (swapped for our
previous holding in Hewlett Packard), Safety Kleen Corp.,
Firstmerit Corp. and Wachovia Corp. We also added to
existing holdings in Georgia Pacific Timber and Caseys
General Stores. The Fund eliminated holdings in Brush
Wellman and Chevron, and sold some of our position in
O'Sullivan Industries, as it received a takeover bid from
its management team. In the fixed-income portion of the
Fund, several short-term corporate notes reached maturity
and we sold holdings in three Government Sponsored
Enterprises issues.
For the six months ended June 30, 1999, shareholders
received an ordinary income dividend of $.17 per share and
no long-term capital gain. For corporate shareholders, 7.01%
of ordinary income distributions qualify for the corporate
dividends received deduction.
We appreciate your continued interest in the UMB Scout
Balanced Fund, and welcome your questions and comments.
Sincerely,
/S/David R. Bagby
David R. Bagby
UMB Investment Advisors
CHART - FUND DIVERSIFICATION
CHART - HISTORICAL PER SHARE RECORD
Income & Cumulative**
Net Short-Term Long-Term Value Per
Asset Gains Gains Share Plus
Value Distribution Distribution Distributions
12/31/95 $10.02 $ 0.12 $ - $10.14
12/31/96 10.33 0.18 - 10.75
12/31/97 10.62 0.58 0.16 11.78
12/31/98 10.01 0.45 0.49 12.11
06/30/99* 10.17 0.17 - 12.44
*Six-month only. Distributions typically occur in June and
December.
**Does not assume any compounding of reinvested
distributions.
Table shows calendar year distributions and net asset
values; may differ from fiscal year annual reports.
CHART - HYPOTHETICAL GROWTH OF $10,000
as of June 30, 1999
CHART
COMPARATIVE RATES OF RETURN
as of June 30, 1999
Quarter 1 Year 3 Years
UMB Scout Balanced Fund 4.59% 1.89% 6.60%
Lipper Balanced Fund Index* 4.49% 11.54% 16.68%
Inception - December 6, 1995.
UMB Scout Balanced Fund's average annual compound return
since inception for the period ended June 30, 1999, is
6.50%.
Performance data contained in this report are for past
periods only. Past performance is not predictive of future
results. Investment return and share value will fluctuate,
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 indices).
CHART - top ten equity holdings
Market Percent
Value (000's) of Total
Butler Manufacturing Co. $ 168 3.23%
NPC International 123 2.37%
Roadway Express, Inc. 116 2.24%
Bassett Furniture Industries, Inc. 114 2.20%
Valmont Industries, Inc. 102 1.97%
B.I., Inc. 102 1.97%
Kerr McGee Corp. 100 1.93%
Harmon Industries 99 1.91%
Helmerich & Payne, Inc. 95 1.84%
Caseys General Stores 90 1.73%
Top Ten Equity Holdings Total: $ 1,109* 21.39%
As of June 30, 1999, statement of assets. Subject to change.
*Market Values are rounded; may not equal total.
FINANCIAL STATEMENTS
JUNE 30, 1999
STATEMENT OF NET ASSETS
MARKET
SHARES COMPANY VALUE
COMMON STOCKS - 50.40%
BASIC MATERIALS - 10.16%
4,000 ASA Ltd. $ 66,500
3,000 Barrick Gold Corp. 58,125
92 Deltic Timber Corp. 2,478
4,000 Falcon Products, Inc. 40,750
2,000 Georgia Pacific Corp. Timber Group 50,500
7,000 Homestake Mining Co. 57,313
2,000 Mallinckrodt, Inc. 72,750
3,000 Newmont Mining Corp. 59,625
5,000 Placer Dome, Inc. 59,062
3,000 Safety Kleen Corp.* 54,375
521,478
CAPITAL GOODS - 10.93%
8,000 BHA Group, Inc. 66,000
6,000 Butler Manufacturing Co. 167,625
5,000 Harmon Industries 99,063
7,000 Isco, Inc.* 43,750
3,000 Superior Industries 81,938
6,000 Valmont Industries, Inc. 102,187
560,563
CONSUMER CYCLICAL - 7.63%
12,000 B. I., Inc.* 102,000
5,000 Bassett Furniture Industries, Inc. 114,375
6,000 Caseys General Stores 90,000
5,000 O'Sullivan Industries, Inc.* 85,000
391,375
CONSUMER STAPLES - 7.39%
1,000 Agribrands International, Inc.* 39,562
4,000 Bob Evans Farms, Inc. 79,500
8,000 NPC International, Inc.* 123,000
7,000 Racing Champions Corp.* 49,875
5,000 VICORP Restaurants, Inc.* 86,875
378,812
ENERGY - 6.52%
1,500 Baker Hughes, Inc. 50,250
800 Halliburton Co. 36,200
4,000 Helmerich & Payne, Inc. 95,250
2,000 Kerr McGee Corp. 100,375
1,600 USX-Marathon Group 52,100
334,175
FINANCIAL - 1.65%
1,500 Firstmerit Corp.* 42,094
500 Wachovia Corp.* 42,781
84,875
TECHNOLOGY - 3.85%
12,000 Exabyte Corp.* 46,500
1,200 Intel Corp.* 71,400
3,000 Novell, Inc.* 79,500
197,400
TRANSPORTATION & SERVICES - 2.27%
6,000 Roadway Express,Inc. 116,250
TOTAL COMMON STOCKS (Cost $2,388,705) - 50.40% 2,584,928
CORPORATE BONDS - 9.47%
250,000 PepsiCo, Inc., Notes,
5.75%, due January 2, 2003 244,693
250,000 The Stanley Works, Notes,
5.75%, due March 1, 2004 241,155
TOTAL CORPORATE BONDS (Cost $504,884) - 9.47% 485,848
FACE MARKET
AMOUNT DESCRIPTION VALUE
GOVERNMENT SPONSORED ENTERPRISES - 37.16%
$ 250,000 Federal Home Loan Banks,
5.215%, due January 12, 2004 $ 239,922
200,000 Federal Home Loan Banks,
5.40%, due February 24, 2004 193,312
250,000 Federal Home Loan Banks,
5.415%, due February 24, 2004 241,798
200,000 Federal Home Loan Banks,
5.805%, due August 24, 2005 194,656
250,000 Federal Home Loan Banks,
5.82%, due August 7, 2003 246,798
250,000 Federal Home Loan Banks,
5.835%, due July 6, 2005 244,609
20,108 Federal National Mortgage Association,
7.00%, due October 1, 1999 20,127
42,276 Federal National Mortgage Association,
6.00%, due April 1, 2001 42,052
16,111 Federal National Mortgage Association,
7.00%, due February 1, 2003 16,227
100,000 Federal National Mortgage Association,
5.75%, due June 15, 2005 97,562
250,000 Federal National Mortgage Association,
6.00%, due September 29, 2008 234,960
132,689 Government National Mortgage Association,
7.00%, due September 15, 2010 133,863
TOTAL GOVERNMENT SPONSORED ENTERPRISES
(Cost $1,959,111) - 37.16% 1,905,886
REPURCHASE AGREEMENT (Cost $160,000) - 3.12%
160,000 Northern Trust Co., 4.79%, due July 1, 1999
(Collateralized by U.S. Treasury Notes,
7.125%, due September 30, 1999) 160,000
TOTAL INVESTMENTS (Cost $5,012,700) - 100.15% 5,136,662
Other assets less liabilities - (0.15%) (8,176)
TOTAL NET ASSETS - 100.00%
(equivalent to $10.17 per share;
10,000,000 shares of $1.00 par value
capital shares authorized; 504,215 shares outstanding) $ 5,128,486
For federal income tax purposes, the identified cost of investments owned
at June 30, 1999 was $5,013,341. Net unrealized appreciation for federal
income tax purposes was $124,604, which is comprised of unrealized
appreciation of $406,405 and unrealized depreciation of $281,801.
*Non-income producing security
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
JUNE 30, 1999
STATEMENT OF ASSETS AND LIABILITIES
ASSETS:
Investment securities, at market value
(identified cost $5,012,700) $ 5,136,662
Dividends receivable 2,460
Interest receivable 48,583
Total assets 5,187,705
LIABILITIES:
Disbursements in excess of demand deposit cash 59,219
Total liabilities 59,219
NET ASSETS $ 5,128,486
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in capital) $ 4,988,942
Accumulated undistributed income:
Net investment income 5,270
Net realized gain on investment transactions 10,312
Net unrealized appreciation on investments 123,962
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 5,128,486
Capital shares, $1.00 par value
Authorized 10,000,000
Outstanding 504,215
NET ASSET VALUE PER SHARE $ 10.17
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
JUNE 30, 1999
STATEMENT OF OPERATIONS
INVESTMENT INCOME:
Income:
Dividends $ 44,319
Interest 241,971
286,290
Expenses:
Management fees 56,502
Government fees 552
57,054
Net investment income 229,236
REALIZED and unrealized GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions 70,581
Decrease in net unrealized appreciation on investments (184,994)
Net realized and unrealized loss on investments (114,413)
Net increase in net assets
resulting from operations $ 114,823
See accompanying Notes to Financial Statements.
FINANCIAL STATEMENTS
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
</CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 229,236 $ 331,601
Net realized gain from investment transactions 70,581 472,173
Decrease in net unrealized appreciation
on investments (184,994) (18,057)
Net increase in net assets resulting
from operations 114,823 785,717
DISTRIBUTIONS TO SHAREHOLDERS FROM:*
Net investment income (248,871) (346,178)
Net realized gain from investment transactions (344,326) (279,276)
Decrease in net assets from distributions (593,197) (625,454)
DECREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 185,671 and 217,322 shares sold 1,921,356 2,402,628
Net asset value of 17,636 and 58,707 shares
issued for reinvestment of distributions 174,851 623,518
2,096,207 3,026,146
Cost of 394,307 and 350,576 shares redeemed (4,075,129) (3,856,194)
Net decrease in net assets from
capital share transactions (1,978,922) (830,048)
Net decrease in net assets (2,457,296) (669,785)
NET ASSETS:
Beginning of year 7,585,782 8,255,567
End of year (including undistributed
net investment income of $5,270 and
$24,905, respectively) $ 5,128,486 $ 7,585,782
*Distributions to shareholders:
Income dividends per share $ 0.41 $ 0.45
Capital gains distribution per share $ 0.50 $ 0.33
</TABLE>
See accompanying Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - 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 statements 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. Securities traded over-the-counter are valued
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 formula-
based techniques. Short-term obligations are valued at
amortized cost, which approximates market value. Investment
transactions are recorded on the trade date. Interest income
is recorded daily. 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.
Federal Income Taxes - The Fund's policy is to comply with
the requirements of the Internal Revenue Code that are
applicable to regulated investment companies and to
distribute all of its taxable 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 year ended June 30, 1999
(excluding repurchase agreements and short-term securities),
were as follows:
Other than
U.S. Government U.S. Government
Securities Securities
Purchases $ 3,345,050 $ 1,948,108
Proceeds from sales 5,413,868 1,546,244
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 shareholder accounting system
and transfer agency. Not considered normal operating
expenses and therefore payable by the Fund are taxes,
interest, 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 the
collateral is sufficient to protect the Fund in the event of
default by the seller.
FINANCIAL HIGHLIGHTS
<TABLE>
Per share income and capital changes for a share
outstanding throughout the period.
<CAPTION>
DECEMBER 6,
YEARS ENDED JUNE 30, 1995 to
1999 1998 1997 JUNE 30, 1996*
</CAPTION>
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.91 $ 10.72 $ 10.18 $ 10.09
Income from investment operations:
Net investment income 0.38 0.43 0.35 0.27
Net realized and unrealized gain
(loss) on securities (0.21) 0.54 0.52 0.06
Total from investment operations 0.17 0.97 0.87 0.33
Distributions from:
Net investment income (0.41) (0.45) (0.32) (0.24)
Net realized gain on
investment transactions (0.50) (0.33) (0.01) -
Total distributions (0.91) (0.78) (0.33) (0.24 )
Net asset value, end of period $ 10.17 $ 10.91 $ 10.72 $ 10.18
Total return 2% 9% 9% 6%
Ratios/Supplemental Data
Net assets, end of year (in millions) $ 5 $ 8 $ 8 $ 3
Ratio of expenses to average net assets 0.87% 0.85% 0.83% 0.85%
Ratio of net investment income to
average net assets 3.48% 3.78% 3.85% 3.71%
Portfolio turnover rate 95% 15% 14% 5%
Average commission rate** $.0574 $.0426 $ .0641 $.0660
</TABLE>
*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.
**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.
See accompanying Notes to Financial Statements.
INDEPENDENT ACCOUNTANTS' REPORT
To the Shareholders and Board of Directors of UMB Scout
Balanced Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities of UMB Scout Balanced Fund, Inc., including the
statement of net assets, as of June 30, 1999, and the
related statement of operations, statements of changes in
net assets and the financial highlights for the periods
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 audits.
We conducted our audits 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, 1999, 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 audits provide 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 UMB Scout Balanced Fund,
Inc., as of June 30, 1999, the results of its operations,
the changes in its net assets and the financial highlights
for the periods indicated thereon in conformity with
generally accepted accounting principles.
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
July 24, 1999
This report has been prepared for the information of the
Shareholders of UMB 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 UMB Scout Funds are
offered only by the Prospectus, a copy of which may be
obtained from Jones & Babson, Inc.
UMB SCOUT FUNDS
100% No-Load Mutual Funds
Stock Fund
Stock Select Fund
Regional Fund
WorldWide Fund
WorldWide Select Fund
Capital Preservation Fund
Balanced Fund
Bond Fund
Kansas Tax-Exempt Bond Fund*
Money Market Fund
Tax-Free Money Market Fund
*Available in Kansas and Missouri only.
MANAGER AND INVESTMENT COUNSEL
UMB Bank, n.a., Kansas City, Missouri
AUDITORS
Baird, Kurtz & Dobson, Kansas City, Missouri
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
Philadelphia, Pennsylvania
CUSTODIAN
UMB Bank, n.a., Kansas City, Missouri
UNDERWRITER, DISTRIBUTOR
AND TRANSFER AGENT
Jones & Babson, Inc.
Kansas City, Missouri
UMB Scout Funds
P.O. Box 219757
Kansas City, MO 64121-9757
TOLL FREE 800-996-2862
www.umb.com
"UMB" and "Scout" are registered service marks of UMB
Financial Corporation.
UMB Financial Corporation also claims service mark rights to
the Scout design.
JB26B(8/99) 508762
