WADDELL & REED FINANCIAL INC, S-1, 1998-01-02

WADDELL & REED FINANCIAL INC
S-1, 1998-01-02

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 1998.
REGISTRATION NO. 333-

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- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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WADDELL & REED FINANCIAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 6211 51-0261715
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)

6300 LAMAR AVENUE
OVERLAND PARK, KANSAS 66202
(913) 236-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

KEITH A. TUCKER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WADDELL & REED FINANCIAL, INC.
6300 LAMAR AVENUE
OVERLAND PARK, KANSAS 66202
(913) 236-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

---------------

COPIES TO:
ALAN J. BOGDANOW MATTHEW J. MALLOW
HUGHES & LUCE, L.L.P. SKADDEN, ARPS, SLATE, MEAGHER & FLOM
1717 MAIN STREET, SUITE 2800 LLP
DALLAS, TEXAS 75201 919 THIRD AVENUE
(214) 939-5500 NEW YORK, NEW YORK 10022
(212) 735-3000

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
---------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to 462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]

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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
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<S> <C> <C>
Class A Common Stock, $.01 par value....... $586,500,000 $177,728
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457. In accordance with Rule 457(o) under the
Securities Act of 1933, as amended, the number of shares being registered
and the proposed maximum offering price per share are not included in this
table.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>

EXPLANATORY NOTE

The Prospectus relating to the shares of Class A Common Stock to be used in
connection with a United States and Canadian offering (the "U.S. Prospectus")
is set forth following this page. The Prospectus to be used in a concurrent
international offering (the "International Prospectus") will consist of the
alternate page set forth following the U.S. Prospectus and the balance of the
pages included in the U.S. Prospectus for which no alternate is provided. The
U.S. Prospectus and the International Prospectus are identical except that
they contain different front cover pages.
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued January 2, 1998

Shares
Waddell & Reed Financial, Inc.
CLASS A COMMON STOCK

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OF THE SHARES OF CLASS A COMMON STOCK BEING OFFERED, SHARES ARE BEING
OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS
AND SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES
AND CANADA BY THE INTERNATIONAL UNDERWRITERS. ALL SHARES OF CLASS A
COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY. IT IS
CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE PER
SHARE WILL BE BETWEEN $ AND $ PER SHARE. SEE
"UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS TO BE
CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING
PRICE.

THE COMPANY HAS TWO CLASSES OF AUTHORIZED COMMON STOCK CONSISTING OF CLASS A
COMMON STOCK OFFERED HEREBY AND CLASS B COMMON STOCK (COLLECTIVELY, THE
"COMMON STOCK"). SEE "DESCRIPTION OF CAPITAL STOCK." HOLDERS OF CLASS
A COMMON STOCK ARE ENTITLED TO ONE VOTE PER SHARE AND HOLDERS OF
CLASS B COMMON STOCK ARE ENTITLED TO VOTES PER SHARE ON EACH
MATTER SUBMITTED TO A VOTE OF STOCKHOLDERS. ALL OF THE CLASS
B COMMON STOCK IS BENEFICIALLY OWNED BY TORCHMARK
CORPORATION. ALL HOLDERS OF COMMON STOCK ARE ENTITLED
TO RECEIVE SUCH DIVIDENDS AND DISTRIBUTIONS, IF ANY,
AS MAY BE DECLARED FROM TIME TO TIME BY THE
BOARD OF DIRECTORS.

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APPLICATION WILL BE MADE TO HAVE THE CLASS A COMMON STOCK APPROVED FOR LISTING
ON THE NEW YORK STOCK EXCHANGE UNDER THE TRADING SYMBOL WDR.

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SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

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PRICE $ A SHARE

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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
-------- ---------------------- -----------
<S> <C> <C> <C>
Per Share........................... $ $ $
Total(3)............................ $ $ $
</TABLE>
- -----
(1) The Company and Torchmark Corporation have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company has granted the U.S. Underwriters an option exercisable
within 30 days of the date hereof to purchase up to an aggregate of
additional shares of Class A Common Stock at the price to the public
shown above less underwriting discounts and commissions for the purpose
of covering over-allotments, if any. If the U.S. Underwriters exercise
such option in full, the total price to the public, underwriting
discounts and commissions, and proceeds to the Company will be $ ,
$ , and $ , respectively. See "Underwriters."

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The Class A Common Stock is offered subject to prior sale, when, as, and if
accepted by the Underwriters and, subject to approval of certain legal matters
by Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriters, and
to certain other conditions. It is expected that delivery of the Class A Common
Stock will be made on or about , 1998 at the offices of Morgan Stanley &
Co. Incorporated, New York, New York, against payment therefor in immediately
available funds.

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MORGAN STANLEY DEAN WITTER

, 1998
<PAGE>

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITY OTHER THAN THE CLASS A COMMON STOCK OFFERED HEREBY, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY WILL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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[MAP OF SALES OFFICE LOCATIONS]

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............................................................. 3
Risk Factors.................................................................... 11
Special Note Regarding Forward- Looking Information............................. 15
Use of Proceeds................................................................. 15
Dividend Policy................................................................. 16
Pro Forma Capitalization........................................................ 16
Selected Financial and Operating Data........................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations.................................................................. 19
Business........................................................................ 23
Management...................................................................... 35
Certain Transactions............................................................ 46
Description of Capital Stock.................................................... 50
Shares Eligible for Future Sale................................................. 57
Certain United States Federal Tax Considerations for Non-United States Holders.. 58
Underwriters.................................................................... 60
Legal Matters................................................................... 63
Experts......................................................................... 63
Additional Information.......................................................... 63
Appendix I...................................................................... A-1
Index to Consolidated Financial Statements...................................... F-1
</TABLE>

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The Company intends to furnish to its stockholders annual reports containing
audited consolidated financial statements and quarterly reports for the first
three quarters of each fiscal year containing unaudited interim financial
information.

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CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT THE CLASS A COMMON STOCK
IN CONNECTION WITH THE OFFERING, AND MAY BID FOR AND PURCHASE THE SHARES OF
CLASS A COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITERS."

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
(including notes) appearing elsewhere in this Prospectus. Unless otherwise
indicated, the information contained in this Prospectus (i) gives effect to the
transactions described below under "Background", which will have been
consummated prior to or concurrently with the Offering, and (ii) assumes no
exercise of the Underwriters' over-allotment option. Unless the context
otherwise requires, (i) the "Company" and "Waddell & Reed" refer to Waddell &
Reed Financial, Inc. and its subsidiaries and (ii) "Torchmark" refers to
Torchmark Corporation and its subsidiaries other than the Company. References
to "Common Stock" are to the Class A Common Stock and the Class B Common Stock
of the Company.

THE COMPANY

OVERVIEW

Waddell & Reed was founded in 1937 and is one of the oldest mutual fund
complexes in the United States, having introduced the United family of funds in
1940. Waddell & Reed focuses on selling investment products to middle income
Americans primarily through a virtually exclusive financial adviser sales
force. As of September 30, 1997, the Company had $23.2 billion of assets under
management consisting of $20.7 billion of mutual fund assets and the remainder
in institutional accounts. As of September 30, 1997, the Company had more than
559,000 customers holding an average of 2.4 mutual fund accounts per customer.
The Company has enjoyed high profit margins and return on equity relative to
the mutual fund advisory industry. The Company's earnings have grown for 17
consecutive years, and the Company has achieved a 16.8% compound annual growth
rate in pretax operating income for the five years ended December 31, 1996.

The Company is the exclusive underwriter and distributor of 36 mutual fund
portfolios (the "Funds"), including 17 comprising the United Group of Mutual
Funds (the "United Funds"), eight comprising the Waddell & Reed Funds, Inc.
(the "W&R Funds"), and 11 comprising the TMK/United Funds, Inc. (the
"TMK/United Funds"). The Company also distributes Torchmark underwritten
variable annuities and life insurance products to its customers as part of its
financial planning services. The Company sells front-end loaded and contingent
deferred sales charge mutual fund products. As of September 30, 1997
approximately 79% of the Company's mutual fund assets under management were
invested in equity funds and the remainder in fixed income and money market
funds. For the twelve months ended September 30, 1997, the Company's financial
adviser sales force sold $1.5 billion of mutual fund and variable products.

The traditional market for the Company has generally been professionals and
working families with annual incomes between $40,000 and $100,000 who are
saving for retirement. The Company believes that demographic trends and shifts
in attitudes toward retirement savings will continue to support increased
consumer demand for its products. According to U.S. Census Bureau projections,
the number of Americans between the ages of 45 and 64 will grow from 53.7
million in 1996 to 71.1 million in 2005, making this "preretirement" age group
the fastest growing segment of the U.S. population.

The Company distributes the Funds and other financial products through a
financial adviser sales force that represents the Company on a virtually
exclusive basis. At September 30, 1997, the Company's sales force consisted of
2,113 financial advisers and 123 division managers operating from 179 sales
offices located throughout the United States. The Company believes, based on
industry data, that its financial adviser sales force is currently the second
largest sales force in the United States selling primarily mutual funds.
Currently, 44% of the Company's financial advisers have been with the Company
for more than 5 years and 27% for more than 10 years.

3
<PAGE>

broker/dealers and independent financial advisers. The Company's marketing
efforts are currently focused on customers residing in smaller metropolitan
areas and rural communities. The Company conducts investment seminars
throughout the United States to reach a large number of potential clients. The
Company also develops individual financial plans for clients (over 39,000 plans
in 1996) through one-on-one consultations with financial advisers, who
emphasize long-term relationships with a client through continuing service,
rather than a one-time sale. The Company believes that it is well-positioned to
benefit from a developing industry trend toward "assisted sales"--sales of
mutual fund products through a sales person--driven by the array of options now
available to investors and the need for financial planning advice that has
resulted from the recent increase in the average household's financial assets.
According to the Investment Company Institute, assisted sales for the nine
months ended September 30, 1997 constituted 60.6% of the total dollar value of
mutual fund sales, a figure that has grown from 54.9% for 1994.

The Company's investment philosophy and financial planning approach emphasize
long-term savings. The Company's portfolio managers seek consistent long-term
performance and downside protection in turbulent markets. As a result, the
Company has developed a loyal customer base with clients maintaining their
accounts for approximately 13 years on average as compared to six years for the
mutual fund industry, according to the Investment Company Institute. This
loyalty is evidenced by a relatively low fund redemption rate for the five
years ended September 30, 1997 of 7.6% for the Funds (other than money market
funds), which is less than one-half of the industry average of 18.4% and a
relatively high dividend reinvestment rate of 86.5% for the Funds (other than
money market funds) for the same period versus 66.8% for the mutual fund
industry. Approximately 45% of the Company's assets under management are in
retirement accounts as of September 30, 1997. The historically low redemption
and high reinvestment rates have provided a stable source of asset and revenue
growth at a relatively low cost. The Company's success with these strategies
has been demonstrated in turbulent markets, as, for example, in the year ended
1994 when the Company's net sales as a percentage of asset growth was more than
three times better than that of the mutual fund industry.

The Company has a seasoned team of portfolio managers, having an average of
20 years industry experience and 14 years tenure with the Company. The five
most senior portfolio managers have an average of 30 years industry experience
and 26 years service at the Company. The Company maintains an internal equity
and fixed income investment research staff that has substantial resources
available to it including hundreds of meetings annually with company management
both on and off site. In addition, the Company utilizes research provided by
brokerage firms and independent outside consultants. Portfolio managers usually
were analysts for a substantial length of time prior to acquiring money
management assignments. The prominent style of the Company's investments is
growth equity. This investment strategy emphasizes investment at attractive
valuations in companies that the portfolio managers believe can produce above
average growth in earnings.

SPIN-OFF

From 1981 until the Offering, the Company has been a subsidiary of Torchmark.
The Company, in keeping with Torchmark's strategy for its subsidiaries, paid
virtually all of its earnings to Torchmark as dividends. Torchmark,
implementing its strategy to enhance shareholder value, has advised the Company
that, subject to certain conditions, it currently intends to divest its
ownership interest in the Company by means of a special dividend to the
stockholders of Torchmark Corporation of all of the Class A Common Stock and
Class B Common Stock owned by Torchmark after the Offering (the "Spin-Off").
After the Offering, the Company will be able to devote substantially more of
its earnings to support its future growth.

BUSINESS STRATEGY

The Company's business strategy is outlined below.

4
<PAGE>

increasing the number of financial advisers. The Company's current
objective is to increase the number of financial advisers by 10% per year.
The Company hired additional experienced sales managers and reorganized its
management and reporting lines and incentive structure. The Company has
revised the compensation system for its 123 division managers by tying the
majority of their potential income to the recruitment, retention, and
training of the Company's financial advisers and proportionately less to
their personal sales production. From December 31, 1996 to September 30,
1997, the number of financial advisers has increased from 2,010 to 2,113.

In 1994, the Company also began implementing a "bridge income" program,
which provides newly recruited financial advisers with a source of earnings
until they can develop the skills and client base necessary to earn a
stable income from commissions. The Company believes this program, which
currently provides qualifying individuals with $2,000 per month for up to
six months, has been critical in increasing the number of new financial
advisers, improving retention, and increasing average first-year sales
production. Financial advisers recruited in 1997 who participated in the
bridge income program produced, on average, at two and a half times the
rate of non-participants during their first three months.

. CONTINUE TO INCREASE PERCENTAGE OF FULL-TIME FINANCIAL ADVISERS: Since
1993, the Company has emphasized increasing the proportion of its sales
force that sells financial services products on a full-time basis and has
not allowed the renewal of the licenses of financial advisers that fail to
meet sales goals. The Company believes that these changes have enhanced
productivity. At September 30, 1997, the percentage of financial advisers
whose annual production is the equivalent of investment product sales in
excess of $900,000 per year, which the Company considers full-time ("Full-
Time Advisers"), was 30% of the Company's total sales force, up from 18% at
December 31, 1992. For Full-Time Advisers, the annual investment product
sales per adviser increased from $1.4 million in 1992 to a current annual
rate of about $1.9 million, an increase of 36%. In addition, the overall
annual investment product sales per adviser increased from $380,000 to
$689,000, or 81%, over this same period as a result of both increasing the
number and the productivity of Full-Time Advisers and of not renewing the
licenses of advisers who do not meet sales goals.

. EXPAND GEOGRAPHIC SCOPE: The Company intends to pursue geographic expansion
of its sales force with two related strategies. In larger communities it
intends to establish new division offices with the facilities to
accommodate up to twenty financial advisers, and in smaller communities or
suburban areas it will open offices with facilities to accommodate a
smaller group of advisers. While historically the Company has opened new
offices in areas that were contiguous with existing offices, it now intends
to select new locations based on expected growth opportunities. Consistent
with its focus on retirement savings and planning, the Company expects to
open new offices in Florida and Arizona, as well as smaller offices in
other areas of the country, in 1998.

. ENHANCE MARKETING AND FINANCIAL PLANNING TOOLS: The Company expects to
implement an improved financial planning package, which will allow its
financial advisers to customize solutions to a client's savings, retirement
income, estate planning, life insurance, and other personal financial
planning needs. The Company has traditionally provided financial planning
advice to its clients free of charge. The Company now intends to begin
charging a fee, typically $250, for such services. The Company believes
that its program of selling its improved financial plans for a fee will
stimulate sales and result in a significantly higher average sale per plan.
The Company expects to introduce the revised financial plan by the end of
the first quarter of 1998.

The Company has also implemented formal training programs for its new
financial advisers. The program consists of field office classes that
address prospecting techniques, product knowledge, and sales presentation
skills. Field sales management personnel, assisted by six regional sales
training specialists who receive direction and support from the Company's
headquarters, conduct the field office classes. During 1998, the Company
intends to increase the number of regional sales training specialists from
six to twelve. In addition, new advisers will attend a three day course
conducted at the Company's headquarters intended to supplement and
reinforce the field classes.

5
<PAGE>

. INVEST IN PORTFOLIO MANAGERS AND INVESTMENT ANALYSTS: The Company's
objective is for its Fund families to achieve top quartile performance. The
Company is also focused on building its industry and geographic expertise.
To achieve this goal, the Company has begun to implement a plan to add
several portfolio managers and investment analysts. Through these additions,
the Company intends to increase the depth of its investment management team
and to increase the scope of its expertise. To assist in recruiting and
retention, the Company is implementing a new incentive compensation
structure that relies on stock options and increases in cash compensation to
bring total compensation for portfolio managers and investment analysts to a
more market-competitive level. The Company believes that providing equity-
based compensation as a significant component of income will be important in
attracting new portfolio managers and investment analysts as well as
retaining present staff.

. INVEST IN SYSTEMS AND TECHNOLOGY: In order to support its anticipated
growth, the Company is engaged in projects to enhance its information
systems. The Company will install a management system in all division
offices that it believes better enable division sales managers to monitor
the activities of the individual financial advisers including the number of
sales calls completed, the number of client contacts, and overall sales
results. The Company has recently completed agreements to outsource the data
processing components of its transfer agency activities to a third party
provider by the fourth quarter of 1998. The Company expects that this
arrangement will facilitate its ability to introduce new products and enter
new markets as well as enable the Company to improve its participant record-
keeping services offered to sponsors of 403(b) and 401(k) plans. In
addition, the Company expects to realize operating efficiencies with respect
to its processing activities through the use of electronic imaging, which is
a component of the third party system. The Company has developed and is
testing an intranet to be used by its financial advisers to obtain updated
training materials, product information, and electronic interactive product
illustrations. In addition, the Company expects that clients will have
access to the intranet to obtain data related to their personal accounts
once information security concerns are addressed.

. PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES TO EXPAND PRODUCT OFFERING AND
DISTRIBUTION: The Company intends to selectively pursue acquisitions and
alliances that will add new products or alternative distribution systems.
The Company believes that it will be better positioned to pursue
acquisitions as one of relatively few independent, public investment
advisory and asset management companies. The Company believes that potential
investment management acquisition candidates may be more receptive to
receiving shares of the Company as opposed to stock in a company outside of
the investment management industry. The Company has traditionally
distributed its investment products only through its virtually exclusive
financial adviser sales force. In the future, the Company may acquire
another fund complex the products of which it can distribute outside its
sales force. These mutual funds will likely not be marketed to the Company's
existing customer base, thereby avoiding competing with the Company's
existing sales force and cannibalizing the Company's current revenues. The
Company may also pursue opportunities to establish strategic relationships
with alternative distribution systems such as broker/dealers and banks or
acquire independent financial planning companies.

6
<PAGE>

THE OFFERING

Class A Common Stock
Offered
United States Offering..... shares

International Offering..... shares

Total....................... shares

Common Stock to be
outstanding after the
Offering

Class A Common Stock........ shares(1)

Class B Common Stock........ shares

Total....................... shares(1)

Use of proceeds............. Repayment of $90 million principal amount
Liberty Note (as defined) and of $390
million of the Torchmark Notes (as defined)
and the excess, if any, for general
corporate purposes

Dividend Policy............. The Company currently intends to pay
quarterly dividends of $ per share to
holders of Class A Common Stock and Class B
Common Stock.

NYSE Symbol................. WDR
- --------
(1) Does not include options to purchase shares of Class A Common Stock
issued pursuant to compensation and benefit plans of the Company. See
"Management--Compensation, Benefits, and Retirement Plans."

BACKGROUND

The Company's outstanding capital stock currently consists solely of common
stock, all of which is held by Torchmark. Prior to the consummation of the
Offering, the currently outstanding common stock will be converted into
shares of Class A Common Stock and shares of Class B Common Stock to be
held by Torchmark (the "Recapitalization").

Prior to the Offering, the Company was a wholly owned subsidiary of
Torchmark. In November 1997, the Company paid to Torchmark as a dividend
unsecured promissory notes in the aggregate principal amount of $480 million
that mature on November 25, 2002 and bear interest at an annual rate of 8% (the
"Torchmark Notes"). The Torchmark Notes are mandatorily prepayable from the
proceeds of any financing, including the Offering. The principal amount of the
Torchmark Notes was reduced to $390 million by a $90 million prepayment prior
to the Offering. The Company also owed $127 million to Liberty National Life
Insurance Company, a wholly owned subsidiary of Torchmark ("Liberty"), under a
promissory note that matures on May 1, 2000 and bears interest at an annual
rate of 6% (the "Liberty Note"). The Liberty Note was reduced to $90 million by
a $37 million prepayment prior to the Offering. Upon consummation of the
Offering, the Torchmark Notes and the Liberty Note will have been paid in full,
and the Company will have no other debt outstanding.

7
<PAGE>

The Company currently holds all of the issued and outstanding capital stock
of United Investors Life Insurance Company ("UILIC"). Prior to the Offering,
the Company will declare and pay a dividend of all the capital stock of UILIC
to Torchmark (the "UILIC Dividend").

After the consummation of the Offering, the Company will continue to be
controlled by Torchmark, which will own more than 80% of the combined voting
power of the Class A Common Stock and the Class B Common Stock of the Company.
The holders of Class A Common Stock and Class B Common Stock have identical
rights except that (i) holders of Class A Common Stock are entitled to one vote
per share while holders of Class B Common Stock are entitled to votes per
share on all matters to be voted on by stockholders and (ii) holders of Class A
Common Stock are not eligible to vote on matters relating exclusively to Class
B Common Stock and vice versa. Torchmark has advised the Company that, subject
to certain conditions, Torchmark currently intends to divest its ownership
interest in the Company in the Spin-Off by means of a special dividend to the
stockholders of Torchmark of all of the Class A Common Stock and Class B Common
Stock owned by Torchmark. See "Risk Factors--Planned Spin-Off of the Company";
"Risk Factors--Relationship with Torchmark; Conflicts of Interest";
"Background"; and "Certain Transactions--Relationship with Torchmark."

In connection with the Offering, the Company is either entering into or
amending several agreements with Torchmark and its affiliates (the "Affiliate
Agreements"), which will provide the basis for future relationships between the
Company and Torchmark. See "Risk Factors--Relationship with Torchmark;
Conflicts of Interest" and "Certain Transactions--Relationship with Torchmark."

8
<PAGE>

SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA

The following tables set forth summary historical financial and operating
data for the five years ended December 31, 1996 and the nine months ended
September 30, 1996 and 1997, as well as summary historical balance sheet data
of the Company as of the end of each of the last five years and as of September
30, 1997. The information set forth should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the Consolidated Financial Statements and the related notes
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Investment management
fees.................. $ 56,205 $ 64,208 $ 70,711 $ 85,289 $101,466 $ 74,434 $ 84,472
Underwriting and
distribution fees..... 76,488 78,037 72,150 70,393 85,837 65,132 65,756
Shareholder service
fees.................. 19,889 21,280 22,297 23,527 28,378 20,654 22,966
Investment and other
income................ 11,262 14,681 3,878 4,295 5,295 3,692 2,829
-------- -------- -------- -------- -------- -------- --------
Total revenue......... 163,844 178,206 169,036 183,504 220,976 163,912 176,023
Goodwill
amortization(1)....... 415 1,332 2,903 2,903 2,903 2,177 2,177
Other expenses......... 97,209 101,494 89,282 95,894 112,766 84,024 83,090
-------- -------- -------- -------- -------- -------- --------
Total expenses........ 97,624 102,826 92,185 98,797 115,669 86,201 85,267
-------- -------- -------- -------- -------- -------- --------
Income before provision
for income taxes...... 66,220 75,380 76,851 84,707 105,307 77,711 90,756
Provision for income
taxes................. 25,365 28,873 30,470 33,862 41,129 30,369 35,249
-------- -------- -------- -------- -------- -------- --------
Income before effect of
change in accounting
principle............. 40,855 46,507 46,381 50,845 64,178 47,342 55,507
Cumulative effect of
change in accounting
principle............. -- 4,125 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income............. $ 40,855 $ 50,632 $ 46,381 $ 50,845 $ 64,178 $ 47,342 $ 55,507
======== ======== ======== ======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
-------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets(2)...... $262,277 $162,933 $121,412 $ 86,293 $ 97,183 $ 90,939
Goodwill............... 11,979 110,443 107,540 104,637 101,734 99,557
Total assets(2)........ 300,118 301,568 262,612 227,196 369,302 358,540
Total liabilities(2)... 83,609 58,574 80,852 65,081 196,723 187,403
Total stockholder's
equity(3)............. 216,509 242,994 181,760 162,115 172,579 171,137
</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
AS OF AND
FOR THE NINE
AS OF AND FOR THE YEAR ENDED DECEMBER 31, MONTHS ENDED
------------------------------------------------ SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER OPERATING DATA:
Financial Advisors:
Full time(4)........... 510 546 487 505 634 642
Part time.............. 2,467 2,141 1,770 1,830 1,376 1,471
-------- -------- -------- -------- -------- -------
Totals................ 2,977 2,687 2,257 2,335 2,010 2,113
Number of investors(5):
Mutual funds........... 479,900 499,400 517,600 537,100 522,600 559,300
Variable products...... 9,400 16,400 22,700 27,800 33,400 36,600
Average value per
investor(6):
Mutual funds........... $ 20,300 $ 22,500 $ 21,600 $ 26,100 $ 28,500 $33,600
Variable products...... $ 32,300 $ 33,700 $ 31,900 $ 39,600 $ 42,900 $51,100
Redemption rates of
mutual funds:
Mutual funds........... 7.56% 7.55% 7.52% 7.64% 7.64% 8.00%
Industry average(7).... 18.04% 18.37% 21.27% 17.35% 16.95% 17.89%
Dividend reinvestment
rate:
Mutual funds........... 83.7% 84.9% 86.0% 86.8% 87.5% 87.2%
Industry average(7).... 56.7% 53.9% 65.8% 71.7% 72.6% 69.8%
Assets under management
(millions):
Mutual fund:
Equity funds.......... $ 6,266 $ 7,563 $ 8,174 $ 10,931 $ 12,990 $16,274
Fixed income funds.... 3,340 3,870 3,349 3,719 3,681 3,868
Money market funds.... 417 348 369 442 537 536
-------- -------- -------- -------- -------- -------
Total mutual funds.... $ 10,023 $ 11,781 $ 11,892 $ 15,092 $ 17,208 $20,678
Institutional(8)....... $ 2,121 $ 2,685 $ 2,685 $ 3,575 $ 2,042 $ 2,479
</TABLE>
- --------
(1) Amortization relates to Torchmark's acquisition of the Company in 1981 and
1993. Current annual amortization is $2.9 million.
(2) The Company's current assets, total assets, and total liabilities can be
significantly affected by amounts due both to and from affiliates. At
December 31, 1992, 1993, 1994, 1995, and 1996 and September 30, 1997,
amounts due from affiliates amounted to $51.0 million, $53.9 million, $55.7
million, $1.1 million, $124.5 million, and $132.5 million, respectively.
Amounts due to affiliates at December 31, 1992, 1993, 1994, 1995, and 1996
and September 30, 1997 amounted to $36.9 million, $8.0 million, $41.7
million, $13.6 million, $126.6 million, and $128.2 million, respectively.
(3) Cash dividends paid to Torchmark for the years 1992, 1993, 1994, 1995, and
1996 and the nine months ended September 30, 1997 were $9.6 million, $153.3
million, $80.0 million, $0, $10.0 million, and $53.0 million, respectively.
(4) Financial advisers whose annual or annualized production is the equivalent
of investment product sales in excess of $900 thousand.
(5) Mutual funds reflect the number of investors in the United Funds and W&R
Funds. Variable products reflect the number of variable annuity and
variable life policies.
(6) Mutual funds average value reflects the value for the United Funds and W&R
Funds. The variable product average is based on the value of TMK/United
Fund assets divided by the number of variable annuity and life policies.
(7) Source: Investment Company Institute.
(8) Institutional assets include assets of Torchmark affiliates of $0, $0,
$77.3 million, $373.8 million, $391.2 million, and $652.5 million at
December 31, 1992, 1993, 1994, 1995, 1996, and September 30, 1997,
respectively.

10
<PAGE>

RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following information
relating to the Company and the Class A Common Stock before making an
investment in the Class A Common Stock offered by this Prospectus.

RELATIONSHIP WITH TORCHMARK; CONFLICTS OF INTEREST

Torchmark currently owns all of the outstanding capital stock of the
Company. See "Certain Transactions." Upon completion of the Offering,
Torchmark will beneficially own approximately % of the Company's outstanding
Class A Common Stock and 100% of the Company's outstanding Class B Common
Stock, representing approximately % of the combined voting power of all
classes of voting stock of the Company. In addition, Torchmark and the Company
will have a majority of their directors in common upon completion of the
Offering and the Spin-Off. As long as Torchmark beneficially owns a majority
of the combined voting power of the Common Stock, it will have the ability to
elect all of the members of the Board of Directors and thereby to control the
management and affairs of the Company, including any determinations with
respect to acquisitions, dispositions, borrowings, issuances of Common Stock
or other securities of the Company, and the declaration and payment of any
dividends on the Common Stock. In addition, Torchmark will be able to
determine the outcome of any matter submitted to a vote of the Company's
stockholders for approval and will be able to cause or prevent a change in
control of the Company. As a result of Torchmark's control of the Company,
none of the Affiliate Agreements resulted from "arm's-length" negotiations,
although the parties endeavored to implement market based agreements. There
can be no assurance that the Company would not have received more favorable
terms from an unaffiliated party. For a description of the Affiliate
Agreements, see "Certain Transactions--Relationship with Torchmark."

Conflicts of interest may arise between the Company and Torchmark in a
number of areas relating to their past and ongoing relationships, including
the nature, quality, and pricing of services rendered by the Company to
Torchmark or by Torchmark to the Company, potential competitive business
activities, shared marketing functions, tax and employee benefit matters,
indemnity agreements, sales or distributions by Torchmark of all or any
portion of its ownership interest in the Company, or Torchmark's ability to
control the management and affairs of the Company. There can be no assurance
that Torchmark and the Company will be able to resolve any potential conflict
or that, if resolved, the Company would not receive more favorable resolution
if it were dealing with an unaffiliated party. See "Description of Capital
Stock--Certificate of Incorporation and Bylaw Provisions--Corporate
Opportunity and Conflict of Interest Policies."

Torchmark could decide to sell or otherwise dispose of all or a portion of
its Common Stock at some future date. There can be no assurance that any
holders of Class A Common Stock will be allowed to participate in any transfer
by Torchmark of a controlling interest in the Company or will realize any
premium with respect to their shares of Class A Common Stock.

DEPENDENCE ON SECURITIES MARKETS

The Company's results of operations are affected by certain economic
factors, including the level of the securities markets. Favorable performance
by the United States securities markets over the last five years has attracted
a substantial increase in the investments in these markets and has benefited
the Funds and the Company. A decline in the securities markets, failure of the
securities markets to sustain their recent levels of growth, or short-term
volatility in the securities markets could result in investors withdrawing
from the markets or decreasing their rate of investment, either of which could
adversely affect the Company. Because the revenues of the Company are, to a
large extent, based on the value of assets under management, a decline in the
value of these assets would adversely affect revenues of the Company. The
Company's growth is dependent to a significant degree upon the ability of the
Funds to attract and retain mutual fund assets, and, in an adverse economic
environment, this may prove difficult. The Company's growth rate has varied
from year to year, and there can be no assurance that the average growth rates
sustained in the recent past will continue.

11
<PAGE>

EFFECTS OF FUND PERFORMANCE

Success in the investment management and mutual fund businesses is dependent
on the Funds' investment performance. Good performance stimulates sales of the
Funds' shares and tends to keep redemptions low. Sales of Funds' shares
generate higher management fees and distribution revenues (which are based on
assets of the Funds). Good performance also attracts private institutional
accounts to the Company. Conversely, relatively poor performance tends to
result in decreased sales, increased redemptions of the Funds' shares, and the
loss of private institutional accounts, with corresponding decreases in
revenues to the Company. Failure of the Funds to perform well could,
therefore, have a material adverse effect on the Company.

TERMINATION OF INVESTMENT MANAGEMENT AGREEMENTS

A substantial majority of the Company's revenues are derived from investment
management agreements with the Funds that, as required by law, are terminable
on 60 days' notice. In addition, each such investment management agreement
must be approved and renewed annually by the disinterested members of each
Fund's board or its shareholders, as required by law. See "Business--
Investment Management Agreements." Any failure to renew or termination of a
significant number of these agreements would have a material adverse effect on
the Company.

NECESSITY OF RETAINING AND RECRUITING KEY PERSONNEL AND SALES FORCE

The future success of the Company depends to a substantial degree on its
ability to attract and retain qualified personnel to conduct its fund
management and investment advisory business. The market for qualified fund
managers, investment analysts, and financial advisers is extremely competitive
and has grown more so in recent periods as the mutual fund management industry
has experienced growth. The Company anticipates that it will be necessary for
it to add fund managers and investment analysts, and it has adopted a strategy
intended to attract and retain fund managers and investment analysts. See
"Business--Business Strategy." There can be no assurance, however, that the
Company will be successful in its efforts to recruit and retain the required
personnel.

The Company is currently dependent on its sales force to sell its mutual
fund and other investment products. The Company's future growth prospects will
be directly affected by the quality and quantity of financial advisers it is
able to successfully recruit and retain.

COMPETITION

The mutual fund distribution and service and investment management
industries are intensely competitive and are undergoing substantial
consolidations. Many organizations in these industries are attempting to
market to and service the same clients as the Company, not only with mutual
fund investments and services but with a wide range of other financial
products and services. Many of the Company's competitors have more products
and product lines, services, and may also have substantially greater assets
under management and financial resources. See "Business--Competition."

POTENTIAL ACQUISITIONS

The Company has no history of finding, acquiring, or integrating other
companies. There can be no assurance that the Company will find suitable
acquisition candidates at acceptable prices, have sufficient capital resources
to realize its acquisition strategy, be successful in entering into definitive
agreements for desired acquisitions, or successfully integrate acquired
companies into the Company, or that any such acquisitions, if consummated,
will prove to be advantageous to the Company.

DEPENDENCE ON INFORMATION SYSTEMS

A number of the Company's key information technology systems were developed
solely to handle the Company's particular information technology
infrastructure. The Company is in the process of implementing

12
<PAGE>

new information technology and systems (internally and through outsourcing its
shareholder service functions) that it believes could facilitate the
acquisition and integration of other mutual fund companies. See "--Potential
Acquisitions." There can be no assurance that the Company will be successful
in implementing the new information technology and systems or that their
implementation will be completed in a timely manner or within the Company's
budget.

YEAR 2000 COMPLIANCE

As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Management is in the process of modifying its systems and working with
its software vendors to prepare the Company for the year 2000. Based on
information currently available, management does not anticipate that the
Company will incur significant operating expenses or be required to incur
material costs to be year 2000 compliant. The Company is, however, still
analyzing and modifying its systems and requirements. In addition, the Company
and the Funds have relationships with third parties that have computer systems
that may not be year 2000 compliant. To the extent the Company's or such third
parties' systems are not fully year 2000 compliant, there can be no assurance
that potential systems interruptions or the cost necessary to update software
would not have a material adverse effect on the Company's business, financial
condition, results of operations, or business prospects.

PLANNED SPIN-OFF OF THE COMPANY

Torchmark has advised the Company that, subject to certain conditions,
Torchmark intends to divest its ownership interest in the Company in the Spin-
Off by means of a special dividend to Torchmark Corporation shareholders of
all of the Class A Common Stock and Class B Common Stock owned by Torchmark.
Torchmark has advised the Company that it presently anticipates that the Spin-
Off will occur in the fourth quarter of 1998. Among other things, the Spin-Off
is conditioned on the receipt of a ruling by the Internal Revenue Service to
the effect that the Spin-Off will qualify as a tax-free distribution under (S)
355 of the Internal Revenue Code of 1986, as amended (the "Code"). No
assurance can be given that such conditions will be satisfied or waived, nor
can any assurance be given that, in any event, the Spin-Off will occur or that
Torchmark will not sell or retain its Common Stock. See "Certain
Transactions--Relationship with Torchmark--Public Offering and Separation
Agreement." The Company has been advised by counsel that the Spin-Off as
presently contemplated should not result in an assignment of the Company's
investment advisory agreements under the Investment Company Act of 1940, as
amended (the "Investment Company Act") or the Investment Advisers Act of 1940,
as amended (the "Investment Advisers Act") and, therefore, that the Company
should not be required under the Investment Company Act or the Investment
Advisers Act to obtain the consent of mutual fund shareholders or of advisory
clients to new investment advisory agreements. Were the Company required to
seek shareholder approval of new investment advisory agreements as a result of
a change in circumstances or otherwise, seeking such approval would result in
expenses to the Company, could result in a delay of the Spin-Off, and would
expose the Company to the prospect of not obtaining the requisite approval.

TWO CLASSES OF COMMON STOCK

The holders of Class A Common Stock and Class B Common Stock have identical
rights except that (i) holders of Class A Common Stock are entitled to one
vote per share while holders of Class B Common Stock are entitled to votes
per share on all matters to be voted on by stockholders and (ii) holders of
Class A Common Stock are not eligible to vote on matters relating exclusively
to Class B Common Stock and vice versa. The differential in the voting rights
could, however, adversely affect the value of the Class A Common Stock to the
extent that investors, or any potential future purchaser of the Company, views
the superior voting rights of the Class B Common Stock to have value. The
existence of two separate classes of Common Stock could result in less
liquidity for either class of Common Stock than if there were only one class
of common stock.

13
<PAGE>

FUNDS AND INFORMATION IN POSSESSION OF ADVISERS

The Company's financial advisers handle a significant amount of funds and
financial and personal information for investors in the Funds and purchasers
of other investment and insurance products. Although the Company has
implemented a system of controls to minimize the risk of fraudulent taking or
misuse of such funds and information, there can be no assurance that such
controls will be adequate or that such taking or misuse can be prevented. The
Company could have liability in the event of such taking or misuse and could
also be subject to regulatory sanctions. Although the Company believes that it
is adequately insured against such risks, there can be no assurance that such
insurance will be maintained or that it will be adequate to meet any future
liability.

SHARES AVAILABLE FOR FUTURE SALE OR DISTRIBUTION

Subject to applicable law, Torchmark will be free to sell any and all of the
shares of Common Stock it owns after completion of the Offering. In addition,
the Affiliate Agreements provide that Torchmark will have the right in certain
circumstances to require the Company to use its best efforts to register for
resale its shares of Common Stock. See "Certain Transactions--Relationship
with Torchmark--Public Offering and Separation Agreement." Each of Torchmark
and the Company has, however, entered into a lock up agreement (the "Lock Up
Agreement") providing that, subject to certain exceptions, they will not sell
or otherwise dispose of any shares of Common Stock (other than the shares
offered by this Prospectus or pursuant to employee stock benefit plans that
exist on, or are described in this Prospectus to be implemented after, the
date of this Prospectus) for a period of 180 days after the date of this
Prospectus without the prior written consent of Morgan Stanley & Co.
Incorporated, on behalf of the Underwriters. Torchmark will be permitted to
sell in the public market limited amounts of such Common Stock without
registration pursuant to Rule 144 ("Rule 144") under the Securities Act of
1933, as amended (the "Securities Act"), immediately after the shares of
Common Stock owned by Torchmark are no longer subject to the Lock Up
Agreement. Torchmark has also announced its intent to consummate the Spin-Off.
No prediction can be made as to the effect, if any, that future sales or
distributions of Class A Common Stock or Class B Common Stock by Torchmark, or
the availability of Class A Common Stock and Class B Common Stock for future
sale or distribution, will have on the market price of the Class A Common
Stock prevailing from time to time. Sales or distributions of substantial
amounts of Class A Common Stock or Class B Common Stock, or the perception
that such sales or distributions could occur, could adversely affect
prevailing market prices for the Class A Common Stock. See "Shares Eligible
for Future Sale."

NO ASSURANCE OF DIVIDENDS

The Company's Board of Directors currently intends to declare quarterly
dividends on both the Class A Common Stock and the Class B Common Stock. See
"Dividend Policy." The declaration and payment of dividends by the Company are
subject to the discretion of its Board of Directors. Any determination as to
the payment of dividends, as well as the level of such dividends, will depend
on, among other things, general economic and business conditions, the
strategic plans of the Company, the Company's financial results and condition,
contractual, legal, and regulatory restrictions on the payment of dividends by
the Company or its subsidiaries, and such other factors as the Board of
Directors of the Company may consider to be relevant. The Company is a holding
company, and, as such, its ability to pay dividends is subject to the ability
of the subsidiaries of the Company to provide cash to the Company. There can
be no assurance that the initial quarterly dividend level will be maintained
or that any dividends will be paid by the Company in any future period.

ABSENCE OF A PRIOR PUBLIC MARKET; VOLATILITY OF PRICE

Prior to the Offering, there has been no public market for the Class A
Common Stock and there can be no assurance that an active trading market will
develop or be sustained. The initial public offering price of the Class A
Common Stock will be determined through negotiation among the Company,
Torchmark, and the Underwriters and may not be indicative of the market price
for the Class A Common Stock after the Offering. See "Underwriters." The
market price for the Class A Common Stock may be highly volatile. The Company
believes that factors such as announcements by the Company, or by its
competitors, of quarterly variances in

14
<PAGE>

financial results could cause the market price of the Class A Common Stock to
fluctuate substantially. In addition, the stock market may experience extreme
price and volume fluctuations, which often are unrelated to the operating
performance of specific companies. Market fluctuations or perceptions
regarding the Company's industry, as well as general economic or political
conditions, may adversely affect the market price of the Class A Common Stock.

REGULATION

The Company's investment management business is subject to extensive
regulation in the United States, primarily at the Federal level, including
regulation by the Securities and Exchange Commission (the "Commission").
Changes in laws or regulations or in governmental policies could materially
and adversely affect the business and operations of the Company. See
"Business--Regulation."

POTENTIAL ANTI-TAKEOVER PROVISIONS

Under the Company's Certificate of Incorporation (the "Certificate of
Incorporation"), the Board of Directors has the authority, without action by
the Company's stockholders, to fix certain terms and issue shares of Preferred
Stock, par value $1.00 per share (the "Preferred Stock"). Actions of the Board
of Directors pursuant to this authority may have the effect of delaying,
deterring, or preventing a change in control of the Company. Other provisions
in the Certificate of Incorporation and in the Bylaws of the Company (the
"Bylaws") impose procedural and other requirements that could make it more
difficult to effect certain corporate actions, including replacing incumbent
directors. In addition, the Board of Directors of the Company is divided into
three classes, each of which is to serve for a staggered three-year term after
the initial classification and election, and, after Torchmark ceases to be the
beneficial owner of an aggregate of at least a majority of the voting power of
the Company, incumbent directors may not be removed without cause, all of
which may make it more difficult for a third party to gain control of the
Board of Directors. With certain exceptions, (S) 203 of the Delaware General
Corporation Law (the "DGCL") imposes certain restrictions on mergers and other
business combinations between the Company and any holder of 15% or more of the
voting stock of the Company. Section 203 does not apply to Torchmark's
interest in the Company. See "Description of Capital Stock--Certificate of
Incorporation and Bylaw Provisions" and "Description of Capital Stock--
Business Combination Statute."

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

Certain statements under "Prospectus Summary"; "Risk Factors"; "Management's
Discussion and Analysis of Financial Condition and Results of Operations";
"Business"; and elsewhere in this Prospectus constitute forward-looking
statements, which involve known and unknown risks, uncertainties, and other
factors that may cause the actual results, levels of activity, performance, or
achievements of the Company, or industry results, to be materially different
from any future results, levels of activity, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, those listed under "Risk Factors" and elsewhere in this
Prospectus. As a result of the foregoing and other factors, no assurance can
be given as to future results, levels of activity, or achievements, and
neither the Company nor any other person assumes responsibility for the
accuracy and completeness of such statements.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the shares
of Class A Common Stock in the Offering at an assumed public offering price of
$ per share, after deducting underwriting commissions and discounts and the
estimated expenses of the Offering, are expected to be approximately $
million. The Company intends to use the net proceeds from the Offering to
repay the Liberty Note, which will have an aggregate principal amount of $90
million, and to prepay the Torchmark Notes, which will have an aggregate
remaining principal amount outstanding of $390 million. The Company issued the
Liberty Note in December 1996. The Liberty Note bears interest at 6% and
matures on May 1, 2000. The Company distributed the

15
<PAGE>

Torchmark Notes as a dividend on November 25, 1997. The Torchmark Notes bear
interest at a rate of 8% per year and mature on November 25, 2002. The
remaining net proceeds in excess of that amount, if any, including any
proceeds of the over-allotment option, will be retained by the Company for
general corporate purposes.

DIVIDEND POLICY

The Company's Board of Directors currently intends to declare quarterly cash
dividends on both the Class A Common Stock and the Class B Common Stock. The
Class A Common Stock and the Class B Common Stock will share equally in any
cash dividend, subject to any preferential rights of any outstanding Preferred
Stock. The Company expects that the first quarterly dividend payment will be
$ per share (an annual rate of $ ), with the initial dividend to be
declared and paid in the quarter of 1998. The declaration and payment of
dividends by the Company are subject to the discretion of its Board of
Directors. Any determination as to the payment of dividends, including the
level of dividends, will depend on, among other things, general economic and
business conditions, the strategic plans of the Company, the Company's
financial results and condition, contractual, legal, and regulatory
restrictions on the payment of dividends by the Company or its subsidiaries,
and such other factors as the Board of Directors of the Company may consider
to be relevant. The Company is a holding company, and as such, its ability to
pay dividends is subject to the ability of the subsidiaries of the Company to
provide cash to the Company. Because the Company was a wholly owned subsidiary
of Torchmark prior to the Offering, its historic dividend payments should not
be considered relevant to its future dividend policy. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."

PRO FORMA CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1997 (i) on a pro forma basis giving effect to the issuance of
the Torchmark Notes, the reduction of the Torchmark Notes and the Liberty Note
through prepayments of $127 million, and the Recapitalization and (ii) as
adjusted for the Offering. This table should be read in conjunction with the
Consolidated Financial Statements and related notes and other financial and
operating data appearing elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-Term Debt:
Liberty Note and Torchmark Notes...................... $ 480,000 --
Stockholders' Equity:
Class A Common Stock, $.01 par value, shares
authorized; shares issued and outstanding (pro
forma); shares issued and outstanding (pro forma
as adjusted).........................................
Class B Common Stock, $.01 par value, shares
authorized; shares issued and outstanding (pro
forma and pro forma as adjusted).....................
Additional paid-in capital............................
Retained earnings..................................... -- --
Unrealized gain on available-for-sale securities...... 293 293
Dividends in excess of retained earnings and
additional paid-in capital........................... (309,157) --
--------- --------
Total Stockholders' Equity.......................... (308,863) 171,137
--------- --------
Total capitalization.............................. $ 171,137 $171,137
========= ========
</TABLE>
- --------
(1) Does not include options to purchase shares of Class A Common Stock
issued pursuant to compensation and benefit plans of the Company. See
"Management--Compensation, Benefits, and Retirement Plans."

16
<PAGE>

SELECTED FINANCIAL AND OPERATING DATA

The following tables set forth summary historical financial and operating
data for the five years ended December 31, 1996 and the nine months ended
September 30, 1996 and 1997, as well as summary historical balance sheet data
of the Company as of the end of each of the last five years and as of
September 30, 1997. The information set forth should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations," and the Consolidated Financial Statements and the related
notes included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Investment management
fees.................. $56,205 $64,208 $70,711 $85,289 $101,466 $74,434 $84,472
Underwriting and
distribution fees..... 76,488 78,037 72,150 70,393 85,837 65,132 65,756
Shareholder service
fees.................. 19,889 21,280 22,297 23,527 28,378 20,654 22,966
Investment and other
income................ 11,262 14,681 3,878 4,295 5,295 3,692 2,829
------- ------- ------- ------- -------- ------- -------
Total revenue......... 163,844 178,206 169,036 183,504 220,976 163,912 176,023
Goodwill
amortization(1)....... 415 1,332 2,903 2,903 2,903 2,177 2,177
Other expenses......... 97,209 101,494 89,282 95,894 112,766 84,024 83,090
------- ------- ------- ------- -------- ------- -------
Total expenses........ 97,624 102,826 92,185 98,797 115,669 86,201 85,267
------- ------- ------- ------- -------- ------- -------
Income before provision
for income taxes...... 66,220 75,380 76,851 84,707 105,307 77,711 90,756
Provision for income
taxes................. 25,365 28,873 30,470 33,862 41,129 30,369 35,249
------- ------- ------- ------- -------- ------- -------
Income before effect of
change in accounting
principle............. 40,855 46,507 46,381 50,845 64,178 47,342 55,507
Cumulative effect of
change in accounting
principle............. -- 4,125 -- -- -- -- --
------- ------- ------- ------- -------- ------- -------
Net income............. $40,855 $50,632 $46,381 $50,845 $ 64,178 $47,342 $55,507
======= ======= ======= ======= ======== ======= =======
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
AS OF AND
FOR THE NINE
AS OF AND FOR THE YEAR ENDED DECEMBER 31, MONTHS ENDED
------------------------------------------------ SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER OPERATING DATA:
Financial Advisors:
Full time(4)........... 510 546 487 505 634 642
Part time.............. 2,467 2,141 1,770 1,830 1,376 1,471
-------- -------- -------- -------- -------- -------
Totals................ 2,977 2,687 2,257 2,335 2,010 2,113
Number of investors(5):
Mutual funds........... 479,900 499,400 517,600 537,100 522,600 559,300
Variable products...... 9,400 16,400 22,700 27,800 33,400 36,600
Average value per
investor(6):
Mutual funds........... $ 20,300 $ 22,500 $ 21,600 $ 26,100 $ 28,500 $33,600
Variable products...... $ 32,300 $ 33,700 $ 31,900 $ 39,600 $ 42,900 $51,100
Redemption rates of
mutual funds:
Mutual funds........... 7.56% 7.55% 7.52% 7.64% 7.64% 8.00%
Industry average(7).... 18.04% 18.37% 21.27% 17.35% 16.95% 17.89%
Dividend reinvestment
rate:
Mutual funds........... 83.7% 84.9% 86.0% 86.8% 87.5% 87.2%
Industry average(7).... 56.7% 53.9% 65.8% 71.7% 72.6% 69.8%
Assets under management
(millions):
Mutual fund:
Equity funds.......... $ 6,266 $ 7,563 $ 8,174 $ 10,931 $ 12,990 $16,274
Fixed income funds.... 3,340 3,870 3,349 3,719 3,681 3,868
Money market funds.... 417 348 369 442 537 536
-------- -------- -------- -------- -------- -------
Total mutual funds... $ 10,023 $ 11,781 $ 11,892 $ 15,092 $ 17,208 $20,678
Institutional(8)....... $ 2,121 $ 2,685 $ 2,685 $ 3,575 $ 2,042 $ 2,479
</TABLE>
- --------
(1) Amortization relates to Torchmark's acquisition of the Company in 1981 and
1993. Current annual amortization is $2.9 million.
(2) The Company's current assets, total assets, and total liabilities can be
significantly affected by amounts due both to and from affiliates. At
December 31, 1992, 1993, 1994, 1995, and 1996 and September 30, 1997,
amounts due from affiliates amounted to $51.0 million, $53.9 million,
$55.7 million, $1.1 million, $124.5 million, and $132.5 million,
respectively. Amounts due to affiliates at December 31, 1992, 1993, 1994,
1995, and 1996 and September 30, 1997 amounted to $36.9 million, $8.0
million, $41.7 million, $13.6 million, $126.6 million, and $128.2 million,
respectively.
(3) Cash dividends paid to Torchmark for the years 1992, 1993, 1994, 1995, and
1996 and the nine months ended September 30, 1997 were $9.6 million,
$153.3 million, $80.0 million, $0, $10.0 million, and $53.0 million,
respectively.
(4) Financial advisers whose annual or annualized production is the equivalent
of investment product sales in excess of $900 thousand.
(5) Mutual funds reflect the number of investors in the United Funds and W&R
Funds. Variable products reflect the number of variable annuity and
variable life policies.
(6) Mutual funds average value reflects the value for the United Funds and W&R
Funds. The variable product average is based on the value of TMK/United
Fund assets divided by the number of variable annuity and life policies.
(7) Source: Investment Company Institute.
(8) Institutional assets include assets of Torchmark affiliates of $0, $0,
$77.3 million, $373.8 million, $391.2 million, and $652.5 million at
December 31, 1992, 1993, 1994, 1995, 1996, and September 30, 1997,
respectively.

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The revenues of the Company are largely dependent on the total value and
composition of assets under management and, accordingly, fluctuations in
financial markets and in the composition of assets under management have a
substantial effect on revenues and results of operations. Investment
management fees, the Company's most substantial source of revenue, are based
on the amount of assets under management and are affected by sales levels,
financial market conditions, redemptions, and the composition of assets.
Equity-oriented portfolios generally have higher management fee rates than
fixed-income portfolios. See "Business--Investment Management Agreements."

Underwriting and distribution revenues consist of sales charges and
commissions derived from the sale of investment and insurance products and
distribution fees earned from the W&R Funds for distributing their shares. The
products sold have various sales charge structures, and the revenues received
from the sale of products will vary based on the type and amount sold. The
United Group of Funds have a front-load sales charge while the W&R Funds have
a contingent deferred or back-load sales charge. Rule 12b-1 distribution and
service fees earned for distributing shares of the W&R Funds are based upon a
percentage of assets and fluctuate based on sales, redemptions, and financial
market conditions. See "Business--Underwriting and Distribution." The Company
earns a sales commission on insurance products sold pursuant to the Agent
Agreements. See "Certain Transactions--Relationship with Torchmark--Agent
Agreements."

Shareholder service fees include transfer agency fees, custodian fees for
retirement plan accounts, and portfolio accounting fees. The transfer agency
fees and custodian fees are primarily based on annual charges per account,
and, therefore, are affected by the number of accounts opened and closed.
Portfolio accounting fees are charged based on the amount of assets in the
portfolio subject to a maximum per portfolio. These fees vary based on the
number of portfolios and the value of the assets in each portfolio. See
"Business--Service Agreements."

Other expenses consist of underwriting and distribution expenses,
compensation and related cost expenses, general and administrative expenses,
and depreciation and amortization, excluding goodwill. Underwriting and
distribution expenses include sales commissions and related amounts paid to
financial advisors, various expenses associated with product promotion,
expenses associated with education and training of financial advisors, and
other marketing costs. Distribution expenses, principally selling commissions,
related to the W&R Funds are deferred and amortized over a period not
exceeding ten years. Compensation and related costs reflect the compensation
and benefits for investment management, shareholder service, and
administrative personnel. The amount of goodwill at September 30, 1997 was
$99.6 million, and amortization of goodwill is $2.9 million annually.

OPERATING RESULTS FOR NINE MONTHS ENDED SEPTEMBER 30, 1997 AS COMPARED TO
SEPTEMBER 30, 1996

Investment management fees increased $10.0 million or 14% to $84.5 million
for the nine months ended September 30, 1997, primarily as the result of
strong financial markets. Average assets under management were up $2.0 billion
or 10% from that of the nine months ended September 30, 1997 to $21.0 billion
for 1996. Total assets under management were $23.2 billion at September 30,
1997 compared to $19.0 billion at September 30, 1996. Market appreciation
accounted for $4.0 billion of the $4.2 billion increase, with the remainder
resulting from net sales. Mutual fund assets increased $4.1 billion from $16.6
billion at September 30, 1996 to $20.7 billion at September 30, 1997.
Institutional assets grew from $2.4 billion at September 30, 1996 to $2.5
billion at September 30, 1997. Growth in fee revenue exceeded the growth in
average assets due to changes in the composition of assets. Mutual fund
assets, which generally have a higher management fee rate than institutional
accounts, constituted a greater percentage of total assets for 1997.

Underwriting and distribution fee revenue was $65.8 million for the nine
months ended September 30, 1997, up $.6 million or 1% compared with that of
1996. The increase was attributable to higher revenue associated with the W&R
Funds. Distribution revenue, which consists primarily of Rule 12b-1
distribution fees from the W&R Funds, increased from $3.3 million in 1996 to
$4.7 million for 1997. Distribution fees are based on a percentage

19
<PAGE>

of assets under management and increase with higher asset values. Commission
revenue from front-load investment products, which include the front-load
United Funds and variable products, declined from $51.6 million in the nine
month period of 1996 to $50.8 million for the nine month period of 1997. This
decline in front-load commission revenue was due to lower sales of variable
products and a lower average sale charge for the United Funds. United Fund
sales charges can vary depending on the type of fund shares purchased, amount
of purchase, and value of assets in the shareholders' accounts. The United
Fund sales charge, which can range from 0% to 5.75%, averaged 4.78% for the
nine month period of 1996 and 4.58% for the nine month period of 1997.
Commissions from the sale of insurance products were approximately $10.2
million for each of 1996 and 1997.

Shareholder servicing fees for the nine month period in 1997 were $23.0
million, a $2.3 million or 11% increase over that of 1996. Approximately half
of this increase was attributable to an increase in the number of accounts
serviced, with the other half due to a fee increase that was effective April
1, 1996. At September 30, 1997, there were 1.35 million accounts, an increase
of 5% over the number of accounts on September 30, 1996.

Other expenses decreased from $84.0 million for the nine months ended
September 30, 1996 to $83.1 million for the 1997 period, a decrease of 1%.
Underwriting and distribution costs of $58.8 million in the nine month period
in 1997 rose .9% over that of 1996. Compensation and related costs of $18.5
million in 1997 were up 5% over that of 1996 due to normal wage increases and
an increase in the number of employees. General and administrative expenses
were $4.8 million in 1997, a $1.9 million or 28% decrease from that of the
same period in 1996. A decrease of $1.8 million was attributable to costs
recorded in 1996 for modifying systems applications for year 2000 compliance.

Income tax expense was $30.4 million and $35.2 million for the nine months
ended September 30, 1996 and 1997, respectively, representing effective tax
rates of 39.1% and 38.8%.

Net income increased from $47.3 million for the nine months ended September
30, 1996 to $55.5 million for the 1997 period, an increase of 17%.

OPERATING RESULTS FOR THE YEAR ENDED 1996 AS COMPARED TO 1995

Investment management fees increased $16.2 million or 19% to $101.5 million
for the year ended December 31, 1996 primarily as the result of strong
financial markets. Average assets under management in 1996 were up $2.2
billion or 13% from that of the year ended December 31, 1995 to $19.1 billion
for 1996. Assets under management were $19.3 billion at December 31, 1996
compared with $18.7 billion at December 31, 1995. Mutual fund assets increased
$2.1 billion from $15.1 billion at December 31, 1995 to $17.2 billion at
December 31, 1996, while institutional assets declined from $3.6 billion at
December 31, 1995 to $2.0 billion at December 31, 1996 due to the loss of
certain accounts. Market appreciation of $1.8 billion in 1996 was
substantially offset by institutional account redemptions. Growth in fee
revenue exceeded the growth in average assets due to changes in the
composition of assets. Mutual fund assets, which generally have a higher
management fee rate than institutional accounts, constituted a greater
percentage of total assets for 1996.

Underwriting and distribution fee revenue was $85.8 million for 1996, up
$15.4 million or 22% compared with that of 1995. Commission revenue from
front-load investment products increased $13.1 million from $54.1 million in
1995 to $67.2 million in 1996 primarily as a result of higher sales volumes.
Distribution revenue, which consists primarily of Rule 12b-1 distribution fees
from the W&R Funds, increased from $2.8 million in 1995 to $4.7 million in
1996 due to growth in assets. Commissions from the sale of insurance products
were $13.5 million in 1995 and $13.9 million in 1996.

Shareholder servicing fees in 1996 were $28.4 million, a $4.9 million or 21%
increase over that of 1995. Approximately 75% of this increase was
attributable to a fee increase effective April 1, 1996 with the remainder due
to the increase in number of shareholder accounts. At December 31, 1996, there
were 1.31 million accounts, an increase of 7% from the 1.22 million accounts
on December 31, 1995.

20
<PAGE>

Other expenses increased from $95.9 million for 1995 to $112.8 million for
1996, an increase of 18%. Underwriting and distribution costs of $78.9 million
in 1996 were $14.8 million or 23% higher than that of 1995. Most of the
increase in underwriting and distribution costs was attributable to selling
commissions and other costs associated with higher sales levels. Compensation
and related costs of $21.9 million were up 3% over that of 1995 due primarily
to an increase in the number of employees. General and administrative expenses
were $10.2 million in 1996, a $1.6 million or 19% increase from that of 1995.
This increase was primarily attributable to charges of approximately $2.3
million in 1996 for modifying systems applications for year 2000 compliance,
partially offset by a $1.2 million one time franchise tax assessment that was
paid in 1995.

Income tax expense was $33.9 million and $41.1 million for 1995 and 1996,
respectively, representing effective tax rates of 40.0% and 39.1%.

Net income increased from $50.8 million for 1995 to $64.2 million for 1996,
an increase of 26%.

OPERATING RESULTS FOR THE YEAR ENDED 1995 AS COMPARED TO 1994

Investment management fees increased $14.6 million or 21% to $85.3 million
for the year ending December 31, 1995 primarily as the result of strong
financial markets. Average assets under management in 1995 were up $2.3
billion or 15% from that of the year ending December 31, 1994 to $16.9 billion
for 1995. Assets under management were $18.7 billion at December 31, 1995
compared with $14.6 billion at December 31, 1994. Market appreciation
accounted for $3.3 billion of the growth in assets. Mutual fund assets
increased $3.2 billion from $11.9 billion at December 31, 1994 to $15.1
billion at December 31, 1995. Institutional assets increased from $2.7 billion
in 1994 to $3.6 billion in 1995. The growth in management fee revenues
exceeded the growth in average assets due to a fee increase on certain funds
in December 1994. This fee increase accounted for approximately $4.6 million
of the increase in management fee revenue for 1995.

Underwriting and distribution fee revenue was $70.4 million in 1995, down
$1.8 million or 2% when compared with that of 1994. Commission revenue from
front-load investment products declined $3.7 million from $57.8 million in
1994 to $54.1 million in 1995 as a result of lower sales volumes of United
Funds and variable products. Distribution revenue, which consists primarily of
Rule 12b-1 distribution fees from the W&R Funds, increased from $1.6 million
in 1994 to $2.8 million in 1995 due to asset growth. Commissions from the sale
of insurance products were $12.8 million in 1994 and $13.5 million in 1995.
This increase was due to increased sales volumes.

Shareholder servicing fees in 1995 were $23.5 million, a $1.2 million or 6%
increase over the 1994 period. This increase was due to the increase in the
number of shareholder accounts. At December 31, 1995, there were 1.22 million
accounts, an increase of 6% from the 1.15 million accounts on December 31,
1994.

Other expenses increased from $89.3 million for 1994 to $95.9 million for
1995, an increase of 7%. Underwriting and distribution costs of $64.1 million
in 1995 rose $1.3 million or 2% over the same period in 1994. The commission
component of underwriting and distribution costs declined $1.3 million or 3%
in correlation to commission revenue. Increased marketing and sales efforts
for recruiting, advertising and sales programs led to the higher total
underwriting and distribution costs. Compensation and related costs of
$21.3 million in 1995 were up $3.2 million or 18% over that of 1994 due to an
increase in investment management bonuses in 1995 and lower benefit plan costs
reflected in the 1994 period. General and administrative expenses were $8.6
million in the 1995 period, a $1.7 million or 25% increase from that of the
same period in 1994. In 1995, there was a $1.2 million tax assessment.

Income tax expense was $30.5 million and $33.9 million for 1994 and 1995
respectively, representing effective tax rates of 39.6% and 40.0%.

Net income increased from $46.4 million for 1994 to $50.8 million for 1995,
an increase of 10%.

21
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's operations have historically generated cash flows in excess of
its current cash needs. Cash flow provided from the Company's operations was
$32.4 and $55.3 million for the nine months ended September 30, 1997 and 1996,
and $83.7 million, $59.6 million, and $43.4 million for the years ended
December 31, 1996, 1995, and 1994, respectively. The timing of tax payments of
$13.1 million increased cash from operations for the year ended December 31,
1996, and reduced cash from the Company's operations in the same amount for
the nine months ended September 30, 1997. Payments to affiliates for operating
purposes in the amount of $7.2 million decreased cash from the Company's
operations for the nine months ended September 30, 1997. Cash flows from
investing activities generally include capital expenditures and the results of
investment securities sales, purchases, and maturities.

Cash flows from financing activities include cash dividends to Torchmark,
amounts paid or received from affiliates, and cash contributions from
Torchmark. Historically, the Company has distributed its excess cash flow to
Torchmark. The Company's Board of Directors currently intends to declare
quarterly cash dividends on the Common Stock of $ million annually. The
Company believes that its cash flows from operations will be sufficient to
fund such dividends and its operations for the forseeable future. See
"Dividend Policy."

RECENT ACCOUNTING DEVELOPMENTS

In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 128 ("Earnings Per Share").
SFAS No. 128 simplifies existing computation guidelines for earnings per share
and makes a number of changes to existing disclosure requirements. SFAS No.
128 is effective for financial statements ending after December 15, 1997,
including interim periods. The Company does not expect the effect of
implementation to be significant.

In 1997, FASB issued SFAS No. 130 ("Reporting Comprehensive Income") and
SFAS No. 131 ("Disclosures about Segments of an Enterprise and Related
Information"). These statements, which are effective for periods beginning
after December 15, 1997, expand or modify disclosures. The Company does not
expect implementation to have any significant effect on the Company's reported
financial position, results of operations, or segment reporting.

SEASONALITY AND INFLATION

The Company does not believe its operations are subject to significant
seasonal fluctuations. The Company does not believe that inflation has had a
significant impact on operations.

22
<PAGE>

BUSINESS

OVERVIEW

Waddell & Reed was founded in 1937 and is one of the oldest mutual fund
complexes in the United States, having introduced the United family of funds
in 1940. Waddell & Reed focuses on selling investment products to middle
income Americans primarily through a virtually exclusive financial adviser
sales force. As of September 30, 1997, the Company had $23.2 billion of assets
under management consisting of $20.7 billion of mutual fund assets and the
remainder in institutional accounts. As of September 30, 1997, the Company had
more than 559,000 customers holding an average of 2.4 mutual fund accounts per
customer. The Company has enjoyed high profit margins and return on equity
relative to the mutual fund advisory industry. The Company's earnings have
grown for 17 consecutive years, and the Company has achieved a 16.8% compound
annual growth rate in pretax operating income for the five years ended
December 31, 1996.

The Company is the exclusive underwriter and distributor of 36 mutual fund
portfolios, including 17 comprising the United Funds, eight comprising the W&R
Funds, and 11 comprising the TMK/United Funds. The Company also distributes
Torchmark underwritten variable annuities and life insurance products to its
customers as part of its financial planning services. The Company sells front-
end loaded and contingent deferred sales charge mutual fund products. As of
September 30, 1997 approximately 79% of the Company's mutual fund assets under
management were invested in equity funds and the remainder in fixed income and
money market funds. For the twelve months ended September 30, 1997, the
Company's financial adviser sales force sold $1.5 billion of mutual fund and
variable products.

The financial adviser industry is fragmented, consisting primarily of
relatively small companies generally employing fewer than 100 investment
professionals. The Company's sales force competes primarily with small
broker/dealers and independent financial advisers. The Company's marketing
efforts are currently focused on customers residing in smaller metropolitan
areas and rural communities. The Company conducts investment seminars
throughout the United States to reach a large number of potential clients. The
Company also develops individual financial plans for clients (over 39,000
plans in 1996) through one-on-one consultations with financial advisers, who
emphasize long-term relationships with a client through continuing service,
rather than a one-time sale. The Company believes that it is well-positioned
to benefit from a developing industry trend toward "assisted sales"--sales of
mutual fund products through a sales person--driven by the array of options
now available to investors and the need for financial planning advice that has
resulted from the recent increase in the average household's financial assets.
According to the Investment Company Institute, assisted sales for the nine
months ended September 30, 1997 constituted 60.6% of the total dollar value of
mutual fund sales, a figure that has grown from 54.9% for 1994.

23
<PAGE>

The Company's investment philosophy and financial planning approach
emphasize long-term savings. The Company's portfolio managers seek consistent
long-term performance and downside protection in turbulent markets. As a
result, the Company has developed a loyal customer base with clients
maintaining their accounts for approximately 13 years on average as compared
to six years for the mutual fund industry, according to the Investment Company
Institute. This loyalty is evidenced by a relatively low fund redemption rate
for the five years ended September 30, 1997 of 7.6% for the Funds (other than
money market funds), which is less than one-half of the industry average of
18.4% and a relatively high dividend reinvestment rate of 86.5% for the Funds
(other than money market funds) for the same period versus 66.8% for the
mutual fund industry. Approximately 45% of the Company's assets under
management are in retirement accounts as of September 30, 1997. The
historically low redemption and high reinvestment rates have provided a stable
source of asset and revenue growth at a relatively low cost. The Company's
success with these strategies has been demonstrated in turbulent markets, as,
for example, in the year ended 1994 when the Company's net sales as a
percentage of asset growth was more than three times better than that of the
mutual fund industry.

The Company has a seasoned team of portfolio managers, having an average of
20 years industry experience and 14 years tenure with the Company. The five
most senior portfolio managers have an average of 30 years industry experience
and 26 years service at the Company. The Company maintains an internal equity
and fixed income investment research staff that has substantial resources
available to it including hundreds of meetings annually with company
management both on and off site. In addition, the Company utilizes research
provided by brokerage firms and independent outside consultants. Portfolio
managers usually were analysts for a substantial length of time prior to
acquiring money management assignments. The prominent style of the Company's
investments is growth equity. This investment strategy emphasizes investment
at attractive valuations in companies that the portfolio managers believe can
produce above average growth in earnings.

Waddell & Reed Financial, Inc. is a holding company that conducts its
business through its subsidiaries, which are described briefly below. Waddell
& Reed, Inc. ("W&R"), is a registered broker-dealer and registered financial
adviser that acts primarily as the nationwide distributor and underwriter for
the shares of mutual funds and distributor of insurance products primarily of
UILIC. Waddell & Reed Investment Management Company ("WRIMCO"), is a
registered investment adviser that provides investment management and advisory
services to the Funds and to institutions and other private clients through a
subcontract with another subsidiary of Torchmark. Waddell & Reed Services
Company ("WRSCO") provides transfer agency and accounting services to the
Funds and their shareholders and to another subsidiary of Torchmark.

The executive office of the Company is located at 6300 Lamar Avenue,
Overland Park, Kansas 66202, telephone number (913) 236-2000.

BUSINESS STRATEGY

The Company's business strategy is outlined below.

. INCREASE NUMBER OF FINANCIAL ADVISERS: The Company intends to expand its
distribution network by recruiting high quality candidates to be
financial advisers. In early 1994 the Company began to focus on
increasing the number of financial advisers. The Company's current
objective is to increase the number of financial advisers by 10% per
year. The Company hired additional experienced sales managers and
reorganized its management and reporting lines and incentive structure.
The Company has revised the compensation system for its 123 division
managers by tying the majority of their potential income to the
recruitment, retention, and training of the Company's financial advisers
and proportionately less to their personal sales production. From
December 31, 1996 to September 30, 1997, the number of financial
advisers has increased from 2,010 to 2,113.

24
<PAGE>

currently provides qualifying individuals with $2,000 per month for up
to six months, has been critical in increasing the number of new
financial advisers, improving retention, and increasing average first-
year sales production. Financial advisers recruited in 1997 who
participated in the bridge income program produced, on average, at two
and one half times the rate of non-participants during their first
three months.

. CONTINUE TO INCREASE PERCENTAGE OF FULL-TIME FINANCIAL ADVISERS: Since
1993, the Company has emphasized increasing the proportion of its sales
force that sells financial services products on a full-time basis and
has not allowed the renewal of the licenses of financial advisers that
fail to meet sales goals. The Company believes that these changes have
enhanced productivity. At September 30, 1997, the percentage of Full-
Time Advisers was 30% of the Company's total sales force, up from 18% at
December 31, 1992. For Full-Time Advisers, the annual investment product
sales per adviser increased from $1.4 million in 1992 to a current
annual rate of about $1.9 million, an increase of 36%. In addition, the
overall annual investment product sales per adviser increased from
$380,000 to $689,000, or 81%, over this same period as a result of both
increasing the number and the productivity of Full-Time Advisers and of
not renewing the licenses of advisers who do not meet sales goals.

. EXPAND GEOGRAPHIC SCOPE: The Company intends to pursue geographic
expansion of its sales force with two related strategies. In larger
communities it intends to establish new division offices with the
facilities to accommodate up to twenty financial advisers, and in
smaller communities or suburban areas it will open offices with
facilities to accommodate a smaller group of advisers. While
historically the Company has opened new offices in areas that were
contiguous with existing offices, it now intends to select new locations
based on expected growth opportunities. Consistent with its focus on
retirement savings and planning, the Company expects to open new offices
in Florida and Arizona, as well as smaller offices in other areas of the
country, in 1998.

. ENHANCE MARKETING AND FINANCIAL PLANNING TOOLS: The Company expects to
implement an improved financial planning package, which will allow its
financial advisers to customize solutions to a client's savings,
retirement income, estate planning, life insurance, and other personal
financial planning needs. The Company has traditionally provided
financial planning advice to its clients free of charge. The Company now
intends to begin charging a fee, typically $250, for such services. The
Company believes that its program of selling its improved financial
plans for a fee will stimulate sales and result in a significantly
higher average sale per plan. The Company expects to introduce the
revised financial plan by the end of the first quarter of 1998.

The Company has also implemented formal training programs for its new
financial advisers. The program consists of field office classes that
address prospecting techniques, product knowledge, and sales
presentation skills. Field sales management personnel, assisted by six
regional sales training specialists who receive direction and support
from the Company's headquarters, conduct the field office classes.
During 1998, the Company intends to increase the number of regional
sales training specialists from six to twelve. In addition, new
advisers will attend a three day course conducted at the Company's
headquarters intended to supplement and reinforce the field classes.

. INVEST IN PORTFOLIO MANAGERS AND INVESTMENT ANALYSTS: The Company's
objective is for its Fund families to achieve top quartile performance.
The Company is also focused on building its industry and geographic
expertise. To achieve this goal, the Company has begun to implement a
plan to add several portfolio managers and investment analysts. Through
these additions, the Company intends to increase the depth of its
investment management team and to increase the scope of its expertise.
To assist in recruiting and retention, the Company is implementing a new
incentive compensation structure that relies on stock options and
increases in cash compensation to bring total compensation for portfolio
managers and investment analysts to a more market-competitive level. The
Company believes that providing equity-based compensation as a
significant component of income will be important in attracting new
portfolio managers and investment analysts as well as retaining present
staff.

25
<PAGE>

. INVEST IN SYSTEMS AND TECHNOLOGY: In order to support its anticipated
growth, the Company is engaged in projects to enhance its information
systems. The Company will install a management system in all division
offices that it believes better enable division sales managers to
monitor the activities of the individual financial advisers including
the number of sales calls completed, the number of client contacts, and
overall sales results. The Company has recently completed agreements to
outsource the data processing components of its transfer agency
activities to a third party provider by the fourth quarter of 1998. The
Company expects that this arrangement will facilitate its ability to
introduce new products and enter new markets as well as enable the
Company to improve its participant record-keeping services offered to
sponsors of 403(b) and 401(k) plans. In addition, the Company expects to
realize operating efficiencies with respect to its processing activities
through the use of electronic imaging, which is a component of the third
party system. The Company has developed and is testing an intranet to be
used by its financial advisers to obtain updated training materials,
product information, and electronic interactive product illustrations.
In addition, the Company expects that clients will have access to the
intranet to obtain data related to their personal accounts once
information security concerns are addressed.

. PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES TO EXPAND PRODUCT OFFERING
AND DISTRIBUTION: The Company intends to selectively pursue acquisitions
and alliances that will add new products or alternative distribution
systems. The Company believes that it will be better positioned to
pursue acquisitions as one of relatively few independent, public
investment advisory and asset management companies. The Company believes
that potential investment management acquisition candidates may be more
receptive to receiving publicly traded shares of the Company as opposed
to stock in a company outside of the investment management industry. The
Company has traditionally distributed its investment products only
through its virtually exclusive financial adviser sales force. In the
future, the Company may acquire another fund complex the products of
which it can distribute outside its sales force. These mutual funds will
likely not be marketed to the Company's existing customer base, thereby
avoiding competing with the Company's existing sales force and
cannibalizing the Company's current revenues. The Company may also
pursue opportunities to establish strategic relationships with
alternative distribution systems such as broker/dealers and banks or
acquire independent financial planning companies.

MARKETING

The Company markets its mutual funds through a sales force that represents
the Company on a virtually exclusive basis. As of September 30, 1997, the
sales force comprised approximately 2,113 financial advisers of whom
approximately 642 are Full-Time Advisers. The Company's financial advisers are
located primarily in smaller metropolitan areas and rural communities. The
sales force is organized into divisions that are supervised, as of September
30, 1997, by one of approximately 123 division sales managers who, in turn,
report to eight regional vice presidents.

The Company has taken several steps to increase the productivity of its
sales force. Since 1992, the Company has been implementing a policy of
developing a full-time sales force and has not allowed the renewal of the
licenses of financial advisers that fail to meet sales goals. This policy has
resulted in the reduction of the number of part-time financial advisers (those
having annual or annualized production of less than $900,000 of investment
product sales) from 2,141 at December 31, 1993 to 1,471 at September 30, 1997.
At the same time, the number of Full-Time Advisers increased from 546 at
December 31, 1993 to 642 at September 30, 1997. Prior to 1993, division
managers were engaged in personal sales production as well as sales
management. In order to emphasize the importance of recruiting and developing
a full-time sales force, the Company implemented a compensation system that
ties compensation of division managers to the development of new financial
advisers and to division sales rather than personal sales.

The Company implemented a bridge income program in 1994 to provide a source
of earnings to newly recruited financial advisers for a period of three months
while they developed the skills and client base necessary

26
<PAGE>

to earn an income from commissions. The Company enhanced the program in 1997
by increasing the monthly amount and extending the period to six months based
on the success of the program in improving the productivity of new recruits.
In order to qualify for the bridge income program, advisers must, within 90
days, make five joint sales calls with the division manager, five calls with
another adviser to gather data for a financial plan, and make one sale. Once
on the bridge income program, the adviser receives $2,000 per month with
earned commissions up to $2,000 applied against the bridge income and
commission in excess of $2,000 held in escrow until the adviser is off of the
bridge income program.

The following tables set forth information about the Company's financial
adviser sales force, product sales, and clients at the dates and for the
periods indicated.

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997
----- ----- ----- ----- -------------
<S> <C> <C> <C> <C> <C>
Financial Advisers:
Full time(1)............................ 546 487 505 634 642
Part time............................... 2,141 1,770 1,830 1,376 1,471
----- ----- ----- ----- -----
Totals................................ 2,687 2,257 2,335 2,010 2,113
===== ===== ===== ===== =====
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997
-------- -------- -------- -------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Mutual fund sales(2)........ $1,033.3 $ 988.3 $ 995.7 $1,252.2 $ 934.5
Total investment product
sales(3)................... $1,239.2 $1,188.5 $1,187.6 $1,505.1 $1,116.2
Annualized life insurance
premiums................... $ 7.4 $ 8.2 $ 9.5 $ 9.3 $ 6.1
Number of clients(4)........ 499,400 517,600 537,100 552,600 559,300
Number of mutual fund ac-
counts per client.......... 2.2 2.2 2.3 2.4 2.4
</TABLE>
- --------
(1) Based on minimum annual or annualized production that is the equivalent of
investment product sales in excess of $900,000.
(2) Reflects sales of United Funds for which a sales charge was collected and
sales of the W&R Funds.
(3) Reflects mutual fund and variable product sales. Reflects mutual fund and
variable product sales.
(4) Defined as a person or entity having a single Federal tax identification
number.

The Company provides training and motivational programs for its sales force.
Six sales training specialists provide a regular program of training for new
recruits as well as advanced training for experienced financial advisers.
Programs for new recruits focus on prospecting techniques, product knowledge,
and sales skills. Field office classes provide guidance in identifying target
markets, practical exercises to learn interview skills and data collection,
instruction in basic financial planning software, and guidance in matching
products with various investment objectives. Sales presentation skills are
taught and practiced in the classroom environment as well as on joint sales
calls with field sales management. The programs for experienced advisers focus
on skills related to dealing with larger investment sums (such as IRA
rollovers) and include training in the use of asset allocation and estate
planning software. In addition, the Company takes top producers to retreats
where headquarters staff and experienced sales personnel conduct workshop
seminars covering such subjects as product features, financial planning, and
the use of illustrative software packages. The Company intends to increase the
number of programs made available to new recruits and experienced advisers by
increasing the number of sales training specialists from six to twelve in
1998.

FUNDS AND ASSET MANAGEMENT

The Company serves as underwriter for, and investment adviser to, the United
Funds, the W&R Funds, and the TMK/United Funds and distributes variable
annuity products based on the TMK/United Funds. The Company's sales force also
serves as distributor of insurance products such as single premium annuities
and term and whole life insurance. The Company provides various administrative
services to the Funds, including mutual fund transfer agency, accounting, and
shareholder services.

27
<PAGE>

The Company offers the Funds' shareholders a broad range of investment
products designed to attract and retain clients with varying investment
objectives. The predominant style of the Company's investments is growth
equity. This investment strategy emphasizes investment at attractive
valuations in companies that the portfolio managers believe can produce above
average growth in earnings. The Company's United Funds rank in the top 15% of
diversified mutual fund complexes for the five year period ending December 31,
1996, as measured by Lipper Analytical Services Corp. As of September 30,
1997, 79% of the assets under management in the Funds were invested in equity
funds, 19% were invested in fixed income funds, and 2% were invested in money
market funds. Fund shareholders are allowed to exchange funds within each
group of funds as economic and market conditions and investor needs change at
no additional cost. The Company periodically introduces new mutual funds
designed to complement and expand its investment product offerings, respond to
competitive developments in the financial marketplace, and meet the changing
needs of clients. The Company's base of assets under management consists of a
broad range of domestic and international stock, bond, and money market mutual
funds that meet the varied needs and objectives of its individual and
institutional investors. For summary information about each of the Funds, see
Appendix I to this Prospectus.

The Company has a seasoned team of portfolio managers, having an average of
20 years industry experience and 14 years tenure with the Company. The five
most senior portfolio managers have an average of 30 years industry experience
and 26 years service at the Company. The Company maintains an internal equity
and fixed income investment research staff that has substantial resources
available to it including hundreds of meetings annually with company
management both on and off site. In addition, the Company utilizes research
provided by brokerage firms and independent outside consultants. Portfolio
managers usually were analysts for a substantial length of time prior to
acquiring money management assignments.

In addition to performing investment management services for the Funds, the
Company acts as an investment adviser and portfolio manager for institutional
and other private investors. The Company receives a fee that is generally
based on a percentage of assets under management for its services as an
investment adviser or portfolio manager. Assets under management for
institutional and private accounts totaled approximately $2.5 billion at
September 30, 1997. Investment management fees from institutional accounts
were approximately $3.0 million, or less than 4% of total investment
management fees, for the nine months ended September 30, 1997.

28
<PAGE>

The following table sets forth beginning assets and ending assets for the
Company's Funds by type as well as transactions related thereto for the
periods shown.

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997
-------- -------- --------- --------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CHANGE IN UNITED, W&R
AND TMK/UNITED FUNDS
ASSETS:
Equity funds:
Beginning assets...... $6,266.2 $7,563.6 $ 8,173.8 $10,930.9 $12,990.1
Net sales........... 857.3 1,023.1 1,050.3 1,414.7 1,079.5
Redemptions......... (496.6) (544.3) (680.3) (867.8) (850.6)
Net exchanges in
(out).............. (32.9) 91.7 (43.6) (57.8) (78.8)
Net dividends
paid(1)............ (21.9) (22.5) (26.2) (34.8) (3.3)
Net investment
income............. 93.7 101.9 118.6 121.8 99.4
Appreciation
(depreciation)..... 897.8 (39.7) 2,338.3 1,483.1 3,037.9
-------- -------- --------- --------- ---------
Ending Assets......... $7,563.6 $8,173.8 $10,930.9 $12,990.1 $16,274.2
======== ======== ========= ========= =========
Fixed income funds:
Beginning assets...... $3,340.0 $3,870.0 $ 3,348.3 $ 3,718.5 $ 3,681.1
Net sales........... 439.3 250.8 227.7 222.7 205.7
Redemptions......... (293.9) (352.7) (338.0) (338.2) (261.3)
Net exchanges in
(out).............. (58.6) (195.1) (90.5) (132.9) (49.4)
Net dividends
paid(1)............ (49.3) (39.6) (40.2) (40.4) (28.7)
Net investment
income............. 248.6 254.7 253.0 252.7 191.0
Appreciation
(depreciation)..... 243.9 (439.8) 358.2 (1.3) 129.3
-------- -------- --------- --------- ---------
Ending Assets......... $3,870.0 $3,348.3 $ 3,718.5 $ 3,681.1 $ 3,867.7
======== ======== ========= ========= =========
Money Market funds:
Beginning assets...... $ 417.3 $ 347.6 $ 369.4 $ 442.4 $ 536.8
Net sales(2)........ 481.0 482.8 635.8 711.5 528.4
Redemptions(2)...... (650.9) (576.0) (717.1) (829.2) (675.4)
Net exchanges in
(out).............. 91.5 103.4 134.1 190.7 128.2
Net dividends
paid(1)............ (0.1) (0.2) (0.4) (0.8) (1.1)
Net investment
income............. 8.8 11.8 20.6 22.2 19.2
Appreciation
(depreciation)..... 0.0 0.0 0.0 0.0 0.0
-------- -------- --------- --------- ---------
Ending assets......... $ 347.6 $ 369.4 $ 442.4 $ 536.8 $ 536.1
======== ======== ========= ========= =========
</TABLE>
- --------
(1)Total dividends paid to shareholders less the amount of dividends
reinvested in shares of the Funds.
(2) Includes the sales and redemptions of the money market portfolio of the
TMK/United Funds. The TMK/United money market portfolio is the initial
investment portfolio for all variable products.

29
<PAGE>

The following table sets forth assets under management, client accounts, and
sales of the Funds by group as of the dates and for the periods shown.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Assets Under Management:
United Funds.......... $ 11,102 $ 10,948 $ 13,574 $ 15,130 $ 17,987
TMK/United Funds...... 555 725 1,099 1,435 1,869
W&R Funds............. 124 219 419 643 822
---------- ---------- ---------- ---------- ----------
Totals.............. $ 11,781 $ 11,892 $ 15,092 $ 17,208 $ 20,678
========== ========== ========== ========== ==========
Client accounts:
United Funds(1)....... 1,067,900 1,119,800 1,171,700 1,236,900 1,274,200
TMK/United Funds(2)... 16,400 22,700 27,800 33,400 36,600
W&R Funds(1).......... 17,700 30,500 48,400 69,100 79,800
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997
------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
Sales:
United Funds(3)..................... $ 939 $ 881 $ 838 $1,025 $ 806
TMK/United Funds.................... 206 200 192 253 182
W&R Funds........................... 94 107 158 227 128
------ ------ ------ ------ ------
Totals............................ $1,239 $1,188 $1,188 $1,505 $1,116
====== ====== ====== ====== ======
</TABLE>
- --------
(1) Number of mutual fund products.
(2) Number of variable policies.
(3) Reflects sales for which a sales charge was collected.

INVESTMENT MANAGEMENT AGREEMENTS

The Company provides investment advisory and management services pursuant to
an Investment Management Agreement with each Fund. While the specific terms of
the Investment Management Agreements vary, the basic terms of the Investment
Management Agreements are similar. The Investment Management Agreements
provide that the Company renders overall management services to each of the
Funds, subject to the oversight of each Fund's board of directors and in
accordance with each Fund's fundamental investment objectives and policies.
The Investment Management Agreements permit the Company to enter into separate
agreements for shareholder services or accounting services with the respective
Funds.

30
<PAGE>

The following table sets forth information with respect to the Company's
mutual fund investment management fees for the periods shown.

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997
------- ------- ------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Mutual Fund Investment
Management Fees:
Equity funds.................. $37,759 $45,145 $59,651 $74,199 $66,360
Fixed income funds............ 18,441 18,172 17,859 18,126 13,698
Money market funds............ 1,603 1,462 1,670 1,989 1,616
------- ------- ------- ------- -------
Total..................... $57,803 $64,779 $79,180 $94,314 $81,674
======= ======= ======= ======= =======
As a percent of average assets:
Equity funds.................. .554% .566% .619% .618% .609%
Fixed income funds............ .504% .504% .501% .497% .491%
Money market funds............ .426% .423% .420% .414% .406%
</TABLE>

Each Fund's board of directors, including a majority of the directors who
are not "interested persons," of the Fund or the Company within the meaning of
the Investment Company Act, and its shareholders must have approved the
Investment Management Agreement between the respective Fund and the Company.
These agreements may continue in effect from year to year if specifically
approved at least annually by (i) the Fund's board of directors, including a
majority vote of the directors who are not parties to the agreements or
"interested persons" of any such party, or (ii) the vote of the holders of a
majority of the outstanding voting securities of the Fund and the vote of a
majority of the Fund's directors who are not parties to the agreement or
"interested persons" of any such party, each vote being cast in person at a
meeting called for such purpose. Each agreement automatically terminates in
the event of its "assignment" as defined in the Investment Company Act or the
Investment Advisers Act and may be terminated without penalty by the Fund by
giving the Company 60 days' written notice, if the termination has been
approved by a majority of the Fund's directors or shareholders. The Offering
will not and the Spin-Off should not constitute an "assignment" for the
purposes of the Investment Company Act or the Investment Advisers Act. The
Company may terminate an Investment Management Agreement without penalty on
120 days' written notice.

The Company receives fees described in Appendix I for provision of
investment advisory and management services to the Funds. The Company pays all
of its own expenses incurred in performing investment advisory and management
services for the Funds.

SERVICE AGREEMENTS

The Company provides various services to the Funds and their shareholders
pursuant to a Shareholder Servicing Agreement with each Fund (except the
TMK/United Funds) and an Accounting Services Agreement with each Fund.
Pursuant to the Shareholder Servicing Agreements, the Company performs
shareholder servicing functions, including the maintenance of shareholder
accounts, the issuance, transfer, and redemption of shares, distribution of
dividends and payment of redemptions, furnishing information related to the
Fund, and handling shareholder inquiries. The Funds pay a monthly fee to the
Company for such services. Pursuant to the Accounting Services Agreements, the
Company provides the Funds with bookkeeping and accounting services and
assistance, including maintenance of the Fund's records, pricing of the Fund's
shares, and preparation of the prospectuses for existing shareholders, proxy
statements, and certain reports. The Funds pay the Company a monthly fee for
such services. A Fund's Shareholder Servicing Agreement or Accounting Services
Agreement

31
<PAGE>

may be adopted or amended with the approval of the Fund's directors. Each of
the Shareholder Servicing Agreements and Accounting Services Agreements have
terms of one year expiring on October 1, 1998. The following table sets forth
the revenues received by the Company for accounting and shareholder services
and number of shareholder accounts for the periods and at the dates indicated:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997
--------- --------- --------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Transfer agent fees..... $ 15,277 $ 16,028 $ 16,906 $ 21,436 $ 17,600
Custodian fees.......... 4,767 4,958 5,179 5,352 4,111
Portfolio accounting
services............... 1,236 1,311 1,442 1,590 1,255
--------- --------- --------- --------- ---------
Totals................ $ 21,280 $ 22,297 $ 23,527 $ 28,378 $ 22,966
========= ========= ========= ========= =========
<CAPTION>
DECEMBER 31,
--------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997
--------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Number of Mutual Fund
Accounts............... 1,085,600 1,150,300 1,220,100 1,306,000 1,354,000
</TABLE>

UNDERWRITING AND DISTRIBUTION

The Company distributes the Funds pursuant to an Underwriting Agreement with
each Fund (except TMK/United Funds). The Company distributes products relating
to the TMK/United Funds under an Underwriting Agreement between the Company
and Torchmark. Under each Underwriting Agreement with a Fund, the Company
offers and sells the Fund's shares on a continual basis and pays the costs of
sales literature and printing of prospectuses furnished to it by the Fund. The
Company receives underwriting commissions for such services, a major portion
of which is paid to financial advisers and sales managers of the Company. The
Company charges a sales charge to clients upon purchase of shares in the
United Funds, which are front-end load funds, which ranges from zero to 5.75%
of the net asset value of the shares purchased. The sales charge for the
United Funds typically declines as the net asset value of the account
increases, and there is generally no sales charge for purchases over $2.0
million. In addition, investors may combine their purchases of these Funds'
shares within the respective group of Funds to qualify for the reduced sales
charge. Investors in the W&R Funds generally pay contingent deferred sales
charges upon redemption of shares in W&R Funds of up to 3% of the net asset
value of the redeemed shares if the shares are redeemed within two calendar
years of their purchase, declining to zero if the shares are held for more
than four calendar years. The following table sets forth the revenues received
by the Company for underwriting commissions for distribution of the Funds for
the periods indicated:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997
------- ------- ------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Underwriting/distribution fees:
United Funds(1)................. $49,444 $43,007 $39,802 $48,505 $36,932
TMK/United Funds(1)............. 15,169 14,692 14,032 18,452 13,352
W&R Funds(2).................... 598 1,623 2,762 4,719 4,749
------- ------- ------- ------- -------
Totals........................ $65,211 $59,322 $56,596 $71,676 $55,033
======= ======= ======= ======= =======
</TABLE>
- --------
(1) Underwriting fees.
(2) Distribution fees.

The Underwriting Agreements are subject to approval annually by the
directors of the respective Funds, including a majority of the directors who
are not "interested persons" of the Funds or the Company within the meaning of
the Investment Company Act, or "interested persons" of any such party and who
have no direct or

32
<PAGE>

indirect financial interest in the operation of the Distribution and Service
Plan (as described below), as applicable, of the Funds or any agreements
relating thereto, cast in person at a meeting called for the purpose of voting
on such approval. Each agreement automatically terminates in the event of its
assignment, as defined in the Investment Company Act, and either party may
terminate the agreement without penalty upon 60 days' written notice.

Under a Distribution and Service Plan for Class A shares of the United Funds
(except the money market fund) and under a Distribution and Service Plan for
the Class B shares of the money market fund and the W&R Funds, each of which
plans are adopted under Rule 12b-1 of the Investment Company Act, the Funds
may pay the Company a fee for its costs and expenses in connection with the
provision of personal service to shareholders of the Fund and maintenance of
shareholder accounts and distribution costs and expenses under the
Distribution and Service Plan. Each Distribution and Service Plan is subject
to approval annually by the directors, including the independent directors,
cast in person at a meeting called for the purpose of voting on such approval.
The Fund may terminate the Plan at any time without penalty.

PROPERTIES

The Company operates from a 115,000 square foot facility that it owns, which
is located in United Investors Park, a commercial development at 6300 Lamar
Avenue, Overland Park, Kansas. The Company leases additional property as sales
office space at approximately 179 locations. The Company believes that its
properties are in good repair and adequate for their purposes.

EMPLOYEES

At September 30, 1997, the Company had 597 full-time employees. Its 2,113
financial advisers are independent contractors.

COMPETITION

The Company is subject to substantial competition in all aspects of its
business. The Company competes with hundreds of other mutual fund management
distribution and service companies that distribute their fund shares through a
variety of methods including affiliated and unaffiliated sales forces, broker-
dealers, and direct sales to the public of shares offered at low or no sales
charge. In addition, the Company competes with brokerage and investment
banking firms, insurance companies, banks, and other financial institutions in
all aspects of its business. Although no one company or group of companies
dominates the mutual fund management and services industry, many are larger
than the Company and have greater resources. Competition is based on the
methods of distribution of fund shares, the ability to develop investment
products for certain segments of the market, the ability to meet the changing
needs of investors, the ability to achieve superior investment management
performance, the type and quality of shareholder services, and the success of
sales promotion efforts. The Company believes that competition in the mutual
fund industry will increase as a result of increased flexibility afforded to
banks and other financial institutions to sponsor mutual funds and distribute
mutual fund shares, and as a result of consolidation and acquisition activity
within the industry. In addition, barriers to entry to the investment
management business are relatively few, and the Company thus anticipates that
it will face a growing number of competitors. Many of the Company's
competitors in the mutual fund industry are larger, better known, have
penetrated more markets than the Company, and have more resources than those
of the Company.

The Company's financial advisers compete primarily with small broker/dealers
and independent financial advisers. The market for financial advice and
planning is extremely fragmented, consisting primarily of relatively small
companies with fewer than 100 investment professionals. Competition is based
on sales techniques, personal relationships and skills, the quality of
financial planning products and services, the quality of the financial and
insurance products offered, and the quality of service. Competition in this
area is intense and some of the financial advisers' competitors are larger,
better known, and have more resources.

33
<PAGE>

REGULATION

Virtually all aspects of the Company's businesses are subject to various
Federal and state laws and regulations. These laws and regulations are
primarily intended to protect investment advisory clients and shareholders of
registered investment companies. Under such laws and regulations, agencies
that regulate investment advisers and broker-dealers such as the Company have
broad administrative powers, including the power to limit, restrict, or
prohibit such an adviser or broker-dealer from carrying on its business in the
event that it fails to comply with such laws and regulations. In such event,
the possible sanctions that may be imposed include the suspension of
individual employees, limitations on engaging in certain lines of business for
specified periods of time, revocation of investment adviser and other
registrations, censures, and fines. The Company believes that it is in
substantial compliance with all material laws and regulations.

The business of the Company is subject to regulation at both the Federal and
state level by the Commission and other regulatory bodies. Subsidiaries of the
Company are registered with the Commission under the Investment Advisers Act
and the Funds are registered with the Commission under the Investment Company
Act. A subsidiary of the Company is also registered as a broker-dealer with
the Commission and is subject to regulation by the National Association of
Securities Dealers, Inc. (the "NASD") and various states.

Subsidiaries of the Company are registered with the Commission under the
Investment Advisers Act and as such are regulated by and subject to
examination by the Commission. The Investment Advisers Act imposes numerous
obligations on registered investment advisers including fiduciary duties,
recordkeeping requirements, operational requirements, and disclosure
obligations. The Commission is authorized to institute proceedings and impose
sanctions for violations of the Investment Advisers Act, ranging from censure
to termination of an investment adviser's registration. The failure of a
subsidiary of the Company to comply with the requirements of the Commission
could have a material adverse effect on the Company. The Company believes it
is in substantial compliance with the requirements of the Commission.

The Company derives a large portion of its revenues from investment
management agreements. Under the Investment Advisers Act, the Company's
investment management agreements terminate automatically if assigned without
the client's consent. Under the Investment Company Act, advisory agreements
with registered investment companies such as the Funds terminate automatically
upon assignment. The term "assignment" is broadly defined and includes direct
assignments as well as assignments that may be deemed to occur, under certain
circumstances, upon the transfer, directly or indirectly, of a controlling
interest in the Company. The Offering will not and the Spin-Off should not
constitute an assignment for these purposes. Accordingly, the Company does not
intend to seek approvals of new investment advisory agreements from the
shareholders of the registered investment companies it manages or other client
consents in connection with these transactions. See "Risk Factors--Planned
Spin-Off of the Company."

The Company is also a member of the Securities Investor Protection
Corporation. In its capacity as a broker-dealer, the Company is required to
maintain certain minimum net capital and cash reserves for the benefit of its
customers, which may limit its ability to pay dividends. The Company's net
capital, as defined, has consistently met or exceeded all minimum
requirements. Various regulations cover certain investment strategies that may
be used by the Funds for hedging purposes. To the extent that the Funds
purchase futures contracts, the Funds are subject to the commodities and
futures regulations of the Commodity Futures Trading Commission. Under the
rules and regulations of the Commission promulgated pursuant to the Federal
securities laws, the Company is subject to periodic examination by the
Commission. The Company is also subject to periodic examination by the NASD.
The Company is registered under the Exchange Act as a transfer agent. The most
recent examination of the Company and the Funds by the Commission was in 1997.
The most recent examination of the Company by the NASD was February 1996.

LEGAL MATTERS

From time to time the Company is a defendant in various lawsuits in routine
matters incidental to its business. The Company does not believe that the
outcome of any current litigation will have a material effect on the financial
condition of the Company.

34
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

As of the date of the Offering, the Company's directors and executive
officers are expected to be, and their ages as of December 31, 1997 are, as
follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David L. Boren.................... 56 Director
Joseph M. Farley.................. 70 Director
Louis T. Hagopian................. 72 Director
Robert L. Hechler................. 60 Executive Vice President, Chief Operating Officer, Director
Henry J. Herrmann................. 55 President, Chief Investment Officer, Treasurer, Director
Joseph L. Lanier, Jr.............. 65 Director
Harold T. McCormick............... 68 Director
Sharon Pappas..................... 38 Secretary
George J. Records................. 63 Director
R.K. Richey....................... 71 Director
Keith A. Tucker................... 52 Chairman of the Board and Chief Executive Officer, Director
</TABLE>
- --------

Set forth below is a description of the backgrounds of the executive
officers and directors of the Company.

David L. Boren has been President of The University of Oklahoma, Norman,
Oklahoma since November 1994, and prior thereto he served as United States
Senator from Oklahoma, 1979-1994 and a member of the Senate Finance Committee.
Mr. Boren is a director of Torchmark Corporation, Phillips Petroleum
Corporation, AMR Corporation, and Texas Instruments, Inc. Mr. Boren's term on
the Board of Directors of the Company expires in 2000.

Joseph M. Farley has been Of Counsel at Balch & Bingham, Attorneys and
Counselors, Birmingham, Alabama since November 1992. Mr. Farley is a director
of Torchmark Corporation and an advisory director of The Southern Company. Mr.
Farley's term on the Board of Directors of the Company expires in 2000.

Louis T. Hagopian has been owner of Meadowbrook Enterprises, Darien,
Connecticut, an advertising and marketing consultancy, since January 1990 and
is Vice Chairman, Partnership for a Drug-Free America, New York, New York. Mr.
Hagopian is a director of Torchmark Corporation. Mr. Hagopian's term on the
Board of Directors of the Company expires in 1999.

Robert L. Hechler has been President, Chief Executive Officer, and Treasurer
of Waddell & Reed, Inc. since April 1993 and President of Waddell & Reed
Services Company since January 1982. Mr. Hechler's term on the Board of
Directors expires in 2000.

Henry J. Herrmann has been Vice President and Chief Investment Officer of
the Company since April 1993, and prior thereto was Senior Vice President and
Chief Investment Officer of the Company since March 1987. Mr. Herrmann's term
on the Board of Directors of the Company expires in 2001.

Joseph L. Lanier, Jr. has been Chairman of the Board and Chief Executive
Officer of Dan River Incorporated, Danville, Virginia, a textile manufacturer,
since November 1989. Mr. Lanier is a director of Torchmark Corporation,
Flowers Industries, Inc., Dimon Inc., and SunTrust Banks, Inc. Mr. Lanier's
term on the Board of Directors of the Company expires in 2001.

Harold T. McCormick has served as Chairman and Chief Executive Officer of
Bay Point Yacht & Country Club, Panama City, Florida since March 1988 and as
Chairman, First Ireland Spirits Co., Ltd., Dublin, Ireland, since February
1996. Mr. McCormick is a director of Torchmark Corporation. Mr. McCormick's
term on the Board of Directors of the Company expires in 2000.

35
<PAGE>

George J. Records has served as Chairman of Midland Financial Co., Oklahoma
City, Oklahoma, a bank and financial holding company for retail banking and
mortgage operations, since 1982. Mr. Records is a director of Torchmark
Corporation. Mr. Records' term on the Board of Directors of the Company
expires in 1999.

R. K. Richey is Chairman of and Chief Executive Officer of Torchmark
Corporation and is a director of Full House Resorts, Inc., Vesta Insurance
Group, Inc., and of each of the United Funds, the W&R Funds, and the
TMK/United Funds. Mr. Richey's term on the Board of Directors of the Company
expires in 1999.

Keith A. Tucker is a director and Vice Chairman of Torchmark Corporation. He
is a director of each of the United Funds, W&R Funds, and the TMK/United
Funds. Mr. Tucker's term on the Board of Directors of the Company expires in
1999.

BOARD OF DIRECTORS

The Company's Board of Directors is divided into three classes with the
initial term of the first class expiring at the annual meeting of stockholders
to be held in 1999 (four directors), the second class expiring at the annual
meeting of stockholders to be held in 2000 (four directors), and the third
class expiring at the annual meeting of stockholders to be held in 2001 (two
directors). The Company intends to add two directors to the third class of
directors as soon as practicable after the Offering.

The executive officers of the Company are elected annually and serve at the
discretion of the Board of Directors.

After completion of the Offering, the Company intends to establish an Audit
Committee and a Compensation Committee, each composed of at least two
independent directors, an Executive Committee and a Nominating Committee. The
Audit Committee will recommend the annual appointment of the Company's
auditors, with whom the Audit Committee will review the scope of audit and
non-audit assignments and related fees, accounting principles used by the
Company in financial reporting, internal auditing procedures, and the adequacy
of the Company's internal control procedures. The Compensation Committee will
administer the Company's Plans (as defined below) and make recommendations to
the Board of Directors regarding compensation for the Company's executive
officers. In the absence of a meeting of the Board of Directors, the Executive
Committee is empowered to exercise all the powers and authority of the Board
of Directors in the management of the business affairs of the Company, except
that the Executive Committee is not permitted to take any action that
committees are expressly prohibited from taking under the terms of the
Certificate of Incorporation, the Bylaws, or the laws of the State of
Delaware. The Nominating Committee will review the qualifications of potential
candidates for the Board of Directors, report its findings to the Board of
Directors, and propose nominations for Board memberships for approval by the
Board of Directors and submission to the stockholders of the Company for
approval.

COMPENSATION OF DIRECTORS

Directors of the Company who are also employees receive no additional
compensation for their services as a director. Non-employee directors (the
"Non-Employee Directors") do not currently receive a fee for their service as
directors, although the Board of Directors may determine to pay such a fee in
the future. The Company reimburses all directors of the Company for travel
expenses incurred in attending meetings of the Board of Directors and its
committees.

36
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth the compensation received by the persons who
will be the Company's Chairman of the Board and Chief Executive Officer and
the four other most highly paid executive officers of the Company (the "Named
Executive Officers") for the Company's most recent fiscal year. Mr. Tucker's
compensation has been paid by Torchmark Corporation and Messrs. Herrmann,
Hechler, Thompson, and Holliday's compensation has been paid by the Company.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
---------------------- -------------------------------------
SECURITIES UNDERLYING ALL OTHER
NAMES AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS/SARS(2) COMPENSATION(3)
- ---------------------------- ---- -------- -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Keith A. Tucker......... 1996 $700,000 $ 0 130,000 $6,114
Henry J. Herrmann....... 1996 $420,000 $392,000 36,000 $4,500
Robert L. Hechler....... 1996 $300,000 $295,000 16,000 $4,500
Russell E. Thompson..... 1996 $350,000 $146,254 8,000 $4,500
John M. Holliday........ 1996 $200,000 $112,000 8,000 $4,500
</TABLE>
- --------
(1) Mr. Tucker elected to defer his 1996 bonus of $425,000 pursuant to the
Torchmark Corporation 1996 Executive Deferred Compensation Stock Option
Plan. This amount is excluded from the table. Pursuant to a Portfolio
Manager's Deferred Compensation Plan, $54,000 and $48,000 of the 1996
portfolio manager's bonuses for Messrs. Thompson and Holliday,
respectively, were mandatorily deferred. These amounts are also excluded
from the table.
(2) Messrs. Tucker, Herrmann, Hechler, Thompson, and Holliday received option
grants in Torchmark Corporation common stock pursuant to the Torchmark
Corporation 1987 Stock Incentive Plan, as amended (the "TMK Incentive
Plan").
(3) Includes Torchmark Corporation contributions to Torchmark Corporation
Savings and Investment Plan, a funded qualified defined contribution plan,
for Mr. Tucker of $4,500 and interest only on prior contributions to the
Torchmark Corporation Supplemental Savings and Investment Plan, an
unfunded, non-qualified, defined contribution plan of $1,614. Includes
Company contributions to the United Investors Management Company Saving
and Investment Plan, a funded, qualified contribution plan, for Messrs.
Herrmann, Hechler, Thompson, and Holliday of $4,500 each.

The following table provides information on grants of options in fiscal year
1996 to the Named Executive Officers to purchase shares of Torchmark
Corporation common stock.

OPTIONS GRANTED DURING 1996

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SECURITIES % OF TOTAL OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE OR FOR OPTION TERM
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION ----------------------------
NAME GRANTED(1) IN FISCAL YEAR (PER SHARE) DATE 5% 10%
---- ---------- --------------- ----------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Keith A. Tucker......... 130,000 46.8% $24.875 12/18/06 $ 2,033,688 $ 5,153,765
Henry J. Herrmann....... 36,000 13.0% $24.875 12/18/06 $ 563,175 $ 1,427,196
Robert L. Hechler....... 16,000 5.8% $24.875 12/18/06 $ 250,300 $ 634,309
Russell E. Thompson..... 8,000 2.9% $24.875 12/18/06 $ 125,150 $ 317,155
John M. Holliday........ 8,000 2.9% $24.875 12/18/06 $ 125,150 $ 317,155
</TABLE>
- --------
(1) All options are non-qualified stock options granted in Torchmark
Corporation common stock pursuant to the TMK Incentive Plan with a ten
year and two day term at an exercise price equal to the closing price of
Torchmark Corporation common stock on the grant date. Options are not
generally exercisable during the first two years after the grant date and
become first exercisable on 50% of the shares on the second anniversary of
the grant date and on the remaining 50% of the shares on the third
anniversary of the grant date.

37
<PAGE>

The following table provides information on option exercises in 1996 by the
Named Executive Officers and the value of each such Named Executive Officers'
unexercised options to acquire common stock of Torchmark Corporation at
December 31, 1996.

AGGREGATED OPTION EXERCISES DURING 1996 AND OPTION VALUES AT DECEMBER 31, 1996

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
NUMBER OF SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END
ACQUIRED VALUE ------------------------------ -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- -------- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Keith A. Tucker......... 0 $ 0 357,224 395,000 $2,141,681 $1,297,500
Henry J. Herrmann....... 5,250 $ 82,031 198,200 99,500 $1,454,578 $ 331,125
Robert L. Hechler....... 6,000 $ 93,000 127,622 40,000 $1,479,414 $ 91,500
Russell E. Thompson..... 37,622 $388,959 10,000 16,000 $ 82,500 $ 31,500
John M. Holliday........ 0 $ 0 47,526 12,000 $ 592,775 $ 17,250
</TABLE>

COMPENSATION, BENEFITS, AND RETIREMENT PLANS

The Company intends to implement the following stock plans: The 1998 Stock
Incentive Plan (the "Stock Incentive Plan"), The 1998 Non-Employee Director
Stock Plan (the "Non-Employee Director Plan"), and The 1998 Executive Deferred
Compensation Stock Plan (the "Executive Deferral Plan") (collectively, the
"Plans"). Terms not expressly defined in the descriptions of the Plans below
have the same meaning as assigned to such terms in the Plans. Each Plan will
be filed as an exhibit to the Registration Statement of which this Prospectus
is a part.

Upon consummation of the Offering and after giving effect to the grants made
in connection with the Offering referred to below, under the Plans the Company
will have (i) awarded options to purchase up to shares of Class A Common
Stock, or approximately % of the outstanding Common Stock, to the Named
Executive Officers; (ii) issued shares of restricted Class A Common Stock,
or approximately % of the outstanding Common Stock, to the Named Executive
Officers; and (iii) reserved shares, or approximately % of the
outstanding Class A Common Stock (including shares reserved under the Plans),
for issuance under the Plans. Overall, the Named Executive Officers will own
approximately shares of the outstanding Common Stock (on a fully diluted
basis and assuming the exercise of all options granted to them and excluding
shares of stock purchased outside of the Plans), or approximately % of the
outstanding Common Stock of the Company. The following is a brief summary of
each of the Plans, which are qualified in their entirety by the Plans, copies
of which will be filed as an exhibit to the Registration Statement of which
the Prospectus is a part.

Stock Incentive Plan

The Stock Incentive Plan, covering shares, will permit (i) the grant of
options to purchase shares of Class A Common Stock intended to qualify as
incentive stock options under (S) 422 of the Code ("Incentive Options"); (ii)
the grant of options that do not so qualify ("Non-Qualified Options"); and
(iii) the issuance of Class A Common Stock that may be subject to certain
restrictions ("Restricted Stock"). The Stock Incentive Plan was designed and
intended as a performance incentive for officers, employees, consultants, and
other key persons performing services for the Company to encourage such
persons to acquire or increase a proprietary interest in the success and
progress of the Company. In connection with the Offering, options will be
awarded under the Stock Incentive Plan, and the Company will issue an
aggregate of shares of Restricted Stock under the Stock Incentive Plan.
These stock options will be initially exercisable at the initial public
offering price, and such stock options and the restricted stock grants will be
subject to vesting requirements, over years and years, respectively.

The Stock Incentive Plan is administered by the Compensation Committee (the
"Compensation Committee"). All members of the Compensation Committee are
"disinterested persons" as that term is defined under the rules promulgated by
the Commission. On and after the date the Stock Incentive Plan becomes subject
to (S) 162(m) of the Code, all members of the Compensation Committee will be
"outside directors" as defined in

38
<PAGE>

(S) 162(m) of the Code and the regulations thereunder. The Compensation
Committee has full power to select, from among the employees and other persons
eligible for awards, the individuals to whom awards will be granted, to make
any combination of awards to participants, and to determine the specific terms
and conditions of each award, subject to the provisions of the Stock Incentive
Plan. Persons eligible to participate in the Stock Incentive Plan will be
those officers, employees, and other key persons, such as consultants, of the
Company who are responsible for or contribute to the management, growth, or
profitability of the Company, as selected from time to time by the
Compensation Committee.

Only employees of the Company may be granted Incentive Options. The option
exercise price of each option will be determined by the Compensation Committee
but may not be less than 100% of the fair market value of the Common Stock on
the date of grant in the case of Incentive Options and Non-Qualified Options.

The Stock Incentive Plan provides that automatic formula-based Non-Qualified
Options for shares will be awarded to non-employee directors on the first
day of each calendar year on which the Company's Class A Common Stock is
traded on the New York Stock Exchange at 100% of the market value of the Class
A Common Stock on that date. Additionally, non-employee directors may be
granted non-formula based Non-Qualified Options at the discretion of the
Compensation Committee, which may have an exercise price equal to the market
value of the stock on the grant date or at a discount not to exceed 25% of the
market value on the grant date.

The Compensation Committee may also award shares of Restricted Stock to
officers, other employees, and key persons of the Company. The conditions and
restrictions applicable to the Restricted Stock may include the achievement of
certain performance goals and continued employment with the Company through a
specified restricted period. These conditions and restrictions, as well as the
purchase price of shares of Restricted Stock, will be determined by the
Compensation Committee. If the performance goals and other restrictions are
not attained, the employees will forfeit their awards of Restricted Stock.

The Board of Directors may at any time amend or discontinue the Stock
Incentive Plan and the Compensation Committee may at any time amend or cancel
outstanding awards for the purpose of satisfying changes in the law or for any
other lawful purpose. No such action may be taken, however, that adversely
affects any rights under outstanding awards without the holder's consent.
Further, amendments to the Stock Incentive Plan will be subject to approval by
the Company's stockholders if and to the extent required by the Code to
preserve the qualified status of Incentive Options or to preserve tax
deductibility of compensation earned under stock options and stock
appreciation rights.

The Stock Incentive Plan provides that in the event of a sale of all or
substantially all of the assets or Common Stock, a merger or consolidation
that results in a change in control of the Company, or the liquidation or
dissolution of the Company (a "Change in Control"), all stock options and
restricted stock will automatically become fully exercisable or vested, as the
case may be. In addition, at any time prior to or after a Change of Control,
the Compensation Committee may accelerate awards and waive conditions and
restrictions on any awards to the extent it may determine appropriate.

Approximately employees are currently eligible to participate in the
Stock Incentive Plan.

Non-Employee Director Plan

The Non-Employee Director Plan will permit Non-Employee Directors to elect
to defer on an annual basis all or a designated portion of their director
compensation payable in 1998 or thereafter into the interest-bearing account
of the Non-Employee Director Plan (the "Interest Account"). Such deferrals
would be made subject to a one-time opportunity by the Non-Employee Director
to convert that particular year's deferred director compensation into options,
granted either at market value or at a designated discount not to exceed 25%
of market value, to acquire Class A Common Stock. The Company's current Non-
Employee Directors as well as

39
<PAGE>

any subsequently elected Non-Employee Directors constitute the class of
persons eligible to participate in this plan. Up to shares of Class A
Common Stock are proposed to be reserved for issuance pursuant to the Non-
Employee Director Plan.

On or before December 31 of each year, each Non-Employee Director will
determine whether to receive all or a portion of his or her annual retainer
and Board of Directors and committee meeting fees for the following calendar
year in cash or to defer all or a portion (in 10% increments, but not less
than 50%) of such Annual Compensation (as defined in the Non-Employee Director
Plan) (assuming maximum attendance at scheduled Board of Directors and
committee meetings) into an interest-bearing account in the Non-Employee
Director Plan. In the case of a newly elected Non-Employee Director, such
determination to defer compensation must be made within the 30-day period
immediately following election to the Board of Directors. The determination to
defer, if made, will be indicated upon a Primary Election Form, which will
specify the percentage of compensation deferred and the basis for payment of
the interest-bearing account balance (a lump sum or designated number of
monthly payments not to exceed 120) to the Non-Employee Director upon the
earliest of (i) December 31 of the fifth year after the year with respect to
which the deferral was made; (ii) the first business day of the fourth month
after such Non-Employee Director's death; or (iii) termination as a Non-
Employee Director, for any reason other than by death.

At any time, but only once, during the calendar year immediately following
the filing of a Primary Election Form, a participating Non-Employee Director
may elect to convert the then current balance in his or her Interest Account
for the calendar year to which such Primary Election Form relates into options
to acquire Class A Common Stock. For example, if a Primary Election Form was
filed in December 1997 deferring Annual Compensation to be earned in 1998, the
Non-Employee Director may elect at any time during 1998 to convert such
deferred amount plus accrued interest to the conversion election date into
stock options. The irrevocable election to receive options as of this election
date, which is made on a Secondary Election Form, will specify the percentage
of such stock options to be granted at an exercise price of 100% of the Fair
Market Value per Share on the Option Grant Date and the percentage of options
to be granted at an exercise price of not less than 75% of the Fair Market
Value per Share (with the discount of up to 25% to be determined by the
Compensation Committee in its discretion). Non-Employee Directors may elect to
receive discounted stock options, market value stock options, or a combination
of both. To the extent that a Non-Employee Director chooses to receive
discounted stock options, he or she will receive options on a smaller number
of shares with a lower exercise price per share while a decision to receive
market value options will result a larger number of shares subject to option
with a higher exercise price per share.

Options granted pursuant to the Non-Employee Director Plan will be non-
qualified stock options. Based upon the Non-Employee Director's decision as to
the exercise price (discounted or market value) of the options to be received,
the number of Shares subject to such option will be the whole number of Shares
equal to (a) the dollar amount which the Non-Employee Director has elected to
convert to options divided by (b) the per share value of an option on the
Option Grant Date, as determined using an option valuation model selected by
the Compensation Committee. Options are first exercisable, cumulatively, as to
10% of the Shares on each of the first through tenth anniversaries of the
Option Grant Date. The term of the option will be as specified by the
Compensation Committee but in no event may the period of time over which an
option may be exercised exceed eleven years from the Option Grant Date. In no
event will death, disability, retirement, other termination of directorship,
or failure to be reelected as a director shorten the term of any outstanding
option. Options may be subject to accelerated vesting and will be immediately
exercisable upon the Non-Employee Director's death or Disability, a Change in
Control of the Company as defined in the plan or the unanimous decision of the
Compensation Committee to accelerate. Upon acceleration, an option remains
exercisable for the remainder of its original term. Options may be exercised
in whole or in part. Shares will be issued pursuant to the exercise of an
option only upon receipt by the Company of payment in full of the aggregate
purchase price for the Shares subject to the option or portion thereof being
exercised. The Compensation Committee may determine the specific method of
payment, including permitting "cashless exercises," and other terms and
provisions of options in its sole discretion.

40
<PAGE>

Options will not be assignable or transferable other than by will or by the
laws of descent and distribution, except that the Compensation Committee may
permit transfers that it, in its sole discretion, concludes do not result in
accelerated taxation and that are otherwise appropriate and desirable taking
into account any applicable securities laws.

Based upon current Federal tax laws, a Non-Employee Director will not
recognize income upon the making of a proper and timely deferral to the
Interest Account nor will income be recognized upon the conversion of such
account balance to options. The Non-Employee Director will recognize income
for purposes of Federal income tax when the amount in his or her Interest
Account is paid out or immediately upon the exercise of the options, generally
in an amount equal to the difference between the fair market value of the
Common Stock on the date of exercise and the exercise price of the option. The
Company generally will receive a corresponding tax deduction when the Non-
Employee Director recognizes income subject to any applicable deductibility
limitations of the Code.

The Non-Employee Director Plan will be administered by the Compensation
Committee, which will have the authority to interpret and construe the Non-
Employee Director Plan, make necessary rules and regulations to administer the
plan, and designate persons as its agents who are neither members of the
Compensation Committee or the Board of Directors to carry out administrative
responsibilities under the Plan.

Adjustments will be made to the total number of Shares reserved for issuance
under the Non-Employee Director Plan, the number of Shares covered by, and the
exercise price of each outstanding option if the Company at any time changes
the number of issued Shares through a stock dividend, stock split,
recapitalization, reorganization, or other change in corporate structure
affecting the Shares. The Compensation Committee will authorize the issuance,
continuation, or assumption of outstanding options or provide for other
equitable adjustments after changes in Shares resulting from any merger,
consolidation, sale of assets, acquisition of property or stock, or similar
occurrence in which the Company is the surviving or continuing corporation
upon such terms and conditions as it deems necessary. In the case of an
acquisition where the Company is not the surviving or continuing corporation
and outstanding Shares are not converted into or exchanged for different
securities, cash, or other property, a Non-Employee Director who holds an
outstanding option will have the right then and during the remaining term of
the option to receive the same acquisition consideration received by the
Company's other shareholders.

The Board of Directors may amend, suspend, or terminate the Non-Employee
Director Plan or any stock option award notice under the plan at any time,
except that it may condition amendments or modifications on shareholder
approval if necessary or advisable because of tax, securities, or other
applicable laws, policies, or regulations. No amendment, modification, or
termination will adversely affect any outstanding options or Interest Accounts
without the consent of the participant.

Executive Deferral Plan

The Executive Deferral Plan will permit Eligible Executives to defer salary
and bonus into interest-bearing accounts in the plan, subject to a one time
opportunity to elect to convert within a designated time period any deferred
salary for that year as well as a one time opportunity to elect within a
designated time period to convert any deferred bonus for that calendar year
into options to acquire Class A Common Stock. Such options may be granted with
an exercise price of the fair market value of the stock or at a discount not
to exceed 25% of its market value. The Eligible Executives will be determined
from time to time by the Compensation Committee or its designee or by the
Chairman of the Board. Currently, persons have been designated as eligible
to participate in the Executive Deferral Plan, and it is contemplated that the
number of Eligible Executives will not in any case exceed 10 persons. Up to
shares of Class A Common Stock have been reserved for issuance pursuant to
the Executive Deferral Plan.

On or before the last day of each calendar quarter, an Eligible Executive
may elect to receive all or a portion of his or her salary for the next
calendar quarter in cash or may irrevocably elect to defer all or a portion in
10%

41
<PAGE>

or $10,000 increments of next quarter's salary into an Interest Account for
Salary under the Executive Deferral Plan by delivering a Primary Election Form
for Salary to the plan administrator. Such Primary Election Form for Salary
will specify the amount of Salary to be deferred into the interest-bearing
account and the form and timing of the payout of deferred amounts, except that
if an executive elects to defer Salary for more than one quarter in a calendar
year, the form and timing of payout for each quarter's deferral must be
identical.

At any time prior to December 31 of each year, an Eligible Executive may
also elect to receive all or a portion of his or her bonus for the current
calendar year in cash or may irrevocably elect to defer all or a portion (in
10% or $10,000 increments) of such current calendar year bonus into an
Interest Account for Bonus under the Executive Deferral Plan by delivering a
Primary Election Form for Bonus to the Plan administrator. Such Primary
Election Form for Bonus will specify the amount of Annual Bonus to be deferred
and the form and timing of payout of the deferred amount, except that if an
executive elects to defer both Salary and Annual Bonus for a particular
calendar year, the form and timing must be identical.

The Interest Accounts of an Eligible Executive will be segregated to reflect
deferred compensation on a year-by-year basis and as to the type of
compensation deferred (salary or bonus). Interest will be credited to such
Interest Accounts at the rate determined from time to time by the Compensation
Committee. Payment of the balances in an executive's Interest Accounts will be
made as designated by the executive in a lump sum or in the number of
approximately equal monthly installments not to exceed 120 which have been
selected by the executive. Such payments will begin on the earliest of (a)
December 31 of the fifth year after the year with respect to which the
deferral was made, (b) the first business day of the fourth month after the
executive's death, or (c) termination as an employee of the Company for any
reason other than by death.

At any time, but only once, during the twelve-month period following the end
of the calendar year with respect to which an executive deferred Salary into
the Executive Deferral Plan, such executive will have the right to convert his
or her Interest Account for Salary for the previous year into options in Class
A Common Stock by filing an irrevocable Secondary Election Form for Salary.
Also, at any time, but only one time, during the twelve month period following
the end of a calendar year with respect to which an executive has deferred
Annual Bonus into the Plan, such executive will have the right to convert his
or her Interest Account for Bonus for such previous year into options in Class
A Common Stock by filing an irrevocable Secondary Election Form for Bonus. The
filing of such Secondary Election Form for Salary or Secondary Election Form
for Bonus will result in receipt by the executive of options as of the date of
such filing. The Secondary Election Form will specify the percentage of
options to be granted at an exercise price of 100% of the Fair Market Value
per Share on the Option Grant Date and the percentage of options to be granted
at an exercise price of not less than 75% of the Fair Market Value per Share
on the Option Grant Date (with the discount of up to 25% to be determined by
Compensation Committee in its discretion). An Eligible Executive may elect to
receive market value stock options, discounted stock options or a combination
of both. To the extent that an executive selects market value options, he or
she will receive options on a larger number of shares with a higher exercise
price than if discounted options on fewer shares with a lower exercise price
were selected.

Options issued pursuant to the Executive Deferral Plan will be non-qualified
stock options. Based upon the Eligible Executive's decision as to the exercise
price (discounted or market value) of the options to be received, the number
of Shares subject to such option will be the whole number of Shares equal to
(i) the dollar amount that the executive has elected to convert to options
divided by (ii) the per share value of an option on the Option Grant Date, as
determined using an option valuation model selected by the Compensation
Committee. Options are first exercisable, cumulatively, as to 10% of the
Shares on each of the first through tenth anniversaries of the Option Grant
Date, except that any option held by a "Covered Employee," as defined in (S)
162(m) of the Code, will not be exercisable before the first day of the
calendar year immediately following the year in which the executive ceased to
be a Covered Employee. The term of the option will be as specified by the
Compensation Committee but in no event may the period of time over which an
option may be exercised exceed the longer of

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eleven years from the Option Grant Date or the thirtieth day of the calendar
year immediately following the year in which the executive ceased to be a
Covered Employee. In no event will death, disability, retirement, or other
termination of employment shorten the term of any outstanding option. Options
will be subject to accelerated vesting and will be immediately exercisable
upon the executive's death or disability, a Change in Control, or the
unanimous decision of the Compensation Committee to accelerate. Upon
acceleration, an option remains exercisable for the remainder of its original
term.

Options may be exercised in whole or in part. Shares will be issued pursuant
to the exercise of an option only upon receipt by the Company of payment in
full of the aggregate purchase price for the Shares subject to the option or
portion thereof being exercised. The Compensation Committee may determine the
specific method of payment, including permitting "cashless exercises," and
other terms and provisions of options in its sole discretion.

Based on current Federal tax laws, a participating executive will not
recognize income upon the making of a proper and timely deferral to Interest
Accounts nor will income be recognized upon the conversion of such account
balances to options. The executive will recognize income for purposes of
Federal income tax when the amounts in his or her Interest Accounts are paid
out or immediately upon the exercise of the non-qualified options, generally
in an amount equal to the option spread on the date of exercise. The Company
generally will receive a corresponding tax deduction when the executive
recognizes income, subject to any applicable deductibility limitations of the
Code.

The Executive Deferral Plan will be administered by the Compensation
Committee, which will have the authority to interpret and construe the plan,
make necessary rules and regulations to administer the Plan and designate
persons as its agents who are neither members of the Compensation Committee or
the Board of Directors to carry out administrative responsibilities under the
Plan.

Adjustments will be made to the total number of Shares reserved for issuance
under the Executive Deferral Plan, the number of Shares covered by and the
exercise price of each outstanding option if the Company at any time changes
the number of issued Shares through a stock dividend, stock split,
recapitalization, reorganization, or other change in corporate structure
affecting the Shares. The Compensation Committee will authorize the issuance,
continuation or assumption of outstanding options or provide for other
equitable adjustments after changes in the number of Shares resulting from any
merger, consolidation, sale of assets, acquisition of property or stock, or
similar occurrence in which the Company is the surviving or continuing
corporation upon such terms and conditions as it deems necessary. In the case
of an acquisition where the Company is not the surviving or continuing
corporation and outstanding Shares are not converted into or exchanged for
different securities, cash, or other property, a participating executive who
holds an outstanding option will have the right then and during the remaining
term of the option to receive the same acquisition consideration received by
the Company's other shareholders.

The Board of Directors may amend, suspend, or terminate the Executive
Deferral Plan or any Stock Option Award Notice under the Plan at any time,
except that it may condition amendments or modifications on shareholder
approval if necessary or advisable because of tax, securities, or other
applicable laws, policies, or regulations. No amendment, modification, or
termination will adversely affect any outstanding options or Interest Accounts
without the consent of the participating executive.

Other Plans

Waddell & Reed Financial, Inc. Savings and Investment Plan (formerly the
United Investors Management Company Savings and Investment Plan). This plan
will be amended and restated, effective as of a date no

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sooner than the date of the Offering, to rename it the Waddell & Reed
Financial, Inc. Savings and Investment Plan, bring it into compliance with
recent legislative and regulatory changes, and change the investment options
available to participants. Effective as of the same date as the adoption of
this plan, assets and liabilities related to participating employees of UILIC
will be transferred from the plan to the Torchmark Corporation Savings and
Investment Plan. The Waddell & Reed Financial, Inc. Savings and Investment
Plan is a tax-qualified, defined contribution plan that allows eligible
employees of the Company to contribute up to 16% of compensation, as described
below, on an after-tax basis. Employees of the Company are eligible to begin
contributing to the plan after completing one year of service. The Company
makes a matching contribution to the Plan, on behalf of each employee who
elects to participate, equal to 50% of the participant's contributions up to
the first 6% of compensation. The plan defines compensation as total
compensation (including amounts deferred pursuant to a cafeteria plan under
(S) 125 of the Code) less annual service awards and other non-cash prizes,
deferred compensation, director's fees, expense reimbursements or allowances,
and amounts in excess of $150,000 per year (as adjusted). Participants may
invest their account balances in one or more of 16 mutual funds that are
sponsored by the Company and made available under the plan. Effective no
sooner than the date of the Offering, participants may elect to invest their
account balances in Class A Common Stock. Effective as of this same date,
participants will be permitted to make investment transfers out of the
Torchmark stock fund but will not be permitted to make transfers into it. The
plan permits investment transfers to take place up to eight times per year.
Transfers take effect during the valuation period that begins after the
valuation period during which a change is requested. There are 24 semi-monthly
valuation periods under the plan. Participants may receive in-service
distributions of amounts attributable to their contributions to the plan.
Distributions are also available upon normal retirement (age 65), disability,
death, or termination of employment before normal retirement age. Upon the
occurrence of this latter event, only the vested portion of the matching
contributions account is distributable. The vesting schedule is a graded six-
year schedule, beginning at 20% at two years of service and increasing in 20%
increments per year of service until six years of service have been completed.

Waddell & Reed Financial, Inc. Retirement Income Plan (formerly the United
Investors Management Company Retirement Income Plan). This plan will be
amended and restated, effective as of a date no sooner than the date of the
Offering, to rename it the Waddell & Reed Financial, Inc. Retirement Income
Plan and bring it into compliance with recent legislative and regulatory
changes. The plan is a tax-qualified, non-contributory pension plan that
covers all eligible employees of the Company who are 21 years of age or older
and have one or more years of credited service. The benefits under the plan
are determined by multiplying the average of the participant's earnings in the
five consecutive years in which they were highest during the last ten years
before the participant's retirement by a percentage equal to 2% for each year
of credited service up to 30 years and by 1% for each year of credited service
for the next ten years and then reducing that result by a Social Security
offset and by other benefits from certain other plans of the Company and
Torchmark or its affiliates. Earnings for purposes of the plan do not include
bonuses or commissions (other than for Regional Vice Presidents, and Division
Managers), directors' fees, expense reimbursements, employer contributions to
retirement plans, deferred compensation, or any amounts in excess of $150,000
per year (as adjusted). Benefits under the plan vest 100% after five years.
Upon the participant's retirement, benefits under the plan are payable as an
annuity or in a lump sum.

Waddell & Reed, Inc. Career Field Retirement Plan. Until January 1, 1973,
Company employees participated in the Waddell & Reed, Inc. Career Field
Retirement Plan. Under this plan, the Company contributed annually up to 10%
of its profits less forfeitures, which were allocated to the participants on
the basis of their compensation. Voluntary employee contributions were
permitted under the plan but not required. Since January 1, 1973, no new
participants have been admitted to the plan, and participants and the employer
make no further contributions. All participants are fully vested. Upon the
participant's retirement, termination of employment, disability, death, or
reaching age 65, his account is used to purchase an annuity or is paid in a
lump sum. Benefits paid under the plan do not offset benefits paid under any
other pension plan.

Control Group Issues. Following the consummation of the Offering, the
Company will continue to be a member of the Torchmark controlled group, within
the meaning of (S) 414(b) of the Code, and will continue to be treated as a
trade or business under common control with Torchmark, within the meaning of
(S) 414(c) of the

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Code. All members of a controlled group or group of trades or businesses under
common control are required to be treated as one employer for purposes of many
of the Code's provisions relating to tax qualification, such as (S) 401
(nondiscrimination in benefits and various other nondiscrimination rules), (S)
410 (coverage rules), (S) 411 (benefit accrual and vesting rules), (S) 415
(maximum benefit rules), and (S) 416 (top-heavy rules). Application of these
rules may require a change of benefits, coverage, or structure of the
Company's qualified plans in order to maintain the qualified status of the
plans.

Continuing Interrelationships with Torchmark. Both the Company's and
Torchmark's qualified plans will continue to pay benefits to former employees
of Torchmark who were entitled to benefits under the predecessor plans
maintained by the Company (except to the extent that assets and liabilities
related to such benefits are spun off to other qualified plans of Torchmark).
For example, employees of Torch Energy Advisors Incorporated who participated
in the Company's plans prior to January 1, 1996, will continue to be entitled
to receive benefit payments under the Company's tax-qualified plans.

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<PAGE>

CERTAIN TRANSACTIONS

The following is a summary of certain arrangements between the Company and
Torchmark. Although the Company believes that these arrangements embody terms
and conditions no less favorable to the Company than could be obtained in
negotiations between independent parties, these arrangements were established
before the Offering and were not the subject of arm's-length negotiations. See
"Risk Factors--Relationship with Torchmark; Conflicts of Interest."

GENERAL

In November 1997, the Company paid to Torchmark a dividend of the Torchmark
Notes. The Torchmark Notes are mandatorily prepayable from the proceeds of any
financing, including the Offering. The principal amount of the Torchmark Notes
was reduced to $390 million by a $90 million prepayment prior to the Offering.
The Company also owed $127 million to Torchmark under the terms of the Liberty
Note. The Liberty Note was reduced to $90 million by a $37 million prepayment
prior to the Offering. The Company currently holds all of the issued and
outstanding capital stock of UILIC. Prior to the consummation of the Offering,
the Company will declare and pay the UILIC Dividend.

RELATIONSHIP WITH TORCHMARK

Spin-Off. From 1981 until the Offering, the Company has been a subsidiary of
Torchmark. After the consummation of the Offering, the Company will continue
to be controlled by Torchmark, which will own more than 80% of the combined
voting power of the Class A Common Stock and the Class B Common Stock of the
Company. The holders of Class A Common Stock and Class B Common Stock have
identical rights except that (i) holders of Class A Common Stock are entitled
to one vote per share while holders of Class B Common Stock are entitled to
votes per share on all matters to be voted on by stockholders and (ii) holders
of Class A Common Stock are not eligible to vote on matters relating
exclusively to Class B Common Stock and vice versa. Torchmark has advised the
Company that, subject to certain conditions, Torchmark currently intends to
divest its ownership interest in the Company by means of a special dividend to
the stockholders of Torchmark of all of the Class A Common Stock and Class B
Common Stock owned by Torchmark. Torchmark Corporation has advised the Company
that it expects to complete the Spin-Off in the last quarter of 1998.
Conditions to the Spin-Off include the receipt by Torchmark of a ruling by the
Internal Revenue Service to the effect that such dividend will qualify as a
tax-free distribution under (S) 355 of the Code and receipt of necessary
regulatory approvals to the Spin-Off and related transactions. There can be no
assurance that such conditions will be fulfilled or waived by Torchmark, nor
can there be any assurance that, in any event, the Spin-Off will occur or that
Torchmark will not sell or otherwise dispose of its Class A Common Stock and
Class B Common Stock. See "Risk Factors--Planned Spin-Off of the Company."

The following are summaries of the Affiliate Agreements. Reference should be
made to the Affiliate Agreements themselves, which have been filed as exhibits
to the Registration Statement of which this Prospectus is part.

Public Offering and Separation Agreement. The Company and Torchmark have
agreed in principle to a public offering and separation agreement (the
"Separation Agreement") setting forth the parties' agreements with respect to
the Offering, the Spin-Off, and certain relationships of the parties prior to
and following the Offering.

The Separation Agreement provides for certain conditions precedent to the
parties obligation to consummate the Offering, including, that as of the date
of the Offering, a subsidiary of Torchmark must control (within the meaning of
(S) 355 of the Code) the Company, all other conditions to permit the Spin-Off
to qualify as a tax-free distribution to Torchmark, and the shareholders of
Torchmark Corporation must, to the extent applicable as of

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<PAGE>

the time of the Offering, be satisfied, and there must be no event or
condition that is likely to cause any of the foregoing not to be satisfied as
of the time of the Spin-Off. Among other conditions, the Board of Directors of
Torchmark Corporation must also have determined that the terms of the Offering
are acceptable to Torchmark. Subject to the satisfaction of certain
conditions, Torchmark has agreed to effect the Spin-Off as promptly as
practicable after October 1, 1998. The Company and Torchmark have agreed that
the Board of Directors of Torchmark Corporation will have the sole discretion
to determine whether to waive any stated condition. The Spin-Off is
conditioned upon, among other things, the receipt of a private letter ruling
from the Internal Revenue Service that the Spin-Off will qualify as a tax-free
distribution for Federal income tax purposes under (S) 355 of the Code, which
ruling must be in form and substance satisfactory to Torchmark in its sole
discretion. The Spin-Off is also conditioned upon the absence of, since ,
1997, any material adverse change with respect to the business or financial
condition of Torchmark or any other event or development which the Board of
Directors of Torchmark Corporation determines, in its sole discretion, makes
the Spin-Off not in the best interest of Torchmark and its stockholders. The
Company has agreed that if the Spin-Off does not occur on or before March 31,
1999, Torchmark will have the right to cause the Company to use its best
efforts to register the shares of Class A Common Stock and Class B Common
Stock held by Torchmark for resale under the Securities Act, subject to
certain conditions and limitations. The Company has also agreed that if it
files a registration statement for the sale of securities (except with respect
to registration statements on Form S-4 or Form S-8 or another form available
for registration of securities other than to the public) before December 31,
2002, Torchmark may, subject to certain conditions and limitations, include in
such registration statement shares of Class A Common Stock and Class B Common
Stock held by Torchmark.

Under the Separation Agreement, each of Torchmark Corporation and the
Company will indemnify the other in the event of certain liabilities,
including, liabilities arising under the Securities Act or the Exchange Act.
Additionally, each of the Company and Torchmark Corporation have agreed to
indemnify the other for certain liabilities relating to (i) their respective
businesses, (ii) any individual employed by such company or its affiliates on
the date the Offering is completed, except to the extent such person was
acting solely as an officer, director, or employee of the other company or the
other company's affiliates, or (iii) any authorized accountants, counsel, or
other designated representative of the company or any of the company's
affiliates, in each case, whether relating to or arising out of occurrences
prior to, on, or after the date the Offering is completed. The Separation
Agreement also provides that the Company will indemnify Torchmark for tax
liabilities with respect to the Spin-Off that result from certain errors and
omissions in written statements that the Company has furnished or will furnish
to Torchmark in connection with this Registration Statement or the private
letter ruling request and related supplements to be filed with the Internal
Revenue Service regarding the Spin-Off.

Torchmark and the Company have agreed to continue joint coverage under
certain insurance policies following the Offering until the earlier of the
renewal date of the relevant policies or the date of the Spin-Off.

The Company has agreed that between the date the Offering is completed and
the date of the Spin-Off, the Company will not issue any shares of stock or
enter into a binding obligation to do so if the effect would be that Torchmark
would not control the Company within the meaning of (S) 355 of the Code.

Tax Disaffiliation Agreement. The Company and Torchmark have entered into a
tax disaffiliation agreement (the "Tax Disaffiliation Agreement") providing
for the allocation of responsibility between the Company and its subsidiaries
(the "Company Group") and Torchmark and its affiliates other than the Company
and its subsidiaries (the "Torchmark Group") for (i) the filing of tax
returns, (ii) tax liabilities for taxable periods, before and after the
Offering, (iii) the conduct of tax audits and the handling of tax
controversies, and (iv) various related matters. Under the Tax Disaffiliation
Agreement, the Company will be responsible for, and will hold each member of
the Torchmark Group harmless on an after tax basis against, any liability for
taxes attributable to any member of the Company Group with respect to periods
before and after the Offering other than tax liabilities, if any, with respect
to the Offering (including the recognition of certain deferred intercompany
gains at the close of the Offering), the Spin-Off, the distributions of the
stock of Waddell & Reed Asset Management Company, a wholly owned subsidiary of
Torchmark ("WRAMCO") by certain members of the

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<PAGE>

Company Group and the Torchmark Group on September 30, 1997 (the "WRAMCO Spin-
Off") and certain other transactions (collectively, the "Restructuring
Transactions"). However, the Company will be responsible for any tax liability
of the Company Group or the Torchmark Group with respect to a Restructuring
Transaction caused by or resulting from a breach by any member of the Company
Group of certain agreements made in the Tax Disaffiliation Agreement or
certain of the representations, warranties, or agreements set forth in the
private letter ruling request and supplements filed with the Internal Revenue
Service with respect to the Spin-Off, but only to the extent that the
Torchmark Group in the aggregate is liable for more taxes than it would have
been had such breach not occurred. In the event that such tax liabilities with
respect to a Restructuring Transaction were to become payable by the Company,
such payment could have a material adverse effect on the Company. The Company
will be entitled to any tax refund that is attributable to both an entity and
a taxable year or period for which the Company has tax liability under the Tax
Disaffiliation Agreement. No member of the Company Group may carry back any
net operating loss from a tax period after the Offering to a tax period before
the Offering. Members of the Company Group may carry back any credit or other
tax attribute attributable to a member of the Company Group from a tax period
after the Offering to a tax period before the Offering and receive a payment
related to the associated tax benefit, unless such carry back results in a
material detriment to any member of the Torchmark Group. Torchmark has full
responsibility and discretion to file tax returns for periods during which the
Company Group and the Torchmark Group are included in the same consolidated
group for federal income tax purposes or the same consolidated, combined, or
unitary returns for state, local, or foreign tax purposes.

Subadvisory Investment Management Agreements. Prior to the date of the
Offering, the Company, through a wholly owned subsidiary, has provided
subadvisory services to WRAMCO, to support WRAMCO's investment advisory
services to pension funds and to Torchmark. Pursuant to a Subadvisory
Investment Management Agreement, a subsidiary of the Company will continue to
provide investment advisory services to WRAMCO to support WRAMCO's advisory
services provided to its pension fund clients. The Company will receive an
advisory fee based on a percentage of net assets, with such percentage
believed to approximate market. Through a separate Subadvisory Investment
Management Agreement, the Company will continue to provide certain investment
advisory services to WRAMCO to support WRAMCO's advisory services provided to
Torchmark. Such advisory services will be limited to advice relating to the
management of high yield portfolio investments, emerging market investments,
and certain other types of investments, and the advisory fee will be based on
a percentage of net assets, with such percentage believed to approximate
market. These agreements expire on October 1, 1998.

Other Services. Prior to the Offering, the Company provided certain services
to WRAMCO. The Company will continue to provide certain services to WRAMCO,
including, among others, data processing services and mail services. The
Company will receive payment for such services based on the costs actually
incurred on a time and materials basis. In addition, the Company will provide
certain maintenance services pursuant to a Maintenance Agreement with TMK
Income Properties, L.P. a partnership in which Torchmark holds a majority
interest.

Agent Agreements. The Company will continue to have the right to distribute
variable annuities and life insurance products, Medicare supplement, and long
term care insurance underwritten by Torchmark. The current General Agent
Contract (relating to variable annuities and life insurance products) and the
current Independent Agent Contract (relating to Medicare supplement and long
term care insurance) between such parties entered into prior to the Offering
will each be extended through December 31, 1998 on their current terms.

Other. As of September 30, 1997, TMK Income Properties, L.P. owed the
Company approximately $723,000 pursuant to a promissory note bearing interest
at a rate of 8% per annum with a maturity date of December 31, 2002.

For a description of certain other transactions with Torchmark, see Note 6
of Notes to Consolidated Financial Statements.

Any future material transactions between the Company and Torchmark and its
affiliates will be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties on an arm's-length basis and would be
approved by a majority of the Company's independent and disinterested
directors. The Company's

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<PAGE>

Board of Directors will be advised in advance of any such proposed
transactions that are material to the Company and will utilize such procedures
in evaluating their terms and provisions as are appropriate in light of the
Board's fiduciary duties under state law. Depending on the nature and size of
the particular transaction, in any such review the Board may rely on
management's knowledge, utilize outside experts or consultants, secure
appraisals, refer to industry statistics or prices or take such other actions
as are appropriate under the circumstances. The Certificate of Incorporation
contains provisions that address certain potential conflicts of interest
between Torchmark and the Company. See "Description of Capital Stock--
Certificate of Incorporation and Bylaw Provisions--Corporate Opportunity and
Conflicts of Interest Policy."

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of shares of Class A
Common Stock, shares of Class B Common Stock, and shares of Preferred
Stock. No Preferred Stock is outstanding as of the date of this Prospectus. Of
the shares of Class A Common Stock authorized, shares will be
outstanding and held by Torchmark upon consummation of the Offering and
shares are being offered in the Offering ( shares if the Underwriters'
over-allotment option is exercised in full), and shares have been reserved
for issuance pursuant to certain employee benefits plans. See "Management--
Compensation, Benefits, and Retirement Plans." Of the shares of Class B
Common Stock authorized, will be outstanding and held by Torchmark upon
consummation of the Offering. The following summary description of the capital
stock of the Company is qualified by reference to the Certificate of
Incorporation and Bylaws of the Company, copies of which are filed as exhibits
to the Registration Statement.

COMMON STOCK

Voting Rights. The holders of Class A Common Stock and Class B Common Stock
have identical rights except that (i) holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are
entitled to votes per share on all matters to be voted on by stockholders
and (ii) holders of Class A Common Stock are not eligible to vote on matters
relating exclusively to Class B Common Stock and vice versa. Holders of shares
of Class A Common Stock and Class B Common Stock are not entitled to cumulate
their votes in the election of directors. Generally, all matters to be voted
on by stockholders must be approved by a majority (or, in the case of election
of directors, by a plurality) of the votes entitled to be cast by all shares
of Class A Common Stock and Class B Common Stock present in person or
represented by proxy, voting together as a single class, subject to any voting
rights granted to holders of any Preferred Stock. Except as otherwise provided
by law, and subject to any voting rights granted to holders of any outstanding
Preferred Stock, amendments to the Company's Certificate of Incorporation
generally must be approved by a majority of the combined voting power of all
Class A Common Stock and Class B Common Stock voting together as a single
class. Amendments to the Company's Certificate of Incorporation that would
alter or change the powers, preferences, or special rights of the Class A
Common Stock or the Class B Common Stock so as to affect them adversely also
must be approved by a majority of the votes entitled to be cast by the holders
of the shares affected by the amendment, voting as a separate class.
Notwithstanding the foregoing, any amendment to the Company's Certificate of
Incorporation to increase the authorized shares of any class or classes of
stock will be deemed not to affect adversely the powers, preferences, or
special rights of the Class A Common Stock or Class B Common Stock.

Dividends. Holders of Class A Common Stock and Class B Common Stock will
receive an equal amount per share in any dividend declared by the Board of
Directors, subject to any preferential rights of any outstanding Preferred
Stock. Dividends consisting of shares of Class A Common Stock and Class B
Common Stock may be paid only as follows: (i) shares of Class A Common Stock
may be paid only to holders of Class A Common Stock and shares of Class B
Common Stock may be paid only to holders of Class B Common Stock and (ii)
shares will be paid proportionally with respect to each outstanding share of
Class A Common Stock and Class B Common Stock.

Other Rights. On liquidation, dissolution, or winding up of the Company,
after payment in full of the amounts required to be paid to holders of
Preferred Stock, if any, all holders of Common Stock, regardless of class, are
entitled to share ratably in any assets available for distribution to holders
of shares of Common Stock. No shares of Common Stock are subject to redemption
or have preemptive rights to purchase additional shares of Common Stock. Upon
consummation of the Offering, all the outstanding shares of Class A Common
Stock and Class B Common Stock will be validly issued, fully paid, and
nonassessable.

Preferred Stock. As of the date of this Prospectus, no shares of Preferred
Stock are outstanding. The Board of Directors may authorize the issuance of
Preferred Stock in one or more series and may determine, with respect to any
such series, the designations, powers, preferences, and rights of such series,
and its qualifications,

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limitations, and restrictions, including, without limitation, (i) the
designation of the series; (ii) the number of shares of the series, which
number the Board of Directors may thereafter (except where otherwise provided
in the designations for such series) increase or decrease (but not below the
number of shares of such series then outstanding); (iii) whether dividends, if
any, will be cumulative or noncumulative and the dividend rate of the series;
(iv) the conditions upon which and the dates at which dividends, if any, will
be payable, and the relation that such dividends, if any, will bear to the
dividends payable on any other class or classes of stock; (v) the redemption
rights and price or prices, if any, for shares of the series; (vi) the terms
and amounts of any sinking fund provided for the purchase or redemption of
shares of the series; (vii) the amounts payable on and the preferences, if
any, of shares of the series, in the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the Company; (viii)
whether the shares of the series will be convertible into shares of any other
class or series, or any other security, of the Company or any other
corporation, and, if so, the specification of such other class or series or
such other security, the conversion price or prices or rate or rates, any
adjustments thereof, the date or dates as of which such shares will be
convertible and all other terms and conditions upon which such conversion may
be made; and (ix) the voting rights, if any, of the holders of shares of such
series.

The Company believes that the ability of the Board of Directors to issue one
or more series of Preferred Stock will provide the Company with flexibility in
structuring possible future financings and acquisitions and in meeting other
corporate needs that might arise. The authorized shares of Preferred Stock
will be available for issuance without further action by the Company's
stockholders, unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which the Company's
securities may be listed or traded. The New York Stock Exchange, Inc. (the
"NYSE") currently requires stockholder approval as a prerequisite to listing
shares in several instances, including where the present or potential issuance
of shares could result in an increase in the number of shares of common stock
outstanding, or in the amount of voting securities outstanding, of at least
20%.

Although the Board of Directors has no current intention of doing so, it
could issue a series of Preferred Stock that could, depending on the terms of
such series, impede the completion of a merger, tender offer, or other
takeover attempt. The Board of Directors will make any determination to issue
such shares based on its judgment as to the best interests of the Company and
its stockholders. The Board of Directors, in so acting, could issue Preferred
Stock having terms that could discourage a potential acquirer from making,
without first negotiating with the Board of Directors, an acquisition attempt
through which such acquirer may be able to change the composition of the Board
of Directors, including a tender offer or other transaction that some, or a
majority, of the Company's stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock
over the then current market price of such stock.

BUSINESS COMBINATION STATUTE

As a corporation organized under the laws of the State of Delaware, the
Company will be subject to (S) 203 of the DGCL, which restricts certain
business combinations between the Company and an "interested stockholder" (in
general, a stockholder owning 15% or more of the Company's outstanding voting
stock) or its affiliates or associates for a period of three years following
the time that the stockholder becomes an "interested stockholder." The
restrictions do not apply if (i) prior to an interested stockholder becoming
such, the Board of Directors approved either the business combination or the
transaction that resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction that resulted in any
person becoming an interested stockholder, such interested stockholder owns at
least 85% of the voting stock of the Company outstanding at the time the
transaction commenced (excluding shares owned by certain employee stock
ownership plans and persons who are both directors and officers of the
Company); or (iii) at or subsequent to the time an interested stockholder
becomes such, the business combination is both approved by the Board of
Directors and authorized at an annual or special meeting of the Company's
stockholders, not by written consent, by the affirmative vote of at least 66
2/3% of the outstanding voting stock not owned by the interested stockholder.
Because Torchmark became an interested stockholder at a time when the
restrictions did not apply, the restrictions will not apply to any business
combination with Torchmark.

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Under certain circumstances, (S) 203 of the DGCL makes it more difficult for
a person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
under (S) 203. The Certificate of Incorporation of the Company does not
exclude the Company from the restrictions imposed under (S) 203 of the DGCL.
It is anticipated that the provisions of (S) 203 of the DGCL may encourage
companies interested in acquiring the Company to negotiate in advance with the
Board of Directors, since the stockholder approval requirement would be
avoided if a majority of the directors then in office approves, prior to the
date on which a stockholder becomes an interested stockholder, either the
business combination or the transaction that results in the stockholder
becoming an interested stockholder.

CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS

The summary set forth below describes certain provisions of the Certificate
of Incorporation and Bylaws. The summary is qualified in its entirety by
reference to the provisions of the Certificate of Incorporation and Bylaws,
copies of which will be filed as exhibits to the Registration Statement of
which this Prospectus forms a part.

Certain of the provisions of the Certificate of Incorporation and Bylaws
discussed below may have the effect, either alone or in combination with the
provisions of (S) 203 discussed above, of making more difficult or
discouraging a tender offer, proxy contest, or other takeover attempt that is
opposed by the Board of Directors but that a stockholder might consider to be
in such stockholder's best interest. Those provisions include (i) the
classification of the Company's Board of Directors; (ii) restrictions on the
rights of stockholders to remove or elect directors; and (iii) prohibitions
against stockholders calling a special meeting of stockholders or acting by
unanimous written consent in lieu of a meeting. In addition, the Certificate
of Incorporation contains provisions relating to the allocation of certain
corporate opportunities and resolution of certain potential conflicts of
interest. See "--Corporate Opportunity and Conflict of Interest Policies."

Classified Board; Number of Directors; Removal; Filling Vacancies

The Certificate of Incorporation and Bylaws of the Company provide that the
Board of Directors--except for directors who may be elected by the holders of
Preferred Stock--will be divided into three classes of directors, initially
with four directors in two of the classes and two directors in the third
class. See "Management--Directors and Executive Officers." One class is to be
originally elected for a term expiring at the annual meeting of stockholders
to be held in 1999, another class is to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 2000, and another
class is to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 2001. Each director is to hold office until his or
her successor is duly elected and qualified. Commencing with the 1999 annual
meeting of stockholders, directors elected to succeed directors whose terms
then expire will be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election, with each
director to hold office until such person's successor is duly elected and
qualified.

The Certificate of Incorporation provides that, subject to any rights of
holders of Preferred Stock to elect directors under specified circumstances,
the number of directors will be fixed from time to time exclusively pursuant
to a resolution adopted by directors constituting a majority of the total
number of directors that the Company would have if there were no vacancies on
the Board of Directors (the "Whole Board"), with the Whole Board consisting of
not more than 15 nor less than seven directors. The Certificate of
Incorporation also provides that, subject to any rights of holders of
Preferred Stock or any other series or class of stock, and unless the Board of
Directors otherwise determines, any vacancies will be filled only by the
affirmative vote of a majority of the remaining directors, even if less than a
quorum. Accordingly, absent an amendment to the Bylaws, the Board of Directors
could prevent any stockholder from enlarging the Board of Directors and
filling the new directorships with such stockholder's own nominees.

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The Certificate of Incorporation and Bylaws of the Company provide that,
subject to the rights of holders of Preferred Stock to elect directors under
specified circumstances, effective as of the date on which Torchmark
beneficially owns less than a majority of the Voting Stock (as defined below)
(the "Trigger Date"), directors may be removed only for cause and only upon
the affirmative vote of holders of at least 80% of the voting power of all the
then outstanding shares of stock entitled to vote generally in the election of
directors ("Voting Stock"), voting together as a single class. Before the
Trigger Date, directors may be removed, without cause, with the affirmative
vote of the holders of at least a majority of the voting power of the then
outstanding Voting Stock, voting together as a single class.

The classification of directors will have the effect of making it more
difficult for stockholders to change the composition of the Board of
Directors. At least two annual meetings of stockholders, instead of one, will
generally be required to effect a change in a majority of the Board of
Directors. Such a delay may help ensure that the Company's directors, if
confronted by a holder attempting to force a proxy contest, a tender or
exchange offer, or an extraordinary corporate transaction, would have
sufficient time to review the proposal as well as any available alternatives
to the proposal and to act in what they believe to be the best interest of the
stockholders. The classification provisions will apply to every election of
directors, however, regardless of whether a change in the composition of the
Board of Directors would be beneficial to the Company and its stockholders and
whether or not a majority of the Company's stockholders believe that such a
change would be desirable. The classification provisions could also have the
effect of discouraging a third party from initiating a proxy contest, making a
tender offer or otherwise attempting to obtain control of the Company, even
though such an attempt might be beneficial to the Company and its
stockholders. The classification of the Board of Directors could thus increase
the likelihood that incumbent directors will retain their positions. In
addition, because the classification provisions may discourage accumulations
of large blocks of the Company's stock by purchasers whose objective is to
take control of the Company and remove a majority of the Board of Directors,
the classification of the Board of Directors could tend to reduce the
likelihood of fluctuations in the market price of the Common Stock that might
result from accumulations of large blocks. Accordingly, stockholders could be
deprived of certain opportunities to sell their shares of Common Stock at a
higher market price than might otherwise be the case.

No Stockholder Action By Written Consent; Special Meetings

The Certificate of Incorporation and Bylaws provide that, effective as of
the Trigger Date, and subject to the rights of any holders of Preferred Stock
to elect additional directors under specified circumstances, stockholder
action can be taken only at an annual or special meeting of stockholders and
stockholder action may not be taken by written consent in lieu of a meeting.
The Bylaws provide that, subject to the rights of holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
special meetings of stockholders can be called only by the Board of Directors
pursuant to a resolution adopted by a majority of the Whole Board or the
Chairman of the Board, except that prior to the Trigger Date, special meetings
can also be called at the request of the holders of a majority of the voting
power of the then outstanding Voting Stock. Effective as of the Trigger Date,
stockholders will not be permitted to call a special meeting or to require
that the Board of Directors call a special meeting of stockholders. Moreover,
the business permitted to be conducted at any special meeting of stockholders
is limited to the business brought before the meeting pursuant to the notice
of meeting given by the Company.

The provisions of the Certificate of Incorporation and Bylaws of the Company
prohibiting stockholder action by written consent and permitting special
meetings to be called only by the Chairman or at the request of a majority of
the Whole Board may have the effect, after the Trigger Date, of delaying
consideration of a stockholder proposal until the next annual meeting. The
provisions would also prevent the holders of a majority of the voting power of
the Voting Stock from unilaterally using the written consent procedure to take
stockholder action. Moreover, a stockholder could not force stockholder
consideration of a proposal over the opposition of the Chairman or a majority
of the Whole Board by calling a special meeting of stockholders prior to the
time such parties believe such consideration to be appropriate.

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Liability of Directors; Indemnification

The Certificate of Incorporation provides that a director will not be
personally liable for monetary damages to the Company or its stockholders for
breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders;
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; (iii) for paying a dividend or
approving a stock repurchase in violation of (S) 174 of the DGCL; or (iv) for
any transaction from which the director derived an improper personal benefit.
Any amendment or repeal of such provision will not adversely affect any right
or protection of a director existing under such provision for any act or
omission occurring prior to such amendment or repeal.

The Bylaws provide that the Company will indemnify any person who was or is
a party to any threatened, pending, or completed action, suit, or proceeding
because he or she is or was a director or officer of the Company, or is or was
serving at the request of the Company as a director or officer of another
corporation, partnership, or other enterprise. The Bylaws provide that this
indemnification will be from and against expenses, judgments, fines, and
amounts paid in settlement by the indemnitee. However, this indemnification
will only be provided if the indemnitee acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the Company.

Corporate Opportunity and Conflict of Interest Policies

In order to address certain potential conflicts of interest between the
Company and Torchmark, the Certificate of Incorporation contains provisions
concerning the conduct of certain affairs of the Company as they may involve
Torchmark and its subsidiaries (other than the Company and its subsidiaries)
and their respective officers and directors, and the powers, rights, duties,
and liabilities of the Company and its subsidiaries and their respective
officers, directors, and stockholders in connection therewith. In general,
these provisions recognize that the Company and Torchmark may engage in the
same or similar business activities and lines of business and have an interest
in the same areas of corporate opportunities and that the Company and
Torchmark will continue to have contractual and business relations with each
other (including service of officers and directors of Torchmark as directors
of the Company). See "Management--Directors and Executive Officers."

For purposes of these provisions, the terms "Company" and "Torchmark"
include their subsidiaries and other entities in which they respectively
beneficially own, directly or indirectly, 50% or more of the outstanding
voting securities or interests (except that "Torchmark" does not include the
Company and its subsidiaries and such other entities), and, in the case of
Torchmark, all successors to Torchmark by way of merger, consolidation, or
sale of all or substantially all its assets.

The Certificate of Incorporation provides that any person purchasing or
otherwise acquiring any interest in any shares of capital stock of the Company
will be deemed to have notice of and to have consented to these provisions.

Before the Trigger Date, the affirmative vote of the holders of more than
80% of the outstanding Voting Stock, voting together as a single class, will
be required to alter, amend, or repeal any of these conflict of interest or
corporate opportunity provisions in a manner adverse to the interests of
Torchmark. After the Trigger Date, the conflict of interest and corporate
opportunity provisions will terminate.

Corporate Opportunity Policy. The Certificate of Incorporation provides
that, except as Torchmark may otherwise agree in writing, Torchmark will have
the right (i) to engage in the same or similar business activities or lines of
business as the Company; (ii) to do business with any potential or actual
client, customer, or supplier of the Company; and (iii) to employ or engage
any officer or employee of the Company. Neither Torchmark nor any officer or
director of Torchmark will be liable to the Company or its stockholders for
breach of any fiduciary duty by reason of these activities.

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If Torchmark acquires knowledge of a potential transaction or matter that
may be a corporate opportunity for both Torchmark and the Company, Torchmark
will have no duty to communicate that opportunity to the Company. Furthermore,
Torchmark will not be liable to the Company or its stockholders because
Torchmark pursues or acquires such corporate opportunity for itself, directs
that corporate opportunity to another person or entity, or does not present
that corporate opportunity to the Company.

If a director or officer of the Company who is also a director or officer of
Torchmark acquires knowledge of a potential transaction or matter that may be
a corporate opportunity for both the Company and Torchmark, the Certificate of
Incorporation requires that the director or officer of the Company act in good
faith in accordance with the following three-part policy, and a director or
officer so acting will be deemed to have acted reasonably and in good faith
and fully to have satisfied his or her duties of loyalty and fiduciary duties
to the Company and its stockholders with respect to such opportunity.

First, a corporate opportunity offered to any person who is a director but
not an officer of the Company and who is also an officer (whether or not a
director) of Torchmark will belong to Torchmark, unless the opportunity is
expressly offered to that person primarily in his or her capacity as a
director of the Company, in which case the opportunity will belong to the
Company.

Second, a corporate opportunity offered to any person who is an officer
(whether or not a director) of the Company and who is also a director but not
an officer of Torchmark will belong to the Company, unless the opportunity is
expressly offered to that person primarily in his or her capacity as a
director of Torchmark, in which case the opportunity will belong to Torchmark.

Third, a corporate opportunity offered to any other person who is either an
officer of both the Company and Torchmark or a director of both the Company
and Torchmark will belong to Torchmark or to the Company, as the case may be,
if the opportunity is expressly offered to the person primarily in his or her
capacity as an officer or director of Torchmark or of the Company,
respectively. Otherwise, the opportunity will belong to Torchmark.

Under the Certificate of Incorporation, any corporate opportunity that
belongs to Torchmark or to the Company pursuant to the foregoing policy will
not be pursued by the other (or directed by the other to another person or
entity) unless and until Torchmark or the Company, as the case may be,
determines not to pursue the opportunity. If the party to whom the corporate
opportunity belongs does not, however, within a reasonable period of time,
begin to pursue, or thereafter continue to pursue, such opportunity diligently
and in good faith, the other party may pursue such opportunity (or direct it
to another person or entity).

A director or officer of the Company who acts in accordance with the
foregoing three-part policy (i) will be deemed fully to have satisfied his or
her fiduciary duties to the Company and its stockholders with respect to such
corporate opportunity; (ii) will not be liable to the Company or its
stockholders for any breach of fiduciary duty by reason of the fact that
Torchmark pursues or acquires such opportunity for itself or directs such
corporate opportunity to another person or entity or does not communicate
information regarding such opportunity to the Company; (iii) will be deemed to
have acted in good faith and in a manner he or she reasonably believes to be
in the best interests of the Company; and (iv) will be deemed not to have
breached his or her duty of loyalty to the Company or its stockholders and not
to have derived an improper benefit therefrom.

Under the Certificate of Incorporation, "corporate opportunities"
potentially allocable to the Company consist of business opportunities that
(i) the Company is financially able to undertake; (ii) are, from their nature,
in the Company's line or lines of business and are of practical advantage to
the Company; and (iii) are ones in which the Company has an interest or
reasonable expectancy. In addition, "corporate opportunities" do not include
transactions in which the Company or Torchmark is permitted to participate
pursuant to any agreement between the Company and Torchmark that is in effect
as of the time any equity security of the Company is held of record by any
person other than Torchmark or subsequently entered into with the approval of
the members of the Board of Directors.

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For purposes of these corporate-opportunity provisions, a director of the
Company who is chairman of the Board of Directors (or a committee thereof) or
chief executive officer will not be deemed to be an officer of the Company by
reason of holding such position, unless such person is a full-time employee of
the Company.

Conflict of Interests Policy. The Certificate of Incorporation provides that
no contract, agreement, arrangement, or transaction between the Company and
Torchmark or any customer or supplier or any entity in which a director of the
Company has a financial interest (a "Related Entity"), or between the Company
and one or more of the directors or officers of the Company, Torchmark, or any
Related Entity; any amendment, modification, or termination thereof; or any
waiver of any right thereunder, will be voidable solely because Torchmark or
such customer or supplier, any Related Entity, or any one or more of the
officers or directors of the Company, Torchmark, or any Related Entity are
parties thereto, or solely because any such directors or officers are present
at or participate in the meeting of the Board of Directors or committee
thereof that authorizes the contract, agreement, arrangement, transaction,
amendment, modification, termination, or waiver (each, a "Transaction") or
solely because their votes are counted for such purpose, if the standard
specified is satisfied. That standard will be satisfied, and Torchmark, the
Related Entity, and the directors and officers of the Company, Torchmark, or
the Related Entity (as applicable) will be deemed to have acted reasonably and
in good faith (to the extent such standard is applicable to such person's
conduct) and fully to have satisfied any duties of loyalty and fiduciary
duties they may have to the Company and its stockholders with respect to such
Transaction if any of the following four requirements are met:

(i) the material facts as to the relationship or interest and as to the
Transaction are disclosed or known to the Board of Directors or the
committee thereof that authorizes the Transaction, and the Board of
Directors or such committee in good faith approves the Transaction by the
affirmative vote of a majority of the disinterested directors on the Board
of Directors or such committee, even if the disinterested directors are
less than a quorum;

(ii) the material facts as to the relationship or interest and as to the
Transaction are disclosed or known to the holders of Voting Stock entitled
to vote thereon, and the Transaction is specifically approved by vote of
the holders of a majority of the voting power of the then outstanding
Voting Stock not owned by Torchmark or such Related Entity, voting together
as a single class;

(iii) the Transaction is effected pursuant to guidelines that are in good
faith approved by a majority of the disinterested directors on the Board of
Directors or the applicable committee thereof or by vote of the holders of
a majority of the then outstanding Voting Stock not owned by Torchmark or
such Related Entity, voting together as a single class; or

(iv) the Transaction is fair to the Company as of the time it is approved
by the Board of Directors, a committee thereof or the stockholders of the
Company.

The Certificate of Incorporation also provides that any such Transaction
authorized, approved, or effected, and each of such guidelines so authorized
or approved, as described in (i), (ii), or (iii) above, will be deemed to be
entirely fair to the Company and its stockholders, except that, if such
authorization or approval is not obtained, or such Transaction is not so
effected, no presumption will arise that such Transaction or guideline is not
fair to the Company and its stockholders. In addition, the Certificate of
Incorporation provides that Torchmark will not be liable to the Company or its
stockholders for breach of any fiduciary duty that Torchmark may have as a
stockholder of the Company by reason of the fact that Torchmark takes any
action in connection with any transaction between Torchmark and the Company.

LISTING

The Company intends to apply for the listing of the Class A Common Stock on
the New York Stock Exchange under the symbol WDR.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is First Chicago Trust
Company of New York.

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SHARES ELIGIBLE FOR FUTURE SALE

Before the Offering, there has been no market for the Common Stock of the
Company. Future sales or distributions of substantial amounts of Common Stock
in the public market could adversely affect prevailing market prices.
Torchmark has advised the Company that it intends to effect the Spin-Off,
subject to conditions. See "Certain Transactions--Relationship with
Torchmark--Spin-Off."

Upon completion of the Offering, the Company will have shares of Class A
Common Stock issued and outstanding ( Shares of Class A Common Stock if
the Underwriters' over-allotment option is exercised in full) and shares of
Class B Common Stock issued and outstanding. All of the shares of Class A
Common Stock to be sold in the Offering will be freely tradable without
restrictions, or further registration under the Securities Act, except that
shares purchased by an "affiliate" of the Company (as that term is defined in
Rule 144 (an "Affiliate")) will be subject to the resale limitations of Rule
144. None of the outstanding shares of Common Stock owned by Torchmark has
been registered under the Securities Act, and may be sold only pursuant to an
effective registration statement under the Securities Act or in accordance
with Rule 144 or another exemption from registration ("Restricted Shares").

The Restricted Shares will constitute "restricted securities" within the
meaning of Rule 144 promulgated under the Securities Act and will be eligible
for sale in the open market after the Offering subject to the Lock-Up
Agreement and applicable requirements of Rule 144 described below. For as long
as Torchmark is able to cause a majority of the Company's Board of Directors
to be elected, it will be able to require the Company at any time to register
under the Securities Act all or a portion of the Common Stock owned by it, in
which event such shares could be sold publicly upon the effectiveness of any
such registration without restriction. In addition, under the Affiliate
Agreements, Torchmark will have the right to require the Company to use its
best efforts to register for sale its shares of Common Stock and to include
such shares of Common Stock in certain registration statements. See "Certain
Transactions--Relationship with Torchmark."

In general, under Rule 144 as currently in effect, if a period of at least
one year has elapsed between the later of the date on which "restricted
shares" (as that phrase is defined in Rule 144) were acquired from the Company
and the date on which they were acquired from an Affiliate, then the holder of
such restricted shares (including an Affiliate) is entitled to sell a number
of shares within any three-month period that does not exceed the greater of
(i) one percent of the then outstanding shares of the Common Stock or (ii) the
average weekly reported volume of trading of the Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain requirements pertaining to the manner of such sales, notices of such
sales, and the availability of current public information concerning the
Company. Because Torchmark will be deemed to have held its shares of Common
Stock for more than one year, Torchmark will be able to sell its shares of
Common Stock in the public markets without registration immediately upon
expiration of the Lock-Up Agreement, subject to the foregoing volume limits.
Affiliates may sell shares not constituting restricted shares in accordance
with the foregoing volume limitations and other requirements but without
regard to the one-year period. Under Rule 144(k), if a period of at least two
years has elapsed between the later of the date on which restricted shares
were acquired from the Company and the date on which they were acquired from
an Affiliate, a holder of such restricted shares who is not an Affiliate at
the time of the sale and has not been an Affiliate for at least three months
prior to the sale would be entitled to sell the shares immediately without
regard to the volume limitations and other conditions described above. The
foregoing description of Rule 144 is not intended to be complete, and Rule 144
in its entirety should be referred to.

Sales of significant amounts of the Class A Common Stock or Class B Common
Stock, or the perception that such sales could occur, could have an adverse
effect on the market price of the Class A Common Stock. Each of the Company
and Torchmark have agreed that during the period beginning on the date of this
Prospectus and continuing to and including the date 180 days after the date of
this Prospectus, it will not offer, sell, contract to sell, or otherwise
dispose of any shares of Class A Common Stock or Class B Common Stock (other
than pursuant to employee benefit plans existing, or on conversion or exchange
of convertible or exchangeable securities outstanding, on the date of this
Prospectus or as payment for acquisitions by the Company) without

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the prior written consent of Morgan Stanley & Co. Incorporated, except for the
shares of Class A Common Stock offered in connection with the Offering. See
"Underwriters."

CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS

The following is a general discussion of certain United States Federal
income and estate tax considerations with respect to the ownership and
disposition of Class A Common Stock applicable to Non-U.S. Holders. In
general, a "Non-U.S. Holder" is any holder other than (i) a citizen or
resident of the United States; (ii) a corporation or partnership created or
organized in the United States or under the laws of the United States or of
any state; (iii) an estate, the income of which is includable in gross income
for United States federal income tax purposes regardless of its source; or
(iv) a trust if (a) a court within the United States is able to exercise
primary supervision over the administration of the trust and (b) one or more
United States persons have the authority to control all substantial decisions
of the trust. This discussion is based on current law, which is subject to
change (possibly with retroactive effect), and is for general information
only. This discussion does not address all aspects of income and estate
taxation or any aspects of state, local or non-United States taxes, nor does
it consider any specific facts or circumstances that may apply to a particular
Non-U.S. Holder (including certain U.S. expatriates). ACCORDINGLY, PROSPECTIVE
INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES
FEDERAL, STATE, LOCAL, AND NON-UNITED STATES INCOME AND OTHER TAX
CONSIDERATIONS OF HOLDING AND DISPOSING OF SHARES OF CLASS A COMMON STOCK.

DIVIDENDS

In general, dividends paid to a Non-U.S. Holder will be subject to United
States withholding tax at a 30% rate of the gross amount (or a lower rate
prescribed by an applicable income tax treaty) unless the dividends are either
(i) effectively connected with a trade or business carried on by the Non-U.S.
Holder within the United States or (ii) if certain income tax treaties apply,
attributable to a permanent establishment in the United States maintained by
the Non-U.S. Holder. Dividends effectively connected with such a United States
trade or business or attributable to such a United States permanent
establishment generally will not be subject to United States withholding tax
if the Non-U.S. Holder files certain forms, including Internal Revenue Service
Form 4224, with the payor of the dividend, and generally will be subject to
United States federal income tax on a net income basis, in the same manner as
if the Non-U.S. Holder were a resident of the United States. A Non-U.S. Holder
that is a corporation may be subject to an additional branch profits tax at a
rate of 30% (or such lower rate as may be specified by an applicable income
tax treaty) on the repatriation from the United States of its "effectively
connected earnings and profits," subject to certain adjustments. To determine
the applicability of a tax treaty providing for a lower rate of withholding
under the currently effective Treasury Regulations (the "Current
Regulations"), dividends paid to an address in a foreign country are presumed
to be paid to a resident of that country absent knowledge to the contrary.
Under Treasury Regulations issued on October 6, 1997 (the "Final
Regulations"), generally effective for payments made after December 31, 1998,
a Non-U.S. Holder (including, in certain cases of Non-U.S. Holders that are
entities, the owner or owners of such entities) will be required to satisfy
certain certification requirements in order to claim a reduced rate of
withholding pursuant to an applicable income tax treaty.

GAIN OR SALE OR OTHER DISPOSITION OF CLASS A COMMON STOCK

In general, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the sale or other disposition of such
holder's shares of Class A Common Stock unless (i) the gain either is
effectively connected with a trade or business carried on by the Non-U.S.
Holder within the United States or, if certain income tax treaties apply, is
attributable to a permanent establishment in the United States maintained by
the Non-U.S. Holder (and, in either case, the branch profits tax discussed
above may also apply if the Non-U.S. Holder is a corporation); (ii) the Non-
U.S. Holder is an individual who holds shares of Class A Common Stock

58
<PAGE>

as a capital asset and is present in the United States for 183 days or more in
the taxable year of disposition and certain other tests are met; or (iii) the
Company is or has been a United States real property holding corporation (a
"USRPHC") for United States Federal income tax purposes (which the Company
does not believe that it has been, currently is, or will become) at any time
within the shorter of the five-year period preceding such disposition or such
Non-U.S. Holder's holding period. If the Company were or were to become a
USRPHC at any time during this period, gains realized upon a disposition of
Class A Common Stock by a Non-U.S. Holder that did not directly or indirectly
own more than 5% of the Class A Common Stock during this period generally
would not be subject to United States Federal income tax, provided that the
Class A Common Stock is regularly traded on an established securities market.

ESTATE TAX

Class A Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as defined for United States Federal estate tax purposes)
of the United States at the time of death will be includable in the
individual's gross estate for United States Federal estate tax purposes unless
an applicable estate tax treaty provides otherwise, and therefore may be
subject to United States Federal estate tax.

BACKUP WITHHOLDING, INFORMATION REPORTING, AND OTHER REPORTING REQUIREMENTS

The Company must report annually to the Internal Revenue Service and to each
Non-U.S. Holder the amount of dividends paid to, and the tax withheld with
respect to, each Non-U.S. Holder. These reporting requirements apply
regardless of whether withholding was reduced or eliminated by an applicable
tax treaty. Copies of this information also may be made available under the
provisions of a specific treaty or agreement with the tax authorities in the
country in which the Non-U.S. Holder resides or is established.

Under the Current Regulations, United States backup withholding tax (which
generally is imposed at the rate of 31% on certain payments to persons that
fail to furnish the information required under the United States information
reporting requirements) and information reporting requirements (other than
those discussed above under "Dividends") generally will not apply to dividends
paid on Class A Common Stock to a Non-U.S. holder at an address outside the
United States. Backup withholding and information reporting generally will
apply, however, to dividends paid on shares of Class A Common Stock to a Non-
U.S. Holder at an address in the United States, if such holder fails to
establish an exemption or to provide certain other information to the payor.

Under the Current Regulations, the payment of proceeds from the disposition
of Class A Common Stock to or through a United States office of a broker will
be subject to information reporting and backup withholding unless the
beneficial owner, under penalties of perjury, certifies, among other things,
its status as a Non-U.S. Holder or otherwise establishes an exemption. The
payment of proceeds from the disposition of Class A Common Stock to or through
a non-U.S. office of a broker generally will not be subject to backup
withholding and information reporting except as noted below. In the case of
proceeds from a disposition of Class A Common Stock paid to or through a non-
U.S. office of a broker that is (i) a United States person; (ii) a "controlled
foreign corporation" for United States Federal income tax purposes; or (iii) a
foreign person 50% or more of whose gross income from certain periods is
effectively connected with a United States trade or business, information
reporting (but not backup withholding) will apply unless the broker has
documentary evidence in its files that the owner is a Non-U.S. Holder (and the
broker has no actual knowledge to the contrary).

Under the Final Regulations, the payment of dividends or the payment of
proceeds from the disposition of Class A Common Stock to a Non-U.S. Holder may
be subject to information reporting and backup withholding unless such
recipient satisfies applicable certification requirements or otherwise
establishes an exemption.

Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-U.S. Holder will be refunded
or credited against the Non-U.S. Holder's United States Federal income tax
liability, if any, provided that the required information is furnished to the
Internal Revenue Service in a timely manner.

59
<PAGE>

UNDERWRITERS

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement"),
the U.S. Underwriters named below for whom Morgan Stanley & Co. Incorporated
is acting as U.S. Representative, and the International Underwriters named
below for whom Morgan Stanley & Co. International Limited is acting as
International Representative, have severally agreed to purchase, and the
Company has agreed to sell to them, severally, the respective number of shares
of Class A Common Stock set forth opposite the names of such Underwriters
below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated...................................
----
Subtotal..........................................................
International Underwriters:
Morgan Stanley & Co. International Limited..........................
----
Subtotal..........................................................
----
Total...........................................................
====
</TABLE>

The U.S. Underwriters and the International Underwriters, and the U.S.
Representative and the International Representative are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Class A Common
Stock offered hereby are subject to the approval of certain legal matters by
their counsel and to certain other conditions. The Underwriters are obligated
to take and pay for all of the shares of Class A Common Stock offered hereby
(other than those covered by the U.S. Underwriters' over-allotment option
described below) if any such shares are taken.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions (i)
it is not purchasing any Shares (as defined below,) for the account of anyone
other than a United States or Canadian Person (as defined below) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly,
any Shares or distribute any prospectus relating to Shares outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions (i) it is not purchasing any Shares for the account of any United
States or Canadian person and (ii) it has not offered or sold, and will not
offer or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States
or Canadian Person. With respect to any Underwriter that is a U.S. Underwriter
and an International Underwriter, the foregoing representations and agreements
(i) made by it in its capacity as a U.S. Underwriter apply only to it in its
capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter apply only to it in its capacity as an International
Underwriter. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement
between the U.S. and International Underwriters. As used herein, "United
States or Canadian Person" means any national or resident of the United States
or Canada, or any corporation, pension, profit-sharing, or other trust or
other entity organized under the laws of the United States or Canada or of any
political subdivision thereof (other than a branch located outside the United
States and Canada of any United States or Canadian Person). All shares of
Class A Common Stock to be purchased by the Underwriters are referred to
herein as the "Shares."

Pursuant to the Agreement between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of
any number of Shares as may be mutually agreed. The per share price of any
Shares so sold will be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per
share amount of the concession to dealers set forth below.

60
<PAGE>

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has
agreed not to offer or sell, any Shares, directly or indirectly, in any
province or territory of Canada in contravention of the securities laws
thereof and has represented that any offer of Shares in Canada will be made
only pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will
not offer or sell, directly or indirectly, any of such Shares in any province
or territory of Canada or to, or for the benefit of, any resident of any
province or territory of Canada in contravention of the securities laws
thereof and that any offer of Shares in Canada will be made only pursuant to
an exemption from the requirement to file a prospectus in the province or
territory of Canada in which such offer or sale is made, and that such dealer
will deliver to any other dealer to whom it sells any of such Shares a notice
containing substantially the same statement as is contained in this sentence.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not
offered or sold and, prior to the date six months after the closing date for
the sale of the Shares to the International Underwriters, will not offer or
sell, any Shares to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing, or disposing
of investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances that have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the Shares in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and
will only issue or pass on in the United Kingdom any document received by it
in connection with the offering of the Shares to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document
may otherwise be lawfully issued or passed on.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or
sales to Japanese International Underwriters or dealers and except pursuant to
any exemption from the registration requirements of the Securities and
Exchange Law and otherwise in compliance with applicable provisions of
Japanese law. Each International Underwriter has further agreed to send to any
dealer who purchases from it any of the Shares a notice stating in substance
that, by purchasing such Shares, such dealer represents and agrees that it has
not offered or sold, and will not offer or sell, any of such Shares, directly
or indirectly, in Japan or to or for the account of any resident thereof
except for offers or sales to Japanese International Underwriters or dealers
and except pursuant to any exemption from the registration requirements of the
Securities and Exchange Law and otherwise in compliance with applicable
provisions of Japanese law, and that such dealer will send to any other dealer
to whom it sells any of such Shares a notice containing substantially the same
statement as is contained in this sentence.

The Underwriters initially propose to offer part of the Shares directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price that represents a concession not in excess
of $ per share under the public offering price. Any Underwriter may allow,
and such dealers may reallow, a concession not in excess of $ per share to
other Underwriters or to certain other dealers. After the initial offering of
the Shares, the offering price and other selling terms may from time to time
be varied by the Representatives.

The Company has granted to the U.S. Underwriters an option, exercisable for
30 days from the date of this Prospectus, to purchase up to an aggregate of
additional shares of Class A Common Stock at the price to public set
forth on the cover page hereof, less underwriting discounts and commissions.
The U.S. Underwriters

61
<PAGE>

may exercise such option solely for the purpose of covering over-allotments,
if any, made in connection with the offering of the shares of Class A Common
Stock offered hereby. To the extent such option is exercised, each U.S.
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Class A Common
Stock as the number set forth next to such U.S. Underwriter's name in the
preceding table bears to the total number of shares of Class A Common Stock
set forth next to the names of all U.S. Underwriters in the preceding table.

The Underwriters have informed the Company that they do not intend for sales
to discretionary accounts to exceed five percent of the aggregate number of
shares of Class A Common Stock offered by them.

The Company will apply to have the Class A Common Stock listed on the New
York Stock Exchange under the symbol "WDR."

Each of the Company and Torchmark has agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it
will not, during the period ending 180 days after the date of this Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer, lend or dispose of, directly or
indirectly, any shares of Class A Common Stock or any securities convertible
into or exercisable or exchangeable for Class A Common Stock, or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Class A Common
Stock whether any such transaction described in clause (i) or (ii) above is
settled by delivery of Class A Common Stock, or such other securities, in
cash, or otherwise. The restrictions described in this paragraph do not apply
to (x) the sale of Shares to the Underwriters, (y) the issuance by the Company
of shares of Class A Common Stock upon the exercise of an option or warrant or
the conversion of a security outstanding on the date of this Prospectus of
which the Underwriters have been advised in writing, or (z) transactions by
any person other than the Company or Torchmark relating to shares of Class A
Common Stock or other securities acquired in open market transactions after
the completion of the Offering. The restriction on the Company and Torchmark
is subject to exceptions for the issuance of Class A Common Stock pursuant to
employee benefit plans and as payment for acquisitions by the Company.

In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain, or otherwise affect the price of the
Class A Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offering, creating a short position in the Class A Common
Stock for their own account. In addition, to cover over-allotments or to
stabilize the price of the Class A Common Stock, the Underwriters may bid for,
and purchase, shares of Class A Common Stock in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an
Underwriter or a dealer for distributing the Class A Common Stock in the
Offering, if the syndicate repurchases previously distributed Class A Common
Stock in transactions to cover syndicate short positions, in stabilization
transactions, or otherwise. Any of these activities may stabilize or maintain
the market price of the Class A Common Stock above independent market levels.
The Underwriters are not required to engage in these activities, and may end
any of these activities at any time.

From time to time, Morgan Stanley & Co. Incorporated has provided, and
continues to provide, investment banking services to Torchmark Corporation and
the Company.

Torchmark, the Company, and the Underwriters have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act.

DIRECTED SHARE PROGRAM

At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price, up to shares of the Class A Common Stock
offered hereby for directors, officers, employees, business associates, and
related persons of the Company. The number of shares of Class A Common Stock
available for

62
<PAGE>

sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares that are not so purchased will be
offered by the Underwriters to the general public on the same basis as the
other shares offered hereby.

PRICING OF THE OFFERING

Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price will be determined by
negotiations between Torchmark and the Company on the one hand and the U.S.
Representative on the other hand. Among the factors to be considered in
determining the initial public offering price will be the future prospects of
the Company and its industry in general, sales, earnings, and certain other
financial operating information of the Company in recent periods, and the
price-earnings ratios, price-sales ratios, market prices of securities and
certain financial and operating information of companies engaged in activities
similar to those of the Company. The estimated initial public offering price
range set forth on the cover page of this Prospectus is subject to change as a
result of market conditions and other factors.

LEGAL MATTERS

The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Hughes & Luce, L.L.P., Dallas, Texas. Certain
legal matters in connection with the sale of shares of Class A Common Stock in
the Offering will be passed upon for the Underwriters by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York.

EXPERTS

The Consolidated Financial Statements of the Company as of December 31, 1995
and 1996, and for each of the years in the three-year period ended December
31, 1996 included in this Prospectus have been so included in reliance on the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (as amended from time to time and together with all exhibits and schedules
thereto, the "Registration Statement") under the Securities Act with respect
to the Class A Common Stock to be sold in the Offering. This Prospectus
constitutes a part of the Registration Statement and does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the content of any contract or
other document are not necessarily complete, and in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respect
by such reference. For further information regarding the Company and the Class
A Common Stock, reference is hereby made to the Registration Statement, a copy
of which may be obtained from the Commission at its principal office in
Washington, D.C. upon payment of the fees prescribed by the Commission.

The Registration Statement, and the reports and other information to be
filed by the Company with the Commission following the Offering in accordance
with the Exchange Act, can be inspected and copied at the principal office of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the
Commission: 7 World Trade Center, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may be obtained from the Commission's website,
http//www.sec.gov, and from the Public Reference Section of the Commission at
its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of the fees prescribed by the Commission.

63
<PAGE>

APPENDIX I

FUND SUMMARY

For the United Funds and TMK/United Funds, the total management fee for each
Fund is the sum of (i) a fee computed on a Fund's net asset value as of the
close of business on each business day at an annual rate specified in the
respective Investment Management Agreements (the "Specific Fee") and (ii) a
fee computed each day on the combined net asset values of all Funds in the
group of Funds of which the particular Fund is a member (the "Group Fee"). The
Group Fee rate for the United Funds is computed each day on the basis of the
combined net asset value of all of the United Funds at annual rates of .51% of
the first $750 million of the United Funds' net asset values declining to .36%
of the United Funds' net asset values in excess of $12 billion. The Group Fee
rate for TMK/United Funds is computed each day on the basis of the combined
net asset value of all the series at annual rates of .51% of the first $750
million of the TMK/United Funds' net asset value declining to .45% of the
TMK/United Funds' net asset value in excess of $2.25 billion. For the series
of W&R Funds, the total management fee is the Specific Fee computed daily on
each series' net assets value at the annual rate shown in the table set forth
below.

The following table sets forth, for each mutual fund or portfolio within the
Funds, the date that shares in such Fund were first offered to the public, the
net assets of such Fund as of September 30, 1997, a description of the Funds'
investment objectives, and the Specific Fee for each Fund.

A-1
<PAGE>

<TABLE>
<CAPTION>
NET ASSETS SPECIFIC FEE
FIRST AT SEPTEMBER 30, 1997 AS A FRACTION
FUND/PORTFOLIO NAME OFFERED (DOLLARS IN MILLIONS) DESCRIPTION OF FUND OF 1%
- ------------------- ------- --------------------- ------------------------- -------------
<S> <C> <C> <C> <C>
United Science and 1950 $1,084 Seeks long-term capital .20
Technology Fund growth through a
portfolio emphasizing
science and technology
securities.
United Gold & Government 1985 $ 22 Seeks high total return .30
Fund, Inc. through investing in
precious metals, mineral-
related securities and
gold, silver and platinum
during periods of actual
or expected inflation or
when the environment for
investments in precious
metals appears to be
favorable, and U.S.
Government securities
during periods of actual
or expected disinflation
or low inflation.
United Government 1982 $ 129 Seeks high current income None
Securities Fund, Inc. consistent with safety of
principal.
United High Income Fund, 1979 $1,069 Seeks a high level of .15
Inc. current income, with a
secondary objective of
seeking capital growth
when consistent with its
primary objective.
United High Income Fund 1986 $ 409 Seeks a high level of .15
II, Inc. current income, with a
secondary objective of
seeking capital growth
when consistent with its
primary objective.
United International 1970 $1,073 Seeks long-term capital .30
Growth Fund, Inc. appreciation, with a
secondary objective of
realization of income, by
investing in securities
issued by companies or
governments of any
nation.
United Municipal Bond 1976 $ 994 Seeks income that is not .03
Fund, Inc. subject to Federal income
taxation by investing
principally in tax-exempt
municipal bonds.
United Municipal High 1986 $ 474 Seeks a high level of .10
Income Fund, Inc. income that is not
subject to Federal income
taxation by investing
principally in medium and
lower quality tax-exempt
municipal bonds.
</TABLE>

A-2
<PAGE>

<TABLE>
<CAPTION>
NET ASSETS SPECIFIC FEE
FIRST AT SEPTEMBER 30, 1997 AS A FRACTION
FUND/PORTFOLIO NAME OFFERED (DOLLARS IN MILLIONS) DESCRIPTION OF FUND OF 1%
- ------------------- ------- --------------------- ------------------------- -------------
<S> <C> <C> <C> <C>
United New Concepts 1983 $ 675 Seeks capital growth by .35
Fund, Inc. investing in securities
issued by relatively new
or unseasoned companies,
companies in the early
stages of development or
smaller companies in new
and emerging industries
with above average
opportunity for growth.
United Retirement 1972 $ 753 Seeks the highest long- .15
Shares, Inc. term total return
consistent with
reasonable safety of
capital.
United Vanguard Fund, 1969 $1,483 Seeks capital .30
Inc. appreciation through
diversified holdings of
securities issued
primarily by companies
that have appreciation
possibilities and through
proper timing of
purchases and sales of
securities.
WADDELL & REED FUNDS,
INC.
Total Return Fund 1992 $ 411 Seeks current income and .71
capital growth by
investing in securities
issued by companies that
have a record of paying
regular dividends on
common stock or have the
potential for capital
appreciation.
Growth Fund 1992 $ 261 Seeks capital .81
appreciation by investing
principally in securities
issued by companies that
offer above-average
growth potential,
including relatively new
or unseasoned companies.
Limited-Term Bond Fund 1992 $ 18 Seeks a high level of .56
current income consistent
with preservation of
capital by investing
primarily in debt
securities issued or
guaranteed by the U.S.
government or its
agencies or
instrumentalities and
maintaining a dollar-
weighted average maturity
of the portfolio of two
to five years.
</TABLE>

A-3
<PAGE>

<TABLE>
<CAPTION>
NET ASSETS SPECIFIC FEE
FIRST AT SEPTEMBER 30, 1997 AS A FRACTION
FUND/PORTFOLIO NAME OFFERED (DOLLARS IN MILLIONS) DESCRIPTION OF FUND OF 1%
- ------------------- ------- --------------------- ------------------------- -------------
<S> <C> <C> <C> <C>
Municipal Bond Fund 1992 $ 38 Seeks income that is not .56
subject to Federal income
taxation by investing
primarily in municipal
bonds.
International Growth 1992 $ 73 Seeks long-term .81
Fund appreciation, with a
secondary goal of
realization of income, by
investing in securities
issued by companies or
governments of any
nation.
Asset Strategy Fund 1995 $ 16 Seeks high total return .81
over the long term by
allocating assets among
stocks, bonds and short-
term instruments.
Science and Technology 1997 $ 2 Seeks long-term capital .71
Fund growth through a
portfolio emphasizing
science and technology
securities.
High Income Fund 1997 $ 3 Seeks a high level of .66
current income, with a
secondary objective of
seeking capital growth
when consistent with its
primary objective.
TMK/UNITED FUNDS, INC.
Money Market Portfolio 1987 $ 43 Seeks maximum current None
income consistent with
stability of principal by
investing in money market
securities.
Bond Portfolio 1987 $ 96 Seeks current income with .03
an emphasis on
preservation of capital.
High Income Portfolio 1987 $114 Seeks high current .15
income, with a secondary
goal of capital growth.
Growth Portfolio 1987 $645 Seeks capital growth with .20
current income as a
secondary objective.
Income Portfolio 1991 $634 Seeks maintenance of .20
current income, subject
to market conditions with
a secondary goal of
capital growth.
</TABLE>

A-4
<PAGE>

<TABLE>
<CAPTION>
NET ASSETS SPECIFIC FEE
FIRST AT SEPTEMBER 30, 1997 AS A FRACTION
FUND/PORTFOLIO NAME OFFERED (DOLLARS IN MILLIONS) DESCRIPTION OF FUND OF 1%
- ------------------- ------- --------------------- ------------------------- -------------
<S> <C> <C> <C> <C>
International Portfolio 1994 $113 Seeks long-term .30
appreciation of capital,
with current income as a
secondary objective by
investing principally in
securities issued by
companies or governments
of any nation.
Small Cap Portfolio 1994 $142 Seeks capital growth by .35
investing primarily in
securities issued by
relatively new or
unseasoned companies,
companies in their early
stages of development or
smaller companies
positioned in new and
emerging industries with
above average opportunity
for rapid growth.
Balanced Portfolio 1994 $ 62 Seeks current income with .10
a secondary goal of long-
term appreciation of
capital.
Limited-Term Bond 1994 $ 4 Seeks a high level of .05
Portfolio current income consistent
with preservation of
capital by investing
primarily in debt
securities of investment
grade and maintaining a
dollar weighted average
maturity of the portfolio
of two to five years.
Asset Strategy Portfolio 1995 $ 10 Seeks high total return .30
over the long term by
allocating its assets
among stocks, bonds and
short-term instruments.
Science and Technology 1997 $ 8 Seeks long-term capital .20
Portfolio growth through a
portfolio emphasizing
science and technology
securities.
</TABLE>

A-5
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF WADDELL & REED FINANCIAL, INC. AND SUBSIDIARY
Consolidated Balance Sheets as of December 31, 1996 and September 30, 1997 (unaudited)......... F-2
Consolidated Statements of Income for the nine month periods ended September 30, 1996 and 1997
(unaudited)................................................................................... F-3
Consolidated Statements of Common Shareholders' Equity for the nine month period ended
September 30, 1997 (unaudited)................................................................ F-4
Consolidated Statements of Cash Flows for the nine month periods ended September 30, 1996 and
1997 (unaudited).............................................................................. F-5
Notes to Unaudited Consolidated Financial Statement............................................ F-6
CONSOLIDATED FINANCIAL STATEMENTS OF WADDELL & REED FINANCIAL, INC. AND SUBSIDIARY
Independent Auditors' Report................................................................... F-8
Consolidated Balance Sheets as of December 31, 1995 and 1996................................... F-9
Consolidated Statements of Income for the years ended December 31, 1994, 1995 and 1996......... F-10
Consolidated Statements of Common Shareholder's Equity for the years ended December 31, 1994,
1995 and 1996................................................................................. F-11
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996..... F-12
Notes to Consolidated Financial Statements..................................................... F-13
</TABLE>

F-1
<PAGE>

WADDELL & REED FINANCIAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents......................... $ 59,003 43,979
Investments securities, available-for-sale........ 19,980 19,071
Receivables:
United Funds and W&R Funds....................... 3,579 4,305
Customers and other.............................. 11,986 13,161
Due from affiliates (note 2)...................... 364 5,420
Income taxes receivable........................... -- 1,336
Deferred income taxes............................. 120 1,640
Prepaid expenses and other current assets......... 2,151 2,027
-------- -------
Total current assets............................ 97,183 90,939
Due from affiliates............................... 124,133 127,046
Property and equipment, net....................... 10,392 11,028
Investment in real estate, net.................... 17,092 --
Investment in real estate partnership............. -- 17,567
Deferred sales commissions, net................... 10,439 11,683
Goodwill (net of accumulated amortization of
$14,575 and $16,752)............................. 101,734 99,557
Other assets...................................... 8,329 720
-------- -------
Total assets.................................... $369,302 358,540
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Current liabilities:
Accounts payable.................................. $ 24,832 27,479
Due to affiliates (note 2)........................ 2,428 1,194
Accrued salesforce compensation................... 9,007 7,663
Income taxes payable.............................. 18,249 5,000
Other current liabilities......................... 8,146 7,526
-------- -------
Total current liabilities....................... 62,662 48,862
Due to affiliates................................. 124,133 127,046
Deferred income taxes............................. 947 2,259
Accrued pensions and post-retirement costs........ 7,938 9,236
Other liabilities................................. 1,043 --
-------- -------
Total liabilities............................... 196,723 187,403
Shareholders' equity (note 3):
Common stock ($1 par value; 1,000 shares
authorized, issued and outstanding).............. 1 1
Additional paid-in capital........................ 172,414 170,843
Retained earnings................................. -- --
Unrealized gain on available-for-sale securities.. 164 293
-------- -------
Total shareholders' equity.................... 172,579 171,137
-------- -------
Total liabilities and shareholders' equity.... $369,302 358,540
======== =======
</TABLE>

See notes to condensed consolidated financial statements.

F-2
<PAGE>

WADDELL & REED FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997

<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Revenue (note 2):
Investment management fees...................... $ 74,434 84,472
Underwriting and distribution fees.............. 65,132 65,756
Shareholder servicing fees...................... 20,654 22,966
Investment and other revenue.................... 3,692 2,829
-------- -------
Total revenue................................. 163,912 176,023
-------- -------
Expenses:
Underwriting and distribution................... 58,263 58,773
Compensation and related costs.................. 17,704 18,508
General and administrative...................... 6,719 4,844
Depreciation.................................... 1,338 965
Amortization of goodwill........................ 2,177 2,177
-------- -------
Total expenses................................ 86,201 85,267
-------- -------
Income before interest and provision for income
taxes............................................ 77,711 90,756
Interest:
Income.......................................... -- 5,578
Expense......................................... -- (5,578)
-------- -------
Income before provision for income taxes.......... 77,711 90,756
Provision for income taxes........................ 30,369 35,249
-------- -------
Net income........................................ $ 47,342 55,507
======== =======
</TABLE>

See notes to condensed consolidated financial statements.

F-3
<PAGE>

WADDELL & REED FINANCIAL, INC.

CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN RETAINED UNREALIZED TOTAL
------------- CAPITAL EARNINGS GAIN (LOSS) ON STOCKHOLDERS'
SHARES AMOUNT (NOTE 3) (NOTE 3) INVESTMENT EQUITY
------ ------ ---------- -------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 1,000 $ 1 172,414 -- 164 172,579
Net income............ -- -- -- 55,507 -- 55,507
Contributions from
parent............... -- -- 50,444 -- -- 50,444
Other distributions... -- -- (52,015) (2,530) -- (54,545)
Cash dividend to
parent............... -- -- -- (52,977) -- (52,977)
Unrealized gain on
investment
securities........... -- -- -- -- 129 129
----- ---- ------- ------- --- -------
Balance at September 30,
1997................... 1,000 $ 1 170,843 -- 293 171,137
===== ==== ======= ======= === =======
</TABLE>

See notes to condensed consolidated financial statements.

F-4
<PAGE>

WADDELL & REED FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997

<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 47,342 55,507
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 3,515 3,142
Loss on sale and retirement of fixed assets...... 312 2
Capital gains and dividends reinvested........... (59) (49)
Deferred income taxes............................ 2,641 2,420
Changes in assets and liabilities:
Receivables from funds.......................... 1,373 (726)
Other receivables............................... 794 (1,175)
Due to/due from affiliates--operating........... 883 (6,290)
Other assets.................................... (3,330) (3,946)
Accounts payable................................ (763) 2,647
Other liabilities............................... 2,566 (19,127)
-------- -------
Net cash provided by operating activities.......... 55,274 32,405
-------- -------
Cash flows from investing activities:
Additions to investments......................... (3) (558)
Proceeds from sales of investments............... -- 4
Proceeds from maturity of investments............ 918 1,816
Purchase of property and equipment............... (1,226) (1,777)
Purchase of real estate.......................... (163) --
Other............................................ 17 195
-------- -------
Net cash used in investing activities.............. (457) (320)
-------- -------
Cash flows from financing activities:
Cash dividends to parent......................... -- (52,977)
Change in due to/due from affiliates--non-
operating....................................... (100,556) (39,000)
Cash contributions from parent................... 56,492 44,868
-------- -------
Net cash used in financing activities.............. (44,064) (47,109)
-------- -------
Net increase (decrease) in cash and cash
equivalents....................................... 10,753 (15,024)
Cash and cash equivalents at beginning of period... 41,788 59,003
-------- -------
Cash and cash equivalents at end of period......... $ 52,541 43,979
======== =======
Cash paid for interest............................. $ -- 2,644
======== =======
Cash paid for income taxes......................... $ 32,855 39,449
======== =======
</TABLE>

See Note 2 for non-cash investing and financing activities.

See notes to condensed consolidated financial statements.

F-5
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) INTERIM REPORTING AND BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements are unaudited
and should be read in conjunction with the annual consolidated financial
statements and notes included elsewhere in this prospectus. In the opinion of
management, the interim financial statements reflect all adjustments,
consisting of normal recurring adjustments, which are necessary for fair
presentation of financial position, results of operations and cash flows for
the interim periods. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the entire year.
Balance sheet information as of December 31, 1996 has been derived from the
audited financial statements as of that date.

Waddell & Reed Financial, Inc. is owned by Torchmark Corporation and
Torchmark's subsidiary Liberty National Life Insurance Company. Torchmark and
its subsidiaries, other than Waddell & Reed Financial, Inc., are referred to
herein as "Torchmark". In December 1997, Waddell & Reed Financial, Inc.'s name
was changed from United Investors Management Company to Waddell & Reed
Financial, Inc. In the first quarter of 1998, the insurance operations of
Waddell & Reed Financial, Inc., United Investors Life Insurance Company, were
distributed to Torchmark. Waddell & Reed Financial, Inc.'s remaining
subsidiary is Waddell & Reed Financial Services, Inc. and its subsidiaries
(WRFS).

The accompanying financial statements include accounts of Waddell & Reed
Financial, Inc. and WRFS (the Company) for all periods presented. All
significant intercompany accounts and transactions are eliminated in
consolidation.

(2) TRANSACTIONS WITH RELATED PARTIES

The Company serves as investment adviser to various affiliates of Torchmark
and receives advisory fees for this service. Advisory fees, which are based on
assets under management, amounted to $770,000 and $846,000 for the periods
ended September 30, 1996 and 1997, respectively.

The Company earns commissions from Torchmark for marketing life and health
insurance products. For the periods ended September 30, 1996 and 1997, the
commissions amounted to $9,440,000 and $9,332,000, respectively. These
commissions were earned under contracts which have been renewed for 1998 with
substantially the same terms.

Torchmark performs certain administrative services for the Company. Charges
for such services which are allocated based on a formula using assets and
compensation expense were $1,642,000 and $1,472,000 for the periods ended
September 30, 1996 and 1997, respectively.

The current amounts due from affiliates at December 31, 1996 and September
30, 1997 include non-interest bearing advances for current operating expenses
and commissions due from the sale of affiliates' products. The 1997 non-
current amounts due from affiliates include a $123,947,000 note receivable
from Torchmark, plus $3,099,000 of accrued interest. The 6% note requires
semi-annual interest payments and matures May 1, 2000. During the periods
ended September 30, 1996 and 1997, amounts due from Torchmark aggregating
$87,806,000 and $94,576,000, respectively, were forgiven and charged against
shareholders' equity.

The current amounts due to affiliates at December 31, 1996 and September 30,
1997 include amounts due for administrative services. Included in the 1997
balance, is a $123,947,000 note payable to Liberty, plus $3,099,000 of accrued
interest. The 6% note requires semi-annual interest payments and matures May
1, 2000.

Effective September 1997, Waddell & Reed Asset Management Company (WRAMCO),
a subsidiary of WRFS, was distributed to Torchmark at its net book value of
$2,977,000. WRAMCO provides investment

F-6
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

management services to institutional investors. The Company intends to enter
into a subadvisory management agreement to continue to provide investment
advisory services to WRAMCO.

(3) SHAREHOLDERS' EQUITY

As discussed in note 1, the condensed consolidated financial statements
include only the amounts for the Company. Transactions involving former
subsidiaries of the Company and Torchmark are reflected as due to/due from
affiliates. To the extent such transactions resulted in a gain or loss, such
amounts are reflected in additional paid-in capital or retained earnings.
Retained earnings have been charged for dividends and other distributions to
the Company's parent to the extent such retained earnings were sufficient. The
excess has been charged to additional paid-in capital.

F-7
<PAGE>

When the transaction referred to in Note 1 has been consummated, we will be
in a position to render the following report.

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Waddell & Reed Financial, Inc.:

We have audited the accompanying consolidated balance sheets of Waddell &
Reed Financial, Inc. and subsidiaries, a subsidiary of Torchmark Corporation,
as of December 31, 1995 and 1996 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements 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 are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Waddell &
Reed Financial, Inc. and subsidiaries as of December 31, 1995 and 1996 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.

December 19, 1997

KPMG Peat Marwick LLP

F-8
<PAGE>

WADDELL & REED FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>
1995 1996
-------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents (note 2).......................... $ 41,788 59,003
Investment securities, available-for-sale (note 3).......... 21,211 19,980
Receivables:
United Funds and W&R Funds................................ 4,751 3,579
Customers and other....................................... 14,711 11,986
Due from affiliates (note 6)................................ 1,097 364
Deferred income taxes (note 8).............................. 329 120
Prepaid expenses and other current assets................... 2,406 2,151
-------- -------
Total current assets...................................... 86,293 97,183
Due from affiliates (note 6)................................ -- 124,133
Property and equipment, net (note 4)........................ 10,774 10,392
Investment in real estate, net (note 5)..................... 16,794 17,092
Deferred sales commissions, net............................. 6,637 10,439
Goodwill (net of accumulated amortization of $11,672 and
$14,575)................................................... 104,637 101,734
Other assets................................................ 2,061 8,329
-------- -------
Total assets.............................................. $227,196 369,302
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Current liabilities:
Accounts payable............................................ $ 25,084 24,832
Due to affiliates (note 6).................................. 13,620 2,428
Accrued salesforce compensation............................. 7,431 9,007
Income taxes payable........................................ 5,125 18,249
Other current liabilities................................... 3,908 8,146
-------- -------
Total current liabilities................................. 55,168 62,662
-------- -------
Due to affiliates (note 6).................................. -- 124,133
Deferred income taxes (note 8).............................. 329 947
Accrued pensions and post-retirement costs (notes 9 and
10)........................................................ 8,305 7,938
Other liabilities........................................... 1,279 1,043
-------- -------
Total liabilities......................................... 65,081 196,723
-------- -------
Shareholders' equity (note 7):
Common stock ($1 par value; 1,000 shares authorized,
issued and outstanding).................................... 1 1
Additional paid-in capital.................................. 161,850 172,414
Retained earnings........................................... -- --
Unrealized gain on available-for-sale securities............ 264 164
-------- -------
Total shareholders' equity................................ 162,115 172,579
-------- -------
Commitments, contingencies and subsequent events (notes 14 and
15)
Total liabilities and shareholders' equity................ $227,196 369,302
======== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-9
<PAGE>

WADDELL & REED FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue (note 6):
Investment management fees........................ $ 70,711 85,289 101,466
Underwriting and distribution fees................ 72,150 70,393 85,837
Shareholder servicing fees........................ 22,297 23,527 28,378
Investment and other revenue...................... 3,878 4,295 5,295
-------- ------- -------
Total revenue....................................... 169,036 183,504 220,976
-------- ------- -------
Expenses:
Underwriting and distribution..................... 62,748 64,082 78,915
Compensation and related costs.................... 18,106 21,304 21,913
General and administrative........................ 6,863 8,594 10,180
Depreciation...................................... 1,565 1,914 1,758
Amortization of goodwill.......................... 2,903 2,903 2,903
-------- ------- -------
Total expenses...................................... 92,185 98,797 115,669
-------- ------- -------
Income before interest and provision for income
taxes.............................................. 76,851 84,707 105,307
Interest (note 6):
Income............................................ -- -- 186
Expense........................................... -- -- (186)
-------- ------- -------
Income before provision for income taxes............ 76,851 84,707 105,307
Provision for income taxes (note 8)................. 30,470 33,862 41,129
-------- ------- -------
Net income.......................................... $ 46,381 50,845 64,178
======== ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-10
<PAGE>

WADDELL & REED FINANCIAL, INC.

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN RETAINED UNREALIZED TOTAL
------------- CAPITAL EARNINGS GAIN (LOSS) ON STOCKHOLDERS'
SHARES AMOUNT (NOTE 7) (NOTE 7) INVESTMENT EQUITY
------ ------ ---------- -------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 1,000 $ 1 181,056 61,502 435 242,994
Net income.............. -- -- -- 46,381 -- 46,381
Contributions from
parent................. -- -- 13,988 -- -- 13,988
Other distributions..... -- -- (12,619) (27,914) -- (40,533)
Cash dividends to
parent................. -- -- -- (79,969) -- (79,969)
Unrealized loss on
investment securities.. -- -- -- -- (1,101) (1,101)
----- ---- -------- ------- ------ --------
Balance at December 31,
1994................... 1,000 $ 1 182,425 -- (666) 181,760
Net income.............. -- -- -- 50,845 -- 50,845
Contributions from
parent................. -- -- 13,236 -- -- 13,236
Other distributions..... -- -- (33,811) (50,845) -- (84,656)
Unrealized gain on
investment securities.. -- -- -- -- 930 930
----- ---- -------- ------- ------ --------
Balance at December 31,
1995................... 1,000 1 161,850 -- 264 162,115
Net income.............. -- -- -- 64,178 -- 64,178
Contributions from
parent................. -- -- 123,880 -- -- 123,880
Other distributions..... -- -- (113,316) (54,178) -- (167,494)
Cash dividends to
parent................. -- -- -- (10,000) -- (10,000)
Unrealized loss on
investment securities.. -- -- -- -- (100) (100)
----- ---- -------- ------- ------ --------
Balance at December 31,
1996................... 1,000 $ 1 172,414 -- 164 172,579
===== ==== ======== ======= ====== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-11
<PAGE>

WADDELL & REED FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 46,381 50,845 64,178
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 4,468 4,817 4,661
(Gain) loss on sale of investments............. 729 (30) --
Loss on sale and retirement of fixed assets.... 1 59 311
Capital gains and dividends reinvested......... (75) (60) (60)
Deferred income taxes.......................... 1,203 (186) 827
Changes in assets and liabilities:
Receivables from funds........................ (689) (1,606) 1,172
Other receivables............................. 3,821 (1,836) 2,725
Due to/due from affiliates--operating......... 1,076 (660) 1,703
Other assets.................................. (1,624) (3,317) (9,913)
Accounts payable.............................. (7,773) 7,488 (252)
Other liabilities............................. (4,094) 4,082 18,369
-------- -------- --------
Net cash provided by operating activities........ 43,424 59,596 83,721
-------- -------- --------
Cash flows from investing activities:
Additions to investments....................... (9,853) (917) (116)
Proceeds from sales of investments............. 23,284 1,201 --
Proceeds from maturity of investments.......... 4,286 1,440 1,355
Purchase of property and equipment............. (2,731) (1,428) (1,689)
Investment in real estate...................... (2,703) (312) (298)
Other.......................................... 113 25 18
-------- -------- --------
Net cash provided by (used in) investing activi-
ties............................................ 12,396 9 (730)
-------- -------- --------
Cash flows from financing activities:
Cash dividends to parent....................... (79,969) -- (10,000)
Change in due to/due from affiliates--non-
operating..................................... (9,871) (57,384) (167,494)
Cash contributions from parent................. 13,988 13,236 111,718
-------- -------- --------
Net cash used in financing activities............ (75,852) (44,148) (65,776)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents..................................... (20,032) 15,457 17,215
Cash and cash equivalents at beginning of
period.......................................... 46,363 26,331 41,788
-------- -------- --------
Cash and cash equivalents at end of period....... $ 26,331 41,788 59,003
======== ======== ========
Cash paid for income taxes....................... $ 31,656 33,084 43,667
======== ======== ========
</TABLE>

See Notes 6 and 7 for non-cash investing and financing activities.

See accompanying notes to consolidated financial statements.

F-12
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1994, 1995 AND 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Waddell & Reed Financial, Inc. is owned by Torchmark Corporation and
Torchmark's subsidiary Liberty National Life Insurance Company (Liberty).
Torchmark and its subsidiaries, other than Waddell & Reed Financial, Inc., are
referred to herein as "Torchmark". In December 1997, Waddell & Reed Financial,
Inc.'s name was changed from United Investors Management Company to Waddell &
Reed Financial, Inc. In the first quarter of 1998, the insurance operations of
Waddell & Reed Financial, Inc., United Investors Life Insurance Company, were
distributed to Torchmark. Waddell & Reed Financial, Inc.'s remaining
subsidiary is Waddell & Reed Financial Services, Inc. and its subsidiaries
(WRFS).

The accompanying financial statements include accounts of Waddell & Reed
Financial, Inc. and WRFS (the Company) for all periods presented (see note 7).
All significant intercompany accounts and transactions are eliminated in
consolidation.

Business

Through WRFS, the Company derives its revenue primarily from investment
management, administration, distribution and related services provided to the
United mutual funds and the Waddell & Reed mutual funds (the Funds) and
institutional accounts in the United States. The Funds and institutional
accounts operate under various rules and regulations set forth by the
Securities and Exchange Commission (SEC). Services to the Funds are provided
under contracts that set forth the fees to be charged for these services. The
majority of these contracts are subject to annual review and approval by each
fund's Board of Directors/Trustees and shareholders. Currently the United
Income Fund represents approximately 14% of total revenues. No other fund
represents 10% or more of revenues. Company revenues are largely dependent on
the total value and composition of assets under management, which include
domestic and international equity and debt securities; accordingly,
fluctuations in financial markets and composition of assets under management
impact revenues and results of operations.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and short-term investments.
The Company considers all highly liquid debt instruments with original
maturities of ninety days or less to be cash equivalents.

Revenue Recognition

Investment advisory and administrative service fees are recognized when
earned. Commission revenue and expenses (and related receivables and payables)
resulting from securities transactions are recorded on the date on which the
order to buy or sell securities is executed.

Advertising

Costs of advertising are expensed as incurred. Amounts charged to expense
were not significant for the years ended December 31, 1994, 1995 and 1996.

Investments Securities and Investment in Affiliated Mutual Funds

All investments in debt securities and affiliated stock and fixed income
mutual funds are classified as available-for-sale. As a result, these
investments are recorded at fair value. Unrealized holding gains and losses,
net of related tax effects, are excluded from earnings until realized and are
reported as a separate component of shareholders' equity.

F-13
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Concentrations of Credit Risk

Financial instruments which potentially expose the Company to concentrations
of credit risk, as defined by Statement of Financial Accounting Standards
(SFAS) No. 105, consist primarily of investments in U.S. government and agency
securities, municipal securities and affiliated money market and fixed income
mutual funds and accounts receivable. Credit risk is believed to be minimal in
that the U.S. government and agency securities are backed by the full faith
and credit of the U.S. government, municipal securities are backed by the full
taxing power of the issuing municipality or revenues from a specific project,
and the affiliated mutual funds have substantial net assets.

Property and Equipment

Property and equipment are carried at cost. Depreciation on property and
equipment is calculated using the straight-line method over the estimated
useful lives of the assets.

Goodwill

Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, arose in connection with the acquisition of the Company
by Torchmark. Amortization is on a straight-line basis over forty years. The
Company assesses the recoverability of goodwill and measures impairment, if
any, by determining whether the unamortized balance can be recovered through
undiscounted future operating cash flows over its remaining life.

Deferred Sales Commissions

The Company defers certain costs, principally selling commissions, that are
paid to financial advisors in connection with the sale of certain shares of
Waddell & Reed mutual funds (W&R Funds). These costs are amortized on a
straight line basis over a period not exceeding ten years. The Company
recovers such costs through 12b-1 distribution fees which are paid by the W&R
Funds and a continent deferred sales charge paid by shareholders who redeem
their shares prior to completion of the required holding period.

Income Taxes

The accounts of the Company are included in the consolidated federal income
tax return of Torchmark. The Company's provision for income taxes has been
made on the same basis as if the Company filed separate returns.

Disclosures About Fair Value of Financial Instruments

Given the nature of the Company's assets and liabilities, the Company
believes the amounts in the financial statements approximate fair value.

Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

(2) CASH AND CASH EQUIVALENTS

Cash and cash equivalents at December 31, 1995 and 1996 includes reserves of
$11,838,000 and $15,028,000, respectively, for the benefit of customers in
compliance with securities industry regulations and an

F-14
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

investment of $2,837,000 and $4,344,000, respectively, in a money market fund
for which the Company is principal underwriter and investment advisor.

(3) INVESTMENTS SECURITIES, AVAILABLE-FOR-SALE

Investments at December 31, 1995 and 1996, are as follows:

<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
1995 COST GAINS LOSSES VALUE
---- --------- ---------- ---------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
United States government-backed
mortgage securities............... $ 7,031 83 -- 7,114
Municipal bonds maturing:
After five years but within ten
years........................... 11,786 341 (22) 12,105
After ten years.................. 1,205 26 -- 1,231
Affiliated mutual funds............ 786 6 (31) 761
------- --- --- ------
$20,808 456 (53) 21,211
======= === === ======
<CAPTION>
1996
----
<S> <C> <C> <C> <C>
United States government-backed
mortgage securities............... $ 5,925 32 (17) 5,940
Municipal bonds maturing:
After five years but within ten
years........................... 11,760 276 (42) 11,994
After ten years.................. 1,196 12 -- 1,208
Affiliated mutual funds............ 833 9 (4) 838
------- --- --- ------
$19,714 329 (63) 19,980
======= === === ======
</TABLE>

(4) PROPERTY AND EQUIPMENT

A summary of property and equipment at December 31, 1995 and 1996 is as
follows:

<TABLE>
<CAPTION>
ESTIMATED
1995 1996 USEFUL LIVES
------- ------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Land............................................. $ 1,717 1,717 --
Building......................................... 6,215 6,242 40 years
Furniture and fixtures........................... 5,640 5,719 3-10 years
Equipment and machinery.......................... 6,629 6,186 3-10 years
------- ------ ----------
Property and equipment, at cost.................. 20,201 19,864
Less accumulated depreciation.................... 9,427 9,472
------- ------
Property and equipment, net...................... $10,774 10,392
======= ======
</TABLE>

F-15
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(5) INVESTMENT IN REAL ESTATE

A summary of investment in rental real estate at December 31, 1995 and 1996
is as follows:

<TABLE>
<CAPTION>
ESTIMATED
1995 1996 USEFUL LIVES
------- ------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Land............................................. $ 7,537 7,784 --
Buildings........................................ 10,337 10,771 40 years
------- ------ --------
Rental real estate, at cost...................... 17,874 18,555
Less accumulated depreciation.................... 1,080 1,463
------- ------
Rental real estate, net.......................... $16,794 17,092
======= ======
</TABLE>

Rental income of $866,000, $1,409,000 and $1,682,000 for the years ended
December 31, 1994, 1995 and 1996, respectively, is included in Investment and
Other Revenue. Depreciation expense for the years ended December 31, 1994,
1995 and 1996 was $237,000, $367,000 and $383,000, respectively.

Effective January 1, 1997, the Company contributed its investment in real
estate which is located adjacent to its offices in Overland Park, Kansas to
TMK Income Properties, L.P. (TMK) in exchange for a 14% limited partnership
interest in TMK. TMK is a limited partnership with other Torchmark affiliates
that was formed for the purpose of acquiring, developing and managing real
property. The property was transferred to TMK at the Company's net book value
as of December 31, 1996 of $11,961,000. Effective July 1, 1997, the Company
contributed additional land for an additional 5% limited partnership interest
in TMK. The land was transferred at the Company's net book value of
$5,113,000.

(6) TRANSACTIONS WITH RELATED PARTIES

The Company serves as investment adviser to various affiliates of Torchmark
and receives advisory fees for this service. Advisory fees, which are based on
assets under management, amounted to $175,000, $800,000 and $1,094,000 for the
years ended December 31, 1994, 1995 and 1996, respectively.

The Company earns commissions from Torchmark for marketing life and health
insurance products. For the years ended December 31, 1994, 1995 and 1996, the
commissions amounted to $11,766,000, $12,577,000 and $12,847,000,
respectively. These commissions were earned under contracts which have been
renewed for 1998 with substantially the same terms.

Torchmark performs certain administrative services for the Company. Charges
for such services which are allocated based on a formula using assets and
compensation expense were $2,904,000, $2,731,000 and $2,189,000 for the years
ended December 31, 1994, 1995 and 1996, respectively.

The current amounts due from affiliates at December 31, 1995 and 1996
include non-interest bearing advances for current operating expenses and
commissions due from the sale of affiliates' products. The 1996 non-current
amounts due from affiliates include a $123,947,000 note receivable from
Torchmark, plus $186,000 of accrued interest. The 6% note requires semi-annual
interest payments and matures May 1, 2000. During 1994, 1995 and 1996, amounts
due from Torchmark aggregating $40,533,000, $84,656,000 and $167,494,000,
respectively, were forgiven and charged against shareholders' equity.

The current amounts due to affiliates at December 31, 1995 and 1996 include
amounts due for administrative services. The December 31, 1995 non-current
amounts due to affiliates include a $12,000,000 payable to an affiliate, which
was repaid during 1996. Included in the 1996 balance, is a $123,947,000 note

F-16
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

payable to Torchmark, plus $186,000 of accrued interest. The 6% note requires
semi-annual interest payments and matures May 1, 2000.

Effective September 1997, Waddell & Reed Asset Management Company (WRAMCO),
a subsidiary of WRFS, was distributed to Torchmark at its net book value of
$2,977,000. WRAMCO provides investment management services to institutional
investors. The Company intends to enter into subadvisory agreements to
continue to provide investment advisory services to WRAMCO.

(7) SHAREHOLDERS' EQUITY

As discussed in note 1, the consolidated financial statements include only
amounts for the Company. Transactions involving former subsidiaries of Waddell
& Reed Financial, Inc., and Torchmark are reflected as due to/due from
affiliates. To the extent such transactions resulted in a gain or loss, such
amounts are reflected in additional paid-in capital or retained earnings.
Retained earnings has been charged for dividends and other distributions to
the Company's parent to the extent such retained earnings were sufficient. The
excess has been charged to additional paid-in capital.

(8) PROVISION FOR INCOME TAXES

The components of total income tax expense are as follows:

<TABLE>
<CAPTION>
1994 1995 1996
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal............................................. $25,482 30,219 34,833
State............................................... 3,785 3,829 5,469
------- ------ ------
29,267 34,048 40,302
Deferred taxes........................................ 1,203 (186) 827
------- ------ ------
$30,470 33,862 41,129
======= ====== ======
</TABLE>

The tax effect of temporary differences that give rise to significant
portions of deferred tax liabilities and deferred tax assets at December 31,
1995 and 1996 are as follows:

<TABLE>
<CAPTION>
1995 1996
------- ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Deferred sales commissions................................ (2,526) (3,967)
Fixed assets.............................................. (27) (418)
Other..................................................... (459) (458)
------- ------
Total gross deferred liabilities............................ (3,012) (4,843)
------- ------
Deferred tax assets:
Benefits plans............................................ 2,459 3,050
Other..................................................... 553 966
------- ------
Total gross deferred assets................................. 3,012 4,016
------- ------
Net deferred tax liability.................................. $ -- (827)
======= ======
</TABLE>

A valuation allowance for deferred tax assets was not necessary at December
31, 1995 and 1996.

F-17
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following table reconciles the statutory federal income tax rate with
the Company's effective income tax rate:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate.......................... 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefits............ 3.3 2.9 3.1
Other items................................................ 1.3 2.1 1.0
---- ---- ----
Effective income tax rate.................................. 39.6% 40.0% 39.1%
==== ==== ====
</TABLE>

(9) RETIREMENT PLAN

The Company sponsors a noncontributory retirement plan which covers
substantially all employees and, prior to 1996, the employees of former
affiliates. Benefits payable under the plan are based on employees' years of
service and compensation during the final ten years of employment.

At December 31, 1995 and 1996, the assumed discount rate, the rate at which
the plan benefit obligations could be settled, was 7.25% and 7.5%,
respectively. The estimated rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligation was 4.25% and 4.5% for December 31, 1995 and 1996, respectively.
The expected long-term rate of return on plan assets was 9.25% at December 31,
1995 and 1996.

The Company's funding policy is to contribute annually the maximum amount
that can be deducted for federal income tax purposes. Contributions are
intended to provide not only for benefits attributed to service to date but
also for those expected to be earned in the future.

All plan assets are commingled and available for distribution to all
participating employees, and thus, net pension cost includes the cost for the
Company, as well as affiliates.

Net pension cost for all companies for the years ended December 31, 1994,
1995 and 1996 included the following components:

<TABLE>
<CAPTION>
1994 1995 1996
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned during the period... $ 2,206 2,365 1,304
Interest cost on projected benefit obligation..... 1,888 2,103 1,953
Actual return on plan assets...................... 38 (3,626) (3,489)
Net amortization and deferral..................... (1,505) 2,078 1,679
------- ------ ------
Net periodic pension cost of all participating
companies........................................ $ 2,627 2,920 1,447
------- ------ ------
Company portion................................... $ 1,524 1,648 1,447
======= ====== ======
</TABLE>

F-18
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following table sets forth the plan's funded status as of December 31,
1995 and 1996:

<TABLE>
<CAPTION>
1995 1996
------- ------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.......................................... $16,575 17,715
Nonvested benefits....................................... 1,876 558
------- ------
Accumulated benefit obligation............................. 18,451 18,273
Increase in benefits due to future compensation increases.. 8,919 6,513
------- ------
Projected benefit obligation............................... 27,370 24,786
Estimated fair market value of plan assets................. 20,171 23,483
------- ------
Projected benefit obligation in excess of plan assets...... 7,199 1,303
Unrecognized net gain from past experience different from
that assumed and effects of changes in assumptions........ 1,757 3,482
Unrecognized net transition obligation being recognized
over 21.57 years.......................................... (229) (114)
Unrecognized prior service cost attributable to plan
amendments................................................ 552 (761)
------- ------
Pension liability of all participating companies........... $ 9,279 3,910
======= ======
Company portion............................................ $ 7,110 6,711
======= ======
</TABLE>

As of December 31, 1995, former affiliates ceased participation in the plan,
which resulted in a decrease in projected benefits of $3,683,000.

(10) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company sponsors an unfunded defined benefit postretirement medical plan
that covers substantially all its employees. The plan is contributory with
retiree contributions adjusted annually.

Net periodic postretirement benefit cost for the year ended December 31,
1994, 1995 and 1996 included the following components:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits attributed to service during the
year..................................................... $ 48 48 48
Interest cost on accumulated postretirement benefit
obligation............................................... 68 71 70
Amortization of unrecognized prior service cost........... (18) (18) (18)
---- --- ---
Net periodic postretirement benefit cost.................. $ 98 101 100
==== === ===
</TABLE>

F-19
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following table sets forth the plan's funded status as of December 31,
1995 and 1996:

<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees.................................................. $ 311 356
Fully eligible active plan participants................... 137 134
Other active plan participants............................ 400 382
------- ------
Total accumulated postretirement benefit obligation......... 848 872
------- ------
Unrecognized prior service cost........................... 240 223
Actuarial experience...................................... 107 132
------- ------
Accumulated postretirement benefit obligation in excess of
plan assets................................................ $ 1,195 1,227
======= ======
</TABLE>

The significant assumptions used in computing the APBO as of December 31,
1995 and 1996 are as follows:

<TABLE>
<CAPTION>
1995 1996
----------------- -----------------
<S> <C> <C>
Assumed health care cost trend rate
used to measure the expected cost of
benefits covered by the plan:
Current year........................ 11% 10%
Thereafter.......................... Decrease annually Decrease annually
to 5.5% by 2018 to 5.5% by 2018
Discount rate......................... 7.25% 7.5%
</TABLE>

The health care cost trend rate assumption can affect the expenses and
obligations. The effect of a 1% increase each year in the assumed health care
cost trend rate on the aggregate of the service and interest cost components
of net periodic postretirement benefit cost would be an increase of
approximately $29,000 for the year ended December 31, 1996. Additionally, the
effect on the APBO as of December 31, 1996 would be an increase of
approximately $175,000.

(11) SAVINGS AND INVESTMENT PLAN

The Company has a savings and investment plan covering substantially all
employees. The plan provides for a matching corporate contribution of 50% of
the employee's investment in mutual fund shares and/or Torchmark stock, not to
exceed 3% of the employee's salary.

The Company's charge to expense for this plan for the years ended December
31, 1994, 1995 and 1996 was $585,000, $626,000 and $641,000, respectively.

F-20
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(12) EMPLOYEE STOCK OPTIONS

Under the provisions of the Torchmark Corporation 1987 Stock Incentive Plan
(1987 Option Plan), certain employees and directors of the Company have been
granted options to buy shares of Torchmark stock generally at the market value
of the stock on the date of grant. The options are exercisable during a period
of up to ten years and two days after grant. Employee stock options granted
under the 1987 Option Plan generally vest one-half in two years and one-half
in three years. Director grants generally vest in six months.

In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which was
effective for the Company beginning January 1, 1996. SFAS 123 defines the
"fair value method" of accounting for employee stock options. It also allows
accounting for such options under the "intrinsic value method" in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" (APB 25) and related interpretations. If a company elects to use
the intrinsic value method, pro forma disclosures of earnings and earnings per
share are required as if the fair value method of accounting was applied. The
effects of applying SFAS 123 in the pro forma disclosures are not necessarily
indicative of future amounts because the pro forma disclosures do not take
into account the amortization of the fair value of awards prior to 1995.

The Company has elected to account for stock options under the intrinsic
value method. The fair value method requires use of the Black-Scholes option
valuation model to value employee stock options. The Black-Scholes option
valuation model was not developed for use in valuing employee stock options.
Instead, this model was developed for use in estimating the fair value of
traded options, which have no vesting restrictions and are fully transferable.
In addition, option valuation models require highly subjective assumptions
including the expected stock price volatility. Because Torchmark's employee
stock options have characteristics significantly different from those of
traded options, and because changes in the subjective assumptions can
materially affect the fair value estimate, it is management's opinion that the
existing models do not provide a reliable measure of the fair value of its
employee stock options. Under the intrinsic value method, compensation expense
is only recognized if the exercise price of the employee stock option is less
than the market price of the underlying stock on the date of grant.

In accordance with SFAS 123, the fair value for Torchmark's employee stock
options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions for 1995 and
1996:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Risk-free interest rate.......................................... 5.4% 6.4%
Dividend yield................................................... 3.7% 3.7%
Volatility factor................................................ 22.8 22.8
Weighted average expected life (in years)........................ 4.17 4.17
</TABLE>

The weighted average fair values of an option granted during the years ended
December 31, 1995 and 1996 were $3.96 and $4.93, respectively.

For the purpose of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows:

<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Actual net income............................................ $50,845 $64,178
Pro forma net income......................................... $50,337 $63,450
</TABLE>

F-21
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A summary of stock option activity and related information for the years
ended December 31, 1994, 1995 and 1996 follows:

<TABLE>
<CAPTION>
1994 1995 1996
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 1,171,984 $16.00 1,335,984 $16.21 1,596,642 $18.11
Granted................. 175,000 17.00 373,600 21.69 277,600 24.88
Exercised............... (11,000) 6.88 (105,126) 6.72 (130,800) 13.49
Expired................. -- -- (7,816) 17.00 (5,000) 17.00
--------- ------ --------- ------ --------- ------
Outstanding at end of
year................... 1,335,984 $16.21 1,596,642 $18.11 1,738,442 $19.54
========= ====== ========= ====== ========= ======
Exercisable at end of
year................... 334,376 $14.17 660,934 $17.36 999,742 $17.48
========= ====== ========= ====== ========= ======
</TABLE>

(13) UNIFORM CAPITAL RULE REQUIREMENTS

Waddell & Reed, Inc. (W&R), a subsidiary of the Company, is a registered
broker-dealer and a member of the National Association of Securities Dealer,
Inc. and therefore is subject to the SEC's Uniform Net Capital Rule, which
requires the maintenance of certain minimal capital levels. At December 31,
1996, W&R had net capital, as defined, of $10,363,000 which is $7,271,000 in
excess of the required net capital.

(14) COMMITMENTS AND CONTINGENCIES

Rental Expense and Lease Commitments

The Company rents certain sales and other office space under long-term
operating leases. Rent expense for the years ended December 31, 1994, 1995 and
1996, was $3,213,000, $3,459,000 and $3,824,000, respectively. Future minimum
rental commitments under noncancelable operating leases are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Minimum remaining rental commitments years ended December
31:
1997..................................................... $1,982
1998..................................................... 1,048
1999..................................................... 570
2000..................................................... 260
2001..................................................... 41
------
$3,901
======
</TABLE>

New leases are expected to be executed as existing leases expire. Thus,
future minimum lease commitments are not expected to be less than those in
1997.

Contingencies

From time to time, the Company is a party to various claims arising in the
ordinary course of business. In the opinion of management, it is unlikely that
any adverse determination in one or more pending claims would have a material
adverse effect on the Company's financial position or results of operations.

F-22
<PAGE>

WADDELL & REED FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(15) SUBSEQUENT EVENTS

On November 25, 1997, the Company declared a $480,000,000 dividend evidenced
by two 8% promissory notes to Torchmark. These notes are payable on or before
November 25, 2002 and require semiannual interest payments. The notes are
mandatorily prepayable from the capital raised by the Company from a public or
private sale or offering of debt or equity securities.

F-23
<PAGE>

PROSPECTUS (Subject to Completion)
Issued January 2, 1998

Shares
Waddell & Reed Financial, Inc.
CLASS A COMMON STOCK

-----------

OF THE SHARES OF CLASS A COMMON STOCK BEING OFFERED, SHARES ARE BEING
OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS AND SHARES ARE BEING OFFERED INITIALLY
IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS. ALL SHARES
OF CLASS A COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE
COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC
OFFERING PRICE PER SHARE WILL BE BETWEEN $ AND $ PER
SHARE. SEE "UNDERWRITERS" FOR A DISCUSSION OF THE
FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL
PUBLIC OFFERING PRICE.

-----------

APPLICATION WILL BE MADE TO HAVE THE CLASS A COMMON STOCK APPROVED FOR LISTING
ON THE NEW YORK STOCK EXCHANGE UNDER THE TRADING SYMBOL WDR.

-----------

SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS

-----------

PRICE $ A SHARE

-----------

The Class A Common Stock is offered subject to prior sale, when, as, and if
accepted by the Underwriters and subject to approval of certain legal matters
by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Underwriters, and
to certain other conditions. It is expected that delivery of the Class A Common
Stock will be made on or about , 1998 at the offices of Morgan Stanley & Co.
Incorporated, New York, New York, against payment therefor in immediately
available funds.

-----------

MORGAN STANLEY DEAN WITTER

, 1998
<PAGE>

PART II

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table indicates the estimated expenses to be incurred in
connection with the Offering, all of which will be paid by the Company.

<TABLE>
<S> <C>
SEC registration fee............................................... $177,728
NASD fee........................................................... *
NYSE listing fee................................................... *
Accounting fees and expenses....................................... *
Legal fees and expenses............................................ *
Printing and engraving............................................. *
Transfer Agent's fees.............................................. *
Blue Sky fees and expenses (including counsel fees)................ *
Miscellaneous expenses............................................. *
--------
Total............................................................ $ *
========
</TABLE>
- --------
* To be supplied by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's Certificate of Incorporation provides that no director of the
Company will be personally liable to the Company or any of its stockholders
for monetary damages arising from the director's breach of fiduciary duty as a
director, with certain limited expectations. See "Description of Capital
Stock--Certificate of Incorporation and Bylaw Provisions--Liability of
Directors; Indemnification" in the Prospectus.

Pursuant to the provisions of (S) 145 of the Delaware General Corporation
Law, every Delaware corporation has the power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit, or proceeding (other than an action by or in the
right of the corporation) by reason of the fact that such person is or was a
director, officer, employee, or agent of any corporation, partnership, joint
venture, trust, or other enterprise, against any and all expenses, judgments,
fines, and amounts paid in settlement and reasonably incurred in connection
with such action, suit, or proceeding. The power to indemnify applies only if
such person acted in good faith and in a manner such person reasonably
believed to be in the best interest, or not opposed to the best interest, of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.

The power to indemnify applies to actions brought by or in the right of the
corporation as well, but only to the extent of defense and settlement expenses
and not to any satisfaction of a judgment or settlement of the claim itself,
and with the further limitation that in such actions no indemnification will
be made in the event of any adjudication of negligence or misconduct unless
the court, in its discretion, believes that in light of all the circumstances
indemnification should apply.

To the extent any of the persons referred to in the two immediately
preceding paragraphs is successful in the defense of such actions, such person
is entitled, pursuant to Section 145, to indemnification as described above.

The Company's Certificate of Incorporation and Bylaws provide for
indemnification to officers and directors of the Company to the fullest extent
permitted by the Delaware General Corporation Law. See "Description of Capital
Stock--Certificate of Incorporation and Bylaw Provisions--Liability of
Directors; Indemnification" in the Prospectus.

II-1
<PAGE>

The form of Underwriting Agreement to be filed as Exhibit 1.1 will contain
agreements of indemnity between the Company and the Underwriters and
controlling persons against certain civil liabilities, including liabilities
under the Securities Act, or will contribute to payments which the
Underwriters or any such controlling persons may be required to make in
respect thereof.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

None.

ITEMS 16. EXHIBITS

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
1.1* --Form of Underwriting Agreement
3.1* --Certificate of Incorporation of the Company
3.2* --Bylaws of the Company
4.1* --Specimen of Common Stock Certificate
4.2* --Form of Notes payable to Torchmark Corporation and Liberty National Life Insurance Company
5.1* --Form of Opinion of Hughes & Luce, L.L.P. regarding legality of securities being registered
10.1* --Form of Public Offering and Separation Agreement between Torchmark Corporation and Waddell
& Reed Financial, Inc.
10.2* --Form of Tax Disaffiliation Agreement between Torchmark Corporation and Waddell & Reed
Financial, Inc.
10.3* --Form of Subadvisory Investment Management Agreement between Waddell & Reed Investment
Management Company and Waddell & Reed Asset Management Company.
10.4* --Form of Subadvisory Investment Management Agreement between Waddell & Reed Investment
Management Company and Waddell & Reed Asset Management Company.
10.5* --General Agent Contract, dated January 1, 1985, between United Investors Life Insurance Company
and W&R Insurance Agency, Inc.
10.6* --Form of Amendment Extending General Agent Contract between United Investors Life Insurance
Company and W & R Insurance Agency, Inc.
10.7* --Independent Agent Contract, dated June 25, 1997, between United American Insurance Company,
W & R Insurance Agency, Inc., and affiliates identified therein.
10.8* --Form of Amendment Extending Independent Agent Contract between United American Insurance
Company, W & R Insurance Agency, Inc., and affiliates identified therein.
10.9* --Form of The 1998 Stock Incentive Plan.
10.10* --Form of The 1998 Non-Employee Stock Director Plan.
10.11* --Form of The 1998 Executive Deferred Compensation Stock Plan.
10.12* --Form of Waddell & Reed Financial, Inc. Savings and Investment Plan.
10.13* --Form of Waddell & Reed Financial, Inc. Retirement Income Plan.
10.14* --Form of Waddell & Reed, Inc. Career Field Retirement Plan.
10.15* --Form of Maintenance Agreement between the Company and TMK Income Properties, L.P.
21.1 --Subsidiaries of the Registrant
23.1* --Consent of Hughes & Luce, L.L.P. (included in Exhibit 5.1)
23.2 --Consent of KPMG Peat Marwick LLP
24.1 --Powers of Attorney (See Page II-4)
27.1 --Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.

(b) Financial Statement Schedules:

Financial statement schedules are omitted as not required or not applicable
or because the information is included in the Financial Statements or notes
thereto.

II-2
<PAGE>

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the underwriting agreements, the
Company's Certificate of Incorporation, Bylaws, Delaware law or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the Offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OVERLAND PARK, STATE OF
KANSAS, ON JANUARY 2, 1998.

Waddell & Reed Financial, Inc.

By: /s/ RONALD K. RICHEY
----------------------------------
RONALD K. RICHEY,
CHAIRMAN OF THE BOARD

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
Keith A. Tucker, Henry J. Herrmann, and Robert L. Hechler, and each of them,
his true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any additional Registration
Statements related to the Offering contemplated by this Registration Statement
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and hereby
grants to such attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his
substitute or substitutes may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Ronald K. Richey Chairman of the Board January 2, 1998
- ------------------------------------
RONALD K. RICHEY

/s/ Keith A. Tucker President, Chief Executive January 2, 1998
- ------------------------------------ Officer, and Director
KEITH A. TUCKER (Principal Financial Officer)

/s/ Francis B. Jacobs, II Vice-President, Secretary, January 2, 1998
- ------------------------------------ and Director
FRANCIS B. JACOBS, II

/s/ Michael D. Strohm Principal Accounting Officer January 2, 1998
- ------------------------------------
MICHAEL D. STROHM
</TABLE>

II-4

<PAGE>

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
STATE
COMPANY NAME INCORPORATED
------------ ------------
<S> <C>
Waddell & Reed, Inc............................................... Delaware
Waddell & Reed Services Company................................... Missouri
Waddell & Reed Investment Management Company...................... Kansas
Waddell & Reed Financial Services, Inc............................ Missouri
Fiduciary Trust Company of New Hampshire.......................... New Hampshire
</TABLE>
- --------
(1) Excludes other subsidiaries which considered in the aggregate as a single
subsidiary would not constitute a significant subsidiary.

<PAGE>

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Waddell & Reed Financial, Inc.

We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.

KPMG Peat Marwick LLP

Kansas City, Missouri
December 30, 1997

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS PRESENTED BEGINNING ON PAGE F1 OF THE WADDELL & REED
FINANCIAL, INC. FORM S-1 REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON JANUARY 2, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> SEP-01-1997 DEC-31-1996
<CASH> 43,979 59,003
<SECURITIES> 19,071 19,980
<RECEIVABLES> 24,222 15,929
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 90,939 97,183
<PP&E> 11,028 10,392
<DEPRECIATION> 9,636 9,472
<TOTAL-ASSETS> 358,540 369,302
<CURRENT-LIABILITIES> 48,862 62,662
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 171,136 172,578
<TOTAL-LIABILITY-AND-EQUITY> 358,540 369,302
<SALES> 0 0
<TOTAL-REVENUES> 181,601 221,162
<CGS> 0 0
<TOTAL-COSTS> 83,090 112,766
<OTHER-EXPENSES> 2,177 2,903
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,578 186
<INCOME-PRETAX> 90,756 105,307
<INCOME-TAX> 35,249 41,129
<INCOME-CONTINUING> 55,507 64,178
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 55,507 64,178
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>