UNITED
RETIREMENT
SHARES,
INC.
ANNUAL
REPORT
---------------------------------------
For the fiscal year ended June 30, 1998
<PAGE>
MANAGER'S LETTER
JUNE 30, 1998
Dear Shareholder:
This report relates to the operation of United Retirement Shares, Inc. for
the fiscal year ended June 30, 1998. The following discussion, graphs and
tables provide you with information regarding the Fund's performance during that
period.
During the past fiscal year, the Asian crisis was our main focus and also
the main focus of the financial markets. Asia's troubles have important
implications for the rest of the world. Crisis-related currency devaluations in
Asia are resulting in cheaper imports to the United States, depressed commodity
prices and pressured corporate profits. Developing countries, such as Russia
and Brazil, have experienced capital outflows. Flight capital has moved to the
U.S. and Western Europe, causing those markets to experience significant
appreciation.
During the past year, we tried to insulate the Fund from potential
disappointments by avoiding investments in companies that may be negatively
impacted by declining exports to Asia or increasing cheap imports from Asia.
Companies directly associated with the U.S. consumer were stressed, as declining
interest rates and high employment increased purchasing power. The Fund became
more heavily weighted in consumer cyclical and consumer stable companies. We
reduced our exposure to the capital goods and commodity producers.
The strategies and techniques we applied resulted in the direction of the
Fund's performance remaining below that of the equity and mutual fund indexes
and above that of the fixed income index charted on the following page. Those
indexes reflect the performance of securities that generally represent the stock
market (the S&P 500 Index), the bond market (the Salomon Brothers
Treasury/Government Sponsored/Corporate Index) and the universe of funds with
similar investment objectives (the Lipper Growth & Income Fund Universe
Average). Multiple indexes are presented because the Fund invests in both
stocks and bonds. The Fund's performance relative to the equity and mutual fund
indexes was negatively impacted by exposure to bonds, some build-up in the cash
position and a more diverse equity portfolio that did not include many of the
large cap stocks that accounted for much of the positive performance of the
equity indexes.
Despite the problems in Asia, the U.S. economy has been expanding and
operating at a very high level. However, the Asia drag seems likely to increase
worldwide economic slowing and the U.S. should also experience a slowdown.
Inflation should stay low due to depressed commodity prices, competition and a
strong U.S. dollar. Given this outlook, the large high-quality companies with
predictable growth should continue to lead overall market performance. We will
continue to monitor the overall health of the economy. In doing so, we will
make the determination of how the Fund should be structured to seek positive
long-term returns consistent with its objectives.
Thank you very much for your continued support and confidence in our
organization.
Respectfully,
Cynthia P. Prince-Fox
Manager, United Retirement Shares, Inc.
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
UNITED RETIREMENT SHARES, INC. CLASS A SHARES,
THE S&P 500 INDEX,
THE SALOMON BROTHERS TREASURY/ GOVERNMENT SPONSORED/CORPORATE INDEX,
AND THE LIPPER GROWTH & INCOME FUND UNIVERSE AVERAGE
Salomon
Brothers Lipper
Treasury/ Growth &
United Government Income
RetirementS & PSponsored/ Fund
Shares, 500Corporate Universe
Inc. Index Index Average
------------------------------------
06/30/88 Purchase 9,42510,000 10,000 10,000
06/30/89 11,110 12,055 11,237 11,579
06/30/90 12,561 14,043 12,020 12,786
06/30/91 13,197 15,081 13,267 13,604
06/30/92 15,563 17,105 15,156 15,340
06/30/93 17,657 19,436 17,152 17,542
06/30/94 18,546 19,709 16,926 17,878
06/30/95 21,342 24,847 19,079 21,404
06/30/96 24,529 31,308 19,962 26,179
06/30/97 28,627 42,158 21,521 33,449
06/30/98 32,763 54,892 23,963 41,144
==== United Retirement Shares, Inc.* -- $32,763
++++ S & P 500 Index -- $54,892
**** Salomon Brothers Treasury/Government Sponsored/ Corporate Index --
$23,963
- ------ Lipper Growth & Income Fund Universe Average -- $41,144
*The value of the investment in the Fund is impacted by the sales load at the
time of the investment and by the ongoing expenses of the Fund.
Annual Average Total Return +
Class A++ Class Y
-----------------------------
Year Ended
6/30/98 7.86% 14.62%
5 Years Ended
6/30/98 11.82% N/A
10 Years Ended
6/30/98 12.60% N/A
Life of
Class Y +++ N/A 14.23%
+ Total return for the Class Y shares may be greater than that of the Class A
shares because the Fund's Class Y shares are not subject to a sales load or
12b-1 fees.
++ Performance data quoted represents past performance and is based on
deduction of a 5.75% sales load on the initial purchase in each of the
three periods. Investment return and principal value will fluctuate and an
investor's shares, when redeemed, may be worth more or less than their
original cost.
+++ 2/27/96 (the date on which Fund Class Y shares were first acquired by
shareholders) through 6/30/98.
Past performance is not predictive of future performance. Indexes are
unmanaged.
<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.
Cash reserves
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.
For more information about the Fund's
cash reserves flexibility, please
consult the Prospectus.
FOUNDED: 1972
SCHEDULED DIVIDEND FREQUENCY: QUARTERLY (March, June, September,
December)
<PAGE>
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Fiscal Year Ended June 30, 1998
- ---------------------------------------
DIVIDENDS PAID $0.25
=====
CAPITAL GAINS DISTRIBUTION $0.84
=====
NET ASSET VALUE ON
6/30/98 $9.28 adjusted to:$10.12(A)
6/30/97 9.14
-----
CHANGE PER SHARE $0.98
=====
(A)This number includes the capital gains distribution of $0.84 paid in December
1997 added to the actual net asset value on June 30, 1998.
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 6-30-98 7.86% 14.45%
5-year period ended 6-30-98 11.82% 13.16%
10-year period ended 6-30-98 12.60% 13.27%
*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 June 30, 1998, United Retirement Shares, Inc. had net assets totaling
$828,337,312 invested in a diversified portfolio of:
63.09% Common Stocks
19.62% U.S. Government Securities
12.35% Cash and Cash Equivalents
3.95% Corporate Bonds
0.58% Preferred Stocks
0.41% Other Government Security
As a shareholder of United Retirement Shares, Inc. for every $100 you had
invested on June 30, 1998, your Fund owned:
$32.97 Manufacturing Stocks
19.62 U.S. Government Securities
12.35 Cash and Cash Equivalents
9.30 Transportation, Communication, Electric
and Sanitary Services Stocks
8.97 Finance, Insurance and Real Estate Stocks
4.66 Services Stocks
4.14 Wholesale and Retail Trade Stocks
3.95 Corporate Bonds
3.05 Miscellaneous Investing Institutions Stocks
0.58 Preferred Stocks
0.41 Other Government Security
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1998
Shares Value
COMMON STOCKS
Amusement and Recreation Services - 0.69%
SFX Entertainment, Inc., Class A* ...... 125,000 $ 5,730,375
Apparel and Accessory Stores - 1.04%
Kohl's Corporation* .................... 166,000 8,611,250
Apparel and Other Textile Products - 1.40%
Liz Claiborne, Inc. .................... 222,000 11,613,264
Business Services - 1.38%
BMC Software, Inc.* .................... 220,000 11,432,960
Chemicals and Allied Products - 8.03%
Abbott Laboratories .................... 200,000 8,175,000
Dow Chemical Company (The) ............. 40,000 3,867,480
du Pont (E.I.) de Nemours and Company .. 100,000 7,462,500
Lilly (Eli) and Company ................ 115,000 7,604,375
Monsanto Company ....................... 150,000 8,381,250
Novartis, AG (A) ....................... 4,700 7,833,851
Pfizer Inc. ............................ 146,000 15,868,302
Procter & Gamble Company (The) ......... 80,000 7,284,960
Total ................................. 66,477,718
Communication - 6.22%
AT&T Corporation ....................... 155,000 8,854,375
Carso Global Telecom & Media (A) ....... 500,000 1,558,673
Cox Communications, Inc.* .............. 120,000 5,812,440
MediaOne Group, Inc.* .................. 295,000 12,961,415
SBC Communications Inc. ................ 390,000 15,600,000
Telebras S.A., ADR ..................... 62,000 6,758,000
Total ................................. 51,544,903
Depository Institutions - 1.57%
BankAmerica Corporation ................ 150,000 12,965,550
Electric, Gas and Sanitary Services - 1.86%
Houston Industries Incorporated ........ 260,000 8,027,500
Unicom Corporation ..................... 210,000 7,350,000
Total ................................. 15,377,500
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1998
Shares Value
COMMON STOCKS (Continued)
Electronic and Other Electric Equipment - 3.92%
Emerson Electric Co. ................... 200,000 $ 12,075,000
Intel Corporation ...................... 100,000 7,409,300
Texas Instruments Incorporated ......... 100,000 5,831,200
U. S. Industries, Inc. ................. 290,000 7,177,500
Total ................................. 32,493,000
Fabricated Metal Products - 0.67%
Mark IV Industries, Inc. ............... 254,677 5,507,390
Food and Kindred Products - 3.05%
General Mills, Inc. .................... 110,000 7,521,250
Heinz (H. J.) Company .................. 150,000 8,418,750
Ralston-Ralston Purina Group ........... 80,000 9,344,960
Total ................................. 25,284,960
General Merchandise Stores - 1.58%
Cifra, S.A. de C.V., Series C (A) ...... 550,000 764,195
Cifra, S.A. de C.V., Series V (A) ...... 112,454 167,767
Wal-Mart Stores, Inc. .................. 200,000 12,150,000
Total ................................. 13,081,962
Health Services - 1.70%
Columbia/HCA Healthcare Corporation .... 270,000 7,863,750
Tenet Healthcare Corporation* .......... 200,000 6,250,000
Total ................................. 14,113,750
Holding and Other Investment Offices - 3.05%
Berkshire Hathaway Inc., Class B* ...... 3,000 7,830,000
Boston Properties, Inc. ................ 100,000 3,450,000
Grupo Carso, S.A. de C.V.,
Series 1A (A) ......................... 500,000 2,056,892
LTC Properties, Inc. ................... 300,000 5,587,500
National Health Investors, Inc. ........ 190,500 6,310,312
Total ................................. 25,234,704
Industrial Machinery and Equipment - 2.58%
Baker Hughes Incorporated .............. 175,000 6,048,350
Deere & Company ........................ 75,000 3,965,625
Minnesota Mining and Manufacturing Company 90,000 7,396,830
Parker Hannifin Corporation ............ 104,300 3,976,437
Total ................................. 21,387,242
Instruments and Related Products - 0.53%
St. Jude Medical, Inc.* ................ 120,000 4,417,440
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1998
Shares Value
COMMON STOCKS (Continued)
Insurance Carriers - 4.56%
Chubb Corporation (The) ................ 175,000 $ 14,065,625
Hartford Financial Services Group
Inc. (The) ............................ 125,000 14,296,875
MGIC Investment Corporation ............ 165,000 9,415,230
Total ................................. 37,777,730
Miscellaneous Manufacturing Industries - 0.64%
Mattel, Inc. ........................... 125,000 5,289,000
Miscellaneous Retail - 1.52%
Costco Companies, Inc.* ................ 200,000 12,612,400
Motion Pictures - 0.89%
Walt Disney Company (The) .............. 70,000 7,354,340
Nondepository Institutions - 2.84%
Freddie Mac ............................ 240,000 11,294,880
Household International, Inc. .......... 120,000 5,985,000
Providian Financial Corporation ........ 80,000 6,284,960
Total ................................. 23,564,840
Oil and Gas Extraction - 0.46%
Noble Affiliates, Inc. ................. 100,000 3,793,700
Petroleum and Coal Products - 5.30%
Chevron Corporation .................... 100,000 8,306,200
Exxon Corporation ...................... 200,000 14,262,400
Mobil Corporation ...................... 90,000 6,896,250
Royal Dutch Petroleum Company .......... 180,000 9,866,160
Tosco Corporation ...................... 154,500 4,538,438
Total ................................. 43,869,448
Primary Metal Industries - 0.62%
British Steel plc, ADR ................. 225,000 5,118,750
Printing and Publishing - 4.00%
Gannett Co., Inc. ...................... 135,000 9,593,370
McGraw-Hill Companies, Inc. (The) ...... 100,000 8,156,200
Meredith Corporation ................... 150,000 7,040,550
New York Times Company (The), Class A .. 105,000 8,321,250
Total ................................. 33,111,370
Rubber and Miscellaneous Plastics Products - 1.09%
A. Schulman, Inc. ...................... 200,000 3,900,000
Goodyear Tire & Rubber Company (The) ... 80,000 5,154,960
Total ................................. 9,054,960
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1998
Shares Value
COMMON STOCKS (Continued)
Transportation Equipment - 0.68%
Chrysler Corporation ................... 100,000 $ 5,637,500
Transportation Services - 1.22%
Dial Corporation (The) ................. 390,000 10,140,000
TOTAL COMMON STOCKS - 63.09% $522,598,006
(Cost: $385,762,243)
PREFERRED STOCKS
Electric, Gas and Sanitary Services - 0.12%
El Paso Energy Capital Trust I,
Convertible ........................... 20,000 1,060,000
Holding and Other Investment Offices - 0.46%
LTC Properties, Inc., 9.5%, ............ 150,000 3,796,800
TOTAL PREFERRED STOCKS - 0.58% $ 4,856,800
(Cost: $4,825,000)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Building Materials and Garden Supplies - 0.36%
Home Depot, Inc. (The), Convertible,
3.25%, 10-1-2001 ...................... $ 1,600 2,976,000
Communication - 1.29%
Bell Telephone Company of Pennsylvania (The),
8.35%, 12-15-2030 ..................... 3,000 3,782,670
Clear Channel Communications, Inc., Convertible,
2.625%, 4-1-2003 ...................... 6,400 6,912,000
Total ................................. 10,694,670
Electric, Gas and Sanitary Services - 0.12%
California Infrastructure and Economic Development
Bank Special Purpose Trust PG&E-1,
6.42%, 9-25-2008 ...................... 1,000 1,021,410
Electronic and Other Electric Equipment - 0.54%
Cooper Industries, Inc.,
6.0%, 1-1-99 (Exchangeable) ........... 3,416 4,459,125
Food and Kindred Products - 0.63%
Coca-Cola Enterprises Inc.,
6.7%, 10-15-2036 ...................... 5,000 5,212,000
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1998
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Nondepository Institutions - 0.43%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... $ 3,000 $ 3,538,740
United States Postal Service - 0.29%
Postal Square Limited Partnership,
8.95%, 6-15-2022 ...................... 1,892 2,408,165
Wholesale Trade -- Nondurable Goods - 0.29%
Enron Corp.,
6.25%, 12-13-98 (Exchangeable) ........ 2,588 2,380,000
TOTAL CORPORATE DEBT SECURITIES - 3.95% $ 32,690,110
(Cost: $28,086,996)
OTHER GOVERNMENT SECURITY - 0.41%
Supranational
International Bank for Reconstruction and
Development,
9.25%, 7-15-2017 ...................... 2,500 $ 3,412,250
(Cost: $2,498,260)
UNITED STATES GOVERNMENT SECURITIES
National Archives Facility Trust,
8.5%, 9-1-2019 ........................ 4,235 5,181,092
United States Treasury:
9.25%, 8-15-98 ........................ 5,000 5,022,650
4.75%, 10-31-98 ....................... 10,000 9,976,600
5.5%, 2-28-99 ......................... 15,000 15,002,400
7.125%, 9-30-99 ....................... 20,000 20,381,200
7.75%, 12-31-99 ....................... 10,000 10,315,600
5.75%, 10-31-2000 ..................... 10,000 10,046,900
7.25%, 5-15-2004 ...................... 5,000 5,425,000
7.875%, 11-15-2004 .................... 10,000 11,231,200
7.5%, 2-15-2005 ....................... 37,000 40,954,190
9.375%, 2-15-2006 ..................... 8,500 10,497,500
10.375%, 11-15-2012 ................... 4,000 5,356,240
9.25%, 2-15-2016 ...................... 5,000 6,954,700
0.0%, 2-15-2019 ....................... 20,000 6,181,400
TOTAL UNITED STATES GOVERNMENT SECURITIES - 19.62% $162,526,672
(Cost: $154,689,919)
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES
Auto Repair, Services and Parking - 0.17%
PHH Corp.,
6.5%, 7-1-98 .......................... $ 1,400 $ 1,400,000
Depository Institutions - 1.69%
J.P. Morgan & Co. Incorporated,
5.53%, 7-6-98 ......................... 14,000 13,989,247
Electric, Gas and Sanitary Services - 0.23%
Commonwealth Edison Co.,
5.8%, 7-24-98 ......................... 1,875 1,868,052
Electronic and Other Electric Equipment - 0.86%
Emerson Electric Co.,
5.53%, 7-27-98 ........................ 7,120 7,091,564
Engineering and Management Services - 1.20%
Halliburton Co.,
5.62%, 7-31-98 ........................ 10,000 9,953,167
Fabricated Metal Products - 0.21%
Danaher Corporation,
5.6602%, Master Note .................. 1,778 1,778,000
Food and Kindred Products - 1.43%
Hercules Inc.,
5.7%, 7-13-98 ......................... 3,900 3,892,590
Ralston Purina Company,
5.7%, 7-17-98 ......................... 8,010 7,989,708
Total ................................. 11,882,298
Industrial Machinery and Equipment - 2.89%
Ingersoll-Rand Company,
5.68%, 7-10-98 ........................ 24,000 23,965,920
Nondepository Institutions - 0.34%
Textron Financial Corp.,
5.73%, 7-17-98 ........................ 2,800 2,792,869
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Oil and Gas Extraction - 2.04%
Atlantic Richfield Company,
5.56%, 7-30-98 ........................ $17,000 $ 16,923,859
Primary Metal Industries - 0.28%
Aluminum Company of America,
5.53%, 7-15-98 ........................ 2,300 2,295,054
Textile Mill Products - 0.07%
Sara Lee Corporation,
5.5102%, Master Note .................. 580 580,000
Transportation Equipment - 0.63%
Dana Credit Corp.,
5.71%, 7-14-98 ........................ 5,215 5,204,247
TOTAL SHORT-TERM SECURITIES - 12.04% $ 99,724,277
(Cost: $99,724,277)
TOTAL INVESTMENT SECURITIES - 99.69% $825,808,115
(Cost: $675,586,695)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.31% 2,529,197
NET ASSETS - 100.00% $828,337,312
Notes to Schedule of Investments
*No 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
JUNE 30, 1998
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $825,808
Cash ............................................ 12
Receivables:
Dividends and interest .......................... 4,283
Investment securities sold ...................... 546
Fund shares sold ................................ 1,027
Prepaid insurance premium ......................... 9
Other assets ..................................... 13
--------
Total assets .................................. 831,698
--------
Liabilities
Payable to Fund shareholders ..................... 2,927
Accrued service fee (Note 2) ..................... 315
Accrued transfer agency and
dividend disbursing (Note 2) .................... 95
Accrued management fee (Note 2) .................. 12
Accrued accounting services fee (Note 2) ......... 7
Other ............................................ 5
--------
Total liabilities ............................. 3,361
--------
Total net assets ............................. $828,337
========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 89,286
Additional paid-in capital....................... 556,020
Accumulated undistributed income:
Accumulated undistributed net investment income . 981
Accumulated undistributed net realized
gain on investment transactions ............... 31,829
Net unrealized appreciation in value of
investments ................................... 150,221
--------
Net assets applicable to outstanding
units of capital ............................. $828,337
========
Capital shares outstanding
Class A .......................................... 88,958
Class Y .......................................... 328
Capital shares authorized .......................... 300,000
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $9.28
Class Y .......................................... $9.28
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended JUNE 30, 1998
(In Thousands)
Investment Income
Income (Note 1B):
Interest and amortization ....................... $ 17,920
Dividends ....................................... 9,212
--------
Total income .................................. 27,132
............................................ --------
Expenses (Note 2):
Investment management fee ....................... 4,229
Distribution and service fees - Class A.......... 1,573
Transfer agency and dividend disbursing - Class A 1,046
Accounting services fee ......................... 80
Custodian fees .................................. 43
Audit fees ...................................... 13
Legal fees ...................................... 8
Shareholder servicing - Class Y ................. 6
Other ........................................... 195
--------
Total expenses ................................ 7,193
--------
Net investment income ........................ 19,939
--------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net gain on securities .................. 65,740
Realized net loss on foreign
currency transactions ........................... (35)
--------
Realized net gain on investments ................ 65,705
Unrealized appreciation in value of investments
during the period ............................... 18,773
--------
Net gain on investments ....................... 84,478
--------
Net increase in net assets resulting
from operations ............................ $104,417
========
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS
(Dollars In Thousands)
For the fiscal year ended
June 30,
-------------------------
1998 1997
Increase in Net Assets ------------ -----------
Operations:
Net investment income ............... $ 19,939 $ 20,202
Realized net gain on investments .... 65,705 49,201
Unrealized appreciation ............. 18,773 32,716
-------- --------
Net increase in net assets
resulting from operations ........ 104,417 102,119
-------- --------
Distributions to shareholders from (Note 1D):*
Net investment income
Class A ........................... (20,761) (19,808)
Class Y ........................... (88) (81)
Realized gains on securities
transactions
Class A ........................... (66,648) (46,608)
Class Y ........................... (271) (174)
-------- --------
(87,768) (66,671)
Capital share transactions: -------- --------
Proceeds from sale of shares:
Class A (10,522,139 and 8,619,974
shares, respectively) ............ 96,683 75,017
Class Y (61,007 and 171,527
shares, respectively) ............ 570 1,493
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (9,995,667 and
7,914,002 shares, respectively) .. 87,119 66,243
Class Y (41,126 and 30,364
shares, respectively) ............ 359 255
Payments for shares redeemed:
Class A (9,861,351 and 7,839,899
shares, respectively) ............ (90,559) (68,275)
Class Y (107,103 and 80,360
shares, respectively) ............ (990) (709)
-------- --------
Net increase in net assets
resulting from capital
share transactions ............... 93,182 74,024
-------- --------
Total increase ................... 109,831 109,472
Net Assets
Beginning of period .................. 718,506 609,034
-------- --------
End of period, including undistributed
net investment income of $981
and $1,926, respectively ............ $828,337 $718,506
======== ========
*See "Financial Highlights" on pages 16 - 17.
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 fiscal year ended June 30,
----------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $9.14 $8.72 $8.26 $7.64 $7.70
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .24 .27 .26 .24 .18
Net realized and
unrealized gain
on investments .. .99 1.08 .94 .86 .22
----- ----- ----- ----- -----
Total from investment
operations ....... 1.23 1.35 1.20 1.10 .40
----- ----- ----- ----- -----
Less distributions:
From net
investment
income .......... (0.25) (0.27) (0.27) (0.22) (0.18)
From capital
gains ........... (0.84) (0.66) (0.47) (0.26) (0.28)
----- ----- ----- ----- -----
Total distributions. (1.09) (0.93) (0.74) (0.48) (0.46)
----- ----- ----- ----- -----
Net asset value,
end of period .... $9.28 $9.14 $8.72 $8.26 $7.64
===== ===== ===== ===== =====
Total return* ...... 14.45% 16.70% 14.93% 15.07% 5.03%
Net assets, end of
period (in millions) $825 $716 $607 $528 $453
Ratio of expenses to
average net assets 0.93% 0.92% 0.89% 0.89% 0.87%
Ratio of net
investment income
to average net
assets ........... 2.57% 3.12% 3.01% 3.04% 2.32%
Portfolio turnover
rate ............. 53.52% 39.55% 42.05% 48.62% 27.10%
Average commission
rate paid ........ $0.0628$0.0580
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
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 fiscal year period
ended June 30, from 2/27/96*
----------------------- through
1998 1997 6/30/96
-------- -------- --------
Net asset value,
beginning of period $9.14 $8.72 $8.68
----- ----- -----
Income from investment
operations:
Net investment
income .......... .25 .29 .10
Net realized and
unrealized gain
on investments .. .99 1.07 .06
----- ----- -----
Total from investment
operations ........ 1.24 1.36 .16
----- ----- -----
Less distributions:
From net investment
income........... (0.26) (.28) (.12)
From capital gains (0.84) (.66) (.00)
----- ----- -----
Total distributions. (1.10) (.94) (.12)
----- ----- -----
Net asset value,
end of period .... $9.28 $9.14 $8.72
===== ===== =====
Total return ....... 14.62% 16.87% 1.91%
Net assets, end of
period (in
millions) ........ $3 $3 $2
Ratio of expenses
to average net
assets ............ 0.79% 0.78% 0.71%**
Ratio of net
investment income
to average net
assets ............ 2.71% 3.28% 3.36%**
Portfolio
turnover rate ..... 53.52% 39.55% 42.05%**
Average commission
rate paid ........ $0.0628 $0.0580
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
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 the Nasdaq Stock Market, which provides information on bid and
asked 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. Foreign currency translations -- All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars daily. Purchases and
sales of investment securities and accruals of income and expenses are
translated at the rate of exchange prevailing on the date of the
transaction. For assets and liabilities other than investments in
securities and bullion, net realized and unrealized gains and losses from
foreign currency translations arise from changes in currency exchange
rates. The Fund combines fluctuations from currency exchange rates and
fluctuations in market value when computing net realized and unrealized
gain or loss from investments.
D. 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.
E. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. Net investment income
dividends 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 carryovers.
At June 30, 1998, $35,502 was reclassified between accumulated
undistributed net investment income and accumulated undistributed net
realized gain on investment transactions.
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 $19.9 billion of
combined net assets at June 30, 1998) 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 gross sales
commissions for Class A shares (which are not an expense of the Fund) of
$3,494,973, out of which W&R paid sales commissions of $2,023,238 and all
expenses in connection with the sale of Fund shares, except for registration
fees and related expenses.
Under a Distribution and Service Plan for Class A shares adopted by theFund
pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
may pay monthly a distribution and/or service fee to W&R in an amount not to
exceed .25% of the Fund's average annual net assets. The fee is to be paid to
reimburse W&R for amounts it expends in connection with the distribution of the
Class A shares and/or provision of personal services to Fund shareholders and/or
maintenance of shareholder accounts. The Fund incurred $2,335 and $1,531,139 in
distribution and service fees, respectively.
The Fund paid Directors' fees of $27,439, which are included in other
expenses.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and Waddell & Reed Financial, Inc., 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 $377,638,284 while proceeds from
maturities and sales aggregated $328,937,797. Purchases of short-term and U.S.
Government securities aggregated $1,157,293,086 and $15,360,438, respectively.
Proceeds from maturities and sales of short-term and U.S. Government securities
aggregated $1,171,514,721 and $35,067,813, respectively.
For Federal income tax purposes, cost of investments owned at June 30, 1998
was $676,349,793, resulting in net unrealized appreciation of $149,458,322 of
which $159,722,323 related to appreciated securities and $10,264,001 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $66,504,485 during its fiscal year ended June 30, 1998, of which a portion
was paid to shareholders during the period ended June 30, 1998. Remaining
capital gain net income will be distributed to Fund shareholders.
NOTE 5 -- 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 Distribution and 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. (the "Fund") as
of June 30, 1998, and the related statements of operations for the fiscal year
then ended and changes in net assets for each of the fiscal years in the two-
year period then ended, and the financial highlights for each of the fiscal
years in the five-year 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and 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 June
30, 1998 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 audits provide 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 United Retirement
Shares, Inc. as of June 30, 1998, the results of its operations, the changes in
its net assets and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
August 7, 1998
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends and long-term capital gains below, multiplied by
the number of shares owned by you on the record dates, will give you the total
amounts to be reported in your Federal income tax return for the years in which
they were received or reinvested.
PER-SHARE AMOUNTS REPORTABLE AS:
--------------------------------------------------------------------
For Individuals For Corporations
---------------------------------------------------------------
Record OrdinaryLong-Term Capital Gain Non- Long-Term
Date Total Income 28% Rate 20% RateQualifyingQualifyingCapital Gain
- ----------- ------------- -------- ---------------------------------------
Class A
09-12-97 $0.060 $0.0600 $ ---- $ ---- $0.0233 $0.0367 $ ---
12-12-97 .920 .2603 .2889 .3708 .0325 .2278 .6597
03-13-98 .060 .0600 --- --- .0250 .0350 ---
06-12-98 .050 .0500 --- --- .0208 .0292 ---
------ ------- ------- ------- ------- ------- -------
Total $1.090 $0.4303 $0.2889 $0.3708 $0.1016 $0.3287 $0.6597
====== ======= ======= ======= ======= ======= =======
Class Y
09-12-97 $0.064$0d.0640 $ --- $ --- $0.0249 $0.0391 $ ---
12-12-97 .924 .2643 .2889 .3708 .0342 .2301 .6597
03-13-98 .062 .0620 --- --- .0258 .0362 ---
06-12-98 .054 .0540 --- --- .0225 .0315 ---
------ ------- ------- ------- ------- ------- -------
Total $1.104 $0.4443 $0.2889 $0.3708 $0.1074 $0.3369 $0.6597
====== ======= ======= ======= ======= ======= =======
CORPORATION DEDUCTIONS -- Under Federal tax law, the amounts reportable as
Qualifying Dividends are eligible for the dividends received deduction in the
year received as provided by Section 243 of the Internal Revenue Code.
The tax status of dividends paid will be reported to you on Form 1099-DIV after
the close of the applicable calendar year.
Shareholders are advised to consult with their tax advisor concerning the tax
treatment of dividends and distributions from the Fund.
<PAGE>
Shareholder Meeting Results
A special meeting of shareholders of United Retirement Shares, Inc. was held on
July 24, 1997. The matters voted upon by the shareholders and the resulting
votes for each matter are presented below.
Item 1. To elect the Board of Directors;
Broker
For Withheld Non-Votes*
Henry L. Bellmon 38,612,842 650,712 0
Dodds I. Buchanan 38,665,768 597,786 0
James M. Concannon 38,666,485 597,069 0
John A. Dillingham 38,647,800 615,754 0
Linda Graves 38,638,242 625,312 0
John F. Hayes 38,606,261 657,293 0
Glendon E. Johnson 38,602,142 661,412 0
William T. Morgan 38,667,049 596,505 0
Ronald K. Richey 38,636,611 626,943 0
William L. Rogers 38,635,311 628,243 0
Frank J. Ross, Jr. 38,667,302 596,252 0
Eleanor B. Schwartz 38,636,717 626,837 0
Keith A. Tucker 38,665,489 598,065 0
Frederick Vogel III 38,666,956 596,598 0
Paul S. Wise 38,615,541 648,013 0
Item 2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent accountants for its current fiscal year;
Broker
For Against Abstain Non-Votes*
37,624,736 212,198 1,426,620 0
Item 3. To approve or disapprove changes to certain of its fundamental
investment policies and restrictions:
3.1 Elimination of Fundamental Restriction Regarding Restricted
Securities
Broker
For Against Abstain Non-Votes*
35,907,672 1,018,654 2,304,831 32,397
3.2 Modification of Fundamental Restriction Regarding Diversification
of Assets
Broker
For Against Abstain Non-Votes*
35,847,305 1,075,995 2,307,857 32,397
3.3 Modification and/or Elimination of Fundamental Restrictions
Regarding Options, Commodities, Forward Contracts and/or Futures
Contracts
Broker
For Against Abstain Non-Votes*
35,888,827 1,034,842 2,307,488 32,397
3.4 Elimination of Fundamental Restriction Regarding Mortgaging or
Pledging Securities
Broker
For Against Abstain Non-Votes*
35,888,528 1,035,141 2,307,488 32,397
3.5 Modification of Fundamental Restriction Regarding Margin Purchases
of Securities
Broker
For Against Abstain Non-Votes*
35,902,135 1,021,534 2,307,488 32,397
3.6 Modification of Fundamental Restriction Regarding Short Sales of
Securities
Broker
For Against Abstain Non-Votes*
35,918,666 1,005,003 2,307,488 32,397
3.7 Elimination of Fundamental Restriction Regarding Investment in
Warrants and Rights
Broker
For Against Abstain Non-Votes*
35,913,445 1,008,557 2,309,155 32,397
3.8 Elimination of Fundamental Restriction Regarding Purchasing Call
Options
Broker
For Against Abstain Non-Votes*
35,917,604 1,006,065 2,307,488 32,397
3.9 Elimination of Fundamental Restriction Regarding Arbitrage
Transactions
Broker
For Against Abstain Non-Votes*
35,910,632 1,013,037 2,307,488 32,397
3.10 Elimination of Fundamental Restriction Regarding Investments in
Issuers Whose Securities are Owned by Certain Persons
Broker
For Against Abstain Non-Votes*
35,909,626 1,014,043 2,307,488 32,397
3.11 Modification of Fundamental Policy Regarding Loans
Broker
For Against Abstain Non-Votes*
35,922,215 1,001,454 2,307,488 32,397
Item 4. To amend the terms of the service plan adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940.
Broker
For Against Abstain Non-Votes*
34,309,473 1,379,345 3,251,799 17,062
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the beneficial
owner or other persons entitled to vote nor has discretionary power to vote on a
particular matter.
<PAGE>
DIRECTORS
Keith A. Tucker, Overland Park, Kansas, Chairman of the Board
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
David P. Gardner, Menlo Park, California
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Ronald K. Richey, Birmingham, Alabama
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
OFFICERS
Robert L. Hechler, 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
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.
To all traditional IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from a traditional 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
NUR1007A(6-98)
printed on recycled paper
