File No. 333-96461
File No. 811-09813
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. _1_ /X/
Post Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/
Amendment No.
(Check appropriate box or boxes.)
UMB SCOUT FUNDS
(Exact name of Registrant as Specified in Charter)
BMA Tower, 700 Karnes Blvd., Kansas City, MO 64108-3306
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (816) 751-5900
Steven S. Soden, BMA Tower, 700 Karnes Blvd., Kansas City, MO
64108-3306
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering
It is proposed that this filing become effective (check
appropriate box)
/_/ immediately upon filing pursuant to paragraph (b)
/_/ on (date) pursuant to paragraph (b)
/-/ 60 days after filing pursuant to paragraph (a)(1)
/_/ on March 31, 1999 pursuant to paragraph (a)(1)
/_/ 75 days after filing pursuant to paragraph (a)(2)
/_/ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/_/ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The Registrant hereby amends this Registration Statement on
such dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the
Commission, acting pursuant to such Section 8(a), may
determine.
<PAGE>
UMB SCOUT FUNDS
EQUITY INDEX FUND
A no-load mutual fund that seeks to provide investment
results that track, as closely as possible, the performance
of the Standard & Poor's 500 Composite Stock Price Index.
Shares of the Fund have not been approved or disapproved by the
Securities
and Exchange Commission nor has the Commission passed on the adequacy
of this Prospectus. Any representation to the contrary is a criminal
offense.
PROSPECTUS
MAY 1, 2000
Toll-Free 800-996-2862
UMB Scout Equity Index Fund
Investment Advisor and Manager:
UMB BANK, N.A.
Kansas City, Missouri
Investment Sub-Advisor:
Northern Trust Quantitative Advisors, Inc.
Chicago, Illinois
Distributor:
JONES & BABSON, INC.
Kansas City, Missouri
TABLE OF CONTENTS
Page
Information About the Fund
Investment Objective and Principal Investment Strategies 2
Principal Risk Factors 2
Performance Information 3
Fees and Expenses 3
Investment Advisor and Manager 4
Investment Sub-Advisor 4
Information About Investing
How to Purchase Shares 5
How to Redeem Shares 5
Additional Policies about Transactions 5
Shareholder Services 6
How Share Price is Determined 7
Dividends, Distributions and their Taxation 7
Conducting Business with the UMB Scout Funds 8
INVESTMENT OBJECTIVE AND Principal investment strategies
The Fund seeks to provide investment results that track, as closely as
possible, the performance of the Standard & Poor's Composite Stock
Price Index ("S&P 500r Index").
The S&P 500r Index is an unmanaged stock market index which includes
the stocks of 500 companies operating across a broad spectrum of the
U.S. economy. The Index is dominated by large U.S. companies and its
performance is widely considered representative of the U.S. stock
market as a whole.
The Fund is passively managed, which means it tries to duplicate the
investment composition and performance of the S&P 500r Index using
sophisticated computer programs and statistical procedures. As a
result, the investment management team does not use traditional methods
of active investment management, such as buying and selling securities
on the basis of economic, financial and market analysis. The Fund has
operating expenses and transaction costs, while the Index has none.
Therefore, the performance of the Fund will generally be less than that
of the Index.
In order to track the S&P 500r Index as closely as possible, the Fund
normally invests substantially all (at least 80%) of its total assets
in the stocks that make up the Index, in approximately the same
proportions as they are represented in the Index. Under normal market
conditions, it is expected that the quarterly performance of the Fund
will be within a 0.90 correlation with the S&P 500r Index after
deduction of Fund expenses. A correlation of 1.00 would mean a perfect
correlation between the performance of the Fund and the Index.
Because the Fund is an index fund, it generally takes a buy-and-hold
approach to investing. The Fund normally sells portfolio securities
only to respond to redemption requests or to adjust the number of its
shares to track the weighting or composition of the Index. The Fund
will buy and sell securities in response to changes in the composition of
the Index. As a result, the Fund's portfolio turnover rate is expected
to be extremely low. A low portfolio turnover rate usually results in
low transaction costs and provides tax efficiencies for shareholders.
To maintain exposure to the Index and manage cash flows, the Fund may
invest in Standard & Poor's Depository Receipts, which are types of
derivatives. These investments allow the Fund to quickly and
efficiently gain market exposure, to keep cash on hand to meet
shareholder redemption requests while simulating full investment in
stocks.
"Standard & Poor'sr," "S&Pr," "S&P 500r" and (Standard & Poor's 500)
are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by UMB Bank, n.a. The Fund is not sponsored, endorsed,
sold or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of investing in the Fund.
PRINCIPAL RISK FACTORS
As with any mutual fund, there is a risk that you could lose money by
investing in the Fund.
Market Risks - Equity securities are subject to market, economic and
business risks that will cause their prices to fluctuate over time.
Since the Fund invests in equity securities, the value of the Fund may
go up and down. Different types of investments shift in and out of
favor depending on market and economic conditions. At various times
stocks will be more or less favorable than bonds, and small company
stocks will be more or less favorable than large company stocks.
Because of this, the Fund will perform better or worse than other types
of funds depending on what is in favor.
Tracking Variance Risk - The Fund is subject to the risk that its
performance may not precisely track the performance of the S&P 500r
Index. Tracking variance may result from purchases and redemptions,
transaction costs, Fund expenses, changes in the composition of the
Index and other factors. If securities the Fund owns underperform
those in the Index, the Fund's performance will be lower than the
Index. Under normal market conditions, the Fund expects the quarterly
performance of the Fund to be within a .90 correlation with the Index,
after expenses.
The shares offered by this prospectus are not deposits or obligations
of, nor guaranteed or endorsed by, UMB Bank, n.a., or any of its
affiliate banks. They are not federally insured by the Federal Deposit
Insurance Corporation (F.D.I.C.), or any other U.S. Government agency.
These shares involve investment risks, including the possible loss of
the principal invested.
PERFORMANCE INFORMATION
The Fund is new as of May 1, 2000, therefore, there is no performance
information.
FEES & EXPENSES
The following tables describe the fees and expenses that you may pay if
you buy and hold shares of the Fund. The Fund is new as of May 1, 2000,
so the amount of "Other Expenses" is based on estimates for the first
year of operations.
Shareholder Fees
(Fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses
(Expenses deducted from Fund assets)
Management Fees 0.40%
Distribution (12b-1) Fees None
Other Expenses 0.02%
Total Annual Fund Operating Expenses 0.42%
Less Manager's Fee Waiver/Payments* (0.12%)
Net Annual Fund Operating Expenses 0.30%
* The Manager has entered into a contractual commitment to
waive its fees and/or make expense payments through the fiscal year
ending June 30, 2001 so that net annual fund operating expenses do not
exceed 0.30% of average daily net assets.
Example
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses remain the
same. Please note that the first year in each example reflects the
effect of the manager's fee waiver/expense payments. Although your
actual costs may be higher or lower, based on these assumptions your
costs would be:
1 Year 3 Years
$31 $123
INVESTMENT ADVISOR AND MANAGER
UMB Bank, n.a., is the Fund's Investment Advisor and Manager. UMB Bank,
n.a. is a wholly-owned subsidiary of UMB Financial Corporation, a
seven billion dollar financial services institution. UMB Bank, n.a. was
founded in 1913. UMB Bank, n.a. provides investment management and
trust services for a broad variety of individual, corporate and
institutional clients, including the UMB Scout mutual funds. The bank
currently manages approximately $14 billion in client assets. As
manager, UMB Bank, n.a., provides or pays the cost of all management,
supervisory and administrative services required in the normal
operation of the Fund. This includes investment management and
supervision; fees of the custodian, independent auditors and legal
counsel; officers, directors and other personnel; rent; shareholder
services; and other items incidental to corporate administration.
Operating expenses not required in the normal operation of the Fund are
payable by the Fund. The Fund also pays its own brokerage costs, dues,
and all extraordinary costs including expenses arising out of
anticipated or actual litigation or administrative proceedings.
For its services, the Fund pays UMB Bank, n.a., a fee at the annual
rate of 40/100 of one percent (0.40%) of average daily net assets.
Through the fiscal year ending June 30, 2001 the manager has entered
into a contractual commitment with the Fund to limit annual fund
operating expenses to 30/100 of one percent (0.30%) of average daily
net assets. When the Fund's assets grow to a point where fee waivers
are no longer necessary, UMB Bank, n.a. may seek to recoup such amounts
for a period of three years from the date such amount was waived or
paid. UMB Bank, n.a., is located at 1010 Grand Boulevard, Kansas City,
MO 64106.
Jones & Babson, Inc., serves as transfer agent and principal
underwriter for the Fund. Jones & Babson, Inc., was founded in 1959 and
is located at BMA Tower, 700 Karnes Boulevard, Kansas City, MO 64108-
3306.
UMB Bank, n.a., from its own resources, may compensate its affiliates
for marketing, shareholder servicing, recordkeeping and/or other
services performed with respect to the Fund's shares. This includes a
fee paid by UMB Bank, n.a., to UMB Scout Brokerage Services, Inc. on
UMB Scout Fund shares held in customer accounts at UMB Scout Brokerage
Services.
INVESTMENT SUB-ADVISOR
UMB Bank, n.a., employs at its own expense Northern Trust Quantitative
Advisors, Inc. ("Northern Trust"), to assist in the day-to-day
management function of the UMB Scout Equity Index Fund. Northern Trust
is a wholly-owned subsidiary of the Northern Trust Corporation, a
Chicago based multi-bank holding company. Northern Trust was organized
in 1997 and serves as investment manager for individuals, charitable
organizations, foundations and large corporate investors. Northern
Trust and its affiliates administer in various capacities (including as
master trustee, investment manager and custodian) over $1 trillion of
assets as of December 31, 1999. Northern Trust is located at 50 S.
LaSalle Street, Chicago, IL 60675.
HOW TO PURCHASE SHARES
No-Load Fund
There are no sales commissions, redemption fees or Rule 12b-1
distribution fees
How to Buy Shares (see chart on page 8 for details)
By phone, mail or wire
Through Automatic Monthly Investments
Through exchanges from other UMB Scout Funds
Minimum Initial Investment
$1,000 for most accounts
$250 for IRA and Uniform Transfer (Gift) to Minors accounts
$100 with Automatic Monthly Investments
$1,000 for exchanges from another UMB Scout Fund
Minimum Additional Investments
$100 for purchases by phone or mail ($500 for wire purchases)
$50 for Automatic Monthly Investments
$1,000 for exchanges from another UMB Scout Fund
Minimum Account Size
You must maintain a minimum account size equal to the current minimum
initial investment (usually $1,000). If your account falls below this
amount due to redemptions (not market action) we may notify you and ask
you to increase the account to the minimum. We will close the account
and send your money if you do not bring the account up to the minimum
within 60 days after we mail you the notice.
HOW TO REDEEM SHARES
You may withdraw from your Fund account at any time in the following
amounts:
any amount for redemptions requested by mail or phone
$500 or more for redemptions wired to your account (there may
be a fee)
$50 or more for redemptions by a systematic redemption plan
(there may be a fee)
$1,000 or more for exchanges to another Fund
$100 or more for redemptions by automatic monthly exchange to
another Fund
ADDITIONAL POLICIES ABOUT TRANSACTIONS
We cannot process transaction requests that are not complete and in
good order. A request is in good order if it contains the required
information as described in the section entitled "Conducting Business
with the UMB Scout Funds" on page 8. We may cancel or change our
transaction policies without notice. To avoid delays, please call us if
you have any questions about these policies.
If you wish to purchase (or redeem) shares of a UMB Scout Fund through
a broker, a fee may be charged by that broker. In addition, you may be
subject to other policies or restrictions of the broker such as higher
minimum account value, etc.
Purchases - We may reject orders when not accompanied by payment or
when in the best interest of the Fund and its shareholders.
Redemptions - We try to send proceeds as soon as practical and normally
send proceeds by the third business day after we receive a
request in good order. We cannot accept requests that contain special
conditions or effective dates. We may request additional documentation
to ensure that a request is genuine. Under certain circumstances, we
may pay you proceeds in the form of portfolio securities owned by the
Fund. If you receive securities instead of cash, you may incur
brokerage costs when converting them into cash.
The Manager believes that certain investors who try to "time the
market" by purchasing and redeeming shares from the Fund on a regular
basis may disrupt the investment process and pose additional
transaction costs to the Fund. Therefore, in those cases the Fund
Manager may refuse to sell shares to market timers in order to
discourage such activity.
If you request a redemption within 15 days of purchase, we will delay sending
your proceeds until we have collected unconditional payment, which may take
up to 15 days from the date of purchase. For your protection, if your account
address has been changed within the last 30 days, your redemption request
must be in writing and signed by each account owner, with signature
guarantees. The right to redeem shares may be temporarily suspended in
emergency situations, only as permitted under federal law.
Signature Guarantees - You can get a signature guarantee from most
banks or securities dealers and certain other financial institutions,
but not a notary public. For your protection, we require a guaranteed
signature if you request:
A redemption check sent to a different payee, bank or address than we
have on file.
A redemption check mailed to an address that has been changed within
the last 30 days.
A redemption for $50,000 or more in writing.
A change in account registration or redemption instructions.
Corporations, Trusts and Other Entities - Additional documentation is
normally required for corporations, fiduciaries and others who hold
shares in a representative or nominee capacity. We cannot process your
request until we have all documents in the form required. Please call
us first to avoid delays.
Exchanges to Another Fund - You must meet the minimum investment
requirement of the Fund into which you are exchanging. The names and
registrations on the two accounts must be identical. Your shares must
have been held in an open account for 15 days or more.
Telephone Services - During periods of increased market activity, you
may have difficulty reaching us by telephone. If this happens, contact
us by mail. We may refuse a telephone request, including a telephone
redemption request. We will use reasonable procedures to confirm that
telephone instructions are genuine. If such procedures are followed,
the Fund will not be liable for losses due to unauthorized or
fraudulent instructions. At our option, we may limit the frequency or
the amount of telephone redemption requests. Neither the Fund nor Jones
& Babson, Inc. assumes responsibility for the authenticity of telephone
redemption requests.
SHAREHOLDER SERVICES
The following services are also available to shareholders. Please call
800-996-2862 for more information:
Traditional IRA accounts
Roth IRA accounts
Education IRA accounts
Simplified Employee Pensions (SEPs)
Uniform Transfers (Gifts) to Minors accounts
Accounts for corporations or partnerships
Sub-Accounting Services for Keogh, tax qualified retirement plans,
and others
Prototype Retirement Plans for the self-employed, partnerships and
corporations.
HOW SHARE PRICE IS DETERMINED
Shares of the Fund are purchased or redeemed at the net asset value per
share next calculated after your purchase order and payment or
redemption order is received by us in good order. In the case of
certain institutions which have made satisfactory payment or redemption
arrangements with the Fund and have received your purchase order and
payment or redemption order, we may process the order at the net asset
value per share next effective after receipt of the order by the
institution.
The per share calculation is made by subtracting from the Fund's total
assets any liabilities and then dividing into this amount the Fund's
total outstanding shares as of the date of the calculation. The net
asset value per share is computed once daily, Monday through Friday,
at 4:00 p.m. (Eastern Time) on days when the Fund is open for
business. These are the same days that the New York Stock
Exchange is open for trading. The New York Stock Exchange is closed on
weekends, most national holidays and Good Friday.
Each security owned by the Fund that is listed on an Exchange is valued
at its last sale price on that Exchange on the date when assets are
valued. Where the security is listed on more than one Exchange, the
Fund will use the price of that Exchange which it generally considers
to be the principal Exchange on which the stock is traded. Lacking
sales, the security is valued at the mean between the last current
closing bid and asked prices. An unlisted security for which over-the-
counter market quotations are readily available is valued at the mean
between the last current bid and asked prices. When market quotations
are not readily available, any security or other asset is valued at its
fair value as determined in good faith by the Fund's Board of Trustees
or by the Investment Advisor in accordance with procedures approved by
the Board of Trustees. Short-term instruments maturing within 60 days
may be valued at amortized cost.
DIVIDENDS, DISTRIBUTIONS AND THEIR TAXATION
Distributions - Your distributions will be reinvested automatically in
additional shares of the Fund unless you have elected on your original
application, or by written instructions filed with the Fund, to have
them paid in cash ($10 minimum check amount). There are no fees or
sales charges on reinvestments.
The Fund will pay substantially all of its net investment income
semiannually, usually in June and December. It is contemplated that
substantially all of any net capital gains realized during a fiscal
year will be distributed with the fiscal year-end dividend, with any
remaining balance paid in December.
If you buy shares of the Fund shortly before the record date, please
keep in mind that any distribution will lower the value of the Fund's
shares by the amount of the distribution and you will then receive a
portion of the price back in the form of a taxable distribution.
Tax Considerations - In general, Fund distributions are taxable to you
as either ordinary income or capital gains. This is true whether you
reinvest your distributions in additional Fund shares or receive them
in cash. Any capital gains the Fund distributes are taxable to you as
long-term capital gains no matter how long you have owned your shares.
By law, the Fund must withhold 31% of your taxable distributions and
redemption proceeds if you do not provide your correct Social Security
or Taxpayer Identification Number and certify that you are not subject
to backup withholding, or if the IRS instructs the Fund to do so.
Every January, you will receive a statement that shows the tax status
of distributions you received for the previous year. Distributions
declared in December but paid in January are taxable as if they were
paid in December.
In general, when you sell your shares of the Fund, you may have a
capital gain or loss. For tax purposes, an exchange of your Fund shares
for shares of a different UMB Scout Fund is the same as a sale. The
individual tax rate on any gain from the sale or exchange of your Fund
shares depends on your marginal tax bracket and on how long the shares
have been held.
Many states grant tax-free status to dividends paid from interest
earned on direct obligations of the U.S. government, subject to
certain restrictions.
Fund distributions and gains from the sale or exchange of your Fund
shares generally will be subject to state and local income tax. Non-
U.S. investors may be subject to U.S. withholding and estate tax. You
should consult your tax advisor about the federal, state, local or
foreign tax consequences of your investment in the Fund.
Conducting Business With The UMB Scout Funds By Phone
800-996-2862, in the Kansas City area 816-751-5900
You must authorize each type of
telephone transaction on your account application or the appropriate
form, available from us. All account owners must sign. When you call,
we may request personal identification and tape record the call.
How To Open An Account
If you already have an account with us and you have authorized
telephone exchanges, you may call to open an account in another UMB
Scout Fund by exchange ($1,000 minimum). The names and registrations on
the accounts must be identical.
How To Add To An Account
You may invest by telephone ($100 minimum). After we receive your
telephone call, we will deduct from your checking account the cost of
the shares.
Availability of this service is subject to approval by the Fund and
participating banks.
How To Sell Shares
You may withdraw any amount by telephone ($500 minimum if wired). We
will send funds only to the address or bank account on file with us.
Provide the Fund's name, your account number, the names of each account
owner (exactly as registered), and the number of shares or dollar
amount to be redeemed. For wires, also provide the bank name and bank
account number.
How To Exchange Shares
You may exchange shares ($1,000 minimum or the initial minimum fund
requirement) for shares in another UMB Scout Fund. The shares being
exchanged must have been held in open account for 15 days or more.
Conducting Business With The UMB Scout Funds By Mail
UMB Scout Funds
P.O. Box 219757
Kansas City, MO 64121-9757
How To Open An Account
Complete and sign the application included with this Prospectus. Your
initial investment must meet the minimum amount and you must indicate
the name of the Fund in which you want to invest. Make your check
payable to UMB Bank, n.a.
How To Add To An Account
Make your check ($100 minimum) payable to UMB Bank, n.a., and mail it
to us. Always identify your account number or include the detachable
coupon (from your confirmation statement).
How To Sell Shares
In a letter, include the genuine signature of each registered owner
(exactly as registered), the name of each account owner, the account
number and the number of shares or the dollar amount to be redeemed. We
will send funds only to the address of record.
How To Exchange Shares
In a letter, include the genuine signature of each registered owner,
the Fund name and your account number, the number of shares or dollar
amount to be exchanged ($1,000 minimum) and the UMB Scout Fund into
which the amount is being transferred.
Conducting Business With The UMB Scout Funds By Wire
UMB Bank, n.a.,
Kansas City, Missouri, ABA #101000695
For UMB Scout Funds/AC=98 01186957
Please provide your fund number, account number and name on account.
How To Open An Account
Call us first to get an account number. We will require information
such as your Social Security or Taxpayer Identification Number, the
amount being wired ($1,000 minimum), and the name and telephone number
of the wiring bank. Then tell your bank to wire the amount. You must
send us a completed application as soon as possible or payment of your
redemption proceeds may be delayed.
How To Add To An Account
Wire share purchases ($500 minimum) should include the names of each
account owner, your account number and the full name of the Fund. You
should notify us by telephone that you have sent a wire purchase order
to UMB Bank, n.a.
How To Sell Shares
Redemption proceeds ($500 minimum) may be wired to your pre-identified
bank account. A minimal fee may be deducted. If we receive your request
before
4:00 p.m. (Eastern Time) we will normally wire funds the following
business day. If we receive your request later in the day, we will
normally wire funds on the
second business day. Contact your bank about the time of receipt and
availability.
How To Exchange Shares
Not applicable.
Conducting Business With The UMB Scout Funds Through Automatic
Transaction Plans
You must authorize each type of automatic transaction on your account
application or complete an authorization form, available from us upon
request. All registered
owners must sign.
How To Open An Account
Not applicable.
How To Add To An Account
Automatic Monthly Investment:
You may authorize automatic monthly investments in a constant dollar
amount ($50 minimum) from your checking account. We will draft your
checking account on the same day each month in the amount you
authorize.
How To Sell Shares
Systematic Redemption Plan:
You may specify a dollar amount ($50 minimum) to be withdrawn monthly
or quarterly or have your shares redeemed at a rate calculated to
exhaust the account at the end of a specified period. A fee of $1.50 or
less may be charged for each withdrawal. You must own shares in an open
account valued at $10,000 when you first authorize the systematic
redemption plan. You may cancel or change your plan or redeem all your
shares at any time. We will continue withdrawals until your shares are
gone or until the Fund or you cancel the plan.
How To Exchange Shares
You may authorize monthly exchanges from your account ($100 minimum) to
another UMB Scout Fund. Exchanges will be continued until all shares
have been exchanged or until you terminate the service. You must own
shares in an open account valued at $2,500 or more when you first
authorize monthly exchanges.
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
Equity Index Fund
Technology Fund
Bond Fund
Kansas Tax-Exempt Bond Fund*
Money Market Fund
Federal Portfolio
Prime Portfolio
Tax-Free Money Market Fund
*Available in Kansas and Missouri only.
INVESTMENT ADVISOR AND MANAGER
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
ADDITIONAL INFORMATION
The Statement of Additional Information (SAI) contains additional
information about the Fund and is incorporated by reference into this
Prospectus. The Fund's annual and semi-annual reports to shareholders
will contain additional information about the Fund's investments.
Because the Fund is new, it has not yet published an annual or semi-
annual report to shareholders.
You may obtain a free copy of these documents by contacting the Fund by
telephone, mail or through the website as shown below. You may also
call the toll-free number given below to request other information
about the Fund and to make shareholder inquiries.
You may review and copy the SAI and other information about the Fund by
visiting the Securities and Exchange Commission's Public Reference Room
in Washington, D.C. or by visiting the EDGAR Database on the
Commission's Internet site at http://www.sec.gov. Information on the
operation of the Public Reference Room may be obtained by calling the
Commission at 1-202-942-8090. Copies of this information may also be
obtained, upon payment of a duplicating fee, by electronic request to
[email protected], or by writing to the Public Reference Section of
the Commission, Washington, DC 20549-0102.
UMB SCOUT FUNDS
P.O. Box 219757
Kansas City, MO 64121-9757
www.umb.com
"UMB", "Scout" and the "Scout" design are registered
service marks of UMB Financial Corporation.
<PAGE>
UMB SCOUT FUNDS
TECHNOLOGY FUND
A no-load mutual fund that invests principally in securities
of companies that develop, produce or distribute products
and services related to technology.
PROSPECTUS MAY 1, 2000
Shares of the Fund have not been approved or disapproved by the Securities
and Exchange Commission nor has the Commission passed on the adequacy
of this Prospectus. Any representation to the contrary is a criminal offense.
PROSPECTUS
MAY 1, 2000
Toll-Free 800-996-2862
UMB Scout Technology Fund
Investment Advisor and Manager:
UMB BANK, N.A.
Kansas City, Missouri
Distributor:
JONES & BABSON, INC.
Kansas City, Missouri
TABLE OF CONTENTS
Page
Information About the Fund
Investment Objective and Principal Investment Strategies 2
Principal Risk Factors 3
Performance Information 3
Fees and Expenses 4
Investment Advisor and Manager 4
Information About Investing
How to Purchase Shares 5
How to Redeem Shares 5
Additional Policies about Transactions 5
Shareholder Services 6
How Share Price is Determined 7
Dividends, Distributions and their Taxation 7
Conducting Business with the UMB Scout Funds 8
Investment Objective and Principal Investment Strategies
The Fund seeks to provide long-term capital appreciation. To pursue its
objective, the Fund will invest principally (at least 65% of total assets) in
securities of companies that develop, produce or distribute products and
services related to technology.
In considering whether an issuer is principally engaged in technology
business activities, the Investment Advisor may consider, among other things,
whether it is listed on the Morgan Stanley High-Technology 35 Index (the
"Morgan Stanley Index"), the Hambrecht and Quist Technology Index (the "H&Q
Index"), the SoundView Technology Index (the "SoundView Index"), the
Technology grouping of the S&P 500r Index or any other comparable technology
index.
Using fundamental research and quantitative analysis, the investment
management team selects securities of technology companies believed to have
the potential to outperform the technology sector over the long-term. In
doing so, the investment management team selects investments based on factors
such as:
Financial condition;
Market share;
Product leadership, innovative concepts or market niches;
Earnings growth rates compared with relevant competitors;
Market valuation compared to securities of other technology-related
companies and the stock's own historical norms;
Product and industry trends; and
Price trends.
The investment management team intends to sell securities it believes are no
longer suitable for achieving the Fund's objective of long-term capital
appreciation.
Companies in which the Fund may invest include businesses related to the
following products and services: computers, software and peripheral products;
industrial and business machines; communications, telecommunications and
information products and services; electronics, semiconductors and
minicomputers; electronic media; environmental services; internet; office
equipment and supplies; television and video equipment and services;
satellite technology and equipment; chemicals and synthetic materials; and
biotechnology, health care and medical supplies. It is expected that more
than 25% of the Fund's total assets will normally be invested in
combination of technology companies that develop or sell computers, software
and peripheral products. The Fund may invest in both small and large
technology companies, without regard to their size and, at times, may have
a significant amount of its assets invested in small companies.
Although the Fund primarily invests in the securities of U.S. companies, it
may invest a portion of its assets in the securities of foreign issuers. The
Fund does not expect normally to invest more than 35% of its assets in the
securities of foreign issuers.
The Fund intends to hold some cash, short-term debt obligations, government
securities or other high-quality investments pending investment in suitable
equity securities, or for reserves to cover redemptions and unanticipated
expenses. There may be times, however, when the Fund attempts to respond to
adverse market, economic, political or other conditions by investing up to
100% of its assets in those types of investments for temporary, defensive
purposes. During those times, the Fund will not be able to pursue long-term
capital appreciation and, instead, will focus on preserving your investment.
Principal Risk Factors
As with any mutual fund, there is a risk that you could lose money by
investing in the Fund.
Market Risks - Equity securities are subject to market, economic and business
risks that will cause their prices to fluctuate over time. Since the Fund is
normally invested in equity securities, the value of the Fund may go down.
Different types of investments shift in and out of favor depending on market
and economic conditions. For example, at various times equity securities will
be more or less favorable than bonds. Because of this, the Fund will perform
better or worse than other types of funds depending on what is in favor.
Concentration Risks - The Fund will be highly concentrated in companies
engaged in technology business activities, particularly
companies that develop or sell computers, software and peripheral products.
Therefore, the Fund may be especially sensitive to changes
in the general stock market and other economic conditions that affect those
industries. Companies in the rapidly changing fields of science and
technology often face special risks. For example, their products may prove
commercially unsuccessful, become obsolete or become adversely impacted by a
government regulation. In addition, computer and software businesses are
subject to intense competitive pressures and aggrestive pricing, which can
negatively affect their stock price. Technology stocks may experience
signficant price movements cuased by disproportionate investor optimism or
pessimism and earnings dissappointment can result in sharp price declines.
The Fund is therefore likely to be much more volatile than a Fund that is
exposed to a greater variety of industries, especially over the short term.
Small Company Risks - The Fund may have a significant amount of its assets
invested in small companies. Generally, smaller and less seasoned companies
have more potential for rapid growth. However, they often involve greater
risk than larger companies and these risks are passed on to the Fund. These
companies may not have the management experience, financial resources,
product diversification and competitive strengths of larger companies.
Therefore, the securities of smaller companies are generally more volatile
than the securities of larger, more established companies. An investment in
the Fund may be more suitable for long-term investors who can bear the risk
of these fluctuations.
Smaller company stocks tend to be bought and sold less often and in smaller
amounts than larger company stocks. Because of this, if the Fund wants to
sell a large quantity of a small company stock it may have to sell at a lower
price than the Investment Advisor might prefer, or it may have to sell in
small quantities over a period of time. The Fund tries to minimize this risk
by investing in stocks that are readily bought and sold.
International Risks - International investing by the Fund poses additional
risks such as currency fluctuations. If a security owned by the Fund is
denominated in a foreign currency, the price of that security may go up in
the local currency but cause a loss to the Fund when priced in U.S. dollars.
International markets, especially in developing countries, are subject to
political and economic instability and are not always as liquid as in the
U.S., sometimes making it harder to sell a security. In addition, foreign
companies may not be subject to comparable securities regulation and
accounting, auditing and financial reporting standards as U.S. companies.
These risks are inherently passed on to the company's shareholders, including
the Fund, and in turn, to the Fund's shareholders.
PERFORMANCE INFORMATION
The Fund is new as of May 1, 2000, therefore, there is no performance
information.
FEES & EXPENSES
The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Fund. The Fund is new as of May 1, 2000, so the
amount of "Other Expenses" is based on estimates for the first year of
operations.
Shareholder Fees
(Fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses
(Expenses deducted from Fund assets)
Management Fees 1.50%
Distribution (12b-1) Fees None
Other Expenses 0.03%
Total Annual Fund Operating Expenses 1.53%
Less Manager's Fee Waiver/Payments* (0.43%)
Net Annual Fund Operating Expenses 1.10%
* The Manager has entered into a contractual commitment to waive
its fees and/or to make expense payments through the fiscal year ending June
30, 2001 so that net annual fund operating expenses do not exceed 1.10% of
average daily net assets.
Example
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Please note that only the first
year in each example reflects the effect of the Manager's fee waiver/expense
reimbursement. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years
$112 $305
INVESTMENT ADVISOR AND MANAGER
UMB Bank, n.a., is the Fund's Investment Advisor and Manager on a day to day
basis. UMB Bank, n.a. is a wholly-owned subsidiary of UMB Financial
Corporation, a seven billion dollar financial services institution. UMB Bank,
n.a. was founded in 1913. UMB Bank, n.a. provides investment management and
trust services for a broad variety of individual, corporate and
institutional clients, including the UMB Scout mutual funds. The bank
currently manages approximately $14 billion in client assets. A management
team led by William Greiner is responsible for investment decisions for the
Fund. Mr. Greiner has been the chief investment officer at UMB Bank since
1999. Prior to that, he managed investments at Northern Trust Company,
Chicago, IL. Mr. Greiner has over 21 years of investment management
experience.
As Manager, UMB Bank, n.a., provides or pays the cost of all management,
supervisory and administrative services required in the normal operation of
the Fund. This includes investment management and supervision; fees of the
custodian, independent auditors and legal counsel; officers, directors and
other personnel; rent; shareholder services; and other items incidental to
corporate administration. Operating expenses not required in the normal
operation of the Fund are payable by the Fund. The Fund also pays its own
brokerage costs, dues, and all extraordinary costs including expenses arising
out of anticipated or actual litigation or administrative proceedings.
For its services, the Fund pays UMB Bank, n.a., a fee at the annual rate of
one and one-half percent (1.50%) of average daily net assets. Through the
fiscal year ending June 30, 2001, the manager has entered into a contractual
agreement with the Fund to limit annual fund operating expenses to 1.10% of
average daily net assets. When the Fund's assets grow to a point where fee
waivers are no longer necessary, UMB Bank, n.a. may seek to recoup such
amounts for a period of three years from the date such amount was waived or
paid. UMB Bank, n.a., is located at 1010 Grand Boulevard, Kansas City, MO
64106.
Jones & Babson, Inc., serves as transfer agent and principal underwriter for
the Fund. Jones & Babson, Inc., was founded in 1959 and is located at BMA
Tower, 700 Karnes Boulevard, Kansas City, MO 64108-3306.
UMB Bank, n.a., from its own resources, may compensate its affiliates for
marketing, shareholder servicing, recordkeeping and/or other services
performed with respect to the Fund's shares. This includes a fee paid by UMB
Bank, n.a., to UMB Scout Brokerage Services, Inc. on UMB Scout Fund shares
held in customer accounts at UMB Scout Brokerage Services.
HOW TO PURCHASE SHARES
No-Load Fund
There are no sales commissions, redemption fees or Rule 12b-1
distribution fees
How to Buy Shares (see chart on page 8 for details)
By phone, mail or wire
Through Automatic Monthly Investments
Through exchanges from other UMB Scout Funds
Minimum Initial Investment
$1,000 for most accounts
$250 for IRA and Uniform Transfer (Gift) to Minors accounts
$100 with Automatic Monthly Investments
$1,000 for exchanges from another UMB Scout Fund
Minimum Additional Investments
$100 for purchases by phone or mail ($500 for wire purchases)
$50 for Automatic Monthly Investments
$1,000 for exchanges from another UMB Scout Fund
Minimum Account Size
You must maintain a minimum account size equal to the current minimum initial
investment (usually $1,000). If your account falls below this amount due to
redemptions (not market action) we may notify you and ask you to increase the
account to the minimum. We will close the account and send your money if you
do not bring the account up to the minimum within 60 days after we mail you
the notice.
HOW TO REDEEM SHARES
You may withdraw from your Fund account at any time in the following amounts:
any amount for redemptions requested by mail or phone
$500 or more for redemptions wired to your account (there may be a fee)
$50 or more for redemptions by a systematic redemption plan (there may be a
fee)
$1,000 or more for exchanges to another Fund
$100 or more for redemptions by automatic monthly exchange to another Fund
ADDITIONAL POLICIES ABOUT TRANSACTIONS
We cannot process transaction requests that are not complete and in good
order. A request is in good order if it contains the required information as
described in the section entitled "Conducting Business with the UMB Scout
Funds" on page 8. We may cancel or change our transaction policies without
notice. To avoid delays, please call us if you have any questions about these
policies.
If you wish to purchase (or redeem) shares of a UMB Scout Fund through a
broker, a fee may be charged by that broker. In addition, you may be subject
to other policies or restrictions of the broker such as higher minimum
account value, etc.
Purchases - We may reject orders when not accompanied by payment or when in
the best interest of the Fund and its shareholders.
Redemptions - We try to send proceeds as soon as practical and normally.
send proceeds by the third business day after we receive a
request in good order. We cannot accept requests that contain special conditions
or effective dates. We may request additional documentation to ensure that a
request is genuine. Under certain circumstances, we may pay you proceeds in
the form of portfolio securities owned by the Fund. If you receive
securities instead of cash, you may incur brokerage costs when converting
them into cash.
The Manager believes that certain investors who try to "time the market" by
purchasing and redeeming shares from the Fund on a regular basis may disrupt
the investment process and pose additional transaction costs to the Fund.
Therefore in those cases the Fund Manager may delay redemption proceeds up to
seven days or refuse to sell to market timers in order to discourage such
activity.
If you request a redemption within 15 days of purchase, we will delay sending
your proceeds until we have collected unconditional payment, which may take
up to 15 days from the date of purchase. For your protection, if your account
address has been changed within the last 30 days, your redemption request
must be in writing and signed by each account owner, with signature
guarantees. The right to redeem shares may be temporarily suspended in
emergency situations, only as permitted under federal law.
Signature Guarantees - You can get a signature guarantee from most banks or
securities dealers and certain other financial institutions, but not a notary
public. For your protection, we require a guaranteed signature if you
request:
A redemption check sent to a different payee, bank or address than we have
on file.
A redemption check mailed to an address that has been changed within the
last 30 days.
A redemption for $50,000 or more in writing.
A change in account registration or redemption instructions.
Corporations, Trusts and Other Entities - Additional documentation is
normally required for corporations, fiduciaries and others who hold shares in
a representative or nominee capacity. We cannot process your request until we
have all documents in the form required. Please call us first to avoid
delays.
Exchanges to Another Fund - You must meet the minimum investment
requirement of the Fund into which you are exchanging. The names and
registrations on the two accounts must be identical. Your shares must
have been held in an open account for 15 days or more.
Telephone Services - During periods of increased market activity, you may
have difficulty reaching us by telephone. If this happens, contact us by
mail. We may refuse a telephone request, including a telephone redemption
request. We will use reasonable procedures to confirm that telephone
instructions are genuine. If such procedures are followed, the Fund will not
be liable for losses due to unauthorized or fraudulent instructions. At our
option, we may limit the frequency or the amount of telephone redemption
requests. Neither the Fund nor Jones & Babson, Inc. assumes responsibility
for the authenticity of telephone redemption requests.
SHAREHOLDER SERVICES
The following services are also available to shareholders. Please call 800-
996-2862 for more information:
Traditional IRA accounts
Roth IRA accounts
Education IRA accounts
Simplified Employee Pensions (SEPs)
Uniform Transfers (Gifts) to Minors accounts
Accounts for corporations or partnerships
Sub-Accounting Services for Keogh, tax qualified retirement plans, and
others
Prototype Retirement Plans for the self-employed, partnerships and
corporations.
HOW SHARE PRICE IS DETERMINED
Shares of the Fund are purchased or redeemed at the net asset value per share
next calculated after your purchase order and payment or redemption order is
received by us in good order. In the case of certain institutions which have
made satisfactory payment or redemption arrangements with the Fund and have
received your purchase order and payment or redemption order, we may process
the order at the net asset value per share next effective after receipt of
the order by the institution.
The per share calculation is made by subtracting from the Fund's total assets
any liabilities and then dividing into this amount the Fund's total
outstanding shares as of the date of the calculation. The net asset value per
share is computed once daily, Monday through Friday, at 4:00 p.m. (Eastern
Time) on days when the Fund is open for business. These are the
same days that the New York Stock Exchange is open for trading. The New York
Stock Exchange is closed on weekends, most national holidays and Good Friday.
Each security owned by the Fund that is listed on an Exchange is valued at
its last sale price on that Exchange on the date when assets are valued.
Where the security is listed on more than one Exchange, the Fund will use the
price of that Exchange which it generally considers to be the principal
Exchange on which the stock is traded. Lacking sales, the security is valued
at the mean between the last current closing bid and asked prices. An
unlisted security for which over-the-counter market quotations are readily
available is valued at the mean between the last current bid and asked
prices. When market quotations are not readily available, any security or
other asset is valued at its fair value as determined in good faith by the
Fund's Board of Trustees or by the Investment Advisor in accordance with
procedures approved by the Board of Trustees. Short-term instruments maturing
within 60 days may be valued at amortized cost.
DIVIDENDS, DISTRIBUTIONS AND THEIR TAXATION
Distributions - Your distributions will be reinvested automatically in
additional shares of the Fund unless you have elected on your original
application, or by written instructions filed with the Fund, to have them
paid in cash ($10 minimum check amount). There are no fees or sales charges
on reinvestments.
The Fund will pay substantially all of its net investment income
semiannually, usually in June and December. It is contemplated that
substantially all of any net capital gains realized during a fiscal year will
be distributed with the fiscal year-end dividend, with any remaining balance
paid in December.
If you buy shares of the Fund shortly before the record date, please keep in
mind that any distribution will lower the value of the Fund's shares by the
amount of the distribution and you will then receive a portion of the price
back in the form of a taxable distribution.
Tax Considerations - In general, Fund distributions are taxable to you as
either ordinary income or capital gains. This is true whether you reinvest
your distributions in additional Fund shares or receive them in cash. Any
capital gains the Fund distributes are taxable to you as long-term capital
gains no matter how long you have owned your shares.
By law, the Fund must withhold 31% of your taxable distributions and
redemption proceeds if you do not provide your correct Social Security or
Taxpayer Identification Number and certify that you are not subject to
backup withholding, or if the IRS instructs the Fund to do so.
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
In general, when you sell your shares of the Fund, you may have a capital
gain or loss. For tax purposes, an exchange of your Fund shares for shares of
a different UMB Scout Fund is the same as a sale. The individual tax rate on
any gain from the sale or exchange of your Fund shares depends on your
marginal tax bracket and on how long the shares have been held.
Many states grant tax-free status to dividends paid from interest earned on
direct obligations of the U.S. government, subject to certain restrictions.
Fund distributions and gains from the sale or exchange of your Fund shares
generally will be subject to state and local income tax. Non-U.S. investors
may be subject to U.S. withholding and estate tax. You should consult your
tax advisor about the federal, state, local or foreign tax consequences of
your investment in the Fund.
Conducting Business With The UMB Scout Funds By Phone
800-996-2862, in the Kansas City area 816-751-5900
You must authorize each type of telephone transaction on your account
application or the appropriate form, available from us. All account owners
must sign. When you call, we may request personal identification and tape
record the call.
How To Open An Account
If you already have an account with us and you have authorized telephone
exchanges, you may call to open an account in another UMB Scout Fund by
exchange ($1,000 minimum). The names and registrations on the accounts must
be identical.
How To Add To An Account
You may invest by telephone ($100 minimum). After we receive your telephone
call, we will deduct from your checking account the cost of the shares.
Availability of this service is subject to approval by the Fund and
participating banks.
How To Sell Shares
You may withdraw any amount by telephone ($500 minimum if wired). We will
send funds only to the address or bank account on file with us. Provide the
Fund's name, your account number, the names of each account owner (exactly as
registered), and the number of shares or dollar amount to be redeemed. For
wires, also provide the bank name and bank account number.
How To Exchange Shares
You may exchange shares ($1,000 minimum or the initial minimum fund
requirement) for shares in another UMB Scout Fund. The shares being exchanged
must have been held in open account for 15 days or more.
Conducting Business With The UMB Scout Funds By Mail
UMB Scout Funds
P.O. Box 219757
Kansas City, MO 64121-9757
How To Open An Account
Complete and sign the application included with this Prospectus. Your initial
investment must meet the minimum amount and you must indicate the name of the
Fund in which you want to invest. Make your check payable to UMB Bank, n.a.
How To Add To An Account
Make your check ($100 minimum) payable to UMB Bank, n.a., and mail it to us.
Always identify your account number or include the detachable coupon (from
your confirmation statement).
How To Sell Shares
In a letter, include the genuine signature of each registered owner (exactly
as registered), the name of each account owner, the account number and the
number of shares or the dollar amount to be redeemed. We will send funds only
to the address of record.
How To Exchange Shares
In a letter, include the genuine signature of each registered owner, the Fund
name and your account number, the number of shares or dollar amount to be
exchanged ($1,000 minimum) and the UMB Scout Fund into which the amount is
being transferred.
Conducting Business With The UMB Scout Funds By Wire
UMB Bank, n.a.,
Kansas City, Missouri, ABA #101000695
For UMB Scout Funds/AC=98 01186957
Please provide your fund number, account number and name on account.
How To Open An Account
Call us first to get an account number. We will require information such as
your Social Security or Taxpayer Identification Number, the amount being
wired ($1,000 minimum), and the name and telephone number of the wiring bank.
Then tell your bank to wire the amount. You must send us a completed
application as soon as possible or payment of your redemption proceeds may be
delayed.
How To Add To An Account
Wire share purchases ($500 minimum) should include the names of each account
owner, your account number and the full name of the Fund. You should notify
us by telephone that you have sent a wire purchase order to UMB Bank, n.a.
How To Sell Shares
Redemption proceeds ($500 minimum) may be wired to your pre-identified bank
account. A minimal fee may be deducted. If we receive your request before
4:00 p.m. (Eastern Time) we will normally wire funds the following business
day. If we receive your request later in the day, we will normally wire funds
on the
second business day. Contact your bank about the time of receipt and
availability.
How To Exchange Shares
Not applicable.
Conducting Business With The UMB Scout Funds Through Automatic Transaction
Plans
You must authorize each type of automatic transaction on your account
application or complete an authorization form, available from us upon
request. All registered
owners must sign.
How To Open An Account
Not applicable.
How To Add To An Account
Automatic Monthly Investment:
You may authorize automatic monthly investments in a constant dollar amount
($50 minimum) from your checking account. We will draft your checking account
on the same day each month in the amount you authorize.
How To Sell Shares
Systematic Redemption Plan:
You may specify a dollar amount ($50 minimum) to be withdrawn monthly or
quarterly or have your shares redeemed at a rate calculated to exhaust the
account at the end of a specified period. A fee of $1.50 or less may be
charged for each withdrawal. You must own shares in an open account valued at
$10,000 when you first authorize the systematic redemption plan. You may
cancel or change your plan or redeem all your shares at any time. We will
continue withdrawals until your shares are gone or until the Fund or you
cancel the plan.
How To Exchange Shares
You may authorize monthly exchanges from your account ($100 minimum) to
another UMB Scout Fund. Exchanges will be continued until all shares have
been exchanged or until you terminate the service. You must own shares in an
open account valued at $2,500 or more when you first authorize monthly
exchanges.
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
Equity Index Fund
Technology Fund
Bond Fund
Kansas Tax-Exempt Bond Fund*
Money Market Fund
Federal Portfolio
Prime Portfolio
Tax-Free Money Market Fund
*Available in Kansas and Missouri only.
INVESTMENT ADVISOR AND MANAGER
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
ADDITIONAL INFORMATION
The Statement of Additional Information (SAI) contains additional information
about the Fund and is incorporated by reference into this Prospectus. The
Fund's annual and semi-annual reports to shareholders will contain additional
information about the Fund's investments. Because the Fund is new, it has not
yet published an annual or semi-annual report to shareholders.
You may obtain a free copy of these documents by contacting the Fund by
telephone, mail or through the website as shown below. You may also call the
toll-free number given below to request other information about the Fund and
to make shareholder inquiries.
You may review and copy the SAI and other information about the Fund by
visiting the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. or by visiting the EDGAR Database on the Commission's
Internet site at http://www.sec.gov. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at 1-202-942-
8090. Copies of this information may also be obtained, upon payment of a
duplicating fee, by electronic request to [email protected], or by writing
to the Public Reference Section of the Commission, Washington, DC 20549-0102.
UMB SCOUT FUNDS
P.O. Box 219757
Kansas City, MO 64121-9757
www.umb.com
"UMB", "Scout" and the "Scout" design are registered
service marks of UMB Financial Corporation.
<PAGE>
PART B
UMB SCOUT EQUITY INDEX FUND
UMB SCOUT TECHNOLOGY FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
This Statement of Additional Information is not a Prospectus but
should be read in conjunction with each current Fund's Prospectus
dated May 1, 2000. To obtain the Prospectus or any available
Annual or Semi-Annual Report to shareholders, please call the
Funds toll-free at 1-800-996-2862, or in the Kansas City area 816-
751-5900. The Funds are series of the UMB Scout Funds.
JB181
TABLE OF CONTENTS
Page
Introduction 3
Investment Objectives and, Strategies 3
UMB Scout Equity Index Fund 3
UMB Scout Technology Fund 4
Investment Policies Related to Both Funds 5
Short-Term Debt Obligations 5
Repurchase Agreements 5
Portfolio Turnover 6
Risk Factors 6
Risk Factors Applicable to Foreign Investments 6
Risk Factors Applicable to Repurchase Agreements 6
Investment Restrictions 7
Portfolio Transactions 8
Portfolio Turnover 9
Performance Measures 9
Total Return 9
Performance Comparisons 10
How the Funds' Shares are Distributed 11
How Share Purchases are Handled 11
Redemption of Shares 12
Signature Guarantees 12
Additional Purchase and Redemption Policies 13
Holidays 13
Dividends, Distributions and Taxes 13
Management and Investment Advisor 15
Investment Sub-Advisor 16
Officers and Trustees 16
Compensation Table 17
Underwriter and Distributor 17
Transfer Agent 18
Custodian 18
Independent Auditors 18
General Information and History 18
"UMB", "Scout" and the Scout design are registered service marks of UMB
Financial Corporation.
INTRODUCTION
The UMB Scout Equity Index Fund and the UMB Scout Technology Fund are
classified as open-end, diversified management investment companies under the
Investment Company Act of 1940, as amended (the "1940 Act"). This
classification means that the assets of the Funds are invested in a
diversified portfolio of securities and that the Funds operate as mutual
funds, allowing shareholders to buy and sell shares at any time (as described
in the Prospectus).
This Statement of Additional Information (SAI) supplements the information
contained in the Prospectuses for the Funds. The Prospectuses outline the
principal investment strategies and risks of the Funds, and this SAI contains
some of the same information, as well as information about additional
strategies and risks.
INVESTMENT OBJECTIVES AND STRATEGIES
UMB Scout Equity Index Fund
The UMB Scout Equity Index Fund seeks to provide investment results that
track, as closely as possible, the performance of the Standard & Poor'sr 500
Composite Stock Price Index (the "S&P 500r Index").
The S&P 500r Index is a market value-weighted index consisting of 500 common
stocks which are traded on the New York Stock Exchange, American Stock
Exchange and the Nasdaq National Market System and selected by Standard &
Poor's Corporation ("Standard & Poor's") through a detailed screening process
starting on a macro-economic level and working toward a micro-economic level
dealing with company-specific information such as market value, industry group
classification, capitalization and trading activity. Standard & Poor's
primary objective for the S&P 500r Index is to be the performance benchmark
for the U.S. equity markets. The companies chosen for inclusion in the S&P
500r Index tend to be leaders in important industries within the U.S. economy.
However, companies are not selected by Standard & Poor's for inclusion because
they are expected to have superior stock price performance relative to the
market in general or other stocks in particular. Standard & Poor's makes no
representation or warranty, implied or express, to purchasers of UMB Scout
Equity Index Fund shares or any member of the public regarding the
advisability of investing in the Fund or the ability of the S&P 500r Index to
track general stock market performance.
"Standard & Poor's r", "S&Pr", "S&P 500r", "Standard & Poor's 500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use
by UMB Bank, n.a.
The Fund is not sponsored, endorsed, sold or promoted by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&Pr makes no
representation or warranty, express or implied, to the owners of the Fund or
any member of the public regarding the advisability of investing in securities
generally or in the Fund particularly or the ability of the S&P 500r Index to
track general stock market performance. S&P's only relationship to the
Licensee is the licensing of certain trademarks and trade names of S&Pr and of
the S&P 500r Index which is determined, composed and calculated by S&Pr
without regard to the Licensee or the Fund. S&Pr has no obligation to take
the needs of the Licensee or the owners of the Fund into consideration in
determining, composing or calculating the S&P 500r Index. S&Pr is not
responsible for and has not participated in the determination of the prices
and amount of the Fund or the timing of the issuance or sale of the Fund or in
the determination or calculation of the equation by which the Fund is to be
converted into cash. S&Pr has no obligation or liability in connection with
the administration, marketing or trading of the Fund.
S&Pr DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500r INDEX OR ANY DATA INCLUDED THEREIN AND S&Pr SHALL HAVE NO LIABILITY FOR
ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&Pr MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE
FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500r INDEX OR ANY
DATA INCLUDED THEREIN. S&Pr MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500r INDEX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
S&Pr HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
Tracking Variance. As discussed in the Prospectus, the UMB Scout Equity Index
Fund is subject to the risk of tracking variance. Tracking variance may
result from share purchases and redemptions, transaction costs, expenses and
other factors. Share purchases and redemptions may necessitate the purchase
and sale of securities by the Fund and the resulting transaction costs which
may be substantial because of the number and the characteristics of the
securities held. In addition, transaction costs are incurred because sales of
securities received in connection with spin-offs and other corporate
organizations are made to conform the Fund's holdings with its investment
objective. Tracking variance may also occur due to factors such as the size
of the Fund, the maintenance of a cash reserve pending investment or to meet
expected redemptions, changes made in the S&P 500r Index or the manner in
which the Index is calculated or because the indexing and investment approach
of the Investment Advisor does not produce the intended goal of the Fund. In
the event the performance of the Fund is not comparable to the performance of
the S&P 500r Index, the Board of Trustees will evaluate the reasons for the
deviation and the availability of corrective measures. If substantial
deviation in the Fund's performance were to continue for extended periods, it
is expected that the Board of Trustees would consider recommending to
shareholders possible changes to the Fund's investment objective.
UMB Scout Technology Fund
The Fund will, under normal market conditions, invest at least 65% of the
value of its total assets in securities of companies principally engaged in
technology business activities. An issuer is considered principally engaged
in technology business activities if such issuer is listed on the Morgan
Stanley High-Technology 35 Index (the "Morgan Stanley Index"), the Hambrecht
and Quist Technology Index (the "H&Q Index"), the SoundView Technology Index,
the technology groupings of the S&P 500r Index or any other comparable index.
The Morgan Stanley Index is an equal dollar weighted index of 35 stocks drawn
from nine technology subsectors: computer services, design software, server
software, PC software and new media, networking and telecom equipment, server
hardware, PC hardware and peripherals, specialized systems and semi-
conductors. The SoundView Technology Index is an equal dollar weighted index
designed to measure the performance of the technology industry. It is
comprised of 100 major technology companies chosen by SoundView Financial
Group. The H&Q Index is comprised of publicly traded stocks of approximately
250 technology companies. The H&Q Index includes companies in the electronics
services and related technologies industries and is a market capitalization
weighted index. Changes in the indices may occur when Morgan Stanley,
SoundView or H&Q choose to modify their indices or as mergers, acquisitions
and failures dictate. Such changes may happen with fair regularity owing to
the fast-changing nature of the technology industries.
Warrants. The UMB Scout Technology Fund may purchase warrants and similar
rights, which are privileges issued by corporations enabling the owners to
subscribe to and purchase a specified number of shares of the corporation at a
specified price during a specified period of time. The prices of warrants do
not necessarily correlate with the prices of the underlying shares. The
purchase of warrants involves the risk that the Fund could lose the purchase
value of a warrant if the right to subscribe to additional shares is not
exercised prior to the warrant's expiration. Also, the purchase of warrants
involves the risk that the effective price paid for the warrant added to the
subscription price of the related security may exceed the value of the
subscribed security's market price such as when there is no movement in the
level of the underlying security.
Convertible Securities. Convertible securities entitle the holder to receive
interest paid or accrued on debt or the dividend paid on preferred stock until
the convertible securities mature or are redeemed, converted or exchanged.
Prior to conversion, convertible securities have characteristics similar to
ordinary debt securities in that they normally provide a stable stream of
income with generally higher yields than those of common stock of the same or
similar issuers. Convertible securities rank senior to common stock in a
corporation's capital structure and therefore generally entail less risk than
the corporation's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed-income security. In selecting
convertible securities, the Investment Advisor will consider, among other
factors: an evaluation of the creditworthiness of the issuers of the
securities; the interest or dividend income generated by the securities; the
potential for capital appreciation of the securities and the underlying common
stocks; the prices of the securities relative to other comparable securities
and to the underlying common stocks; whether the securities are entitled to
the benefits of sinking funds or other protective conditions; diversification
of the Fund's portfolio as to issuers; and whether the securities are rated by
a rating agency and, if so, the ratings assigned.
INVESTMENT POLICIES RELATED TO BOTH FUNDS
Short-Term Debt Obligations. For cash management purposes including meeting
redemptions and unanticipated expenses, each Fund may invest a portion of its
assets in cash or high-quality, short-term debt obligations readily changeable
into cash such as:
(1) certificates of deposit, bankers' acceptances and other short-
term obligations issued domestically by United States
commercial banks having assets of at least $1 billion and
which are members of the Federal Deposit Insurance Corporation
or holding companies of such banks;
(2) commercial paper of companies rated P-2 or higher by Moody's
or A-2 or higher by S&Pr, or if not rated by either Moody's or
S&Pr, a company's commercial paper may be purchased by the
Fund if the company has an outstanding bond issue rated Aa or
higher by Moody's or AA or higher by S⪻
(3) short-term debt securities which are non-convertible and
which have one year or less remaining to maturity at the date
of purchase and which are rated Aa or higher by Moody's or AA
or higher by S⪻ and
(4) negotiable certificates of deposit and other short-term debt
obligations of savings and loan associations having assets of
at least $1 billion and which are members of the Federal Home
Loan Banks Association and insured by the Federal Savings and
Loan Insurance Corporation.
There may be times, however, when the UMB Scout Technology Fund attempts to
respond to adverse market, economic, political or other conditions by
investing up to 100% of its assets in those types of investments for
temporary, defensive purposes. During those times, the Technology Fund will
not be able to pursue its investment objective and, instead, will focus on
preserving your investment.
Repurchase Agreements. The Funds, for cash management purposes, may invest in
issues of the United States Treasury or a United States government agency
subject to repurchase agreements. A repurchase agreement involves the sale of
securities to the Fund with the concurrent agreement by the seller to
repurchase the securities at the Funds' cost plus interest at an agreed rate
upon demand or within a specified time, thereby determining the yield during
the Funds' period of ownership. The result is a fixed rate of return insulated
from market fluctuations during such period. Under the 1940 Act, repurchase
agreements are considered loans by the Funds.
The Funds will enter into repurchase agreements only with United States banks
having assets in excess of $1 billion which are members of the Federal Deposit
Insurance Corporation, and with certain securities dealers who meet the
qualifications set from time to time by the Investment Advisor. The term to
maturity of a repurchase agreement normally will be no longer than a few days.
With respect to the UMB Scout Equity Index Fund and the UMB Scout Technology
Fund, repurchase agreements maturing in more than seven days and other
illiquid securities will not exceed 15% of each Fund's net assets.
Borrowing. As a matter of non-fundamental investment policy, neither Fund may
borrow money for the purpose of leveraging its investments. In addition,
neither Fund will purchase portfolio securities when borrowings exceed 5% of
their respective total assets.
PORTFOLIO TURNOVER
The Funds do not intend to purchase securities solely for short-term trading;
nor will securities be sold for the sole purpose of realizing gains. However,
with regard to UMB Scout Technology Fund, a security may be sold and another
of comparable quality purchased at approximately the same time to take
advantage of what the Funds' investment advisor believes to be a disparity in
the normal yield relationship between the two securities. In addition, a
security may be sold and another purchased when, in the opinion of management,
a favorable yield spread exists between specific issues or different market
sectors. With regard to UMB Scout Equity Index Fund, securities will be
bought and sold in response to changes in the S&P 500r Index and cash flows.
Short-term debt instruments with maturities of less than one year are excluded
from the calculation of portfolio turnover.
There are no fixed limitations regarding portfolio turnover for either Fund.
Although the Funds do not trade for short-term profits, securities may be sold
without regard to the time they have been held in the Fund when, in the
opinion of the Fund's management, investment considerations warrant such
action. As a result, while it is anticipated that the turnover rates will not
exceed 100%, under certain market conditions, these portfolio turnover rates
may exceed 100%. Increased portfolio turnover rates would cause the Fund to
incur greater brokerage costs than would otherwise be the case and may result
in the acceleration of capital gains which are taxable when distributed to
shareholders.
RISK FACTORS
Risk Factors Applicable to Foreign Investments. From time to time, the UMB
Scout Technology Fund may invest in companies located in developing countries.
A developing country is generally considered to be a country that is in the
initial stages of its industrialization cycle with a low per capita gross
national product. Compared to investment in the United States and other
developed countries, investing in the equity and fixed-income markets of
developing countries involves exposure to relatively unstable governments,
economic structures that are generally less mature and based on only a few
industries and securities markets which trade a small number of securities.
Prices on securities exchanges in developing countries generally will be more
volatile than those in developed countries. The UMB Scout Technology Fund
will not invest more than 20% of its total assets in companies located in
developing countries.
The risks to which the UMB Scout Technology Fund is exposed, as a result of
investing in companies located outside the United States include: currency
risks such as fluctuations in the value of foreign currencies and the
performance of foreign currencies relative to the U.S. dollar; exchange
control regulations; and costs incurred in connection with conversions between
various currencies (fees may also be incurred when converting foreign
investments to U.S. dollars). As a result, the relative strength of the U.S.
dollar may be an important factor in the performance of the Fund.
As non-U.S. companies are not generally subject to uniform accounting,
auditing and financial reporting standards and practices comparable to those
applicable to U.S. companies, comparable information may not be readily
available about certain foreign companies. Securities of some non-U.S.
companies may be less liquid and more volatile than securities of comparable
U.S. companies. In addition, in certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments which could affect U.S. investments in
those countries.
Risk Factors Applicable to Repurchase Agreements. The use of repurchase
agreements involves certain risks. For example, if the seller of the agreement
defaults on its obligation to repurchase the underlying securities at a time
when the value of these securities has declined, the Funds may incur a loss
upon disposition of them. If the seller of the agreement becomes insolvent and
subject to liquidation or reorganization under the Bankruptcy Code or other
laws, disposition of the underlying securities may be delayed pending court
proceedings. Finally, it is possible that the Funds may not be able to
perfect their interest in the underlying securities. While the Funds'
management acknowledges these risks, it is expected that they can be
controlled through stringent security selection criteria and careful
monitoring procedures.
Risk Factors Applicable to Illiquid and Restricted Securities. Illiquid
securities include repurchase agreements and time deposits with
notice/termination dates of more than seven days, certain variable-amount
master demand notes that cannot be called within seven days, certain insurance
funding agreements (see below), certain unlisted over-the-counter options and
other securities that are traded in the U.S. but are subject to trading
restrictions because they are not registered under the Securities Act of 1933,
as amended (the "1933 Act").
Each Fund may invest up to 15% of its net assets in securities that are
illiquid. If otherwise consistent with their investment objectives and
policies, the Funds may purchase commercial paper issued pursuant to Section
4(2) of the 1933 Act and domestically traded securities that are not
registered under the 1933 Act but can be sold to "qualified institutional
buyers" in accordance with Rule 144A under the 1933 Act ("Rule 144A
Securities"). These securities will not be considered illiquid so long as the
investment advisor determines, under guidelines approved by the Board of
Trustees, that an adequate trading market exists.
Because illiquid and restricted securities may be difficult to sell at an
acceptable price, they may be subject to greater volatility and may result in
a loss to a Fund. The practice of investing in Rule 144A Securities could
increase the level of a Fund's illiquidity during any period that qualified
institutional buyers become uninterested in purchasing these securities.
Risk Factors Applicable to Investment Companies. To the extent consistent
with its investment objective and policies, the UMB Scout Equity Index Fund
may invest in securities issued by other investment companies, particularly
S&P's Depository Receipts ("SPDRs") and similar securities of other issuers.
Investments by a Fund in other investment companies will be subject to the
limitations of the 1940 Act.
As a shareholder of another investment company, the Fund would be subject to
the same risks as any other investor in that company. In addition, it would
bear a proportionate share of any fees and expenses paid by that company.
These would be in addition to the advisory and other fees paid directly by the
Fund.
Risk Factors Applicable to Securities Lending. In order to generate
additional income, the Funds may lend securities on a short-term basis to
banks, broker-dealers or other qualified institutions. In exchange, the Funds
will receive collateral equal to at least 100% of the value of the securities
loaned. Securities lending may represent no more than one-third the value of
a Fund's total assets (including the loan collateral). Any cash collateral
received by a Fund in connection with these loans may be invested in U.S.
government securities and other liquid high-grade debt obligations.
The main risk when lending portfolio securities is that the borrower might
become insolvent or refuse to honor its obligation to return the securities.
In this event, a Fund could experience delays in recovering its securities and
may incur a capital loss. In addition, a Fund may incur a loss in reinvesting
the cash collateral it receives.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The Funds have adopted the following fundamental investment policies and
restrictions that cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Fund. Under the 1940 Act, a "majority
of the outstanding voting securities" of a Fund means the vote of: (i) more
than 50% of the outstanding voting securities of the Fund; or (ii) 67% or more
of the voting securities of the Fund present at a meeting, if the holders of
more than 50% of the outstanding voting securities are present or represented
by proxy, whichever is less. With respect to the policies concerning
concentration, borrowing money and senior securities, legal or regulatory
limitations are explained in the investment restrictions. Such explanations
are not part of the fundamental investment restriction and may be modified
without shareholder approval to reflect changes in the legal and regulatory
requirements.
Each Fund is classified as diversified as defined under the 1940 Act and the
Funds may not change their classification from diversified to non-diversified
without shareholder approval. Under the 1940 Act, diversified generally means
that each Fund may not, with respect to 75% of its total assets, invest more
than 5% of its total assets in securities of any one issuer (except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and securities issued by investment companies), or purchase
more than 10% of the voting securities of any one issuer.
UMB Scout Equity Index Fund will not make investments that will result in the
concentration (as that term may be defined in the 1940 Act, any rule or order
thereunder, or U.S. Securities and Exchange Commission ("SEC") staff
interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry. UMB Scout Technology Fund will not
make investments that will result in the concentration (as that term may be
defined in the 1940 Act, any rules or orders thereunder, or SEC staff
interpretation thereof) of its total assets in a particular industry, except
that it will invest more than 25% of its total assets in the technology sector
(which includes companies that develop or sell computers, software and
peripheral products). The SEC staff currently takes the position that a
mutual fund concentrates its investments in a particular industry if 25% or
more of its total assets are invested in issuers within the industry. These
restrictions do not limit either Fund from investing in obligations issued or
guaranteed by the U.S. government, or its agencies or instrumentalities. In
applying each Fund's fundamental policy concerning industry concentration, it
is a matter of non-fundamental policy that investments in certain categories
of companies will not be considered to be investments in a particular
industry. In particular, technology companies will be divided according to
their products and services, for example, hardware, software, information
services and outsourcing, or telecommunications will each be a separate
industry. Also, for example: (i) financial service companies will be
classified according to the end users of their services, for example,
automobile finance, bank finance and diversified finance will each be
considered a separate industry; (ii) asset-backed securities will be
classified according to the underlying assets securing such securities; and
(iii) utility companies will be divided according to their services, for
example, gas, gas transmission, electric and telephone will each be considered
a separate industry.
UMB Scout Equity Index Fund and UMB Scout Technology Fund will not: (1) borrow
money or issue senior securities, except as the 1940 Act, any rule thereunder,
or SEC staff interpretation thereof, may permit. The following sentence is
intended to describe the current regulatory limits relating to senior
securities and borrowing activities that apply to mutual funds and the
information in the sentence may be changed without shareholder approval to
reflect legal or regulatory changes. A fund may borrow up to 5% of its total
assets for temporary purposes and may also borrow from banks, provided that if
borrowings exceed 5%, the fund must have assets totaling at least 300% of the
borrowing when the amount of the borrowing is added to the fund's other
assets. The effect of this provision is to allow a fund to borrow from banks
amounts up to one-third (33 1/3%) of its total assets (including those assets
represented by the borrowing); (2) underwrite the securities of other issuers,
except that the Fund may engage in transactions involving the acquisition,
disposition or resale of its portfolio securities, under circumstances where
it may be considered to be an underwriter under the Securities Act of 1933;
(3) may not purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this
restriction does not prevent the Fund from investing in issuers which invest,
deal or otherwise engage in transactions in real estate or interests therein,
or investing in securities that are secured by real estate or interests
therein; (4) purchase or sell physical commodities, unless acquired as a
result of ownership of securities or other instruments and provided that this
restriction does not prevent the Fund from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities; (5) make loans, provided that this
restriction does not prevent the Fund from purchasing debt obligations,
entering into repurchase agreements, and loaning its assets to broker/dealers
or institutional investors.
Non-Fundamental Investment Policies
In addition to the fundamental policies and investment restrictions described
above, and the various general investment policies described in the
Prospectus, the UMB Scout Equity Index Fund and the UMB Scout Technology Fund
will be subject to the following non-fundamental investment restrictions,
which may be changed by the Board of Trustees without shareholder approval.
(1) each Fund is permitted to invest in other investment companies, including
open-end, closed-end or unregistered investment companies, either within the
percentage limits set forth in the 1940 Act, any rule or order thereunder, or
SEC staff interpretation thereof, or without regard to percentage limits in
connection with a merger, reorganization, consolidation or other similar
transaction. However, neither Fund may operate as a fund of funds which
invests primarily in the shares of other investment companies as permitted by
Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a fund of funds. Under current legal and regulatory
requirements, each Fund may invest up to 5% of its total assets in the
securities of any one investment company, but may not own more than 3% of any
investment company or invest more than 10% of its total assets in the
securities of other investment companies; (2) with respect to the UMB Scout
Technology Fund, it may invest in American Depository Receipts (ADRs), which
represent foreign securities and are traded on U.S. Exchanges or in the over-
the-counter market. However, the Fund reserves the right to invest directly
in foreign securities or to purchase European Deposit Receipts (EDRs) and
International Depository Receipts (IDRs), in bearer form, which are designed
for use in European and other securities markets; (3) each Fund may not invest
more than 15% of its net assets in securities which they can not sell or
dispose of in the ordinary course of business within seven days at
approximately the value at which the Fund has valued the investment; and (4)
each Fund will not borrow for the purpose of leveraging its investments. In
this regard, neither Fund will purchase portfolio securities when borrowings
exceed 5% of their respective total assets.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the UMB Scout Technology Fund are
made by UMB Bank, n.a. Decisions to buy and sell securities for the UMB Scout
Equity Index Fund are made by Northern Trust Quantitative Advisors, Inc.
Officers of the Funds and Jones & Babson, Inc. are generally responsible for
implementing or supervising these decisions, including allocation of portfolio
brokerage and principal business and the negotiation of commissions and/or the
price of the securities.
The Funds, in purchasing and selling portfolio securities, will seek the best
available combination of execution and overall price (which shall include the
cost of the transaction) consistent with the circumstances which exist at the
time. The Funds do not intend to solicit competitive bids on each
transaction.
The Funds believe it is in their best interest, and that of their
shareholders, to have a stable and continuous relationship with a diverse
group of financially strong and technically qualified broker-dealers who will
provide quality executions at competitive rates. Broker-dealers meeting these
qualifications also will be selected for their demonstrated loyalty to the
Funds, when acting on their behalf, as well as for any research or other
services provided to the Funds. The Funds normally will not pay a higher
commission rate to broker-dealers providing benefits or services to them than
they would pay to broker-dealers who do not provide such benefits or services.
However, the Funds reserve the right to do so within the principles set out in
Section 28(e) of the Securities Exchange Act of 1934 when it appears that this
would be in the best interests of the shareholders.
No commitment is made to any broker or dealer with regard to placing of orders
for the purchase or sale of Fund portfolio securities, and no specific formula
is used in placing such business. Allocation is reviewed regularly by both
the Boards of Trustees of the Funds and by UMB Bank, n.a.
Since the Funds do not currently market their shares through intermediary
brokers or dealers, it is not their practice to allocate brokerage or
principal business on the basis of sales of their shares which may be made
through such firms. However, they may place portfolio orders with qualified
broker-dealers who recommend a Fund to other clients, or who act as agent in
the purchase of Fund shares for their clients.
Research services furnished by broker-dealers may be useful to a Fund's
investment advisor or sub-advisor in serving other clients, as well as a Fund.
Conversely, a Fund may benefit from research services obtained by a Fund's
investment advisor or sub-advisor from the placement of portfolio brokerage of
other clients.
When the investment advisor or sub-advisor in its fiduciary duty believes it
to be in the best interests of its shareholders, a Fund may join with other
clients of the investment advisor or sub-advisor in acquiring or disposing of
a portfolio holding. Securities acquired or proceeds obtained will be
equitably distributed between the Fund and other clients participating in the
transaction. In some instances, this investment procedure may affect the
price paid or received by the Fund or the size of the position obtained by the
Fund.
>
>
PERFORMANCE MEASURES
From time to time, each of the Funds may advertise its performance in various
ways, as summarized below.
Total Return
The UMB Scout Equity Index Fund and the UMB Scout Technology Fund may
advertise "average annual total return" over various periods of time. Such
total return figures show the average percentage change in value of an
investment in a Fund from the beginning date of the measuring period to the
end of the measuring period. These figures reflect changes in the price of
the Fund's shares and assume that any income dividends and/or capital gains
distributions made by the Funds during the period were reinvested in shares of
the Fund. Figures will be given for recent one-, five- and ten-year periods
(if applicable), and may be given for other periods as well (such as from
commencement of a Fund's operations, or on a year-by-year basis).
The Funds' "average annual total return" figures described and shown below are
computed according to a formula prescribed by the Securities and Exchange
Commission. The formula can be expressed as follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1000
payment made at the beginning of the 1, 5 or 10
years (or other) periods at the end of the 1, 5 or
10 years (or other) periods (or fractional portions
thereof).
Performance Comparisons. In advertisements or in reports to shareholders, the
Funds may compare their performance to that of other mutual funds with similar
investment objectives and to stock or other relevant indices. Performance
information, rankings, ratings, published editorial comments and listings as
reported in national financial publications such as Kiplinger's Personal
Finance Magazine, Business Week, Morningstar Mutual Funds, Investor's Business
Daily, Smart Money, Money Central Investors, Institutional Investor, The Wall
Street Journal, Mutual Fund Forecaster, No-Load Investor, Money, Forbes,
Fortune, Barron's Financial World, U.S. News & World Report, USA Today,
Bloomberg's Personal Finance, Income & Safety, The Mutual Fund Letter, United
Mutual Fund Selector, No-Load Fund Analyst, No-Load Fund X, Louis Rukeyser's
Wall Street newsletter, Donoghue's Money Letter, CDA Investment Technologies,
Inc., Wiesenberger Investment Companies Service, Donoghue's Mutual Fund
Almanac, Bank Rate Monitor and Donoghue's Money Fund Report may also be used
in comparing performance of the Funds. Performance comparisons should not be
considered as representative of the future performance of the Funds.
HOW THE FUNDS' SHARES ARE DISTRIBUTED
Jones & Babson, Inc., as agent of the UMB Scout Funds, agrees to supply its
best efforts as sole distributor of the Funds' shares and, at its own expense,
pay all sales and distribution expenses in connection with their offering
other than registration fees and other government charges. Jones & Babson,
Inc. can be reached by calling 800-996-2862 and is located at BMA Tower, 700
Karnes Blvd., Kansas City, MO 64108-3306.
Jones & Babson, Inc. does not receive any fee or other compensation under its
distribution agreements with the Funds which continue in effect initially for
two years and then automatically for successive annual periods ending each
October 31, if continued at least annually by the Funds' Board of Trustees,
including a majority of those Trustees who are not parties to such Agreements
or interested persons of any such party. They terminate automatically if
assigned by either party or upon 60 days written notice by either party to the
other.
HOW SHARE PURCHASES ARE HANDLED
We will not be responsible for the consequences of delays, including delays in
the banking or Federal Reserve wire systems. We cannot process transaction
requests that are not complete and in good order as described in the
prospectus. If you use the services of any other broker to purchase or redeem
shares of the Funds, that broker may charge you a fee. Each order accepted
will be fully invested in whole and fractional shares, unless the purchase of
a certain number of whole shares is specified, at the net asset value per
share next effective after the order is accepted by the Funds.
Each investment is confirmed by a year-to-date statement which provides the
details of the immediate transaction, plus all prior transactions in your
account during the current year. This includes the dollar amount invested,
the number of shares purchased or redeemed, the price per share, and the
aggregate shares owned. A transcript of all activity in your account during
the previous year will be furnished each January. By retaining each annual
summary and the last year-to-date statement, you have a complete detailed
history of your account which provides necessary tax information. A duplicate
copy of a past annual statement is available from Jones & Babson, Inc. at its
cost, subject to a minimum charge of $5 per account, per year requested.
Each statement and transaction confirmation will request that you inform the
Fund in writing of any questions about the information presented. If you do
not notify the Fund in writing of any questions within the specified time
period, it will indicate that you have approved the information.
The shares you purchase are held by the Funds in an open account, thereby
relieving you of the responsibility of providing for the safekeeping of a
negotiable share certificate. Jones & Babson does not intend to issue new
certificated shares for any accounts.
If an order to purchase shares must be canceled due to non-payment, the
purchaser will be responsible for any loss incurred by the Funds arising out
of such cancellation. To recover any such loss, the Funds reserve the right
to redeem shares owned by any purchaser whose order is canceled, and such
purchaser may be prohibited or restricted in the manner of placing further
orders.
The Funds reserve the right in their sole discretion to withdraw all or any
part of the offering made by the prospectus or to reject purchase orders when,
in the judgment of management, such withdrawal or rejection is in the best
interest of the Funds and its shareholders. The Funds also reserve the right
at any time to waive or increase the minimum requirements applicable to
initial or subsequent investments with respect to any person or class of
persons, which includes shareholders of the Funds' special investment
programs.
The Funds reserve the right to refuse to accept orders for Fund shares unless
accompanied by payment, except when a responsible person has indemnified the
Fund against losses resulting from the failure of investors to make payment.
In the event that the Funds sustains a loss as the result of failure by a
purchaser to make payment, the Funds' underwriter, Jones & Babson, Inc., will
cover the loss.
REDEMPTION OF SHARES
The Funds will transmit redemption proceeds to the proper party, as
instructed, as soon as practicable after a redemption request has been
received in "good order" and accepted, but in no event later than the seventh
day thereafter, or earlier if required by applical law. Transmissions are made
by mail unless an expedited method has been authorized and specified in the
redemption request. The Funds will not be responsible for the consequences
of delays including delays in the banking or Federal Reserve wire systems.
In the case of redemption requests
made within 15 days of the date of purchase, the Funds may delay transmission
of proceeds until such time as it is certain that unconditional payment in
federal funds has been collected for the purchase of shares being redeemed or
15 days from the date of purchase, whichever occurs first.
Due to the high cost of maintaining smaller accounts, the Trustees have
authorized the Funds to close shareholder accounts where their value falls
below the current minimum initial investment requirement at the time of
initial purchase as a result of redemptions and not as the result of market
action, and remains below this level for 60 days after each such shareholder
account is mailed a notice of: (1) the Fund's intention to close the account,
(2) the minimum account size requirement, and (3) the date on which the
account will be closed if the minimum size requirement is not met. Since the
minimum investment amount and the minimum account size are the same, any
redemption from an account containing only the minimum investment amount may
result in redemption of that account.
We will not be responsible for the consequences of delays, including delays in
the banking or Federal Reserve wire systems. We cannot process transaction
requests that are not complete and in good order. We must receive an endorsed
share certificate with a signature guarantee, where a certificate has been
issued.
The right of redemption may be suspended, or the date of payment postponed
beyond the normal three-day period by the Board of Trustees under the
following conditions authorized by the 1940 Act: (1) for any period (a)
during which the New York Stock Exchange is closed, other than customary
weekend and holiday closing, or (b) during which trading on the New York Stock
Exchange is restricted; (2) for any period during which an emergency exists as
a result of which (a) disposal by the Funds of securities owned by it is not
reasonably practicable, or (b) it is not reasonably practicable for the Funds
to determine the fair value of its net assets; or (3) for such other periods
as the Securities and Exchange Commission may by order permit for the
protection of the Funds' shareholders.
UMB Scout Equity Index Fund and UMB Scout Technology Fund have elected to be
governed by Rule 18f-1 under the 1940 Act, pursuant to which these Funds are
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1%
of a Fund's net asset value during any 90-day period for any one shareholder.
Should redemptions by any shareholder exceed such limitation, a Fund may
redeem the excess in kind. If shares are redeemed in kind, the redeeming
shareholder may incur brokerage costs in converting the assets to cash. The
method of valuing securities used to make redemptions in kind will be the same
as the method of valuing portfolio securities described under "How Share Price
is Determined" in the Prospectus, and such valuation will be made as of the
same time the redemption price is determined.
SIGNATURE GUARANTEES
Signature guarantees normally reduce the possibility of forgery and are
required in connection with certain redemptions. Signature guarantees are
required in connection with all redemptions of $50,000 or more by mail, or
changes in share registration, except as hereinafter provided. These
requirements may be waived by the Fund in certain instances where it appears
reasonable to do so and will not unduly affect the interest of other
shareholders. Signature(s) must be guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934. Eligible guarantor institutions include: (1) national or state banks,
savings associations, savings and loan associations, trust companies, savings
banks, industrial loan companies and credit unions; (2) national securities
exchanges, registered securities associations and clearing agencies; or (3)
securities broker/dealers which are members of a national securities exchange
or clearing agency or which have a minimum net capital of $100,000. A
notarized signature will not be sufficient for the request to be in proper
form.
Signature guarantees will be waived for mail redemptions of $50,000 or less,
but they will be required regardless of the size of the redemption if the
checks are to be payable to someone other than the registered owner(s), or are
to be mailed to an address different from the registered address of the
shareholder(s). Signatures guarantees are also required for a change in
account registration or redemption instructions.
Signature guarantees must appear together with the signature(s) of the
registered owner(s) on: (1) a separate instrument of assignment, which should
specify the total number of shares to be redeemed (this "stock power" may be
obtained from the Fund or from most banks or stock brokers); or (2) all stock
certificates tendered for redemption.
ADDITIONAL PURCHASE AND REDEMPTION POLICIES
We reserve the right to:
- - Waive or increase the minimum investment requirements with
respect to any person or class of persons, which include
shareholders of the Funds' special investment programs.
- - Cancel or change the telephone investment service, the
telephone exchange service and the automatic monthly investment
plan without prior notice to you where in the best interest of
the Funds and their investors.
- - Cancel or change the telephone redemption service at any time
without notice.
- - Begin charging a fee for the telephone investment service or
the automatic monthly investment plan and to cancel or change
these services upon 15 days written notice to you.
- - Begin charging a fee for the systematic redemption plan upon 30
days written notice to you.
- - Waive signature guarantee requirements in certain instances
where it appears reasonable to do so and will not unduly affect
the interests of other shareholders. We may waive the
signature guarantee requirement if you authorize the telephone
redemption method at the same time you submit the initial
application to purchase shares.
- - Require signature guarantees if there appears to be a
pattern of redemptions designed to avoid the signature
guarantee requirement, or if we have other reason to believe
that this requirement would be in the best interests of the
Funds and their shareholders.
The Funds does not allow market timers. The Funds may refuse to sell
shares to market timers. You will be considered a market timer if you
have (i) requested a redemption of Fund shares within two weeks of an
earlier purchase request, (ii) make investments of large amounts of $1
million or more followed by a redemption request in close proximity to
the purchase or (iii) otherwise seem to follow a timing pattern. Shares
under common ownership or control are combined for these purposes.
HOLIDAYS
The net asset value per share of each Fund's portfolio is computed once daily,
as described in the prospectus, Monday through Friday, at the specific time
during the day that the Board of Trustees sets at least annually, except on
days on which changes in the value of a Fund's portfolio securities will not
materially affect the net asset value, or days during which no security is
tendered for redemption and no order to purchase or sell such security is
received by the Fund, or the following holidays:
New Year's Day January 1
Martin Luther King, Jr. Day Third Monday in January
Presidents' Holiday Third Monday in February
Good Friday Friday before Easter
Memorial Day Last Monday in May
Independence Day July 4
Labor Day First Monday in September
Thanksgiving Day Fourth Thursday in November
Christmas Day December 25
DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions and Taxes
Distributions of net investment income In general, the Funds receive income
in the form of dividends or interest on their investments. This income, less
expenses incurred in the operation of a Fund, constitutes a Fund's net
investment income from which dividends may be paid to investors. Any
distributions by a Fund from such income will be taxable to investors as
ordinary income, whether the investors take them in cash or in additional
shares.
Distributions of capital gains In general, the Funds may derive capital gains
and losses in connection with sales or other dispositions of their portfolio
securities. Distributions from net short-term capital gains will be
distributed and taxed as ordinary income. Distributions from net long-term
capital gains will be taxable as long-term capital gain, regardless of how
long the Fund shares have been held. Any net capital gains realized by a Fund
generally will be distributed once each year, and may be distributed more
frequently, if necessary, in order to reduce or eliminate excise or income
taxes on the Fund.
Effect of foreign investments on distributions Most foreign exchange gains
realized on the sale of debt securities by the UMB Scout Technology Fund are
treated as ordinary income by the Fund. Similarly, foreign exchange losses
realized by the Fund on the sale of debt securities are generally treated as
ordinary losses by the Fund. These gains when distributed will be taxable as
ordinary dividends, and any losses will reduce the Fund's ordinary income
otherwise available for distribution. This treatment could increase or reduce
the Fund's ordinary income distributions, and may cause some or all of the
Fund's previously distributed income to be classified as a return of capital.
The UMB Scout Technology Fund may be subject to foreign withholding taxes on
income from certain of its foreign securities. This, in turn, could reduce
ordinary income distributions to the shareholders.
Information on the tax character of distributions The Funds will inform you
of the amount of your ordinary income dividends and capital gains
distributions at the time they are paid, and will advise you of their tax
status for federal income tax purposes shortly after the close of each
calendar year. If you have not held Fund shares for a full year, a Fund may
designate and distribute to you, as ordinary income or capital gain, a
percentage of income that is not equal to the actual amount of such income
earned during the period of your investment in the Fund.
Election to be taxed as a regulated investment company Each Fund has elected
to be treated as a regulated investment company under Subchapter M of the
Internal Revenue Code and intends to so qualify during the current fiscal
year. As regulated investment companies, the Funds generally pay no federal
income tax on the income and gains they distribute to you. The Board of
Trustees reserves the right not to maintain the qualification of a Fund as a
regulated investment company if it determines such course of action to be
beneficial to shareholders. In such case, the Fund will be subject to
federal, and possibly state, corporate taxes on its taxable income and gains,
and distributions to you will be taxed as ordinary dividend income to the
extent of such Fund's earnings and profits.
Excise tax distribution requirements To avoid federal excise taxes, the
Internal Revenue Code requires each Fund to distribute to you by December 31
of each year, at a minimum, the following amounts: 98% of its taxable ordinary
income earned during the calendar year; 98% of its capital gain net income
earned during the twelve month period ending October 31; and 100% of any
undistributed amounts from the prior year. Each Fund intends to declare and
pay these amounts in December (or in January that are treated by you as
received in December) to avoid these excise taxes, but can give no assurances
that its distributions will be sufficient to eliminate all taxes.
Redemption of fund shares Redemptions (including redemptions in-kind) and
exchanges of Fund shares are taxable transactions for federal and state income
tax purposes. If you redeem your Fund shares, or exchange your Fund shares
for shares of a different UMB Scout Fund, the IRS will require that you report
any gain or loss on your redemption or exchange. If you hold your shares as a
capital asset, any gain or loss that you realize will be capital gain or loss
and will be long-term or short-term, generally depending on how long you hold
your shares.
Beginning after the year 2005 (2000 for certain shareholders), gain in a sale
or redemption of Fund shares held for more than five years may be subject to a
reduced rate of tax. Any loss incurred on the redemption or exchange of
shares held for six months or less will be treated as a long-term capital loss
to the extent of any long-term capital gains distributed to you by the Fund on
those shares. All or a portion of any loss that you realize upon the
redemption of your fund shares will be disallowed to the extent that you buy
other shares in such fund (through reinvestment of dividends or otherwise)
within 30 days before or after your share redemption. Any loss disallowed
under these rules will be added to your tax basis in the new shares you buy.
Dividends-received deduction for corporations If you are a corporate
shareholder, you should note that only a small percentage of the dividends
paid by the Funds for this fiscal year are expected to qualify for the
dividends-received deduction. In some circumstances, you may be allowed to
deduct these qualified dividends, thereby reducing the tax that you would
otherwise be required to pay on these dividends. The dividends-received
deduction will be available only with respect to dividends designated by such
Fund as eligible for such treatment. All dividends (including the deducted
portion) must be included in your alternative minimum taxable income
calculation.
Investment in complex securities The funds may invest in complex securities.
These investments may be subject to numerous special and complex tax rules.
These rules could affect whether gains and losses recognized by a fund are
treated as ordinary income or capital gain, accelerate the recognition of
income to a fund and/or defer a fund's ability to recognize losses, and, in
limited cases, subject a fund to U.S. federal income tax on income from
certain of its foreign securities. In turn, these rules may affect the
amount, timing or character of the income distributed to you by a fund.
MANAGEMENT AND INVESTMENT ADVISOR
Pursuant to Management Agreements, each Fund employs, at its own expense, UMB
Bank, n.a. as its manager and investment advisor. As manager and investment
advisor, UMB Bank, n.a. makes available professional portfolio managers who
make all decisions concerning the investment and reinvestment of the assets of
the Funds in accordance with the Funds' stated investment objective and
policies. As investment advisor, UMB Bank, n.a. either provides or pays the
cost of all management, supervisory and administrative services required in
the normal operations of the Funds.
The annual fee charged by UMB Bank, n.a. covers all normal operating costs of
the Funds. The annual fee is equal to the following percentage of each Fund's
average net assets:
Average Net Assets
UMB Scout Equity Index Fund
.40%*
UMB Scout Technology Fund
1.50%*
* UMB Bank, n.a. intends to contractually waive fees for the fiscal year
ending June 30, 2001 so that total annual fund expenses of the Equity
Index Fund do not exceed 0.30% and the annual fund expenses of the
Technology Fund do not exceed 1.10%.
INVESTMENT SUB-ADVISOR
As a part of the Management Agreement, UMB Bank, n.a., employs at its own
expense Northern Trust Quantitative Advisors, Inc., ("Northern Trust"), an
Illinois state-chartered trust company, to provide the day-to-day investment
advisory services for the UMB Scout Equity Index Fund. UMB Bank, n.a. has
agreed to pay Northern Trust a fee of 8/100 of one percent (0.08%) of the
average daily net assets, for their services. Northern Trust agrees to
provide UMB Scout Equity Index Fund investment management services on a daily
basis.
OFFICERS AND TRUSTEES
The officers of the Funds manage their day-to-day operations. The Funds'
officers, as well as the Funds' investment advisor and manager are subject to
the direct supervision and control of the Board of Trustees. Under the
Delaware Business Trust Act, all of the Trustees owe a fiduciary duty to the
shareholders of the Funds.
The following is a list of the senior officers and Trustees of the Funds and
their ages and business experience for the past five years. Unless noted
otherwise, the address of each officer and Trustee is BMA Tower, 700 Karnes
Blvd., Kansas City, Missouri 64108-3306. An asterisk (*) by a Trustee's name
denotes a Trustee who is an interested person as that term is defined in the
1940 Act.
*Stephen Soden (55), President and Trustee. President and Director or Trustee,
as the case may be, Jones & Babson, Inc. and each of the Babson Funds, UMB
Scout Funds, Buffalo Funds and the Investors Mark Series Fund, Inc.; President
and Trustee, D.L. Babson Bond Trust; Director, AFBA Five Star Fund, Inc.
William E. Hoffman, D.D.S. (62), Trustee. Director or Trustee, as the case
may be, of each of the investment companies within the UMB Scout Funds group;
Orthodontist, 3700 West 83rd Street, Suite 206, Prairie Village, Kansas 66208.
Eric T. Jager (57), Trustee. Director or Trustee, as the case may be, of each
of the investment companies within the UMB Scout Funds group; President,
Windcrest Investment Management, Inc.; Director, Bartlett Futures, Inc.,
Nygaard Corporation, 4800 Main Street, Suite 600, Kansas City, Missouri 64112.
Stephen F. Rose (52), Trustee. Director or Trustee, as the case may be, of
each of the investment companies within the UMB Scout Funds group; President,
Sun Publications, Inc., 7373 W. 107th Street, Overland Park, Kansas 66212.
Stuart Wien (76), Trustee. Director or Trustee, as the case may be, of each
of the investment companies within the UMB Scout Funds group; Retired, 4589
West 124th Place, Leawood, Kansas 66209, formerly Chairman of the Board,
Milgram Food Stores, Inc.
P. Bradley Adams (39), Vice President and Treasurer. Vice President and
Treasurer, Jones & Babson, Inc. and each of the Babson Funds, UMB Scout Funds
and Buffalo Funds; Vice President and Chief Financial Officer, AFBA Five Star
Fund, Inc.; Principal Financial Officer, Investors Mark Series Fund, Inc.
W. Guy Cooke (38), Vice President. Chief Compliance Officer, Jones & Babson,
Inc.; Vice President and Chief Compliance Officer of each of the Babson Funds,
UMB Scout Funds, Buffalo Funds and AFBA Five Star Fund, Inc. Cooke joined
Jones & Babson in March 1998 and previously was Director of Compliance at
American Century Companies.
Martin A. Cramer (49), Vice President and Secretary. Vice President and
Secretary, Jones & Babson, Inc. and each of the Babson Funds, UMB Scout Funds
and Buffalo Funds; Secretary and Assistant Vice President, AFBA Five Star
Fund, Inc.; Secretary, Investors Mark Series Fund, Inc.
Constance E. Martin (38), Vice President. Shareholder Operations Vice
President and Director, Jones & Babson, Inc.; Vice President of each of the
Babson Funds, UMB Scout Funds, Buffalo Funds and AFBA Five Star Fund, Inc.
Compensation of Officers and Trustees. None of the officers or Trustees will
be compensated by the Funds for their normal duties and services. Their
compensation and expenses arising out of normal operations will be paid by UMB
Bank, n.a. under the provisions of the Management Agreement. As an "interested
person," Mr. Soden receives no compensation for his service as a Trustee.
Messrs. Hoffman, Jager, Rose and Wien have no financial interest in, nor are
they affiliated with, either UMB Bank, n.a. or Jones & Babson, Inc. The Audit
Committee of the Board of Trustees is composed of Messrs. Hoffman, Jager, Rose
and Wien.
The officers and Trustees as a group own less than 1% of the Funds.
Compensation Table
Name of Aggregate Pension Estimated Total
Trustee Compensation or Annual Compensation
From the Retirement Benefits From All UMB
Funds** Benefits Upon Scout Funds
Accrued As Retirement Paid to
Part of Fund Trustees**
Expenses
Stephen S.
Soden* -- -- -- --
William E.
Hoffman $6,375 -- -- $6,375
Eric T. Jager $7,500 -- -- $7,500
Stephen F.
Rose $7,500 -- -- $7,500
Stuart Wien $7,500 -- -- $7,500
* As an "interested person," Mr. Soden received no compensation for his
services as a Trustee.
** The amounts reported in this column reflect the amounts expected to be
paid for services as a Trustee of the Funds during the current fiscal
year. Such amounts are paid by the Funds' manager and not by the Funds
themselves.
*** The amounts reported in this column reflect the total compensation paid
to each Trustee for his services as a director of each of the other
twelve UMB Scout Funds during the fiscal year ended June 30, 1999.
Directors' fees are paid by the manager and not by the UMB Scout Funds
themselves.
UNDERWRITER AND DISTRIBUTOR
Jones and Babson, Inc., BMA Tower, 700 Karnes Boulevard, Kansas City, Missouri
64108-3306, serves as the principal underwriter and distributor of the Funds'
shares. The shares are continuously offered by Jones & Babson, who has
agreed, as agent of the Funds, to use its best efforts to distribute shares of
the Funds. Jones and Babson pays all sales and distribution expenses, other
than registration fees and other governmental charges.
Jones and Babson does not receive compensation or reimbursement for its
distribution and underwriting activities from the Funds. Instead, it is
compensated by UMB Bank, n.a. for other services provided to the company and
Fund. As indicated in the "Trustees and Officers" section of this Statement
of Additional Information, the following officers of Jones and Babson are
Trustees or officers of the Funds: Stephen S. Soden, P. Bradley Adams, Martin
A. Cramer and Constance E. Martin.
TRANSFER AGENT
As manager, UMB Bank, n.a. employs Jones and Babson, Inc., at its own expense,
to provide services to the Funds, including the maintenance of a shareholder
accounting and transfer agency system, and such other items as are incidental
to corporate administration. Jones and Babson, Inc. is located at BMA Tower,
700 Karnes Boulevard, Kansas City, Missouri 64108-3306.
CUSTODIAN
The Funds' assets are held for safekeeping by an independent custodian, UMB
Bank, n.a. This means the bank, rather than the Funds, has possession of the
Funds' cash and securities. As directed by the Funds' officers and portfolio
managers, the bank delivers cash to those who have sold securities to the
Funds in return for such securities, and to those who have purchased portfolio
securities from the Funds. It delivers such securities in return for their
cash purchase price. It also collects income directly from issuers of
securities owned by the Funds and holds this for payment to shareholders after
deduction of the Funds' expenses. UMB Bank, n.a. also serves as investment
advisor and manager, and receives compensation for all of its services through
receipt of management fees. UMB Bank, n.a. is located at 1010 Grand
Boulevard, Kansas City, Missouri, 64141.
INDEPENDENT AUDITORS
The Funds' financial statements are audited annually by independent auditors
approved by the Trustees each year, and in years in which an annual meeting is
held the Trustees may submit their selection of independent auditors to the
shareholders for ratification. Baird, Kurtz & Dobson, City Center Square,
Suite 2700, 1100 Main Street, Kansas City, Missouri 64105, is the Funds'
present independent auditor.
GENERAL INFORMATION AND HISTORY
UMB Scout Funds (the "Trust") which consists of two separate series -- the UMB
Scout Equity Index Fund series and the UMB Scout Technology Fund series - was
organized as a business trust in Delaware on January 27, 2000.
Each series represents interests in a separate portfolio of investments and is
subject to separate liabilities. Shares of each series are entitled to vote
as a series only to the extent required by the 1940 Act or as permitted by the
Trustees. The beneficial interest of each series is divided into an unlimited
number of shares, with no par value. Each share has equal dividend, voting,
liquidation and redemption rights. There are no conversion or preemptive
rights. Shares, when issued, will be fully paid and nonassessable.
Fractional shares have proportional voting rights. Shares will be maintained
in open accounts on the books of the transfer agent, and certificates for
shares will generally not be issued. The Trust does not intend to hold
regular annual shareholder meetings. Upon the Trust's liquidation, all
shareholders of a series would share pro-rata in the net assets of such series
available for distribution to shareholders of the series, but, as shareholders
of such series, would not be entitled to share in the distribution of assets
belonging to any other series.
If they deem it advisable and in the best interests of shareholders, the
Trustees may create additional series of shares and may create multiple
classes of shares of each series, which may differ from each other as to
expenses and dividends.
Each of the Funds has agreed that it may use the words "UMB" and "Scout" in
its name, and may use the Scout design, so long as UMB Bank, n.a. is continued
as its manager.
Non-Cumulative Voting. All of the Trust's shares have non-cumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of Trustees can elect 100% of the Trustees, if they choose to do
so, and in such event, the holders of the remaining less than 50% of the
shares voting will not be able to elect any Trustees.
Control Persons and Principal Holders of Shares. As of April 28, 2000, which
was prior to the public offering of the Funds' shares, UMB Bank, n.a. was the
holder of 100% of each Fund's shares and there were no other control persons
or principal holders of shares of either Fund. Control persons are persons
deemed to control a Fund because they own beneficially over 25% of the
outstanding equity securities. Principal holders are persons that own
beneficially 5% or more of a Fund's outstanding equity securities.
Code of Ethics. Each Fund, its investment advisor, sub-advisor (if
applicable) and principal underwriter have each adopted a code of ethics, as
required by federal securities laws. Under each code of ethics, persons who
are designated as access persons may engage in personal securities
transactions, including transactions involving securities that may be
purchased or sold by either Fund, subject to certain general restrictions and
procedures. Each code of ethics contains provisions designed to substantially
comply with the recommendations contained in the Investment Company
Institute's 1994 Report of the Advisory Group on Personal Investing. The
codes of ethics are on file with the Securities and Exchange Commission.
22
<PAGE>
UMB SCOUT FUNDS
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Agreement and Declaration of Trust.
(1) Registrant's Agreement and Declaration of Trust dated
01/26/2000 is herein incorporated by reference to
Exhibit No. EX-99.a.1 of Item 23 of Registrant's
Initial Registration Statement on Form N-1A as filed
with the Securities and Exchange Commission (the "SEC")
on February 9, 2000.
(2) Registrant's Certificate of Trust dated 01/26/2000 is
herein incorporated by reference to Exhibit No. EX-
99.a.2 of Item 23 of Registrant's Initial Registration
Statement on Form N-1A as filed with the SEC on
February 9, 2000.
(b) By-Laws.
Registrant's By-Laws are herein incorporated by reference to
Exhibit No. EX-99.b to Item 23 of Registrant's Initial
Registration Statement on Form N-1A as filed with the SEC on
February 9, 2000.
(c) Instrument Defining Rights of Security Holders.
Not Applicable.
(d) Investment Advisory Contracts.
(1) Form of Management Agreement between UMB Bank, n.a. and
Registrant on behalf of the UMB Scout Technology Fund
is herein incorporated by reference to Exhibit No. EX-
99.d.1 to Item 23 of Registrant's Initial Registration
Statement on Form N-1A as filed with the SEC on
February 9, 2000.
(2) Form of Management Agreement between UMB Bank, n.a. and
Registrant on behalf of the UMB Scout Equity Income
Fund is herein incorporated by reference to Exhibit No.
EX 99.d.2 to Item 23 of Registrant's Initial
Registration Statement on Form N-1A as filed with the
SEC on February 9, 2000.
(3) Form of Sub-Advisory Agreement between UMB Bank, n.a.
and Northern Trust Quantitative Advisors, Inc. for the
UMB Scout Equity Index Fund is herein incorporated by
reference to Exhibit No. EX-99.d.3 to Item 23 of
Registrant's Initial Registration Statement on Form N-
1A as filed with the SEC on February 9, 2000.
(e) Underwriting Contracts.
Form of Underwriting Agreement between Jones & Babson, Inc.
and Registrant is herein incorporated by reference to
Exhibit No. EX-99.e to Item 23 of Registrant's Initial
Registration Statement on Form N-1A as filed with the SEC on
February 9, 2000.
(f) Bonus or Profit Sharing Contracts.
Not Applicable.
(g) Custodian Agreement.
Form of Custodian Servicing Agreement between the Registrant
and UMB Bank, n.a. is herein incorporated by reference to
Exhibit No. EX-99.g to Item 23 of Registrant's Initial
Registration Statement on Form N-1A as filed with the SEC on
February 9, 2000.
(h) Other Material Contracts.
Form of Transfer Agency Agreement between, UMB Bank, n.a.
and Jones & Babson, Inc. is herein incorporated by reference
to Exhibit No. EX-99.h to Item 23 of Registrant's Initial
Registration Statement on Form N-1A as filed with the SEC on
February 9, 2000.
(i) Legal Opinion.
Opinion and Consent of Counsel as to the legality of the
securities issued by the Registrant is filed herewith as
Exhibit No. EX-99.i.
(j) Other Opinions.
Power of Attorney is herein incorporated by reference to
Exhibit No. EX-99.j to Item 23 of Registrant's Initial
Registration Statement on Form N-1A as filed with the SEC on
February 9, 2000.
Consent of Auditors is filed herewith as Exhibit No. EX-
99.j.2.
(k) Omitted Financial Statements.
Not Applicable.
(l) Initial Capital Agreements.
Not Applicable.
(m) Rule 12b-1 Plan.
Not Applicable.
(n) Rule 18f-3 Plan.
Not Applicable.
(p) Code of Ethics
(1) The Code of Ethics of the Investment Adviser, UMB Bank,
n.a., is filed herewith as Exhibit No. EX-99.p.1.
(2) The Code of Ethics of the underwriter, Jones & Babson,
Inc. for each Fund is filed herewith as Exhibit No. EX-
99.p.2.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Under the terms of the Delaware Business Trust Act (the "Delaware
Act") and the Registrant's Agreement and Declaration of Trust and
By-Laws, no officer or trustee of the Registrant shall have any
liability to the Registrant or its shareholders for damages,
except to the extent such limitation of liability is precluded by
the Delaware Act, the Agreement and Declaration of Trust, or the
By-Laws.
Subject to the standards and restrictions set forth in the
Registrant's Agreement and Declaration of Trust, Section 3817 of
the Delaware Act permits a business trust to indemnify any
trustee, beneficial owner, or other person from and against any
claims and demands whatsoever. Section 3803 of the Delaware Act
protects a trustee, when acting in such capacity, from liability
to any person other than the business trust or beneficial owner
for any act, omission, or obligation of the business trust or any
trustee thereof, except as otherwise provided in the Agreement
and Declaration of Trust.
The Agreement and Declaration of Trust provides that the officers
and trustees shall not be liable for any act or omission of any
agent or employee of the Registrant, any investment adviser or
principal underwriter of the Registrant, or with respect to each
trustee or officer, the act or omission of any other trustee or
officer. Subject to the provisions of the By-Laws, the
Registrant, out of its assets, shall indemnify and hold harmless
each and every officer and trustee from and against any and all
claims and demands whatsoever arising out of or related to such
officer's or trustee's performance of his or her duties as an
officer or trustee of the Registrant. This limitation on
liability applies to events occurring at the time a person serves
as a trustee or officer of the Registrant whether or not such
person is a trustee or officer at the time of any proceeding in
which liability is asserted. Nothing herein contained shall
indemnify, hold harmless or protect any officer or trustee from
or against any liability to the Registrant or any shareholder to
which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such person's office.
The By-Laws provide that in actions by others than the
Registrant, the Registrant shall indemnify any person who was or
is a party or is threatened to be made a party to any proceeding
(other than an action by or in the right of the Registrant) by
reason of the fact that such person is or was an agent of the
Registrant, against expenses, judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with
such proceeding if such person acted in good faith and in a
manner that such person reasonably believed to be in the best
interests of the Registrant and in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of
such person was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction or plea of nolo
contendere or its equivalent shall not of itself create a
presumption that the person did not act in good faith or in a
manner which the person reasonably believed to be in the best
interests of the Registrant or that the person had reasonable
cause to believe that the person's conduct was unlawful. The By-
laws provide that in actions by the Registrant, the Registrant
shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action
by or in the right of the Registrant to procure a judgment in its
favor by reason of the fact that the person is or was an agent of
the Registrant, against expenses actually and reasonably incurred
by that person in connection with the defense or settlement of
that action if that person acted in good faith, in a manner that
person believed to be in the best interests of the Registrant and
with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar
circumstances.
Notwithstanding any provision to the contrary contained in the By-
laws, there shall be no right to indemnification for any
liability arising by reason of willful misfeasance, bad faith,
gross negligence, or the reckless disregard of the duties
involved in the conduct of the agent's office with the
Registrant.
No indemnification shall be made under the provisions of the By-
laws:
(a) In respect of any claim, issue or matter as to which
that person shall have been adjudged to be liable in the
performance of that person's duty to the Trust, unless and only
to the extent that the court in which that action was brought
shall determine upon application that in view of all the
circumstances of the case, that person was not liable by reason
of the disabling conduct set forth in the preceding paragraph and
is fairly and reasonably entitled to indemnity for the expenses
which the court shall determine; or
(b) In respect of any claim, issue, or matter as to which
that person shall have been adjudged to be liable on the basis
that personal benefit was improperly received by him, whether or
not the benefit resulted from an action taken in the person's
official capacity; or
(c) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval, or
of expenses incurred in defending a threatened or pending action
which is settled or otherwise disposed of without court approval,
unless the required approval set forth in Section 6 of Article VI
of the By-laws is obtained.
To the extent that an agent of the Registrant has been successful
on the merits in defense of any proceeding referred to in the
above paragraphs or in defense of any claim, issue or matter
therein, before the court or other body before whom the
proceeding was brought, the agent shall be indemnified against
expenses actually and reasonably incurred by the agent in
connection therewith, provided that the Board of Trustees,
including a majority who are disinterested, non-party trustees,
also determines that based upon a review of the facts, the agent
was not liable by reason of the disabling conduct referred to
above and as set forth in the By-laws.
Except as provided in the above paragraph concerning a successful
defense, any indemnification under the provisions of the By-laws
shall be made by the Registrant only if authorized in the
specific case on a determination that indemnification of the
agent is proper in the circumstances because the agent has met
the applicable standard of conduct set forth in the By-laws and
is not prohibited from indemnification because of the disabling
conduct referred to above and as set forth in the By-laws :
(a) A majority vote of a quorum consisting of trustees who
are not parties to the proceeding and are not "interested
persons" of the Trust (as defined in the 1940 Act); or
(b) A written opinion by an independent legal counsel.
To the fullest extent permitted by applicable law, the officers
and trustees shall be entitled and have the authority to purchase
with the assets of the Registrant, insurance for liability and
for all expenses reasonably incurred or paid or expected to be
paid by a trustee or officer in connection with any claim,
action, suit or proceeding in which such person becomes involved
by virtue of such person's capacity or former capacity with the
Registrant, whether or not the Registrant would have the power to
indemnify such person against such liability under the provisions
of Article VII of its Agreement and Declaration of Trust.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT
ADVISER.
The principal business of UMB Bank, n.a. is the provision of
banking and investment management services to individuals and
businesses.
ITEM 27. PRINCIPAL UNDERWRITER.
(a) Jones & Babson, Inc., the only principal underwriter of
the Registrant, also acts as principal underwriter for the
following:
UMB Scout Stock Fund, Inc.
UMB Scout Worldwide Fund, Inc.
UMB Scout Regional Fund, Inc.
UMB Scout Balanced Fund, Inc.
UMB Scout Bond Fund, Inc.
UMB Scout Capital Preservation Fund, Inc.
UMB Scout Kansas Tax-Exempt Bond Fund, Inc.
UMB Scout Money Market Fund, Inc.
UMB Scout Tax-Free Money Market Fund, Inc.
David L. Babson Growth Fund, Inc.
Babson Enterprise Fund, Inc.
Babson Enterprise Fund II, Inc.
D.L. Babson Money Market Fund, Inc.
D.L. Babson Tax-Free Income Fund, Inc.
D.L. Babson Bond Trust
Babson Value Fund, Inc.
Shadow Stock Fund, Inc.
Babson-Stewart Ivory International Fund, Inc.
Buffalo Balanced Fund, Inc.
Buffalo Equity Fund, Inc.
Buffalo USA Global Fund, Inc.
Buffalo High Yield Fund, Inc.
Buffalo Small Cap Fund, Inc.
AFBA Five Star Fund, Inc.
Investors Mark Series Fund, Inc.
(b) Herewith is the information required by the following
table with respect to each director, officer or partner of the
only underwriter named in answer to Item 20 of Part B:
Name and Principal Position and Offices Positions and
Business Address with Underwriter Offices
with Registrant
Stephen S. Soden President and President and
700 Karnes Blvd. Director Trustee
Kansas City, MO
64108-3306
Giorgio Balzer Director None
700 Karnes Blvd.
Kansas City, MO
64108-3306
Robert T. Rakich Director None
700 Karnes Blvd.
Kansas City, MO
64108-3306
Edward S. Ritter Director None
700 Karnes Blvd.
Kansas City, MO
64108-3306
Robert N. Sawyer Director None
700 Karnes Blvd.
Kansas City, MO
64108-3306
Vernon W. Voorhees Director None
700 Karnes Blvd.
Kansas City, MO
64108-3306
P. Bradley Adams Vice President and Vice President and
700 Karnes Blvd. Treasurer Treasurer
Kansas City, MO
64108-3306
Martin A. Cramer Vice President and Vice President and
700 Karnes Blvd. Secretary Secretary
Kansas City, MO
64108-3306
(c) The principal underwriter does not receive any
remuneration or compensation for the duties or services rendered
to the Registrant pursuant to the principal Transfer Agency
Agreement.
ITEM 28. LOCATION OF ACOUNTS AND RECORDS.
Each account, book or other document required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended
and Rules (17 CFR 270-31a-1 to 31a-3) promulgated thereunder, is
in the physical possession of Jones and Babson, Inc., at BMA
Tower, 700 Karnes Blvd., Kansas City, Missouri 64108-3306, or UMB
Bank, n.a., 1010 Grand Blvd., Kansas City, Missouri 64141.
ITEM 29. MANAGEMENT SERVICES.
There are no management related service contracts not discussed
in Part A or Part B.
ITEM 30. UNDERTAKINGS.
Not applicable.
EXHIBIT INDEX
Exhibit Exhibit No.
Legal Opinion EX-99.i
Auditors Consent EX-99.j.2
Code of Ethics EX-99.p.1
Code of Ethics EX-99.p.2
307283
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933 and the Investment Company Act of 1940, each as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, duly authorized, in the City of Kansas City,
and State of Missouri, on the 20th day of April, 2000.
UMB SCOUT FUNDS
By /s/ Stephen S. Soden
Stephen S. Soden, President, Principal Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title
Date
/s/ Stephen S. Soden President, Principal Executive April 20, 2000
Stephen S. Soden Officer and Director
/s/ Eric T. Jager Director April 20, 2000
Eric T. Jager*
/s/ William E. Hoffman Director April 20, 2000
William E. Hoffman*
/s/ Stephen F. Rose Director April 20, 2000
Stephen F. Rose*
/s/ Stewart Wien* Director April 20, 2000
Stewart Wien*
/s/ P. Bradley Adams Vice President and Principal April 20, 2000
P. Bradley Adams Financial and Accounting Officer
*Signed pursuant to Power of Attorney
By: /s/ Stephen S. Soden
Stephen S. Soden, Attorney-in-Fact
Doc. #309034
Law Office
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8024
April 20, 2000
UMB Scout Funds
700 Karnes Blvd.
Kansas City, MO 64108
Re: Legal Opinion-Securities Act of 1933
Ladies and Gentlemen:
We have examined the Agreement and Declaration of Trust
(the "Agreement") of UMB Scout Funds (the "Fund"), a series
business trust organized under the Delaware Business Trust Act,
the By-Laws of the Fund, and its proposed form of Share
Certificates (if any), all as amended to date, and the various
pertinent corporate proceedings we deem material. We have also
examined the Notification of Registration and the Registration
Statement filed under the Investment Company Act of 1940, as
amended (the "Investment Company Act") and the Securities Act of
1933, as amended (the "Securities Act"), as well as other items
we deem material to this opinion.
The Fund is authorized by the Agreement to issue an
unlimited number of shares with no par value and currently issues
shares of the UMB Scout Technology Fund and UMB Scout Equity
Index Fund series of shares. The Agreement also empowers the
Board to designate any additional series or classes and allocate
shares to such series or classes.
The Fund has filed with the U.S. Securities and
Exchange Commission, a registration statement under the
Securities Act, which registration statement is deemed to
register an indefinite number of shares of the Fund pursuant to
the provisions of Section 24(f) of the Investment Company Act.
You have further advised us that the Fund has filed, and each
year hereafter will timely file, a Notice pursuant to Rule 24f-2
under the Investment Company Act perfecting the registration of
the shares sold by the Fund during each fiscal year during which
such registration of an indefinite number of shares remains in
effect.
You have also informed us that the shares of the Fund
will be sold in accordance with the Fund's usual method of
distributing its registered shares, under which prospectuses are
made available for delivery to offerees and purchasers of such
shares in accordance with Section 5(b) of the Securities Act.
Based upon the foregoing information and examination,
it is our opinion that the Fund is a valid and subsisting entity
under the laws of its state of organization, and the registration
of an indefinite number of shares of the Fund will be effective,
and the authorized shares of the Fund when issued for the
consideration set by the Board of Trustees pursuant to the
Agreement, and subject to compliance with Rule 24f-2, will be
legally outstanding, fully-paid, and non-assessable shares, and
the holders of such shares will have all the rights provided for
with respect to such holding by the Agreement and the laws of the
State of Delaware.
We hereby consent to the use of this opinion, in lieu
of any other, as an exhibit to the Registration Statement of the
Fund, along with any amendments thereto, covering the
registration of the shares of the Fund under the Securities Act
and the applications, registration statements or notice filings,
and amendments thereto, filed in accordance with the securities
laws of the several states in which shares of the Fund are
offered, and we further consent to reference in the registration
statement of the Fund to the fact that this opinion concerning
the legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
BY: /s/ Mark H. Plafker
Mark H. Plafker
UMB SCOUT FUNDS
UMB Scout Technology Fund (In Organization)
UMB Scout Equity Index Fund (In Organization)
Accountants' Report and Financial Statements
April 12, 2000
<PAGE>
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and
Board of Trustees
UMB Scout Funds
Kansas City, Missouri
We hereby consent to the use in this Registration Statement under the
Securities Act of 1933 and the Investment Company Act of 1940, both on form
N-1A, of our report dated April 17, 2000, accompanying and pertaining to the
financial statements of the UMB Scout Technology Fund (In Organization) and
the UMB Scout Equity Index Fund (In Organization) series of UMB Scout Funds,
as of April 12, 2000, which is included in such Registration Statement.
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
April 17, 2000
Independent Accountants' Report
To the Shareholders and
Board of Trustees
UMB Scout Funds
Kansas City, Missouri
We have audited the accompanying statements of assets and
liabilities of the UMB SCOUT TECHNOLOGY FUND (In Organization) and
the UMB SCOUT EQUITY INDEX FUND (In Organization), (the two funds
comprising UMB SCOUT FUNDS), including the statements of net assets
as of April 12, 2000. These financial statements are the
responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements 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 are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting amounts
and disclosures in the financial statements. 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 referred to above
present fairly, in all material respects, the financial position of
the UMB SCOUT TECHNOLOGY FUND (In Organization) and the UMB SCOUT
EQUITY INDEX FUND (In Organization), (the two funds comprising UMB
SCOUT FUNDS) as of April 12, 2000, in conformity with generally
accepted accounting principles.
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
April 17, 2000
UMB SCOUT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 12, 2000
Equity
Technology Index
Fund Fund
ASSETS
Cash $ 100,000 $ 100,000
NET ASSETS CONSIST OF:
Capital (capital shares and paid-in 100,000 100,000
capital)
NET ASSETS APPLICABLE TO OUTSTANDING SHARES $ 100,000 $ 100,000
Capital shares, no par value
Authorized Unlimited Unlimited
Outstanding 10,000 10,000
NET ASSET VALUE PER SHARE $ 10.00 $ 10.00
See Note Financial Statements
<PAGE>
UMB SCOUT FUNDS
STATEMENTS OF NET ASSETS
APRIL 12, 2000
Equity
Technology Index
Fund Fund
CASH $ 100,000 $ 100,000
TOTAL NET ASSETS (Equivalent to $10.00
per share; unlimited number of beneficial
interests, no par value, authorized;
10,000 shares outstanding) $ 100,000 $ 100,000
See Note Financial Statements
<PAGE>
NOTE TO FINANCIAL STATEMENTS
APRIL 12, 2000
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UMB Scout Funds (the "Trust") is in organization and is
registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The
registration of the Trust's shares of beneficial interest is
pending under the Securities Act of 1933, as amended. UMB Scout
Technology Fund and UMB Scout Equity Index Fund (the Funds) are the
two series of shares issued by the Trust. On April 12, 2000,
initial seed capital of $100,000 was deposited by the Funds'
investment management in each Fund in exchange for 10,000 shares of
beneficial interest, no par value shares of each Fund in order to
initiate registration with the Securities and Exchange Commission.
A summary of the significant accounting policies that the Funds use
in the preparation of their financial statements follows. The
policies are in conformity with generally accepted accounting
principles.
Fund Management
Management fees, which will include all normal expenses of the
Funds, other than taxes, fees and other charges of governmental
agencies for qualifying the Funds' shares for sale, special legal
fees, interest and brokerage commissions, will be paid to UMB Bank,
n.a., a related party. The fees are based on average daily net
assets of the Funds at the annual rate of 1.50% of net assets for
the UMB Scout Technology Fund and .40% of net assets for the UMB
Scout Equity Index Fund. Certain officers and/or trustees of the
Trust are also officers and/or directors of UMB Bank, n.a.
Federal Income Taxes
The Funds intend to comply with the Internal Revenue Code
requirements applicable to regulated investment companies and will
distribute all income to their shareholders. Therefore, no federal
income tax provision is required.
CODE OF ETHICS
(Revised January 2000)
Terms which are in bold italics in the text are defined in Appendix 1.
I. Purpose of Code.
The Code of Ethics establishes rules that govern personal investment
activities of the officers, directors and certain employees (or
contractors) of Jones & Babson, Inc. ("Jones & Babson"), Investors Mark
Advisor, L.L.C., Investors Mark Series Fund, Inc. and each of the funds
within the AFBA, Babson, Buffalo and UMB Scout fund groups (the
"Funds"), the names of each fund are listed on Schedule A to this Code of
Ethics.
II. Why Do We Have a Code of Ethics?
A. We want to protect our Clients.
We have a duty to place the interests of the shareholders of the
Funds first and to avoid even the appearance of a conflict of
interest. This is how we earn and keep the trust of Fund
shareholders. We must conduct ourselves and our personal securities
transactions in a manner that does not create a conflict of interest
with the Funds or their shareholders, or take unfair advantage of our
relationship with them.
B. Federal law requires that we have a Code of Ethics
The Investment Company Act of 1940 and the Investment Advisers Act of
1940 require that we have in place safeguards to prevent behavior and
activities that might disadvantage the Funds or their shareholders.
These safeguards are embodied in this Code of Ethics.
III. Does the Code of Ethics Apply to You?
Yes! All employees (including contract personnel) of Jones & Babson and
the Funds must observe the principles contained in the Code of Ethics.
Any director, officer, employee or contractor of Jones & Babson, or any
Fund who is already subject to a substantially similar (as determined by
Jones & Babson's compliance officer) Code of Ethics because of their
association with a separate company, will not be subject to this Code of
Ethics.
There are different categories of restrictions on personal investing
activities. The category in which you have been placed generally depends
on your job function, although unique circumstances may prompt us to
place you in a different category. The range of categories is as
follows:
Fewest Restrictions Most Restrictions
Non-Access Person Access Person Investment Person Portfolio Person
In addition, there is a fifth category for the Independent Directors of
the Funds. The standard profiles for each of the categories is described
below:
A. Portfolio Persons.
Portfolio Persons are those employees entrusted with direct
responsibility and authority to make investment decisions affecting
one or more Funds.
B. Investment Persons.
Investment Persons are financial analysts, investment analysts,
traders and other employees who provide information or advice to a
portfolio management team or who help execute the portfolio
management team's decisions.
C. Access Persons.
You are an Access Person if, as part of your job, you do any of the
following:
* participate in the purchase or sale of securities for Fund
portfolios;
* perform a function which relates to the making of recommendations
with respect to such purchases or sales of securities for Fund
portfolios; OR
* have the ability to obtain information regarding the purchase or
sale of securities for Fund portfolios.
In addition, you are an Access Person if you are any of the
following:
* an officer or "interested" director of any Fund; OR
* an officer or director of Jones & Babson, Inc.
As an Access Person, if you know that during the 5 days immediately
preceding or after the date of your transaction, the same security
was (1) held by one or more Fund and was being considered for sale,
or (2) being considered for purchase by one or more Fund, you must
preclear your personal security transaction requests in accordance
with Section IV A.
D. Non-Access Persons.
If you are an officer, director, or employee of any contractor, for a
Fund or for Jones & Babson, or if you are an employee of a Fund or
Jones & Babson AND you do not fit into any of the above categories,
you are a Non-Access Person. Because you normally do not have access
to or receive confidential information about Fund portfolios, you are
subject only to Sections V(C), VI, VII, VIII, IX and X of this Code
of Ethics.
E. Independent Directors.
If you are a director of a Fund and are not an "interested" director
as defined in the Investment Company Act of 1940 ("Independent
Director"), you are subject only to Sections II, VII, VIII and IX of
this Code of Ethics. However, if you know, or in the ordinary course
of fulfilling your official duties as an Independent Director should
know, that during the 15 days immediately preceding or after the date
of your transaction, the same security was (1) purchased or sold by
one or more Fund, or (2) was being considered for purchase or sale by
one or more Fund, you will be considered an Access Person for the
purpose of trading in that security, and you must comply with all the
requirements applicable to Access Persons.
IV. Restrictions on Personal Investing Activities.
A. Investment and Portfolio Persons Preclearance of Personal Securities
Transactions.
Before either of the following things happen:
* the purchase or sale of a security for your own account; OR
* the purchase or sale of a security for an account for which you
are a beneficial owner
you must follow the following preclearance procedures:
1. Preclear the transaction with Jones & Babson's Compliance
Officer.
E-mail your request to gcooke@jones&babson.com or fill out a
pre-clearance request form, and provide the following
information:
* Issuer name;
* Ticker symbol or CUSIP number;
* Type of security (stock, bond, note, etc.);
* Maximum expected dollar amount of proposed transaction; AND
* Nature of transaction (purchase or sale)
2. If you receive preclearance for the transaction :
You have 5 business days to execute your transaction.
B. Investment and Portfolio Persons: Additional Restrictions.
1. Initial Public Offerings.
You cannot acquire securities issued in an initial public
offering.
2. Private Placements.
Before you acquire any securities in a private placement, you
must obtain written approval from Jones & Babson's compliance
officer . Once you receive approval, you cannot participate in
any subsequent consideration of an investment in that issuer for
any of the Funds.
3. Short-Term Trading Profits.
You cannot profit from any purchase and sale, or sale and
purchase, of the same (or equivalent) securities within sixty
(60) calendar days.
C. Portfolio Persons: Blackout Period.
If you are a Portfolio Person, you may not purchase or sell a
security within seven (7) days before and after a Fund that you
manage executes a trade in that security.
V. Reporting Requirements.
A. Disclosure of Personal Securities Holdings
[Access, Investment and Portfolio Persons]
Upon commencement of employment or acquisition of Access Person
status, whichever is sooner, and annually thereafter, you must report
all securities holdings to the compliance officer. Your initial
holdings report is due no later than 10 days after you are designated
an Access Person while your annual holdings report is due no later
than 30 days after year end. The report must include all securities
beneficially owned by you (including securities owned by certain
family members), except for code-exempt securities.
B. Quarterly Report of Securities Transactions
[Access, Investment and Portfolio Persons]
Each quarter you must report the purchase or sale of a security in
which you have (or will have) any direct or indirect beneficial
ownership. This may include securities owned by certain family
members. See Appendix 2 for details. (You do not need to report
transactions in code-exempt securities.) Jones & Babson will provide
you with a form of report. You must file your report no later than 10
days after the end of each calendar quarter.
On the report you must state whether you have engaged in a securities
transaction during the quarter, and if so provide the following
information about each transaction:
* The date of the transaction, the description and number of shares,
and the principal amount of each security involved;
* The nature of the transaction, that is, purchase, sale or any
other type of acquisition or disposition;
* The transaction price; AND
* The name of the broker, dealer or bank through whom the
transaction was effected.
C. Duplicate Confirmations [Non-Access (except Independent Directors),
Access, Investment and Portfolio Persons].
You must instruct your broker-dealer to send duplicate confirmations
of all transactions (excluding transactions in code-exempt
securities) in such accounts to:
Jones & Babson Inc.
BMA Tower, 700 Karnes Blvd.
Kansas City, MO 64108-3306
Attention: Compliance Officer
Please note that "your broker-dealer" includes both of the following:
* a broker or dealer with whom you have a securities brokerage
account; AND
* a broker or dealer who maintains an account for a person whose
trades you must report because you are deemed to be a beneficial
owner.
VI. Can there be any exceptions to the restrictions*
Yes. The compliance officer or his or her designee, upon consultation
with your manager, may grant limited exemptions to specific provisions of
the Code of Ethics on a case-by-case basis.
A. How to Request an Exemption
Send a written request to Jones & Babson compliance officer detailing
your situation. The Jones & Babson compliance officer has been
designated to develop procedures reasonably designed to detect
violations of this Code and to grant exemptions under certain
circumstances.
B. Factors Considered
In considering your request, the compliance officer or his or her
designee will grant your exemption request if he or she is satisfied
that:
* your request addresses an undue personal hardship imposed on you
by the Code of Ethics;
* your situation is not contemplated by the Code of Ethics; and
* your exemption, if granted, would be consistent with the
achievement of the objectives of the Code of Ethics.
C. Exemption Reporting
All exemptions granted must be reported to the Boards of Directors of
the Funds. The Boards of Directors may choose to delegate the task
of receiving and reviewing reports to a Committee comprised of
Independent Directors.
VII. Confidential Information.
All information about Fund securities transactions, actual or
contemplated, is confidential. You must not disclose, except as required
by the duties of your employment, securities transactions of Funds,
actual or contemplated, or the contents of any written or oral
communication, study, report or opinion concerning any security. This
does not apply to information which has already been publicly disclosed.
VIII. Conflicts of Interest.
A. All Persons except Independent Directors
You must receive prior written approval from Jones & Babson or the
Funds and/or the Independent Directors of the Funds, as appropriate,
to do any of the following:
* negotiate or enter into any agreement on the Fund's behalf with
any business concern doing or seeking to do business with the Fund
if you, or a person related to you, has a substantial interest in
the business concern;
* enter into an agreement, negotiate or otherwise do business on the
Fund's behalf with a personal friend or a person related to you;
OR
* serve on the board of directors of, or act as consultant to, any
publicly traded corporation.
B. Independent Director
If you are an Independent Director, you cannot serve as officer of,
director of, employee of; OR consultant to any corporation or other
business entity which
* engages in an activity in competition with a Fund; OR
* which is engaged in any activity that would create a conflict of
interest with your duties
unless you receive prior approval of the other Independent Directors.
These prohibitions also apply to anyone who lives in the same
household with you.
IX. What happens if you violate the rules in the Code of Ethics*
You may be subject to serious penalties.
A. The penalties which may be imposed include:
* formal warning;
* restriction of trading privileges;
* disgorgement of trading profits;
* fine; AND/OR
* suspension or termination of employment.
B. Penalty Factors
The factors which may be considered when determining the appropriate
penalty include, but are not limited to:
* the harm to the interests of the Funds and/or shareholders;
* the extent of unjust enrichment;
* the frequency of occurrence;
* the degree to which there is personal benefit from unique
knowledge obtained through employment with the Advisors;
* the degree of perception of a conflict of interest;
* evidence of fraud, violation of law, or reckless disregard of a
regulatory requirement; AND/OR
* the level of accurate, honest and timely cooperation from the
person subject to the Code of Ethics.
If you have any questions about the Code of Ethics, do not hesitate
to ask a member of management or Compliance.
X. Annual Certification of Compliance with the Code
As a condition of your employment, you will be asked to certify annually:
* that you have read this Code of Ethics;
* that you understand this Code of Ethics; AND
* that you have complied with this Code of Ethics.
XI. Regular Reporting to Fund Directors
The management of Jones & Babson and the Funds will deliver reports to
the Board of Directors of each Fund at least annually:
* of any violation of this Code of Ethics requiring significant
sanctions;
* outlining the results of any sub-adviser or affiliate Code of Ethics
monitoring activity; AND
* certifying that Jones & Babson has adopted reasonable procedures
necessary to prevent its access persons from violating this Code of
Ethics.
XII. Approval of this Code of Ethics
The Board of Directors, including a majority of the independent
Directors, of each Fund shall approve this Code of Ethics, and any
material changes subsequently made to it
APPENDIX 1: DEFINITIONS
1. "Beneficial Ownership"
See "Appendix 2: What is Beneficial Ownership*".
2. "Code-Exempt Security"
A "code-exempt security" is a security in which you may invest without
preclearing or reporting such transactions with Jones & Babson. The list
of Code-Exempt Securities appears in Appendix 3.
3. "Initial Public Offering"
"Initial public offering" means an offering of securities for which a
registration statement has not previously been filed with the SEC and for
which there is no active public market in the shares.
4. "Private Placement"
"Private placement" means an offering of securities in which the issuer
relies on an exemption from the registration provisions of the federal
securities laws, and usually involves a limited number of sophisticated
investors and a restriction on resale of the securities.
5. "Security"
A "security" includes a great number of different investment vehicles.
However, for purposes of this Code of Ethics, "security" includes any of
the following:
* note,
* stock,
* treasury stock,
* bond,
* debenture,
* evidence of indebtedness,
* certificate of interest or participation in any profit-sharing
agreement,
* collateral-trust certificate,
* preorganization certificate or subscription,
* transferable share,
* investment contract,
* voting-trust certificate,
* certificate of deposit for a security,
* fractional undivided interest in oil, gas or other mineral rights,
* any put, call, straddle, option, or privilege on any security
(including a certificate of deposit) or on any group or index of
securities (including any interest therein or based on the value
thereof), or
* any put, call, straddle, option, or privilege entered into on a
national securities exchange relating to foreign currency, or
* in general, any interest or instrument commonly known as a "security,"
or
* any certificate of interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, future on or warrant or
right to subscribe to or purchase, any of the foregoing.
APPENDIX 2: WHAT IS "BENEFICIAL OWNERSHIP"*
1. Are securities held by family members "beneficially owned" by me*
Probably. As a general rule, you are regarded as the beneficial owner of
securities held in the name of
* your spouse;
* your minor children;
* a relative who shares your home; OR
* any other person IF:
* You obtain from such securities benefits substantially similar to
those of ownership. For example, if you receive or benefit from
some of the income from the securities held by your spouse, you are
the beneficial owner; OR
* You can obtain title to the securities now or in the future.
2. Are securities held by a company I own also "beneficially owned" by me*
Probably not. Owning the securities of a company does not mean you
"beneficially own" the securities that the company itself owns. However,
you will be deemed to "beneficially own" these securities if:
* The company is merely a medium through which you (by yourself or with
others) in a small group invest or trade in securities; AND
* The company has no other substantial business.
In such cases, you and those who are in a position to control the company
will be deemed to "beneficially own" the securities owned by the company.
3. Are securities held in trust "beneficially owned" by me*
Maybe. You are deemed to "beneficially own" securities held in trust if
any of the following is true:
* You are a trustee and either you or members of your immediate family
have a vested interest in the income or corpus of the trust;
* You have a vested beneficial interest in the trust; OR
* You are settlor of the trust and you have the power to revoke the
trust without obtaining the consent of all the beneficiaries.
As used in this section, the "immediate family" of a trustee means:
* A son or daughter of the trustee, or a descendent of either;
* A stepson or stepdaughter of the trustee;
* The father or mother of the trustee, or an ancestor of either;
* A stepfather or stepmother of the trustee; and
* A spouse of the trustee.
For the purpose of determining whether any of the foregoing relationships
exists, a legally adopted child of a person is considered a child of such
person by blood.
4. Are securities in pension or retirement plans "beneficially owned" by me*
Probably not. Beneficial ownership does not include indirect interest by
any person in portfolio securities held by a pension or retirement plan
holding securities of an issuer whose employees generally are the
beneficiaries of the plan
However, your participation in a pension or retirement plan is considered
beneficial ownership of the portfolio securities if you can withdraw and
trade the securities without withdrawing from the plan.
5. Examples of Beneficial Ownership
Securities Held by Family Members
Example 1: Tom and Mary are married. Although Mary has an independent
source of income from a family inheritance and segregates her funds from
those of her husband, Mary contributes to the maintenance of the family
home. Tom and Mary have engaged in joint estate planning and have the
same financial adviser. Since Tom and Mary's resources are clearly
significantly directed towards their common property, they shall be
deemed to be the beneficial owners of each other's securities.
Example 2: Mike's adult son David lives in Mike's home. David is self-
supporting and contributes to household expenses. Mike is a beneficial
owner of David's securities.
Example 3: Joe's mother Margaret lives alone and is financially
independent. Joe has power of attorney over his mother's estate, pays
all her bills and manages her investment affairs. Joe borrows freely
from Margaret without being required to pay back funds with interest, if
at all. Joe takes out personal loans from Margaret's bank in Margaret's
name, the interest from such loans being paid from Margaret's account.
Joe is a significant heir of Margaret's estate. Joe is a beneficial
owner of Margaret's estate.
Securities Held by a Company
Example 4: ABC is a holding company with five shareholders owning equal
shares in the company. Although ABC Company does no business on its own,
it has several wholly-owned subsidiaries which invest in securities.
Stan is a shareholder of ABC Company. Stan has a beneficial interest in
the securities owned by ABC Company's subsidiaries.
Securities Held in Trust
Example 5: John is trustee of a trust created for his two minor
children. When both of John's children reach 21, each shall receive an
equal share of the corpus of the trust. John is a beneficial owner of
the trust.
Example 6: Jane is trustee of an irrevocable trust for her daughter.
Jane is a director of the issuer of the equity securities held by the
trust. The daughter is entitled to the income of the trust until she is
25 years old, and is then entitled to the corpus. If the daughter dies
before reaching 25, Jane is entitled to the corpus. Jane is a beneficial
owner of the trust.
Example 7: Tom's spouse is the beneficiary of an irrevocable trust
managed by a third party investment adviser. Tom is a beneficial owner
of the trust
APPENDIX 3: CODE-EXEMPT SECURITIES
Because they do not pose a possibility for abuse, some securities are exempt
from the Advisors' Code of Ethics. The following is the current list of
"Code-Exempt Securities":
* Mutual funds (open-end funds)
* Bank Certificates of Deposit
* U.S. government securities (such as Treasury notes, etc.)
* Securities which are acquired through an employer-sponsored automatic
payroll deduction plan
* securities purchased through dividend reinvestment programs
* commercial paper;
* bankers acceptances; AND
* Futures contracts (and option contracts) on the following:
* Standard & Poor's 500 Index; or
* Standard & Poor's 100 Index
We may modify this list of securities at any time, please send a written
request to Jones & Babson to request the most current list.
APPENDIX 4: HOW DOES THE PRECLEARANCE PROCESS WORK*
After requesting pre-clearance from the compliance officer, your request is
then subjected to the following test.
Step 1: Blackout Test
* Is the security in question on the relevant Access Person, Investment or
Portfolio Person blackout list?
If "YES", the system will send a message to you to DENY the personal trade
request.
If "NO", then your request will be approved by the compliance officer.
The preclearance process can be changed at any time to ensure that the goals
of the Advisors' Code of Ethics are advanced.
SCHEDULE A
THE FUNDS:
AFBA FIVE STAR FUND, INC.
D.L. BABSON BOND TRUST
BABSON ENTERPRISE FUND, INC.
BABSON ENTERPRISE FUND II, INC.
DAVID L. BABSON GROWTH FUND, INC.
SHADOW STOCK FUND, INC.
BABSON VALUE FUND, INC.
D.L. BABSON MONEY MARKET FUND, INC.
D.L. BABSON TAX-FREE INCOME FUND, INC.
BABSON-STEWART IVORY INTERNATIONAL FUND, INC.
BUFFALO BALANCED FUND, INC.
BUFFALO EQUITY FUND, INC.
BUFFALO SMALL CAP FUND, INC.
BUFFALO USA GLOBAL FUND, INC.
BUFFALO HIGH YIELD FUND, INC.
INVESTORS MARK SERIES FUND, INC.
UMB SCOUT CAPITAL PRESERVATION FUND, INC.
UMB SCOUT WORLDWIDE FUND
UMB SCOUT WORLDWIDE SELECT FUND
UMB SCOUT KANSAS TAX-EXEMPT BOND FUND, INC.
UMB SCOUT STOCK FUND
UMB SCOUT STOCK SELECT FUND
UMB SCOUT REGIONAL FUND, INC.
UMB SCOUT BOND FUND, INC.
UMB SCOUT MONEY MARKET FUND, INC.
UMB SCOUT TAX-FREE MONEY MARKET FUND, INC.
UMB SCOUT BALANCED FUND, INC.
UMB SCOUT EQUITY INDEX FUND
UMB SCOUT TECHNOLOGY FUND
ACKNOWLEDGMENT OF CODE OF ETHICS
I have read the Code of Ethics and agree to comply with its provisions.
Print Name
Signature
Date
CODE OF ETHICS FOR UMB BANK, N.A.
AS MANAGER AND INVESTMENT ADVISER
FOR THE UMB SCOUT FUNDS
I. Introduction
UMB Bank, n.a. ("UMB"), is statutory manager, investment advisor and
custodian
for the UMB Scout Funds . As investment advisor to the UMB Scout Funds, UMB
is required to adopt a written Code of Ethics (the "Code"), pursuant to Rule
17j-1 (17 C.F.R. 270.17j-1) under the Investment Company Act of 1940,
containing provisions reasonably necessary to prevent "Access Persons from
engaging in fraudulent, deceptive or manipulative acts." The Code is adopted
for the purpose of complying with Rule 17j-1.
II. General Rule
The Code is applicable to any affiliated person of UMB who is defined as an
Access Person pursuant to Rule 17j-1(a)(1). Access Persons shall include any
director, officer, general partner, or advisory person of UMB or its
affiliates who, with respect to the UMB Scout Funds, makes any
recommendation,
participates in the determination of which recommendation shall be made, or
whose principal function or duties relate to the determination of which
recommendation shall be made to any of the UMB Scout Funds; or who, in
connection with his or her duties, obtains any information concerning
securities recommendations being made by UMB to the UMB Scout Funds. For the
purposes of the Code, Access Persons shall include the subcategories of
Portfolio Persons and Investment Persons. Portfolio Persons are those
employees of UMB entrusted with direct responsibility and authority to make
investment decisions affecting one or more of the UMB Scout Funds.
Investment
Persons are investment analysts, traders, and other employees who provide
information or advice or help execute decisions.
It shall be a violation of the Code for any Access Person in connection with
the purchase or sale, directly or indirectly, by such person of a security
held or to be acquired by the UMB Scout Funds -
a) To employ any device, scheme, or artifice to defraud the UMB Scout
Funds;
b) To make to the UMB Scout Funds any untrue statement of a material
fact or omit to state to the UMB Scout Funds a material fact
necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading;
c) To engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon the UMB Scout Funds; or
d) To engage in any manipulative practice with respect to the UMB Scout
Funds.
In exercising its duties as statutory manager, investment advisor, and
custodian for the UMB Scout Funds, UMB is subject to the same fiduciary
duties
applicable in the exercise of its trust powers. Additionally, all activities
relating to the UMB Scout Funds should be governed by the following fiduciary
principles:
a) The interest of the shareholders of the UMB Scout Funds must come first.
In any decision relating to their personal investments, persons covered
by the Code of Ethics must avoid servicing their own personal interests
ahead of the shareholders.
b) Personal Securities transactions should be conducted in accordance with
this Code of Ethics and should avoid any actual or potential conflicts
of interest. Persons covered by the Code should avoid situations
involving any real or potential impropriety. It bears emphasis that
technical compliance with the code's procedures is not enough. Persons
covered by this Code should abide by the spirit of the Code and the
principles articulated herein.
c) Personnel should not take inappropriate advantage of their position.
Persons covered by the Code should avoid any such situation that might
compromise, or call into question, their exercise of fully independent
judgment in the interests of the UMB Scout Funds shareholders.
Access Persons are prohibited from receiving any gift or other thing of more
than de minimis value from any person or entity that does business with or on
behalf of the UMB Scout Funds. Cash must never be accepted.
Access Persons are prohibited from serving on the boards of directors of
publicly traded companies, absent prior authorization from the Funds
Investment Advisory Committee. Authorization to serve on the board of
directors of publicly traded companies will be based upon a determination
that
board service would not be inconsistent with the interests of the UMB Scout
Funds and its shareholders.
III. Personal Investing Activities
The following provisions pertain to transactions in Covered Securities in
all
accounts of an Access Person including accounts of an Investment Person or
Portfolio Person whenever specifically indicated. For purposes of these
provisions, the accounts of a person include all accounts in which the Access
Person has a direct or indirect beneficial ownership of covered securities.
Any questions regarding the application of the following provision may be
made
to the Review Officer.
1. Blackout Periods
Access Persons may not engage in buying or selling for their accounts so as
to
benefit from UMB or UMB Scout Fund trading positions or plans. Access
Persons
are prohibited from executing trades on a day during which any fund covered
by
the Code has a pending buy or sell order in the same security. Portfolio
Persons are prohibited from engaging in a securities transaction during the
period beginning 7 calendar days before and after the day on which the fund
such Portfolio Person manages purchases or sells that same security.
2. Preclearance of Trades
Portfolio Persons and Investment Persons must preclear all transactions for
their accounts in Covered Securities with the Review Officer. Requests for
approval must be submitted to the Review Officer by e-mail or on the
prescribed form. Once the Review Officer has authorized the transaction, the
Portfolio Person or Investment Person has five days to execute the
transaction.
3. Short-term Trading Profits
Access Persons are prohibited from engaging in short-term trading, i.e.
purchasing and selling, or selling and purchasing, the same (or equivalent)
securities within 60 calendar days, without prior approval from the Review
Officer.
4. Initial Public Offerings
No Access Person shall purchase any securities in an initial public offering.
5. Limited Offerings
Access Persons must receive prior approval from the Review Officer before
directly or indirectly acquiring beneficial ownership in any security in a
limited offering.
6. Required Reports
The UMB Scout Funds Review Officer will notify every Access Person of their
responsibility to provide the following reports:
a) Initial Holdings Report
No later than 10 days after an individual becomes an Access Person, the
person shall file with the UMB Scout Funds Review Officer a report, using
the prescribed form, showing the title, number of shares and principal
amount of each Covered Security in which the person had any direct or
indirect beneficial ownership at the time they became an Access Person.
The person shall also name any broker, dealer or bank with whom the person
maintained an account in which any securities were held.
b) Quarterly Transaction Reports
Access Persons must report, using the prescribed form, any transactions in
Covered Securities during the quarter in which the person had direct or
indirect beneficial ownership. The report must be filed with the Review
Officer no later than 10 days after the end of the calendar quarter. The
information shall include the date of the transaction, nature of the
transaction (i.e., purchase, sale, or any other type of acquisition or
disposition), the title, the interest rate and maturity date (if
applicable), the number of shares and the principal amount of each Covered
Security. It shall also include the price at which the transaction was
effected and the name of the broker, dealer, or bank with or through whom
the transaction was effected.
Access Persons must also report any account established during the quarter
in which securities were held for the direct or indirect benefit of the
person. The report shall include the name of the broker, dealer or bank
with whom the Access Person maintains the account and the date the account
was established.
c) Annual Holdings Report
Access Persons shall file an annual holdings report, using the prescribed
form, that includes the title, number of shares and principal amount of
each covered security in which the Access Person has any direct or indirect
beneficial ownership. The Access Person must also report the name of any
broker, dealer or bank with whom the Access Person maintains these covered
securities. All information must be submitted to the Review Officer no
later than January 31 each year and must be current as of a date no more
than 30 days before the report is submitted.
d) Duplicate Confirmations and Statements
Access Persons must instruct any brokers, dealers, or banks with whom the
Access Person maintains an account holding Covered Securities to provide
duplicate confirmations of all transactions in covered transactions and
statements to the Review Officer.
IV. Compliance Procedures
1. List of "Access Persons"
The UMB Scout Funds Review Officer shall determine, with the assistance of
the
UMB legal department, which employees are "Access Persons" as defined by Rule
17j-1(a)(1) and shall maintain a list of all "Access Persons". The Review
Officer shall also be responsible for notifying all Access Persons of their
reporting obligations.
2. Review of Reports
The UMB Scout Funds Review Officer will be responsible for reviewing the
Initial Holdings Reports, Quarterly Transaction Reports, and Annual Holdings
Reports. The Review Officer will review the trades and holdings of the
Access
Persons against the trades of the UMB Scout Funds to determine if there are
any violations of the Code. The Review Officer will promptly notify the
Funds
Investment Advisory Committee and UMB Scout Funds Board of Directors of any
apparent violations of the code.
3. Violations of the Code of Ethics
The UMB Scout Funds Review Officer shall be responsible for reporting all
apparent violations to the Funds Investment Advisory Committee and the UMB
Scout Funds Board of Directors. The Funds Investment Advisory Committee will
be responsible for determining the sanctions for any violation of the Code of
Ethics. Sanctions may include, but are not limited to, termination of
employment, suspension, imposition of a fine, and/or disgorgement of profits
made from fraudulent activities.
4. Annual Report to the Funds Investment Advisory Committee and Board of
Directors
The UMB Scout Funds Review Officer shall prepare a written annual report to
the UMB Funds Investment Advisory Committee and the UMB Scout Funds Board of
Directors describing issues under the Code of Ethics since the last report,
including, but not limited to, information about violations of the Code,
sanctions imposed in response to such violations, changes made to the Code or
procedures, and any proposed or recommended changes to the Code and
procedures. The report shall also certify that procedures to prevent Access
Persons from violating the Code are in place and effective.
5. Retention of Records
The UMB Scout Funds Review Officer shall maintain the following records:
a) A copy of each Code of Ethics which is, or at any time during the past
five years has been, in effect.
b) Records of any violation of the Code of Ethics, and of any action
taken
as a result of such violation occurring during the five years before the
current fiscal year.
c) Copies of each report made by an Access Person made during the five
years before the current fiscal year.
d) A list of all persons who are, or within the past five years have been,
required to make Securities Transaction Reports, and a list of all
persons responsible for reviewing such reports.
e) Copies of all reports made to the UMB Scout Funds Board of Directors
during the past five years.
f) A record of any decision, and the reasons supporting the decision, to
approve the acquisition by any Access Person of Initial Public Offerings
or Limited Offerings.
UMB Scout Funds include the UMB Scout Stock Fund, UMB Scout Stock Select
Fund, UMB Scout Bond Fund,
UMB Scout Regional Fund, UMB Scout Worldwide Fund, UMB Scout Worldwide Select
Fund, UMB Scout
Balanced Fund, UMB Scout Capital Preservation Fund, UMB Scout Kansas Tax-
Exempt Bond Fund, UMB Scout
Money Market Fund, and the UMB Scout Tax-Free Money Market Fund.
The term "Covered Security" when used in the Code shall have the same
meaning set forth in section 2(a)(36) of
the Investment Company Act, except that it shall not include: (a) Direct
obligations of the Government of the
United States; (b) Bankers' acceptances, bank certificates of deposit,
commercial paper and high quality short-term
debt instruments, including repurchase agreements; and, (c) Shares of
registered open-end mutual funds.
An Access Person is a "beneficial owner" of a security if he or she,
directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares a direct
or indirect pecuniary interest in the
securities. A pecuniary interest means the opportunity, directly or
indirectly, to profit or share in any profit derived
from a transaction in subject securities. An indirect pecuniary interest
includes, but is not limited to: (1) securities
held by members of a person's immediate family sharing the same household;
(2) a general partner's proportionate
interest in portfolio securities held by a general or limited partnership;
(3) a person's right to dividends that is
separated or separable from the underlying securities; (4) a person's
interest in securities held by a trust; and (5) a
person's right to acquire securities through the exercise or conversion of
any derivative security, whether or not
presently exercisable. An indirect pecuniary interest would include, for
example, the right of a UMB employee to
acquire UMB Financial Corporation stock pursuant to an employee stock option.
5
