UNITED ASSET STRATEGY FUND, INC., Class A Shares
UNITED CASH MANAGEMENT, INC., Class A Shares
UNITED CONTINENTAL INCOME FUND, INC., Class A Shares
UNITED FUNDS, INC., Class A Shares
UNITED GOLD & GOVERNMENT FUND, INC., Class A Shares
UNITED GOVERNMENT SECURITIES FUND, INC., Class A Shares
UNITED HIGH INCOME FUND, INC., Class A Shares
UNITED HIGH INCOME FUND II, INC., Class A Shares
UNITED INTERNATIONAL GROWTH FUND, INC., Class A Shares
UNITED MUNICIPAL BOND FUND, INC., Class A Shares
UNITED MUNICIPAL HIGH INCOME FUND, INC., Class A Shares
UNITED NEW CONCEPTS FUND, INC., Class A Shares
UNITED RETIREMENT SHARES, INC., Class A Shares
UNITED VANGUARD FUND, INC., Class A Shares
6300 Lamar Avenue . Overland Park, Kansas 66202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
July 24, 1997
To Shareholders:
Notice is hereby given that a Special Meeting of the shareholders of each
of the investment companies set forth above (each, a "Fund" and collectively,
the "Funds"), respectively, will be held jointly at 6300 Lamar Avenue, Overland
Park, Kansas 66202, on the 24th day of July, 1997, at 2:00 p.m., local time, or
any adjournment(s) thereof, for the following purposes:
1. For each Fund: To elect the Board of Directors;
2. For each Fund: To ratify the selection of Deloitte & Touche LLP as
independent accountants for its current fiscal year;
3. For each Fund: To approve or disapprove changes to certain of its
fundamental investment policies and restrictions;
4. For United Asset Strategy Fund, Inc. only: To approve or disapprove a
change in its goal;
5. For United Funds, Inc. - United Income Fund only: To approve or
disapprove a change in its goal by adding a secondary goal;
6. For United Cash Management, Inc. only: To approve or disapprove a
change in its fundamental policy regarding portfolio maturity;
7. For each Fund (other than United Cash Management, Inc.): To amend the
terms of the service plan adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940;
8. To transact such other business as may properly come before the
Special Meetings or any adjournment(s) thereof.
The Board of Directors of each Fund has fixed the close of business on May
7, 1997, as the record date for the determination of shareholders entitled to
notice of and to vote at the Special Meetings. You are entitled to vote at the
meeting and any adjournment(s) thereof if you owned shares of any of the Funds
at the close of business on May 7, 1997. If you attend the meeting, you may
vote your shares in person. If you do not expect to attend the meeting, please
complete, date, sign and properly return the enclosed proxy card(s) in the
enclosed postage paid envelope. If you do not sign and return your proxy
card(s), the Funds may incur the additional expense of subsequent mailings in
order to have a sufficient number of cards signed and returned.
Retain this Notice and Proxy Statement. This is a joint Notice and Proxy
Statement for the above-named Funds in the United Group of Mutual Funds. The
shares you own in a particular Fund may only be voted with respect to that Fund.
If you own shares in more than one of the Funds listed, please vote with respect
to each Fund on the proxy card provided with respect to that Fund. Please sign,
date and return any and all proxy cards that are mailed to you.
May 22, 1997 By Order of the Boards of Directors
Sharon K. Pappas, Secretary
<PAGE>
UNITED ASSET STRATEGY FUND, INC., Class A Shares
UNITED CASH MANAGEMENT, INC., Class A Shares
UNITED CONTINENTAL INCOME FUND, INC., Class A Shares
UNITED FUNDS, INC., Class A Shares
UNITED GOLD & GOVERNMENT FUND, INC., Class A Shares
UNITED GOVERNMENT SECURITIES FUND, INC., Class A Shares
UNITED HIGH INCOME FUND, INC., Class A Shares
UNITED HIGH INCOME FUND II, INC., Class A Shares
UNITED INTERNATIONAL GROWTH FUND, INC., Class A Shares
UNITED MUNICIPAL BOND FUND, INC., Class A Shares
UNITED MUNICIPAL HIGH INCOME FUND, INC., Class A Shares
UNITED NEW CONCEPTS FUND, INC., Class A Shares
UNITED RETIREMENT SHARES, INC., Class A Shares
UNITED VANGUARD FUND, INC., Class A Shares
6300 Lamar Avenue . Overland Park, Kansas 66202
PROXY STATEMENT
INTRODUCTION
This document is a joint proxy statement with respect to each of the above-
listed investment companies (the "Companies") in connection with the
solicitation of proxies by the Board of Directors of each Company to be used at
the Companies' joint Special Meeting of shareholders ("Meeting") or any
adjournment(s) thereof. The Meeting will be held on July 24, 1997, 2:00 p.m.
local time, at 6300 Lamar Avenue, Overland Park, Kansas 66202, for the purposes
set forth in the attached Notice of the Meeting. This Proxy Statement is being
first mailed to shareholders on or about May 22, 1997.
United Funds, Inc. is composed of four separate series, each of which is
referred to herein as a "Fund." When the context makes it appropriate, the
Companies listed above are referred to in this Proxy Statement collectively as
the "Funds" and, individually, as a "Fund." The name of each Fund is set forth
below, along with the proposals to be voted on by the shareholders of that Fund.
The names of Funds that are series of a Company are indented under the name of
the relevant Company.
Name of Fund Proposals
Used in This Applicable to
Fund Name Proxy Statement Company or Fund
United Asset Strategy Fund, Inc. Asset Strategy 1,2,3,4,7
United Cash Management, Inc. Cash Management 1,2,3,6
United Continental Income Fund, Inc. Continental Income 1,2,3,7
United Funds, Inc.
Income Fund Income Fund 1,2,3,5,7
Bond Fund Bond Fund 1,2,3,7
Accumulative Fund Accumulative Fund 1,2,3,7
Science and Technology Fund Science and Technology1,2,3,7
United Gold & Government Fund, Inc. Gold & Government 1,2,3,7
United Government Securities Fund, Inc. Government Securities 1,2,3,7
United High Income Fund, Inc. High Income 1,2,3,7
United High Income Fund II, Inc. High Income II 1,2,3,7
United International Growth Fund, Inc. International Growth 1,2,3,7
United Municipal Bond Fund, Inc. Municipal Bond 1,2,3,7
United Municipal High Income Fund, Inc. Municipal High Income 1,2,3,7
United New Concepts Fund, Inc. New Concepts 1,2,3,7
United Retirement Shares, Inc. Retirement Shares 1,2,3,7
United Vanguard Fund, Inc. Vanguard 1,2,3,7
For each Fund, other than those named in the next sentence, a majority of
the shares outstanding on the record date, May 7, 1997 ("Record Date"),
represented in person or by proxy, of a Fund must be present for the transaction
of business at that Fund's Meeting. For New Concepts, Gold & Government,
Government Securities, High Income II, Municipal High Income and Asset Strategy,
one-third of the shares outstanding on the Record Date, represented in person or
by proxy, of that Fund, must be present for the transaction of business at that
Fund's meeting. In the event that a quorum is not present or if a quorum is
present at the Meeting but sufficient votes to approve any one of the Proposals
are not received, the persons named as proxies (or their substitutes) may
propose one or more adjournments of the Meeting to permit the further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares represented at the Meeting in person or by proxy.
The persons named as proxies will vote those proxies that they are entitled to
vote "For" such Proposal in favor of an adjournment and will vote those proxies
required to be voted "Against" such Proposal against such adjournment. A
shareholder vote may be taken on one or more of the Proposals described in this
Proxy Statement prior to any such adjournment if sufficient votes have been
received and it is otherwise appropriate.
The individuals named as proxies (or their substitutes) in the enclosed
proxy card (or cards if you own shares of more than one Fund or have multiple
accounts) will vote in accordance with your directions as indicated thereon if
your proxy is received properly executed. You may direct the proxy holders to
vote your Fund shares on a Proposal applicable to that Fund by checking the
appropriate box "For" or "Against," or instruct them not to vote those shares on
the Proposal by checking the "Abstain" box. Alternatively, you may simply sign,
date and return your proxy card(s) with no specific instructions as to the
Proposals. If you properly execute your proxy and give no voting instructions
with respect to a Proposal on which you are entitled to vote, your shares will
be voted for the Proposal. The duly appointed proxies may, in their discretion,
vote upon such other matters as may properly come before the Meeting.
Each full share of a Fund that is issued and outstanding on the record
date, whether Class A or Class Y (Class B for Cash Management), is entitled to
one vote, and each fractional share issued and outstanding on the record date is
entitled to a proportionate share of one vote. The Class A and Class Y (Class B
for Cash Management) shareholders of each Fund vote together with respect to
each Proposal that affects their Fund, except that all Class A and Class Y
shareholders of all the Funds constituting United Funds, Inc., vote together
with respect to the election of Directors (Proposal 1) and the ratification of
independent accountants (Proposal 2). With respect to Proposal 7, only the
Class A shareholders of each Fund, other than Cash Management, are entitled to
vote.
Abstentions and "broker non-votes" (as defined below) are counted for
purposes of determining whether a quorum is present, but do not represent votes
cast with respect to any Proposal. "Broker non-votes" are shares held by a
broker or nominee for which an executed proxy is received by the Fund, but are
not voted as to one or more Proposals because instructions have not been
received from the beneficial owners or persons entitled to vote and the broker
or nominee does not have discretionary voting power.
You may revoke your proxy with respect to a Fund: (a) at any time prior to
its exercise by written notice of its revocation to the Secretary of the Fund at
the above address prior to the Meeting; (b) by the subsequent execution and
return of another proxy prior to the Meeting; or (c) by being present and voting
in person at the Meeting and giving oral notice of revocation to the Chairman of
the Meeting. Attendance at the Meeting will not in and of itself constitute
revocation of your proxy.
Information as to the number of outstanding shares of each Fund, and class
thereof, as of the Record Date, is set forth in Exhibit A. A listing of the
owners of more than 5% of the shares of any Fund as of April 30, 1997, is set
forth in Exhibit B. To the knowledge of each Fund's management, the executive
officers and Directors of each Fund, as a group, owned less than 1% of the
outstanding shares of each Fund as of April 30, 1997.
Copies of each Fund's most recent annual and semiannual reports have been
sent to shareholders of that Fund on or before the mailing of this Proxy
Statement. Shareholders of any Fund may obtain, free of charge, copies of that
Fund's annual and semiannual reports by writing to Waddell & Reed, Inc. at 6300
Lamar Avenue, P.O. Box 29217, Shawnee Mission, KS 66201-9217 or calling (800)
366-5465.
THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THESE PROPOSALS AND
RECOMMENDS THAT YOU VOTE IN FAVOR OF EACH OF THEM.
PROPOSAL 1: ELECTION OF DIRECTORS
Relevant Companies: All Companies.
Discussion. The persons set forth below have been nominated for election
as Directors of each Company, and each has consented to his or her nomination
and agreed to serve if elected. Each nominee (except James M. Concannon and
John A. Dillingham) is currently a Director of each Company. Each current
Director serves pursuant to election by shareholders except Linda Graves and
Eleanor B. Schwartz, each of whom was elected by the other Directors effective
July 12, 1995, and William L. Rogers and Frank J. Ross, Jr., each of whom was
elected by the other Directors effective October 16, 1996. If any of the
nominees should not be available for election, the persons named as proxies (or
their substitutes) may vote for other persons in their discretion. Management
has no reason to believe that any nominee will be unavailable for election.
The names of each Company's Directors, nominees and executive officers,
their respective offices, and principal occupations during the last five years
are set forth below.
Directors and Nominees of the Companies
As of the date of this Proxy Statement, six of each Company's Directors
were "interested persons," as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), of Waddell & Reed Investment Management Company, the
investment manager of each Fund ("WRIMCO"), and Waddell & Reed, Inc., each
Fund's principal underwriter ("W&R"). The Directors who are "interested
persons" are indicated as such by an asterisk. Messrs. Morgan, Richey and
Tucker are interested persons because they are present or former officers,
directors and/or shareholders of WRIMCO and/or certain of its affiliates. Ms.
Graves and Mr. Hayes are interested persons because of their ownership of shares
of Torchmark Corporation, which indirectly controls WRIMCO and W&R, and because
Ms. Graves is a member of Mr. Richey's immediate family. Mr. Ross is an
interested person because he is a partner in a law firm which has acted as legal
counsel for W&R. Each of the Company's Directors is also a Director of each of
the funds in the Fund Complex, and each of the Company's officers listed below
is also an officer of each of the funds in the Fund Complex. The term "Fund
Complex" includes each of the Funds, TMK/United Funds, Inc. with its eleven
portfolios, and Waddell & Reed Funds, Inc., with its six funds, each of which is
managed by WRIMCO. Waddell & Reed Services Company, an affiliate of W&R and
WRIMCO, is the shareholder servicing agent and accounting services agent for
each Fund. Its address is the same as that for W&R. A table indicating each
Director's and nominee's ownership of Fund shares is attached hereto as Exhibit
C.
RONALD K. RICHEY* (age 70) -- Director of each Company since May 1, 1993
or its inception, whichever is later; Chairman of the Board of Directors of each
Company; Chairman of the Board of Directors of Waddell & Reed Financial
Services, Inc., United Investors Management Company and United Investors Life
Insurance Company; Chairman of the Board of Directors and Chief Executive
Officer of Torchmark Corporation; Chairman of the Board of Directors of Vesta
Insurance Group, Inc.; formerly, Chairman of the Board of Directors of W&R.
Father of Linda Graves, Director of each of the Companies in the Fund Complex.
KEITH A. TUCKER* (age 52) -- Director of each Company since July 17, 1991
or its inception, whichever is later. President of each Company; President,
Chief Executive Officer and Director of Waddell & Reed Financial Services, Inc.;
Chairman of the Board of Directors of WRIMCO, W&R, Waddell & Reed Services
Company, Waddell & Reed Asset Management Company and Torchmark Distributors,
Inc., each an affiliate of Waddell & Reed, Inc.; Vice Chairman of the Board of
Directors, Chief Executive Officer and President of United Investors Management
Company; Vice Chairman of the Board of Directors of Torchmark Corporation;
Director of Southwestern Life Corporation; formerly, partner in Trivest, a
private investment concern; formerly, Director of Atlantis Group, Inc., a
diversified company.
HENRY L. BELLMON (age 75) -- Director of each Company since February 1,
1991 or its inception, whichever is later. Rancher; Professor, Oklahoma State
University; formerly, Governor of Oklahoma.
DODDS I. BUCHANAN (age 66) -- Director of each Company since December 7,
1971 or its inception, whichever is later. Advisory Director, The Hand
Companies, an actuarial consulting company; President, Buchanan Ranch
Corporation; formerly, Senior Vice President and Director of Marketing Services,
The Meyer Group of Management Consultants; formerly, Professor and Chairman of
Marketing, College of Business, University of Colorado.
JAMES M. CONCANNON (age 49) -- Dean and Professor of Law, Washburn
University School of Law.
JOHN A. DILLINGHAM (age 58) -- Director and consultant, McDougal
Construction Company; formerly Senior Vice President-Sales and Marketing, Garney
Companies, Inc., a specialty utility contractor.
LINDA GRAVES* (age 43) -- Director of each Company since July 12, 1995.
First Lady of Kansas; formerly, partner, Levy and Craig, P.C., a law firm.
Daughter of Ronald K. Richey, Chairman of the Board of each of the Companies in
the Fund Complex.
JOHN F. HAYES* (age 77) -- Director of each Company since June 28, 1988 or
its inception, whichever is later. Director, Central Bank and Trust; Director,
Central Kansas Bankshares; Director, Central Properties, Inc.; Chairman,
Gilliland & Hayes, P.A., a law firm; formerly, President, Gilliland & Hayes,
P.A.
GLENDON E. JOHNSON (age 73) -- Director of each Company since June 2, 1971
or its inception, whichever is later. Director and Chief Executive Officer of
John Alden Financial Corporation and subsidiaries.
WILLIAM T. MORGAN* (age 69) -- Director of each Company since February 13,
1985 or its inception, whichever is later. Retired; formerly, Chairman of the
Board of Directors and President of each Company (Mr. Morgan retired as Chairman
of the Board of Directors and President of each Company on April 30, 1993);
formerly, President, Director and Chief Executive Officer of WRIMCO and W&R;
formerly, Chairman of the Board of Directors of Waddell & Reed Services Company;
formerly, Director of Waddell & Reed Asset Management Company, United Investors
Management Company and United Investors Life Insurance Company, affiliates of
Waddell & Reed, Inc.
WILLIAM L. ROGERS (age 50) -- Director of each Company since October 16,
1996. Principal, Colony Capital, Inc., a real estate-related investment
company; formerly, partner in Trivest, a private investment concern.
FRANK J. ROSS, JR.* (age 44) -- Director of each Company since October 16,
1996. Partner, Polsinelli, White, Vardeman & Shalton, a law firm.
ELEANOR B. SCHWARTZ (age 60) -- Director of each Company since July 12,
1995. Chancellor, University of Missouri-Kansas City; formerly, Interim
Chancellor, University of Missouri-Kansas City.
FREDERICK VOGEL III (age 61) -- Director of each Company since June 2, 1971
or its inception, whichever is later. Retired.
PAUL S. WISE (age 76) -- Director of each Company since January 12, 1987 or
its inception, whichever is later. Director of Potash Corporation of
Saskatchewan, a fertilizer company.
Based on the recommendation of each Company's Nominating Committee, at the
meeting of the Board of Directors on April 23, 1997, the Directors of each
Company, including the Directors who are not "interested persons" of the
Company, as defined in the 1940 Act ("Independent Directors"), unanimously
approved the nomination of the foregoing persons to serve or continue to serve
as Directors, as applicable, and directed that the election of these nominees be
submitted to the Company's shareholders.
The Boards of Directors of each Company met six times during that Company's
most recent fiscal year. Except for Messrs. Rogers and Ross, who were elected
to each Company's Board of Directors effective October 16, 1996, each nominee
attended, for all Companies, at least 75% of the meetings of the Board and each
of its committees on which he or she serves during the respective Companies'
most recent fiscal year.
Each Company has an Audit Committee that reviews and evaluates the audit
function, including recommending to the Directors the independent public
accountants to be selected for the Companies. The Audit Committee currently
consists of Messrs. Buchanan (Chairman) and Vogel, and Ms. Schwartz, each of
whom is an Independent Director, and Messrs. Morgan and Hayes. Each was elected
to the Audit Committee on August 30, 1995. Each Company's Audit Committee met
four times during that Company's most recent fiscal year.
Each Company also has a Nominating Committee that is responsible for the
selection and nomination of the Independent Directors. The Nominating Committee
currently consists of Messrs. Johnson and Wise, each of whom is an Independent
Director. For United Funds, Inc. and Gold & Government, the Nominating
Committee met once during that Company's most recent fiscal year. For New
Concepts, Continental Income, Government Securities and High Income the
Nominating Committee met twice during that Company's most recent fiscal year.
For each of the other Companies, the Nominating Committee did not meet during
that Company's most recent fiscal year. The Nominating Committee generally does
not consider unsolicited Director nominations recommended by Company
shareholders.
Each of the Directors, other than Messrs. Richey and Tucker, receives an
annual retainer of $44,000 per year, plus $1,000 for each meeting of the Board
of Directors attended, plus reimbursement of expenses of attending such meeting,
and $500 for each committee meeting attended which is not in conjunction with a
Board of Directors meeting. The fees and reimbursed expenses paid to the
Directors are divided among each of the Funds in the Fund Complex.
The following table sets forth information relating to the compensation
paid to Directors during the last fiscal years:
COMPENSATION TABLE
<TABLE>
Board Member (1)
Amounts Paid During
the Most Recent Fiscal Henry John Glendon William William Frank
Year from Company to L. Dodds I. Linda F. E. T. L. J. Eleanor Frederick Paul S.
Directors Bellmon Buchanan Graves Hayes Johnson Morgan Rogers Ross, Jr. Schwartz Vogel, III Wise
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Continental Income $ 1,568 $ 1,568 $ 1,568 $ 1,568 $ 1,537 $ 1,568 $ 739 $ 739 $ 1,535 $ 1,568 $ 1,568
Government Securities 442 442 442 442 434 442 202 202 433 442 442
High Income 3,019 3,019 3,019 3,019 2,958 3,019 1,418 1,418 2,955 3,019 3,019
New Concepts 1,634 1,634 1,634 1,634 1,600 1,634 791 791 1,603 1,634 1,634
Total Compensation Paid
to Board Members From
Companies and Fund
Complex for the Year Ended
March 31, 1997(2) 50,000 50,000 50,000 50,000 49,000 50,000 24,000 24,000 49,000 50,000 50,000
Cash Management 1,244 1,244 954 1,244 1,244 1,244 N/A N/A 927 1,244 1,244
International Growth 2,265 2,265 1,720 2,265 2,265 2,265 N/A N/A 1,674 2,265 2,265
Retirement Shares 1,786 1,786 1,358 1,786 1,785 1,786 N/A N/A 1,320 1,786 1,786
Total Compensation Paid
to Board Members From
Companies and Fund
Complex for the Year Ended
June 30, 1996(2) 47,000 47,000 36,000 47,000 47,000 47,000 N/A N/A 35,000 47,000 47,000
Asset Strategy 50 50 50 50 50 50 N/A N/A 48 50 50
High Income II 1,158 1,158 1,158 1,158 1,158 1,158 N/A N/A 1,158 1,158 1,158
Municipal Bond 3,118 3,118 3,118 3,118 3,118 3,118 N/A N/A 3,054 3,118 3,118
Municipal High Income 1,219 1,219 1,219 1,219 1,219 1,219 N/A N/A 1,194 1,219 1,219
Vanguard 4,097 4,097 4,097 4,097 4,097 4,097 N/A N/A 4,012 4,097 4,097
Total Compensation Paid
to Board Members From
Companies and Fund
Complex for the Year Ended
September 30, 1996(2) 48,000 48,000 48,000 48,000 48,000 48,000 N/A N/A 47,000 48,000 48,000
Gold & Government 108 108 108 108 106 108 23 23 106 108 108
United Funds, Inc. 21,929 21,929 21,929 21,929 21,482 21,929 4,914 4,914 21,482 21,929 21,929
Total Compensation Paid
to Board Members From
Companies and Fund
Complex for the Year Ended
December 31, 1996(2) 49,000 49,000 49,000 49,000 48,000 49,000 11,000 11,000 48,000 49,000 49,000
(1) Board members who are also affiliated persons of the Companies, as defined
in the 1940 Act, receive no salary, fees or compensation from the Companies.
(2) No pension or retirement benefits have been accrued as a part of Company
expenses.
</TABLE>
The Board of Directors of each Company has created an honorary position of
Director Emeritus. The Director Emeritus policy provides that an incumbent
Director who has attained the age of 75 and was initially elected as a Director
prior to May 31, 1993, may, or if initially elected as a Director on or after
May 31, 1993, must, resign his or her position as a Director and, unless he or
she elects otherwise, will serve as a Director Emeritus provided that the
Director has served as a Director of one or more of the Companies for at least
five years, which need not have been consecutive. A Director Emeritus receives
an annual fee from the Company in an amount equal to the annual retainer he or
she was receiving at the time he or she resigned as a Director; provided that a
Director initially elected to a Board of Directors on or after May 31, 1993,
receives such annual fee only for a period of three years commencing upon the
date the Director began his or her service as a Director Emeritus or in an
equivalent lump sum. A Director Emeritus receives these fees in recognition of
his or her past services, whether or not services are rendered in his or her
capacity as Director Emeritus, but has no authority or responsibility with
respect to management of the Funds. Messrs. Jay B. Dillingham and Doyle
Patterson currently serve as Directors Emeritus.
If elected, the Directors will hold office without limit in time except (a)
any Director may resign, (b) any Director may be removed by shareholders upon an
affirmative vote of a majority of all the shares entitled to be cast for the
election of Directors, and (c) in connection with the Director Emeritus policy
described above.
Executive Officers of the Companies
The executive officers of each Company, other than those who serve as
Directors, are set forth below. Each executive officer, as such, is an
"interested person" of each Company. Each executive officer set forth below
holds the same position with each of the Companies in the Fund Complex.
Robert L. Hechler (age 60) -- Vice President and Principal Financial
Officer of each Company since 1977 or its inception, whichever is later; Vice
President, Chief Operations Officer, Director and Treasurer of Waddell & Reed
Financial Services, Inc.; Executive Vice President, Principal Financial Officer,
Director and Treasurer of WRIMCO; President, Chief Executive Officer, Principal
Financial Officer, Director and Treasurer of W&R; Director and Treasurer of
Waddell & Reed Asset Management Company; President, Director and Treasurer of
Waddell & Reed Services Company; Vice President, Treasurer and Director of
Torchmark Distributors, Inc.
Henry J. Herrmann (age 54) -- Vice President of each Company since 1987 or
its inception, whichever is later; Vice President, Chief Investment Officer and
Director of Waddell & Reed Financial Services, Inc.; Director of W&R; President,
Chief Executive Officer, Chief Investment Officer and Director of WRIMCO and
Waddell & Reed Asset Management Company; Senior Vice President and Chief
Investment Officer of United Investors Management Company.
Theodore W. Howard (age 54) -- Vice President of each Company since 1987,
Treasurer and Principal Accounting Officer of each Company since 1976 or its
inception, whichever is later; Vice President of Waddell & Reed Services
Company.
Sharon K. Pappas (age 38) -- Secretary of each Company since 1989, Vice
President of each Company since 1992, General Counsel of each Company since 1994
or its inception, whichever is later; Vice President, Secretary and General
Counsel of Waddell & Reed Financial Services, Inc.; Senior Vice President,
Secretary and General Counsel of WRIMCO and W&R; Director, Senior Vice
President, Secretary and General Counsel of Waddell & Reed Services Company;
Director, Secretary and General Counsel of Waddell & Reed Asset Management
Company; Vice President, Secretary and General Counsel of Torchmark
Distributors, Inc.; formerly, Assistant General Counsel of each Company, WRIMCO,
Waddell & Reed Financial Services, Inc., W&R, Waddell & Reed Asset Management
Company and Waddell & Reed Services Company.
Required Vote: The election of Directors of a Company requires the
favorable vote of the holders of a plurality of the shares cast in person or by
proxy of that Company, provided a quorum is present.
THE BOARDS OF DIRECTORS RECOMMEND THAT YOU VOTE FOR PROPOSAL 1.
PROPOSAL 2: RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS EACH
FUND'S INDEPENDENT ACCOUNTANTS
Relevant Companies: All Companies.
Discussion. Deloitte & Touche LLP has been selected by the respective
Boards of Directors, with the approval of the respective Audit Committees, as
each Company's independent public accountants for the Company's current fiscal
year. The shareholders of each Company are entitled to vote for or against the
ratification of the selection of Deloitte & Touche LLP.
Deloitte & Touche LLP has advised each Company that neither it nor any of
its partners has any direct or indirect financial interest or connection (other
than as independent accountants) in or with the Fund or any of its affiliates.
Deloitte & Touche LLP has been given the opportunity to make a statement at the
Meeting if it so desires. Deloitte & Touche LLP is not expected to have a
representative present at the Meeting but will be available should any matter
arise requiring its presence.
On November 5, 1996, Price Waterhouse LLP, the then independent accountants
of the Funds, resigned as the independent accountants of the Funds. Price
Waterhouse LLP audited the Funds' financial statements during each Company's two
most recent fiscal years that ended on or before September 30, 1996, and for the
period from October 1, 1996 through November 5, 1996. During such period, the
Funds did not have any disagreements with Price Waterhouse LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement if not resolved to the satisfaction of
Price Waterhouse LLP would have caused them to make reference thereto in their
report on the financial statements for such periods.
Price Waterhouse LLP did not at any time during each Company's two most
recent fiscal years, and any subsequent interim period, advise the Company (i)
that internal controls necessary for the Company to develop reliable financial
statements did not exist, (ii) that it had received information that led it to
no longer be able to rely on management's representations that made it unwilling
to be associated with the financial statements prepared by management, (iii) of
the need to expand significantly the scope of its audit or that it had received
information that if further investigated may materially impact the fairness or
reliability of a previously issued or subsequent audit report or the underlying
financial statements or cause it to be unwilling to rely on management's
representations or be associated with the financial statements prepared by
management, or (iv) that it had received information that it concluded
materially impacted the fairness or reliability of a previously issued or
subsequent audit report or the underlying financial statements. Price
Waterhouse LLP did not so expand any such audit or conduct further
investigation, and no issues existed which were not resolved to the accountants'
satisfaction prior to resignation.
Required Vote: Approval of this Proposal 2 requires the affirmative vote
of a majority of outstanding securities of each Company, provided a quorum is
present.
THE BOARDS OF DIRECTORS RECOMMEND THAT YOU VOTE FOR PROPOSAL 2.
PROPOSAL 3: APPROVAL OF CHANGES TO CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS
AND POLICIES OF EACH FUND
The following table identifies generally the proposed changes and Funds
affected as discussed further below.
Proposal Action Proposed Fund(s) Affected
3.1 Restricted Securities Elimination Accumulative Fund, Bond
Fund, Cash Management,
Gold & Government, High
Income, High Income II,
Income Fund,
International Growth,
Municipal Bond, New
Concepts, Retirement
Shares, Science and
Technology and Vanguard
3.2 Diversification of Assets Modification All Funds, except Asset
Strategy and Government
Securities
3.3 Unseasoned Issuers Elimination Accumulative Fund, Bond
Fund, High Income,
Income Fund, Municipal
Bond, New Concepts and
Science and Technology
3.4 Repurchase Transactions Elimination Municipal Bond
3.5 Options, Commodities Modification and All Funds, except Cash
and Futures /or Elimination Management
3.6 Pledging Elimination All Funds, except Asset
Strategy, Cash
Management, Government
Securities, Municipal
Bond and New Concepts
3.7 Margin Purchases Modification All Funds, except Cash
Management
3.8 Short Sales Modification All Funds, except Cash
Management
3.9 Foreign Currencies Elimination Gold & Government,
International Growth and
New Concepts
3.10 Warrants and Rights Elimination Accumulative Fund, Bond
Fund, Continental
Income, High Income,
High Income II, Income
Fund, International
Growth, New Concepts,
Retirement Shares,
Science and Technology
and Vanguard
3.11 Purchasing Call Options Elimination International Growth,
New Concepts, Retirement
Shares and Vanguard
3.12 Arbitrage Transactions Elimination Accumulative Fund, Bond
Fund, Continental
Income, Gold &
Government, Government
Securities, High Income,
High Income II, Income
Fund, International
Growth, Municipal Bond,
Municipal High Income,
New Concepts, Retirement
Shares, Science and
Technology and Vanguard
3.13 Indexed Securities Elimination Government Securities
3.14 Securities Owned by Elimination All Funds, except
Certain Persons Government Securities
3.15 Loans Modification All Funds
Reasons for the Proposed Changes. Pursuant to the 1940 Act, each of the
Funds has adopted certain fundamental investment restrictions and policies,
which are set forth in the Fund's prospectus or statement of additional
information, and which may be changed only with shareholder approval.
Restrictions and policies that a Fund has not specifically designated as being
fundamental are considered to be "non-fundamental" or "operating" and may be
changed by the Fund's Board of Directors without shareholder approval.
Certain of the fundamental restrictions that the Funds have adopted in the
past reflect business or industry conditions or practices or federal
requirements that are no longer in effect. Other fundamental restrictions
reflect regulatory requirements that remain in effect, but which are not
required to be stated as fundamental, or in some cases even as non-fundamental,
restrictions. Also, as new Funds have been created over a period of years,
substantially similar fundamental restrictions often have been phrased in
slightly different ways, sometimes resulting in minor but unintended differences
in effect or potentially giving rise to unintended differences in
interpretation. Finally, on October 11, 1996, the National Securities Markets
Improvement Act of 1996 (the "NSMIA") was enacted. The NSMIA created a national
system of regulating mutual funds by preempting certain state securities or
"blue sky" laws that apply to mutual funds. Therefore, certain of the
fundamental restrictions reflect state regulatory requirements with which the
Funds are no longer required to comply.
Accordingly, the Board of Directors of each Fund has approved revisions to
certain of the Fund's fundamental restrictions in order to simplify, modernize
and standardize certain investment restrictions that are required to be
fundamental, and to eliminate certain fundamental restrictions that are not
legally required. In several instances, if an existing fundamental restriction
is eliminated because it is not required to be fundamental, the Fund intends to
implement a similar restriction as a non-fundamental, operating policy.
The Board of Directors believes that eliminating disparities among certain
of the Funds' fundamental restrictions will enhance WRIMCO's ability to manage
efficiently and effectively the Funds' assets in changing regulatory and
investment environments and will facilitate monitoring of compliance with
fundamental and non-fundamental investment limitations. In addition, by
reducing those policies that can be changed only by shareholder vote, each Fund
will be able to avoid the costs and delays associated with a shareholder meeting
when making changes to its investment policies that, at a future time, its Board
of Directors may consider desirable. Although the proposed changes in
fundamental restrictions will allow the Funds greater investment flexibility to
respond to future investment opportunities, the Board of Directors does not
anticipate that the changes, individually or in the aggregate, will result at
this time in a material change in the level of investment risk associated with
an investment in any Fund.
With respect to investments in options, futures contracts and other
derivative instruments, the Board of Directors determined that the current
policies for certain Funds unnecessarily restrict these Funds from taking
advantage of potential investment and risk management opportunities and
techniques. The Board of Directors of each such Fund accordingly considered and
approved modifications to certain of the Fund's fundamental restrictions, as
well as elimination of certain other fundamental restrictions, that would
provide the Funds greater flexibility to attempt to enhance income or yield and
to attempt to hedge their investments through the use of options on securities
(including index options), options on foreign currencies, futures contracts for
the purchase or sale of instruments based on financial indices (including
interest rates or an index of U.S. Government or foreign government securities
or equity or debt securities) and futures contracts on foreign currencies or
debt securities (hereinafter "futures contracts"), and options on futures
contracts, forward contracts, swaps and swap-related products and indexed
securities. Exhibit D attached hereto sets forth a summary of the features of
options, futures contracts, forward contracts, swaps and certain swap-related
products and indexed securities, and the potential uses and risks of these
investments.
For certain Funds, the Board of Directors has determined that the Fund
would benefit from having greater flexibility with respect to purchasing and
selling options, futures contracts and other derivative instruments. The Board
of Directors of each such Fund has concluded that amendment and/or elimination
of the Fund's current fundamental investment restrictions regarding commodities,
options, and other derivative instruments as set forth in sub-proposal 3.5 is in
the best interests of each Fund and its shareholders.
The text and a summary description of each proposed change to the affected
Funds' fundamental restrictions are set forth below. For purposes of the
discussion of each proposed change, the terms "Fund" or "Funds" refer only to
those Funds named as to which the change applies.
Shareholders should refer to Exhibit E to this Proxy Statement for the text
of the existing fundamental restrictions that are proposed to be amended or
eliminated. Shareholders should note, however, that, for some Funds, certain of
the fundamental restrictions that are treated separately below currently are
combined within a single fundamental restriction.
The text below also describes those operating policies that the Funds
intend to implement in conjunction with the elimination of fundamental
restrictions under this Proposal 3. To the extent that a current fundamental
investment restriction is replaced by a non-fundamental, operating policy, such
operating policy could in the future be changed by the Fund's Board of Directors
without approval of the affected shareholders, subject to such disclosure to
existing and prospective investors as may be required by law.
If approved by the shareholders of the affected Fund, the amendment or
elimination of fundamental investment restrictions shall become operative
concurrently with the effectiveness of an amendment to the Fund's registration
statement describing the same. If a Proposal is not approved as to a particular
Fund, the Fund's corresponding current investment restriction will remain
unchanged.
3.1 Elimination of Fundamental Restrictions Regarding Restricted Securities
Funds to which this change applies: Accumulative Fund, Bond Fund, Cash
Management, Gold & Government, High Income, High Income II, Income Fund,
International Growth, Municipal Bond, New Concepts, Retirement Shares, Science
and Technology and Vanguard.
Discussion: Typically, restricted securities cannot be sold to the public
without registration under the Securities Act of 1933, as amended ("1933 Act").
Unless registered, these securities can only be sold in privately negotiated
transactions and/or pursuant to an exemption from registration. Each of these
Funds currently has a fundamental restriction that precludes it either from
investing more than a specified percentage of its net assets in restricted
securities or from investing in restricted securities at all. In addition,
Accumulative Fund, Bond Fund, Income Fund and Science and Technology have a
fundamental restriction prohibiting investment in securities that do not have
readily available market quotations (other than commercial paper), which would
include a range of securities not traded on an exchange as well as restricted
and illiquid securities.
However, the Funds' investment restrictions on restricted securities do not
expressly refer to liquidity. For example, Rule 144A under the 1933 Act permits
resales to eligible institutional investors of restricted securities that, when
issued, were not of the same class as securities listed on a U.S. securities
exchange or Nasdaq. Rule 144A reflects recognition that, even though
unregistered securities may not be freely offered to the general public, in many
cases an active secondary market exists for unregistered securities and other
institutional buyers stand ready to purchase such securities at market value
from institutional holders such as the Funds in transactions exempt from
registration.
In view of changes that have occurred, and that may in the future occur, in
the 1933 Act requirements regarding the types of offers and sales that may be
made without an effective registration statement and the increased size and
liquidity of the institutional markets for unregistered and/or non-exchange
traded securities, the Board of Directors believes that the current
restriction(s) for each Fund is unnecessarily limiting, particularly since the
Funds also have a non-fundamental policy that limits its illiquid investments.
Under that policy, the Fund may not make an investment if, as a result, more
than 10% of its net assets would be invested in illiquid investments. (Under a
current position of the staff of the Securities and Exchange Commission (the
"SEC")), each Fund could invest up to 15% of its assets in illiquid investments,
although the Board of Directors of each Fund has no present intention to change
any Fund's current policy to reflect this higher limit.)
If the shareholders of a Fund approve this Proposal to eliminate that
Fund's fundamental restriction(s) regarding restricted securities, whether or
not the Fund could invest in an unregistered security and, in the case of
Accumulative Fund, Bond Fund, Income Fund and Science and Technology, a security
for which there is no readily available market quotation, would be determined by
reference to the Fund's goal(s) and investment policies, including its policy
regarding illiquid investments, subject to the applicable requirements of the
1940 Act.
3.2 Modification of Fundamental Restriction Regarding Diversification of Assets
Funds to which this change applies: All Funds, except Asset Strategy and
Government Securities.
Discussion: The diversification requirement contained in the current
investment restriction of each Fund (other than Asset Strategy) is more
restrictive than required under the 1940 Act because the current restriction
applies to 100%, rather than 75%, of the Fund's total assets. In addition,
Continental Income, Bond Fund, Income Fund, Accumulative Fund, Science and
Technology, Gold & Government, High Income, High Income II, International
Growth, New Concepts and Retirement Shares are further restricted from
purchasing more than 10% of any class of securities of an issuer, and Cash
Management is restricted from buying the securities of any company if it would
then own more than 10% of the total value of that company's outstanding
securities. The 1940 Act's diversification requirement restricts only
outstanding voting securities of an issuer, not other classes of securities of
that issuer. However, Cash Management would continue to be subject to, and
operate in compliance with, the diversification requirements of Rule 2a-7 under
the 1940 Act as currently are, or in the future may be, in effect.
Accordingly, this Proposal will increase the amount of each Fund's assets
that may be invested in the securities of any one issuer, and with respect to
Continental Income, Bond Fund, Income Fund, Accumulative Fund, Science and
Technology, Gold & Government, High Income, High Income II, International
Growth, New Concepts and Retirement Shares, will eliminate the restriction
against holding more than 10% of any "class" of an issuer's securities. With
respect to 75% of the value of its total assets, a Fund would continue to be
prohibited from (a) investing in the securities of any one issuer in an amount
exceeding 5% of the value of the Fund's total assets, and (b) owning more than
10% of the outstanding voting securities of any one issuer. However, the Fund
would not be so restricted with respect to 25% of the value of its total assets.
Thus, for example, a Fund would be permitted to invest 25% of its total assets
in the securities of one issuer or to invest 10% of its total assets in the
securities of one issuer and 15% in the securities of another issuer.
The greater a Fund's holdings of a particular issuer, the greater the
impact that changes in the value of such securities may have on the Fund's total
investment portfolio. WRIMCO believes that the proposed amended fundamental
restriction will provide each Fund with additional flexibility in connection
with the purchase of portfolio securities, while maintaining full compliance
with the diversification requirements of the 1940 Act.
Proposed Text of Fundamental Investment Restriction: If the shareholders
of a Fund (other than Cash Management, Municipal Bond and Municipal High Income)
approve this sub-proposal 3.2, that Fund's current fundamental restriction
regarding diversification of its investments would be amended to provide that
the Fund may not:
With respect to 75% of its total assets, purchase securities of any one
issuer (other than cash items and "Government securities" as defined in the
1940 Act), if immediately after and as a result of such purchase, (a) the
value of the holdings of the Fund in the securities of such issuer exceeds
5% of the value of the Fund's total assets, or (b) the Fund owns more than
10% of the outstanding voting securities of such issuer.
Cash Management, Municipal Bond and Municipal High Income currently have
fundamental investment restrictions prohibiting the purchase of voting
securities of any issuer; therefore, if the shareholders of each of those Funds
approve this sub-proposal 3.2, that Fund's current fundamental restriction
regarding diversification of its investments would be amended to provide that
the Fund may not:
With respect to 75% of its total assets, purchase securities of any one
issuer (other than cash items and "Government securities" as defined in the
1940 Act), if immediately after and as a result of such purchase, the value
of the holdings of the Fund in the securities of such issuer exceeds 5% of
the value of the Fund's total assets.
3.3 Elimination of Fundamental Restriction Regarding Unseasoned Issuers
Funds to which this change applies: Accumulative Fund, Bond Fund, High
Income, Income Fund, Municipal Bond, New Concepts and Science and Technology.
Discussion: Companies with less than three years of continuous operation
are typically referred to as "unseasoned issuers." The purpose of the
fundamental restriction on investments in unseasoned issuers was to comply with
state securities laws and/or regulations and limit the risks associated with
investing in companies that have no proven long-term track record in business
and whose prospects are uncertain. Because of the enactment of the NSMIA, the
Funds need not comply with state blue sky laws involving investment
restrictions. If the shareholders of a Fund approve the elimination of its
current fundamental restriction regarding unseasoned issuers, each Fund (other
than High Income, New Concepts and Science and Technology) intends to implement
the operating policy described below regarding investing in unseasoned issuers;
therefore, this Proposal likely will not change the way in which the Fund is
currently managed. It will, however, clarify that each Fund's restriction on
investing in unseasoned issuers is applicable only to issuers that are not U.S.,
state or local governments or their respective agencies and instrumentalities,
or are not special purpose entities or whose securities are not guaranteed by
entities with a record of more than three years' continuous operation, including
that of predecessors.
New Non-Fundamental, Operating Policy: If this sub-proposal 3.3 is adopted
by the shareholders of a Fund, each Fund, other than High Income, New Concepts
and Science and Technology, will eliminate its current fundamental restriction
and intends to implement the following operating policy, which could be changed
by the Board of Directors of each Fund without approval of that Fund's
shareholders. This new operating policy would provide that each Fund, other
than High Income, New Concepts and Science and Technology, does not:
[C]urrently intend to purchase the securities of any issuer (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof) if, as a result, more than 5% of its total
assets would be invested in the securities of business enterprises that,
including predecessors, have a record of less than three years of
continuous operation. This restriction does not apply to any obligations
issued or guaranteed by the U.S. government, or a state or local government
authority, or their respective agencies or instrumentalities, or to
collateralized mortgage obligations, other mortgage-related securities,
asset-backed securities, indexed securities or over-the-counter derivative
financial instruments.
With respect to each of High Income, New Concepts and Science and
Technology, if this sub-proposal 3.3 is approved, the limitation on investments
in the securities of unseasoned issuers will be eliminated and will not be
replaced by the operating policy stated above. High Income seeks a high level
of current income, as a primary goal, and capital growth, as a secondary goal,
when consistent with its primary goal. High Income invests primarily in a
diversified portfolio of high-yield, high-risk, fixed-income securities, many of
which may be issued by newer or unseasoned companies. New Concepts seeks growth
through a diversified holding of securities issued primarily by new or
unseasoned companies, companies that are in their early stages of development or
smaller companies positioned in new and emerging industries where the
opportunity for rapid growth is above average. Science and Technology seeks
long-term capital growth by concentrating its investments in science and
technology securities. Many of the securities in which Science and Technology
may wish to invest are also issued by new or unseasoned companies. Therefore,
WRIMCO believes that eliminating this policy will provide these Funds with
greater flexibility in attempting to meet their stated goals.
3.4 Elimination of Fundamental Restriction Regarding Repurchase Transactions
Fund to which this change applies: Municipal Bond.
Discussion: Municipal Bond has a fundamental investment restriction that
prohibits it from engaging in repurchase transactions. WRIMCO believes that the
Fund would benefit from having the flexibility to enter into repurchase
agreements, which are commonly used by mutual funds for the short-term
investment of cash. In general, a repurchase agreement is an arrangement under
which the Fund would buy a security and the seller would simultaneously agree to
repurchase the security at a specified time and price that reflects a market
rate of interest. For certain purposes, a repurchase agreement is viewed as a
loan by a fund that is collateralized by the security which is the subject of
the transaction.
If sub-proposal 3.4 is approved by the shareholders of Municipal Bond, the
Fund will eliminate its current restriction prohibiting its use of repurchase
arrangements. The Fund's repurchase agreements will be structured so as to
fully collateralize the loans. In other words, the value of the underlying
securities, which will be held by the Fund's custodian bank or by a third party
that qualifies as a custodian under Section 17(f) of the 1940 Act, is and,
during the entire term of the agreement, will remain at least equal to the value
of the loan, including the accrued interest earned thereon. To reduce the risk
of loss if the selling party were to default on its obligation to repurchase and
the value of the underlying security declined, the Fund will enter into
repurchase agreements only with those entities such as the Fund's custodian bank
and recognized securities dealers approved by WRIMCO on the basis of criteria
established by the Board of Directors, and WRIMCO will monitor the market value
of the underlying security during the term of the agreement.
Repurchase agreements will generate taxable income to the Fund and will
accordingly be subject to the Fund's current limit on taxable income.
Repurchase agreements not terminable within seven days will be considered
illiquid and subject to the Fund's limit on illiquid investments.
3.5 Modification and/or Elimination of Fundamental Restrictions Regarding
Options, Commodities, Forward Contracts and/or Futures Contracts
Funds to which this change applies: All Funds, except Cash Management.
Discussion: Approval of this sub-proposal 3.5 by the shareholders of a
Fund would eliminate and/or modify that Fund's fundamental investment
restrictions, as follows. To the extent applicable to a Fund, the Fund's
fundamental restrictions:
(a) regarding investments in commodities and commodity contracts would be
modified;
(b) requiring that the Fund only buy and sell derivative instruments on
securities in which the Fund may invest would be eliminated;
(c) regarding the specific types and amounts of derivative instruments in
which the Fund may invest would be eliminated;
(d) regarding the percentage of the Fund's assets that can be invested in
covered calls would be eliminated;
(e) requiring that the options and futures contracts purchased and sold by
the Fund be listed on a domestic or national securities or commodities
exchange or quoted on Nasdaq would be eliminated;
(f) requiring that all call options written by the Fund be covered would
be eliminated;
(g) requiring that options on stock indices, futures contracts and options
on futures contracts be for non-speculative purposes only would be
eliminated;
(h) limiting the amount committed to the consummation of forward currency
contracts to 15% of the value of the Fund's assets would be
eliminated;
(i) providing that the Fund may not enter into forward currency contracts
or maintain a net exposure to such contracts where the consummation of
such contracts would obligate the Fund to deliver an amount of foreign
currency in excess of the value of its portfolio securities or other
assets denominated in that currency would be eliminated; and
(j) limiting the Fund's ability to enter into forward currency contracts
solely in connection with the purchase or sale of a security
denominated in a foreign currency to "lock in" the U.S. dollar price
of the security would be eliminated.
If this sub-proposal 3.5 is adopted by the shareholders of a Fund, that
Fund intends to implement a non-fundamental, operating policy, which could be
changed by the Board of Directors of the Fund without the approval of
shareholders of the Fund, regarding investment in derivative instruments for
that Fund, as described below.
In addition, with respect to Gold & Government only, the fundamental
restrictions (a) prohibiting its investment in minerals-related programs and
leases and (b) limiting its investment in gold, silver and platinum to no more
than 25% of its total assets would also be eliminated.
The primary purpose of this sub-proposal 3.5 is to authorize each Fund to
engage in certain transactions in options, futures contracts, and other
derivative instruments, which will provide the Fund greater flexibility in the
management of its investments. In addition, Gold & Government would be
permitted to invest in minerals-related programs and leases, which is currently
prohibited by its fundamental restrictions. WRIMCO believes that it is
desirable for the Funds to be able to engage in options, futures contracts and
other derivative instruments in order to enhance income or yield to hedge
portfolio positions, as may be permitted under applicable law and regulations
and in a manner that is consistent with that Fund's goal and investment
policies.
Proposed Fundamental Investment Restriction and New Non-Fundamental,
Operating Policy: The fundamental investment restrictions for each Fund (other
than Asset Strategy, Gold & Government and Government Securities) governing
options, commodities, futures contracts and other derivative instruments are
proposed to be revised (and, where a Fund currently has more than one
restriction affecting these derivatives, proposed to be consolidated and
revised) to provide as follows:
The Fund may not purchase or sell physical commodities; however, this
policy shall not prevent the Fund from purchasing and selling foreign
currency, futures contracts, options, forward contracts, swaps, caps,
collars, floors and other financial instruments.
The fundamental investment restriction for Asset Strategy governing
commodities is proposed to be revised to provide as follows:
The Fund may not purchase or sell physical commodities, except that the
Fund may purchase and sell precious metals for temporary, defensive
purposes; however, this policy shall not prevent the Fund from purchasing
and selling foreign currency, futures contracts, options, forward
contracts, swaps, caps, collars, floors and other financial
instruments.
The fundamental investment restrictions for Gold & Government governing
options, commodities, futures contracts and other derivative instruments are
proposed to be revised to eliminate any restrictions on that Fund's use of
options, futures contracts, forward contracts, swaps, caps, collars and floors
and otherwise to provide that the Fund may not:
Purchase or sell physical commodities, except that (a) it may invest in
gold, silver and platinum, (b) it may invest in minerals-related programs
and leases, and (c) this policy shall not prevent the Fund from purchasing
and selling foreign currency, futures contracts, options, forward
contracts, swaps, caps, collars, floors and other financial instruments.
The fundamental investment restrictions for Government Securities governing
options, commodities, futures contracts and other derivative instruments are
proposed to be revised (and coordinated with its current restriction limiting
the Fund's investments to U.S. Government Securities) to provide that the Fund
may not:
Purchase or sell any securities or physical commodities other than U.S.
Government Securities; however, this policy shall not prevent the Fund from
purchasing and selling (a) foreign currency if a U.S. Government Security
that the Fund owns or intends to acquire is denominated in that foreign
currency and (b) futures contracts, options, forward contracts, swaps,
caps, collars, floors and other financial instruments if the return on, or
value of, the financial instrument is based on the return on, or value of,
U.S. Government Securities.
If the shareholders of a Fund (other than Government Securities) approve
the elimination and/or modification of its fundamental restriction(s) as
proposed, that Fund intends to implement a non-fundamental, operating policy
that provides that:
Generally, the Fund may purchase and sell any type of derivative instrument
(including, without limitation, futures contracts, options, forward
contracts, swaps, caps, collars, floors and indexed securities). However,
the Fund will only purchase or sell a particular derivative instrument if
the Fund is authorized to invest in the type of asset by which the return
on, or value of, the derivative instrument is primarily measured or, with
respect to foreign currency derivatives, if the Fund is authorized to
invest in foreign securities.
In addition, if the shareholders of Gold & Government approve the
elimination and modification of its fundamental restrictions as proposed, that
Fund intends also to implement a non-fundamental, operating policy limiting its
investment in gold, silver and platinum to 25% of its total assets.
3.6 Elimination of Fundamental Restrictions Regarding Mortgaging or Pledging
Securities
Funds to which this change applies: All Funds, except Asset Strategy, Cash
Management, Government Securities, Municipal Bond and New Concepts.
Discussion: The primary purpose of this sub-proposal 3.6 is to permit the
Funds to mortgage or pledge their respective securities or other assets under
certain circumstances. If sub-proposal 3.6 is approved by the shareholders of a
Fund, that Fund intends to implement a non-fundamental, operating policy that
would prohibit the pledging of assets in connection with borrowings and would
make clear that assets deposited or segregated in connection with transactions
in options, futures contracts, forward contracts, swaps and other derivative
instruments are not subject to the restriction.
New Non-Fundamental, Operating Policy: If this sub-proposal 3.6 is
approved by the shareholders of a Fund, that Fund will eliminate its current
fundamental investment restriction regarding mortgaging or pledging securities
or other assets and will implement the following non-fundamental, operating
policy, which could be changed by the Board of Directors of the Fund without the
approval of the shareholders of that Fund. The non-fundamental, operating
policy would provide that the Fund may not:
Pledge its assets in connection with any permitted borrowings. However,
this policy does not prevent the Fund from pledging its assets in
connection with its purchase and sale of futures contracts, options,
forward contracts, swaps, caps, collars, floors and other financial
instruments.
3.7 Modification of Fundamental Restriction Regarding Margin Purchases of
Securities
Funds to which this change applies: All Funds, except Cash Management.
Discussion: Margin purchases involve the purchase of securities with money
borrowed from a broker. "Margin" is the cash or eligible securities that the
borrower places with the broker as collateral to secure the loan. Pursuant to
its current fundamental restriction(s), each Fund is prohibited from purchasing
securities on margin. With some exceptions, mutual funds are prohibited from
entering into most types of margin purchases by applicable rules and policies
adopted by the SEC. If this sub-proposal 3.7 is approved by the shareholders of
a Fund, the Fund intends to implement a revised fundamental investment
restriction (set forth below) that permits the Fund to purchase securities on
margin under certain circumstances and makes clear that short-term credits
necessary for the clearance of transactions and margin payments and other
deposits made in connection with options, futures contracts, forward contracts,
swaps and other derivative instruments are not considered purchasing securities
on margin.
Proposed Fundamental Investment Restriction: Each Fund's fundamental
investment restriction is proposed to be revised to prohibit margin purchases
except under conditions permitted by applicable SEC rules and would clarify that
the Fund may make margin payments in connection with options, futures contracts
and other financial instruments. The proposed fundamental investment
restriction would provide that each Fund may not:
Purchase securities on margin, except that the Fund may obtain such short-
term credits as are necessary for the clearance of transactions and that
the Fund may make margin payments in connection with futures contracts,
options, forward contracts, swaps, caps, collars, floors and other
financial instruments.
3.8 Modification of Fundamental Restriction Regarding Short Sales of Securities
Funds to which this change applies: All Funds, except Cash Management.
Discussion: In a short sale, an investor sells a borrowed security and has
a corresponding obligation to the lender to return the identical security. In
an investment technique known as a short sale "against the box," an investor
sells securities short while owning the same securities in the same amount, or
having the right to obtain equivalent securities. The investor could have the
right to obtain equivalent securities, for example, through its ownership of
warrants, options or convertible bonds.
The fundamental restriction, as it is proposed to be modified, would permit
the Fund to engage in short sales of securities against the box. In addition,
the revised fundamental restriction would clarify that options, futures
contracts, swaps, forward contracts and other financial instruments are not
considered short sales.
Proposed Fundamental Investment Restriction: Each Fund's fundamental
investment restriction on short selling is proposed to be revised to provide
that a Fund may not:
Sell securities short (unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short); however, this
policy does not prevent the Fund from entering into short positions in
foreign currency, futures contracts, options, forward contracts, swaps,
caps, collars, floors and other financial instruments.
3.9 Elimination of Fundamental Restriction Regarding Foreign Currencies
Funds to which this change applies: Gold & Government, International Growth
and New Concepts.
Discussion: If this sub-proposal 3.9 is approved by the shareholders of a
Fund, that Fund will eliminate its current fundamental restriction that provides
that the Fund may only hold foreign currency in connection with forward
contracts for up to four business days, and/or in connection with the purchase
or sale of foreign securities. The Fund intends instead to operate in
accordance with the fundamental restriction and operating policy as proposed in
sub-proposal 3.5 above.
3.10 Elimination of Fundamental Restriction Regarding Investment in Warrants and
Rights
Funds to which this change applies: Accumulative Fund, Bond Fund,
Continental Income, High Income, High Income II, Income Fund, International
Growth, New Concepts, Retirement Shares, Science and Technology and Vanguard.
Discussion: If this sub-proposal 3.10 is approved by the shareholders of a
Fund, that Fund will eliminate its current fundamental restriction regarding
investment in warrants and rights. Each Fund will then have the ability to
invest in warrants and rights without a percentage limitation. Each Fund
intends, however, to operate in accordance with the proposed fundamental
restriction and new non-fundamental, operating policy as proposed in sub-
proposal 3.5 above.
3.11 Elimination of Fundamental Restriction Regarding Purchasing Call
Options
Funds to which this change applies: International Growth, New Concepts,
Retirement Shares and Vanguard.
Discussion: If this sub-proposal 3.11 is approved by the shareholders of a
Fund, that Fund will eliminate its current fundamental restriction that provides
that the Fund may purchase calls only to close out its position in a call that
that Fund has written. The Fund intends to operate in accordance with the
fundamental restriction and operating policy as proposed in sub-proposal 3.5
above.
3.12 Elimination of Fundamental Restriction Regarding Arbitrage Transactions
Funds to which this change applies: Accumulative Fund, Bond Fund,
Continental Income, Gold & Government, Government Securities, High Income, High
Income II, Income Fund, International Growth, Municipal Bond, Municipal High
Income, New Concepts, Retirement Shares, Science and Technology and Vanguard.
Discussion: If this sub-proposal 3.12 is approved by the shareholders of a
Fund, that Fund will eliminate its current fundamental restriction that provides
that the Fund may not engage in arbitrage transactions. The Fund intends to
operate in accordance with the proposed fundamental restriction and new non-
fundamental, operating policy as proposed in sub-proposal 3.5 above.
3.13 Elimination of Fundamental Restriction Regarding Indexed Securities
Fund to which this change applies: Government Securities.
Discussion: If this sub-proposal 3.13 is approved by the shareholders of
Government Securities, that Fund will eliminate its current fundamental
restriction that provides that the Fund may invest in indexed securities only if
they are issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and intends to replace the fundamental policy with a non-
fundamental, operating policy to the same effect. In addition, the Fund intends
to operate in accordance with the proposed fundamental restriction and new, non-
fundamental operating policy set forth in sub-proposal 3.5 above.
3.14 Elimination of Fundamental Restriction Regarding Investments in Issuers
Whose Securities are Owned by Certain Persons
Funds to which this change applies: All Funds, except Government
Securities.
Discussion: Each Fund (other than Government Securities) currently has a
fundamental investment restriction that prohibits it from purchasing or holding
the securities of an issuer if the officers and directors of the Fund and/or
WRIMCO who beneficially own more than 1/2 of 1% of the securities of that issuer
together own beneficially more than 5% of the securities of that issuer. This
restriction was originally adopted to address state securities law requirements
in connection with the registration of Fund shares for sale in that state. Since
the effectiveness of NSMIA, these state restrictions no longer apply.
WRIMCO believes that this fundamental investment restriction should be
eliminated. Although this restriction has not precluded Fund investments in the
past, elimination of the restriction will potentially increase WRIMCO's
flexibility when selecting investments for a Fund in the future. The ability of
a Fund to invest in companies in which its Directors and officers, or its
affiliates and their directors and officers, hold interests would continue to be
restricted by the 1940 Act, whether or not the current fundamental investment
restriction is eliminated.
3.15 Modification of Fundamental Policy Regarding Loans
Funds to which this change applies: All Funds.
Discussion: Each of these Funds currently has a fundamental investment
restriction that, in general, prohibits the Fund from making loans. Certain of
these restrictions expressly exclude from the prohibition debt securities that
"have been sold to the public," as well as "other obligations customarily
acquired by institutional investors." For Asset Strategy, this exception
applies to "a portion of an issue of debt securities." For Cash Management,
Government Securities, Municipal Bond and Municipal High Income, the exception
refers to the types of securities that the Fund is permitted to purchase or in
which the Fund may otherwise invest.
To eliminate any ambiguity or potential disparity in interpretation of the
scope of these exceptions, each Fund's fundamental restriction regarding its
ability to make loans is proposed to be modified to make clear that the Fund may
buy "debt securities and other obligations consistent with its goal and its
other investment policies and restrictions."
Required Vote. Approval of each of the numbered changes contemplated by
Proposal 3 with respect to a Fund requires the affirmative vote of a "majority
of the outstanding voting securities" of that Fund, which for this purpose means
the affirmative vote of the lesser of (1) 67% or more of the shares of the Fund
present at the Meeting or represented by proxy if more than 50% of the
outstanding shares of the Fund are so present or represented or (2) more than
50% of the outstanding shares of the Fund.
If one or more of the numbered changes contemplated by Proposal 3 is not
approved by shareholders of that Fund, the related existing fundamental
restriction(s) of the Fund will continue in effect for that Fund, but
disapproval of all or part of Proposal 3 by the shareholders of one Fund will
not affect any approvals of Proposal 3 that are obtained with respect to any
other Fund.
THE BOARDS OF DIRECTORS RECOMMEND THAT YOU VOTE FOR PROPOSALS 3.1 THROUGH 3.15,
INCLUSIVE.
PROPOSAL 4: APPROVAL OF CHANGE TO
GOAL OF ASSET STRATEGY
Relevant Company: Asset Strategy.
Discussion: Proposal 4 is to approve the recommendation of WRIMCO and the
Board of Directors of Asset Strategy to change the Fund's goal from seeking
"high total return with reduced risk over the long term" to "high total return
over the long term."
Under the Fund's current investment policy, which is non-fundamental and by
which the Fund seeks to achieve its goal, the Fund's assets are allocated among
the following classes, or types, of investments. The stock class includes
equity securities of all types. The bond class includes all varieties of fixed-
income instruments with maturities of more than three years (including
adjustable rate preferred stocks). The short-term class includes all types of
short-term instruments with remaining maturities of three years or less.
WRIMCO has the ability to allocate the Fund's assets among these classes
within specified ranges. The Fund's mix indicates the benchmark for its
combination of investments in each class over time. WRIMCO may change the mix
within the specified ranges from time to time. Under normal circumstances, a
single reallocation will not involve more than 10% of the Fund's total assets.
The range and approximate percentage of the mix for each asset class are shown
below.
Mix Range
--------- ------
Stock class 10-60%
40%
Bond class 20-60%
40%
Short-term class 0-70%
20%
WRIMCO believes that it is desirable to modify the specified range and mix
for each asset class and that the Fund's goal, as it is proposed to be modified,
would be more consistent with the desired range and mix than the current goal.
In particular, if this Proposal 4 is approved by the shareholders of Asset
Strategy, the Fund intends to (i) eliminate the operating policy regarding the
10% reallocation, and (ii) revise the specified ranges and mix as follows:
Mix Range
--------- ------
Stock class 0-100%
70%
Bond class 0-100%
25%
Short-term class 0-100%
5%
WRIMCO seeks to balance the investment risks undertaken by the Fund against
the higher total returns that may be available by reducing exposure to the stock
market during down cycles and allowing a higher allocation in the stock class
during periods of strongly positive market performance. The Fund has the
ability to take a more defensive posture by increasing its holdings in the bond
or short-term class when WRIMCO believes that there exists a potential bear
market, prolonged downturn in stock prices or significant loss in value.
The proposed change to the Fund's goal does not reflect any current or
contemplated change to any other investment policies of the Fund other than
those described above, and it is not intended to reflect any change in the level
of risk associated with an investment in the Fund. If the Proposal is not
approved, the goal will remain unchanged.
Required Vote: Approval of this Proposal 4 requires the affirmative vote
of a "majority of the outstanding voting securities" of the Fund, which for this
purpose means the affirmative vote of the lesser of (1) 67% or more of the
shares of the Fund present at the Meeting or represented by proxy if more than
50% of the outstanding shares of the Fund are so present or represented or (2)
more than 50% of the outstanding shares of the Fund.
THE BOARD OF DIRECTORS OF ASSET STRATEGY RECOMMENDS THAT YOU VOTE
FOR PROPOSAL 4.
PROPOSAL 5: APPROVAL OF CHANGE TO GOAL OF
INCOME FUND BY ADDING A SECONDARY GOAL
Relevant Fund: Income Fund.
Discussion: Proposal 5 is to approve the recommendation of WRIMCO and the
Board of Directors of United Funds, Inc. to change Income Fund's goal from "The
Fund seeks to maintain current income, subject to market conditions" to "The
Fund seeks, as a primary goal, to maintain current income, subject to market
conditions. As a secondary goal, the Fund seeks capital growth."
Income Fund currently invests primarily in common stocks, or securities
convertible into common stocks, of companies that have the potential for capital
growth or that may be expected to resist market decline. At least 65% of the
Fund's total assets are invested, during normal market conditions, in income
producing securities. WRIMCO believes that it would be desirable for the Fund,
while maintaining its primary objective of providing current income, also to
seek capital growth. Accordingly, if this Proposal 5 is approved by the
shareholders of Income Fund, the Fund intends to revise this investment strategy
to provide that Income Fund seeks to achieve these goals through investment in
common stocks, or securities convertible into common stocks, of companies that
have a record of paying regular dividends on common stock or have the potential
for capital appreciation. If the Proposal is not approved, the goal will remain
unchanged.
Required Vote: Approval of this Proposal 5 requires the affirmative vote
of a "majority of the outstanding voting securities" of the Fund, which for this
purpose means the affirmative vote of the lesser of (1) 67% or more of the
shares of the Fund present at the Meeting or represented by proxy if more than
50% of the outstanding shares of the Fund are so present or represented or (2)
more than 50% of the outstanding shares of the Fund.
THE BOARD OF DIRECTORS OF UNITED FUNDS, INC. RECOMMENDS THAT YOU VOTE
FOR PROPOSAL 5.
PROPOSAL 6: ELIMINATION OF FUNDAMENTAL RESTRICTION REGARDING REMAINING MATURITY
OF SECURITIES
Relevant Company: Cash Management.
Discussion: The main purpose of this proposal is to conform the Fund's
investment policy regarding the remaining maturity of securities to the
applicable requirements of Rule 2a-7 (the "Rule") promulgated under the 1940
Act. The Rule defines the quality, maturity, and diversification criteria to be
used by investment advisers in selecting investments for money market funds. To
the extent that criteria specified in the Rule are narrower than the Fund's
fundamental investment policies, WRIMCO observes the narrower criteria specified
in the Rule. To the extent that criteria specified in the Rule are broader than
the Fund's fundamental investment policies, WRIMCO observes the narrower
criteria specified in the Fund's fundamental policies.
The Rule is broader than the Fund's current fundamental restriction
regarding the permissible remaining maturity of the Fund's portfolio securities.
As a matter of fundamental policy, the Fund limits its investments to securities
with remaining maturities of one year or less. Generally, the extended maturity
limit of 397 days under the Rule accommodates money market funds, such as the
Fund, that purchase securities on a when-issued or delayed-delivery basis and
clarifies money market funds' ability to make commitments in connection with the
remarketing of certain obligations, and permits the purchase of long-term bonds
during the final 13 months of their maturity. Eliminating the Fund's
fundamental policy limiting the remaining maturity to one year and replacing it
with a less restrictive, non-fundamental policy (i.e., permitting remaining
maturity of up to 397 days) will not materially change the way the Fund is
currently managed.
New Non-Fundamental, Operating Policy: If this proposal 6 is approved by
the shareholders, the Fund will implement the following non-fundamental,
operating policy:
In accordance with Rule 2a-7, the Fund may invest in securities with a
remaining maturity of not more than 397 calendar days.
If the Proposal is not approved, the policy will remain unchanged.
Required Vote: Approval of this Proposal 6 requires the affirmative vote
of a "majority of the outstanding voting securities" of Cash Management, which
for this purpose means the affirmative vote of the lesser of (1) 67% or more of
the shares of the Fund present at the Meeting or represented by proxy if more
than 50% of the outstanding shares of the Fund are so present or represented or
(2) more than 50% of the outstanding shares of the Fund.
THE BOARD OF DIRECTORS OF CASH MANAGEMENT RECOMMENDS THAT YOU VOTE FOR PROPOSAL
6.
PROPOSAL 7: AMENDMENT OF THE SERVICE PLAN PURSUANT TO
RULE 12b-1 UNDER THE 1940 ACT
Relevant Companies: All Companies, except Cash Management.
Discussion: The Board of Directors of each Company except Cash Management
has approved the amendment of the Fund's current Service Plan pursuant to Rule
12b-1 under the 1940 Act with respect to Class A shares of the Fund ("Current
Plan") to change the Current Plan into a distribution and service plan pursuant
to Rule 12b-1 ("Proposed Plan"), subject to the approval of the Class A
shareholders of the Fund. The Proposed Plan was approved on April 23, 1997, by
the unanimous votes of the full Board and of the Directors who are not
interested persons of the Company and have no financial interest in the
operation of the Proposed Plan or any related agreement ("Independent Plan
Directors") cast in person at a meeting called for that purpose.
The Proposed Plan broadens the range of activities that a Fund may support
but does not change the total amount of fees that the Fund may pay. Under each
Proposed Plan, the applicable Fund would be authorized to pay W&R a distribution
fee or a service fee, or a combination of the two, that, in the aggregate, does
not exceed .25% of the Fund's Class A average annual net assets. A copy of the
Proposed Plan, marked to reflect changes from the Current Plan, is attached to
this Proxy Statement as Exhibit F.
Description of the Current Plan and Existing Distribution and Service
Arrangements: Currently, W&R provides distribution services as the Fund's
principal underwriter, for which it receives the front-end sales charges
applicable to purchases of Class A shares of the Fund. In addition, each Fund
has adopted the Current Plan under which the Fund may pay W&R a service fee of
up to .25% of the Fund's Class A average annual net assets. This service fee is
to reimburse W&R for the provision, by W&R, its affiliated companies and/or
broker-dealers who sell Fund shares, of personal services to shareholders and/or
for actions taken to encourage the maintenance of Class A shareholder accounts.
Payments are made under the Current Plan pursuant to a Service Agreement between
W&R and the Fund.
Under the Service Agreement, W&R may, through compensation arrangements,
training, support and other means, cause appropriate W&R personnel to maintain
personal contact with the Class A shareholders of the Fund and to provide
services that may include the provision of information and explanations
concerning Class A shareholders' investments in the Fund, shareholders' rights
and privileges, and the status of those shareholders' Fund accounts, assistance
in the handling of transactions and similar services. Additionally, W&R may
increase the services provided to Fund Class A shareholders by office personnel
located at its branch offices and engage in such other activities as W&R deems
appropriate and useful to provide personal services to Class A shareholders of
the Fund and/or to maintain Class A shareholder accounts. The Current Plan also
contemplates that W&R may pay a portion of the service fee it receives from the
Fund to other broker-dealers who regularly sell Class A shares of the Fund to
compensate such other broker-dealers for providing services to Class A
shareholders and/or maintaining Class A shareholder accounts. To date, W&R has
not entered into any such arrangements with other broker-dealers with respect to
Class A shares for any of the Funds.
The Current Plan requires that W&R furnish to the Board of Directors of the
Fund, at least quarterly, a written report of the amounts expended pursuant to
the Current Plan and the purposes for which such expenditures were made. While
the Current Plan is in effect, the selection and nomination of the directors who
are not interested persons of the Fund are committed to the discretion of the
Independent Directors.
The Current Plan may be terminated at any time, without penalty, by the
vote of a majority of the Independent Plan Directors or by a vote of a majority
of the outstanding Class A shares of the Fund. The Current Plan may be amended
by a vote of the Directors, including a vote of the Independent Plan Directors,
cast in person at a meeting called for that purpose. Any material amendment to
the Current Plan, including any amendments to increase materially the amount of
the fees a Fund is authorized to pay thereunder, requires the approval of the
Fund's Class A shareholders.
In accordance with its terms, the Current Plan of each Fund, other than
Asset Strategy, was approved initially on October 1, 1993, by a majority of the
applicable Fund's Class A shareholders. The Current Plan for Asset Strategy was
approved by its initial shareholder on March 9, 1995. The Current Plan remains
in effect from year to year provided such continuance is approved annually by a
vote of the Fund's Directors, including a majority of the Independent Plan
Directors, cast in person at a meeting called for the purpose of voting on such
continuance. The continuance of the Current Plan for each Fund, other than
Asset Strategy, was most recently approved by the Directors, including the
Independent Plan Directors, cast in person at a meeting called for this purpose
on August 28, 1996. Continuance of the Current Plan for Asset Strategy was so
approved on February 5, 1997.
As of the end of its last fiscal year, each Fund paid W&R the following
service fees with respect to the Class A shares:
Service Fees Paid
Fiscal Year Ended 1996
% of Average
Amount Net Assets
Asset Strategy
(fiscal year ends September 30) 0.18%
United Funds, Inc.
Bond Fund 0.14
Income Fund 0.15
Accumulative Fund 0.13
Science and Technology 0.15
(fiscal year ends December 31)
Gold & Government
(fiscal year ends December 31) 0.25
High Income II
(fiscal year ends September 30) 0.15
International Growth
(fiscal year ends June 30) 0.16
Municipal Bond
(fiscal year ends September 30) 0.13
Municipal High Income
(fiscal year ends September 30) 0.14
Retirement Shares
(fiscal year ends June 30) 0.15
Vanguard Fund
(fiscal year ends September 30) 0.16
Service Fees Paid
Fiscal Year Ended March 31, 1997
% of Average
Amount Net Assets
Continental Income 0.16%
Government Securities 0.16
High Income 0.14
New Concepts 0.18
Since the inception of each Current Plan, W&R has not sought reimbursement
for all of the costs and expenses it incurred in providing services under the
Current Plan.
Description of the Proposed Plan
The terms and conditions of the Proposed Plan are identical to the terms
and conditions of the Current Plan, except: (a) as appropriate to authorize the
Fund's payment for distribution services by W&R and/or other broker-dealers who
sell Class A shares of the Fund; and (b) to remove references to the Service
Agreement under which service fees are paid under the Current Plan but which is
not necessary for implementation of the Proposed Plan. Amendment of each Fund's
Current Plan as provided in the Proposed Plan will provide the Fund with the
flexibility to pay W&R either a "distribution fee" to finance the distribution
of the Fund's Class A shares or a "service fee" for the provision of personal
services to Class A shareholders and/or the maintenance of Class A shareholder
accounts, or a combination of these distribution and service fees.
The Proposed Plan provides that the applicable Fund may pay W&R a
distribution fee and/or service fee that, in the aggregate, does not exceed on
an annual basis .25 of 1% of the Fund's Class A average annual net assets, the
same limit as in the Current Plan. Each Fund's expenditures under the Current
Plan have been equal to or less than the maximum permitted. W&R anticipates
that, for some period of time, this same level of expenditures will continue
under the Proposed Plan. W&R will notify the Board of Directors of the Fund if
expenditures under the Proposed Plan are anticipated to increase from the
current level.
Under the Proposed Plan, W&R expects to provide the same personal services
to Class A shareholders and/or the maintenance of Class A shareholders' accounts
provided under the Current Plan. The distribution services that W&R may provide
include, but are not limited to, the printing and mailing of prospectuses and
sales material to prospective investors in Class A shares of the Fund, training
of sales personnel, advertising and other promotional activities, including
compensating other broker-dealers who sell Fund Class A shares for their
distribution services.
For purposes of the Proposed Plan and the application of Rule 2830 of the
National Association of Securities Dealers, Inc. ("NASD") Conduct Rules, the
"distribution fee" may be considered a sales charge that is deducted from the
Class A net assets of the Fund and does not include the service fee. The
"service fee" is a payment for personal services and/or the maintenance of
shareholder accounts, as defined pursuant to Rule 2830 of the Conduct Rules
(formerly Article III, Section 26(b) of the NASD Rules of Fair Practice, which
is referred to in the Current Plan). If the NASD adopts a definition of a
"service fee" for purposes of Rule 2830 that differs from the definition of
"service fee" as used in the Proposed Plan, or if the NASD adopts a related
definition intended to define the same concept, the definition of "service fee"
will be amended to conform to the NASD definition.
Director Consideration of the Plan
Prior to approving the amendment of the Current Plan to change it into the
Proposed Plan, the Board of Directors of each Fund, including the Independent
Plan Directors, reviewed detailed information relating to the Proposed Plan.
Each Board consulted with independent counsel. Among other matters each Board
considered with respect to the Class A shares of the applicable Fund were:
1. the level and consistency of personal services and/or maintenance of
shareholder accounts provided to Class A shareholders since the
adoption of the Current Plan;
2. the extent to which W&R's provision of personal services and/or
maintenance of shareholder accounts have resulted in increased
shareholder satisfaction and reduced redemptions;
3. whether the payment of a distribution fee in addition to or in lieu of
a service fee would adversely affect W&R's provision of personal
services and/or maintenance of Class A shareholder accounts and result
in decreased shareholder satisfaction and increased redemptions;
4. whether the flexibility to reimburse W&R for expenses incurred in
connection with the distribution of the Fund's Class A shares under
the Proposed Plan would result in a further retention of Class A
assets and increased sales of Class A shares;
5. the benefits to the Class A shares of the Fund from W&R's and its
affiliates' ability to attract and retain a professional staff to
provide distribution services and personal services to Class A
shareholders and/or maintenance of Class A shareholder accounts that
may not be present if Fund Class A assets were declining;
6. the cost to the Class A Fund shareholders for W&R to provide the
distribution services and personal services to Class A shareholders
and/or maintenance of Class A shareholder accounts under the Proposed
Plan and the effect on the performance of Class A shareholder
investments over various periods of time;
7. the mutual fund industry's practices in the past several years of
adopting and maintaining plans similar to the Proposed Plan;
8. the benefits to W&R's affiliates whose fees for providing investment
management and transfer agency services to the Fund are based on the
level of the Fund's Class A net assets and the number of its
shareholder accounts, if distribution services under the Proposed Plan
result in increased sales of the Fund's Class A shares;
9. the benefits to W&R in receiving payment for certain distribution-
related activities that it may now provide without reimbursement;
10. the competitive benefits associated with the adoption of a plan that
is substantially the same as that currently in effect for Waddell &
Reed Funds, Inc., Class B shares, particularly with respect to the
maintenance of a comparable incentive and compensation structure for
W&R and its affiliates in connection with the distribution of Class A
shares and the provision of shareholder services; and
11. the merits of possible alternatives to the Proposed Plan.
Following its consideration, the Board of Directors of each Fund, including
the Independent Plan Directors, concluded that the fees payable by that Fund
pursuant to the Proposed Plan were reasonable in view of the services that would
be provided by W&R and the benefits of the Proposed Plan to the Fund. The
Directors of each Fund, including the Independent Plan Directors, determined
that the implementation of the Proposed Plan would be in the best interests of
the applicable Fund and would have a reasonable likelihood of benefiting the
Fund and its Class A shareholders. The Directors, however, recognized that
there was no assurance that the benefits sought pursuant to the Proposed Plan
would be achieved nor when or in what period of time the benefits might be
realized.
If this Proposal is not approved by the Class A shareholders of a Fund, the
Current Plan will remain in effect for that Fund. The Board of Directors may
also consider such further action as may be appropriate, and W&R has advised
each Fund that, if the Proposed Plan is not approved, it may consider the
development of a modified Proposed Plan for presentation to the Fund.
Required Vote: The adoption of the Proposed Plan by each Fund with respect
to its Class A shares requires the favorable vote of the holders of a majority
of the Fund's outstanding Class A shares, which, as defined in the 1940 Act, is
the affirmative vote of the lesser of: (a) 67% or more of the Fund's Class A
shares present at the Meeting or represented by proxy if the holders of more
than 50% of the outstanding Class A shares are so present or represented; or (b)
more than 50% of the Fund's outstanding Class A shares.
THE BOARDS OF DIRECTORS RECOMMEND THAT YOU
VOTE FOR PROPOSAL 7.
ADDITIONAL INFORMATION
The solicitation of proxies, the cost of which will be borne by the Funds,
will be made primarily by mail, telephone or oral communications by
representatives of each Fund, regular employees and sales representatives of
W&R, W&R's affiliates, certain broker-dealers (who may be specifically
compensated for such services), or by representatives of Management Information
Services Corp., professional proxy solicitors, retained by the Funds who will be
paid the following approximate fees for soliciting services set forth below.
Each Fund will pay this firm for its share of the fees and out-of-pocket
expenses for proxy solicitation. Each Fund will pay a portion of the costs of
the Meeting, including the costs of solicitation, allocated on the basis of the
number of shareholder accounts of each Fund.
Soliciting Fees
and Expenses
Fund (Approximate)
Asset Strategy $ 160
Cash Management 2,472
Continental Income 1,535
United Funds, Inc.
Income Fund 11,824
Bond Fund 1,268
Accumulative Fund 2,754
Science and Technology 4,162
Gold & Government Fund 291
Government Securities 455
High Income 1,904
High Income II 948
International Growth 4,127
Municipal Bond 1,097
Municipal High Income 570
New Concepts 3,146
Retirement Shares 1,810
Vanguard 4,828
RECEIPT OF SHAREHOLDER PROPOSALS
As a general matter, the Funds do not hold regular annual or other meetings
of shareholders. Any shareholder who wishes to submit proposals to be
considered at a special meeting of a Fund's shareholders should send such
proposals to the Fund at 6300 Lamar Avenue, P.O. Box 29217, Shawnee Mission,
Kansas 66201-9217.
OTHER BUSINESS
No Fund knows of any other business to be presented at the Meeting other
than the matters set forth in this Proxy Statement. If any other matter or
matters are properly presented for action at the Meeting, the proxy holders will
vote the shares which the proxy cards entitle them to vote in accordance with
their judgment on such matter or matters. By signing and returning your proxy
card, you give the proxy holders discretionary authority as to any such matter
or matters.
May 22, 1997 By order of the Boards of Directors,
Sharon K. Pappas, Secretary
<PAGE>
INDEX TO EXHIBITS TO PROXY STATEMENT
Exhibit A--Number of Outstanding Shares of Each Fund...................A-1
Exhibit B--Beneficial Ownership of Greater than 5% of Fund Shares......B-1
Exhibit C--Fund Ownership of Nominees and Current Board Members........C-1
Exhibit D--Summary of Futures Contracts, Options, Forward..............D-1
Contracts, Swaps, Caps, Collars, Floors and
Indexed Securities
Exhibit E--Existing Fundamental Restrictions Proposed to be............E-1
Modified or Eliminated
Exhibit F--Form of Distribution and Service Plan.......................F-1
<PAGE>
EXHIBIT A
NUMBER OF OUTSTANDING SHARES OF EACH FUND
Shares Outstanding
as of
Fund Record Date
Asset Strategy
Class A 5,094,550
Class Y 53,562
Cash Management
Class A 491,422,770
Class B 7,876,087
Continental Income
Class A 22,187,496
Class Y 273,656
Gold & Government
Class A 3,123,657
Class Y 57,635
Government Securities
Class A 24,612,301
Class Y 127,487
High Income
Class A 106,743,891
Class Y 336,383
High Income II
Class A 89,826,900
Class Y 349,051
International Growth
Class A 92,205,817
Class Y 627,605
Municipal Bond
Class A 134,301,885
Class Y 0
Municipal High Income
Class A 78,439,223
Class Y 0
New Concepts
Class A 37,013,416
Class Y 568,389
Retirement Shares
Class A 77,623,199
Class Y 342,199
United Funds, Inc.
Accumulative Fund
Class A 163,436,206
Class Y 348,783
Bond Fund
Class A 82,879,223
Class Y 667,582
Income Fund
Class A 148,460,000
Class Y 6,410,539
Science and Technology Fund
Class A 42,516,676
Class Y 150,707
Vanguard
Class A 166,013,585
Class Y 588,678
<PAGE>
EXHIBIT B
BENEFICIAL OWNERSHIP OF GREATER THAN 5% OF A FUND OR CLASS A OF A FUND
Number and Percentage
of Shares Beneficially Owned
Name and Address Fund and Class Thereof as of April 30,
1997
NONE
<PAGE>
EXHIBIT C
FUND OWNERSHIP OF ANY CLASS OF NOMINEES AND CURRENT BOARD MEMBERS
No. of Shares Held
as of
April 30, 19971
United
United United Science and United
Income Accumulative Technology Bond
Name of Nominee Fund Fund Fund Fund
- -------------- ----- ------- --------- ------
Henry L. Bellmon 248 0 0 0
Dodds I. Buchanan 4,021 2,351 0 3,014
James M. Concannon 563 0 0 0
John A. Dillingham 0 0 0 0
Linda Graves 0 0 0 0
John F. Hayes 3,486 0 0 0
Glendon E. Johnson 0 0 0 0
William T. Morgan 27,579 0 0 0
Ronald K. Richey 0 0 0 0
William L. Rogers 0 0 0 0
Frank J. Ross, Jr. 223 0 0 0
Eleanor B. Schwartz 0 0 0 0
Keith A. Tucker 0 0 0 0
Frederick Vogel III 1,467 4,336 829 241
Paul S. Wise 1,850 0 278 0
All Directors and
executive officers
as a group* 47,992* 6,687* 5,106* 3,255*
*Less than 1% of the outstanding shares of the Fund
1Unless otherwise stated, as of the date indicated, each Director had sole
voting and investment power of shares owned.
<PAGE>
United United United United
Asset Cash Continental Gold &
Strategy Management Income Government
Name of Nominee Fund, Inc. Inc. Fund, Inc. Fund, Inc.
- --------------- --------- -------- ---------- ----------
Henry L. Bellmon 0 0 0 0
Dodds I. Buchanan 0 38,031 0 0
James M. Concannon 0 0 0 0
John A. Dillingham 0 0 0 0
Linda Graves 0 38,312 0 0
John F. Hayes 0 0 0 0
Glendon E. Johnson 0 0 0 0
William T. Morgan 0 9,672 0 0
Ronald K. Richey 0 1,130,678 0 0
William L. Rogers 0 0 0 0
Frank J. Ross, Jr. 0 0 0 0
Eleanor B. Schwartz 0 0 0 0
Keith A. Tucker 0 66,879 0 0
Frederick Vogel III 147 58,828 0 0
Paul S. Wise 0 15,382 0 0
All Directors and
executive officers
as a group* 147* 2,227,236* 0* 0*
*Less than 1% of the outstanding shares of the Fund
<PAGE>
United United United United
Government High High Income International
Securities Income Fund II, Growth
Name of Nominee Fund, Inc. Fund, Inc. Inc. Fund, Inc.
- --------------- --------- --------- --------- ------------
Henry L. Bellmon 0 0 0 0
Dodds I. Buchanan 0 7,681 0 0
James M. Concannon 0 0 0 0
John A. Dillingham 0 0 0 0
Linda Graves 4,986 0 0 0
John F. Hayes 0 0 0 0
Glendon E. Johnson 0 0 0 0
William T. Morgan 0 64,398 285,883 90,245
Ronald K. Richey 0 0 0 0
William L. Rogers 0 0 0 0
Frank J. Ross, Jr. 0 0 0 294
Eleanor B. Schwartz 0 0 0 0
Keith A. Tucker 0 0 0 645
Frederick Vogel III 14,169 0 0 0
Paul S. Wise 0 0 0 1,592
All Directors and
executive officers
as a group* 19,155* 72,079* 285,883* 122,893*
*Less than 1% of the outstanding shares of the Fund
<PAGE>
United United United United
Municipal Municipal New Retirement
Bond High Income Concepts Shares,
Name of Nominee Fund, Inc. Fund, Inc. Fund, Inc. Inc.
- --------------- --------- ----------- ---------- -------
Henry L. Bellmon 0 0 0 0
Dodds I. Buchanan 0 14,890 3,550 3,401
James M. Concannon 0 0 0 0
John A. Dillingham 0 0 813 0
Linda Graves 125,246 0 0 0
John F. Hayes 0 0 0 0
Glendon E. Johnson 0 0 0 0
William T. Morgan 0 181,108 0 0
Ronald K. Richey 0 0 0 2,336
William L. Rogers 0 0 0 0
Frank J. Ross, Jr. 0 451 0 0
Eleanor B. Schwartz 0 0 0 0
Keith A. Tucker 0 0 967 0
Frederick Vogel III 0 0 607 0
Paul S. Wise 0 0 1,390 0
All Directors and
executive officers
as a group* 139,743* 196,449* 199,780* 5,737*
*Less than 1% of the outstanding shares of the Fund
<PAGE>
United
Vanguard
Name of Nominee Fund, Inc.
- --------------- ----------
Henry L. Bellmon 0
Dodds I. Buchanan 0
James M. Concannon 0
John A. Dillingham 0
Linda Graves 9,931
John F. Hayes 0
Glendon E. Johnson 0
William T. Morgan 0
Ronald K. Richey 0
William L. Rogers 0
Frank J. Ross, Jr. 0
Eleanor B. Schwartz 0
Keith A. Tucker 0
Frederick Vogel III 1,000
Paul S. Wise 0
All Directors and
executive officers
as a group* 20,574*
*Less than 1% of the outstanding shares of the Fund
<PAGE>
EXHIBIT D
SUMMARY OF FUTURES CONTRACTS, OPTIONS, FORWARD CONTRACTS, SWAPS, CAPS, COLLARS,
FLOORS AND INDEXED SECURITIES
Futures Contracts
When a Fund purchases a futures contract, it incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
U.S. futures contracts are traded on exchanges that have been designated
"contract markets" by the Commodity Futures Trading Commission ("CFTC") and must
be executed through a futures commission merchant ("FCM"), or brokerage firm,
which is a member of the relevant contract market. Through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange.
Options on Futures Contracts
When a Fund writes an option on a futures contract, it becomes obligated,
in return for the premium paid, to assume a position in the futures contract at
a specified exercise price at any time during the term of the option. If a Fund
has written a call, it assumes a short futures position. If a Fund has written
a put, it assumes a long futures position. When a Fund purchases an option on a
futures contract, it acquires the right, in return for the premium it pays, to
assume a position in the futures contract (a long position if the option is a
call and a short position if the option is a put).
Options on Securities, Currencies and Indices
A put option gives the holder the right, upon payment of a premium, to
deliver a specified amount of a security or currency to the writer of the option
on or before a fixed date at a predetermined price. A call option gives the
holder the right, upon payment of a premium, to call upon the writer to deliver
a specified amount of a security or currency on or before a fixed date at a
predetermined price. Puts and calls on indices are similar to puts and calls on
securities or futures contracts except that all settlements are in cash and gain
or loss depends on changes in the index in question rather than on price
movements in individual securities or futures contracts.
Forward Contracts
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days (term)
from the date of the forward contract agreed upon by the parties, at a price set
at the time of the forward contract. These forward contracts are traded
directly between currency traders (usually large commercial banks) and their
customers.
Swaps, Caps, Collars and Floors
Swap agreements, including caps, collars and floors, can be individually
negotiated and structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap agreements
may increase or decrease a Fund's exposure to long- or short-term interest rates
(in the United States or abroad), foreign currency values, mortgage-backed
security values, corporate borrowing rates or other factors such as security
prices or inflation rates.
Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agrees to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease a Fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options.
Indexed Securities
Indexed securities are securities whose prices are indexed to the prices of
other securities, securities indices, currencies, precious metals or other
commodities, or other financial indicators. Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic. The
performance of indexed securities depends to a great extent on the performance
of the security, currency, or other instrument to which they are indexed, and
may also be influenced by interest rate changes in the United States and abroad.
At the same time, indexed securities are subject to the credit risks associated
with the issuer of the security, and their values may decline substantially if
the issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
Special Investments Considerations and Risks
The use of options, futures contracts, options on futures contracts,
forward currency contracts, swaps, caps, collars and floors, and the investment
in indexed securities, involve special risks, including (i) possible imperfect
or no correlation between price movements of the portfolio investments (held or
intended to be purchased) involved in the transaction and price movements of the
instruments involved in the transaction, (ii) possible lack of a liquid
secondary market for any particular instrument at a particular time, (iii) the
need for additional portfolio management skills and techniques, (iv) losses due
to unanticipated market price movements, (v) the fact that, while such
strategies can reduce the risk of loss, they can also reduce the opportunity for
gain, or even result in losses, by offsetting favorable price movements in
investments involved in the transaction, (vi) incorrect forecasts by WRIMCO
concerning interest or currency exchange rates or direction of price
fluctuations of the investment involved in the transaction, which may result in
the strategy being ineffective, (vii) loss of premiums paid by the Fund on
options it purchases, and (viii) the possible inability of the Fund to purchase
or sell a portfolio security at a time when it would otherwise be favorable for
it to do so, or the possible need for the Fund to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with such transactions and the possible
inability of the Fund to close out or liquidate its position.
For a hedging strategy to be completely effective, the price change of the
hedging instrument must equal the price change of the investment being hedged.
The risk of imperfect correlation of these price changes increases as the
composition of the Fund's portfolio diverges from instruments underlying a
hedging instrument. Such equal price changes are not always possible because
the investment underlying the hedging instruments may not be the same investment
that is being hedged. WRIMCO will attempt to create a closely correlated hedge
but hedging activity may not be completely successful in eliminating market
value fluctuation.
WRIMCO may use derivative instruments for hedging purposes to adjust the
risk characteristics of the Fund's portfolio of investments and may use these
instruments to adjust the return characteristics of the Fund's portfolio of
investments. The use of derivative instruments for speculative purposes can
increase investment risk. If WRIMCO judges market conditions incorrectly or
employs a strategy that does not correlate well with the Fund's investments,
these techniques could result in a loss, regardless of whether the intent was to
reduce risk or increase return. These techniques may increase the volatility of
the Fund and may involve a small investment of cash relative to the magnitude of
the risk assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised or if there is not
a liquid secondary market to close out a position that the Fund has entered
into.
The ordinary spreads between prices in the cash and futures markets, due to
the differences in the natures of those markets, are subject to distortion. Due
to the possibility of distortion, a correct forecast of general interest rate,
foreign currency exchange rate or stock market trends by WRIMCO may still not
result in a successful transaction. WRIMCO may be incorrect in its expectations
as to the extent of various interest or foreign exchange rate movements or stock
market movements or the time span within which the movements take place.
Options and futures contracts may increase portfolio turnover rates, which
results in correspondingly greater commission expenses and transactions costs
and may result in certain tax consequences.
<PAGE>
EXHIBIT E
EXISTING INVESTMENT RESTRICTIONS
PROPOSED TO BE MODIFIED OR ELIMINATED
United Asset Strategy Fund, Inc.
The Fund:
(i) May not sell securities short, provided that transactions in futures
contracts, options and other financial instruments are not deemed to
constitute short sales;
(ii) May not purchase securities on margin, except that the Fund may obtain
such short-term credits as are necessary for the clearance of
transactions, and provided that the Fund may make initial and variation
margin payments in connection with transactions in futures contracts,
options and other financial instruments;
(iii) May not borrow money, except that the Fund may borrow money for emergency
or extraordinary purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of the value of its total assets (less liabilities
other than borrowings). Any borrowings that come to exceed 33 1/3% of
the value of the Fund's total assets by reason of a decline in net assets
will be reduced within three days to the extent necessary to comply with
the 33 1/3% limitation. For purposes of this limitation, "three days"
means three days, exclusive of Sundays and holidays;
(iv) May not purchase or sell physical commodities unless acquired as a result
of ownership of securities (but this shall not prevent the Fund from
purchasing and selling currencies, futures contracts, options, forward
currency contracts or other financial instruments);
(v) May not purchase or retain the securities of an issuer if the officers
and directors of the Fund and of Waddell & Reed Investment Management
Company, the Fund's investment manager ("WRIMCO"), owning beneficially
more than / of 1% of the securities of an issuer together own
beneficially more than 5% of the securities of that issuer;
(vi) May not make loans, except (a) by lending portfolio securities provided
that no securities loan will be made if, as a result thereof, more than
10% of the Fund's total assets (taken at current value) would be lent to
another party; (b) through the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies, and
limitations; and (c) by engaging in repurchase agreements with respect to
portfolio securities.
United Cash Management, Inc.
The Fund:
(i) May not buy the securities of any company if it would then own more than
10% of the total value of its outstanding securities; or buy the
securities (not including U.S. Government Obligations) of any company if
more than 5% of the Fund's total assets (valued at market value) would
then be invested in that company; or buy the securities of companies in
any one industry if more than 25% of the Fund's total assets would then
be in companies in that industry; U.S. Government Obligations and bank
obligations and instruments are not included in this limit (but see
"Foreign Obligations and Instruments");
(ii) May not engage in the underwriting of securities or invest in restricted
securities, which are securities that are restricted as to disposition
under the Federal securities laws, except commercial paper that is exempt
from registration under Section 4(2) of the Securities Act of 1933;
(iii) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own a certain percentage of the same
securities; if any one of these individuals owns more than .5 of 1% of
the shares of a company and if the individuals who own that much or more
own 5% of that company's shares, the Fund cannot buy that company's
shares or continue to own them;
(iv) May not make loans other than certain limited types of loans described
herein; the Fund can buy debt securities that it is permitted to
purchase; it can also lend its portfolio securities (see "Lending
Securities" above) or, except as provided above, enter into repurchase
agreements (see ``Repurchase Agreements'' above).
United Continental Income Fund, Inc.
The Fund:
(i) May not buy or sell commodities or commodity contracts except that it
may, for non-speculative purposes, buy or sell futures contracts on
broadly-based stock indices ("Stock Index Futures"), futures contracts on
debt securities ("Debt Futures") and options on Stock Index Futures and
Debt Futures;
(ii) May not sell securities short, buy securities on margin or engage in
arbitrage transactions; however, the Fund may make margin deposits in
connection with its use of any financial instruments permitted by its
fundamental policies;
(iii) May not purchase warrants, which are rights to buy securities;
(iv) May not purchase or write puts, calls or combinations thereof; however
call options may be written on securities if: (i) such calls are listed
on a domestic securities exchange; (ii) when any such call is written and
at all times prior to a closing purchase transaction as to such call, or
its lapse or exercise, the Fund owns the securities that are subject to
the call or has the right to acquire such securities without the payment
of further consideration; and (iii) when any such call is written, not
more than 25% of the Fund's total assets would be subject to calls; calls
may be purchased to effect a closing purchase transaction as to any call
written in accordance with the foregoing. In addition, the Fund may
purchase calls and write and purchase put options on securities in which
the Fund may invest and may, for non-speculative purposes, write and
purchase options on broadly-based stock indices;
(v) May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets but may enter into escrow and
collateral arrangements in connection with the use of options and
futures. The Fund may borrow money from banks as a temporary measure or
for extraordinary or emergency purposes but only up to 5% of its total
assets;
(vi) May not buy the securities of any company if it would then own more than
10% of its voting securities or any class of its securities; or buy the
securities of any company if more than 5% of the Fund's total assets
(valued at market value) would then be invested in that company; or buy
the securities of companies in any one industry if more than 25% of the
Fund's total assets would then be in companies in that industry;
(vii) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one two-hundredths (i.e., .5 of 1%) of
the shares of a company and if the people who own that much or more own
one twentieth (i.e., 5%) of that company's shares, the Fund cannot buy
that company's shares or continue to own them;
(viii)May not lend money or other assets, other than certain limited types of
loans described herein; the Fund can buy debt securities that have been
sold to the public; it can buy other obligations customarily acquired by
institutional investors; it can also lend its portfolio securities (see
"Lending Securities" above) or, except as provided above, enter into
repurchase agreements (see "Repurchase Agreements" above).
United Funds, Inc.
Each of Bond Fund, Income Fund, Accumulative Fund and Science and Technology
Fund:
(i) May not sell securities short, buy securities on margin or engage in
arbitrage transactions; however, a Fund may make margin deposits in
connection with its use of any financial instrument permitted by its
fundamental policies;
(ii) May not engage in the underwriting of securities, that is, the selling of
securities for others; also, United Bond Fund and United Science and
Technology Fund do not invest in restricted securities; restricted
securities are securities that cannot freely be sold for legal reasons;
(iii) May not buy a security if, as a result, it would own more than ten
percent of the issuer's voting securities or any class of its securities,
or if more than five percent of its total assets would be invested in
securities of that issuer; United Income Fund, United Accumulative Fund
and United Bond Fund may not buy securities of companies in any one
industry if more than 25% of that Fund's total assets would then be
invested in companies in that industry;
(iv) May not buy securities of companies less than three years old, that is,
which have not been in continuous operation for at least three years,
including the operation of predecessor companies; buy securities that do
not have readily available market quotations, other than commercial
paper;
(v) May not purchase warrants, except United Bond Fund may invest in
warrants, valued at the lower of cost or market, up to 5% of the value of
its net assets, which amount may include no more than 2% of its net
assets in warrants not listed on the New York Stock Exchange or the
American Stock Exchange;
(vi) May not buy or continue to hold securities if the Corporation's Directors
or officers or certain others own a certain percentage of the same
securities; if any one of these people owns more than one two-hundredths
(i.e., .5 of 1%) of the shares of a company and if the people who own
that much or more own one twentieth (i.e., 5%) of that company's shares,
the Fund cannot buy that company's shares or continue to own them;
(vii) May not lend money or other assets, other than through certain limited
types of loans; the Funds may buy debt securities that have been sold to
the public; the Funds may buy other obligations customarily acquired by
institutional investors; they may also lend their portfolio securities
(see "Lending Securities" above) and enter into repurchase agreements
(see "Repurchase Agreements" above).
Additional Investment Restrictions of Bond Fund
(i) United Bond Fund may not buy commodities or commodity contracts; however,
it may buy and sell any of the financial instruments it is permitted to
by fundamental policy, whether or not any such financial instrument is
considered to be a commodity or commodity contract;
(ii) United Bond Fund may not borrow money or mortgage or pledge any assets;
this does not prohibit the escrow arrangements contemplated by the
writing of covered call options;
(iii) United Bond Fund may write (i.e., sell) call options, but only if (i) the
investments to which the call relates are either debt securities or Debt
Futures; and (ii) either (a) the calls are covered, i.e., the Fund owns
the related investments (or other investments acceptable for escrow
arrangements) while the call is outstanding, or (b) the related
investments are Debt Futures;
(iv) United Bond Fund may purchase calls but only if the related investments
are either debt securities or Debt Futures;
(v) United Bond Fund may purchase put options but only if the investments to
which the put relates are debt securities or Debt Futures. The Fund may
purchase puts as to related investments it owns ("protective puts") or as
to related investments it does not own ("nonprotective puts");
(vi) United Bond Fund may write (i.e., sell) puts but only if the related
investments are debt securities or Debt Futures;
(vii) United Bond Fund may only purchase and sell Debt Futures.
Additional Investment Restrictions of Accumulative Fund, Income Fund and Science
and Technology
(i) The Funds may not purchase or write puts, calls or combinations thereof;
however call options may be written on securities if (i) such calls are
listed on a domestic securities exchange; (ii) when any such call is
written and at all times prior to a closing purchase transaction as to
such call, or its lapse or exercise, a Fund owns the securities that are
subject to the call or has the right to acquire such securities without
the payment of further consideration; and (iii) when any such call is
written, not more than 25% of any one Fund's total assets would be
subject to calls. In addition, the Funds may purchase calls and write
and purchase put options on securities in which the Funds may invest and
may, for non-speculative purposes, write and purchase options on broadly-
based stock indices;
(ii) The Funds may not buy or sell commodities or commodities contracts except
that each Fund may, for non-speculative purposes, buy or sell Stock Index
Futures, Debt Futures and options on Stock Index Futures and Debt
Futures;
(iii) The Funds may not borrow money or pledge any of their assets but may
enter into escrow and collateral arrangements in connection with
investment in options and futures contracts.
United Gold & Government Fund, Inc.
The Fund:
(i) May not buy the securities of any company if it would then own more than
10% of its voting securities or any class of its securities; or buy the
securities of any company if more than 5% of the Fund's total assets
(valued at market value) would then be invested in that company; or buy
the securities of companies in any one industry if more than 25% of the
Fund's total assets would then be in companies in that industry, except,
as stated in the Prospectus, the Fund intends to concentrate in gold and
other minerals-related securities;
(ii) May not sell securities short or buy securities on margin, however, the
Fund may make margin deposits in connection with Government Securities
Futures contracts and options thereon; also, the Fund may not engage in
arbitrage transactions;
(iii) May not engage in the underwriting of securities or invest in restricted
securities, except up to 5% of total assets taken at the time of purchase
may be invested in restricted foreign securities. Restricted securities
are securities subject to legal or contractual restrictions on resale;
(iv) May not buy commodities except that it may invest up to 25% of its total
assets in gold, silver and platinum and may buy put and call options and
Government Securities Futures. Put and call options and Government
Securities Futures may, for various purposes, be considered to be
"commodities" or "securities" but the Fund may buy them whether they are
"commodities" or "securities." The Fund may also not buy any minerals-
related programs or leases;
(v) May purchase and write (sell) put and call options only on U.S.
Government Securities (except that the Fund may write call options on
securities whether or not they are U.S. Government Securities);
(vi) May write calls on securities only if the calls are covered calls (i.e.,
the Fund must own the related investments or other investments acceptable
for escrow arrangements);
(vii) May only purchase or write options if they are listed on a domestic
securities or commodities exchange or quoted on the National Association
of Securities Dealers Automated Quotations system ("Nasdaq"), except the
Fund may purchase optional delivery standby commitments;
(viii)May only buy and sell futures contracts relating to U.S. Government
Securities ("U.S. Government Securities Futures") and options thereon;
(ix) May buy and sell only listed options on U.S. Government Securities
Futures;
(x) May not have more than 15% of the value of its assets committed to the
consummation of forward currency contracts;
(xi) Will not enter into forward currency contracts or maintain a net exposure
to forward currency contracts where the consummation of such contracts
would obligate the Fund to deliver an amount of foreign currency in
excess of the value of its portfolio securities or other assets
denominated in that currency;
(xii) May hold foreign currency only in connection with forward currency
contracts, only up to four business days, as well as in connection with
the purchase or sale of foreign securities, but not otherwise;
(xiii)May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets; this does not prohibit the
escrow deposits required by put and call transactions. The Fund may
borrow money from banks as a temporary measure or for extraordinary or
emergency purposes but only up to 5% of its total assets;
(xiv) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any of
these people owns more than one two-hundredths (i.e., .5 of 1%) of the
shares of a company and if the people who own that much or more own one-
twentieth (i.e., 5%) of that company's shares, the Fund cannot buy that
company's shares or continue to own them;
(xv) May not make loans other than certain limited types of loans; the Fund
can also buy debt securities that have been sold to the public; it can
also lend its portfolio securities (see "Lending Securities" above) and
enter into repurchase agreements (see "Repurchase Agreements" above).
United Government Securities Fund, Inc.
The Fund:
(i) May not buy any securities or commodities other than U.S. Government
Securities, put and call options and Government Securities Futures. Put
and call options and Government Securities Futures may, for various
purposes, be considered to be "commodities" or "securities" but the Fund
may buy them whether they are "commodities" or "securities." The Fund
may not buy any voting securities, any mineral related programs or leases
or any shares of other investment companies;
(ii) May not sell securities short or buy securities on margin; however, the
Fund may make margin deposits in connection with Government Securities
Futures and options thereon; also, the Fund may not engage in arbitrage
transactions;
(iii) May not borrow to purchase securities or increase income, but only to
meet redemptions so it will not have to sell portfolio securities for
this purpose. The Fund may borrow money from banks for temporary or
emergency purposes but only up to 10% of its total assets. It can
mortgage or pledge its assets in connection with such borrowing but only
up to the lesser of the amounts borrowed or 5% of the value of the Fund's
assets. The Fund will not purchase securities while outstanding
borrowings are more than 5% of the value of its assets. Interest on
borrowing would reduce the Fund's income. The Fund may, without
violation of this restriction, make the escrow deposits required by its
put and call activities;
(iv) May purchase and write put and call options (including optional delivery
standby commitments) only on U.S. Government Securities;
(v) May buy and sell futures contracts but only those relating to U.S.
Government Securities and options thereon and these options must be
listed on a domestic securities or commodities exchange or quoted on
Nasdaq;
(vi) Calls written by the Fund on U.S. Government Securities must be covered
(i.e., the Fund must own the related investments or other investments
acceptable for escrow arrangements);
(vii) May write puts only if they are listed on a domestic securities or
commodities exchange or quoted on Nasdaq (National Association of
Securities Dealers Automated Quotations system);
(viii)May invest in indexed securities only if they are issued or guaranteed by
the U.S. Government or its agencies or instrumentalities;
(ix) May not make loans other than certain limited types of loans as indicated
above; the Fund can buy the U.S. Government Securities which it is
permitted to buy; it can also lend its portfolio securities (see "Lending
Securities" above) and enter into repurchase agreements except as
indicated above (see "Repurchase Agreements" above).
United High Income Fund, Inc.
The Fund:
(i) May not buy commodities or commodity contracts or invest in mineral
related programs or leases; however, it may buy and sell any of the
financial instruments that it may use as permitted by any other
fundamental policy, whether or not any such financial instrument is
considered to be a commodity or a commodity contract;
(ii) May not buy the securities of any company if it would then own more than
10% of its voting securities or any class of its securities of that
company; or buy the securities of any company if more than 5% of the
Fund's total assets (valued at market value) would then be invested in
that company; or buy the securities of companies in any one industry if
more than 25% of the Fund's total assets would then be in companies in
that industry;
(iii) May not sell securities short or buy securities on margin; also, the Fund
may not engage in arbitrage transactions; however, the Fund may make
margin deposits in connection with any of the financial instruments it
may use as permitted by any of its other fundamental policies;
(iv) May not engage in the underwriting of securities, except to the extent it
may be deemed to be an underwriter in connection with the sale of
restricted securities. The Fund will not purchase restricted securities
if as a result of such purchase more than 10% of its net assets would be
invested in such securities;
(v) May not hold securities unless they are securities of a company that has
been in continuous operation for at least three years, including the
operations of predecessor companies, or are securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities. However, the Fund may buy securities not meeting this
test if it does not then have more than 5% of its total assets so
invested;
(vi) May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets; this does not prohibit the
escrow arrangements contemplated by the writing of covered call options.
The Fund may borrow money from banks, as a temporary measure or for
extraordinary or emergency purposes but only up to 5% of its total
assets;
(vii) May purchase and write (sell) put and call options only on debt
securities, common stocks, broadly-based stock indices (i.e., include
stocks that are not limited to issuers in any particular industry or
similar industries), futures contracts relating to debt securities and
futures contracts on broadly-based stock indices and options thereon;
(viii)May write calls on securities only if the calls are covered calls (i.e.,
the Fund must own the related investments or other investments suitable
for escrow arrangements);
(ix) May invest up to 5% of its net assets, valued at the lower of cost or
market, in warrants;
(x) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one two-hundredths (i.e., .5 of 1%) of
the shares of a company and if the people who own that much or more own
one twentieth (i.e., 5%) of that company's shares, the Fund cannot buy
that company's shares or continue to own them;
(xi) May not make loans other than certain limited types of loans; the Fund
may buy debt securities which have been sold to the public; it may also
buy other obligations customarily acquired by institutional investors;
this can be considered to be making loans. The Fund may also enter into
repurchase agreements (see "Repurchase Agreements" above) and lend its
securities (see "Lending Securities" above).
United High Income Fund II, Inc.
The Fund:
(i) May not buy commodities or commodity contracts; however, it may buy and
sell options and futures as permitted by any other fundamental policy,
whether or not any such option or future is considered to be a commodity
or a commodity contract;
(ii) May not buy the securities of a company if it would then own more than
10% of the voting securities or any class of securities of that company;
or buy the securities of any company if more than 5% of the Fund's total
assets (valued at market value) would then be invested in that company;
or buy the securities of companies in any one industry if more than 25%
of the Fund's total assets would then be invested in companies in that
industry;
(iii) May not sell securities short or buy securities on margin; also, the Fund
may not engage in arbitrage transactions; however, the Fund may make
margin deposits in connection with any of the financial instruments it is
permitted to buy or sell in accordance with any other fundamental
policies;
(iv) May not engage in the underwriting of securities, except to the extent it
may be deemed to be an underwriter in connection with the sale of
restricted securities; however, the Fund will not purchase restricted
securities if as a result of such purchase more than 10% of its assets
would be invested in such securities;
(v) May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets; this does not prohibit the
escrow arrangements contemplated by the writing of covered call options.
The Fund may borrow money from banks as a temporary measure or for
extraordinary or emergency purposes but only up to 5% of its total
assets;
(vi) May purchase and write (sell) put and call options only on debt
securities, common stocks, broadly-based stock indices (i.e., include
stocks that are not limited to issuers in any particular industry or
similar industries), futures contracts relating to debt securities and
futures contracts on broadly-based stock indices and options thereon;
(vii) May write calls on securities only if the calls are covered calls (i.e.,
the Fund must own the related investments or other investments suitable
for escrow arrangements);
(viii)May invest up to 5% of its net assets, valued at the lower of cost or
market, in warrants;
(ix) May not buy or continue to hold securities of a company if the Fund's
Directors or officers or certain others who own more than .5 of 1% of the
shares of that company own in the aggregate more than 5% of the shares of
that company;
(x) May not make loans other than certain limited types of loans; the Fund
may buy debt securities which have been sold to the public; it may also
buy other obligations customarily acquired by institutional investors;
this can be considered to be making loans. The Fund may also enter into
repurchase agreements (see "Repurchase Agreements" above) and lend its
securities (see "Lending Securities" above).
United International Growth Fund, Inc.
The Fund:
(i) May not buy the securities of any company if it would then own more than
10% of its voting securities or any class of its securities; or buy the
securities of any company if more than 5% of the Fund's total assets
(valued at market value) would then be invested in that company; or buy
the securities of companies in any one industry if more than 25% of the
Fund's total assets would then be in companies in that industry;
(ii) May not sell securities short or buy securities on margin; also, the Fund
may not engage in arbitrage transactions;
(iii) May not engage in the underwriting of securities or invest in restricted
securities, except restricted foreign securities. However, the Fund will
not purchase restricted securities if as a result of such purchase more
than 5% of its total assets would consist of restricted securities.
Restricted securities are securities that are subject to legal or
contractual restrictions on resale;
(iv) May not purchase calls, which are rights to buy securities, or purchase
puts, which are rights to sell securities. The Fund also may not write
(i.e., sell) any puts or calls or combinations of the two except that it
may write certain covered call options and purchase calls to close out
its position in a call which it has written;
(v) May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets; this does not prohibit the
escrow arrangements contemplated by the writing of covered call options.
The Fund may borrow money from banks as a temporary measure or for
extraordinary or emergency purposes but only up to 5% of its total
assets;
(vi) May not buy commodities or commodity contracts other than forward
currency contracts and foreign currency;
(vii) May write listed, covered calls on securities (i.e., the Fund must own
the securities that are subject to the call or have the right to acquire
them without additional payment) if, when a call is written, not more
than 10% of the Fund's total assets would be subject to calls;
(viii)May enter into forward currency contracts provided that it does not have
more than 15% of the value of its assets committed to the consummation of
all such contracts;
(ix) Will not enter into forward currency contracts or maintain a net exposure
to such contracts if the consummation of such contracts would obligate
the Fund to deliver an amount of foreign currency in excess of the value
of the Fund's portfolio securities or other assets denominated in that
currency;
(x) May hold foreign currency only in connection with forward currency
contracts, only up to four business days, as well as in connection with
the purchase or sale of foreign securities, but not otherwise;
(xi) May purchase warrants and rights to purchase securities only if, as a
result of such purchase, no more than 5% of its total assets would
consist of warrants, rights or a combination thereof;
(xii) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one two-hundredths (i.e., .5 of 1%) of
the shares of a company and if the people who own that much or more own
one twentieth (i.e., 5%) of that company's shares, the Fund cannot buy
that company's shares or continue to own them;
(xiii)May not make loans other than certain limited types of loans described
herein; the Fund can buy debt securities that have been sold to the
public; it can also lend its portfolio securities (see "Lending
Securities" above) or, except as provided above, enter into repurchase
agreements (see "Repurchase Agreements" above).
United Municipal Bond Fund, Inc.
The Fund:
(i) May not make any investments other than in the municipal bonds and in the
taxable obligations, options, futures contracts and other financial
instruments described in the Prospectus. Further, such municipal bonds
and taxable obligations are subject to the percentage limitations and the
quality restrictions described in the Prospectus. Thus, the Fund may not
purchase any voting securities, any commodities or commodity contracts
(except that it may buy and sell the options, futures contracts and other
financial instruments described in the Prospectus whether or not any of
them is considered to be a commodity or a commodity contract), any real
estate or interests in real estate investment trusts or any investment
company securities. Also, the Fund may not engage in repurchase
transactions;
(ii) May not invest in securities on which the payment of principal and
interest is the obligation of any nongovernmental entity (i.e., a
company) unless the company obligated to make these payments has been in
continuous operation for at least three years. This three-year period
includes the operation of predecessor companies. However, the Fund may
buy securities not meeting this test if it does not then have more than
5% of its total assets in these other securities;
(iii) May not sell short, buy on margin, engage in arbitrage transactions or
participate on a joint, or a joint and several, basis in any trading
account in securities; however, it may make margin deposits in connection
with the options, futures contracts and other financial instruments
described in the Prospectus; also, the Fund may enter into escrow and
collateral arrangements in connection with its use of options and futures
contracts;
(iv) May not engage in the underwriting of securities, that is, the selling of
securities for others. Also, it may not invest in restricted securities.
Restricted securities are securities which cannot freely be sold for
legal reasons or because a promise has been given establishing conditions
for their sale;
(v) May not purchase the securities of any "issuer" if more than 5% of the
Fund's total assets, taken at market, would then be invested in that
"issuer";
(vi) May purchase and write (sell) put and call options only on domestic debt
securities and municipal bond indices, and may only buy and sell futures
contracts relating to domestic debt securities, futures contracts
relating to municipal bond indices and options on futures relating to
domestic debt securities;
(vii) May not buy or continue to hold securities if any one of the Fund's
Directors or officers or certain others own more than .5 of 1% of the
securities of an issuer and if the persons who own that much or more own
5% of that issuer's securities;
(viii)May not lend money or other assets; it may, of course, purchase all or a
portion of an issue of the municipal bonds or taxable obligations in
which it invests.
United Municipal High Income Fund, Inc.
The Fund:
(i) May not make any investments other than in municipal bonds and in the
taxable obligations, options, futures contracts and other financial
instruments described in the Prospectus;
(ii) May not purchase any voting securities, any commodities or commodity
contracts (except that it may buy and sell the options, futures contracts
and other financial instruments described in the Prospectus whether or
not any of them is considered to be a commodity or a commodity contract),
or any real estate or interests in real estate investment trusts;
(iii) May not borrow money or pledge any of its assets except that, as a
temporary measure for extraordinary or emergency purposes and not for
investment purposes, the Fund may borrow from banks up to 5% of the value
of its total assets (this does not prohibit the escrow and collateral
arrangements contemplated in connection with investment in options and
futures contracts);
(iv) May not sell short, buy on margin, engage in arbitrage transactions or
participate on a joint, or a joint and several, basis in any trading
account in securities; however, it may make margin deposits in connection
with options and futures contracts;
(v) May not purchase the securities of any "issuer" if more than 5% of the
Fund's total assets, taken at market, would then be invested in that
"issuer";
(vi) May purchase and write (sell) put and call options only on domestic debt
securities and municipal bond indices, and may only buy and sell futures
contracts relating to domestic debt securities ("Debt Futures"), futures
contracts relating to municipal bond indices ("Municipal Bond Index
Futures") and options on Debt Futures;
(vii) May not buy or continue to hold securities if any one of the Fund's
Directors or officers or certain others own more than .5 of 1% of the
securities of an issuer and if the persons who own that much or more own
5% of that issuer's securities;
(viii)May not lend money or other assets (neither purchasing the securities in
which the Fund may invest or engaging in repurchase agreements is
considered "lending").
United New Concepts Fund, Inc.
The Fund:
(i) May not buy or sell commodities or commodity contracts except that it
may, for non-speculative purposes, buy or sell futures contracts on
broadly-based stock indices ("Stock Index Futures"), futures contracts on
debt securities ("Debt Futures") and options on Stock Index Futures and
Debt Futures; the Fund may enter into the forward foreign currency
exchange contracts discussed above;
(ii) May not sell securities short, buy securities on margin or engage in
arbitrage transactions; however, the Fund may make margin deposits in
connection with its use of any financial instrument permitted by its
fundamental policies. Also, the Fund may enter into escrow and
collateral arrangements in connection with its use of options and
futures;
(iii) May not engage in the underwriting of securities, that is, the selling of
securities for others; also, the Fund does not invest in restricted
securities; restricted securities are securities that cannot freely be
sold for legal reasons;
(iv) May purchase securities of foreign issuers only if not more than 10% of
the Fund's assets (including the foreign currency exchange contracts
described below) are invested in foreign securities and only if such
securities are (i) listed or admitted to trading on a domestic or foreign
securities exchange, (ii) represented by American Depositary Receipts
(dollar denominated receipts issued against securities of foreign issuers
deposited or to be deposited with an American depository) so listed or
admitted on a domestic securities exchange or traded in the U.S. over-
the-counter market, or (iii) issued or guaranteed by any foreign
government or any subdivision, agency or instrumentality thereof;
(v) May not hold foreign currency except in connection with the purchase or
sale of foreign securities;
(vi) May purchase warrants if, as a result of such purchase, no more than 5%
of its assets would consist of warrants (other than those that have been
acquired in units or attached to other securities), and of which no more
than 2% of the Fund's assets may be invested in warrants that are not
listed on the New York Stock Exchange or the American Stock Exchange;
(vii) May not purchase or write puts, calls or combinations thereof on
securities; however, call options ("calls") may be written on securities
if: (i) such calls are listed on a domestic securities exchange; (ii)
when any such call is written and at all times prior to a closing
purchase transaction as to such call, or its lapse or exercise, the Fund
owns the securities that are subject to the call or has the right to
acquire such securities without the payment of further consideration; and
(iii) when any such call is written, not more than 25% of the Fund's
total assets would be subject to calls; calls may be purchased to effect
a closing purchase transaction as to any call written in accordance with
the foregoing. In addition, the Fund may purchase calls and write and
purchase put options ("puts") on securities in which the Fund may invest
and may, for non-speculative purposes, write and purchase options on
broadly-based stock indices;
(viii)May not buy the securities of any company if it would then own more than
10% of its voting securities or any class of its securities; or buy the
securities of any company if more than 5% of the Fund's total assets
(valued at market value) would then be invested in that company; or buy
the securities of companies in any one industry if more than 25% of the
Fund's total assets would then be in companies in that industry;
(ix) May, for non-speculative purposes, buy and sell futures contracts on debt
securities ("Debt Futures"), and Stock Index Futures and options on Debt
Futures and Stock Index Futures;
(x) May enter into forward currency contracts solely in connection with the
purchase or sale of a security denominated in a foreign currency when it
is desirable to "lock in" the U.S. dollar price of the security;
(xi) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one two-hundredths (i.e., .5 of 1%) of
the shares of a company and if the people who own that much or more own
one twentieth (i.e., 5%) of that company's shares, the Fund cannot buy
that company's shares or continue to own them;
(xii) May not invest more than 5% of its assets in companies, including
predecessors, with less than three years continuous operation;
(xiii)May not lend money or other assets, other than certain limited types of
loans described herein; the Fund can buy debt securities that have been
sold to the public; it can buy other obligations customarily acquired by
institutional investors; it can also lend its portfolio securities (see
"Lending Securities" above) or, except as provided above, enter into
repurchase agreements (see "Repurchase Agreements" above).
United Retirement Shares, Inc.
The Fund:
(i) May not buy or sell commodities or commodity contracts except that it
may, for non-speculative purposes, buy or sell Stock Index Futures,
futures contracts on debt securities ("Debt Futures") and options on
Stock Index Futures and Debt Futures;
(ii) May not sell securities short, buy securities on margin or engage in
arbitrage transactions; however, the Fund may make margin deposits in
connection with its use of any financial instrument permitted by its
fundamental policies;
(iii) May not engage in the underwriting of securities, that is, the selling of
securities for others; also, the Fund does not invest in restricted
securities; restricted securities are securities that cannot freely be
sold for legal reasons;
(iv) May not purchase warrants;
(v) May not purchase or write puts, calls or combinations thereof; however
call options may be written on securities if: (i) such calls are listed
on a domestic securities exchange; (ii) when any such call is written and
at all times prior to a closing purchase transaction as to such call, or
its lapse or exercise, the Fund owns the securities that are subject to
the call or has the right to acquire such securities without the payment
of further consideration; and (iii) when any such call is written, not
more than 50% of the Fund's total assets would be subject to calls; calls
may be purchased to effect a closing purchase transaction as to any call
written in accordance with the foregoing. In addition, the Fund may
purchase calls and write and purchase put options on securities in which
the Fund may invest and may, for non-speculative purposes, write and
purchase options on broadly-based stock indices;
(vi) May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets but may enter into escrow and
collateral arrangements in connection with the use of options and
futures. The Fund may borrow money from banks as a temporary measure or
for extraordinary or emergency purposes but only up to 5% of its total
assets;
(vii) May not buy the securities of any company if it would then own more than
10% of the voting securities or any class of the securities; or buy the
securities of any company if more than 5% of the Fund's total assets
(valued at market value) would then be invested in that company; or buy
the securities of companies in any one industry if more than 25% of the
Fund's total assets would then be in companies in that industry;
(viii)May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one two-hundredths (i.e., .5 of 1%) of
the shares of a company and if the people who own that much or more own
one twentieth (i.e., 5%) of that company's shares, the Fund cannot buy
that company's shares or continue to own them;
(ix) May not lend money or other assets, other than through certain limited
types of loans described herein; the Fund can buy debt securities that
have been sold to the public; it can buy other obligations customarily
acquired by institutional investors; it can also lend its portfolio
securities (see "Lending Securities" above) or, except as provided above,
enter into repurchase agreements (see "Repurchase Agreements" above).
United Vanguard Fund, Inc.
The Fund:
(i) May not buy or sell commodities or commodity contracts, except that it
may, for non-speculative purposes, buy or sell Stock Index Futures,
futures contracts on debt securities ("Debt Futures") and options on
Stock Index Futures and Debt Futures;
(ii) May not sell securities short, buy securities on margin or engage in
arbitrage transactions; however, the Fund may make margin deposits in
connection with its use of any financial instruments permitted by its
fundamental policies;
(iii) May not engage in the underwriting of securities, that is, the selling of
securities for others; also, the Fund does not invest in restricted
securities; restricted securities are securities that cannot freely be
sold for legal reasons;
(iv) May not invest more than 2% of its net assets valued at the lower of cost
or market in warrants. Warrants acquired in units or attached to other
securities are not considered for purposes of computing the 2%
limitation;
(v) May not purchase or write puts, calls or combinations thereof; however
call options may be written on securities if: (i) such calls are listed
on a domestic securities exchange; (ii) when any such call is written and
at all times prior to a closing purchase transaction as to such call, or
its lapse or exercise, the Fund owns the securities that are subject to
the call or has the right to acquire such securities without the payment
of further consideration; and (iii) when any such call is written not
more than 10% of the Fund's total assets would be subject to calls; calls
may be purchased to effect a closing purchase transaction as to any call
written in accordance with the foregoing. In addition, the Fund may
purchase calls and write and purchase put options on securities in which
the Fund may invest and may, for non-speculative purposes, write and
purchase options on broadly-based stock indexes;
(vi) May not borrow money or mortgage or pledge any of its assets; but may
enter into escrow and collateral arrangements in connection with the use
of options and futures;
(vii) May not buy a security if, as a result, it would own more than 10% of the
issuer's voting securities, or if more than 5% of its total assets would
be invested in securities of that issuer, or if more than 25% of its
assets would then be in securities of companies in any one industry;
(viii)May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one- two-hundredths (i.e., .5 of 1%)
of the shares of a company and if the people who own that much or more
own one-twentieth (i.e., 5%) of that company's shares, the Fund cannot
buy that company's shares or continue to own them;
(ix) May not lend money or other assets, other than through certain limited
types of loans; the Fund can buy debt securities that have been sold to
the public; it can buy other obligations customarily acquired by
institutional investors; it can also lend its portfolio securities (see
"Lending Securities" above) and enter into repurchase agreements (see
"Repurchase Agreements" above).
<PAGE>
EXHIBIT F
DISTRIBUTION AND SERVICE PLAN
FOR CLASS A SHARES
(Adopted on October 1, 1993,
and Restated on February 8, 1995 and
amended on _____, 1997)
This Plan is adopted by [Name of Fund] (the "Fund"), pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the "Act") to provide for
payment by the Fund of certain expenses in connection with the distribution of
the Fund's Class A shares, provision of personal services to the Fund's Class A
shareholders and/or maintenance of its Class A shareholder accounts. Payments
under the Plan are to be made to Waddell & Reed, Inc. ("W&R") which serves as
the principal underwriter for the Fund under the terms of a written Service
Agreement ("Agreement") separate and apart from the Underwriting Agreement
pursuant to which W&R offers and sells the shares of the Fund.
Distribution Fee and Service Fee
The Fund is authorized to pay to W&R an amount not to exceed on an annual basis
.25 of 1% of the Fund's average net assets of the Class A shares as either (1) a
"distribution fee" to finance the distribution of the Fund's Class A shares, or
(2) a "service fee" to finance shareholder servicing by W&R, its affiliated
companies, broker-dealers who may sell Class A shares and other third-parties to
encourage and foster the maintenance of Class A shareholder accounts, or as a
combination of the two fees. The amounts shall be payable to W&R monthly or at
such other intervals as the board of directors may determine to reimburse W&R
for costs and expenses incurred.
NASD Definition
For purposes of this Plan, the "distribution fee" may be considered as a sales
charge that is deducted from the Class A net assets of the Fund and does not
include the service fee. The "service fee" shall be considered a payment made
by the Fund for personal service and/or maintenance of Class A shareholder
accounts, as such is now defined by the National Association of Securities
Dealers, Inc. ("NASD"), provided, however, if the NASD adopts a definition of
"service fee" for purposes of Article III, Section 26(b) of its Rules of Fair
Practice Rule 2830 of the NASD Conduct Rules that differs from the definition of
"service fee" as presently used, or if the NASD adopts a related definition
intended to define the same concept, the definition of "service fee" as used
herein shall be automatically amended to conform to the NASD definition.
Quarterly Reports
W&R shall provide to the board of directors of the Fund and the board of
directors shall review at least quarterly a written report of the amounts so
expended of the distribution fee and/or service fee paid or payable to it under
this Plan and the purposes for which such expenditures were made.
Approval of Plan
This Plan shall become effective when it has been approved by a vote of at least
a majority of the outstanding Class A voting securities of the Fund (as defined
in the Act) and by a vote of the board of directors of the Fund and of the
directors who are not interested persons of the Fund and have no direct or
indirect financial interest in the operation of the Plan or any agreement
related to this Plan (other than as directors or shareholders of the Fund)
("independent directors") cast in person at a meeting called for the purposes of
voting on such Plan. The initial Agreement shall become effective the effective
date of this Plan, provided however, that it has been approved in accordance
with the requirements of Rule 12b-1 under the Act.
Continuance
This Plan shall continue in effect for a period of one (1) year and thereafter
from year to year only so long as such continuance is approved by the directors,
including the independent directors, as specified hereinabove for the adoption
of the Plan by the directors and independent directors.
Director Continuation
In considering whether to adopt, continue or implement this Plan, the directors
shall have a duty to request and evaluate, and W&R shall have a duty to furnish,
such information as may be reasonably necessary to an informed determination of
whether this Plan should be adopted, implemented or continued.
Termination
This Plan may be terminated at any time by a vote of a majority of the
independent directors of the Fund or by a vote of the majority of the
outstanding Class A voting securities of the Fund without penalty. On
termination, the payment of all distribution fees and service fees shall cease,
and the Fund shall have no obligation to W&R to reimburse it for any cost or
expenditure it has made or may make to distribute the Class A shares or service
Class A shareholder accounts.
Amendments
This Plan may not be amended to increase materially the amount to be spent for
distribution of Class A shares, personal service and/or maintenance of
shareholder accounts without approval of the Class A shareholders, and all
material amendments of this Plan must be approved in the manner prescribed for
the adoption of the Plan as provided hereinabove.
Directors
While this Plan is in effect, the selection and nomination of the directors who
are not interested persons of the Fund shall be committed to the discretion of
the directors who are not interested persons of the Fund.
Records
Copies of this Plan, the Underwriting Agreement and reports made pursuant to
this Plan shall be preserved as provided in Rule 12b-1(f) under the Act.
<PAGE>
UNITED ASSET STRATEGY FUND, INC., Class A Shares
UNITED CASH MANAGEMENT, INC., Class A Shares
UNITED CONTINENTAL INCOME FUND, INC., Class A Shares
UNITED FUNDS, INC., Class A Shares
UNITED GOLD & GOVERNMENT FUND, INC., Class A Shares
UNITED GOVERNMENT SECURITIES FUND, INC., Class A Shares
UNITED HIGH INCOME FUND, INC., Class A Shares
UNITED HIGH INCOME FUND II, INC., Class A Shares
UNITED INTERNATIONAL GROWTH FUND, INC., Class A Shares
UNITED MUNICIPAL BOND FUND, INC., Class A Shares
UNITED MUNICIPAL HIGH INCOME FUND, INC., Class A Shares
UNITED NEW CONCEPTS FUND, INC., Class A Shares
UNITED RETIREMENT SHARES, INC., Class A Shares
UNITED VANGUARD FUND, INC., Class A Shares
THIS PROXY/AUTHORIZATION AND DIRECTION OF EXECUTION OF PROXY, IF PROPERLY
EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED.
IF NO DIRECTION IS MADE FOR A PROPOSAL, THE SHARES WILL BE VOTED "FOR" THAT
PROPOSAL.
NOTE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED.
Please fold and detach card at perforation. Return bottom portion only.
Please vote by filling in the boxes below.
1.For each Fund: To elect as Directors
H. Bellmon; D. Buchanan; J. Concannon; J. Dillingham; L. Graves; J. Hayes;
G. Johnson; W. Morgan; R. Richey; W. Rogers; F. Ross; E. Schwartz; K. Tucker;
F. Vogel; P. Wise
/ / FOR ALL
/ / WITHHOLD ALL
To withhold authority to vote for any individual nominee, print that nominee's
name on the line below.
________________________________________________________________________
2. For each Fund: To ratify the FOR AGAINST ABSTAIN
selection of Deloitte & Touche LLP / / / / / /
as the Fund's independent
accountants for its current fiscal year
3. For each Fund: To approve FOR AGAINST ABSTAIN
changes to certain of its ALL ALL ALL
fundamental policies / / / / / /
and restrictions
(3.1) Restricted Securities
(3.2) Diversification of Assets
(3.3) Unseasoned Issuers
(3.4) Repurchase Transactions
(3.5) Options, Commodities and Futures
(3.6) Pledging
(3.7) Margin Purchases
(3.8) Short Sales
(3.9) Foreign Currencies
(3.10) Warrants and Rights
(3.11) Purchasing Call Options
(3.12) Arbitrage Transactions
(3.13) Indexed Securities
(3.14) Securities Owned by Certain Persons
(3.15) Loans
To vote against or abstain with respect to a particular proposed change,
refer to the proxy statement for the changes applicable to the Fund and
write the number of the sub-proposal on the line below.
_____________________________________________________________________
4 For United Asset Strategy Fund, Inc.: FOR AGAINST ABSTAIN
To approve a change in the Fund's goal / / / / / /
5 For United Funds, Inc. United Income FOR AGAINST ABSTAIN
Fund: To approve a change in the / / / / / /
Fund's goal
6 For United Cash Management, Inc.: FOR AGAINST ABSTAIN
To modify the Fund's fundamental / / / / / /
policy regarding portfolio maturity
7 For each Fund (other than United FOR AGAINST ABSTAIN
Cash Management, Inc.): To amend / / / / / /
the terms of the service plan
adopted pursuant to Rule 12b-1
<PAGE>
YOUR VOTE IS IMPORTANT!
To avoid the expense of adjourning the meeting to a subsequent date,
please sign, date and return all proxies received in
the enclosed post-paid envelope.
Please fold and detach card at perforation. Return bottom portion only.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Keith A. Tucker and Sharon K. Pappas, or either
of them (or their substitutes), as attorneys and proxies of the undersigned,
with full power of substitution to represent and vote all of the shares of the
Fund in which the undersigned owns shares and which are entitled to be voted at
the Special Meeting of Shareholders of the Fund to be held July 24, 1997, at
2:00 p.m., local time, at 6300 Lamar Avenue, Overland Park, Kansas 66202, and
any adjournment(s) thereof, and revoking all proxies heretofore given, as
designated on the reverse side of this card. As to any other matter that may
properly come before the meeting, the attorneys and proxies shall be authorized
to vote in accordance with their best judgment. This proxy shall remain in
effect for a period of one year from its date. Receipt of the Proxy Statement
is hereby acknowledged.
Dated: __________________________________, 1997
PLEASE SIGN IN BOX BELOW
Please sign exactly as your name appears hereon. If
shares are registered in more than one name, all should
sign, but if one signs, it binds the others. When
signing as attorney, executor, administrator, agent,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by
an authorized person. If a partnership, please sign in
partnership name by an authorized person.
_________________________________________________
/ /
/ /
/ /
/________________________________________________/Signa
Signature(s), Title(s), if applicable
<PAGE>
UNITED ASSET STRATEGY FUND, INC., Class Y Shares
UNITED CASH MANAGEMENT, INC., Class B Shares
UNITED CONTINENTAL INCOME FUND, INC., Class Y Shares
UNITED FUNDS, INC., Class Y Shares
UNITED GOLD & GOVERNMENT FUND, INC., Class Y Shares
UNITED GOVERNMENT SECURITIES FUND, INC., Class Y Shares
UNITED HIGH INCOME FUND, INC., Class Y Shares
UNITED HIGH INCOME FUND II, INC., Class Y Shares
UNITED INTERNATIONAL GROWTH FUND, INC., Class Y Shares
UNITED MUNICIPAL BOND FUND, INC., Class Y Shares
UNITED MUNICIPAL HIGH INCOME FUND, INC., Class Y Shares
UNITED NEW CONCEPTS FUND, INC., Class Y Shares
UNITED RETIREMENT SHARES, INC., Class Y Shares
UNITED VANGUARD FUND, INC., Class Y Shares
6300 Lamar Avenue . Overland Park, Kansas 66202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
July 24, 1997
To Shareholders:
Notice is hereby given that a Special Meeting of the shareholders of each
of the investment companies set forth above (each, a "Fund" and collectively,
the "Funds"), respectively, will be held jointly at 6300 Lamar Avenue, Overland
Park, Kansas 66202, on the 24th day of July, 1997, at 2:00 p.m., local time, or
any adjournment(s) thereof, for the following purposes:
1. For each Fund: To elect the Board of Directors;
2. For each Fund: To ratify the selection of Deloitte & Touche LLP as
independent accountants for its current fiscal year;
3. For each Fund: To approve or disapprove changes to certain of its
fundamental investment policies and restrictions;
4. For United Asset Strategy Fund, Inc. only: To approve or disapprove a
change in its goal;
5. For United Funds, Inc. - United Income Fund only: To approve or
disapprove a change in its goal by adding a secondary goal;
6. For United Cash Management, Inc. only: To approve or disapprove a
change in its fundamental policy regarding portfolio maturity;
7. To transact such other business as may properly come before the
Special Meetings or any adjournment(s) thereof.
The Board of Directors of each Fund has fixed the close of business on May
7, 1997 as the record date for the determination of shareholders entitled to
notice of and to vote at the Special Meetings. You are entitled to vote at the
meeting and any adjournment(s) thereof if you owned shares of any of the Funds
at the close of business on May 7, 1997. If you attend the meeting, you may
vote your shares in person. If you do not expect to attend the meeting, please
complete, date, sign and properly return the enclosed proxy card(s) in the
enclosed postage paid envelope. If you do not sign and return your proxy
card(s), the Funds may incur the additional expense of subsequent mailings in
order to have a sufficient number of cards signed and returned.
Retain this Notice and Proxy Statement. This is a joint Notice and Proxy
Statement for the above-named Funds in the United Group of Mutual Funds. The
shares you own in a particular Fund may only be voted with respect to that Fund.
If you own shares in more than one of the Funds listed, please vote with respect
to each Fund on the proxy card provided with respect to that Fund. Please sign,
date and return any and all proxy cards that are mailed to you.
May 30, 1997 By Order of the Boards of Directors
Sharon K. Pappas, Secretary
<PAGE>
UNITED ASSET STRATEGY FUND, INC., Class Y Shares
UNITED CASH MANAGEMENT, INC., Class B Shares
UNITED CONTINENTAL INCOME FUND, INC., Class Y Shares
UNITED FUNDS, INC., Class Y Shares
UNITED GOLD & GOVERNMENT FUND, INC., Class Y Shares
UNITED GOVERNMENT SECURITIES FUND, INC., Class Y Shares
UNITED HIGH INCOME FUND, INC., Class Y Shares
UNITED HIGH INCOME FUND II, INC., Class Y Shares
UNITED INTERNATIONAL GROWTH FUND, INC., Class Y Shares
UNITED MUNICIPAL BOND FUND, INC., Class Y Shares
UNITED MUNICIPAL HIGH INCOME FUND, INC., Class Y Shares
UNITED NEW CONCEPTS FUND, INC., Class Y Shares
UNITED RETIREMENT SHARES, INC., Class Y Shares
UNITED VANGUARD FUND, INC., Class Y Shares
6300 Lamar Avenue . Overland Park, Kansas 66202
PROXY STATEMENT
INTRODUCTION
This document is a joint proxy statement with respect to each of the above-
listed investment companies (the "Companies") in connection with the
solicitation of proxies by the Board of Directors of each Company to be used at
the Companies' joint Special Meeting of shareholders ("Meeting") or any
adjournment(s) thereof. The Meeting will be held on July 24, 1997, 2:00 p.m.
local time, at 6300 Lamar Avenue, Overland Park, Kansas 66202, for the purposes
set forth in the attached Notice of the Meeting. This Proxy Statement is being
first mailed to shareholders on or about May 30, 1997.
United Funds, Inc. is composed of four separate series, each of which is
referred to herein as a "Fund." When the context makes it appropriate, the
Companies listed above are referred to in this Proxy Statement collectively as
the "Funds" and, individually, as a "Fund." The name of each Fund is set forth
below, along with the proposals to be voted on by the shareholders of that Fund.
The names of Funds that are series of a Company are indented under the name of
the relevant Company.
Name of Fund Proposals
Used in This Applicable to
Fund Name Proxy Statement Company or Fund
United Asset Strategy Fund, Inc. Asset Strategy 1,2,3,4
United Cash Management, Inc. Cash Management 1,2,3,6
United Continental Income Fund, Inc. Continental Income 1,2,3
United Funds, Inc.
Income Fund Income Fund 1,2,3,5
Bond Fund Bond Fund 1,2,3
Accumulative Fund Accumulative Fund 1,2,3
Science and Technology Fund Science and Technology1,2,3
United Gold & Government Fund, Inc. Gold & Government 1,2,3
United Government Securities Fund, Inc. Government Securities 1,2,3
United High Income Fund, Inc. High Income 1,2,3
United High Income Fund II, Inc. High Income II 1,2,3
United International Growth Fund, Inc. International Growth 1,2,3
United Municipal Bond Fund, Inc. Municipal Bond 1,2,3
United Municipal High Income Fund, Inc. Municipal High Income 1,2,3
United New Concepts Fund, Inc. New Concepts 1,2,3
United Retirement Shares, Inc. Retirement Shares 1,2,3
United Vanguard Fund, Inc. Vanguard 1,2,3
For each Fund, other than those named in the next sentence, a majority of
the shares outstanding on the record date, May 7, 1997 ("Record Date"),
represented in person or by proxy, of a Fund must be present for the transaction
of business at that Fund's Meeting. For New Concepts, Gold & Government,
Government Securities, High Income II, Municipal High Income and Asset Strategy,
one-third of the shares outstanding on the Record Date, represented in person or
by proxy, of that Fund, must be present for the transaction of business at that
Fund's meeting. In the event that a quorum is not present or if a quorum is
present at the Meeting but sufficient votes to approve any one of the Proposals
are not received, the persons named as proxies (or their substitutes) may
propose one or more adjournments of the Meeting to permit the further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares represented at the Meeting in person or by proxy.
The persons named as proxies will vote those proxies that they are entitled to
vote "For" such Proposal in favor of an adjournment and will vote those proxies
required to be voted "Against" such Proposal against such adjournment. A
shareholder vote may be taken on one or more of the Proposals described in this
Proxy Statement prior to any such adjournment if sufficient votes have been
received and it is otherwise appropriate.
The individuals named as proxies (or their substitutes) in the enclosed
proxy card (or cards if you own shares of more than one Fund or have multiple
accounts) will vote in accordance with your directions as indicated thereon if
your proxy is received properly executed. You may direct the proxy holders to
vote your Fund shares on a Proposal applicable to that Fund by checking the
appropriate box "For" or "Against," or instruct them not to vote those shares on
the Proposal by checking the "Abstain" box. Alternatively, you may simply sign,
date and return your proxy card(s) with no specific instructions as to the
Proposals. If you properly execute your proxy and give no voting instructions
with respect to a Proposal on which you are entitled to vote, your shares will
be voted "For" the Proposal. The duly appointed proxies may, in their
discretion, vote upon such other matters as may properly come before the
Meeting.
Each full share of a Fund that is issued and outstanding on the record
date, whether Class A or Class Y (Class B for Cash Management), is entitled to
one vote, and each fractional share issued and outstanding on the record date is
entitled to a proportionate share of one vote. The Class A and Class Y (Class B
for Cash Management) shareholders of each Fund vote together with respect to
each Proposal that affects their Fund, except that all Class A and Class Y
shareholders of all the Funds constituting United Funds, Inc., vote together
with respect to the election of Directors (Proposal 1) and the ratification of
independent accountants (Proposal 2).
Abstentions and "broker non-votes" (as defined below) are counted for
purposes of determining whether a quorum is present, but do not represent votes
cast with respect to any Proposal. "Broker non-votes" are shares held by a
broker or nominee for which an executed proxy is received by the Fund, but are
not voted as to one or more Proposals because instructions have not been
received from the beneficial owners or persons entitled to vote and the broker
or nominee does not have discretionary voting power.
You may revoke your proxy with respect to a Fund: (a) at any time prior to
its exercise by written notice of its revocation to the Secretary of the Fund at
the above address prior to the Meeting; (b) by the subsequent execution and
return of another proxy prior to the Meeting; or (c) by being present and voting
in person at the Meeting and giving oral notice of revocation to the Chairman of
the Meeting. Attendance at the Meeting will not in and of itself constitute
revocation of your proxy.
Information as to the number of outstanding shares of each Fund, and class
thereof, as of the Record Date, is set forth in Exhibit A. A listing of the
owners of more than 5% of the shares of a class of any Fund as of April 30,
1997, is set forth in Exhibit B. To the knowledge of each Fund's management,
the executive officers and Directors of each Fund, as a group, owned less than
1% of the outstanding shares of each Fund as of April 30, 1997.
Copies of each Fund's most recent annual and semiannual reports have been
sent to shareholders of that Fund on or before the mailing of this Proxy
Statement. Shareholders of any Fund may obtain, free of charge, copies of that
Fund's annual and semiannual reports by writing to Waddell & Reed, Inc. at 6300
Lamar Avenue, P.O. Box 29217, Shawnee Mission, KS 66201-9217 or calling (800)
366-5465.
THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THESE PROPOSALS AND
RECOMMENDS THAT YOU VOTE IN FAVOR OF EACH OF THEM.
PROPOSAL 1: ELECTION OF DIRECTORS
Relevant Companies: All Companies.
Discussion. The persons set forth below have been nominated for election
as Directors of each Company, and each has consented to his or her nomination
and agreed to serve if elected. Each nominee (except James M. Concannon and
John A. Dillingham) is currently a Director of each Company. Each current
Director serves pursuant to election by shareholders except Linda Graves and
Eleanor B. Schwartz, each of whom was elected by the other Directors effective
July 12, 1995, and William L. Rogers and Frank J. Ross, Jr., each of whom was
elected by the other Directors effective October 16, 1996. If any of the
nominees should not be available for election, the persons named as proxies (or
their substitutes) may vote for other persons in their discretion. Management
has no reason to believe that any nominee will be unavailable for election.
The names of each Company's Directors, nominees and executive officers,
their respective offices, and principal occupations during the last five years
are set forth below.
Directors and Nominees of the Companies
As of the date of this Proxy Statement, six of each Company's Directors
were "interested persons," as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), of Waddell & Reed Investment Management Company, the
investment manager of each Fund ("WRIMCO"), and Waddell & Reed, Inc., each
Fund's principal underwriter ("W&R"). The Directors who are "interested
persons" are indicated as such by an asterisk. Messrs. Morgan, Richey, and
Tucker are interested persons because they are present or former officers,
directors and/or shareholders of WRIMCO and/or certain of its affiliates. Ms.
Graves and Mr. Hayes are interested persons because of their ownership of shares
of Torchmark Corporation, which indirectly controls WRIMCO and W&R, and because
Ms. Graves is a member of Mr. Richey's immediate family. Mr. Ross is an
interested person because he is a partner in a law firm which has acted as legal
counsel for W&R. Each of the Company's Directors is also a Director of each of
the funds in the Fund Complex, and each of the Company's officers listed below
is also an officer of each of the funds in the Fund Complex. The term "Fund
Complex" includes each of the Funds, TMK/United Funds, Inc. with its eleven
portfolios, and Waddell & Reed Funds, Inc., with its six funds, each of which is
managed by WRIMCO. Waddell & Reed Services Company, an affiliate of W&R and
WRIMCO, is the shareholder servicing agent and accounting services agent for
each Fund. Its address is the same as that for W&R. A table indicating each
Director's and nominee's ownership of Fund shares is attached hereto as Exhibit
C.
RONALD K. RICHEY* (age 70) -- Director of each Company since May 1, 1993
or its inception, whichever is later; Chairman of the Board of Directors of each
Company; Chairman of the Board of Directors of Waddell & Reed Financial
Services, Inc., United Investors Management Company and United Investors Life
Insurance Company; Chairman of the Board of Directors and Chief Executive
Officer of Torchmark Corporation; Chairman of the Board of Directors of Vesta
Insurance Group, Inc.; formerly, Chairman of the Board of Directors of W&R.
Father of Linda Graves, Director of each of the Companies in the Fund Complex.
KEITH A. TUCKER* (age 52) -- Director of each Company since July 17, 1991
or its inception, whichever is later. President of each Company; President,
Chief Executive Officer and Director of Waddell & Reed Financial Services, Inc.;
Chairman of the Board of Directors of WRIMCO, W&R, Waddell & Reed Services
Company, Waddell & Reed Asset Management Company and Torchmark Distributors,
Inc., each an affiliate of Waddell & Reed, Inc.; Vice Chairman of the Board of
Directors, Chief Executive Officer and President of United Investors Management
Company; Vice Chairman of the Board of Directors of Torchmark Corporation;
Director of Southwestern Life Corporation; formerly, partner in Trivest, a
private investment concern; formerly, Director of Atlantis Group, Inc., a
diversified company.
HENRY L. BELLMON (age 75) -- Director of each Company since February 1,
1991 or its inception, whichever is later. Rancher; Professor, Oklahoma State
University; formerly, Governor of Oklahoma.
DODDS I. BUCHANAN (age 66) -- Director of each Company since December 7,
1971 or its inception, whichever is later. Advisory Director, The Hand
Companies, an actuarial consulting company; President, Buchanan Ranch
Corporation; formerly, Senior Vice President and Director of Marketing Services,
The Meyer Group of Management Consultants; formerly, Professor and Chairman of
Marketing, College of Business, University of Colorado.
JAMES M. CONCANNON (age 49) -- Dean and Professor of Law, Washburn
University School of Law.
JOHN A. DILLINGHAM (age 58) -- Director and consultant, McDougal
Construction Company; formerly Senior Vice President-Sales and Marketing, Garney
Companies, Inc., a specialty utility contractor.
LINDA GRAVES* (age 43) -- Director of each Company since July 12, 1995.
First Lady of Kansas; formerly, partner, Levy and Craig, P.C., a law firm.
Daughter of Ronald K. Richey, Chairman of the Board of each of the Companies in
the Fund Complex.
JOHN F. HAYES* (age 77) -- Director of each Company since June 28, 1988 or
its inception, whichever is later. Director, Central Bank and Trust; Director,
Central Kansas Bankshares; Director, Central Properties, Inc.; Chairman,
Gilliland & Hayes, P.A., a law firm; formerly, President, Gilliland & Hayes,
P.A.
GLENDON E. JOHNSON (age 73) -- Director of each Company since June 2, 1971
or its inception, whichever is later. Director and Chief Executive Officer of
John Alden Financial Corporation and subsidiaries.
WILLIAM T. MORGAN* (age 69) -- Director of each Company since February 13,
1985 or its inception, whichever is later. Retired; formerly, Chairman of the
Board of Directors and President of each Company (Mr. Morgan retired as Chairman
of the Board of Directors and President of each Company on April 30, 1993);
formerly, President, Director and Chief Executive Officer of WRIMCO and W&R;
formerly, Chairman of the Board of Directors of Waddell & Reed Services Company;
formerly, Director of Waddell & Reed Asset Management Company, United Investors
Management Company and United Investors Life Insurance Company, affiliates of
Waddell & Reed, Inc.
WILLIAM L. ROGERS (age 50) -- Director of each Company since October 16,
1996. Principal, Colony Capital, Inc., a real estate-related investment
company; formerly, partner in Trivest, a private investment concern.
FRANK J. ROSS, JR.* (age 44) -- Director of each Company since October 16,
1996. Partner, Polsinelli, White, Vardeman & Shalton, a law firm.
ELEANOR B. SCHWARTZ (age 60) -- Director of each Company since July 12,
1995. Chancellor, University of Missouri-Kansas City; formerly, Interim
Chancellor, University of Missouri-Kansas City.
FREDERICK VOGEL III (age 61) -- Director of each Company since June 2, 1971
or its inception, whichever is later. Retired.
PAUL S. WISE (age 76) -- Director of each Company since January 12, 1987 or
its inception, whichever is later. Director of Potash Corporation of
Saskatchewan, a fertilizer company.
Based on the recommendation of each Company's Nominating Committee, at the
meeting of the Board of Directors on April 23, 1997, the Directors of each
Company, including the Directors who are not "interested persons" of the
Company, as defined in the 1940 Act ("Independent Directors"), unanimously
approved the nomination of the foregoing persons to serve or continue to serve
as Directors, as applicable, and directed that the election of these nominees be
submitted to the Company's shareholders.
The Boards of Directors of each Company met six times during that Company's
most recent fiscal year. Except for Messrs. Rogers and Ross, who were elected
to each Company's Board of Directors effective October 16, 1996, each nominee
attended, for all Companies, at least 75% of the meetings of the Board and each
of its committees on which he or she serves during the respective Companies'
most recent fiscal year.
Each Company has an Audit Committee that reviews and evaluates the audit
function, including recommending to the Directors the independent public
accountants to be selected for the Companies. The Audit Committee currently
consists of Messrs. Buchanan (Chairman) and Vogel, and Ms. Schwartz, each of
whom is an Independent Director, and Messrs. Morgan and Hayes. Each was elected
to the Audit Committee on August 30, 1995. Each Company's Audit Committee met
four times during that Company's most recent fiscal year.
Each Company also has a Nominating Committee that is responsible for the
selection and nomination of the Independent Directors. The Nominating Committee
currently consists of Messrs. Johnson and Wise, each of whom is an Independent
Director. For United Funds, Inc. and Gold & Government, the Nominating
Committee met once during that Company's most recent fiscal year. For New
Concepts, Continental Income, Government Securities and High Income the
Nominating Committee met twice during that Company's most recent fiscal year.
For each of the other Companies, the Nominating Committee did not meet during
that Company's most recent fiscal year. The Nominating Committee generally does
not consider unsolicited Director nominations recommended by Company
shareholders.
Each of the Directors, other than Messrs. Richey and Tucker, receives an
annual retainer of $44,000 per year, plus $1,000 for each meeting of the Board
of Directors attended, plus reimbursement of expenses of attending such meeting,
and $500 for each committee meeting attended which is not in conjunction with a
Board of Directors meeting. The fees and reimbursed expenses paid to the
Directors are divided among each of the Funds in the Fund Complex.
The following table sets forth information relating to the compensation
paid to Directors during the last fiscal years:
COMPENSATION TABLE
<TABLE>
Board Member (1)
Amounts Paid During
the Most Recent Fiscal Henry John Glendon William William Frank
Year from Company to L. Dodds I. Linda F. E. T. L. J. Eleanor Frederick Paul S.
Directors Bellmon Buchanan Graves Hayes Johnson Morgan Rogers Ross, Jr. Schwartz Vogel, III Wise
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Continental Income $ 1,568 $ 1,568 $ 1,568 $ 1,568 $ 1,537 $ 1,568 $ 739 $ 739 $ 1,535 $ 1,568 $ 1,568
Government Securities 442 442 442 442 434 442 202 202 433 442 442
High Income 3,019 3,019 3,019 3,019 2,958 3,019 1,418 1,418 2,955 3,019 3,019
New Concepts 1,634 1,634 1,634 1,634 1,600 1,634 791 791 1,603 1,634 1,634
Total Compensation Paid
to Board Members From
Companies and Fund
Complex for the Year Ended
March 31, 1997(2) 50,000 50,000 50,000 50,000 49,000 50,000 24,000 24,000 49,000 50,000 50,000
Cash Management 1,244 1,244 954 1,244 1,244 1,244 N/A N/A 927 1,244 1,244
International Growth 2,265 2,265 1,720 2,265 2,265 2,265 N/A N/A 1,674 2,265 2,265
Retirement Shares 1,786 1,786 1,358 1,786 1,785 1,786 N/A N/A 1,320 1,786 1,786
Total Compensation Paid
to Board Members From
Companies and Fund
Complex for the Year Ended
June 30, 1996(2) 47,000 47,000 36,000 47,000 47,000 47,000 N/A N/A 35,000 47,000 47,000
Asset Strategy 50 50 50 50 50 50 N/A N/A 48 50 50
High Income II 1,158 1,158 1,158 1,158 1,158 1,158 N/A N/A 1,158 1,158 1,158
Municipal Bond 3,118 3,118 3,118 3,118 3,118 3,118 N/A N/A 3,054 3,118 3,118
Municipal High Income 1,219 1,219 1,219 1,219 1,219 1,219 N/A N/A 1,194 1,219 1,219
Vanguard 4,097 4,097 4,097 4,097 4,097 4,097 N/A N/A 4,012 4,097 4,097
Total Compensation Paid
to Board Members From
Companies and Fund
Complex for the Year Ended
September 30, 1996(2) 48,000 48,000 48,000 48,000 48,000 48,000 N/A N/A 47,000 48,000 48,000
Gold & Government 108 108 108 108 106 108 23 23 106 108 108
United Funds, Inc. 21,929 21,929 21,929 21,929 21,482 21,929 4,914 4,914 21,482 21,929 21,929
Total Compensation Paid
to Board Members From
Companies and Fund
Complex for the Year Ended
December 31, 1996(2) 49,000 49,000 49,000 49,000 48,000 49,000 11,000 11,000 48,000 49,000 49,000
(1) Board members who are also affiliated persons of the Companies, as defined
in the 1940 Act, receive no salary, fees or compensation from the Companies.
(2) No pension or retirement benefits have been accrued as a part of Company
expenses.
</TABLE>
The Board of Directors of each Company has created an honorary position of
Director Emeritus. The Director Emeritus policy provides that an incumbent
Director who has attained the age of 75 and was initially elected as a Director
prior to May 31, 1993, may, or if initially elected as a Director on or after
May 31, 1993, must, resign his or her position as a Director and, unless he or
she elects otherwise, will serve as a Director Emeritus provided that the
Director has served as a Director of one or more of the Companies for at least
five years, which need not have been consecutive. A Director Emeritus receives
an annual fee from the Company in an amount equal to the annual retainer he or
she was receiving at the time he or she resigned as a Director; provided that a
Director initially elected to a Board of Directors on or after May 31, 1993,
receives such annual fee only for a period of three years commencing upon the
date the Director began his or her service as a Director Emeritus or in an
equivalent lump sum. A Director Emeritus receives these fees in recognition of
his or her past services, whether or not services are rendered in his or her
capacity as Director Emeritus, but has no authority or responsibility with
respect to management of the Funds. Messrs. Jay B. Dillingham and Doyle
Patterson currently serve as Directors Emeritus.
If elected, the Directors will hold office without limit in time except (a)
any Director may resign, (b) any Director may be removed by shareholders upon an
affirmative vote of a majority of all the shares entitled to be cast for the
election of Directors, and (c) in connection with the Director Emeritus policy
described above.
Executive Officers of the Companies
The executive officers of each Company, other than those who serve as
Directors, are set forth below. Each executive officer, as such, is an
"interested person" of each Company. Each executive officer set forth below
holds the same position with each of the Companies in the Fund Complex.
Robert L. Hechler (age 60) -- Vice President and Principal Financial
Officer of each Company since 1977 or its inception, whichever is later; Vice
President, Chief Operations Officer, Director and Treasurer of Waddell & Reed
Financial Services, Inc.; Executive Vice President, Principal Financial Officer,
Director and Treasurer of WRIMCO; President, Chief Executive Officer, Principal
Financial Officer, Director and Treasurer of W&R; Director and Treasurer of
Waddell & Reed Asset Management Company; President, Director and Treasurer of
Waddell & Reed Services Company; Vice President, Treasurer and Director of
Torchmark Distributors, Inc.
Henry J. Herrmann (age 54) -- Vice President of each Company since 1987 or
its inception, whichever is later; Vice President, Chief Investment Officer and
Director of Waddell & Reed Financial Services, Inc.; Director of W&R; President,
Chief Executive Officer, Chief Investment Officer and Director of WRIMCO and
Waddell & Reed Asset Management Company; Senior Vice President and Chief
Investment Officer of United Investors Management Company.
Theodore W. Howard (age 54) -- Vice President of each Company since 1987,
Treasurer and Principal Accounting Officer of each Company since 1976 or its
inception, whichever is later; Vice President of Waddell & Reed Services
Company.
Sharon K. Pappas (age 38) -- Secretary of each Company since 1989, Vice
President of each Company since 1992, General Counsel of each Company since 1994
or its inception, whichever is later; Vice President, Secretary and General
Counsel of Waddell & Reed Financial Services, Inc.; Senior Vice President,
Secretary and General Counsel of WRIMCO and W&R; Director, Senior Vice
President, Secretary and General Counsel of Waddell & Reed Services Company;
Director, Secretary and General Counsel of Waddell & Reed Asset Management
Company; Vice President, Secretary and General Counsel of Torchmark
Distributors, Inc.; formerly, Assistant General Counsel of each Company, WRIMCO,
Waddell & Reed Financial Services, Inc., W&R, Waddell & Reed Asset Management
Company and Waddell & Reed Services Company.
Required Vote: The election of Directors of a Company requires the
favorable vote of the holders of a plurality of the shares cast in person or by
proxy of that Company, provided a quorum is present.
THE BOARDS OF DIRECTORS RECOMMEND THAT YOU VOTE FOR PROPOSAL 1.
PROPOSAL 2: RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS EACH
FUND'S INDEPENDENT ACCOUNTANTS
Relevant Companies: All Companies.
Discussion. Deloitte & Touche LLP has been selected by the respective
Boards of Directors, with the approval of the respective Audit Committees, as
each Company's independent public accountants for the Company's current fiscal
year. The shareholders of each Company are entitled to vote for or against the
ratification of the selection of Deloitte & Touche LLP.
Deloitte & Touche LLP has advised each Company that neither it nor any of
its partners has any direct or indirect financial interest or connection (other
than as independent accountants) in or with the Fund or any of its affiliates.
Deloitte & Touche LLP has been given the opportunity to make a statement at the
Meeting if it so desires. Deloitte & Touche LLP is not expected to have a
representative present at the Meeting but will be available should any matter
arise requiring its presence.
On November 5, 1996, Price Waterhouse LLP, the then independent accountants
of the Funds, resigned as the independent accountants of the Funds. Price
Waterhouse LLP audited the Funds' financial statements during each Company's two
most recent fiscal years that ended on or before September 30, 1996, and for the
period from October 1, 1996 through November 5, 1996. During such period, the
Funds did not have any disagreements with Price Waterhouse LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement if not resolved to the satisfaction of
Price Waterhouse LLP would have caused them to make reference thereto in their
report on the financial statements for such periods.
Price Waterhouse LLP did not at any time during each Company's two most
recent fiscal years, and any subsequent interim period, advise the Company (i)
that internal controls necessary for the Company to develop reliable financial
statements did not exist, (ii) that it had received information that led it to
no longer be able to rely on management's representations that made it unwilling
to be associated with the financial statements prepared by management, (iii) of
the need to expand significantly the scope of its audit or that it had received
information that if further investigated may materially impact the fairness or
reliability of a previously issued or subsequent audit report or the underlying
financial statements or cause it to be unwilling to rely on management's
representations or be associated with the financial statements prepared by
management, or (iv) that it had received information that it concluded
materially impacted the fairness or reliability of a previously issued or
subsequent audit report or the underlying financial statements. Price
Waterhouse LLP did not so expand any such audit or conduct further
investigation, and no issues existed which were not resolved to the accountants'
satisfaction prior to resignation.
Required Vote: Approval of this Proposal 2 requires the affirmative vote
of a majority of outstanding securities of each Company, provided a quorum is
present.
THE BOARDS OF DIRECTORS RECOMMEND THAT YOU VOTE FOR PROPOSAL 2.
PROPOSAL 3: APPROVAL OF CHANGES TO CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS
AND POLICIES OF EACH FUND
The following table identifies generally the proposed changes and Funds
affected as discussed further below.
Proposal Action Proposed Fund(s) Affected
3.1 Restricted Securities Elimination Accumulative Fund, Bond
Fund, Cash Management,
Gold & Government, High
Income, High Income II,
Income Fund,
International Growth,
Municipal Bond, New
Concepts, Retirement
Shares, Science and
Technology and Vanguard
3.2 Diversification of Assets Modification All Funds, except Asset
Strategy and Government
Securities
3.3 Unseasoned Issuers Elimination Accumulative Fund, Bond
Fund, High Income,
Income Fund, Municipal
Bond, New Concepts and
Science and Technology
3.4 Repurchase Transactions Elimination Municipal Bond
3.5 Options, Commodities Modification and All Funds, except Cash
and Futures /or Elimination Management
3.6 Pledging Elimination All Funds, except Asset
Strategy, Cash
Management, Government
Securities, Municipal
Bond and New Concepts
3.7 Margin Purchases Modification All Funds, except Cash
Management
3.8 Short Sales Modification All Funds, except Cash
Management
3.9 Foreign Currencies Elimination Gold & Government,
International Growth and
New Concepts
3.10 Warrants and Rights Elimination Accumulative Fund, Bond
Fund, Continental
Income, High Income,
High Income II, Income
Fund, International
Growth, New Concepts,
Retirement Shares,
Science and Technology
and Vanguard
3.11 Purchasing Call Options Elimination International Growth,
New Concepts, Retirement
Shares and Vanguard
3.12 Arbitrage Transactions Elimination Accumulative Fund, Bond
Fund, Continental
Income, Gold &
Government, Government
Securities, High Income,
High Income II, Income
Fund, International
Growth, Municipal Bond,
Municipal High Income,
New Concepts, Retirement
Shares, Science and
Technology and Vanguard
3.13 Indexed Securities Elimination Government Securities
3.14 Securities Owned by Elimination All Funds, except
Certain Persons Government Securities
3.15 Loans Modification All Funds
Reasons for the Proposed Changes. Pursuant to the 1940 Act, each of the
Funds has adopted certain fundamental investment restrictions and policies,
which are set forth in the Fund's prospectus or statement of additional
information, and which may be changed only with shareholder approval.
Restrictions and policies that a Fund has not specifically designated as being
fundamental are considered to be "non-fundamental" or "operating" and may be
changed by the Fund's Board of Directors without shareholder approval.
Certain of the fundamental restrictions that the Funds have adopted in the
past reflect business or industry conditions or practices or federal
requirements that are no longer in effect. Other fundamental restrictions
reflect regulatory requirements that remain in effect, but which are not
required to be stated as fundamental, or in some cases even as non-fundamental,
restrictions. Also, as new Funds have been created over a period of years,
substantially similar fundamental restrictions often have been phrased in
slightly different ways, sometimes resulting in minor but unintended differences
in effect or potentially giving rise to unintended differences in
interpretation. Finally, on October 11, 1996, the National Securities Markets
Improvement Act of 1996 (the "NSMIA") was enacted. The NSMIA created a national
system of regulating mutual funds by preempting certain state securities or
"blue sky" laws that apply to mutual funds. Therefore, certain of the
fundamental restrictions reflect state regulatory requirements with which the
Funds are no longer required to comply.
Accordingly, the Board of Directors of each Fund has approved revisions to
certain of the Fund's fundamental restrictions in order to simplify, modernize
and standardize certain investment restrictions that are required to be
fundamental, and to eliminate certain fundamental restrictions that are not
legally required. In several instances, if an existing fundamental restriction
is eliminated because it is not required to be fundamental, the Fund intends to
implement a similar restriction as a non-fundamental, operating policy.
The Board of Directors believes that eliminating disparities among certain
of the Funds' fundamental restrictions will enhance WRIMCO's ability to manage
efficiently and effectively the Funds' assets in changing regulatory and
investment environments and will facilitate monitoring of compliance with
fundamental and non-fundamental investment limitations. In addition, by
reducing those policies that can be changed only by shareholder vote, each Fund
will be able to avoid the costs and delays associated with a shareholder meeting
when making changes to its investment policies that, at a future time, its Board
of Directors may consider desirable. Although the proposed changes in
fundamental restrictions will allow the Funds greater investment flexibility to
respond to future investment opportunities, the Board of Directors does not
anticipate that the changes, individually or in the aggregate, will result at
this time in a material change in the level of investment risk associated with
an investment in any Fund.
With respect to investments in options, futures contracts and other
derivative instruments, the Board of Directors determined that the current
policies for certain Funds unnecessarily restrict these Funds from taking
advantage of potential investment and risk management opportunities and
techniques. The Board of Directors of each such Fund accordingly considered and
approved modifications to certain of the Fund's fundamental restrictions, as
well as elimination of certain other fundamental restrictions, that would
provide the Funds greater flexibility to attempt to enhance income or yield and
to attempt to hedge their investments through the use of options on securities
(including index options), options on foreign currencies, futures contracts for
the purchase or sale of instruments based on financial indices (including
interest rates or an index of U.S. Government or foreign government securities
or equity or debt securities) and futures contracts on foreign currencies or
debt securities (hereinafter "futures contracts"), and options on futures
contracts, forward contracts, swaps and swap-related products and indexed
securities. Exhibit D attached hereto sets forth a summary of the features of
options, futures contracts, forward contracts, swaps and certain swap-related
products and indexed securities, and the potential uses and risks of these
investments.
For certain Funds, the Board of Directors has determined that the Fund
would benefit from having greater flexibility with respect to purchasing and
selling options, futures contracts and other derivative instruments. The Board
of Directors of each such Fund has concluded that amendment and/or elimination
of the Fund's current fundamental investment restrictions regarding commodities,
options, and other derivative instruments as set forth in sub-proposal 3.5 is in
the best interests of each Fund and its shareholders.
The text and a summary description of each proposed change to the affected
Funds' fundamental restrictions are set forth below. For purposes of the
discussion of each proposed change, the terms "Fund" or "Funds" refer only to
those Funds named as to which the change applies.
Shareholders should refer to Exhibit E to this Proxy Statement for the text
of the existing fundamental restrictions that are proposed to be amended or
eliminated. Shareholders should note, however, that, for some Funds, certain of
the fundamental restrictions that are treated separately below currently are
combined within a single fundamental restriction.
The text below also describes those operating policies that the Funds
intend to implement in conjunction with the elimination of fundamental
restrictions under this Proposal 3. To the extent that a current fundamental
investment restriction is replaced by a non-fundamental, operating policy, such
operating policy could in the future be changed by the Fund's Board of Directors
without approval of the affected shareholders, subject to such disclosure to
existing and prospective investors as may be required by law.
If approved by the shareholders of the affected Fund, the amendment or
elimination of fundamental investment restrictions shall become operative
concurrently with the effectiveness of an amendment to the Fund's registration
statement describing the same. If a Proposal is not approved as to a particular
Fund, the Fund's corresponding current investment restriction will remain
unchanged.
3.1 Elimination of Fundamental Restrictions Regarding Restricted Securities
Funds to which this change applies: Accumulative Fund, Bond Fund, Cash
Management, Gold & Government, High Income, High Income II, Income Fund,
International Growth, Municipal Bond, New Concepts, Retirement Shares, Science
and Technology and Vanguard.
Discussion: Typically, restricted securities cannot be sold to the public
without registration under the Securities Act of 1933, as amended ("1933 Act").
Unless registered, these securities can only be sold in privately negotiated
transactions and/or pursuant to an exemption from registration. Each of these
Funds currently has a fundamental restriction that precludes it either from
investing more than a specified percentage of its net assets in restricted
securities or from investing in restricted securities at all. In addition,
Accumulative Fund, Bond Fund, Income Fund and Science and Technology have a
fundamental restriction prohibiting investment in securities that do not have
readily available market quotations (other than commercial paper), which would
include a range of securities not traded on an exchange as well as restricted
and illiquid securities.
However, the Funds' investment restrictions on restricted securities do not
expressly refer to liquidity. For example, Rule 144A under the 1933 Act permits
resales to eligible institutional investors of restricted securities that, when
issued, were not of the same class as securities listed on a U.S. securities
exchange or Nasdaq. Rule 144A reflects recognition that, even though
unregistered securities may not be freely offered to the general public, in many
cases an active secondary market exists for unregistered securities and other
institutional buyers stand ready to purchase such securities at market value
from institutional holders such as the Funds in transactions exempt from
registration.
In view of changes that have occurred, and that may in the future occur, in
the 1933 Act requirements regarding the types of offers and sales that may be
made without an effective registration statement and the increased size and
liquidity of the institutional markets for unregistered and/or non-exchange
traded securities, the Board of Directors believes that the current
restriction(s) for each Fund is unnecessarily limiting, particularly since the
Funds also have a non-fundamental policy that limits its illiquid investments.
Under that policy, the Fund may not make an investment if, as a result, more
than 10% of its net assets would be invested in illiquid investments. (Under a
current position of the staff of the Securities and Exchange Commission (the
"SEC"), each Fund could invest up to 15% of its assets in illiquid investments,
although the Board of Directors of each Fund has no present intention to change
any Fund's current policy to reflect this higher limit.)
If the shareholders of a Fund approve this Proposal to eliminate that
Fund's fundamental restriction(s) regarding restricted securities, whether or
not the Fund could invest in an unregistered security and, in the case of
Accumulative Fund, Bond Fund, Income Fund and Science and Technology, a security
for which there is no readily available market quotation, would be determined by
reference to the Fund's goal(s) and investment policies, including its policy
regarding illiquid investments, subject to the applicable requirements of the
1940 Act.
3.2 Modification of Fundamental Restriction Regarding Diversification of Assets
Funds to which this change applies: All Funds, except Asset Strategy and
Government Securities.
Discussion: The diversification requirement contained in the current
investment restriction of each Fund (other than Asset Strategy) is more
restrictive than required under the 1940 Act because the current restriction
applies to 100%, rather than 75%, of the Fund's total assets. In addition,
Continental Income, Bond Fund, Income Fund, Accumulative Fund, Science and
Technology, Gold & Government, High Income, High Income II, International
Growth, New Concepts and Retirement Shares are further restricted from
purchasing more than 10% of any class of securities of an issuer, and Cash
Management is restricted from buying the securities of any company if it would
then own more than 10% of the total value of that company's outstanding
securities. The 1940 Act's diversification requirement restricts only
outstanding voting securities of an issuer, not other classes of securities of
that issuer. However, Cash Management would continue to be subject to, and
operate in compliance with, the diversification requirements of Rule 2a-7 under
the 1940 Act as currently are, or in the future may be, in effect.
Accordingly, this Proposal will increase the amount of each Fund's assets
that may be invested in the securities of any one issuer, and with respect to
Continental Income, Bond Fund, Income Fund, Accumulative Fund, Science and
Technology, Gold & Government, High Income, High Income II, International
Growth, New Concepts and Retirement Shares, will eliminate the restriction
against holding more than 10% of any "class" of an issuer's securities. With
respect to 75% of the value of its total assets, a Fund would continue to be
prohibited from (a) investing in the securities of any one issuer in an amount
exceeding 5% of the value of the Fund's total assets, and (b) owning more than
10% of the outstanding voting securities of any one issuer. However, the Fund
would not be so restricted with respect to 25% of the value of its total assets.
Thus, for example, a Fund would be permitted to invest 25% of its total assets
in the securities of one issuer or to invest 10% of its total assets in the
securities of one issuer and 15% in the securities of another issuer.
The greater a Fund's holdings of a particular issuer, the greater the
impact that changes in the value of such securities may have on the Fund's total
investment portfolio. WRIMCO believes that the proposed amended fundamental
restriction will provide each Fund with additional flexibility in connection
with the purchase of portfolio securities, while maintaining full compliance
with the diversification requirements of the 1940 Act.
Proposed Text of Fundamental Investment Restriction: If the shareholders
of a Fund (other than Cash Management, Municipal Bond and Municipal High Income)
approve this sub-proposal 3.2, that Fund's current fundamental restriction
regarding diversification of its investments would be amended to provide that
the Fund may not:
With respect to 75% of its total assets, purchase securities of any one
issuer (other than cash items and "Government securities" as defined in the
1940 Act), if immediately after and as a result of such purchase, (a) the
value of the holdings of the Fund in the securities of such issuer exceeds
5% of the value of the Fund's total assets, or (b) the Fund owns more than
10% of the outstanding voting securities of such issuer.
Cash Management, Municipal Bond and Municipal High Income currently have
fundamental investment restrictions prohibiting the purchase of voting
securities of any issuer, therefore, if the shareholders of each of those Funds
approve this sub-proposal 3.2, that Fund's current fundamental restriction
regarding diversification of its investments would be amended to provide that
the Fund may not:
With respect to 75% of its total assets, purchase securities of any one
issuer (other than cash items and "Government securities" as defined in the
1940 Act), if immediately after and as a result of such purchase, the value
of the holdings of the Fund in the securities of such issuer exceeds 5% of
the value of the Fund's total assets.
3.3 Elimination of Fundamental Restriction Regarding Unseasoned Issuers
Funds to which this change applies: Accumulative Fund, Bond Fund, High
Income, Income Fund, Municipal Bond, New Concepts and Science and Technology.
Discussion: Companies with less than three years of continuous operation
are typically referred to as "unseasoned issuers." The purpose of the
fundamental restriction on investments in unseasoned issuers was to comply with
state securities laws and/or regulations and limit the risks associated with
investing in companies that have no proven long-term track record in business
and whose prospects are uncertain. Because of the enactment of the NSMIA, the
Funds need not comply with state blue sky laws involving investment
restrictions. If the shareholders of a Fund approve the elimination of its
current fundamental restriction regarding unseasoned issuers, each Fund (other
than High Income, New Concepts and Science and Technology) intends to implement
the operating policy described below regarding investing in unseasoned issuers;
therefore, this Proposal likely will not change the way in which the Fund is
currently managed. It will, however, clarify that each Fund's restriction on
investing in unseasoned issuers is applicable only to issuers that are not U.S.,
state or local governments or their respective agencies and instrumentalities,
or are not special purpose entities or whose securities are not guaranteed by
entities with a record of more than three years' continuous operation, including
that of predecessors.
New Non-Fundamental, Operating Policy: If this sub-proposal 3.3 is adopted
by the shareholders of a Fund, each Fund, other than High Income, New Concepts
and Science and Technology, will eliminate its current fundamental restriction
and intends to implement the following operating policy, which could be changed
by the Board of Directors of each Fund without approval of that Fund's
shareholders. This new operating policy would provide that each Fund, other
than High Income, New Concepts and Science and Technology, does not:
[C]urrently intend to purchase the securities of any issuer (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof) if, as a result, more than 5% of its total
assets would be invested in the securities of business enterprises that,
including predecessors, have a record of less than three years of
continuous operation. This restriction does not apply to any obligations
issued or guaranteed by the U.S. government, or a state or local government
authority, or their respective agencies or instrumentalities, or to
collateralized mortgage obligations, other mortgage-related securities,
asset-backed securities, indexed securities or over-the-counter derivative
financial instruments.
With respect to each of High Income, New Concepts and Science and
Technology, if this sub-proposal 3.3 is approved, the limitation on investments
in the securities of unseasoned issuers will be eliminated and will not be
replaced by the operating policy stated above. High Income seeks a high level
of current income, as a primary goal, and capital growth, as a secondary goal,
when consistent with its primary goal. High Income invests primarily in a
diversified portfolio of high-yield, high-risk, fixed-income securities, many of
which may be issued by newer or unseasoned companies. New Concepts seeks growth
through a diversified holding of securities issued primarily by new or
unseasoned companies, companies that are in their early stages of development or
smaller companies positioned in new and emerging industries where the
opportunity for rapid growth is above average. Science and Technology seeks
long-term capital growth by concentrating its investments in science and
technology securities. Many of the securities in which Science and Technology
may wish to invest are also issued by new or unseasoned companies. Therefore,
WRIMCO believes that eliminating this policy will provide these Funds with
greater flexibility in attempting to meet their stated goals.
3.4 Elimination of Fundamental Restriction Regarding Repurchase Transactions
Fund to which this change applies: Municipal Bond.
Discussion: Municipal Bond has a fundamental investment restriction that
prohibits it from engaging in repurchase transactions. WRIMCO believes that the
Fund would benefit from having the flexibility to enter into repurchase
agreements, which are commonly used by mutual funds for the short-term
investment of cash. In general, a repurchase agreement is an arrangement under
which the Fund would buy a security and the seller would simultaneously agree to
repurchase the security at a specified time and price that reflects a market
rate of interest. For certain purposes, a repurchase agreement is viewed as a
loan by a fund that is collateralized by the security which is the subject of
the transaction.
If sub-proposal 3.4 is approved by the shareholders of Municipal Bond, the
Fund will eliminate its current restriction prohibiting its use of repurchase
arrangements. The Fund's repurchase agreements will be structured so as to
fully collateralize the loans. In other words, the value of the underlying
securities, which will be held by the Fund's custodian bank or by a third party
that qualifies as a custodian under Section 17(f) of the 1940 Act, is, and
during the entire term of the agreement will remain, at least equal to the value
of the loan, including the accrued interest earned thereon. To reduce the risk
of loss if the selling party were to default on its obligation to repurchase and
the value of the underlying security declined, the Fund will enter into
repurchase agreements only with those entities such as the Fund's custodian bank
and recognized securities dealers approved by WRIMCO on the basis of criteria
established by the Board of Directors, and WRIMCO will monitor the market value
of the underlying security during the term of the agreement.
Repurchase agreements will generate taxable income to the Fund and will
accordingly be subject to the Fund's current limit on taxable income.
Repurchase agreements not terminable within seven days will be considered
illiquid and subject to the Fund's limit on illiquid investments.
3.5 Modification and/or Elimination of Fundamental Restrictions Regarding
Options, Commodities, Forward Contracts and/or Futures Contracts
Funds to which this change applies: All Funds, except Cash Management.
Discussion: Approval of this sub-proposal 3.5 by the shareholders of a
Fund would eliminate and/or modify that Fund's fundamental investment
restrictions, as follows. To the extent applicable to a Fund, the Fund's
fundamental restrictions:
(a) regarding investments in commodities and commodity contracts would be
modified;
(b) requiring that the Fund only buy and sell derivative instruments on
securities in which the Fund may invest would be eliminated;
(c) regarding the specific types and amounts of derivative instruments in
which the Fund may invest would be eliminated;
(d) regarding the percentage of the Fund's assets that can be invested in
covered calls would be eliminated;
(e) requiring that the options and futures contracts purchased and sold by
the Fund be listed on a domestic or national securities or commodities
exchange or quoted on Nasdaq would be eliminated;
(f) requiring that all call options written by the Fund be covered would
be eliminated;
(g) requiring that options on stock indices, futures contracts and options
on futures contracts be for non-speculative purposes only would be
eliminated;
(h) limiting the amount committed to the consummation of forward currency
contracts to 15% of the value of the Fund's assets would be
eliminated;
(i) providing that the Fund may not enter into forward currency contracts
or maintain a net exposure to such contracts where the consummation of
such contracts would obligate the Fund to deliver an amount of foreign
currency in excess of the value of its portfolio securities or other
assets denominated in that currency would be eliminated; and
(j) limiting the Fund's ability to enter into forward currency contracts
solely in connection with the purchase or sale of a security
denominated in a foreign currency to "lock in" the U.S. dollar price
of the security would be eliminated.
If this sub-proposal 3.5 is adopted by the shareholders of a Fund, that
Fund intends to implement a non-fundamental, operating policy, which could be
changed by the Board of Directors of the Fund without the approval of
shareholders of the Fund, regarding investment in derivative instruments for
that Fund, as described below.
In addition, with respect to Gold & Government only, the fundamental
restrictions (a) prohibiting its investment in mineral related programs and
leases and (b) limiting its investment in gold, silver and platinum to no more
than 25% of its total assets would also be eliminated.
The primary purpose of this sub-proposal 3.5 is to authorize each Fund to
engage in certain transactions in options, futures contracts, and other
derivative instruments, which will provide the Fund greater flexibility in the
management of its investments. In addition, Gold & Government would be
permitted to invest in minerals-related programs and leases, which is currently
prohibited by its fundamental restrictions. WRIMCO believes that it is
desirable for the Funds to be able to engage in options, futures contracts and
other derivative instruments in order to enhance income or yield to hedge
portfolio positions, as may be permitted under applicable law and regulations
and in a manner that is consistent with that Fund's goal and investment
policies.
Proposed Fundamental Investment Restriction and New Non-Fundamental,
Operating Policy: The fundamental investment restrictions for each Fund (other
than Asset Strategy, Gold & Government and Government Securities) governing
options, commodities, futures contracts and other derivative instruments are
proposed to be revised (and, where a Fund currently has more than one
restriction affecting these derivatives, proposed to be consolidated and
revised) to provide as follows:
The Fund may not purchase or sell physical commodities; however, this
policy shall not prevent the Fund from purchasing and selling foreign
currency, futures contracts, options, forward contracts, swaps, caps,
collars, floors and other financial instruments.
The fundamental investment restriction for Asset Strategy governing
commodities is proposed to be revised to provide as follows:
The Fund may not purchase or sell physical commodities, except that the
Fund may purchase and sell precious metals for temporary, defensive purposes;
however, this policy shall not prevent the Fund from purchasing and selling
foreign currency, futures contracts, options, forward contracts, swaps, caps,
collars, floors and other financial instruments.
The fundamental investment restrictions for Gold & Government governing
options, commodities, futures contracts and other derivative instruments are
proposed to be revised to eliminate any restrictions on that Fund's use of
options, futures contracts, forward contracts, swaps, caps, collars and floors
and otherwise to provide that the Fund may not:
Purchase or sell physical commodities, except that (a) it may invest in
gold, silver and platinum, (b) it may invest in minerals-related programs
and leases, and (c) this policy shall not prevent the Fund from purchasing
and selling foreign currency, futures contracts, options, forward
contracts, swaps, caps, collars, floors and other financial instruments.
The fundamental investment restrictions for Government Securities governing
options, commodities, futures contracts and other derivative instruments are
proposed to be revised (and coordinated with its current restriction limiting
the Fund's investments to U.S. Government Securities) to provide that the Fund
may not:
Purchase or sell any securities or physical commodities other than U.S.
Government Securities; however, this policy shall not prevent the Fund from
purchasing and selling (a) foreign currency if a U.S. Government Security
that the Fund owns or intends to acquire is denominated in that foreign
currency and (b) futures contracts, options, forward contracts, swaps,
caps, collars, floors and other financial instruments if the return on, or
value of, the financial instrument is based on the return on, or value of,
U.S. Government Securities.
If the shareholders of a Fund (other than Government Securities) approve
the elimination and/or modification of its fundamental restriction(s) as
proposed, that Fund intends to implement a non-fundamental, operating policy
that provides that:
Generally, the Fund may purchase and sell any type of derivative instrument
(including, without limitation, futures contracts, options, forward
contracts, swaps, caps, collars, floors and indexed securities). However,
the Fund will only purchase or sell a particular derivative instrument if
the Fund is authorized to invest in the type of asset by which the return
on, or value of, the derivative instrument is primarily measured or, with
respect to foreign currency derivatives, if the Fund is authorized to
invest in foreign securities.
In addition, if the shareholders of Gold & Government approve the
elimination and modification of its fundamental restrictions as proposed, that
Fund intends also to implement a non-fundamental, operating policy limiting its
investment in gold, silver and platinum to 25% of its total assets.
3.6 Elimination of Fundamental Restrictions Regarding Mortgaging or Pledging
Securities
Funds to which this change applies: All Funds, except Asset Strategy, Cash
Management, Government Securities, Municipal Bond and New Concepts.
Discussion: The primary purpose of this sub-proposal 3.6 is to permit the
Funds to mortgage or pledge their respective securities or other assets under
certain circumstances. If sub-proposal 3.6 is approved by the shareholders of a
Fund, that Fund intends to implement a non-fundamental, operating policy that
would prohibit the pledging of assets in connection with borrowings and would
make clear that assets deposited or segregated in connection with transactions
in options, futures contracts, forward contracts, swaps and other derivative
instruments are not subject to the restriction.
New Non-Fundamental, Operating Policy: If this sub-proposal 3.6 is
approved by the shareholders of a Fund, that Fund will eliminate its current
fundamental investment restriction regarding mortgaging or pledging securities
or other assets and will implement the following non-fundamental, operating
policy, which could be changed by the Board of Directors of the Fund without the
approval of the shareholders of that Fund. The non-fundamental, operating
policy would provide that the Fund may not:
Pledge its assets in connection with any permitted borrowings. However,
this policy does not prevent the Fund from pledging its assets in
connection with its purchase and sale of futures contracts, options,
forward contracts, swaps, caps, collars, floors and other financial
instruments.
3.7 Modification of Fundamental Restriction Regarding Margin Purchases of
Securities
Funds to which this change applies: All Funds, except Cash Management.
Discussion: Margin purchases involve the purchase of securities with money
borrowed from a broker. "Margin" is the cash or eligible securities that the
borrower places with the broker as collateral to secure the loan. Pursuant to
its current fundamental restriction(s), each Fund is prohibited from purchasing
securities on margin. With some exceptions, mutual funds are prohibited from
entering into most types of margin purchases by applicable rules and policies
adopted by the SEC. If this sub-proposal 3.7 is approved by the shareholders of
a Fund, the Fund intends to implement a revised fundamental investment
restriction (set forth below) that permits the Fund to purchase securities on
margin under certain circumstances and makes clear that short-term credits
necessary for the clearance of transactions and margin payments and other
deposits made in connection with options, futures contracts, forward contracts,
swaps and other derivative instruments are not considered purchasing securities
on margin.
Proposed Fundamental Investment Restriction: Each Fund's fundamental
investment restriction is proposed to be revised to prohibit margin purchases
except under conditions permitted by applicable SEC rules and would clarify that
the Fund may make margin payments in connection with options, futures contracts
and other financial instruments. The proposed fundamental investment
restriction would provide that each Fund may not:
Purchase securities on margin, except that the Fund may obtain such short-
term credits as are necessary for the clearance of transactions and that
the Fund may make margin payments in connection with futures contracts,
options, forward contracts, swaps, caps, collars, floors and other
financial instruments.
3.8 Modification of Fundamental Restriction Regarding Short Sales of Securities
Funds to which this change applies: All Funds, except Cash Management.
Discussion: In a short sale, an investor sells a borrowed security and has
a corresponding obligation to the lender to return the identical security. In
an investment technique known as a short sale "against the box," an investor
sells securities short while owning the same securities in the same amount, or
having the right to obtain equivalent securities. The investor could have the
right to obtain equivalent securities, for example, through its ownership of
warrants, options or convertible bonds.
The fundamental restriction, as it is proposed to be modified, would permit
the Fund to engage in short sales of securities against the box. In addition,
the revised fundamental restriction would clarify that options, futures
contracts, swaps, forward contracts and other financial instruments are not
considered short sales.
Proposed Fundamental Investment Restriction: Each Fund's fundamental
investment restriction on short selling is proposed to be revised to provide
that a Fund may not:
Sell securities short (unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short); however, this
policy does not prevent the Fund from entering into short positions in
foreign currency, futures contracts, options, forward contracts, swaps,
caps, collars, floors and other financial instruments.
3.9 Elimination of Fundamental Restriction Regarding Foreign Currencies
Funds to which this change applies: Gold & Government, International Growth
and New Concepts.
Discussion: If this sub-proposal 3.9 is approved by the shareholders of a
Fund, that Fund will eliminate its current fundamental restriction that provides
that the Fund may only hold foreign currency in connection with forward
contracts for up to four business days, and/or in connection with the purchase
or sale of foreign securities. The Fund intends instead to operate in
accordance with the fundamental restriction and operating policy as proposed in
sub-proposal 3.5 above.
3.10 Elimination of Fundamental Restriction Regarding Investment in Warrants and
Rights
Funds to which this change applies: Accumulative Fund, Bond Fund,
Continental Income, High Income, High Income II, Income Fund, International
Growth, New Concepts, Retirement Shares, Science and Technology and Vanguard.
Discussion: If this sub-proposal 3.10 is approved by the shareholders of a
Fund, that Fund will eliminate its current fundamental restriction regarding
investment in warrants and rights. Each Fund will then have the ability to
invest in warrants and rights without a percentage limitation. Each Fund
intends, however, to operate in accordance with the proposed fundamental
restriction and new non-fundamental, operating policy as proposed in sub-
proposal 3.5 above.
3.11 Elimination of Fundamental Restriction Regarding Purchasing Call
Options
Funds to which this change applies: International Growth, New Concepts,
Retirement Shares and Vanguard.
Discussion: If this sub-proposal 3.11 is approved by the shareholders of a
Fund, that Fund will eliminate its current fundamental restriction that provides
that the Fund may purchase calls only to close out its position in a call that
that Fund has written. The Fund intends to operate in accordance with the
fundamental restriction and operating policy as proposed in sub-proposal 3.5
above.
3.12 Elimination of Fundamental Restrictions Regarding Arbitrage Transactions
Funds to which this change applies: Accumulative Fund, Bond Fund,
Continental Income, Gold & Government, Government Securities, High Income, High
Income II, Income Fund, International Growth, Municipal Bond, Municipal High
Income, New Concepts, Retirement Shares, Science and Technology and Vanguard.
Discussion: If this sub-proposal 3.12 is approved by the shareholders of a
Fund, that Fund will eliminate its current fundamental restriction that provides
that the Fund may not engage in arbitrage transactions. The Fund intends to
operate in accordance with the proposed fundamental restriction and new non-
fundamental, operating policy as proposed in sub-proposal 3.5 above.
3.13 Elimination of Fundamental Restriction Regarding Indexed Securities
Fund to which this change applies: Government Securities.
Discussion: If this sub-proposal 3.13 is approved by the shareholders of
Government Securities, that Fund will eliminate its current fundamental
restriction that provides that the Fund may invest in indexed securities only if
they are issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and intends to replace the fundamental policy with a non-
fundamental, operating policy to the same effect. In addition, the Fund intends
to operate in accordance with the proposed fundamental restriction and new, non-
fundamental operating policy set forth in sub-proposal 3.5 above.
3.14 Elimination of Fundamental Restriction Regarding Investments in Issuers
Whose Securities are Owned by Certain Persons
Funds to which this change applies: All Funds, except Government
Securities.
Discussion: Each Fund (other than Government Securities) currently has a
fundamental investment restriction that prohibits it from purchasing or holding
the securities of an issuer if the officers and directors of the Fund and/or
WRIMCO who beneficially own more than 1/2 of 1% of the securities of that issuer
together own beneficially more than 5% of the securities of that issuer. This
restriction was originally adopted to address state securities law requirements
in connection with the registration of Fund shares for sale in that state. Since
the effectiveness of NSMIA, these state restrictions no longer apply.
WRIMCO believes that this fundamental investment restriction should be
eliminated. Although this restriction has not precluded Fund investments in the
past, elimination of the restriction will potentially increase WRIMCO's
flexibility when selecting investments for a Fund in the future. The ability of
a Fund to invest in companies in which its Directors and officers, or its
affiliates and their directors and officers, hold interests would continue to be
restricted by the 1940 Act, whether or not the current fundamental investment
restriction is eliminated.
3.15 Modification of Fundamental Policy Regarding Loans
Funds to which this change applies: All Funds.
Discussion: Each of these Funds currently has a fundamental investment
restriction that, in general, prohibits the Fund from making loans. Certain of
these restrictions expressly exclude from the prohibition debt securities that
"have been sold to the public," as well as "other obligations customarily
acquired by institutional investors." For Asset Strategy, this exception
applies to "a portion of an issue of debt securities." For Cash Management,
Government Securities, Municipal Bond and Municipal High Income, the exception
refers to the types of securities that the Fund is permitted to purchase or in
which the Fund may otherwise invest.
To eliminate any ambiguity or potential disparity in interpretation of the
scope of these exceptions, each Fund's fundamental restriction regarding its
ability to make loans is proposed to be modified to make clear that the Fund may
buy "debt securities and other obligations consistent with its goal and its
other investment policies and restrictions."
Required Vote. Approval of each of the numbered changes contemplated by
Proposal 3 with respect to a Fund requires the affirmative vote of a "majority
of the outstanding voting securities" of that Fund, which for this purpose means
the affirmative vote of the lesser of (1) 67% or more of the shares of the Fund
present at the Meeting or represented by proxy if more than 50% of the
outstanding shares of the Fund are so present or represented or (2) more than
50% of the outstanding shares of the Fund.
If one or more of the numbered changes contemplated by Proposal 3 is not
approved by shareholders of that Fund, the related existing fundamental
restriction(s) of the Fund will continue in effect for that Fund, but
disapproval of all or part of Proposal 3 by the shareholders of one Fund will
not affect any approvals of Proposal 3 that are obtained with respect to any
other Fund.
THE BOARDS OF DIRECTORS RECOMMEND THAT YOU VOTE FOR PROPOSALS 3.1 THROUGH 3.15,
INCLUSIVE.
PROPOSAL 4: APPROVAL OF CHANGE TO
GOAL OF ASSET STRATEGY
Relevant Company: Asset Strategy.
Discussion: Proposal 4 is to approve the recommendation of WRIMCO and the
Board of Directors of Asset Strategy to change the Fund's goal from seeking
"high total return with reduced risk over the long term" to "high total return
over the long term."
Under the Fund's current investment policy, which is non-fundamental and by
which the Fund seeks to achieve its goal, the Fund's assets are allocated among
the following classes, or types, of investments. The stock class includes
equity securities of all types. The bond class includes all varieties of fixed-
income instruments with maturities of more than three years (including
adjustable rate preferred stocks). The short-term class includes all types of
short-term instruments with remaining maturities of three years or less.
WRIMCO has the ability to allocate the Fund's assets among these classes
within specified ranges. The Fund's mix indicates the benchmark for its
combination of investments in each class over time. WRIMCO may change the mix
within the specified ranges from time to time. Under normal circumstances, a
single reallocation will not involve more than 10% of the Fund's total assets.
The range and approximate percentage of the mix for each asset class are shown
below.
Mix Range
--------- ------
Stock class 10-60%
40%
Bond class 20-60%
40%
Short-term class 0-70%
20%
WRIMCO believes that it is desirable to modify the specified range and mix
for each asset class and that the Fund's goal, as it is proposed to be modified,
would be more consistent with the desired range and mix than the current goal.
In particular, if this Proposal 4 is approved by the shareholders of Asset
Strategy, the Fund intends to (i) eliminate the operating policy regarding the
10% reallocation, and (ii) revise the specified ranges and mix as follows:
Mix Range
--------- ------
Stock class 0-100%
70%
Bond class 0-100%
25%
Short-term class 0-100%
5%
WRIMCO seeks to balance the investment risks undertaken by the Fund against
the higher total returns that may be available by reducing exposure to the stock
market during down cycles and allowing a higher allocation in the stock class
during periods of strongly positive market performance. The Fund has the
ability to take a more defensive posture by increasing its holdings in the bond
or short-term class when WRIMCO believes that there exists a potential bear
market, prolonged downturn in stock prices or significant loss in value.
The proposed change to the Fund's goal does not reflect any current or
contemplated change to any other investment policies of the Fund other than
those described above, and it is not intended to reflect any change in the level
of risk associated with an investment in the Fund. If the Proposal is not
approved, the goal will remain unchanged.
Required Vote: Approval of this Proposal 4 requires the affirmative vote
of a "majority of the outstanding voting securities" of the Fund, which for this
purpose means the affirmative vote of the lesser of (1) 67% or more of the
shares of the Fund present at the Meeting or represented by proxy if more than
50% of the outstanding shares of the Fund are so present or represented or (2)
more than 50% of the outstanding shares of the Fund.
THE BOARD OF DIRECTORS OF ASSET STRATEGY RECOMMENDS THAT YOU VOTE
FOR PROPOSAL 4.
PROPOSAL 5: APPROVAL OF CHANGE TO GOAL OF
INCOME FUND BY ADDING A SECONDARY GOAL
Relevant Fund: Income Fund.
Discussion: Proposal 5 is to approve the recommendation of WRIMCO and the
Board of Directors of United Funds, Inc. to change Income Fund's goal from "The
Fund seeks to maintain current income, subject to market conditions" to "The
Fund seeks, as a primary goal, to maintain current income, subject to market
conditions. As a secondary goal, the Fund seeks capital growth."
Income Fund currently invests primarily in common stocks, or securities
convertible into common stocks, of companies that have the potential for capital
growth or that may be expected to resist market decline. At least 65% of the
Fund's total assets are invested, during normal market conditions, in income
producing securities. WRIMCO believes that it would be desirable for the Fund,
while maintaining its primary objective of providing current income, also to
seek capital growth. Accordingly, if this Proposal 5 is approved by the
shareholders of Income Fund, the Fund intends to revise this investment strategy
to provide that Income Fund seeks to achieve these goals through investment in
common stocks, or securities convertible into common stocks, of companies that
have a record of paying regular dividends on common stock or have the potential
for capital appreciation. If the Proposal is not approved, the goal will remain
unchanged.
Required Vote: Approval of this Proposal 5 requires the affirmative vote
of a "majority of the outstanding voting securities" of the Fund, which for this
purpose means the affirmative vote of the lesser of (1) 67% or more of the
shares of the Fund present at the Meeting or represented by proxy if more than
50% of the outstanding shares of the Fund are so present or represented or (2)
more than 50% of the outstanding shares of the Fund.
THE BOARD OF DIRECTORS OF UNITED FUNDS, INC. RECOMMENDS THAT YOU VOTE
FOR PROPOSAL 5.
PROPOSAL 6: ELIMINATION OF FUNDAMENTAL RESTRICTION REGARDING REMAINING MATURITY
OF SECURITIES
Relevant Company: Cash Management.
Discussion: The main purpose of this proposal is to conform the Fund's
investment policy regarding the remaining maturity of securities to the
applicable requirements of Rule 2a-7 (the "Rule") promulgated under the 1940
Act. The Rule defines the quality, maturity, and diversification criteria to be
used by investment advisers in selecting investments for money market funds. To
the extent that criteria specified in the Rule are narrower than the Fund's
fundamental investment policies, WRIMCO observes the narrower criteria specified
in the Rule. To the extent that criteria specified in the Rule are broader than
the Fund's fundamental investment policies, WRIMCO observes the narrower
criteria specified in the Fund's fundamental policies.
The Rule is broader than the Fund's current fundamental restriction
regarding the permissible remaining maturity of the Fund's portfolio securities.
As a matter of fundamental policy, the Fund limits its investments to securities
with remaining maturities of one year or less. Generally, the extended maturity
limit of 397 days under the Rule accommodates money market funds, such as the
Fund, that purchase securities on a when-issued or delayed-delivery basis and
clarifies money market funds' ability to make commitments in connection with the
remarketing of certain obligations, and permits the purchase of long-term bonds
during the final 13 months of their maturity. Eliminating the Fund's
fundamental policy limiting the remaining maturity to one year and replacing it
with a less restrictive, non-fundamental policy (i.e., permitting remaining
maturity of up to 397 days) will not materially change the way the Fund is
currently managed.
New Non-Fundamental, Operating Policy: If this proposal 6 is approved by
the shareholders, the Fund will implement the following non-fundamental,
operating policy:
In accordance with Rule 2a-7, the Fund may invest in securities with a
remaining maturity of not more than 397 calendar days.
If the Proposal is not approved, the policy will remain unchanged.
Required Vote: Approval of this Proposal 6 requires the affirmative vote
of a "majority of the outstanding voting securities" of Cash Management, which
for this purpose means the affirmative vote of the lesser of (1) 67% or more of
the shares of the Fund present at the Meeting or represented by proxy if more
than 50% of the outstanding shares of the Fund are so present or represented or
(2) more than 50% of the outstanding shares of the Fund.
THE BOARD OF DIRECTORS OF CASH MANAGEMENT RECOMMENDS THAT YOU VOTE FOR PROPOSAL
6.
ADDITIONAL INFORMATION
The solicitation of proxies, the cost of which will be borne by the Funds,
will be made primarily by mail, telephone or oral communications by
representatives of each Fund, regular employees and sales representatives of
Waddell & Reed, Inc., the principal underwriter of each Fund ("W&R"), W&R's
affiliates, certain broker-dealers (who may be specifically compensated for such
services), or by representatives of Management Information Services Corp.,
professional proxy solicitors, retained by the Funds who will be paid the
following approximate fees for soliciting services set forth below. Each Fund
will pay this firm for its share of the fees and out-of-pocket expenses for
proxy solicitation. Each Fund will pay a portion of the costs of the Meeting,
including the costs of solicitation, allocated on the basis of the number of
shareholder accounts of each Fund.
Soliciting Fees
and Expenses
Fund (Approximate)
Asset Strategy $ 160
Cash Management 2,472
Continental Income 1,536
United Funds, Inc.
Income Fund 11,824
Bond Fund 1,268
Accumulative Fund 2,754
Science and Technology 4,162
Gold & Government 291
Government Securities 455
High Income 1,904
High Income II 948
International Growth 4,127
Municipal Bond 1,097
Municipal High Income 570
New Concepts 3,146
Retirement Shares 1,810
Vanguard 4,828
RECEIPT OF SHAREHOLDER PROPOSALS
As a general matter, the Funds do not hold regular annual or other meetings
of shareholders. Any shareholder who wishes to submit proposals to be
considered at a special meeting of a Fund's shareholders should send such
proposals to the Fund at 6300 Lamar Avenue, P.O. Box 29217, Shawnee Mission,
Kansas 66201-9217.
OTHER BUSINESS
No Fund knows of any other business to be presented at the Meeting other
than the matters set forth in this Proxy Statement. If any other matter or
matters are properly presented for action at the Meeting, the proxy holders will
vote the shares which the proxy cards entitle them to vote in accordance with
their judgment on such matter or matters. By signing and returning your proxy
card, you give the proxy holders discretionary authority as to any such matter
or matters.
May 30, 1997 By order of the Boards of Directors,
Sharon K. Pappas, Secretary
<PAGE>
INDEX TO EXHIBITS TO PROXY STATEMENT
Exhibit A--Number of Outstanding Shares of Each Fund...................A-1
Exhibit B--Beneficial Ownership of Greater than 5% of Fund Shares......B-1
Exhibit C--Fund Ownership of Nominees and Current Board Members........C-1
Exhibit D--Summary of Futures Contracts, Options, Forward..............D-1
Contracts, Swaps, Caps, Collars, Floors and
Indexed Securities
Exhibit E--Existing Fundamental Restrictions Proposed to...............E-1
be Modified or Eliminated
<PAGE>
EXHIBIT A
NUMBER OF OUTSTANDING SHARES OF EACH FUND
Shares Outstanding
as of
Fund Record Date
Asset Strategy
Class A 5,094,550
Class Y 53,562
Cash Management
Class A 491,422,770
Class B 7,876,087
Continental Income
Class A 22,187,496
Class Y 273,656
Gold & Government
Class A 3,123,657
Class Y 57,635
Government Securities
Class A 24,612,301
Class Y 127,487
High Income
Class A 106,743,891
Class Y 336,383
High Income II
Class A 89,826,900
Class Y 349,051
International Growth
Class A 92,205,817
Class Y 627,605
Municipal Bond
Class A 134,301,885
Class Y 0
Municipal High Income
Class A 78,439,223
Class Y 0
New Concepts
Class A 37,013,416
Class Y 568,389
Retirement Shares
Class A 77,623,199
Class Y 342,199
United Funds, Inc.
Accumulative Fund
Class A 163,436,206
Class Y 348,783
Bond Fund
Class A 82,879,223
Class Y 667,582
Income Fund
Class A 148,460,000
Class Y 6,410,539
Science and Technology Fund
Class A 42,516,676
Class Y 150,707
Vanguard
Class A 166,013,585
Class Y 588,678
<PAGE>
EXHIBIT B
BENEFICIAL OWNERSHIP OF GREATER THAN 5% OF A FUND OR CLASS A OF A FUND
Number and Percentage
of Shares Beneficially Owned
Name and Address Fund and Class Thereof as of April 30,
1997
NONE
<PAGE>
EXHIBIT C
FUND OWNERSHIP OF ANY CLASS OF NOMINEES AND CURRENT BOARD MEMBERS
No. of Shares Held
as of
April 30, 19972
United
United United Science and United
Income Accumulative Technology Bond
Name of Nominee Fund Fund Fund Fund
- -------------- ----- ------- --------- ------
Henry L. Bellmon 248 0 0 0
Dodds I. Buchanan 4,021 2,351 0 3,014
James M. Concannon 563 0 0 0
John A. Dillingham 0 0 0 0
Linda Graves 0 0 0 0
John F. Hayes 3,486 0 0 0
Glendon E. Johnson 0 0 0 0
William T. Morgan 27,579 0 0 0
Ronald K. Richey 0 0 0 0
William L. Rogers 0 0 0 0
Frank J. Ross, Jr. 223 0 0 0
Eleanor B. Schwartz 0 0 0 0
Keith A. Tucker 0 0 0 0
Frederick Vogel III 1,467 4,336 829 241
Paul S. Wise 1,850 0 278 0
All Directors and
executive officers
as a group* 47,992* 6,687* 5,106* 3,255*
*Less than 1% of the outstanding shares of the Fund
2 Unless otherwise stated, as of the date indicated, each Director had sole
voting and investment power of shares owned.
<PAGE>
United United United United
Asset Cash Continental Gold &
Strategy Management Income Government
Name of Nominee Fund, Inc. Inc. Fund, Inc. Fund, Inc.
- --------------- --------- -------- ---------- ----------
Henry L. Bellmon 0 0 0 0
Dodds I. Buchanan 0 38,031 0 0
James M. Concannon 0 0 0 0
John A. Dillingham 0 0 0 0
Linda Graves 0 38,312 0 0
John F. Hayes 0 0 0 0
Glendon E. Johnson 0 0 0 0
William T. Morgan 0 9,672 0 0
Ronald K. Richey 0 1,130,678 0 0
William L. Rogers 0 0 0 0
Frank J. Ross, Jr. 0 0 0 0
Eleanor B. Schwartz 0 0 0 0
Keith A. Tucker 0 66,879 0 0
Frederick Vogel III 147 58,828 0 0
Paul S. Wise 0 15,382 0 0
All Directors and
executive officers
as a group* 147* 2,227,236* 0* 0*
*Less than 1% of the outstanding shares of the Fund
<PAGE>
United United United United
Government High High Income International
Securities Income Fund II, Growth
Name of Nominee Fund, Inc. Fund, Inc. Inc. Fund, Inc.
- --------------- --------- --------- --------- ------------
Henry L. Bellmon 0 0 0 0
Dodds I. Buchanan 0 7,681 0 0
James M. Concannon 0 0 0 0
John A. Dillingham 0 0 0 0
Linda Graves 4,986 0 0 0
John F. Hayes 0 0 0 0
Glendon E. Johnson 0 0 0 0
William T. Morgan 0 64,398 285,883 90,245
Ronald K. Richey 0 0 0 0
William L. Rogers 0 0 0 0
Frank J. Ross, Jr. 0 0 0 294
Eleanor B. Schwartz 0 0 0 0
Keith A. Tucker 0 0 0 645
Frederick Vogel III 14,169 0 0 0
Paul S. Wise 0 0 0 1,592
All Directors and
executive officers
as a group* 19,155* 72,079* 285,883* 122,893*
*Less than 1% of the outstanding shares of the Fund
<PAGE>
United United United United
Municipal Municipal New Retirement
Bond High Income Concepts Shares,
Name of Nominee Fund, Inc. Fund, Inc. Fund, Inc. Inc.
- --------------- --------- ----------- ---------- -------
Henry L. Bellmon 0 0 0 0
Dodds I. Buchanan 0 14,890 3,550 3,401
James M. Concannon 0 0 0 0
John A. Dillingham 0 0 813 0
Linda Graves 125,246 0 0 0
John F. Hayes 0 0 0 0
Glendon E. Johnson 0 0 0 0
William T. Morgan 0 181,108 0 0
Ronald K. Richey 0 0 0 2,336
William L. Rogers 0 0 0 0
Frank J. Ross, Jr. 0 451 0 0
Eleanor B. Schwartz 0 0 0 0
Keith A. Tucker 0 0 967 0
Frederick Vogel III 0 0 607 0
Paul S. Wise 0 0 1,390 0
All Directors and
executive officers
as a group* 139,743* 196,449* 199,780* 5,737*
*Less than 1% of the outstanding shares of the Fund
<PAGE>
United
Vanguard
Name of Nominee Fund, Inc.
- --------------- ----------
Henry L. Bellmon 0
Dodds I. Buchanan 0
James M. Concannon 0
John A. Dillingham 0
Linda Graves 9,931
John F. Hayes 0
Glendon E. Johnson 0
William T. Morgan 0
Ronald K. Richey 0
William L. Rogers 0
Frank J. Ross, Jr. 0
Eleanor B. Schwartz 0
Keith A. Tucker 0
Frederick Vogel III 1,000
Paul S. Wise 0
All Directors and
executive officers
as a group* 20,574*
*Less than 1% of the outstanding shares of the Fund
<PAGE>
EXHIBIT D
SUMMARY OF FUTURES CONTRACTS, OPTIONS, FORWARD CONTRACTS, SWAPS, CAPS, COLLARS,
FLOORS AND INDEXED SECURITIES
Futures Contracts
When a Fund purchases a futures contract, it incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
U.S. futures contracts are traded on exchanges that have been designated
"contract markets" by the Commodity Futures Trading Commission ("CFTC") and must
be executed through a futures commission merchant ("FCM"), or brokerage firm,
which is a member of the relevant contract market. Through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange.
Options on Futures Contracts
When a Fund writes an option on a futures contract, it becomes obligated,
in return for the premium paid, to assume a position in the futures contract at
a specified exercise price at any time during the term of the option. If a Fund
has written a call, it assumes a short futures position. If a Fund has written
a put, it assumes a long futures position. When a Fund purchases an option on a
futures contract, it acquires the right, in return for the premium it pays, to
assume a position in the futures contract (a long position if the option is a
call and a short position if the option is a put).
Options on Securities, Currencies and Indices
A put option gives the holder the right, upon payment of a premium, to
deliver a specified amount of a security or currency to the writer of the option
on or before a fixed date at a predetermined price. A call option gives the
holder the right, upon payment of a premium, to call upon the writer to deliver
a specified amount of a security or currency on or before a fixed date at a
predetermined price. Puts and calls on indices are similar to puts and calls on
securities or futures contracts except that all settlements are in cash and gain
or loss depends on changes in the index in question rather than on price
movements in individual securities or futures contracts.
Forward Contracts
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days (term)
from the date of the forward contract agreed upon by the parties, at a price set
at the time of the forward contract. These forward contracts are traded
directly between currency traders (usually large commercial banks) and their
customers.
Swaps, Caps, Collars and Floors
Swap agreements, including caps, collars and floors, can be individually
negotiated and structured to include exposure to a variety of different types of
investments or market factors. Depending on their structure, swap agreements
may increase or decrease a Fund's exposure to long- or short-term interest rates
(in the United States or abroad), foreign currency values, mortgage-backed
security values, corporate borrowing rates or other factors such as security
prices or inflation rates.
Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agrees to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease a Fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options.
Indexed Securities
Indexed securities are securities whose prices are indexed to the prices of
other securities, securities indices, currencies, precious metals or other
commodities, or other financial indicators. Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic. The
performance of indexed securities depends to a great extent on the performance
of the security, currency, or other instrument to which they are indexed, and
may also be influenced by interest rate changes in the United States and abroad.
At the same time, indexed securities are subject to the credit risks associated
with the issuer of the security, and their values may decline substantially if
the issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
Special Investments Considerations and Risks
The use of options, futures contracts, options on futures contracts,
forward currency contracts, swaps, caps, collars and floors, and the investment
in indexed securities, involve special risks, including (i) possible imperfect
or no correlation between price movements of the portfolio investments (held or
intended to be purchased) involved in the transaction and price movements of the
instruments involved in the transaction, (ii) possible lack of a liquid
secondary market for any particular instrument at a particular time, (iii) the
need for additional portfolio management skills and techniques, (iv) losses due
to unanticipated market price movements, (v) the fact that, while such
strategies can reduce the risk of loss, they can also reduce the opportunity for
gain, or even result in losses, by offsetting favorable price movements in
investments involved in the transaction, (vi) incorrect forecasts by WRIMCO
concerning interest or currency exchange rates or direction of price
fluctuations of the investment involved in the transaction, which may result in
the strategy being ineffective, (vii) loss of premiums paid by the Fund on
options it purchases, and (viii) the possible inability of the Fund to purchase
or sell a portfolio security at a time when it would otherwise be favorable for
it to do so, or the possible need for the Fund to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with such transactions and the possible
inability of the Fund to close out or liquidate its position.
For a hedging strategy to be completely effective, the price change of the
hedging instrument must equal the price change of the investment being hedged.
The risk of imperfect correlation of these price changes increases as the
composition of the Fund's portfolio diverges from instruments underlying a
hedging instrument. Such equal price changes are not always possible because
the investment underlying the hedging instruments may not be the same investment
that is being hedged. WRIMCO will attempt to create a closely correlated hedge
but hedging activity may not be completely successful in eliminating market
value fluctuation.
WRIMCO may use derivative instruments for hedging purposes to adjust the
risk characteristics of the Fund's portfolio of investments and may use these
instruments to adjust the return characteristics of the Fund's portfolio of
investments. The use of derivative instruments for speculative purposes can
increase investment risk. If WRIMCO judges market conditions incorrectly or
employs a strategy that does not correlate well with the Fund's investments,
these techniques could result in a loss, regardless of whether the intent was to
reduce risk or increase return. These techniques may increase the volatility of
the Fund and may involve a small investment of cash relative to the magnitude of
the risk assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised or if there is not
a liquid secondary market to close out a position that the Fund has entered
into.
The ordinary spreads between prices in the cash and futures markets, due to
the differences in the natures of those markets, are subject to distortion. Due
to the possibility of distortion, a correct forecast of general interest rate,
foreign currency exchange rate or stock market trends by WRIMCO may still not
result in a successful transaction. WRIMCO may be incorrect in its expectations
as to the extent of various interest or foreign exchange rate movements or stock
market movements or the time span within which the movements take place.
Options and futures contracts may increase portfolio turnover rates, which
results in correspondingly greater commission expenses and transactions costs
and may result in certain tax consequences.
<PAGE>
EXHIBIT E
EXISTING INVESTMENT RESTRICTIONS PROPOSED TO BE
MODIFIED OR ELIMINATED
United Asset Strategy Fund, Inc.
The Fund:
(i) May not sell securities short, provided that transactions in futures
contracts, options and other financial instruments are not deemed to
constitute short sales;
(ii) May not purchase securities on margin, except that the Fund may obtain
such short-term credits as are necessary for the clearance of
transactions, and provided that the Fund may make initial and variation
margin payments in connection with transactions in futures contracts,
options and other financial instruments;
(iii) May not borrow money, except that the Fund may borrow money for emergency
or extraordinary purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of the value of its total assets (less liabilities
other than borrowings). Any borrowings that come to exceed 33 1/3% of
the value of the Fund's total assets by reason of a decline in net assets
will be reduced within three days to the extent necessary to comply with
the 33 1/3% limitation. For purposes of this limitation, "three days"
means three days, exclusive of Sundays and holidays;
(iv) May not purchase or sell physical commodities unless acquired as a result
of ownership of securities (but this shall not prevent the Fund from
purchasing and selling currencies, futures contracts, options, forward
currency contracts or other financial instruments);
(v) May not purchase or retain the securities of an issuer if the officers
and directors of the Fund and of Waddell & Reed Investment Management
Company, the Fund's investment manager ("WRIMCO"), owning beneficially
more than .5 of 1% of the securities of an issuer together own
beneficially more than 5% of the securities of that issuer;
(vi) May not make loans, except (a) by lending portfolio securities provided
that no securities loan will be made if, as a result thereof, more than
10% of the Fund's total assets (taken at current value) would be lent to
another party; (b) through the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies, and
limitations; and (c) by engaging in repurchase agreements with respect to
portfolio securities.
United Cash Management, Inc.
The Fund:
(i) May not buy the securities of any company if it would then own more than
10% of the total value of its outstanding securities; or buy the
securities (not including U.S. Government Obligations) of any company if
more than 5% of the Fund's total assets (valued at market value) would
then be invested in that company; or buy the securities of companies in
any one industry if more than 25% of the Fund's total assets would then
be in companies in that industry; U.S. Government Obligations and bank
obligations and instruments are not included in this limit (but see
"Foreign Obligations and Instruments");
(ii) May not engage in the underwriting of securities or invest in restricted
securities, which are securities that are restricted as to disposition
under the Federal securities laws, except commercial paper that is exempt
from registration under Section 4(2) of the Securities Act of 1933;
(iii) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own a certain percentage of the same
securities; if any one of these individuals owns more than .5 of 1% of
the shares of a company and if the individuals who own that much or more
own 5% of that company's shares, the Fund cannot buy that company's
shares or continue to own them;
(iv) May not make loans other than certain limited types of loans described
herein; the Fund can buy debt securities that it is permitted to
purchase; it can also lend its portfolio securities (see "Lending
Securities" above) or, except as provided above, enter into repurchase
agreements (see "Repurchase Agreements" above).
United Continental Income Fund, Inc.
The Fund:
(i) May not buy or sell commodities or commodity contracts except that it
may, for non-speculative purposes, buy or sell futures contracts on
broadly-based stock indices ("Stock Index Futures"), futures contracts on
debt securities ("Debt Futures") and options on Stock Index Futures and
Debt Futures;
(ii) May not sell securities short, buy securities on margin or engage in
arbitrage transactions; however, the Fund may make margin deposits in
connection with its use of any financial instruments permitted by its
fundamental policies;
(iii) May not purchase warrants, which are rights to buy securities;
(iv) May not purchase or write puts, calls or combinations thereof; however
call options may be written on securities if: (i) such calls are listed
on a domestic securities exchange; (ii) when any such call is written and
at all times prior to a closing purchase transaction as to such call, or
its lapse or exercise, the Fund owns the securities that are subject to
the call or has the right to acquire such securities without the payment
of further consideration; and (iii) when any such call is written, not
more than 25% of the Fund's total assets would be subject to calls; calls
may be purchased to effect a closing purchase transaction as to any call
written in accordance with the foregoing. In addition, the Fund may
purchase calls and write and purchase put options on securities in which
the Fund may invest and may, for non-speculative purposes, write and
purchase options on broadly-based stock indices;
(v) May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets but may enter into escrow and
collateral arrangements in connection with the use of options and
futures. The Fund may borrow money from banks as a temporary measure or
for extraordinary or emergency purposes but only up to 5% of its total
assets;
(vi) May not buy the securities of any company if it would then own more than
10% of its voting securities or any class of its securities; or buy the
securities of any company if more than 5% of the Fund's total assets
(valued at market value) would then be invested in that company; or buy
the securities of companies in any one industry if more than 25% of the
Fund's total assets would then be in companies in that industry;
(vii) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one two-hundredths (i.e., .5 of 1%) of
the shares of a company and if the people who own that much or more own
one twentieth (i.e., 5%) of that company's shares, the Fund cannot buy
that company's shares or continue to own them;
(viii)May not lend money or other assets, other than certain limited types of
loans described herein; the Fund can buy debt securities that have been
sold to the public; it can buy other obligations customarily acquired by
institutional investors; it can also lend its portfolio securities (see
"Lending Securities" above) or, except as provided above, enter into
repurchase agreements (see "Repurchase Agreements" above).
United Funds, Inc.
Each of Bond Fund, Income Fund, Accumulative Fund and Science and Technology
Fund:
(i) May not sell securities short, buy securities on margin or engage in
arbitrage transactions; however, a Fund may make margin deposits in
connection with its use of any financial instrument permitted by its
fundamental policies;
(ii) May not engage in the underwriting of securities, that is, the selling of
securities for others; also, United Bond Fund and United Science and
Technology Fund do not invest in restricted securities; restricted
securities are securities that cannot freely be sold for legal reasons;
(iii) May not buy a security if, as a result, it would own more than ten
percent of the issuer's voting securities or any class of its securities,
or if more than five percent of its total assets would be invested in
securities of that issuer; United Income Fund, United Accumulative Fund
and United Bond Fund may not buy securities of companies in any one
industry if more than 25% of that Fund's total assets would then be
invested in companies in that industry;
(iv) May not buy securities of companies less than three years old, that is,
which have not been in continuous operation for at least three years,
including the operation of predecessor companies; buy securities that do
not have readily available market quotations, other than commercial
paper;
(v) May not purchase warrants, except United Bond Fund may invest in
warrants, valued at the lower of cost or market, up to 5% of the value of
its net assets, which amount may include no more than 2% of its net
assets in warrants not listed on the New York Stock Exchange or the
American Stock Exchange;
(vi) May not buy or continue to hold securities if the Corporation's Directors
or officers or certain others own a certain percentage of the same
securities; if any one of these people owns more than one two-hundredths
(i.e., .5 of 1%) of the shares of a company and if the people who own
that much or more own one twentieth (i.e., 5%) of that company's shares,
the Fund cannot buy that company's shares or continue to own them;
(vii) May not lend money or other assets, other than through certain limited
types of loans; the Funds may buy debt securities that have been sold to
the public; the Funds may buy other obligations customarily acquired by
institutional investors; they may also lend their portfolio securities
(see "Lending Securities" above) and enter into repurchase agreements
(see "Repurchase Agreements" above).
Additional Investment Restrictions of Bond Fund
(i) United Bond Fund may not buy commodities or commodity contracts; however,
it may buy and sell any of the financial instruments it is permitted to
by fundamental policy, whether or not any such financial instrument is
considered to be a commodity or commodity contract;
(ii) United Bond Fund may not borrow money or mortgage or pledge any assets;
this does not prohibit the escrow arrangements contemplated by the
writing of covered call options;
(iii) United Bond Fund may write (i.e., sell) call options, but only if (i) the
investments to which the call relates are either debt securities or Debt
Futures; and (ii) either (a) the calls are covered, i.e., the Fund owns
the related investments (or other investments acceptable for escrow
arrangements) while the call is outstanding, or (b) the related
investments are Debt Futures;
(iv) United Bond Fund may purchase calls but only if the related investments
are either debt securities or Debt Futures;
(v) United Bond Fund may purchase put options but only if the investments to
which the put relates are debt securities or Debt Futures. The Fund may
purchase puts as to related investments it owns ("protective puts") or as
to related investments it does not own ("nonprotective puts");
(vi) United Bond Fund may write (i.e., sell) puts but only if the related
investments are debt securities or Debt Futures;
(vii) United Bond Fund may only purchase and sell Debt Futures.
Additional Investment Restrictions of Accumulative Fund, Income Fund and Science
and Technology
(i) The Funds may not purchase or write puts, calls or combinations thereof;
however call options may be written on securities if (i) such calls are
listed on a domestic securities exchange; (ii) when any such call is
written and at all times prior to a closing purchase transaction as to
such call, or its lapse or exercise, a Fund owns the securities that are
subject to the call or has the right to acquire such securities without
the payment of further consideration; and (iii) when any such call is
written, not more than 25% of any one Fund's total assets would be
subject to calls. In addition, the Funds may purchase calls and write
and purchase put options on securities in which the Funds may invest and
may, for non-speculative purposes, write and purchase options on broadly-
based stock indices;
(ii) The Funds may not buy or sell commodities or commodities contracts except
that each Fund may, for non-speculative purposes, buy or sell Stock Index
Futures, Debt Futures and options on Stock Index Futures and Debt
Futures;
(iii) The Funds may not borrow money or pledge any of their assets but may
enter into escrow and collateral arrangements in connection with
investment in options and futures contracts.
United Gold & Government Fund, Inc.
The Fund:
(i) May not buy the securities of any company if it would then own more than
10% of its voting securities or any class of its securities; or buy the
securities of any company if more than 5% of the Fund's total assets
(valued at market value) would then be invested in that company; or buy
the securities of companies in any one industry if more than 25% of the
Fund's total assets would then be in companies in that industry, except,
as stated in the Prospectus, the Fund intends to concentrate in gold and
other minerals-related securities;
(ii) May not sell securities short or buy securities on margin, however, the
Fund may make margin deposits in connection with Government Securities
Futures contracts and options thereon; also, the Fund may not engage in
arbitrage transactions;
(iii) May not engage in the underwriting of securities or invest in restricted
securities, except up to 5% of total assets taken at the time of purchase
may be invested in restricted foreign securities. Restricted securities
are securities subject to legal or contractual restrictions on resale;
(iv) May not buy commodities except that it may invest up to 25% of its total
assets in gold, silver and platinum and may buy put and call options and
Government Securities Futures. Put and call options and Government
Securities Futures may, for various purposes, be considered to be
"commodities" or "securities" but the Fund may buy them whether they are
"commodities" or "securities." The Fund may also not buy any minerals-
related programs or leases;
(v) May purchase and write (sell) put and call options only on U.S.
Government Securities (except that the Fund may write call options on
securities whether or not they are U.S. Government Securities);
(vi) May write calls on securities only if the calls are covered calls (i.e.,
the Fund must own the related investments or other investments acceptable
for escrow arrangements);
(vii) May only purchase or write options if they are listed on a domestic
securities or commodities exchange or quoted on the National Association
of Securities Dealers Automated Quotations system ("Nasdaq"), except the
Fund may purchase optional delivery standby commitments;
(viii)May only buy and sell futures contracts relating to U.S. Government
Securities ("U.S. Government Securities Futures") and options thereon;
(ix) May buy and sell only listed options on U.S. Government Securities
Futures;
(x) May not have more than 15% of the value of its assets committed to the
consummation of forward currency contracts;
(xi) Will not enter into forward currency contracts or maintain a net exposure
to forward currency contracts where the consummation of such contracts
would obligate the Fund to deliver an amount of foreign currency in
excess of the value of its portfolio securities or other assets
denominated in that currency;
(xii) May hold foreign currency only in connection with forward currency
contracts, only up to four business days, as well as in connection with
the purchase or sale of foreign securities, but not otherwise;
(xiii)May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets; this does not prohibit the
escrow deposits required by put and call transactions. The Fund may
borrow money from banks as a temporary measure or for extraordinary or
emergency purposes but only up to 5% of its total assets;
(xiv) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any of
these people owns more than one two-hundredths (i.e., .5 of 1%) of the
shares of a company and if the people who own that much or more own one-
twentieth (i.e., 5%) of that company's shares, the Fund cannot buy that
company's shares or continue to own them;
(xv) May not make loans other than certain limited types of loans; the Fund
can also buy debt securities that have been sold to the public; it can
also lend its portfolio securities (see "Lending Securities" above) and
enter into repurchase agreements (see "``Repurchase Agreements" above).
United Government Securities Fund, Inc.
The Fund:
(i) May not buy any securities or commodities other than U.S. Government
Securities, put and call options and Government Securities Futures. Put
and call options and Government Securities Futures may, for various
purposes, be considered to be "commodities" or "securities" but the Fund
may buy them whether they are "commodities" or "securities." The Fund
may not buy any voting securities, any mineral related programs or leases
or any shares of other investment companies;
(ii) May not sell securities short or buy securities on margin; however, the
Fund may make margin deposits in connection with Government Securities
Futures and options thereon; also, the Fund may not engage in arbitrage
transactions;
(iii) May not borrow to purchase securities or increase income, but only to
meet redemptions so it will not have to sell portfolio securities for
this purpose. The Fund may borrow money from banks for temporary or
emergency purposes but only up to 10% of its total assets. It can
mortgage or pledge its assets in connection with such borrowing but only
up to the lesser of the amounts borrowed or 5% of the value of the Fund's
assets. The Fund will not purchase securities while outstanding
borrowings are more than 5% of the value of its assets. Interest on
borrowing would reduce the Fund's income. The Fund may, without
violation of this restriction, make the escrow deposits required by its
put and call activities;
(iv) May purchase and write put and call options (including optional delivery
standby commitments) only on U.S. Government Securities;
(v) May buy and sell futures contracts but only those relating to U.S.
Government Securities and options thereon and these options must be
listed on a domestic securities or commodities exchange or quoted on
Nasdaq;
(vi) Calls written by the Fund on U.S. Government Securities must be covered
(i.e., the Fund must own the related investments or other investments
acceptable for escrow arrangements);
(vii) May write puts only if they are listed on a domestic securities or
commodities exchange or quoted on Nasdaq (National Association of
Securities Dealers Automated Quotations system);
(viii)May invest in indexed securities only if they are issued or guaranteed by
the U.S. Government or its agencies or instrumentalities;
(ix) May not lend money or other assets, other than through certain limited
types of loans; the Funds may buy debt securities that have been sold to
the public; the Funds may buy other obligations customarily acquired by
institutional investors; they may also lend their portfolio securities
(see "Lending Securities" above) and enter into repurchase agreements
(see "Repurchase Agreements" above).
United High Income Fund, Inc.
The Fund:
(i) May not buy commodities or commodity contracts or invest in mineral
related programs or leases; however, it may buy and sell any of the
financial instruments that it may use as permitted by any other
fundamental policy, whether or not any such financial instrument is
considered to be a commodity or a commodity contract;
(ii) May not buy the securities of any company if it would then own more than
10% of its voting securities or any class of its securities of that
company; or buy the securities of any company if more than 5% of the
Fund's total assets (valued at market value) would then be invested in
that company; or buy the securities of companies in any one industry if
more than 25% of the Fund's total assets would then be in companies in
that industry;
(iii) May not sell securities short or buy securities on margin; also, the Fund
may not engage in arbitrage transactions; however, the Fund may make
margin deposits in connection with any of the financial instruments it
may use as permitted by any of its other fundamental policies;
(iv) May not engage in the underwriting of securities, except to the extent it
may be deemed to be an underwriter in connection with the sale of
restricted securities. The Fund will not purchase restricted securities
if as a result of such purchase more than 10% of its net assets would be
invested in such securities;
(v) May not hold securities unless they are securities of a company that has
been in continuous operation for at least three years, including the
operations of predecessor companies, or are securities issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities. However, the Fund may buy securities not meeting this
test if it does not then have more than 5% of its total assets so
invested;
(vi) May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets; this does not prohibit the
escrow arrangements contemplated by the writing of covered call options.
The Fund may borrow money from banks, as a temporary measure or for
extraordinary or emergency purposes but only up to 5% of its total
assets;
(vii) May purchase and write (sell) put and call options only on debt
securities, common stocks, broadly-based stock indices (i.e., include
stocks that are not limited to issuers in any particular industry or
similar industries), futures contracts relating to debt securities and
futures contracts on broadly-based stock indices and options thereon;
(viii)May write calls on securities only if the calls are covered calls (i.e.,
the Fund must own the related investments or other investments suitable
for escrow arrangements);
(ix) May invest up to 5% of its net assets, valued at the lower of cost or
market, in warrants;
(x) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one two-hundredths (i.e., .5 of 1%) of
the shares of a company and if the people who own that much or more own
one twentieth (i.e., 5%) of that company's shares, the Fund cannot buy
that company's shares or continue to own them;
(xi) May not make loans other than certain limited types of loans; the Fund
may buy debt securities which have been sold to the public; it may also
buy other obligations customarily acquired by institutional investors;
this can be considered to be making loans. The Fund may also enter into
repurchase agreements (see "Repurchase Agreements" above) and lend its
securities (see "Lending Securities" above).
United High Income Fund II, Inc.
The Fund:
(i) May not buy commodities or commodity contracts; however, it may buy and
sell options and futures as permitted by any other fundamental policy,
whether or not any such option or future is considered to be a commodity
or a commodity contract;
(ii) May not buy the securities of a company if it would then own more than
10% of the voting securities or any class of securities of that company;
or buy the securities of any company if more than 5% of the Fund's total
assets (valued at market value) would then be invested in that company;
or buy the securities of companies in any one industry if more than 25%
of the Fund's total assets would then be invested in companies in that
industry;
(iii) May not sell securities short or buy securities on margin; also, the Fund
may not engage in arbitrage transactions; however, the Fund may make
margin deposits in connection with any of the financial instruments it is
permitted to buy or sell in accordance with any other fundamental
policies;
(iv) May not engage in the underwriting of securities, except to the extent it
may be deemed to be an underwriter in connection with the sale of
restricted securities; however, the Fund will not purchase restricted
securities if as a result of such purchase more than 10% of its assets
would be invested in such securities;
(v) May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets; this does not prohibit the
escrow arrangements contemplated by the writing of covered call options.
The Fund may borrow money from banks as a temporary measure or for
extraordinary or emergency purposes but only up to 5% of its total
assets;
(vi) May purchase and write (sell) put and call options only on debt
securities, common stocks, broadly-based stock indices (i.e., include
stocks that are not limited to issuers in any particular industry or
similar industries), futures contracts relating to debt securities and
futures contracts on broadly-based stock indices and options thereon;
(vii) May write calls on securities only if the calls are covered calls (i.e.,
the Fund must own the related investments or other investments suitable
for escrow arrangements);
(viii)May invest up to 5% of its net assets, valued at the lower of cost or
market, in warrants;
(ix) May not buy or continue to hold securities of a company if the Fund's
Directors or officers or certain others who own more than .5 of 1% of the
shares of that company own in the aggregate more than 5% of the shares of
that company;
(x) May not make loans other than certain limited types of loans; the Fund
may buy debt securities which have been sold to the public; it may also
buy other obligations customarily acquired by institutional investors;
this can be considered to be making loans. The Fund may also enter into
repurchase agreements (see "Repurchase Agreements" above) and lend its
securities (see "Lending Securities" above).
United International Growth Fund, Inc.
The Fund:
(i) May not buy the securities of any company if it would then own more than
10% of its voting securities or any class of its securities; or buy the
securities of any company if more than 5% of the Fund's total assets
(valued at market value) would then be invested in that company; or buy
the securities of companies in any one industry if more than 25% of the
Fund's total assets would then be in companies in that industry;
(ii) May not sell securities short or buy securities on margin; also, the Fund
may not engage in arbitrage transactions;
(iii) May not engage in the underwriting of securities or invest in restricted
securities, except restricted foreign securities. However, the Fund will
not purchase restricted securities if as a result of such purchase more
than 5% of its total assets would consist of restricted securities.
Restricted securities are securities that are subject to legal or
contractual restrictions on resale;
(iv) May not purchase calls, which are rights to buy securities, or purchase
puts, which are rights to sell securities. The Fund also may not write
(i.e., sell) any puts or calls or combinations of the two except that it
may write certain covered call options and purchase calls to close out
its position in a call which it has written;
(v) May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets; this does not prohibit the
escrow arrangements contemplated by the writing of covered call options.
The Fund may borrow money from banks as a temporary measure or for
extraordinary or emergency purposes but only up to 5% of its total
assets;
(vi) May not buy commodities or commodity contracts other than forward
currency contracts and foreign currency;
(vii) May write listed, covered calls on securities (i.e., the Fund must own
the securities that are subject to the call or have the right to acquire
them without additional payment) if, when a call is written, not more
than 10% of the Fund's total assets would be subject to calls;
(viii)May enter into forward currency contracts provided that it does not have
more than 15% of the value of its assets committed to the consummation of
all such contracts;
(ix) Will not enter into forward currency contracts or maintain a net exposure
to such contracts if the consummation of such contracts would obligate
the Fund to deliver an amount of foreign currency in excess of the value
of the Fund's portfolio securities or other assets denominated in that
currency;
(x) May hold foreign currency only in connection with forward currency
contracts, only up to four business days, as well as in connection with
the purchase or sale of foreign securities, but not otherwise;
(xi) May purchase warrants and rights to purchase securities only if, as a
result of such purchase, no more than 5% of its total assets would
consist of warrants, rights or a combination thereof;
(xii) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one two-hundredths (i.e., .5 of 1%) of
the shares of a company and if the people who own that much or more own
one twentieth (i.e., 5%) of that company's shares, the Fund cannot buy
that company's shares or continue to own them;
(xiii)May not make loans other than certain limited types of loans described
herein; the Fund can buy debt securities that have been sold to the
public; it can also lend its portfolio securities (see "Lending
Securities" above) or, except as provided above, enter into repurchase
agreements (see "Repurchase Agreements" above).
United Municipal Bond Fund, Inc.
The Fund:
(i) May not make any investments other than in the municipal bonds and in the
taxable obligations, options, futures contracts and other financial
instruments described in the Prospectus. Further, such municipal bonds
and taxable obligations are subject to the percentage limitations and the
quality restrictions described in the Prospectus. Thus, the Fund may not
purchase any voting securities, any commodities or commodity contracts
(except that it may buy and sell the options, futures contracts and other
financial instruments described in the Prospectus whether or not any of
them is considered to be a commodity or a commodity contract), any real
estate or interests in real estate investment trusts or any investment
company securities. Also, the Fund may not engage in repurchase
transactions;
(ii) May not invest in securities on which the payment of principal and
interest is the obligation of any nongovernmental entity (i.e., a
company) unless the company obligated to make these payments has been in
continuous operation for at least three years. This three-year period
includes the operation of predecessor companies. However, the Fund may
buy securities not meeting this test if it does not then have more than
5% of its total assets in these other securities;
(iii) May not sell short, buy on margin, engage in arbitrage transactions or
participate on a joint, or a joint and several, basis in any trading
account in securities; however, it may make margin deposits in connection
with the options, futures contracts and other financial instruments
described in the Prospectus; also, the Fund may enter into escrow and
collateral arrangements in connection with its use of options and futures
contracts;
(iv) May not engage in the underwriting of securities, that is, the selling of
securities for others. Also, it may not invest in restricted securities.
Restricted securities are securities which cannot freely be sold for
legal reasons or because a promise has been given establishing conditions
for their sale;
(v) May not purchase the securities of any "issuer" if more than 5% of the
Fund's total assets, taken at market, would then be invested in that
"issuer";
(vi) May purchase and write (sell) put and call options only on domestic debt
securities and municipal bond indices, and may only buy and sell futures
contracts relating to domestic debt securities, futures contracts
relating to municipal bond indices and options on futures relating to
domestic debt securities;
(vii) May not buy or continue to hold securities if any one of the Fund's
Directors or officers or certain others own more than .5 of 1% of the
securities of an issuer and if the persons who own that much or more own
5% of that issuer's securities;
(viii)May not lend money or other assets; it may, of course, purchase all or a
portion of an issue of the municipal bonds or taxable obligations in
which it invests.
United Municipal High Income Fund, Inc.
The Fund:
(i) May not make any investments other than in municipal bonds and in the
taxable obligations, options, futures contracts and other financial
instruments described in the Prospectus;
(ii) May not purchase any voting securities, any commodities or commodity
contracts (except that it may buy and sell the options, futures contracts
and other financial instruments described in the Prospectus whether or
not any of them is considered to be a commodity or a commodity contract),
or any real estate or interests in real estate investment trusts;
(iii) May not borrow money or pledge any of its assets except that, as a
temporary measure for extraordinary or emergency purposes and not for
investment purposes, the Fund may borrow from banks up to 5% of the value
of its total assets (this does not prohibit the escrow and collateral
arrangements contemplated in connection with investment in options and
futures contracts);
(iv) May not sell short, buy on margin, engage in arbitrage transactions or
participate on a joint, or a joint and several, basis in any trading
account in securities; however, it may make margin deposits in connection
with options and futures contracts;
(v) May not purchase the securities of any "issuer" if more than 5% of the
Fund's total assets, taken at market, would then be invested in that
"issuer";
(vi) May purchase and write (sell) put and call options only on domestic debt
securities and municipal bond indices, and may only buy and sell futures
contracts relating to domestic debt securities ("Debt Futures"), futures
contracts relating to municipal bond indices ("Municipal Bond Index
Futures") and options on Debt Futures;
(vii) May not buy or continue to hold securities if any one of the Fund's
Directors or officers or certain others own more than .5 of 1% of the
securities of an issuer and if the persons who own that much or more own
5% of that issuer's securities;
(viii)May not lend money or other assets (neither purchasing the securities in
which the Fund may invest or engaging in repurchase agreements is
considered "lending").
United New Concepts Fund, Inc.
The Fund:
(i) May not buy or sell commodities or commodity contracts except that it
may, for non-speculative purposes, buy or sell futures contracts on
broadly-based stock indices ("Stock Index Futures"), futures contracts on
debt securities ("Debt Futures") and options on Stock Index Futures and
Debt Futures; the Fund may enter into the forward foreign currency
exchange contracts discussed above;
(ii) May not sell securities short, buy securities on margin or engage in
arbitrage transactions; however, the Fund may make margin deposits in
connection with its use of any financial instrument permitted by its
fundamental policies. Also, the Fund may enter into escrow and
collateral arrangements in connection with its use of options and
futures;
(iii) May not engage in the underwriting of securities, that is, the selling of
securities for others; also, the Fund does not invest in restricted
securities; restricted securities are securities that cannot freely be
sold for legal reasons;
(iv) May purchase securities of foreign issuers only if not more than 10% of
the Fund's assets (including the foreign currency exchange contracts
described below) are invested in foreign securities and only if such
securities are (i) listed or admitted to trading on a domestic or foreign
securities exchange, (ii) represented by American Depositary Receipts
(dollar denominated receipts issued against securities of foreign issuers
deposited or to be deposited with an American depository) so listed or
admitted on a domestic securities exchange or traded in the U.S. over-
the-counter market, or (iii) issued or guaranteed by any foreign
government or any subdivision, agency or instrumentality thereof;
(v) May not hold foreign currency except in connection with the purchase or
sale of foreign securities;
(vi) May purchase warrants if, as a result of such purchase, no more than 5%
of its assets would consist of warrants (other than those that have been
acquired in units or attached to other securities), and of which no more
than 2% of the Fund's assets may be invested in warrants that are not
listed on the New York Stock Exchange or the American Stock Exchange;
(vii) May not purchase or write puts, calls or combinations thereof on
securities; however, call options ("calls") may be written on securities
if: (i) such calls are listed on a domestic securities exchange; (ii)
when any such call is written and at all times prior to a closing
purchase transaction as to such call, or its lapse or exercise, the Fund
owns the securities that are subject to the call or has the right to
acquire such securities without the payment of further consideration; and
(iii) when any such call is written, not more than 25% of the Fund's
total assets would be subject to calls; calls may be purchased to effect
a closing purchase transaction as to any call written in accordance with
the foregoing. In addition, the Fund may purchase calls and write and
purchase put options ("puts") on securities in which the Fund may invest
and may, for non-speculative purposes, write and purchase options on
broadly-based stock indices;
(viii)May not buy the securities of any company if it would then own more than
10% of its voting securities or any class of its securities; or buy the
securities of any company if more than 5% of the Fund's total assets
(valued at market value) would then be invested in that company; or buy
the securities of companies in any one industry if more than 25% of the
Fund's total assets would then be in companies in that industry;
(ix) May, for non-speculative purposes, buy and sell futures contracts on debt
securities ("Debt Futures"), and Stock Index Futures and options on Debt
Futures and Stock Index Futures;
(x) May enter into forward currency contracts solely in connection with the
purchase or sale of a security denominated in a foreign currency when it
is desirable to "lock in" the U.S. dollar price of the security;
(xi) May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one two-hundredths (i.e., .5 of 1%) of
the shares of a company and if the people who own that much or more own
one twentieth (i.e., 5%) of that company's shares, the Fund cannot buy
that company's shares or continue to own them;
(xii) May not invest more than 5% of its assets in companies, including
predecessors, with less than three years continuous operation;
(xiii)May not lend money or other assets, other than certain limited types of
loans described herein; the Fund can buy debt securities that have been
sold to the public; it can buy other obligations customarily acquired by
institutional investors; it can also lend its portfolio securities (see
"Lending Securities" above) or, except as provided above, enter into
repurchase agreements (see "Repurchase Agreements" above).
United Retirement Shares, Inc.
The Fund:
(i) May not buy or sell commodities or commodity contracts except that it
may, for non-speculative purposes, buy or sell Stock Index Futures,
futures contracts on debt securities ("Debt Futures") and options on
Stock Index Futures and Debt Futures;
(ii) May not sell securities short, buy securities on margin or engage in
arbitrage transactions; however, the Fund may make margin deposits in
connection with its use of any financial instrument permitted by its
fundamental policies;
(iii) May not engage in the underwriting of securities, that is, the selling of
securities for others; also, the Fund does not invest in restricted
securities; restricted securities are securities that cannot freely be
sold for legal reasons;
(iv) May not purchase warrants;
(v) May not purchase or write puts, calls or combinations thereof; however
call options may be written on securities if: (i) such calls are listed
on a domestic securities exchange; (ii) when any such call is written and
at all times prior to a closing purchase transaction as to such call, or
its lapse or exercise, the Fund owns the securities that are subject to
the call or has the right to acquire such securities without the payment
of further consideration; and (iii) when any such call is written, not
more than 50% of the Fund's total assets would be subject to calls; calls
may be purchased to effect a closing purchase transaction as to any call
written in accordance with the foregoing. In addition, the Fund may
purchase calls and write and purchase put options on securities in which
the Fund may invest and may, for non-speculative purposes, write and
purchase options on broadly-based stock indices;
(vi) May not borrow for investment purposes, that is, to purchase securities
or mortgage or pledge any of its assets but may enter into escrow and
collateral arrangements in connection with the use of options and
futures. The Fund may borrow money from banks as a temporary measure or
for extraordinary or emergency purposes but only up to 5% of its total
assets;
(vii) May not buy the securities of any company if it would then own more than
10% of the voting securities or any class of the securities; or buy the
securities of any company if more than 5% of the Fund's total assets
(valued at market value) would then be invested in that company; or buy
the securities of companies in any one industry if more than 25% of the
Fund's total assets would then be in companies in that industry;
(viii)May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one two-hundredths (i.e., .5 of 1%) of
the shares of a company and if the people who own that much or more own
one twentieth (i.e., 5%) of that company's shares, the Fund cannot buy
that company's shares or continue to own them;
(ix) May not lend money or other assets, other than through certain limited
types of loans described herein; the Fund can buy debt securities that
have been sold to the public; it can buy other obligations customarily
acquired by institutional investors; it can also lend its portfolio
securities (see "Lending Securities" above) or, except as provided above,
enter into repurchase agreements (see "Repurchase Agreements" above).
United Vanguard Fund, Inc.
The Fund:
(i) May not buy or sell commodities or commodity contracts, except that it
may, for non-speculative purposes, buy or sell Stock Index Futures,
futures contracts on debt securities ("Debt Futures") and options on
Stock Index Futures and Debt Futures;
(ii) May not sell securities short, buy securities on margin or engage in
arbitrage transactions; however, the Fund may make margin deposits in
connection with its use of any financial instruments permitted by its
fundamental policies;
(iii) May not engage in the underwriting of securities, that is, the selling of
securities for others; also, the Fund does not invest in restricted
securities; restricted securities are securities that cannot freely be
sold for legal reasons;
(iv) May not invest more than 2% of its net assets valued at the lower of cost
or market in warrants. Warrants acquired in units or attached to other
securities are not considered for purposes of computing the 2%
limitation;
(v) May not purchase or write puts, calls or combinations thereof; however
call options may be written on securities if: (i) such calls are listed
on a domestic securities exchange; (ii) when any such call is written and
at all times prior to a closing purchase transaction as to such call, or
its lapse or exercise, the Fund owns the securities that are subject to
the call or has the right to acquire such securities without the payment
of further consideration; and (iii) when any such call is written not
more than 10% of the Fund's total assets would be subject to calls; calls
may be purchased to effect a closing purchase transaction as to any call
written in accordance with the foregoing. In addition, the Fund may
purchase calls and write and purchase put options on securities in which
the Fund may invest and may, for non-speculative purposes, write and
purchase options on broadly-based stock indexes;
(vi) May not borrow money or mortgage or pledge any of its assets; but may
enter into escrow and collateral arrangements in connection with the use
of options and futures;
(vii) May not buy a security if, as a result, it would own more than 10% of the
issuer's voting securities, or if more than 5% of its total assets would
be invested in securities of that issuer, or if more than 25% of its
assets would then be in securities of companies in any one industry;
(viii)May not buy or continue to hold securities if the Fund's Directors or
officers or certain others own too much of the same securities; if any
one of these people owns more than one- two-hundredths (i.e., .5 of 1%)
of the shares of a company and if the people who own that much or more
own one-twentieth (i.e., 5%) of that company's shares, the Fund cannot
buy that company's shares or continue to own them;
(ix) May not lend money or other assets, other than through certain limited
types of loans; the Fund can buy debt securities that have been sold to
the public; it can buy other obligations customarily acquired by
institutional investors; it can also lend its portfolio securities (see
"Lending Securities" above) and enter into repurchase agreements (see
"Repurchase Agreements" above).
<PAGE>
UNITED ASSET STRATEGY FUND, INC., Class Y Shares
UNITED CASH MANAGEMENT, INC., Class B Shares
UNITED CONTINENTAL INCOME FUND, INC., Class Y Shares
UNITED FUNDS, INC., Class Y Shares
UNITED GOLD & GOVERNMENT FUND, INC., Class Y Shares
UNITED GOVERNMENT SECURITIES FUND, INC., Class Y Shares
UNITED HIGH INCOME FUND, INC., Class Y Shares
UNITED HIGH INCOME FUND II, INC., Class Y Shares
UNITED INTERNATIONAL GROWTH FUND, INC., Class Y Shares
UNITED MUNICIPAL BOND FUND, INC., Class Y Shares
UNITED MUNICIPAL HIGH INCOME FUND, INC., Class Y Shares
UNITED NEW CONCEPTS FUND, INC., Class Y Shares
UNITED RETIREMENT SHARES, INC., Class Y Shares
UNITED VANGUARD FUND, INC., Class Y Shares
THIS PROXY/AUTHORIZATION AND DIRECTION OF EXECUTION OF PROXY, IF PROPERLY
EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED.
IF NO DIRECTION IS MADE FOR A PROPOSAL, THE SHARES WILL BE VOTED "FOR" THAT
PROPOSAL.
NOTE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED.
Please fold and detach card at perforation. Return bottom portion only.
Please vote by filling in the boxes below.
1.For each Fund: To elect as Directors
H. Bellmon; D. Buchanan; J. Concannon; J. Dillingham; L. Graves; J. Hayes;
G. Johnson; W. Morgan; R. Richey; W. Rogers; F. Ross; E. Schwartz; K. Tucker;
F. Vogel; P. Wise
/ / FOR ALL
/ / WITHHOLD ALL
To withhold authority to vote for any individual nominee, print that nominee's
name on the line below.
________________________________________________________________________
2.For each Fund: To ratify the FOR AGAINST ABSTAIN
selection of Deloitte & Touche LLP / / / / / /
as the Fund's independent
accountants for its current fiscal year
3.For each Fund: To approve FOR AGAINST ABSTAIN
changes to certain of its ALL* ALL ALL
fundamental investment policies / / / / / /
and restrictions
3.1 Restricted Securities
3.2 Diversification of Assets
3.3 Unseasoned Issuers
3.4 Repurchase Transactions
3.5 Options, Commodities and Futures
3.6 Pledging
3.7 Margin Purchases
3.8 Short Sales
3.9 Foreign Currencies
3.10 Warrants and Rights
3.11 Purchasing Call Options
3.12 Arbitrage Transactions
3.13 Indexed Securities
3.14 Securities Owned by Certain Persons
3.15 Loans
To vote against or abstain with respect to a particular proposed change,
refer to the proxy statement for the changes applicable to the Fund and
write the number of the sub-proposal on the line below.
_____________________________________________________________________
4 For United Asset Strategy Fund, Inc.: FOR AGAINST ABSTAIN
To approve a change in the Fund's goal / / / / / /
5 For United Funds, Inc. United Income FOR AGAINST ABSTAIN
Fund: To approve a change in the / / / / / /
Fund's goal
6 For United Cash Management, Inc.: FOR AGAINST ABSTAIN
to modify the Fund's fundamental / / / / / /
policy regarding portfolio maturity
<PAGE>
YOUR VOTE IS IMPORTANT!
To avoid the expense of adjourning the meeting to a subsequent date,
please sign, date and return all proxies received in
the enclosed post-paid envelope.
Please fold and detach card at perforation. Return bottom portion only.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Keith A. Tucker and Sharon K. Pappas, or either
of them (or their substitutes), as attorneys and proxies of the undersigned,
with full power of substitution to represent and vote all of the shares of the
Fund in which the undersigned owns shares and which are entitled to be voted at
the Special Meeting of Shareholders of the Fund to be held July 24, 1997, at
2:00 p.m., local time, at 6300 Lamar Avenue, Overland Park, Kansas 66202, and
any adjournment(s) thereof, and revoking all proxies heretofore given, as
designated on the reverse side of this card. As to any other matter that may
properly come before the meeting, the attorneys and proxies shall be authorized
to vote in accordance with their best judgment. This proxy shall remain in
effect for a period of one year from its date. Receipt of the Proxy Statement
is hereby acknowledged.
Dated: ___________________________________, 1997
PLEASE SIGN IN BOX BELOW
Please sign exactly as your name appears hereon. If
shares are registered in more than one name, all should
sign, but if one signs, it binds the others. When
signing as attorney, executor, administrator, agent,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by
an authorized person. If a partnership, please sign in
partnership name by an authorized person.
________________________________________________
/ /
/ /
/ /
________________________________________________
Signature(s), Title(s), if applicable
<PAGE>
