UNITED
RETIREMENT
SHARES,
INC.
SEMIANNUAL
REPORT
------------------------------------------
For the six months ended December 31, 1996
<PAGE>
This report is submitted for the general information of the shareholders of
United Retirement Shares, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by
the United Retirement Shares, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
DECEMBER 31, 1996
Dear Shareholder:
As President of your Fund, I would like to thank you for your
continued confidence in our products and services. Our goal to provide the
best service possible to our shareholders has not changed since we opened
our doors nearly 60 years ago. Waddell & Reed's team of professionals,
including the Fund's manager, our customer service representatives and your
personal account representative continue to strive to meet your financial
needs.
Waddell & Reed plays a special role in the investment industry. We
take pride in being one of the few financial services firms committed to
locally based account representatives who provide the personal service you
need. When you're ready to evaluate your financial plan to keep up with
life's changes, or to find an answer to a financial question that you may
have, your representative is ready to assist you--when you need it. He or
she is available to help you plan for your retirement, fund a child's
education or make plans for other long-term financial goals.
All of us are committed to helping you meet the financial goals that
are important to you. This is accomplished by our offering investment
products to meet a variety of personal financial objectives, along with the
personal service to make the investment process more convenient and
accessible.
We want to continue to meet your financial needs for many years to
come. Should you have any questions about your account or other financial
issues that are important to you, contact your personal account
representative or your local Waddell & Reed office. They're ready to help
you make the most of your financial future.
Respectfully,
Keith A. Tucker
President
<PAGE>
SHAREHOLDER SUMMARY
--------------------------------------------------------------------------
UNITED RETIREMENT SHARES, INC.
PORTFOLIO STRATEGY:
Common stocks believed to OBJECTIVE: Highest long-term total
have the potential for: return as is, in the
Long-term appreciation opinion of management,
Stability consistent with the
Income reasonable safety of capital.
Maximum 10% foreign STRATEGY: Invests in equity and
securities debt securities in such
proportions that
management believes are
Debt securities most likely to
achieve the Fund's
objective. (May
Cash reserves purchase securities
subject to repurchase agreements.
May invest in certain options and
futures.)
The use of cash reserves
(often invested in money market
securities) for defensive purposes
is a strategy that may be utilized
by Retirement Shares from time to
time.
Moving into cash reserve positions
at times thought to be near a major
stock market peak allows the Fund
the opportunity to capture profits
and attempts to cushion the impact
of market declines. The added
flexibility provided by our CASH
RESERVES STRATEGY has from time to
time been an important element in
our past success and, when deemed
appropriate, may be used in the
management of the portfolio in the
future.
FOUNDED: 1972
SCHEDULED DIVIDEND FREQUENCY: QUARTERLY (March, June, September,
December)
<PAGE>
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Six Months Ended December 31, 1996
------------------------------------------
DIVIDENDS PAID $0.15
=====
CAPITAL GAINS DISTRIBUTION $0.66
=====
NET ASSET VALUE ON
12/31/96 $8.35 adjusted to: $9.01(A)
06/30/96 8.72
-----
CHANGE PER SHARE $0.29
=====
(A)This number includes the capital gains distribution of $.66 paid in
December 1996 added to the actual net asset value on December 31, 1996.
Past performance is not necessarily an indication of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
------ ----------- ------------
1-year period ended 12-31-96 3.49% 9.80%
5-year period ended 12-31-96 10.24% 11.56%
10-year period ended 12-31-96 10.98% 11.64%
*Performance data quoted represents past performance and is based on
deduction of 5.75% sales load on the initial purchase in each of the
three periods.
**Performance data quoted in this column represents past performance
without taking into account the sales load deducted on an initial
purchase.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On December 31, 1996, United Retirement Shares, Inc. had net assets
totaling $644,061,091 invested in a diversified portfolio of:
60.29% Common Stocks
28.04% U.S. Government Securities
7.71% Cash and Cash Equivalents
2.52% Corporate Bonds
0.96% Convertible Preferred Stocks
0.48% Other Government Security
As a shareholder of United Retirement Shares, Inc. for every $100 you had
invested on December 31, 1996, your Fund owned:
$28.69 Manufacturing Stocks
28.04 United States Government Securities
10.50 Finance, Insurance and Real Estate Stocks
7.71 Cash and Cash Equivalents
7.62 Transportation, Communication, Electric
and Sanitary Services Stocks
3.53 Wholesale and Retail Trade Stocks
3.13 Miscellaneous Investing Institutions Stocks
2.83 Services Stocks
2.52 Corporate Debt Securities
2.29 Mining Stocks
1.01 Agriculture, Forestry and Fisheries Stocks
0.96 Convertible Preferred Stocks
0.69 Contract Construction Stocks
0.48 Other Government Security
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1996
Shares Value
COMMON STOCKS
Apparel and Accessory Stores - 0.82%
Gap, Inc. (The) ........................ 175,000 $ 5,271,875
Apparel and Other Textile Products - 1.20%
Liz Claiborne, Inc. .................... 200,000 7,725,000
Business Services - 2.15%
Electronic Data Systems Corporation .... 160,000 6,920,000
First Data Corporation ................. 189,500 6,916,750
Total ................................. 13,836,750
Chemicals and Allied Products - 10.70%
Abbott Laboratories .................... 160,000 8,120,000
American Home Products Corporation ..... 140,000 8,207,500
Astra AB, Class A (A) .................. 175,000 8,588,175
Avon Products, Inc. .................... 85,000 4,855,625
Dow Chemical Company (The) ............. 80,000 6,270,000
du Pont (E.I.) de Nemours and Company .. 100,000 9,437,500
IMC Global, Inc. ....................... 175,000 6,846,875
Merck & Co., Inc. ...................... 105,000 8,321,250
Pfizer Inc. ............................ 100,000 8,287,500
Total ................................. 68,934,425
Communication - 5.03%
AT&T Corporation ....................... 150,000 6,525,000
Carso Global Telecom & Media (A)* ...... 500,000 1,159,807
GTE Corporation ........................ 179,700 8,176,350
Nokia Corporation, Series A, ADS ....... 111,600 6,430,950
SBC Communications Inc. ................ 195,000 10,091,250
Total ................................. 32,383,357
Depository Institutions - 3.23%
BankAmerica Corporation ................ 100,000 9,975,000
HSBC Holdings plc (A) .................. 202,060 4,323,606
Wells Fargo & Company .................. 24,210 6,530,647
Total ................................. 20,829,253
Eating and Drinking Places - 0.29%
Einstein/Noah Bagel Corp.* ............. 62,500 1,855,437
Electric, Gas and Sanitary Services - 1.41%
Baltimore Gas and Electric Company ..... 120,000 3,210,000
Houston Industries Incorporated ........ 260,000 5,882,500
Total ................................. 9,092,500
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Electronic and Other Electric Equipment - 5.63%
AMP Incorporated ....................... 200,000 $ 7,675,000
Duracell International Inc. ............ 75,000 5,240,625
Emerson Electric Co. ................... 100,000 9,675,000
General Electric Company ............... 60,000 5,932,500
LSI Logic Corporation* ................. 205,000 5,483,750
Lucent Technologies Inc. ............... 48,612 2,248,305
Total ................................. 36,255,180
Fabricated Metal Products - 0.85%
Mark IV Industries, Inc. ............... 242,550 5,487,694
Food and Kindred Products - 0.45%
PepsiCo, Inc. .......................... 100,000 2,925,000
Forestry - 1.01%
Georgia-Pacific Corporation ............ 90,000 6,480,000
General Merchandise Stores - 0.61%
Cifra, S.A. de C.V., Series C (A)* ..... 550,000 670,731
May Department Stores Company (The) .... 70,000 3,272,500
Total ................................. 3,943,231
Health Services - 0.68%
Tenet Healthcare Corporation* .......... 200,000 4,375,000
Heavy Construction, Excluding Building - 0.69%
Foster Wheeler Corporation ............. 120,000 4,455,000
Holding and Other Investment Offices - 3.13%
Grupo Carso, S.A. de C.V.,
Series 1A (A) ......................... 500,000 2,635,925
LTC Properties, Inc. ................... 300,000 5,550,000
National Health Investors, Inc. ........ 190,500 7,215,187
Zurich Insurance Company (A) ........... 17,000 4,725,398
Total ................................. 20,126,510
Industrial Machinery and Equipment - 2.71%
Applied Materials, Inc.* ............... 160,000 5,749,920
Deere & Company ........................ 150,000 6,093,750
York International Corporation ......... 100,000 5,587,500
Total ................................. 17,431,170
Instruments and Related Products - 0.79%
St. Jude Medical, Inc.* ................ 120,000 5,115,000
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Insurance Carriers - 5.98%
Berkshire Hathaway Inc., Class B* ...... 3,000 $ 3,336,000
Chubb Corporation (The) ................ 200,000 10,750,000
Financial Security Assurance Holdings Ltd. 350,000 11,506,250
ITT Hartford Group, Inc. ............... 125,000 8,437,500
United HealthCare Corporation .......... 100,000 4,500,000
Total ................................. 38,529,750
Nondepository Institutions - 1.29%
Associates First Capital Corporation ... 38,000 1,676,750
Federal Home Loan Mortgage Corporation . 60,000 6,607,500
Total ................................. 8,284,250
Oil and Gas Extraction - 2.29%
Noble Affiliates, Inc. ................. 100,000 4,787,500
Schlumberger Limited ................... 100,000 9,987,500
Total ................................. 14,775,000
Petroleum and Coal Products - 2.72%
Exxon Corporation ...................... 100,000 9,800,000
Royal Dutch Petroleum Company .......... 45,000 7,683,750
Total ................................. 17,483,750
Primary Metal Industries - 0.79%
Nucor Corporation ...................... 100,000 5,100,000
Printing and Publishing - 1.98%
Belo (A. H.) Corporation, Class A ...... 113,200 3,947,850
McGraw-Hill, Inc. ...................... 100,000 4,612,500
Viacom Inc., Class B* .................. 120,000 4,185,000
Total ................................. 12,745,350
Textile Mill Products - 0.87%
Sara Lee Corporation ................... 150,000 5,587,500
Transportation by Air - 1.18%
Delta Air Lines, Incorporated .......... 76,050 5,390,044
Southwest Airlines Co. ................. 100,000 2,212,500
Total ................................. 7,602,544
Wholesale Trade -- Nondurable Goods - 1.81%
Gillette Company (The) ................. 150,000 11,662,500
TOTAL COMMON STOCKS - 60.29% ............. $388,293,026
(Cost: $295,459,061)
See Notes to Schedule of Investments on page 10 .
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1996
Shares Value
PREFERRED STOCK - 0.96%
Transportation Equipment
Ford Motor Company, Convertible ........ 60,000 $ 6,225,000
(Cost: $3,000,000)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Building Materials and Garden Supplies - 0.24%
Home Depot, Inc. (The),
3.25%, 10-1-2001 ...................... $ 1,600 1,560,000
Communication - 0.55%
Bell Telephone Company of Pennsylvania (The),
8.35%, 12-15-2030 ..................... 3,000 3,525,420
Electronic and Other Electric Equipment - 0.76%
Cooper Industries, Inc.,
6.0%, 1-1-99 (Exchangeable) ........... 3,416 4,901,875
Nondepository Institutions - 0.52%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 3,000 3,345,120
Oil and Gas Extraction - 0.45%
Enron Corp.,
6.25%, 12-13-98 (Exchangeable)......... 2,588 2,856,000
TOTAL CORPORATE DEBT SECURITIES - 2.52% $ 16,188,415
(Cost: $13,589,000)
OTHER GOVERNMENT SECURITY - 0.48%
Supranational
International Bank for Reconstruction and
Development,
9.25%, 7-15-2017 ...................... 2,500 $ 3,109,900
(Cost: $2,498,217)
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
6.5%, 8-15-97 ......................... $ 5,000 $ 5,029,700
5.625%, 8-31-97 ....................... 10,000 10,003,100
7.375%, 11-15-97 ...................... 5,000 5,071,850
5.125%, 2-28-98 ....................... 15,000 14,903,850
9.25%, 8-15-98 ........................ 5,000 5,260,150
4.75%, 10-31-98 ....................... 10,000 9,809,400
5.5%, 2-28-99 ......................... 15,000 14,873,400
7.125%, 9-30-99 ....................... 20,000 20,553,200
7.75%, 12-31-99 ....................... 10,000 10,459,400
7.25%, 5-15-2004 ...................... 5,000 5,260,950
7.875%, 11-15-2004 .................... 10,000 10,912,500
7.5%, 2-15-2005 ....................... 37,000 39,572,610
9.375%, 2-15-2006 ..................... 8,500 10,229,240
10.375%, 11-15-2012 ................... 4,000 5,151,240
9.25%, 2-15-2016 ...................... 5,000 6,347,650
Miscellaneous United States Government
Backed Securities:
National Archives Facility Trust,
8.5%, 9-1-2019 ...................... 4,334 4,876,214
Postal Square Limited Partnership,
8.95%, 6-15-2022 .................... 1,925 2,250,956
TOTAL UNITED STATES GOVERNMENT SECURITIES - 28.04% $180,565,410
(Cost: $176,003,844)
TOTAL SHORT-TERM SECURITIES - 7.46% $ 48,063,240
(Cost: $48,063,240)
TOTAL INVESTMENT SECURITIES - 99.75% $642,444,991
(Cost: $538,613,362)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.25% 1,616,100
NET ASSETS - 100.00% $644,061,091
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1996
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A) Listed on an exchange outside the United States.
See Note 1 to financial statements for security valuation and other
significant accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
UNITED RETIREMENT SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $642,444,991
Cash ............................................ 2,717
Receivables:
Dividends and interest .......................... 4,449,615
Fund shares sold ................................ 1,071,323
Prepaid insurance premium ......................... 11,312
------------
Total assets .................................. 647,979,958
------------
Liabilities
Payable for Fund shares redeemed ................. 3,544,179
Accrued service fee (Note 2) ..................... 256,000
Accrued transfer agency and
dividend disbursing (Note 2) .................... 84,175
Accrued accounting services fee (Note 2) ......... 5,833
Other ............................................ 28,680
------------
Total liabilities ............................. 3,918,867
------------
Total net assets ............................. $644,061,091
============
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 77,120,380
Additional paid-in capital....................... 461,642,325
Accumulated undistributed income:
Accumulated undistributed net investment income . 459,923
Accumulated undistributed net realized
gain on investment transactions ............... 1,006,834
Net unrealized appreciation in value of
investments at end of period .................. 103,831,629
------------
Net assets applicable to outstanding
units of capital ............................. $644,061,091
============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $8.35
Class Y .......................................... $8.35
Capital shares outstanding
Class A .......................................... 76,826,224
Class Y .......................................... 294,156
Capital shares authorized .......................... 300,000,000
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended DECEMBER 31, 1996
Investment Income
Income (Note 1B):
Interest ........................................ $ 8,744,909
Dividends ....................................... 3,699,118
-----------
Total income .................................. 12,444,027
-----------
Expenses (Note 2):
Investment management fee ....................... 1,734,579
Service fee - Class A............................ 550,215
Transfer agency and dividend disbursing - Class A 470,036
Accounting services fee ......................... 35,000
Custodian fees .................................. 27,984
Audit fees ...................................... 12,273
Legal fees ...................................... 5,321
Shareholder servicing - Class Y.................. 1,876
Other ........................................... 106,098
-----------
Total expenses ................................ 2,943,382
-----------
Net investment income ........................ 9,500,645
-----------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net gain on securities .................. 17,098,552
Realized net gain on foreign
currency transactions ........................... 14,351
-----------
Realized net gain on investments ................ 17,112,903
Unrealized appreciation in value of investments
during the period ............................... 5,099,275
-----------
Net gain on investments ....................... 22,212,178
-----------
Net increase in net assets resulting
from operations ............................ $31,712,823
===========
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS For the For the
six months fiscal year
ended ended
December 31, June 30,
1996 1996
Increase in Net Assets ------------ -----------
Operations:
Net investment income ...............$ 9,500,645 $ 17,244,441
Realized net gain on investments .... 17,112,903 37,039,698
Unrealized appreciation ............. 5,099,275 24,086,193
------------ ------------
Net increase in net assets
resulting from operations ........ 31,712,823 78,370,332
------------ ------------
Dividends to shareholders from (Note 1D):*
Net investment income
Class A ........................... (10,528,406) (17,894,502)
Class Y ........................... (39,793) (23,837)
Realized gains on securities
transactions
Class A ........................... (46,606,691) (29,768,931)
Class Y ........................... (173,810) ---
------------ ------------
(57,348,700) (47,687,270)
------------ ------------
Capital share transactions:
Proceeds from sale of shares:
Class A (3,820,626 and 7,948,671
shares, respectively) ............ 33,346,743 68,712,131
Class Y (92,809 and 231,276
shares, respectively) ............ 818,048 2,009,381
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (6,873,267 and
5,612,672 shares, respectively) .. 56,997,592 47,558,555
Class Y (25,759 and 2,757
shares, respectively) ............ 213,603 23,837
Payments for shares redeemed
Class A (3,475,260 and 7,874,360
shares, respectively) ............ (30,391,615) (67,818,591)
Class Y (35,996 and 22,449
shares, respectively) ............ (321,850) (195,884)
------------ ------------
Net increase in net assets
resulting from capital
share transactions ............... 60,662,521 50,289,429
------------ ------------
Total increase ................... 35,026,644 80,972,491
Net Assets
Beginning of period .................. 609,034,447 528,061,956
------------ ------------
End of period, including undistributed
net investment income of $459,923
and $1,513,126, respectively ........$644,061,091 $609,034,447
============ ============
*See "Financial Highlights" on pages 14 - 15.
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six
months For the fiscal year ended June 30,
ended ----------------------------------
12/31/96 1996 1995 1994 1993 1992
-------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $8.72 $8.26 $7.64 $7.70 $7.20 $6.41
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .13 .26 .24 .18 .22 .21
Net realized and
unrealized gain
on investments .. .31 .94 .86 .22 .73 .91
----- ----- ----- ----- ----- -----
Total from investment
operations ....... .44 1.20 1.10 .40 .95 1.12
----- ----- ----- ----- ----- -----
Less distributions:
Dividends from
net investment
income .......... (0.15) (0.27) (0.22) (0.18) (0.23) (0.22)
Distribution from
capital gains ... (0.66) (0.47) (0.26) (0.28) (0.22) (0.11)
----- ----- ----- ----- ----- -----
Total distributions. (0.81) (0.74) (0.48) (0.46) (0.45) (0.33)
----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $8.35 $8.72 $8.26 $7.64 $7.70 $7.20
===== ===== ===== ===== ===== =====
Total return* ...... 5.19% 14.93% 15.07% 5.03% 13.45% 17.93%
Net assets, end
of period (000
omitted) .........$641,604$607,188$528,062$452,836$379,933$258,862
Ratio of expenses
to average net
assets ........... 0.94%** 0.89% 0.89% 0.87% 0.80% 0.82%
Ratio of net
investment income
to average net
assets ........... 3.04%** 3.01% 3.04% 2.32% 2.98% 3.12%
Portfolio turnover
rate ............. 18.25% 42.05% 48.62% 27.10% 30.62% 38.26%
Average commission
rate paid ........ $0.0551
*Total return calculated without taking into account the sales load
deducted on an initial purchase.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the For the
six period
months from 2/27/96*
ended through
12/31/96 6/30/96
-------- --------
Net asset value,
beginning of period $8.72 $8.68
----- -----
Income from investment
operations:
Net investment
income .......... .15 .10
Net realized and
unrealized gain
on investments .. .30 .06
----- -----
Total from investment
operations ........ .45 .16
----- -----
Less distributions:
Dividends from net
investment
income...........(.16) (.12)
Distribution from
capital gains....(.66) (.00)
----- -----
Total distributions.(.82) (.12)
----- -----
Net asset value,
end of period ..... $8.35 $8.72
===== =====
Total return ....... 5.27% 1.91%
Net assets, end of
period (000
omitted) ......... $2,457 $1,846
Ratio of expenses
to average net
assets ............ 0.78%** 0.71%**
Ratio of net
investment income
to average net
assets ............ 3.20%** 3.36%**
Portfolio
turnover rate ..... 18.25% 42.05%**
Average commission
rate paid ........ $0.0551
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 -- Significant Accounting Policies
United Retirement Shares, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. Its investment objective is to provide the highest
long-term total investment return as is, in the opinion of management,
consistent with reasonable safety of capital. The following is a summary
of significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal
period as reported by the principal securities exchange on which the
issue is traded or, if no sale is reported for a stock, the average of
the latest bid and asked prices. Bonds, other than convertible bonds,
are valued using a pricing system provided by a pricing service or
dealer in bonds. Convertible bonds are valued using this pricing
system only on days when there is no sale reported. Stocks which are
traded over-the-counter are priced using Nasdaq (National Association
of Securities Dealers Automated Quotations System) which provides
information on bid and asked or closing prices quoted by major dealers
in such stocks. Short-term debt securities are valued at amortized
cost, which approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed). Securities gains and losses are calculated
on the identified cost basis. Original issue discount (as defined in
the Internal Revenue Code), premiums on the purchase of bonds and
post-1984 market discount are amortized for both financial and tax
reporting purposes over the remaining lives of the bonds. Dividend
income is recorded on the ex-dividend date. Interest income is
recorded on the accrual basis. See Note 3 -- Investment Securities
Transactions.
C. Federal income taxes -- It is the Fund's policy to distribute all of
its taxable income and capital gains to its shareholders and otherwise
qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code. In addition, the Fund intends to pay
distributions as required to avoid imposition of excise tax.
Accordingly, provision has not been made for Federal income taxes.
See Note 4 -- Federal Income Tax Matters.
D. Dividends and distributions -- Dividends and distributions to
shareholders are recorded by the Fund on the record date. Net
investment income distributions and capital gains distributions are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles. These differences are
due to differing treatments for items such as deferral of wash sales
and post-October losses, foreign currency transactions, net operating
losses and expiring capital loss carryforwards.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The
fee consists of two elements: (i) a "Specific" fee computed on net asset
value as of the close of business each day at the annual rate of .15% of
net assets and (ii) a "Group" fee computed each day on the combined net
asset values of all of the funds in the United Group of mutual funds
(approximately $15.1 billion of combined net assets at December 31, 1996)
at annual rates of .51% of the first $750 million of combined net assets,
.49% on that amount between $750 million and $1.5 billion, .47% between
$1.5 billion and $2.25 billion, .45% between $2.25 billion and $3 billion,
.43% between $3 billion and $3.75 billion, .40% between $3.75 billion and
$7.5 billion, .38% between $7.5 billion and $12 billion, and .36% of that
amount over $12 billion. The Fund accrues and pays this fee daily.
Pursuant to assignment of the Investment Management Agreement between
the Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment
Management Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as
the Fund's investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed
Services Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the
agreement, WARSCO acts as the agent in providing accounting services and
assistance to the Fund and pricing daily the value of shares of the Fund.
For these services, the Fund pays WARSCO a monthly fee of one-twelfth of
the annual fee shown in the following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
For Class A shares, the Fund also pays WARSCO a monthly per account
charge for transfer agency and dividend disbursement services of $1.3125
for each shareholder account which was in existence at any time during the
prior month, plus $0.30 for each account on which a dividend or
distribution of cash or shares had a record date in that month. With
respect to Class Y shares, the Fund pays WARSCO a monthly fee at an annual
rate of .15% of the average daily net assets of the class for the preceding
month. The Fund also reimburses W&R and WARSCO for certain out-of-pocket
costs.
As principal underwriter for the Fund's shares, W&R received direct
and indirect gross sales commissions for Class A shares (which are not an
expense of the Fund) of $1,342,524, out of which W&R paid sales commissions
of $775,124 and all expenses in connection with the sale of Fund shares,
except for registration fees and related expenses.
Under a Service Plan for Class A shares adopted by the Fund pursuant
to Rule 12b-1 under the Investment Company Act of 1940, the Fund may pay
monthly a fee to W&R in an amount not to exceed .25% of the Fund's Class A
average annual net assets. The fee is to be paid to reimburse W&R for
amounts it expends in connection with the provision of personal services to
Fund shareholders and/or maintenance of shareholder accounts.
The Fund paid Directors' fees of $11,959.
W&R is an indirect subsidiary of Torchmark Corporation, a holding
company, and United Investors Management Company, a holding company, and a
direct subsidiary of Waddell & Reed Financial Services, Inc., a holding
company.
NOTE 3 -- Investment Securities Transactions
Purchases of investment securities, other than U.S. Government
obligations and short-term securities, aggregated $99,471,262 while
proceeds from maturities and sales aggregated $91,746,704. Purchases of
short-term and U.S. Government securities aggregated $334,607,387 and
$39,413,281, respectively. Proceeds from maturities and sales of short-
term and U.S. Government securities aggregated $357,960,296 and
$10,040,449, respectively.
For Federal income tax purposes, cost of investments owned at December
31, 1996 was $538,613,362, resulting in net unrealized appreciation of
$103,831,629, of which $108,978,947 related to appreciated securities and
$5,147,318 related to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net
income of $37,040,208 during its fiscal year ended June 30, 1996, of which
a portion was paid to shareholders during the period ended June 30, 1996.
Remaining capital gain net income has been distributed to Fund
shareholders.
NOTE 5 -- Commencement of Multiclass Operations
On October 7, 1995, the Fund was authorized to offer investors a choice
of two classes of shares, Class A and Class Y, each of which has equal
rights as to assets and voting privileges. Class Y shares are not subject
to a sales charge on purchases; they are not subject to a Rule 12b-1
Service Plan and have a separate transfer agency and dividend disbursement
services fee structure. A comprehensive discussion of the terms under
which shares of either class are offered is contained in the prospectus and
the Statement of Additional Information for the Fund.
Income, non-class specific expenses and realized and unrealized gains
and losses are allocated daily to each class of shares based on the value
of relative net assets as of the beginning of each day adjusted for the
prior day's capital share activity.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United Retirement Shares, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of United Retirement Shares, Inc.,
as of December 31, 1996, the related statements of operations and changes
in net assets for the six-month period then ended, and the financial
highlights for the six-month period then ended. These financial statements
and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audit. The financial
statements and the financial highlights of the Fund for each of the years
in the five-year period ended June 30, 1996 were audited by other auditors
whose report, dated August 5, 1996, expressed an unqualified opinion on
those statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned at December 31, 1996 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the United
Retirement Shares, Inc. as of December 31, 1996, the results of its
operations, the changes in its net assets, and the financial highlights for
the six-month period then ended in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
February 7, 1997
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
William L. Rogers, Los Angeles, California
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
OFFICERS
Keith A. Tucker, President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Sharon K. Pappas, Vice President and Secretary
Cynthia P. Prince-Fox, Vice President
Carl E. Sturgeon, Vice President
To all IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from an IRA unless you make a written election
not to have taxes withheld. The election may be made by submitting forms
provided by Waddell & Reed, Inc. which can be obtained from your Waddell &
Reed representative or by submitting Internal Revenue Service form W-4P.
Once made, an election can be revoked by providing written notice to
Waddell & Reed, Inc. If you elect not to have tax withheld you may be
required to make payments of estimated tax. Penalties may be imposed by
the IRS if withholding and estimated tax payments are not adequate.
<PAGE>
THE UNITED GROUP OF MUTUAL FUNDS
United Cash Management, Inc.
United Government Securities Fund, Inc.
United Bond Fund
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Continental Income Fund, Inc.
United Retirement Shares, Inc.
United Asset Strategy Fund, Inc.
United Income Fund
United Accumulative Fund
United Vanguard Fund, Inc.
United New Concepts Fund, Inc.
United Science and Technology Fund
United International Growth Fund, Inc.
United Gold & Government Fund, Inc.
------------------------------------
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, KS 66201-9217
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
NUR1007SA(12-96)
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