UNITED
RETIREMENT
SHARES,
INC.
ANNUAL
REPORT
---------------------------------------
For the fiscal year ended June 30, 1999
<PAGE>
MANAGER'S LETTER
JUNE 30, 1999
Dear Shareholder:
This report relates to the operation of United Retirement Shares, Inc. for the
fiscal year ended June 30, 1999. The following discussion, graphs and tables
provide you with information regarding the Fund's performance during that
period.
During the Fund's first fiscal quarter, investors rushed to the safety of U.S.
Government bonds as the economic and political turmoil in Asia that began in the
fall of 1997 permeated international capital markets. The effects of this
global crisis in Latin America and Russia prompted the Federal Reserve to lower
interest rates in the fall of 1998 and coordinate the bailout of a large hedge
fund in an effort to stabilize the economic outlook. The first two quarters of
1999 produced some strong economic results which were favorably received by the
stock market, but which resulted in rising interest rates.
As the fiscal year began, the Fund had a large position in bonds - with over a
third of its assets in fixed income instruments. Holdings in companies that had
a large exposure to Latin America and Asia were pared back last fall.
Anticipating a rise in interest rates, we reduced our exposure to the fixed
income market from a weighting of roughly 28% at the end of the first calendar
quarter to approximately 14% at the end of the fiscal year. The rise in
interest rates and concerns over a Y2K-induced slowdown in the technology sector
produced an opportunity to sharply increase our exposure to that sector at
attractive prices. Moreover, pharmaceutical companies suffered a correction
during the quarter, allowing us to increase our exposure to the health care
sector which should be a major beneficiary of the aging of baby boomers. We
also increased the Fund's exposure to the energy sector to take advantage of
rising energy prices.
The strategies and techniques we applied resulted in the Fund's performance for
the fiscal year 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 S&P 500 Index was
negatively impacted by exposure to bonds.
The higher interest rates witnessed at the close of the fiscal year should
dampen housing activity, refinancing activity and consumer spending.
Consequently, we expect the economy to slow somewhat and we anticipate
increasing our exposure to the fixed income market. We will continue to monitor
the potential for a slowdown in technology spending as it relates to Y2K issues.
Thank you very much for your continued support and confidence in our
organization.
Respectfully,
Charles W. Hooper, Jr.
Manager, United Retirement Shares, Inc.
The Year 2000 information contained in this letter is
being designated as a Year 2000 readiness disclosure
pursuant to the Year 2000 Information and Readiness Act.
<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
------------------------------------
06/30/89 Purchase 9,42510,000 10,000 10,000
06/30/90 10,656 11,649 10,697 11,043
06/30/91 11,196 12,511 11,806 11,749
06/30/92 13,203 14,189 13,488 13,249
06/30/93 14,980 16,123 15,264 15,151
06/30/94 15,734 16,349 15,063 15,441
06/30/95 18,106 20,612 16,978 18,486
06/30/96 20,809 25,971 17,764 22,610
06/30/97 24,286 34,972 19,152 28,889
06/30/98 27,795 45,536 21,325 35,535
06/30/99 31,337 55,879 21,893 40,703
==== United Retirement Shares, Inc., Class A Shares* -- $31,337
++++ S & P 500 Index -- $55,879
**** Salomon Brothers Treasury/Government Sponsored/ Corporate Index --
$21,893
- ------ Lipper Growth & Income Fund Universe Average -- $40,703
*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
6/30/99 6.27% 13.11%
5 Years Ended
6/30/99 13.42% N/A
10 Years Ended
6/30/99 12.10% N/A
Life of
Class Y +++ N/A 13.89%
+ 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 6/30/99.
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 primarily in
securities common stocks, preferred
stocks or debt securities
Debt securities in such proportions that
management believes are
Cash reserves most likely to achieve
the Fund's objective.
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, 1999
- ---------------------------------------
DIVIDENDS PAID $0.18
=====
CAPITAL GAINS DISTRIBUTION $0.37
=====
NET ASSET VALUE ON
06/30/99 $9.84 adjusted to:$10.21(A)
06/30/98 9.28
-----
CHANGE PER SHARE $0.93
=====
(A)This number includes the capital gains distribution of $0.37 paid in December
1998 added to the actual net asset value on June 30, 1999.
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 6-30-99 6.27% 12.75%
5-year period ended 6-30-99 13.42% 14.77%
10-year period ended 6-30-99 12.10% 12.77%
*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, 1999, United Retirement Shares, Inc. had net assets totaling
$893,335,576 invested in a diversified portfolio of:
83.76% Common Stocks
10.80% U.S. Government Securities
2.81% Corporate Bonds
2.28% Cash and Cash Equivalents
0.35% Other Government Security
As a shareholder of United Retirement Shares, Inc. for every $100 you had
invested on June 30, 1999, your Fund owned:
$38.59 Manufacturing Stocks
16.55 Services Stocks
10.90 Finance, Insurance and Real Estate Stocks
10.80 U.S. Government Securities
6.59 Transportation, Communication, Electric
and Sanitary Services Stocks
5.05 Wholesale and Retail Trade Stocks
4.32 Mining Stocks
2.81 Corporate Bonds
2.28 Cash and Cash Equivalents
1.76 Miscellaneous Stocks
0.35 Other Government Security
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1999
Shares Value
COMMON STOCKS
Apparel and Other Textile Products - 1.03%
Tommy Hilfiger Corporation* ............ 125,000 $ 9,187,500
Building Materials and Garden Supplies - 0.95%
Lowe's Companies, Inc. ................. 150,000 8,503,125
Business Services - 14.90%
America Online, Inc.* .................. 90,000 9,945,000
BMC Software, Inc.* .................... 150,000 8,095,313
Citrix Systems, Inc.* .................. 125,000 7,042,969
Computer Sciences Corporation* ......... 125,000 8,648,438
Compuware Corporation* ................. 275,000 8,739,844
Electronic Data Systems Corporation .... 125,000 7,070,312
Microsoft Corporation* ................. 200,000 18,025,000
Oracle Corporation* .................... 200,000 7,425,000
Parametric Technology Corporation* ..... 500,000 6,953,125
SunGard Data Systems, Inc.* ............ 200,000 6,900,000
Teradyne, Inc.* ........................ 150,000 10,762,500
USWeb Corporation* ..................... 300,000 6,665,625
Veritas Software Corp.* ................ 100,000 9,496,875
Wind River Systems, Inc.* .............. 300,000 4,809,375
Young & Rubicam Inc. ................... 275,000 12,495,312
Total ................................. 133,074,688
Chemicals and Allied Products - 11.28%
Abbott Laboratories .................... 200,000 9,100,000
Biogen, Inc.* .......................... 120,000 7,721,250
Forest Laboratories, Inc.* ............. 150,000 6,937,500
Lilly (Eli) and Company ................ 150,000 10,743,750
Merck & Co., Inc. ...................... 175,000 12,950,000
Pfizer Inc. ............................ 80,000 8,780,000
Pharmacia & Upjohn, Inc. ............... 175,000 9,942,187
Schering-Plough Corporation ............ 225,000 11,925,000
SmithKline Beecham plc, ADR ............ 160,000 11,100,000
Warner-Lambert Company ................. 175,000 11,560,938
Total ................................. 100,760,625
Communication - 4.70%
AT&T Corporation ....................... 175,000 9,767,188
Comcast Corporation, Class A ........... 200,000 7,687,500
SBC Communications Inc. ................ 250,000 14,500,000
USA Networks, Inc.* .................... 250,000 10,023,437
Total ................................. 41,978,125
Depository Institutions - 2.29%
Bank of America Corporation ............ 150,000 10,996,875
Citigroup Inc. ......................... 200,000 9,500,000
Total ................................. 20,496,875
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1999
Shares Value
COMMON STOCKS (Continued)
Eating and Drinking Places - 1.72%
McDonald's Corporation ................. 200,000 $ 8,262,500
Wendy's International, Inc. ............ 250,000 7,078,125
Total ................................. 15,340,625
Electronic and Other Electric Equipment - 10.82%
ADC Telecommunications, Inc.* .......... 200,000 9,106,250
Analog Devices, Inc.* .................. 250,000 12,546,875
General Electric Company ............... 140,000 15,820,000
General Instrument Corporation* ........ 175,000 7,437,500
Intel Corporation ...................... 300,000 17,840,625
Micron Technology, Inc.* ............... 200,000 8,062,500
Nokia Corporation, Series A, ADR ....... 140,000 12,818,750
Texas Instruments Incorporated ......... 90,000 13,050,000
Total ................................. 96,682,500
Food and Kindred Products - 3.53%
Pepsi Bottling Group, Inc. ............. 500,000 11,531,250
Ralston-Ralston Purina Group ........... 325,000 9,892,187
Seagram Company Ltd. (The) ............. 200,000 10,075,000
Total ................................. 31,498,437
General Merchandise Stores - 0.94%
Wal-Mart Stores, Inc. .................. 175,000 8,443,750
Heavy Construction, Except Building - 1.01%
Halliburton Company .................... 200,000 9,050,000
Holding and Other Investment Offices - 0.75%
Berkshire Hathaway Inc., Class B* ...... 3,000 6,720,000
Industrial Machinery and Equipment - 5.91%
Apple Computer, Inc.* .................. 225,000 10,434,375
Applied Materials, Inc.* ............... 200,000 14,768,750
Dell Computer Corporation* ............. 375,000 13,863,281
EMC Corporation* ....................... 250,000 13,750,000
Total ................................. 52,816,406
Instruments and Related Products - 1.70%
Boston Scientific Corporation* ......... 200,000 8,787,500
Guidant Corporation .................... 125,000 6,429,688
Total ................................. 15,217,188
Insurance Carriers - 3.21%
Chubb Corporation (The) ................ 100,000 6,950,000
Equitable Companies Inc. (The) ......... 150,000 10,050,000
Hartford Financial Services Group
Inc. (The) ............................ 200,000 11,662,500
Total ................................. 28,662,500
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1999
Shares Value
COMMON STOCKS (Continued)
Motion Pictures - 1.65%
AT&T Corp. - Liberty Media Group,
Class A* .............................. 200,000 $ 7,350,000
Time Warner Incorporated ............... 100,000 7,350,000
Total ................................. 14,700,000
Nondepository Institutions - 2.83%
Fannie Mae ............................. 200,000 13,675,000
Freddie Mac ............................ 200,000 11,600,000
Total ................................. 25,275,000
Oil and Gas Extraction - 4.32%
Apache Corporation ..................... 200,000 7,800,000
Basin Exploration, Inc.* ............... 250,000 5,039,062
Burlington Resources Incorporated ...... 300,000 12,975,000
Schlumberger Limited ................... 200,000 12,737,500
Total ................................. 38,551,562
Petroleum and Coal Products - 2.74%
Exxon Corporation ...................... 200,000 15,425,000
Royal Dutch Petroleum Company .......... 150,000 9,037,500
Total ................................. 24,462,500
Printing and Publishing - 0.69%
McGraw-Hill Companies, Inc. (The) ...... 115,000 6,202,813
Security and Commodity Brokers - 2.57%
Charles Schwab Corporation (The) ....... 100,000 10,987,500
Merrill Lynch & Co., Inc. .............. 150,000 11,990,625
Total ................................. 22,978,125
Transportation by Air - 1.89%
Northwest Airlines Corporation,
Class A* .............................. 200,000 6,487,500
UAL Corporation* ....................... 160,000 10,400,000
Total ................................. 16,887,500
Transportation Equipment - 0.89%
General Motors Corporation ............. 120,000 7,920,000
Wholesale Trade -- Nondurable Goods - 1.44%
Cardinal Health, Inc. .................. 200,000 12,825,000
TOTAL COMMON STOCKS - 83.76% $748,234,844
(Cost: $604,001,642)
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Communication - 0.54%
Bell Telephone Company of Pennsylvania (The),
8.35%, 12-15-2030 ..................... $ 3,000 $ 3,393,270
Southwestern Bell Telephone Company,
5.77%, 10-14-2003 ..................... 1,500 1,456,320
Total ................................. 4,849,590
Depository Institutions - 0.27%
Wachovia Corporation,
6.25%, 8-4-2008 ....................... 2,500 2,383,875
Electric, Gas and Sanitary Services - 0.11%
California Infrastructure and Economic Development
Bank, Special Purpose Trust PG&E-1,
6.42%, 9-25-2008 ...................... 1,000 994,480
Food and Kindred Products - 0.56%
Coca-Cola Enterprises Inc.,
6.7%, 10-15-2036 ...................... 5,000 5,041,550
Miscellaneous Manufacturing Industries - 0.27%
Tyco International Group S.A.,
6.375%, 6-15-2005 ..................... 2,500 2,445,325
Nondepository Institutions - 0.38%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 3,000 3,355,620
Transportation by Air - 0.43%
Southwest Airlines Co.,
7.875%, 9-1-2007 ...................... 3,650 3,821,441
United States Postal Service - 0.25%
Postal Square Limited Partnership,
8.95%, 6-15-2022 ...................... 1,868 2,226,953
TOTAL CORPORATE DEBT SECURITIES - 2.81% $ 25,118,834
(Cost: $24,581,319)
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1999
Principal
Amount in
Thousands Value
OTHER GOVERNMENT SECURITY - 0.35%
Supranational
International Bank for Reconstruction and
Development,
9.25%, 7-15-2017 ...................... $ 2,500 $ 3,143,825
(Cost: $2,498,292)
UNITED STATES GOVERNMENT SECURITIES
Federal National Mortgage Association:
6.51%, 5-6-2008 ....................... 7,500 7,313,700
6.19%, 7-7-2008 ....................... 5,000 4,789,850
Government National Mortgage Association,
6.5%, 8-15-2028 ....................... 13,100 12,596,260
National Archives Facility Trust,
8.5%, 9-1-2019 ........................ 4,161 4,780,051
United States Treasury:
7.875%, 11-15-2004 .................... 10,000 10,937,500
6.5%, 10-15-2006 ...................... 40,000 41,300,000
0.0%, 2-15-2019 ....................... 20,000 5,814,800
7.25%, 8-15-2022 ...................... 8,000 8,957,520
TOTAL UNITED STATES GOVERNMENT SECURITIES - 10.80% $96,489,681
(Cost: $96,723,673)
TOTAL SHORT-TERM SECURITIES - 1.54% $ 13,738,000
(Cost: $13,738,000)
TOTAL INVESTMENT SECURITIES - 99.26% $886,725,184
(Cost: $741,542,926)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.74% 6,610,392
NET ASSETS - 100.00% $893,335,576
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
JUNE 30, 1999
Notes to Schedule of Investments
*No dividends were paid during the preceding 12 months.
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, 1999
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $886,725
Cash ............................................ 7
Receivables:
Investment securities sold ...................... 26,577
Dividends and interest .......................... 2,017
Fund shares sold ................................ 1,007
Prepaid insurance premium ......................... 9
--------
Total assets .................................. 916,342
--------
Liabilities
Payable for investment securities purchased ...... 21,339
Payable to Fund shareholders ..................... 1,230
Accrued service fee (Note 2) ..................... 165
Accrued transfer agency and
dividend disbursing (Note 2) .................... 125
Accrued distribution fee (Note 2) ................ 23
Accrued management fee (Note 2) .................. 17
Accrued accounting services fee (Note 2) ......... 7
Other ............................................ 100
--------
Total liabilities ............................. 23,006
--------
Total net assets ............................. $893,336
========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 90,743
Additional paid-in capital....................... 566,647
Accumulated undistributed income:
Accumulated undistributed net investment income . 1,633
Accumulated undistributed net realized
gain on investment transactions ............... 89,131
Net unrealized appreciation in value of
investments ................................... 145,182
--------
Net assets applicable to outstanding
units of capital ............................. $893,336
========
Capital shares outstanding
Class A .......................................... 90,403
Class Y .......................................... 340
Capital shares authorized .......................... 300,000
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $9.84
Class Y .......................................... $9.85
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended JUNE 30, 1999
(In Thousands)
Investment Income
Income (Note 1B):
Interest and amortization ....................... $ 18,187
Dividends ....................................... 6,568
--------
Total income .................................. 24,755
--------
Expenses (Note 2):
Investment management fee ....................... 4,421
Service fee - Class A............................ 1,832
Transfer agency and dividend disbursing - Class A 1,226
Distribution fee - Class A....................... 165
Accounting services fee ......................... 85
Custodian fees .................................. 59
Audit fees ...................................... 13
Legal fees ...................................... 12
Shareholder servicing - Class Y ................. 5
Other ........................................... 249
--------
Total expenses ................................ 8,067
--------
Net investment income ........................ 16,688
--------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net gain on securities .................. 89,901
Realized net loss on foreign currency
transactions .................................... (12)
--------
Realized net gain on investments ................ 89,889
Unrealized depreciation in value of investments
during the period ............................... (5,039)
--------
Net gain on investments ....................... 84,850
--------
Net increase in net assets resulting
from operations ............................ $101,538
========
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,
-------------------------
1999 1998
Increase in Net Assets ------------ -----------
Operations:
Net investment income ............... $ 16,688 $ 19,939
Realized net gain on investments .... 89,889 65,705
Unrealized appreciation
(depreciation) .................... (5,039) 18,773
-------- --------
Net increase in net assets
resulting from operations ........ 101,538 104,417
-------- --------
Distributions to shareholders from (Note 1E):*
Net investment income:
Class A ........................... (15,950) (20,761)
Class Y ........................... (74) (88)
Realized gains on securities transactions:
Class A ........................... (32,461) (66,648)
Class Y ........................... (138) (271)
-------- --------
(48,623) (87,768)
Capital share transactions: -------- --------
Proceeds from sale of shares:
Class A (10,309,331 and 10,522,139
shares, respectively) ............ 93,629 96,683
Class Y (230,169 and 61,007
shares, respectively) ............ 2,066 570
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (5,446,253 and
9,995,667 shares, respectively) .. 48,028 87,119
Class Y (24,055 and 41,126
shares, respectively) ............ 212 359
Payments for shares redeemed:
Class A (14,310,457 and 9,861,351
shares, respectively) ............ (129,651) (90,559)
Class Y (242,942 and 107,103
shares, respectively) ............ (2,200) (990)
-------- --------
Net increase in net assets
resulting from capital
share transactions ............. 12,084 93,182
-------- --------
Total increase ................. 64,999 109,831
Net Assets
Beginning of period .................. 828,337 718,506
-------- --------
End of period, including undistributed
net investment income of $1,633
and $981, respectively .............. $893,336 $828,337
======== ========
*See "Financial Highlights" on pages 15 - 16.
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,
----------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $9.28 $9.14 $8.72 $8.26 $7.64
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .19 .24 .27 .26 .24
Net realized and
unrealized gain
on investments .. .92 .99 1.08 .94 .86
----- ----- ----- ----- -----
Total from investment
operations ....... 1.11 1.23 1.35 1.20 1.10
----- ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.18) (0.25) (0.27) (0.27) (0.22)
From capital gains (0.37) (0.84) (0.66) (0.47) (0.26)
----- ----- ----- ----- -----
Total distributions. (0.55) (1.09) (0.93) (0.74) (0.48)
----- ----- ----- ----- -----
Net asset value,
end of period .... $9.84 $9.28 $9.14 $8.72 $8.26
===== ===== ===== ===== =====
Total return* ...... 12.75% 14.45% 16.70% 14.93% 15.07%
Net assets, end of
period (in millions) $890 $825 $716 $607 $528
Ratio of expenses to
average net assets 0.99% 0.93% 0.92% 0.89% 0.89%
Ratio of net
investment income
to average net
assets ........... 2.04% 2.57% 3.12% 3.01% 3.04%
Portfolio turnover
rate ............. 122.58% 53.52% 39.55% 42.05% 48.62%
*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 period
year ended June 30, from 2/27/96*
--------------------- through
1999 1998 1997 6/30/96
------ ------ ------ --------
Net asset value,
beginning of period $9.28 $9.14 $8.72 $8.68
----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .20 .25 .29 .10
Net realized and
unrealized gain
on investments .. .94 .99 1.07 .06
----- ----- ----- -----
Total from investment
operations ........ 1.14 1.24 1.36 .16
----- ----- ----- -----
Less distributions:
From net investment
income........... (0.20) (0.26) (0.28) (0.12)
From capital gains (0.37) (0.84) (0.66) (0.00)
----- ----- ----- -----
Total distributions. (0.57) (1.10) (0.94) (0.12)
----- ----- ----- -----
Net asset value,
end of period .... $9.85 $9.28 $9.14 $8.72
===== ===== ===== =====
Total return ....... 13.11% 14.62% 16.87% 1.91%
Net assets, end of
period (in
millions) ........ $3 $3 $3 $2
Ratio of expenses
to average net
assets ............ 0.75% 0.79% 0.78% 0.71%**
Ratio of net
investment income
to average net
assets ............ 2.32% 2.71% 3.28% 3.36%**
Portfolio
turnover rate ..... 122.58% 53.52% 39.55% 42.05%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
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.
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, 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 business day following 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, 1999, $12,239 was reclassified
between accumulated undistributed net investment income and accumulated
undistributed net realized gain on investment transactions. Net investment
income, net realized gains and net assets were not affected by this change.
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. Until
June 30, 1999, the fee consisted 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 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.
Beginning June 30, 1999, the fee is payable by the Fund at the annual rates of:
0.70% of net assets up to $1 billion, 0.65% of net assets over $1 billion and up
to $2 billion, 0.60% of net assets over $2 billion and up to $3 billion, and
0.55% of net assets over $3 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
$2,706,305, out of which W&R paid sales commissions of $1,569,670 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 the
Fund 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 paid Directors' fees of $30,133, which are included in other
expenses.
W&R is a subsidiary of 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 $850,375,395 while proceeds from
maturities and sales aggregated $730,709,860. Purchases of short-term and U.S.
Government securities aggregated $1,440,556,364 and $146,118,239, respectively.
Proceeds from maturities and sales of short-term and U.S. Government securities
aggregated $1,529,115,090 and $203,784,741, respectively.
For Federal income tax purposes, cost of investments owned at June 30, 1999
was $741,707,108, resulting in net unrealized appreciation of $145,018,076, of
which $151,524,368 related to appreciated securities and $6,506,292 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $89,301,916 during its fiscal year ended June 30, 1999, which will be
distributed to Fund's shareholders.
NOTE 5 -- Multiclass Operations
On October 7, 1995, the Fund was authorized to offer investors 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, 1999, and the related statement of operations for the fiscal year
then ended, the statements of changes in net assets for each of the two fiscal
years in the period then ended, and the financial highlights for each of the
five fiscal years in the 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 as of June
30, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of United
Retirement Shares, Inc. as of June 30, 1999, the results of its operations for
the fiscal year then ended, the changes in its net assets for each of the two
fiscal years in the period then ended, and the financial highlights for each of
the five fiscal years in the period then ended in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
August 6, 1999
<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 Ordinary Long-Term Non- Long-Term
Date Total IncomeCapital GainQualifyingQualifyingCapital Gain
- ----------- ------------- -------- ----------------------------
Class A
09-11-98 $0.0500 $0.0500 $0.0000 $0.0169 $0.0331 $0.0000
12-16-98 0.4420 0.0700 0.3720 0.0221 0.0479 0.3720
03-10-99 0.0400 0.0400 0.0000 0.0163 0.0237 0.0000
06-09-99 0.0200 0.0200 0.0000 0.0082 0.0118 0.0000
------ ------- ------- ------- ------- -------
Total $0.5520 $0.1800 $0.3720 $0.0635 $0.1165 $0.3720
====== ======= ======= ======= ======= =======
Class Y
09-11-98 $0.0530 $0.0530 $0.0000 $0.0179 $0.0351 $0.0000
12-16-98 0.4480 0.0760 0.3720 0.0241 0.0519 0.3720
03-10-99 0.0440 0.0440 0.0000 0.0179 0.0261 0.0000
06-09-99 0.0270 0.0270 0.0000 0.0110 0.0160 0.0000
------ ------- ------- ------- ------- -------
Total $0.5720 $0.2000 $0.3720 $0.0709 $0.1291 $0.3720
====== ======= ======= ======= ======= =======
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 United Retirement Shares, Inc. was held on June 22, 1999.
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*
J. Concannon 45,941,173 1,401,755 0
J. Dillingham 45,919,021 1,423,907 0
D. Gardner 45,885,435 1,457,493 0
L. Graves 45,914,244 1,428,684 0
J. Harroz, Jr. 45,874,198 1,468,730 0
J. Hayes 45,788,010 1,554,918 0
R. Hechler 45,904,982 1,437,946 0
H. Herrmann 45,918,180 1,424,748 0
G. Johnson 45,770,798 1,572,130 0
W. Morgan 45,875,080 1,467,848 0
R. Reimer 45,860,907 1,482,021 0
F. Ross, Jr. 45,934,091 1,408,837 0
E. Schwartz 45,898,436 1,444,492 0
K. Tucker 45,927,896 1,415,032 0
F. Vogel III 45,928,846 1,414,082 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*
45,150,428 429,447 1,763,053 0
Item 3. To approve or disapprove the amendment to the Fund's investment
management agreement with Waddell & Reed Investment Management Company:
Broker
For Against Abstain Non-Votes*
42,310,417 2,859,035 2,142,268 31,208
Item 4. To approve or disapprove amendment of the Fund's policy regarding
securities lending:
Broker
For Against Abstain Non-Votes*
42,275,580 2,150,542 2,885,598 31,208
Item 5. To approve or disapprove the Fund's Articles of Incorporation to
change the par value of Fund shares to $0.001:
Broker
For Against Abstain Non-Votes*
42,613,816 1,456,568 3,272,544 0
*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>
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.
For shareholders who have chosen the Income-Earned option or the Cash option for
their distribution method: if the dividend distribution (for Income-Earned) or
the total distribution (for Cash) is less than five dollars, the distribution
will be automatically paid in additional shares of the same class of the Fund.
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>
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 K. Graves, Topeka, Kansas
Joseph Harroz, Jr., Norman, Oklahoma
John F. Hayes, Hutchinson, Kansas
Robert L. Hechler, Overland Park, Kansas
Henry J. Herrmann, Overland Park, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Ronald C. Reimer, Mission Hills, Kansas
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Frederick Vogel III, Milwaukee, Wisconsin
OFFICERS
Robert L. Hechler, President
Henry J. Herrmann, Vice President
Charles W. Hooper, Vice President
Theodore W. Howard, Vice President and Treasurer
Helge K. Lee, Vice President and Secretary
<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.
- ------------------------------------
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(6-99)
printed on recycled paper
