UMB SCOUT FUNDS
REGIONAL FUND
QUARTERLY REPORT
SEPTEMBER 30, 1998
A no-load mutual fund that seeks long-term growth
of both capital and income by investing
in smaller regional companies
TO THE SHAREHOLDERS
The UMB Scout Regional Fund closed the quarter ended September 30, 1998,
at $10.16 per share and had a total return (price change and reinvested
distributions) of -13.61% for the period. This result was better than
the average for comparable funds, as shown in the Lipper Small Company
Fund Index return of -21.35% and the Russell 2000 index return of -
20.15%. The Fund pursues an investment goal of long-term growth of both
capital and income by investing in smaller companies in an eight-state
region (Missouri, Kansas, Arkansas, Oklahoma, Iowa, Nebraska, Colorado
and Illinois).
The quarter's market activity was a surprise for many large
capitalization stocks, but it was a continuation of the decline for
small-cap stocks that began earlier this year. As global economic
conditions worsened, investors fled to the larger blue-chip "quality"
stocks and U.S. Treasury notes and bonds. Small-cap stocks across the
board showed losses of more than 15% for the quarter and nearly that
amount for the year-to-date. Your Fund performed slightly better in the
quarter, as shown above, and had a year-to-date return of -11.38%.
The Fund performed better than the broad market and other comparable
funds because of its equal weighting of securities and cash reserves.
These attributes have at times worked against the Fund during strong
markets, but we have maintained our disciplined investment style and
long-term objectives. During their "glory days" in mid-1983, small-cap
stocks sold at 16.2 times earnings, a 26% premium over large stocks at
13.1 times earnings. Large caps have experienced a steady run since
then, while small caps fell to a low in September 1990 before beginning
to recover. In September 1990, small-cap stocks traded at a 30% discount
to large caps, trading at 8.8 times earnings versus 12.7 times earnings
for the large caps. Today, small caps still are at a 17% discount,
trading at 14.3 times earnings versus large caps at about 17.2 times
earnings.
We believe the potential for gains in small stocks still is greater than
for the large stocks in the near term - assuming no global economic
catastrophes - because these companies have the potential to deliver
the cash-flow returns and growth expectations reflected in their prices.
By contrast, large-cap stocks trading at 50 times projected cash flow
offer little in the way of realistic returns on investment.
During the quarter, the Fund reduced positions in the finance sector
(Brenton Banks and Kansas City Life Insurance) and utilities (Williams
Companies). Positions were eliminated in basic materials (Laclede Steel
and Laidlaw Environmental Services) and consumer staples (Sealright
Containers). New positions were purchased in capital goods (Butler
Manufacturing) and basic materials (Safety-Kleen Corporation).
We want to remind all shareholders that the Fund name is changing to UMB
Scout Regional Fund, Inc., effective October 31, 1998. However, the
ticker symbol will remain UMBHX.
We appreciate you as a valued shareholder of UMB Scout Regional Fund and
encourage your questions and comments.
Sincerely,
/s/David B. Anderson
David B. Anderson
UMB Investment Advisors
FUND DIVERSIFICATION - PIE CHART
COMPARATIVE RATES OF RETURN
as of September 30, 1998
2 3/4 Years 4 3/4 Years 6 3/4 Years
UMB Scout Regional Fund 7.72% 8.64% 8.58%
Lipper Small Co Fund Index* 3.32% 7.88% 9.72%
Russell 2000* 6.67% 9.00% 11.78%
UMB Scout Regional Fund's average annual compound returns for 1-, 5- and
10-year periods ended September 30, 1998, are -12.06%, 9.01% and 7.00%,
respectively.
Performance data contained in this report are for past periods only.
Past performance is not indicative of future results. Investment return
and share value will fluctuate, and redemption value may be more or less
than original cost.
The Fund's investment objective was changed August 16, 1991.
* Unmanaged index of stocks, bonds or mutual funds (there are no direct
investments or fees in these indices).
TOP TEN EQUITY HOLDINGS
Market Percent
Value (000's) of Total
Instituform Technologies, Inc., CL. A $ 1,126 2.64%
Harmon Industries, Inc. 990 2.32%
Empire District Electric Co. 910 2.13%
CPI Corp. 900 2.11%
Kellwood Co. 806 1.89%
Williams Companies, Inc. 805 1.89%
MYR Group, Inc. 799 1.87%
NPC International, Inc. CL. B 797 1.87%
Aliant Communications, Inc. 792 1.86%
Federal Signal Corp. 737 1.73%
Top 10 Equity Holdings Total: $ 8,662 20.31%
As of September 30, 1998, statement of assets.
Shares of the UMB Scout Funds are not deposits or obligations of, nor
guaranteed by, UMB Bank, n.a. or any other banking institution; nor are
they insured by the Federal Deposit Insurance Corporation ("FDIC").
These shares involve investment risks, including the possible loss of
the principal invested.
FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 (unaudited)
Statement of Net Assets
Market
Shares Company Value
COMMON STOCKS - 79.35%
Basic Materials - 7.80%
25,000 ACX Technologies $ 321,875
25,000 Cyprus Amax Minerals Co. 331,250
2,500 Deltic Timber Corp. 45,000
15,000 Falcon Products, Inc. 165,000
45,000 Huntco, Inc. CL. A 315,000
40,020 Kinross Gold Corp. 122,561
60,000 Lawter International, Inc. 435,000
21,000 Mallinckrodt Group, Inc. 426,562
25,000 Republic Group, Inc. 332,813
117,600 Safety-Kleen Corp. 389,550
15,000 Sigma-Aldrich Corp. 433,125
3,317,736
Capital Goods - 14.86%
25,000 Atchison Casting Co. 248,437
15,000 Baldor Electric 328,125
53,240 BHA Group, Inc. 625,570
10,000 Butler Manufacturing Co. 231,250
35,000 Federal Signal Corp. 737,188
45,000 Harmon Industries, Inc. 990,000
85,000 Instituform Technologies, Inc., CL. A 1,126,250
75,000 Isco, Inc. 459,375
50,000 Layne Christensen Co. 496,875
68,333 MYR Group, Inc. 798,642
5,000 Paul Mueller Co. 201,250
10,000 Trion, Inc. 48,750
2,000 Valmont Industries, Inc. 24,500
6,316,212
Consumer Cyclical - 16.01%
70,000 B.I., Inc. 595,000
16,500 Bandag, Inc. 523,875
10,000 Belden, Inc. 134,375
10,000 Block (H & R), Inc. 413,750
15,000 Brown Group, Inc. 230,625
24,000 Caseys General Stores, Inc. 360,000
37,500 Clarcor, Inc. 576,563
6,000 Dillards, Inc. 169,875
12,000 Donnelley (R.R.) & Sons 422,250
37,925 Flexsteel Industries, Inc. 412,434
30,000 Kellwood Co. 806,250
30,000 Lawson Products 660,000
10,000 Lee Enterprises, Inc. 259,375
8,500 Maytag Corp. 405,875
35,000 O'Sullivan Industries Holdings, Inc. 339,062
8,000 Pharmerica, Inc. 43,500
18,000 Rival Co. 144,000
60,000 Stimsonite Corp. 311,250
6,808,059
Consumer Staples - 14.99%
20,000 Alberto-Culver Co. CL. A 427,500
40,000 Angelica Corp. 642,500
35,000 Beverly Enterprises, Inc. 280,000
21,000 Brunswick Corp. 271,687
38,000 CPI Corp. 900,125
30,000 I B P, Inc. 607,500
11,000 JPS Packaging Co. 43,313
14,000 Medpartners, Inc. 45,500
25,000 Midwest Grain Products, Inc. 268,750
75,000 NPC International, Inc. CL. B 796,875
85,000 Sanfilippo (John B & Son), Inc. 419,687
35,000 Stuart Entertainment, Inc. 24,063
85,000 TCBY Enterprises, Inc. 520,625
41,300 VICORP Restaurants, Inc. 560,131
50,000 Winnebago Industries, Inc. 562,500
6,370,756
Energy - 6.25%
20,000 Helmerich & Payne, Inc. 420,000
10,000 Kerr-McGee Corp. 455,000
35,000 Maverick Tube Corp. 240,625
15,000 Murphy Oil Corp. 581,250
72,000 Southwestern Energy Co. 612,000
5,000 St. Mary Land & Exploration Co. 119,375
10,000 Ultramar Diamond Sharmock Corp. 227,500
2,655,750
Financial - 1.31%
13,500 Brenton Banks 253,969
1,500 Commerce Bancshares, Inc. 59,062
500 Kansas City Life Insurance Co. 40,813
9,000 Old Republic International Corp. 202,500
556,344
Technology - 1.87%
7,000 DII Group, Inc. 84,875
35,000 Exabyte Corp. 227,500
40,000 Fansteel, Inc. 250,000
8,000 Molex, Inc. 232,000
794,375
Transportation & Services - 0.93%
25,000 Werner Enterprises, Inc. 393,750
Utilities - 15.33%
32,000 Aliant Communications, Inc. 792,000
12,000 Ameren Corp. 503,250
8,000 Calenergy, Inc. 212,000
40,000 Empire District Electric Co. 910,000
17,430 Interstate Energy Corp. 558,849
10,000 Kansas City Power & Light Co. 304,375
30,000 Laclede Gas Co. 691,875
35,000 St. Joseph Light & Power Co. 647,500
12,000 Utilicorp United, Inc. 472,500
15,000 Western Resources, Inc. 620,625
28,000 Williams Companies, Inc. 805,000
6,517,974
TOTAL COMMON STOCKS - 79.35% 33,730,956
Face Market
Amount Description Value
Short-Term Corporate Notes - 15.25%
$ 500,000 Bellsouth Telecommunications, Inc.,
5.48%, due October 14, 1998 $ 498,934
500,000 Chevron USA, Inc., 5.53%, due October 2, 1998 499,846
500,000 Coca-Cola Co., 5.42%, due November 6, 1998 497,215
500,000 duPont (E.I.) deNemours & Co.,
5.48%, due October 21, 1998 498,402
500,000 Gannett, Inc., 5.48%, due October 23, 1998 498,249
500,000 General RE Corp., 5.49%, due October 6, 1998 499,543
500,000 Heinz (H.J.) Co., 5.46%, due October 22, 1998 498,332
500,000 Lucent Technologies, Inc., 5.46%, due October 16, 1998 498,787
500,000 Motorola, Inc., 5.48%, due October 7, 1998 499,467
500,000 PepsiCo, Inc., 5.49%, due October 9, 1998 499,314
500,000 PepsiCo, Inc., 5.30%, due October 14 1998 498,969
500,000 Proctor & Gamble Co., 5.45%, due October 13, 1998 499,016
500,000 Sara Lee Corp., 5.20%, due October 28, 1998 497,978
TOTAL SHORT-TERM CORPORATE NOTES - 15.25% 6,484,052
GOVERNMENT SPONSORED ENTERPRISES - 4.69%
1,000,000 Federal Home Loan Banks,
5.375% due November 23, 1998 991,945
500,000 Federal Home Loan Mortgage Corp.
5.35% due October 2, 1998 499,851
500,000 Federal Home Loan Mortgage Corp.
5.40% due October 6, 1998 499,550
TOTAL GOVERNMENT SPONSORED ENTERPRISES - 4.69% 1,991,346
REPURCHASE AGREEMENT - 1.02%
435,000 Northern Trust Co., 5.35%, due October 1, 1998
(Collateralized by U.S. Treasury Notes,
5.875%, due March 31, 1999) 435,000
TOTAL INVESTMENTS - 100.31% $ 42,641,354
Other assets less liabilities - (0.31%) (133,519)
TOTAL NET ASSETS - 100.00%
(equivalent to $ 10.16 per share;
10,000,000 shares of $1.00 par value
capital shares authorized; 4,184,602 shares outstanding) $ 42,507,835
BASIS OF DETERMINING MARKET VALUE. Each investment is valued at the latest
sales price on September 30, 1998, as reported by the
principal exchange on which the issue is listed. If no sale is reported, or
if unlisted, the average of the latest bid and asked price is used.
This report has been prepared for the information of the Shareholders of
UMB Scout Regional Fund, Inc., and is not to be construed
as an offering of the shares of the Fund. Shares of this Fund and of the
other UMB Scout Funds are offered only by the Prospectus,
a copy of which may be obtained from Jones & Babson, Inc.
UMB SCOUT FUNDS
100% No-Load Mutual Funds
Stock Fund
Regional Fund
WorldWide Fund
Capital Preservation Fund
Balanced Fund
Bond Fund
Kansas Tax-Exempt Bond Fund*
Money Market Fund
Tax-Free Money Market Fund
*Available in Kansas and Missouri only.
MANAGER AND INVESTMENT COUNSEL
UMB Bank, n.a., Kansas City, Missouri
AUDITORS
Baird, Kurtz & Dobson, Kansas City, Missouri
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
Philadelphia, Pennsylvania
CUSTODIAN
UMB Bank, n.a., Kansas City, Missouri
UNDERWRITER, DISTRIBUTOR
AND TRANSFER AGENT
Jones & Babson, Inc.
Kansas City, Missouri
UMB Scout Funds
P.O. Box 410498
Kansas City, MO 64141-0498
TOLL FREE 800-996-2862
www.umb.com
"UMB" and "Scout" are registered service marks of UMB Financial
Corporation.
UMB Financial Corporation also claims service mark rights to the Scout
design.
