UNITED
RETIREMENT
SHARES,
INC.
SEMIANNUAL
REPORT
------------------------------------------
For the six months ended December 31, 1998
<PAGE>
This report is submitted for the general information of the shareholders of
United Retirement Shares, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by the
United Retirement Shares, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
DECEMBER 31, 1998
Dear Shareholder:
As president of your Fund, I would like to thank you for your continued
confidence as an investor. From every area of Waddell & Reed, including your
personal financial advisor, our goal has been to provide the best service
possible to our shareholders.
While it is impossible to predict the future direction of the markets, there are
some basic principles that we stand by that can help investors achieve their
objectives:
. Develop a financial plan that helps you pinpoint your financial objectives,
and identify specific strategies for turning your dreams into reality. There
is no better way to plan for your future.
. Invest on a regular basis. It can be one of the best ways to invest long
term and provide a hedge against market volatility.
. Adopt a long-term view to take advantage of compounding. The key to
successful investing is time, not timing. The power of compounding is
awesome and, on a long-term basis, can overwhelm any nuances of timing.
. Review your financial plan regularly. Financial planning is an ongoing
process that requires periodic review.
Waddell & Reed is positioned to assist you as you work toward your financial
goals. We will continue to offer quality investment products and personal
service to make the financial planning and investment process convenient and
accessible to you. Our locally based financial advisors are ready to assist you
with your total financial plan to help you plan for your retirement, to help you
meet your education funding goals or to achieve other financial objectives.
We look forward to assisting you in the future. If you have any questions about
your account, wish to review your financial plan or have other financial issues
that are important to you, contact your financial advisor or your local Waddell
& Reed office.
Respectfully,
Robert L. Hechler
President
<PAGE>
SHAREHOLDER SUMMARY
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------
UNITED RETIREMENT SHARES, INC.
PORTFOLIO STRATEGY:
Common stocks believed to OBJECTIVE: Highest long-term total
have the potential for: return as is, in the
Long-term appreciation opinion of management,
Stability consistent with the
Income reasonable safety of capital.
Maximum 10% foreign STRATEGY: Invests in equity and
securities debt securities in such
proportions that
management believes are
Debt securities most likely to
achieve the Fund's
objective.
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 Six Months Ended December 31, 1998
- ------------------------------------------
DIVIDENDS PAID $0.12
=====
CAPITAL GAINS DISTRIBUTION $0.37
=====
NET ASSET VALUE ON
12/31/98 $8.97 adjusted to: $9.34(A)
6/30/98 9.28
-----
CHANGE PER SHARE $0.06
=====
(A)This number includes the capital gains distribution of $0.37 paid in December
1998 added to the actual net asset value on December 31, 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 12-31-98 3.42% 9.73%
5-year period ended 12-31-98 10.68% 12.00%
10-year period ended 12-31-98 12.44% 13.11%
*Performance data quoted represents past performance and is based on deduction
of 5.75% sales load on the initial purchase in each of the three periods.
**Performance data quoted in this column represents past performance without
taking into account the sales load deducted on an initial purchase.
Investment return and principal value will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On December 31, 1998, United Retirement Shares, Inc. had net assets totaling
$822,118,370 invested in a diversified portfolio of:
56.23% Common Stocks
28.51% U.S. Government Securities
9.06% Cash and Cash Equivalents
5.27% Corporate Bonds
0.51% Preferred Stocks
0.42% Other Government Security
As a shareholder of United Retirement Shares, Inc. for every $100 you had
invested on December 31, 1998, your Fund owned:
$28.51 U.S. Government Securities
26.49 Manufacturing Stocks
9.42 Transportation, Communication, Electric
and Sanitary Services Stocks
9.06 Cash and Cash Equivalents
7.58 Finance, Insurance and Real Estate Stocks
5.27 Corporate Bonds
4.48 Services Stocks
4.46 Wholesale and Retail Trade Stocks
2.24 Miscellaneous Investing Institutions Stocks
1.56 Mining Stocks
0.51 Preferred Stocks
0.42 Other Government Security
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1998
Shares Value
COMMON STOCKS
Apparel and Accessory Stores - 0.62%
Kohl's Corporation* .................... 83,000 $ 5,099,313
Business Services - 2.49%
BMC Software, Inc.* .................... 242,000 10,791,687
Young & Rubicam Inc.* .................. 300,000 9,712,500
Total ................................. 20,504,187
Chemicals and Allied Products _ 7.16%
Abbott Laboratories .................... 200,000 9,800,000
Dial Corporation (The) ................. 137,900 3,981,863
Lilly (Eli) and Company ................ 115,000 10,220,625
Novartis, AG (A) ....................... 4,700 9,239,170
Pfizer Inc. ............................ 146,000 18,313,875
Procter & Gamble Company (The) ......... 80,000 7,305,000
Total ................................. 58,860,533
Communication _ 7.42%
AT&T Corporation ....................... 235,000 17,683,750
Carso Global Telecom & Media (A) ....... 500,000 1,686,017
Clear Channel Communications, Inc.* .... 140,000 7,630,000
Cox Communications, Inc., Class A* ..... 120,000 8,295,000
Infinity Broadcasting Corporation,
Class A* .............................. 175,400 4,801,575
SBC Communications Inc. ................ 390,000 20,913,750
Total ................................. 61,010,092
Depository Institutions _ 2.07%
BankAmerica Corporation ................ 113,160 6,803,745
Comerica Incorporated .................. 150,000 10,228,125
Total ................................. 17,031,870
Electric, Gas and Sanitary Services _ 2.00%
Houston Industries Incorporated ........ 260,000 8,352,500
Unicom Corporation ..................... 210,000 8,098,125
Total ................................. 16,450,625
Electronic and Other Electric Equipment _ 5.14%
Analog Devices, Inc.* .................. 118,100 3,705,387
Emerson Electric Co. ................... 150,000 9,075,000
General Electric Company ............... 80,000 8,165,000
Intel Corporation ...................... 100,000 11,853,125
Texas Instruments Incorporated ......... 110,000 9,411,875
Total ................................. 42,210,387
Fabricated Metal Products _ 1.16%
Mark IV Industries, Inc. ............... 254,677 3,310,801
Newell Co. ............................. 150,000 6,187,500
Total ................................. 9,498,301
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1998
Shares Value
COMMON STOCKS (Continued)
General Merchandise Stores _ 2.08%
Cifra, S.A. de C.V., Series C (A)* ..... 550,000 $ 670,772
Cifra, S.A. de C.V., Series V (A)* ..... 112,454 136,239
Wal-Mart Stores, Inc. .................. 200,000 16,287,500
Total ................................. 17,094,511
Health Services _ 1.45%
Columbia/HCA Healthcare Corporation .... 270,000 6,682,500
Tenet Healthcare Corporation* .......... 200,000 5,250,000
Total ................................. 11,932,500
Holding and Other Investment Offices _ 2.24%
Berkshire Hathaway Inc., Class B* ...... 3,000 7,050,000
Grupo Carso, S.A. de C.V.,
Series 1A (A) ......................... 500,000 1,696,113
LTC Properties, Inc. ................... 300,000 4,987,500
National Health Investors, Inc. ........ 190,500 4,702,969
Total ................................. 18,436,582
Industrial Machinery and Equipment _ 2.26%
Baker Hughes Incorporated .............. 175,000 3,095,312
EMC Corporation* ....................... 182,000 15,470,000
Total ................................. 18,565,312
Instruments and Related Products _ 1.36%
Medtronic, Inc. ........................ 150,000 11,137,500
Insurance Carriers _ 3.05%
Chubb Corporation (The) ................ 175,000 11,353,125
Hartford Financial Services Group
Inc. (The) ............................ 250,000 13,718,750
Total ................................. 25,071,875
Miscellaneous Retail - 1.76%
Costco Companies, Inc.* ................ 200,000 14,468,750
Motion Pictures - 0.54%
Time Warner Incorporated ............... 72,000 4,468,500
Nondepository Institutions _ 2.46%
Freddie Mac ............................ 240,000 15,465,000
Household International, Inc. .......... 120,000 4,755,000
Total ................................. 20,220,000
Oil and Gas Extraction _ 1.56%
Burlington Resources Incorporated ...... 301,000 10,779,563
Enron Oil & Gas Company ................ 119,000 2,052,750
Total ................................. 12,832,313
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1998
Shares Value
COMMON STOCKS (Continued)
Petroleum and Coal Products _ 4.79%
Chevron Corporation .................... 100,000 $ 8,293,750
Exxon Corporation ...................... 200,000 14,625,000
Mobil Corporation ...................... 90,000 7,841,250
Royal Dutch Petroleum Company .......... 180,000 8,617,500
Total ................................. 39,377,500
Primary Metal Industries _ 0.40%
British Steel plc, ADR ................. 225,000 3,290,625
Printing and Publishing _ 3.18%
Gannett Co., Inc. ...................... 100,000 6,450,000
McGraw-Hill Companies, Inc. (The) ...... 100,000 10,187,500
Meredith Corporation ................... 150,000 5,681,250
New York Times Company (The), Class A .. 110,000 3,815,625
Total ................................. 26,134,375
Rubber and Miscellaneous Plastics Products - 1.04%
A. Schulman, Inc. ...................... 200,000 4,518,750
Goodyear Tire & Rubber Company (The) ... 80,000 4,035,000
Total ................................. 8,553,750
TOTAL COMMON STOCKS _ 56.23% $462,249,401
(Cost: $324,703,291)
PREFERRED STOCKS
Electric, Gas and Sanitary Services - 0.11%
El Paso Energy Capital Trust I,
4.75%, Convertible .................... 20,000 957,500
Holding and Other Investment Offices - 0.40%
LTC Properties, Inc., 9.5% ............. 150,000 3,262,500
TOTAL PREFERRED STOCKS - 0.51% $ 4,220,000
(Cost: $4,825,000)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Building Materials and Garden Supplies _ 0.51%
Home Depot, Inc. (The), Convertible,
3.25%, 10-1-2001 ...................... $ 1,600 4,226,000
Chemicals and Allied Products - 0.34%
American Home Products Corporation,
7.9%, 2-15-2005 ....................... 2,500 2,825,100
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication _ 1.49%
Bell Telephone Company of Pennsylvania (The),
8.35%, 12-15-2030 ..................... $3,000 $ 3,905,550
Clear Channel Communications, Inc., Convertible,
2.625%, 4-1-2003 ...................... 6,400 6,856,000
Southwestern Bell Telephone Company,
5.77%, 10-14-2003 ..................... 1,500 1,519,830
Total ................................. 12,281,380
Depository Institutions - 0.32%
Wachovia Corporation,
6.25%, 8-4-2008 ....................... 2,500 2,600,325
Electric, Gas and Sanitary Services - 0.13%
California Infrastructure and Economic Development
Bank Special Purpose Trust PG&E-1,
6.42%, 9-25-2008 ...................... 1,000 1,030,420
Electronic and Other Electric Equipment - 0.28%
Cooper Industries, Inc.,
6.0%, 1-1-99 (Exchangeable) ........... 3,254 2,327,156
Food and Kindred Products - 0.64%
Coca-Cola Enterprises Inc.,
6.7%, 10-15-2036 ...................... 5,000 5,294,250
Miscellaneous Manufacturing Industries - 0.31%
Tyco International Group S.A.,
6.375%, 6-15-2005 ..................... 2,500 2,548,450
Nondepository Institutions _ 0.45%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 3,000 3,675,120
Transportation by Air - 0.50%
Southwest Airlines Co.,
7.875%, 9-1-2007 ...................... 3,650 4,080,262
United States Postal Service - 0.30%
Postal Square Limited Partnership,
8.95%, 6-15-2022 ...................... 1,880 2,454,997
TOTAL CORPORATE DEBT SECURITIES _ 5.27% $ 43,343,460
(Cost: $38,598,861)
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
OTHER GOVERNMENT SECURITY _ 0.42%
Supranational
International Bank for Reconstruction and
Development,
9.25%, 7-15-2017 ...................... $2,500 $ 3,450,825
(Cost: $2,498,276)
UNITED STATES GOVERNMENT SECURITIES
Federal National Mortgage Association:
6.51%, 5-6-2008 ....................... 7,500 7,757,775
6.19%, 7-7-2008 ....................... 5,000 5,099,200
Government National Mortgage Association,
6.5%, 8-15-2028 ....................... 13,544 13,679,047
National Archives Facility Trust,
8.5%, 9-1-2019 ........................ 4,199 5,157,309
United States Treasury:
5.5%, 2-28-99 ......................... 15,000 15,016,350
7.125%, 9-30-99 ....................... 20,000 20,356,200
7.75%, 12-31-99 ....................... 10,000 10,298,400
5.75%, 10-31-2000 ..................... 10,000 10,190,600
7.25%, 5-15-2004 ...................... 5,000 5,603,900
7.875%, 11-15-2004 .................... 10,000 11,585,900
7.5%, 2-15-2005 ....................... 37,000 42,365,000
9.375%, 2-15-2006 ..................... 8,500 10,834,865
10.375%, 11-15-2012 ................... 4,000 5,518,760
9.25%, 2-15-2016 ...................... 5,000 7,173,450
0.0%, 2-15-2019 ....................... 20,000 6,553,000
7.25%, 8-15-2022 ...................... 28,000 34,851,320
6.25%, 8-15-2023 ...................... 20,000 22,353,200
TOTAL UNITED STATES GOVERNMENT SECURITIES _ 28.51% $234,394,276
(Cost: $222,569,367)
TOTAL SHORT-TERM SECURITIES _ 8.54% $ 70,178,393
(Cost: $70,178,393)
TOTAL INVESTMENT SECURITIES _ 99.48% $817,836,355
(Cost: $663,373,188)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.52% 4,282,015
NET ASSETS - 100.00% $822,118,370
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED RETIREMENT SHARES, INC.
DECEMBER 31, 1998
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
DECEMBER 31, 1998
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $817,836
Cash ............................................ 18
Receivables:
Dividends and interest .......................... 5,595
Investment securities sold ...................... 1,400
Fund shares sold ................................ 1,024
Prepaid insurance premium ......................... 12
--------
Total assets .................................. 825,885
--------
Liabilities
Payable to Fund shareholders ..................... 3,421
Accrued service fee (Note 2) ..................... 151
Accrued transfer agency and
dividend disbursing (Note 2) .................... 116
Accrued distribution fee (Note 2) ................ 43
Accrued management fee (Note 2) .................. 12
Accrued accounting services fee (Note 2) ......... 7
Other ............................................ 17
--------
Total liabilities ............................. 3,767
--------
Total net assets ............................. $822,118
========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 91,601
Additional paid-in capital....................... 573,610
Accumulated undistributed income:
Accumulated undistributed net investment income . 595
Accumulated undistributed net realized
gain on investment transactions ............... 1,848
Net unrealized appreciation in value of
investments ................................... 154,464
--------
Net assets applicable to outstanding
units of capital ............................. $822,118
========
Capital shares outstanding
Class A .......................................... 91,210
Class Y .......................................... 391
Capital shares authorized .......................... 300,000
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $8.97
Class Y .......................................... $8.98
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended DECEMBER 31, 1998
(In Thousands)
Investment Income
Income (Note 1B):
Interest and amortization ....................... $10,246
Dividends ....................................... 3,825
-------
Total income .................................. 14,071
............................................ -------
Expenses (Note 2):
Investment management fee ....................... 2,173
Service fee - Class A............................ 880
Transfer agency and dividend disbursing - Class A 563
Distribution fee - Class A....................... 72
Accounting services fee ......................... 43
Custodian fees .................................. 33
Audit fees ...................................... 9
Legal fees ...................................... 6
Shareholder servicing - Class Y ................. 2
Other ........................................... 109
-------
Total expenses ................................ 3,890
-------
Net investment income ........................ 10,181
-------
Realized and Unrealized Gain on
Investments (Notes 1 and 3)
Realized net gain on securities .................. 2,603
Unrealized appreciation in value of investments
during the period ............................... 4,243
-------
Net gain on investments ......................... 6,846
-------
Net increase in net assets resulting
from operations .............................. $17,027
=======
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS For the For the
(Dollars In Thousands) six months fiscal year
ended ended
December 31, June 30,
1998 1998
Increase (Decrease) in Net Assets ------------ -----------
Operations:
Net investment income ............... $10,181 $ 19,939
Realized net gain on investments .... 2,603 65,705
Unrealized appreciation ............. 4,243 18,773
-------- --------
Net increase in net assets
resulting from operations ........ 17,027 104,417
-------- --------
Distributions to shareholders from (Note 1D):*
Net investment income:
Class A ........................... (10,518) (20,761)
Class Y ........................... (49) (88)
Realized gains on securities
transactions:
Class A ........................... (32,446) (66,648)
Class Y ........................... (138) (271)
-------- --------
(43,151) (87,768)
Capital share transactions: -------- --------
Proceeds from sale of shares:
Class A ( 4,364,132 and 10,522,139
shares, respectively) ............ 39,028 96,683
Class Y (102,320 and 61,007
shares, respectively) ............ 911 570
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (4,860,257 and
9,995,667 shares, respectively) .. 42,631 87,119
Class Y (21,347 and 41,126
shares, respectively) ............ 187 359
Payments for shares redeemed:
Class A (6,972,393 and 9,861,351
shares, respectively) ............ (62,310) (90,559)
Class Y (60,677 and 107,103
shares, respectively) ............ (542) (990)
-------- --------
Net increase in net assets
resulting from capital
share transactions ............... 19,905 93,182
-------- --------
Total increase (decrease) ........ (6,219) 109,831
Net Assets
Beginning of period .................. 828,337 718,506
-------- --------
End of period, including undistributed
net investment income of $595
and $981, respectively .............. $822,118 $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
six
months For the fiscal year ended June 30,
ended ----------------------------------
12/31/98 1998 1997 1996 1995 1994
-------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $9.28 $9.14 $8.72 $8.26 $7.64 $7.70
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .11 .24 .27 .26 .24 .18
Net realized and
unrealized gain
on investments .. .07 .99 1.08 .94 .86 .22
----- ----- ----- ----- ----- -----
Total from investment
operations ....... .18 1.23 1.35 1.20 1.10 .40
----- ----- ----- ----- ----- -----
Less distributions:
From net
investment
income .......... (0.12) (0.25) (0.27) (0.27) (0.22) (0.18)
From capital gains (0.37) (0.84) (0.66) (0.47) (0.26) (0.28)
----- ----- ----- ----- ----- -----
Total distributions. (0.49) (1.09) (0.93) (0.74) (0.48) (0.46)
----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $8.97 $9.28 $9.14 $8.72 $8.26 $7.64
===== ===== ===== ===== ===== =====
Total return* ...... 2.11% 14.45% 16.70% 14.93% 15.07% 5.03%
Net assets, end of
period (in millions) $818 $825 $716 $607 $528 $453
Ratio of expenses to
average net assets 0.97%** 0.93% 0.92% 0.89% 0.89% 0.87%
Ratio of net
investment income
to average net
assets ........... 2.54%** 2.57% 3.12% 3.01% 3.04% 2.32%
Portfolio turnover
rate ............. 29.50% 53.52% 39.55% 42.05% 48.62% 27.10%
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the For the For the
six fiscal year period
months ended June 30, from 2/27/96*
ended -------------- through
12/31/98 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 .......... .12 .25 .29 .10
Net realized and
unrealized gain
on investments .. .08 .99 1.07 .06
----- ----- ----- -----
Total from investment
operations ........ .20 1.24 1.36 .16
----- ----- ----- -----
Less distributions:
From net investment
income........... (0.13) (0.26)(.28) (.12)
From capital gains (0.37) (0.84)(.66) (.00)
----- ----- ----- -----
Total distributions. (0.50) (1.10)(.94) (.12)
----- ----- ----- -----
Net asset value,
end of period .... $8.98 $9.28 $9.14 $8.72
===== ===== ===== =====
Total return ....... 2.33% 14.62% 16.87% 1.91%
Net assets, end of
period (in
millions) ........ $4 $3 $3 $2
Ratio of expenses
to average net
assets ............ 0.76%** 0.79% 0.78% 0.71%**
Ratio of net
investment income
to average net
assets ............ 2.78%** 2.71% 3.28% 3.36%**
Portfolio
turnover rate ..... 29.50% 53.52% 39.55% 42.05%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED RETIREMENT SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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.
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.
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 $21.0 billion of
combined net assets at December 31, 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
$1,315,732, out of which W&R paid sales commissions of $763,959 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 $13,943, 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 $119,769,389 while proceeds from
maturities and sales aggregated $172,510,948. Purchases of short-term and U.S.
Government securities aggregated $677,535,050 and $104,928,908, respectively.
Proceeds from maturities and sales of short-term and U.S. Government securities
aggregated $708,966,192 and $37,621,222, respectively.
For Federal income tax purposes, cost of investments owned at December 31,
1998 was $663,373,188, resulting in net unrealized appreciation of $154,463,167,
of which $171,268,515 related to appreciated securities and $16,805,348 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 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 December 31, 1998, and the related statement of operations for the six-month
period then ended, the statement of changes in net assets for the six-month
period then ended and the fiscal year ended June 30, 1998, and the financial
highlights for the six-month period ended December 31, 1998 and for each of the
five fiscal years in the period ended June 30, 1998. 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
December 31, 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, 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 December 31, 1998, the results of its operations
for the six-month period then ended, the changes in its net assets for the six-
month period then ended and the fiscal year ended June 30, 1998, and the
financial highlights for the six-month period ended December 31, 1998 and for
each of the five fiscal years in the period ended June 30, 1998, in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
February 5, 1999
<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
Theodore W. Howard, Vice President and Treasurer
Helge K. Lee, Vice President and Secretary
Cynthia P. Prince-Fox, Vice President
Lower sales charges are available by combining the net asset value ("NAV") of
existing Class A shares of the Fund with additional purchases of Class A shares
of any fund in the United Group, except that only the Class A shares of United
Cash Management, Inc. that were acquired by exchange of another United Group
fund's Class A shares on which a sales charge was paid, plus the shares paid as
dividends on those acquired shares, may be combined.
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
NUR1007SA(12-98)
printed on recycled paper
