<PAGE>
File No. 811-2552
File No. 2-21867
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ____
Post-Effective Amendment No. 115
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 X
Amendment No. 22
UNITED FUNDS, INC.
- ---------------------------------------------------------------------------
(Exact Name as Specified in Charter)
6300 Lamar Avenue, Shawnee Mission, Kansas 66202-4200
- ---------------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code (913) 236-2000
- ---------------------------------------------------------------------------
Rodney O. McWhinney, P. O. Box 29217, Shawnee Mission, Kansas 66201-9217
- ---------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
_____ immediately upon filing pursuant to paragraph (b)
__X__ on March 31, 1994 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)
_____ on (date) pursuant to paragraph (a) of Rule 485
==================================================================
DECLARATION REQUIRED BY RULE 24f-2 (a) (1)
The issuer has registered an indefinite amount of its securities under
the Securities Act of 1933 pursuant to Rule 24f-2(a)(1). Notice for the
Registrant's fiscal year ended December 31, 1993 was filed on February 24,
1994.
<PAGE>
UNITED FUNDS, INC.
==================
Cross Reference Sheet
=====================
Part A of
Form N-1A
Item No. Prospectus Caption
- --------- ------------------
1 ........................ Cover Page
2(a) ..................... Summary of Expenses
(b) ..................... *
(c) ..................... *
3(a) ..................... Financial Highlights
(b) ..................... Financial Highlights
(c) ..................... Performance Information
(d)...................... Performance Information
4(a) ..................... What is United Funds, Inc.?; Goals and
Investment Policies of the Four Funds
(b) ..................... Goals and Investment Policies of the Four
Funds
(c) ..................... Goals and Investment Policies of the Four
Funds
5(a) ..................... What is United Funds, Inc.?
(b)...................... Inside Back Cover; Management and Services
(c) ..................... Management and Services
(d) ..................... Inside Back Cover; Management and Services
(e) ..................... Inside Back Cover; Management and Services
(f) ..................... Management and Services
(g)(i)................... *
(g)(ii).................. Management and Services
5A........................ *
6(a) ..................... What is United Funds, Inc.?
(b) ..................... *
(c) ..................... *
(d) ..................... *
(e) ..................... Management and Services
(f)...................... Dividends, Distributions and Taxes
(g) ..................... Dividends, Distributions and Taxes
7(a) ..................... Management and Services; Inside Back Cover
(b) ..................... Purchase of Shares
(c) ..................... Purchase of Shares
(d) ..................... Purchase of Shares
(e) ..................... *
(f) ..................... Management and Services
8(a) ..................... Redemption
(b) ..................... *
(c) ..................... *
(d) ..................... Redemption
9 ........................ *
Part B of
Form N-1A
Item No. SAI Caption
- --------- -----------
10(a) ..................... Cover Page
(b) ..................... *
11 ........................ Cover Page
12 ........................ *
- ---------------------------------------------------------------------------
*Not Applicable or Negative Answer
<PAGE>
13(a) ..................... Investment Objective and Policies
(b) ..................... Investment Objective and Policies
(c) ..................... Investment Objective and Policies
(d) ..................... Investment Objective and Policies
14(a) ..................... Directors and Officers
(b) ..................... Directors and Officers
(c) ..................... *
15(a) ..................... *
(b) ..................... *
(c) ..................... Directors and Officers
16(a)(i) .................. Investment Management and Other Services
(a)(ii) ................. Directors and Officers
(a)(iii) ................ Investment Management and Other Services
(b) ..................... Investment Management and Other Services
(c) ..................... *
(d) ..................... Investment Management and Other Services
(e) ..................... *
(f) ..................... Investment Management and Other Services
(g) ..................... *
(h) ..................... Investment Management and Other Services
(i) ..................... *
17(a) ..................... Portfolio Transactions and Brokerage
(b) ..................... *
(c) ..................... Portfolio Transactions and Brokerage
(d) ..................... *
(e) ..................... *
18(a) ..................... Other Information
(b) ..................... *
19(a) ..................... Purchase, Redemption and Pricing of Shares
(b) ..................... Purchase, Redemption and Pricing of Shares
(c) ..................... Purchase, Redemption and Pricing of Shares
20 ........................ Payments to Shareholders; Taxes
21(a) ..................... Investment Management and Other Services
(b) ..................... *
(c) ..................... *
22(a) ..................... *
(b)(i) .................. Performance Information
(b)(ii) ................. Performance Information
(b)(iii) ................ *
(b)(iv) ................. Performance Information
23 ........................ Financial Statements
- ---------------------------------------------------------------------------
*Not Applicable or Negative Answer
<PAGE>
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
(913) 236-2000
- -----------------------------------------------------------------
March 31 , 199 4
PROSPECTUS
- -----------------------------------------------------------------
United Funds, Inc. (the "Corporation") is a management investment
company which has four separate Funds, each of which is designed for
investors with different goals.
THE FOUR FUNDS
United Bond Fund seeks a reasonable return with more emphasis on
preservation of capital.
United Income Fund seeks the maintenance of current income subject to
market conditions.
United Accumulative Fund seeks capital growth of your investment with
current income a secondary consideration.
United Science and Technology Fund seeks long-term capital growth
through investment in a portfolio emphasizing science and technology
securities.
This Prospectus contains concise information of which you should be
aware before investing. Additional information has been filed with the
Securities and Exchange Commission and is contained in a Statement of
Additional Information (the "SAI"), dated March 31 , 199 4 .
You may obtain a copy of the SAI free of charge by request to the
Corporation or Waddell & Reed, Inc., its Underwriter, at the address or
telephone number shown below. The SAI is incorporated by reference into
this Prospectus and you will not be aware of all facts unless you read both
this Prospectus and the SAI.
Investments in high-yield, high-risk securities may entail risks that
are different or more pronounced than those involved in higher-rated
securities. See "Risk Factors of High-Yield Investing" included in this
Prospectus for a discussion of the risks associated with non-investment
grade securities.
Retain This Prospectus For Future Reference
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.
<PAGE>
SUMMARY OF EXPENSES
United Bond Fund
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Load Imposed on Purchases 5.75%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None
Dividends (as a percentage of offering price)
Deferred Sales Load (as a percentage
of original purchase price or redemption
proceeds, as applicable) None
Redemption Fees (as a percentage
of amount redeemed, if applicable) None
Exchange Fee None
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fees 0.45 %
12b-1 Service Fees* 0.25%
Other Expenses 0.18 %
(Includes, among other expenses, transfer
agency, accounting, custodian, audit and legal fees)
Total Fund Operating Expenses** 0.88 %
Example 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
You would pay the
following expenses on
a $1,000 investment,
assuming (1) 5% annual
return and (2) redemption
at the end of each
time period: $66 $ 84 $103 $160
The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly
or indirectly. The example should not be considered a representation of
past or future expenses. Actual expenses may be greater or lesser than
those shown.
*Expense information reflects the 12b-1 service fee which became effective
October 1, 1993, which fee will not exceed .25% of the Fund's average
annual net assets. It is possible that long-term shareholders of the
Fund may bear 12b-1 fees which are more than the economic equivalent of
the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
**Expense information has been restated to reflect the
current maximum 12b-1 service fee which became effective October 1, 1993.
<PAGE>
SUMMARY OF EXPENSES
United Income Fund
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Load Imposed on Purchases 5.75%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None
Dividends (as a percentage of offering price)
Deferred Sales Load (as a percentage
of original purchase price or redemption
proceeds, as applicable) None
Redemption Fees (as a percentage
of amount redeemed, if applicable) None
Exchange Fee None
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fees 0.47 %
12b-1 Service Fees* 0.25%
Other Expenses 0.17 %
(Includes, among other expenses, transfer
agency, accounting, custodian, audit and legal fees)
Total Fund Operating Expenses** 0.89 %
Example 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
You would pay the
following expenses on
a $1,000 investment,
assuming (1) 5% annual
return and (2) redemption
at the end of each
time period: $66 $ 84 $104 $161
The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly
or indirectly. The example should not be considered a representation of
past or future expenses. Actual expenses may be greater or lesser than
those shown.
*Expense information reflects the 12b-1 service fee which became effective
October 1, 1993, which fee will not exceed .25% of the Fund's average
annual net assets. It is possible that long-term shareholders of the
Fund may bear 12b-1 fees which are more than the economic equivalent of
the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
**Expense information has been restated to reflect the
current maximum 12b-1 service fee which became effective October 1, 1993.
<PAGE>
SUMMARY OF EXPENSES
United Accumulative Fund
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Load Imposed on Purchases 5.75%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None
Dividends (as a percentage of offering price)
Deferred Sales Load (as a percentage
of original purchase price or redemption
proceeds, as applicable) None
Redemption Fees (as a percentage
of amount redeemed, if applicable) None
Exchange Fee None
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fees 0.47 %
12b-1 Service Fees* 0.25%
Other Expenses 0.16 %
(Includes, among other expenses, transfer
agency, accounting, custodian, audit and legal fees)
Total Fund Operating Expenses** 0.88%
Example 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
You would pay the
following expenses on
a $1,000 investment,
assuming (1) 5% annual
return and (2) redemption
at the end of each
time period: $66 $84 $103 $160
The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly
or indirectly. The example should not be considered a representation of
past or future expenses. Actual expenses may be greater or lesser than
those shown.
*Expense information reflects the 12b-1 service fee which became effective
October 1, 1993, which fee will not exceed .25% of the Fund's average
annual net assets. It is possible that long-term shareholders of the
Fund may bear 12b-1 fees which are more than the economic equivalent of
the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
**Expense information has been restated to reflect the
current maximum 12b-1 service fee which became effective October 1, 1993.
<PAGE>
SUMMARY OF EXPENSES
United Science And Technology Fund
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Load Imposed on Purchases 5.75%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None
Dividends (as a percentage of offering price)
Deferred Sales Load (as a percentage
of original purchase price or redemption
proceeds, as applicable) None
Redemption Fees (as a percentage
of amount redeemed, if applicable) None
Exchange Fee None
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fees 0.62 %
12b-1 Service Fees* 0.25%
Other Expenses 0.26%
(Includes, among other expenses, transfer
agency, accounting, custodian, audit and legal fees)
Total Fund Operating Expenses** 1.13 %
Example 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
You would pay the
following expenses on
a $1,000 investment,
assuming (1) 5% annual
return and (2) redemption
at the end of each
time period: $68 $ 91 $116 $187
The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly
or indirectly. The example should not be considered a representation of
past or future expenses. Actual expenses may be greater or lesser than
those shown.
*Expense information reflects the 12b-1 service fee which became effective
October 1, 1993, which fee will not exceed .25% of the Fund's average
annual net assets. It is possible that long-term shareholders of the
Fund may bear 12b-1 fees which are more than the economic equivalent of
the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc.
**Expense information has been restated to reflect the
current maximum 12b-1 service fee which became effective October 1, 1993.
<PAGE>
UNITED FUNDS, INC.
FINANCIAL HIGHLIGHTS (Audited)
The following information has been audited by Price Waterhouse,
independent accountants, and should be read in conjunction with the
financial statements and notes thereto, together with the report of Price
Waterhouse, included in the SAI.
For a Share of Capital Stock Outstanding Throughout Each Period:
United Bond Fund
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
-----------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ............ $6.31 $6.32 $5.80 $6.07 $6.03 $6.11 $6.42 $6.09 $5.44 $5.48
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment income .41 .45 .47 .50 .55 .54 .56 .55 .61 .67
Net realized and
unrealized gain
(loss) on
investments ..... .41 .00 .56 (0.26) .07 (0.02) (0.28) .34 .66 (0.05)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ........ .82 .45 1.03 .24 .62 .52 .28 .89 1.27 .62
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income .......... (0.41) (0.46) (0.47) (0.50) (0.56) (0.54) (0.55) (0.56) (0.62) (0.66)
Distributions from
capital gains ... (0.33) (0.00) (0.04) (0.01) (0.02) (0.06) (0.04) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions . (0.74) (0.46) (0.51) (0.51) (0.58) (0.60) (0.59) (0.56) (0.62) (0.66)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period $6.39 $6.31 $6.32 $5.80 $6.07 $6.03 $6.11 $6.42 $6.09 $5.44
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return* ...... 13.19% 7.50% 18.78% 4.24% 10.61% 8.99% 4.50% 15.23% 25.42% 12.43%
Net assets, end of
period (000
omitted) ......... $641,668 $589,946 $524,404 $439,487 $403,010 $335,337 $319,273 $339,544 $338,586 $305,935
Ratio of expenses to
average net assets 0.65% 0.64% 0.65% 0.67% 0.64% 0.65% 0.64% 0.64% 0.67% 0.73%
Ratio of net investment
income to average
net assets ....... 6.14% 7.29% 7.96% 8.54% 8.97% 9.00% 8.83% 8.82% 10.90% 12.66%
Portfolio turnover
rate** ........... 175.39% 115.17% 318.76% 294.66% 353.57% 179.07% 232.65% 252.49% 270.71% 93.56%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
**This rate is, in general, calculated by dividing the average value of the Fund's portfolio during the period into the
lesser of its purchases or sales in the period, excluding short-term securities. For periods ended prior to April 1,
1985, U.S. Government Securities were excluded from the calculation.
</TABLE>
<PAGE>
United Income Fund
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........... $22.05 $20.44 $16.46 $18.69 $16.76 $15.08 $17.03 $16.20 $13.11 $13.53
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income .40 .46 .51 .61 .65 .60 .72 .48 .58 .66
Net realized and
unrealized gain
(loss) on
investments .... 3.11 1.96 4.29 (1.61) 3.89 2.35 .59 3.12 3.64 .04
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ....... 3.51 2.42 4.80 (1.00) 4.54 2.95 1.31 3.60 4.22 .70
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income ......... (0.40) (0.46) (0.53) (0.63) (0.65) (0.67) (0.66) (0.49) (0.61) (0.64)
Distributions from
capital gains .. (0.39) (0.35) (0.29) (0.60) (1.96) (0.60) (2.60) (2.28) (0.52) (0.48)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (0.79) (0.81) (0.82) (1.23) (2.61) (1.27) (3.26) (2.77) (1.13) (1.12)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $24.77 $22.05 $20.44 $16.46 $18.69 $16.76 $15.08 $17.03 $16.20 $13.11
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return* ...... 16.05% 11.96% 29.64% -5.45% 27.49% 19.83% 7.17% 22.11% 34.00% 6.37%
Net assets, end of
period (000
omitted) .........$3,060,073$2,537,161$2,150,986$1,578,543$1,550,387$1,149,934 $964,521 $836,594 $675,314 $533,916
Ratio of expenses to
average net assets 0.66% 0.65% 0.66% 0.68% 0.64% 0.67% 0.63% 0.62% 0.66% 0.70%
Ratio of net investment
income to average
net assets ....... 1.70% 2.19% 2.71% 3.44% 3.41% 3.65% 3.99% 2.70% 4.09% 5.32%
Portfolio turnover
rate** ........... 21.70% 19.25% 24.68% 30.94% 60.77% 48.64% 58.46% 29.90% 37.75% 20.71%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
**This rate is, in general, calculated by dividing the average value of the Fund's portfolio during the period into the
lesser of its purchases or sales in the period, excluding short-term securities. For periods ended prior to April 1,
1985, U.S. Government Securities were excluded from the calculation.
</TABLE>
<PAGE>
United Accumulative Fund
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........... $7.50 $7.15 $6.03 $7.12 $6.43 $5.75 $7.78 $8.73 $7.64 $10.13
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income .11 .16 .19 .28 .31 .26 .25 .20 .34 .40
Net realized and
unrealized gain
(loss) on
investments .... .55 .85 1.22 (0.99) 1.43 .71 .19 1.28 1.51 (0.02)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ....... .66 1.01 1.41 (0.71) 1.74 .97 .44 1.48 1.85 .38
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income ......... (0.11) (0.16) (0.20) (0.29) (0.29) (0.29) (0.32) (0.25) (0.39) (0.40)
Distributions from
capital gains .. (0.84) (0.50) (0.09) (0.09) (0.76) (0.00) (2.15) (2.18) (0.37) (2.47)
Distribution in excess
of capital gains (0.02) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (0.97) (0.66) (0.29) (0.38) (1.05) (0.29) (2.47) (2.43) (0.76) (2.87)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $7.19 $7.50 $7.15 $6.03 $7.12 $6.43 $5.75 $7.78 $8.73 $7.64
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return* ...... 9.06% 14.20% 23.68% -10.17% 27.56% 17.05% 4.53% 18.05% 25.56% 6.90%
Net assets, end of
period (000
omitted) .........$1,033,774 $992,924 $904,635 $767,218 $877,109 $737,231 $696,359 $683,989 $604,337 $503,862
Ratio of expenses to
average net assets 0.65% 0.62% 0.63% 0.64% 0.60% 0.63% 0.59% 0.60% 0.63% 0.67%
Ratio of net investment
income to average
net assets ....... 1.34% 2.13% 2.79% 4.12% 4.19% 4.09% 3.17% 2.37% 4.18% 5.56%
Portfolio turnover
rate** ........... 230.29% 194.41% 241.11% 288.64% 338.24% 245.42% 316.74% 260.69% 297.37% 190.69%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
**This rate is, in general, calculated by dividing the average value of the Fund's portfolio during the period into the
lesser of its purchases or sales in the period, excluding short-term securities. For periods ended prior to April 1,
1985, U.S. Government Securities were excluded from the calculation.
</TABLE>
<PAGE>
United Science and Technology Fund
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
-------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........... $14.64 $15.42 $10.27 $11.72 $9.91 $9.28 $10.00 $9.98 $9.23 $11.31
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income .01 .03 .10 .24 .20 .20 .19 .17 .32 .52
Net realized and
unrealized gain
(loss) on
investments .... 1.21 (0.66) 5.90 (0.65) 2.50 .64 1.06 1.61 1.65 (0.75)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ....... 1.22 (0.63) 6.00 (0.41) 2.70 .84 1.25 1.78 1.97 (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income ......... (0.01) (0.03) (0.10) (0.25) (0.19) (0.21) (0.25) (0.24) (0.42) (0.45)
Distributions from
capital gains .. (0.95) (0.12) (0.75) (0.79) (0.70) (0.00) (1.72) (1.52) (0.80) (1.40)
Distribution in excess
of capital gains (0.07) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (1.03) (0.15) (0.85) (1.04) (0.89) (0.21) (1.97) (1.76) (1.22) (1.85)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $14.83 $14.64 $15.42 $10.27 $11.72 $9.91 $9.28 $10.00 $9.98 $9.23
====== ====== ====== ====== ====== ===== ===== ====== ===== =====
Total return* ...... 8.51% -4.03% 59.25% -3.51% 27.40% 9.05% 12.43% 18.19% 22.98% -1.36%
Net assets, end of
period (000
omitted) ......... $446,611 $428,806 $405,380 $239,077 $247,584 $214,693 $214,828 $180,890 $174,042 $160,296
Ratio of expenses to
average net assets 0.91% 0.87% 0.85% 0.90% 0.84% 0.89% 0.81% 0.83% 0.88% 0.96%
Ratio of net investment
income to average
net assets ....... 0.06% 0.24% 0.75% 2.06% 1.73% 1.94% 1.65% 1.62% 3.49% 5.50%
Portfolio turnover
rate** ........... 68.38% 45.79% 59.24% 63.86% 83.19% 60.67% 85.35% 91.71% 146.41% 156.00%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
**This rate is, in general, calculated by dividing the average value of the Fund's portfolio during the period into the
lesser of its purchases or sales in the period, excluding short-term securities. For periods ended prior to April 1,
1985, U.S. Government Securities were excluded from the calculation.
</TABLE>
<PAGE>
What is United Funds, Inc.?
United Funds, Inc. is a corporation organized under Maryland law on
February 21, 1974 as successor to a Delaware corporation which commenced
operations in 1940. It is an open-end diversified management investment
company commonly called a "mutual fund." The Corporation has a Board of
Directors which has overall responsibility for the management of its
affairs. For the names of the Directors and other information about them,
see the SAI. The Corporation has four classes of shares, each of which is
a separate mutual fund with separate assets and liabilities (the
"Funds") . An investor in one of the Funds has an interest only in that
Fund. Each share has the same rights to dividends and to vote. Shares are
fully paid and nonassessable when bought. The Corporation does not hold
annual meetings of shareholders; however, certain significant corporate
matters, such as the approval of a new investment advisory agreement or a
change in a fundamental investment policy, which require shareholder
approval, will be presented to shareholders at an annual or special meeting
called by the Board of Directors for such purpose.
Special meetings of shareholders may be called for any purpose upon
receipt by the Corporation of a request in writing signed by shareholders
holding not less than 25% of all shares entitled to vote at such meeting,
provided certain conditions stated in the Bylaws are met. There will
normally be no meeting of shareholders for the purpose of electing
directors until such time as less than a majority of directors holding
office have been elected by shareholders, at which time the directors then
in office will call a shareholders' meeting for the election of directors.
To the extent that Section 16(c) of the Investment Company Act of 1940, as
amended, applies to the Corporation, the directors are required to call a
meeting of shareholders for the purpose of voting upon the question of
removal of any director when requested in writing to do so by the
shareholders of record of not less than 10% of the outstanding shares.
Performance Information
From time to time Waddell & Reed, Inc. or a Fund may include
performance data in advertisements or in information furnished to present
or prospective shareholders. Fund performance may be shown by presenting
one or more performance measurements, including yield, total return and
performance rankings.
A Fund's yield is based on a 30-day period ending on a specific date
and is computed by dividing the Fund's net investment income per share
earned during the period by the Fund's maximum offering price per share on
the last day of the period.
A Fund's total return is its overall change in value for the period
shown including the effect of reinvesting dividends and
distributions and any change in the net asset value per share. A
cumulative total return reflects the Fund's change in value over a stated
period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the cumulative total
return for a stated period if the Fund's performance had been constant
during each year of that period. Average annual total returns are not
actual year-by-year results and investors should realize that total returns
will fluctuate.
Standardized total return figures reflect payment of the maximum sales
charge. A Fund may also provide non-standardized performance
information which does not reflect deduction of such sales charge or which
is for periods other than those required to be presented or which differs
otherwise from standardized performance information. See the SAI for yield
and total return and method of computation.
From time to time in advertisements and information furnished to
present or prospective shareholders a Fund may discuss its performance
rankings as published by recognized independent mutual fund statistical
services such as Lipper Analytical Services, Inc., or by publications of
general interest such as Forbes, Money, The Wall Street Journal, Business
Week, Barron's, Fortune or Morningstar Mutual Fund Values. A Fund may also
compare its performance to that of other selected mutual funds or selected
recognized market indicators. Performance information may be quoted
numerically or presented in a table, graph or other illustration.
All performance information which a Fund advertises or includes in
information provided to present or prospective shareholders is historical
in nature and is not intended to represent or guarantee future results.
The value of any Fund's shares when redeemed may be more or less than their
original cost.
Information regarding the performance of a Fund is contained in
the Funds' annual report to shareholders, which may be obtained without
charge by request to the Fund at the address or phone number shown on the
cover of this Prospectus.
Goals and Investment Policies of the Four Funds
The goal of each Fund and the type of securities each Fund may
invest in are matters of fundamental policy and may not be changed without
the approval of the shareholders of that Fund. There is no assurance that
a Fund will achieve its goals; some market risks are inherent in all
securities to varying degrees.
There are three main kinds of securities that the four Funds will own:
common stock, preferred stock and debt securities. They may also own
convertible securities. Common stock is an ownership interest in a
company. Preferred stock is also an ownership interest, but usually is
entitled to a stated amount of dividends. Debt securities are an
obligation to pay a specified sum on a specified date and to pay interest
in the meantime. Convertible securities may be exchanged for another type
of security; for example, certain debt securities are convertible into
common stock. Common stocks generally offer the greatest possibilities for
growth, but may not offer as much safety of capital as preferred stocks or
debt securities. These securities in which the Funds may invest include
preferred stock that converts to common stock either automatically or after
a specified period of time or at the option of the issuer, and debt
securities whose performance is linked to a specified equity security or
securities index. Debt securities increase and decrease in value,
depending in large part on changes in prevailing interest rates. An
increase in interest rates may cause the value of a debt security to go
down; a decrease in interest rates may cause the value of the debt security
to go up. Preferred stocks may increase and decrease in value for similar
reasons.
United Bond Fund
The goal of United Bond Fund is a reasonable return with more
emphasis on preservation of capital which it seeks to achieve through
investing in debt securities which may include convertible securities and
debt securities with warrants attached. In selecting debt securities for
the portfolio of the Fund, consideration will be given to yield and
relative safety, and in the case of convertible securities, the possibility
of capital growth. See "Risk Factors of High-Yield Investing" for a
discussion of the risks associated with non-investment grade debt
securities and Appendix A for a description of bond ratings . During
normal market conditions, at least 65% of the Fund's total assets will be
invested in bonds. The Fund may not purchase any securities other than
debt securities if after such purchase more than 10% of its total assets
would consist of other than debt securities. This 10% limit does not
include: premiums paid or received by the Fund in connection with options
transactions; the value of options or futures contracts held by the Fund;
margin deposits as to options and futures contracts; or non-debt securities
held as a result of conversion or exercise of a warrant. See the SAI for
further discussion.
The Fund may purchase securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities ("U.S. Government
Securities") and expects to do so to a significant extent. Securities
issued or guaranteed by the U.S. Government include a variety of Treasury
securities that differ only in their interest rates, maturities and dates
of issuance. U.S. Government Securities, other than U.S. Treasury
securities, may or may not be supported by the full faith and credit of
the United States. Some are backed by the right of the issuer to borrow
from the Treasury; others by discretionary authority of the U.S. Government
to purchase the agencies' obligations; while still others are supported
only by the credit of the instrumentality. In the case of securities not
backed by the full faith and credit of the United States, the investor must
look principally to the agency issuing or guaranteeing the obligation for
ultimate repayment. The Fund will invest in securities of such
instrumentalities only when the Fund's Manager, Waddell & Reed Investment
Management Company (the "Manager"), is satisfied that the credit risk is
acceptable. Among the U.S. Government Securities that the Fund may
purchase are "mortgage-backed securities" of the Government National
Mortgage Association ("Ginnie Mae"). These mortgage-backed securities
include "pass-through" securities, participation certificates and
collateralized mortgage obligations ("CMOs"). The yield characteristics of
mortgage-backed securities, including CMOs, in which the Fund may invest
differ from those of traditional debt securities. Among the major
differences are that interest and principal payments are made more
frequently on mortgage-backed and asset-backed securities and that
principal may be prepaid at any time because the underlying mortgage loans
or other assets generally may be prepaid at any time. As a result, if the
Fund purchases these securities at a premium, a prepayment rate that is
faster than expected will reduce yield to maturity while a prepayment rate
that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if the Fund purchases these securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity. Accelerated
prepayments on securities purchased by the Fund at a premium also impose a
risk of loss of principal because the premium may not have been fully
amortized at the time the principal is repaid in full. Timely payment of
principal and interest on Ginnie Mae pass-throughs is guaranteed by the
full faith and credit of the United States. This is not a guarantee
against market decline of the value of these securities or shares of the
Fund. It is possible that the availability and marketability (i.e.,
liquidity) of these securities could be adversely affected by actions of
the U.S. Government to tighten the availability of its credit . See
the SAI for additional information about the characteristics of U.S.
Government Securities.
United Income Fund
The goal of United Income Fund is the maintenance of current income,
subject to market conditions. It seeks to achieve this goal by investing
in common stocks, or securities convertible into common stocks, of
companies which have the potential for capital growth or which may be
expected to resist market decline. When investment conditions are such
that stocks with high yields are less attractive than other common stocks,
lower yielding common stocks may be held because of their prospects for
appreciation. When investment conditions are such that the return on debt
securities and preferred stocks is more attractive than the return on
common stocks, or when the Manager believes a temporary defensive position
is desirable, the Fund may seek this goal by investing in debt securities
and preferred stocks. During normal market conditions, at least 65% of the
Fund's total assets will be invested in income-producing securities. As an
operating (i.e., nonfundamental) policy, the Fund does not intend to
invest more than 5% of its assets in non-investment grade debt securities.
See "Risk Factors of High-Yield Investing" for a discussion of the risks
associated with non-investment grade debt securities.
United Accumulative Fund
The goal of United Accumulative Fund is capital growth, with current
income a secondary goal. It seeks to achieve these goals by investing in
common stocks or securities convertible into common stocks. As a temporary
defensive measure at times when the Manager believes that such securities
do not offer a good investment opportunity, the Fund may hold a
large portion of its assets in cash or fixed income securities (i.e., debt
securities or preferred stock) or in common stocks chosen because they are
less volatile rather than for their growth potential. As an operating
(i.e., nonfundamental) policy, the Fund does not intend to invest
more than 5% of its assets in non-investment grade debt securities. See
"Risk Factors of High-Yield Investing" for a discussion of the risks
associated with non-investment grade debt securities.
United Science and Technology Fund
The goal of United Science and Technology Fund is long-term capital
growth, which it seeks to achieve through investing in science and
technology securities. Science and technology securities are securities of
companies whose products, processes or services, in the opinion of the
Manager, are being or are expected to be significantly benefited by the
utilization or commercial application of scientific or technological
discoveries or developments in such areas as aerospace, communications and
electronic equipment, computer systems, computer software and services,
electronics, electronic media, business machines, office equipment and
supplies, biotechnology, medical and hospital supplies and services,
medical devices and drugs.
Under normal economic and market conditions the Fund will not
invest in any securities other than science securities or technology
securities if after such investment more than 20% of its total assets would
be invested in such other securities. It is anticipated that less than 20%
of the Fund's assets will be held in U.S. Government Securities; however,
at times, as a temporary defensive measure, the Fund may invest more than
20% of its assets in U.S. Government Securities or other debt securities.
As an operating (i.e., nonfundamental) policy, the Fund does not
intend to invest more than 5% of its assets in non-investment grade debt
securities. See "Risk Factors of High-Yield Investing" for a discussion of
the risks associated with non-investment grade debt securities. Certain
risks are associated with science and technology securities, including the
impact of government regulation and the rapid obsolescence of issuer's
products or processes.
Investments Common to the Four Funds
Options and Futures
United Bond Fund may buy and write (sell) put and call options on debt
securities subject to certain limitations which are set forth in the SAI.
Calls on securities written by that Fund must be covered (i.e., the
Fund must own the securities which are subject to the call or have the
right to acquire them without additional payment). United Income Fund,
United Accumulative Fund and United Science and Technology Fund may write
listed covered calls on securities on up to 25% of the respective assets of
each Fund and may purchase calls and write and purchase puts on securities.
A Fund may write options on securities for the purpose of increasing income
in the form of premiums paid by the purchaser of the option. The purchaser
of a call has the right to purchase from the Fund the securities on which
the call is written at a fixed price for a fixed period. While writing
covered calls may increase a Fund's income, the Fund will lose the
opportunity to profit from an increase in the price of the security subject
to the call over the exercise price. When a Fund writes a put it will
maintain designated cash or readily marketable assets adequate to purchase
the related investments should the put be exercised. In writing puts, a
Fund assumes the risk of loss should the market value of the underlying
security decline below the exercise price at which the Fund is obligated to
purchase the security. A Fund will write a put only when it has determined
that it would be willing to purchase the underlying security at the
exercise price.
A Fund may purchase calls to take advantage of an expected rise in the
market value of securities which the Fund does not hold in its portfolio.
A Fund may also purchase calls to close positions in calls it has written.
A Fund may purchase puts on related investments it owns ("protective puts")
or on related investments it does not own ("nonprotective puts"). Buying a
protective put permits a Fund to protect itself during the period against a
decline in the value of the related investments below the exercise price by
selling them through the exercise of the put. Buying a nonprotective put
permits a Fund, if the market price of the related investments is below the
put price during the put period, either to resell the put or to buy the
related investments and sell them at the exercise price. A Fund may also
purchase puts to close positions in puts it has written. If an option
purchased by a Fund is not exercised or sold, it will become
worthless at its expiration date and the Fund will lose the amount of the
premium it paid.
United Income Fund, United Accumulative Fund and United Science and
Technology Fund may also, for non-speculative purposes, write and purchase
listed options on stock indexes which are not limited to stocks of any
industry or group of industries ("broadly-based stock indexes"). A Fund
will write options on stock indexes primarily to generate income. It will
purchase calls on stock indexes to hedge against an anticipated increase in
the price of securities it wishes to acquire and will purchase puts on
stock indexes to hedge against an anticipated decline in the market value
of its portfolio securities. Because stock index options are settled in
cash, a Fund cannot provide in advance for its potential settlement
obligations on a call it has written on a stock index by holding the
underlying securities. The Fund bears the risk that the value of the
securities it holds will vary from the value of the index.
Options offer large amounts of leverage which will result in a Fund's
net asset value being more sensitive to changes in the value of the related
investment. There is no assurance that a liquid secondary market will
exist for exchange-listed options. The market for options which are not
listed on an exchange may be less active than the market for exchange-
listed options. A Fund will be able to close a position in an option it
has written only if there is a market for the put or call. If a Fund is
not able to enter into a closing transaction on an option it has written it
will be required to maintain the securities, or cash in the case of an
option on a stock index, subject to the call or the collateral underlying
the put until a closing purchase transaction can be entered into or the
option expires. Option transactions may increase a Fund's portfolio
turnover rate creating greater commission expenses, transaction costs and
tax consequences.
United Bond Fund may also buy and sell interest rate futures contracts
relating to debt securities ("Debt Futures") and options on Debt Futures
for the purpose of hedging the value of its securities portfolio against
future changes in interest rates. Calls written on Debt Futures may be
uncovered. At the present time, the debt securities to which Debt Futures
relate are U.S. Treasury securities and Ginnie Mae modified
pass-through mortgage-backed securities . It is a fundamental policy
that United Bond Fund's use of options and futures contracts is limited to
those relating to debt securities and Debt Futures. United Income Fund,
United Accumulative Fund and United Science and Technology Fund may buy and
sell futures contracts on debt securities, futures contracts on broadly-
based stock indexes ("Stock Index Futures") and options on Debt Futures and
Stock Index Futures. A Fund will purchase or sell futures contracts only
for the purpose of hedging against changes in the market value of its
portfolio securities or changes in the market value of securities which the
Manager anticipates it may wish to include in the Fund's portfolio.
Since futures contracts and options thereon can replicate movements in
the cash markets for the securities in which a Fund invests without
the large cash investments required for dealing in such markets, they may
subject a Fund to greater and more volatile risks than might otherwise be
the case. The principal risks related to the use of such instruments are
(i) imperfect correlation between movements in the market price of the
portfolio investments (held or intended) being hedged and in the price of
the futures contract or option; (ii) possible lack of a liquid secondary
market for closing out futures or options positions; (iii) the need for
additional portfolio management skills and techniques; and (iv) losses due
to unanticipated market price movements. For a hedge to be completely
effective, the price change of the hedging instrument should equal the
price change of the security being hedged. Such equal price changes are
not always possible because the investment underlying the hedging
instrument may not be the same investment that is being hedged. The
Manager will attempt to create a closely correlated hedge, but hedging
activity may not be completely successful in eliminating market value
fluctuation. The ordinary spreads between prices in the cash and futures
markets, due to the differences in the natures of those markets, are
subject to distortion. Due to the possibility of distortion, a correct
forecast of general interest or stock market trends by the Manager may
still not result in a successful transaction. The Manager may be incorrect
in its expectations as to the extent of various interest rate movements or
stock market movements or the time span within which the movements take
place. Because United Bond Fund may write certain uncovered calls on Debt
Futures, there is the additional risk that if an uncovered call that the
Fund wrote was exercised, to meet the exercise the Fund would have to
purchase the Debt Future at whatever the market price might be at
the time of the exercise. See the SAI for further information about these
instruments and their risks. As of the date of this Prospectus, except as
to covered call writing, United Income Fund, United Accumulative Fund and
United Science and Technology Fund intend to limit purchase and sale of
options and futures contracts to buying and selling broadly-based Stock
Index Futures and options thereon for the purpose of hedging not
more than 10% of their respective total assets.
Other Investment Policies
For the purpose of increasing income, each of the Funds may purchase
securities subject to repurchase agreements (which can be considered as
collateralized loans by a Fund) but may not cause more than 10% of the net
assets of any Fund to be subject to repurchase agreements not terminable
within seven days. The majority of the repurchase transactions in which a
Fund would engage run from day to day, and the delivery pursuant to the
resale typically will occur within one to five days of the purchase. A
Fund's risk is limited to the ability of the vendor to pay the agreed-upon
sum upon the delivery date.
Each of the Funds may purchase an unlimited amount of foreign
securities, but less than 5% of the combined total assets of all of the
Funds will consist of securities of foreign governments. As an operating
policy not more than 20% of the net assets of each Fund will be invested in
foreign securities. There are certain risks associated with foreign
securities not usually associated with U.S. securities, including the
absence of uniform accounting, auditing and financial standards, less
government regulation, changes in currency rates and in exchange
regulations, and political instability. See the SAI for a discussion of
these risks.
Each of the Funds may buy shares of other investment companies which
do not redeem their shares, subject to the conditions stated in the SAI.
Each Fund may also lend its securities for the purpose of realizing
income. A Fund will not loan more than 10% of its assets at any one time.
The percentage limit and the requirement that such loans be on a
collateralized basis in accordance with certain regulatory requirements are
fundamental policies which can only be changed by shareholder vote. There
are certain risks associated with lending securities in that a Fund may
experience delay in recovering the collateral or even loss of the
collateral. See the SAI for further discussion of these risks.
Each Fund may have a high portfolio turnover. United Accumulative
Fund may engage in short-term trading and have a correspondingly high
turnover rate. See the Financial Highlights table for past turnover. This
results in correspondingly greater commission expenses and transaction
costs and may result in certain tax consequences.
Risk Factors of High-Yield Investing
The market for high-yield, high-risk debt securities is relatively new
and much of its growth paralleled a long economic expansion, during which
this market involved a significant increase in the use of high-yield debt
securities to fund highly leveraged corporate acquisitions and
restructurings. Thereafter, this market was affected by a relatively high
percentage of defaults with respect to high-yield securities as compared
with higher rated securities. An economic downturn or increase in interest
rates is likely to have a greater negative effect on this market, the value
of high-yield debt securities in a Fund's portfolio, a Fund's net asset
value and the ability of the bonds' issuers to repay principal and
interest, meet projected business goals and obtain additional financing
than on higher rated securities. An investment in a Fund which invests in
high-yield debt securities may be considered more speculative than
investment in shares of a fund which invests primarily in higher rated debt
securities.
Prices of high-yield debt securities may be more sensitive to adverse
economic changes or corporate developments than higher rated investments.
Debt securities with longer maturities, which may have higher yields, may
increase or decrease in value more than debt securities with shorter
maturities. Market prices of high-yield debt securities structured as zero
coupon or pay-in-kind securities are affected to a greater extent by
interest rate changes and may be more volatile than securities which pay
interest periodically and in cash. Where it deems it appropriate and in
the best interests of Fund shareholders, a Fund may incur additional
expenses to seek recovery on a debt security on which the issuer has
defaulted and to pursue litigation to protect the interests of security
holders of its portfolio companies.
Because the market for lower rated securities may be thinner and less
active than for higher rated securities, there may be market price
volatility for these securities and limited liquidity in the resale market.
Unrated securities are usually not as attractive to as many buyers as rated
securities are, a factor which may make unrated securities less marketable.
These factors may have the effect of limiting the availability of the
securities for purchase by a Fund and may also limit the ability of a Fund
to sell such securities at their fair value either to meet redemption
requests or in response to changes in the economy or the financial markets.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of high-yield
debt securities, especially in a thinly traded market. To the extent a
Fund owns or may acquire illiquid or restricted high-yield securities,
these securities may involve special registration responsibilities,
liabilities and costs, and liquidity and valuation difficulties. Changes
in values of debt securities which a Fund owns will affect its net asset
value per share. If market quotations are not readily available for a
Fund's lower rated or unrated securities, these securities will be valued
by a method that the Corporation's Board of Directors believes accurately
reflects fair value. Valuation becomes more difficult and judgment plays a
greater role in valuing high-yield debt securities than with respect to
securities for which more external sources of quotations and last sale
information are available.
New and proposed laws may have an impact on the market for high-yield
debt securities. For example, as a result of the Financial Institution's
Reform, Recovery, and Enforcement Act of 1989, savings and loan
associations must dispose of their high-yield bonds no later than July 1,
1994. Qualified affiliates of savings and loan associations, however, may
purchase and retain these securities, and savings and loan associations may
divest these securities by sale to their qualified affiliates. The Manager
is unable at this time to predict what effect, if any, this legislation may
have on the market for high-yield debt securities. Special tax
considerations are associated with investing in high-yield debt securities
structured as zero coupon or pay-in-kind securities. See "Taxes" in the
SAI.
While credit ratings are only one factor the Manager relies on in
evaluating high-yield debt securities, certain risks are associated with
using credit ratings. Credit ratings evaluate the safety of principal and
interest payments, not market value risk. Credit rating agencies may fail
to timely change the credit ratings to reflect subsequent events; however,
the Manager continuously monitors the issuers of high-yield debt securities
in its portfolio in an attempt to determine if the issuers will have
sufficient cash flow and profits to meet required principal and interest
payments. Achievement of a Fund's investment objective may be more
dependent upon the Manager's credit analysis than is the case for higher
quality debt securities. Credit ratings for individual securities may
change from time to time and a Fund may retain a portfolio security whose
rating has been changed.
During the fiscal year ended December 31, 199 3 , the percentage
of the assets of United Bond Fund invested in debt securities in each of
the rating categories of S&P, and the corporate debt securities not rated
by an established rating service, determined on a dollar weighted average,
were as follows:
Rated by Percentage of
S&P Assets of Bond Fund
-------- -------------------
AAA 32.7 %
AA 8.0
A 16.6
BBB 26.1
BB 4.7
B 1.9
Unrated 4.0
-------
The percentage of assets in each category was calculated on the basis
of a monthly dollar weighted average. The monthly dollar weighted average
was calculated using the market value of the securities in United Bond
Fund's portfolio at the end of each month in the thirteen-month period
ended with its last fiscal year, averaged over its last fiscal year. The
rating used for each security is that security's rating as of the end of
each month and, as ratings may change over time, does not necessarily
indicate past or future ratings of any particular security or the ratings
of securities in the portfolio in general. Asset composition of a Fund by
rating categories at any particular time does not necessarily indicate
future asset composition by rating categories.
Management and Services
Waddell & Reed, Inc. and its predecessors served as investment manager
to each of the registered investment companies in the United Group of
Mutual Funds since 1940 or the inception of the investment company,
whichever was later, and to TMK/United Funds, Inc. since its inception. On
January 8, 1992, subject to the authority of the Funds' Board of Directors,
Waddell & Reed, Inc. assigned its investment management duties (and
assigned its professional staff for investment management services) to
Waddell & Reed Investment Management Company, a wholly-owned subsidiary of
Waddell & Reed, Inc. The Manager has also served as investment manager for
Waddell & Reed Funds, Inc. since its inception in September 1992 and
Torchmark Government Securities Fund, Inc. and Torchmark Insured Tax-Free
Fund, Inc. since each commenced operations in February 1993. Waddell &
Reed, Inc. serves as the Funds' underwriter and as underwriter for each of
the investment companies in the United Group of Mutual Funds, TMK/United
Funds, Inc. and Waddell & Reed Funds, Inc. Waddell & Reed, Inc. is an
indirect subsidiary of Torchmark Corporation, a holding company, and United
Investors Management Company, a holding company, and a direct subsidiary of
Waddell & Reed Financial Services, Inc., a holding company.
Subject to authority of the Corporation's Board of Directors, the
Manager provides investment advice and supervises investments for which it
is paid a fee consisting of two elements: (i) a "Specific" fee computed on
each Fund's net asset value as of the close of business each day at the
annual rate of .03 of 1% of the net assets of United Bond Fund, .05 of 1%
of the net assets of United Income Fund and United Accumulative Fund and
.20 of 1% of the net assets of United Science and Technology Fund and (ii)
a pro rata participation based on the relative net asset size of each Fund
in a "Group" fee computed each day on the combined net asset values of all
of the funds in the United Group at the annual rates shown in the following
table. The fee is accrued and paid daily. Prior to the above-described
assignment to the Manager on January 8, 1992, the fees were paid to Waddell
& Reed, Inc.
Group Fee Rate
Group Net Asset Level Annual Group
(all dollars in millions) Fee Rate for Each Level
- ------------------------- -----------------------
From $ 0 to $ 750 .51 of 1%
From $ 750 to $ 1,500 .49 of 1%
From $ 1,500 to $ 2,250 .47 of 1%
From $ 2,250 to $ 3,000 .45 of 1%
From $ 3,000 to $ 3,750 .43 of 1%
From $ 3,750 to $ 7,500 .40 of 1%
From $ 7,500 to $12,000 .38 of 1%
Over $12,000 .36 of 1%
Waddell & Reed Services Company, a subsidiary of Waddell & Reed, Inc.,
acts as transfer agent ("Shareholder Servicing Agent") for the Corporation
and processes the payments of dividends. See the SAI for the fees paid for
these services. Inquiries concerning shareholder accounts should be sent
to that company at the address shown on the inside back cover of this
Prospectus or to the Corporation at the address shown on the front cover of
this Prospectus.
Waddell & Reed Services Company also acts as agent ("Accounting
Services Agent") in providing bookkeeping and accounting services and
assistance to the Corporation and pricing daily the value of shares of the
Funds. For these services, each Fund pays the Accounting Services Agent a
monthly fee of one-twelfth of the annual fee shown in the following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Fund
------------------------- ------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
Under a Service Plan adopted by the Corporation pursuant to Rule 12b-1
under the Investment Company Act of 1940, each Fund may pay monthly a fee
to Waddell & Reed, Inc., the principal underwriter for the Corporation, in
an amount not to exceed .25% of each Fund's average annual net assets. The
fee is to be paid to reimburse Waddell & Reed, Inc. for amounts it expends
in connection with the provision of personal services to shareholders of
the Funds and/or maintenance of shareholder accounts. In particular, the
Service Plan and a related Service Agreement between the Corporation and
Waddell & Reed, Inc. contemplate that these expenditures may include costs
and expenses incurred by Waddell & Reed, Inc. and its affiliates in
compensating, training and supporting registered sales representatives,
sales managers and/or other appropriate personnel in providing personal
services to shareholders of the Funds and/or maintaining shareholder
accounts; increasing services provided to shareholders of the Funds by
office personnel located at field sales offices; engaging in other
activities useful in providing personal services to shareholders of the
Funds and/or maintenance of shareholder accounts; and in compensating
broker-dealers who may regularly sell shares of the Funds for providing
shareholder services and/or maintaining shareholder accounts. See the SAI
for additional information and terms of the Service Plan.
The combined net asset values of all of the funds in the United Group
were approximately $ 11.1 billion as of December 31, 199 3 .
Management fees for each Fund as a percent of each Fund's net assets
for the fiscal year ended December 31, 199 3 and total expenses for
each Fund as a percent of each Fund's average net assets for that year are
as follows:
Management fees Total Expenses
--------------- --------------
United Bond Fund 0.45% 0.65%
United Income Fund 0.47% 0.66%
United Accumulative Fund 0.47% 0.65%
United Science and Technology
Fund 0.62% 0.91%
The Manager places transactions for the portfolio of each Fund and in
doing so may consider sales of shares of each Fund and other funds it
manages as a factor in the selection of brokers to execute portfolio
transactions. See the SAI for further information.
James C. Cusser is primarily responsible for the day-to-day management
of the portfolio of United Bond Fund. Mr. Cusser is Vice President of the
Manager and Vice President of the Fund. He is also Vice President of other
investment companies for which the Manager serves as investment manager.
Mr. Cusser has held his Fund responsibilities since September 1992. He has
been an employee of the Manager since August 1992. Prior to that date, Mr.
Cusser was a fixed income strategist for a major brokerage firm.
Russell E. Thompson is primarily responsible for the day-to-day
management of the portfolio of United Income Fund. Mr. Thompson is Senior
Vice President of the Manager and Vice President of the Fund. He is also
Vice President of other investment companies for which the Manager serves
as investment manager. Mr. Thompson has held his Fund responsibilities
since February 1979. He has been an employee of the Manager since January
8, 1992. Prior to that date, Mr. Thompson was an employee of Waddell &
Reed, Inc., the then investment manager of the Fund, and served as the
portfolio manager for the Fund and other investment companies managed by
Waddell & Reed, Inc. He has been Senior Vice President of Waddell & Reed
Asset Management Company, an affiliate of the Manager, since January 1992
and Vice President since July 1986.
Antonio Intagliata is primarily responsible for the day-to-day
management of the portfolio of United Accumulative Fund. Mr. Intagliata is
Senior Vice President of the Manager and Vice President of the Fund. He is
also Vice President of other investment companies for which the Manager
serves as investment manager. Mr. Intagliata has held his Fund
responsibilities since November 1979. He has been an employee of the
Manager since January 8, 1992. Prior to that date, Mr. Intagliata was an
employee of Waddell & Reed, Inc., the then investment manager of the Fund,
and served as the portfolio manager for the Fund and other investment
companies managed by Waddell & Reed, Inc.
Abel Garcia is primarily responsible for the day-to-day management of
the portfolio of United Science and Technology Fund. Mr. Garcia is Vice
President of the Manager and Vice President of the Fund. Mr. Garcia has
held his Fund responsibilities since January 1984. He has been an employee
of the Manager since January 8, 1992. Prior to that date, Mr. Garcia was
an employee of Waddell & Reed, Inc., the then investment manager of the
Fund, and served as the portfolio manager of the Fund. He has been a Vice
President of Waddell & Reed Asset Management Company, an affiliate of the
Manager, since May 1988.
Other members of the Manager's investment management department
provide input on market outlook, economic conditions, investment research
and other considerations relating to a Fund's investments.
Dividends, Distributions and Taxes
Ordinarily, dividends are paid at the following times: United Bond
Fund, monthly; United Income Fund, quarterly (March, June, September and
December); United Science and Technology Fund and United Accumulative Fund,
semiannually (June and December). Dividends are paid from net
investment income, which includes dividends, accrued interest, earned
discount, and other income earned on portfolio securities less expenses.
Each Fund also distributes substantially all of its net capital gains (the
excess of net long-term capital gains over net short-term capital losses)
and net short-term capital gains, if any, after deducting any available
capital loss carryovers, and any net realized gains from foreign currency
transactions, with its regular dividend at the end of the calendar year.
Each Fund may make additional distributions if necessary to avoid Federal
income or excise taxes on certain undistributed income and capital
gains.
You have the option to receive dividends and distributions in
cash, to reinvest them without charge or to receive dividends in cash and
reinvest distributions, as you may instruct. In the absence of
instructions, dividends and distributions will be reinvested.
Each Fund, which is treated as a separate corporation for Federal
income tax purposes, intends to continue to qualify for treatment as a
regulated investment company under the Internal Revenue Code of 1986 so
that it will be relieved of Federal income tax on that part of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gains and net gains from certain foreign
currency transactions) and net capital gains that are distributed to its
shareholders.
Dividends from a Fund's investment company taxable income are taxable
to you as ordinary income, to the extent of the Fund's earnings and
profits, whether received in cash or reinvested in additional Fund shares.
Distributions of a Fund's realized net capital gains, when designated as
such, are taxable to you as long-term capital gains, whether received in
cash or reinvested in additional Fund shares and regardless of the length
of time you have owned your shares. Each Fund notifies its shareholders
after each calendar year-end as to the amounts of dividends and
distributions paid (or deemed paid) to them for that year.
A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the dividends-
received deduction allowed to corporations. The eligible portion may not
exceed the aggregate dividends received by a Fund from U.S. corporations
(accordingly, the eligible portion of dividends paid by United Bond Fund is
not expected to be substantial). However, dividends received by a
corporate shareholder and deducted by it pursuant to the dividends-received
deduction are subject indirectly to the alternative minimum tax.
Each Fund is required to withhold 31% of all dividends,
distributions and redemption proceeds payable to individuals
and certain non-corporate shareholders who do not furnish the Fund
with a correct tax identification number. Withholding at that rate
from dividends and distributions also is required for such
shareholders who otherwise are subject to backup withholding.
Your redemption of Fund shares will result in taxable gain or loss
to you, depending on whether the redemption proceeds are more or less than
your adjusted basis for the redeemed shares (which normally includes any
sales charge paid). An exchange of shares of a Fund for shares of any
other fund in the United Group, including one of the Funds, generally will
have similar tax consequences. However, special rules apply when you
dispose of shares of a Fund through a redemption or exchange within 90 days
after your purchase thereof and subsequently reacquire shares of that Fund
or acquire shares of another fund in the United Group, including one of the
Funds, without paying a sales charge due to the thirty-day reinvestment
privilege or exchange privilege. In these cases, any gain on the
disposition of the Fund shares would be increased, or loss decreased, by
the amount of the sales charge you paid when those shares were acquired,
and that amount will increase the adjusted basis of the shares subsequently
acquired. In addition, if you purchase shares of a Fund within thirty days
after redeeming other shares of that Fund at a loss, all or part of that
loss will not be deductible and will increase the basis of the newly
purchased shares.
The foregoing is only a summary of some of the important Federal tax
considerations generally affecting the Funds and their shareholders; see
the SAI for a further discussion. There may be other Federal, state or
local tax considerations applicable to a particular investor. You are
urged to consult your own tax adviser.
Purchase of Shares
You may purchase shares through Waddell & Reed, Inc. and its sales
representatives. To open an account you must complete an application.
Orders are accepted only at the home office of Waddell & Reed, Inc. (see
inside back cover of this Prospectus for address), and it need not accept
any orders. The offering price of a share is its net asset value next
determined following acceptance plus the sales charge shown in the table
below. This net asset value per share is the value of a Fund's assets,
less liabilities, divided by the number of shares outstanding. Net asset
value is determined once each day as of the later of the close of the
regular session of the New York Stock Exchange or the close of the regular
session of any domestic securities exchange or commodities exchange on
which an option or future held by a Fund is traded on each day the New York
Stock Exchange is open. A Fund's portfolio securities listed or traded on
an exchange are valued using market quotations or, if not available, at
their fair value in a manner determined in good faith by the Board of
Directors. Bonds are valued according to prices quoted by a dealer in
bonds which offers a pricing service. Short-term debt securities are
valued at amortized cost which approximates market value. Other assets are
valued at their fair value.
Sales Charge
Sales Charge as Approximate
as Percent of Percent of
Size of Purchase Offering Price Amount Invested
Under $100,000 .............................. 5.75% 6.10%
$ 100,000 to less than $ 200,000 .......... 4.75 4.99
200,000 to less than 300,000 .......... 3.50 3.63
300,000 to less than 500,000 .......... 2.50 2.56
500,000 to less than 1,000,000 .......... 1.50 1.52
1,000,000 to less than 2,000,000 .......... 1.00 1.01
2,000,000 and over ......................... 0.00 0.00
Ordinarily, the minimum initial investment is $500. A $50 minimum
initial investment pertains to certain retirement plan accounts and to
sales of shares of United Income Fund in the states of California, Maine,
Montana, Washington and Wisconsin. A $100 minimum initial investment
pertains to certain exchanges of shares from other funds in the United
Group.
A shareholder may arrange with Waddell & Reed, Inc. to purchase shares
by having regular monthly withdrawals of $25 or more made from a checking
account or by having regular monthly exchanges of shares with a value of
$25 or more made from United Cash Management, Inc., subject to certain
conditions explained in the SAI.
Lower sales charges are available by combining additional purchases of
any of the funds in the United Group except United Municipal Bond Fund,
Inc., United Cash Management, Inc., United Government Securities Fund, Inc.
and United Municipal High Income Fund, Inc. with the net asset value of
shares already held ("rights of accumulation") and by grouping all
purchases made during a thirteen-month period ("Statement of Intention").
Shares purchased through a "contractual plan" may not be included unless
the plan has been completed. Purchases by certain related persons may be
grouped. Shares of any of the Funds may be exchanged for shares of another
fund in the United Group without payment of an additional sales charge.
Subject to certain conditions, automatic monthly exchanges of shares of
United Cash Management, Inc. and exchanges of shares of certain other funds
in the United Group (listed on back cover of this Prospectus) may be made
into a Fund. These exchange privileges may be eliminated or modified at
any time, upon notice in certain instances. Information as to rights of
accumulation, Statements of Intention, grouping by related persons,
exchange privileges, Flexible Withdrawal Service, Individual Retirement
Accounts, Section 403(b) plans, Keogh, 401(k), 457 plans and other
qualified employee benefit plans is contained in the SAI. Applicable forms
are available from Waddell & Reed, Inc.'s representatives.
Fund shares may be purchased at net asset value by the Directors and
officers of the Fund, employees of Waddell & Reed, Inc., employees of their
affiliates, sales representatives of Waddell & Reed, Inc. and the
spouse, children, parents , children's spouses and spouse's parents
of each such Director, officer, employee and sales representative.
Purchases in certain retirement plans and certain trusts for these persons
may also be made at net asset value. Purchases in a 401(k) plan having
100 or more eligible employees may be made at net asset value. Shares may
also be issued at net asset value in a merger, acquisition or exchange
offer made pursuant to a plan of reorganization to which the Fund is a
party. See the SAI for additional information.
Redemption
You have the right to sell your shares back to the Corporation
(redeem) at any time by sending a written request to the address on the
front cover of this Prospectus, stating how many shares or the amount in
dollars you wish to redeem. The written request must be in good order
which requires that if more than one person owns the shares, each owner
must sign the written request. If you hold a certificate, it must be
properly endorsed and sent to the Corporation. The Corporation reserves
the right to require a signature guarantee by a national bank, a federally
chartered savings and loan or a member firm of a national stock exchange or
other eligible guarantor in accordance with procedures of the Corporation's
transfer agent if the request for redemption is made by a corporation,
partnership or fiduciary, or if the redemption request is made by, or if
redemption proceeds are payable to, someone other than the owner of record.
If you recently purchased the shares by check, the payment of redemption
proceeds on these shares may be delayed. You may arrange for the bank upon
which the purchase check was drawn to provide to the Corporation telephone
or written assurance, satisfactory to the Corporation, that the check has
cleared and been honored. If no such assurance is given, payment of the
redemption proceeds on these shares will be delayed until the earlier of 10
days or when the Corporation has been able to verify that your purchase
check has cleared and been honored.
The Corporation will redeem your shares at their net asset value
(which may be more or less than what you paid) next computed after receipt
of your written request for redemption in good order at the Corporation's
address shown on the front cover of this Prospectus. Payment is made
within seven days, unless delayed because of emergency conditions
determined by the Securities and Exchange Commission, when the New York
Stock Exchange is closed (other than on weekends and holidays) or when
trading on the Exchange is restricted. Payment is made in cash, although
under extraordinary conditions redemptions may be made in portfolio
securities.
You may reinvest in any one of the four Funds all or part of the
amount you redeemed without charge by sending to the Fund the amount you
wish to reinvest. The reinvested amounts must be received within thirty
days after the date of your redemption. You may do this only once as to
shares of the Corporation.
Under the terms of the 401(k) plan which Waddell & Reed, Inc. has
available, the plan may have the right to make a loan to a plan participant
by redeeming Fund shares held by the plan. Principal and interest payments
on the loan made in accordance with the terms of the plan may be reinvested
by the plan, without payment of a sales charge, in shares of any of the
funds in the United Group in which the plan may invest.
Information concerning the establishment of automatic payments from an
account is available from representatives of Waddell & Reed, Inc.
<PAGE>
APPENDIX A
The following are descriptions of some of the ratings of securities
which a Fund may use. A Fund may also use ratings provided by other
nationally recognized statistical rating organizations.
DESCRIPTION OF BOND RATINGS
Standard & Poor's Corporation. A Standard & Poor's corporate or
municipal bond rating is a current assessment of the creditworthiness of an
obligor with respect to a specific obligation. This assessment of
creditworthiness may take into consideration obligors such as guarantors,
insurers or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.
The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform any audit in
connection with the ratings and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or withdrawn
as a result of changes in, or unavailability of, such information, or for
other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default -- capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA -- This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay interest
and repay principal.
AA -- Debt rated AA also qualifies as high quality debt obligations.
Capacity to pay interest and repay principal is very strong, and in the
majority of instances they differ from AAA issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB -- Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B -- Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied BB or BB- rating.
CCC -- Debt rated CCC has a currently indefinable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC -- The rating CC is typically applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating.
C -- The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating
may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
CI -- The rating CI is reserved for income bonds on which no interest
is being paid.
D -- Debt rated D is in payment default. It is used when interest
payments or principal payments are not made on a due date even if the
applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace periods; it will also be used upon
a filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-) -- To provide more detailed indications of
credit quality, the ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
NR -- Indicates that no public rating has been requested, that there
is insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.
Debt Obligations of issuers outside the United States and its
territories are rated on the same basis as domestic corporate and municipal
issues. The ratings measure the creditworthiness of the obligor but do not
take into account currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the
top four categories (AAA, AA, A, BBB, commonly known as "Investment Grade"
ratings) are generally regarded as eligible for bank investment. In
addition, the Legal Investment Laws of various states may impose certain
rating or other standards for obligations eligible for investment by
savings banks, trust companies, insurance companies and fiduciaries
generally.
Moody's Investors Service. A brief description of the applicable
Moody's Investors Service rating symbols and their meanings follows:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge". Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Some bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
NOTE: Bonds within the above categories which possess the strongest
investment attributes are designated by the symbol "1" following the
rating.
Ba -- Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect
to principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
<PAGE>
United Funds, Inc.
Custodian Underwriter
United Missouri Bank, n. a. Waddell & Reed, Inc.
Kansas City, Missouri 6300 Lamar Avenue
P. O. Box 29217
Legal Counsel Shawnee Mission, Kansas 66201-9217
Kirkpatrick & Lockhart (913) 236-2000
1800 M Street N. W.
Washington, D. C. Shareholder Servicing Agent
Waddell & Reed Services Company
Independent Accountants 6300 Lamar Avenue
Price Waterhouse P. O. Box 29217
Kansas City, Missouri Shawnee Mission, Kansas 66201-9217
(913) 236-2000
Investment Manager
Waddell & Reed Investment Accounting Services Agent
Management Company Waddell & Reed Services Company
6300 Lamar Avenue 6300 Lamar Avenue
P. O. Box 29217 P. O. Box 29217
Shawnee Mission, Kansas Shawnee Mission, Kansas 66201-9217
66201-9217 (913) 236-2000
(913) 236-2000
<PAGE>
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
PROSPECTUS
March 31 , 199 4
The United Group of Mutual Funds
United Funds, Inc.
United Bond Fund
United Income Fund
United Accumulative Fund
United Science and Technology Fund
United International Growth Fund, Inc.
United Continental Income Fund, Inc.
United Vanguard Fund, Inc.
United Retirement Shares, Inc.
United Municipal Bond Fund, Inc.
United High Income Fund, Inc.
United Cash Management, Inc.
United Government Securities Fund, Inc.
United New Concepts Fund, Inc.
United Gold & Government Fund, Inc.
United Municipal High Income Fund, Inc.
United High Income Fund II, Inc.
TABLE OF CONTENTS
Summary of Expenses ................. 2
Financial Highlights................. 6
What is United Funds, Inc.? ......... 10
Performance Information ............. 10
Goals and Investment Policies
of the Four Funds ................ 11
Management and Services ............. 17
Dividends, Distributions
and Taxes ........................ 19
Purchase of Shares ............... 20
Redemption .......................... 22
Appendix A .......................23
NUP 2 000( 3-94 )
printed on recycled paper
<PAGE>
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
(913) 236-2000
March 31 , 199 4
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information (the "SAI") is not a
prospectus. Investors should read this SAI in conjunction with the
prospectus (the "Prospectus") of United Funds, Inc. (the "Corporation")
dated March 31 , 1994, which may be obtained from United Funds, Inc.
or its Underwriter, Waddell & Reed, Inc., at the address or telephone
number shown above.
TABLE OF CONTENTS
Performance Information .................................... 2
Investment Objectives and Policies ......................... 4
Investment Management and Other Services .................. 25
Purchase, Redemption and Pricing of Shares ................ 31
Directors and Officers .................................... 46
Payments to Shareholders ........................... 50
Taxes ..................................................
Portfolio Transactions and Brokerage ...................... 55
Other Information ......................................... 58
Financial Statements ...................................... 59
<PAGE>
PERFORMANCE INFORMATION
Waddell & Reed, Inc., the Fund's underwriter, or the Corporation may
from time to time publish for one or more of the four Funds total return
information, yield information and/or performance rankings in
advertisements and sales materials.
Total Return
An average annual total return quotation is computed by finding the
average annual compounded rates of return over the one-, five-, and ten-
year periods that would equate the initial amount invested to the ending
redeemable value. Standardized total return information is calculated by
assuming an initial $1,000 investment from which the maximum sales load of
5.75% is deducted. All dividends and distributions are assumed to be
reinvested at net asset value as of the day the dividend or distribution is
paid. No sales load is charged on reinvested dividends or
distributions. The formula used to calculate the total return is:
n
P(1 + T) = ERV
Where : P = $1,000 initial payment
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of the $1,000 investment for
the periods shown.
Non-standardized performance information may also be presented and it
may not reflect the sales charge. For example, a Fund may also compute
total return without deduction of the sales load in which case the same
formula noted above will be used but the entire amount of the $1,000
initial payment will be assumed to have been invested. If the sales charge
were reflected, it would reduce the performance quoted.
The average annual total return quotations with sales load deducted as
of December 31 , 1993, which is the most recent balance sheet
included in this Statement of Additional Information, for the periods shown
were as follows:
One-year Five-year Ten-year
period from period from period from
1-1-93 to 1-1-88 to 1-1-83 to
12-31-93 12-31-93 12-31-93
----------- ----------- -----------
United Bond Fund 6.68% 9.45% 11.26%
United Income Fund 9.37 13.86 15.64
United Accumulative Fund 2.79 10.72 12.42
United Science and
Technology Fund 2.27 13.95 12.94
The average annual total return quotations without sales load deducted
as of December 31 , 1993, which is the most recent balance sheet
included in this Statement of Additional Information, for the periods shown
were as follows:
One-year Five-year Ten-year
period from period from period from
1-1-93 to 1-1-88 to 12-1-83 to
12-31-93 12-31-93 12-31-93
----------- ----------- -----------
United Bond Fund 13.19% 10.75% 11.92%
United Income Fund 16.05 15.21 16.33
United Accumulative Fund 9.06 12.03 13.09
United Science and
Technology Fund 8.51 15.31 13.61
Prior to October 1, 1993, United Science and Technology Fund was named
United Science and Energy Fund, and its investment policies related to
investments in science and energy securities rather than science and
technology securities.
A Fund may also quote unaveraged or cumulative total return which
reflects the change in value of an investment over a stated period of time.
Cumulative total returns will be calculated according to the formula
indicated above but without averaging the rate for the number of years in
the period.
Yield
A yield quoted for a Fund is computed by dividing the net investment
income per share earned during the period for which the yield is shown by
the maximum offering price per share on the last day of that period
according to the following formula:
6
Yield = 2((((a - b)/cd)+1) -1)
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
The yield for United Bond Fund computed according to the formula for
the 30-day period ended on December 31 , 1993, the date of the most
recent balance sheet included in this SAI, is 5.73 %.
Change in yields primarily reflect different interest rates received
by a Fund as its portfolio securities change. Yield is also affected by
portfolio quality, portfolio maturity, type of securities held and
operating expenses.
Performance Rankings
Waddell & Reed, Inc. or the Corporation also may from time to time
publish in advertisements or sales material performance rankings as
published by recognized independent mutual fund statistical services such
as Lipper Analytical Services, Inc., or by publications of general interest
such as Forbes, Money, The Wall Street Journal, Business Week, Barron's,
Fortune or Morningstar Mutual Fund Values. A Fund may also compare its
performance to that of other selected mutual funds or selected recognized
market indicators such as the Standard & Poor's 500 Stock Index and the Dow
Jones Industrial Average. Performance information may be quoted
numerically or presented in a table, graph or other illustration.
All performance information which a Fund advertises or includes in
sales material is historical in nature and is not intended to represent or
guarantee future results. The value of a Fund's shares when redeemed may
be more or less than their original cost.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of United Bond Fund, United
Income Fund, United Accumulative Fund and United Science and Technology
Fund (the "Funds") are described in the Prospectus, which refers to the
following investment methods and practices.
Science and Technology Securities
As described in the Prospectus, the portfolio of United Science and
Technology Fund emphasizes science and technology securities. Science and
technology securities are securities of companies whose products, processes
or services, in the opinion of Waddell & Reed Investment Management
Company, the Fund's investment manager (the "Manager"), are being or are
expected to be significantly benefited by the utilization or commercial
application of scientific or technological discoveries or developments in
such areas as aerospace, communications and electronic equipment, computer
systems, computer software and services, electronics, electronic media,
business machines, office equipment and supplies, biotechnology, medical
and hospital supplies and services, medical devices and drugs. Pursuant to
certain state requirements, United Science and Technology Fund has
undertaken that it will not invest in oil, gas or other mineral leases.
Prior to October 1, 1993, the name of United Science and
Technology Fund was United Science and Energy Fund and it previously sought
to achieve its goal of long-term capital growth through investing in
science and energy securities.
United Bond Fund
This Fund may not purchase any securities other than debt securities
if immediately after such purchase more than 10% of the value of the Fund's
total assets would consist of such other securities. This 10% limit shall
not include: (i) any securities required to be sold as promptly as
practicable after conversion of convertible debt securities or exercise of
warrants, as set forth below; or (ii) premiums paid or received by the Fund
as to those put and call options which this Fund is permitted to use, the
value of any put or call options or futures contracts held by it or the
amount of initial or variation margin deposits as to those puts, calls or
futures contracts which it is permitted to use. The debt securities which
the Fund may purchase may include convertible debt securities and debt
securities with warrants attached. The Fund may convert convertible debt
securities and exercise warrants provided that if as a result of conversion
or exercise and/or as a result of warrants becoming separately salable more
than 10% of the value of the Fund's total assets consists of non-debt
securities, sufficient non-debt securities will be sold as promptly as
practical to reduce the percentage of such non-debt securities held by the
Fund to 10% or less of its total assets, less the amounts set forth in (ii)
above. Any such sale shall be made with due regard for losses which might
result from an unduly hasty disposition. No debt securities may be
purchased if, at the time of purchase, it is in default of interest or if
there is less than $1,000,000 principal amount outstanding.
In selecting debt securities for the portfolio of this Fund,
consideration will be given to their yield; this yield would include the
yield to maturity in the case of debt securities purchased at a discount.
Consideration will also be given to the relative safety of debt securities
purchased and, in the case of convertible debt securities, the possibility
of capital growth.
The Fund invests in debt securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities ("U.S. Government
Securities.") These include Treasury Bills which mature within one year of
the date they are issued, Treasury Notes which have maturities of one to
ten years and Treasury Bonds which generally have maturities of more than
10 years. All such Treasury securities are backed by the full faith and
credit of the United States.
U.S. Government agencies and instrumentalities that issue or guarantee
securities include, but are not limited to, the Federal Housing
Administration, Federal National Mortgage Association ("Fannie
Mae") , Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage
Association ("Ginnie Mae") , General Services Administration, Central
Bank for Cooperatives, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation ("Freddie Mac") , Farm Credit Banks, Maritime
Administration, the Tennessee Valley Authority, the Resolution Funding
Corporation and the Student Loan Marketing Association.
Securities issued or guaranteed by U.S. Government agencies and
instrumentalities are not always supported by the full faith and credit of
the United States. Some, such as securities issued by the Federal Home
Loan Banks, are backed by the right of the agency or instrumentality to
borrow from the Treasury. Others, such as securities issued by Fannie
Mae , are supported only by the credit of the instrumentality and not by
the Treasury. If the securities are not backed by the full faith and
credit of the United States, the owner of the securities must look
principally to the agency issuing the obligation for repayment and may not
be able to assert a claim against the United States in the event that the
agency or instrumentality does not meet its commitment. The Fund will
invest in securities of agencies and instrumentalities only if the Manager
is satisfied that the credit risk involved is acceptable.
Among the U.S. Government Securities that the Fund will purchase are
"mortgage-backed securities" of Ginnie Mae, Freddie Mac
and Fannie Mae . These mortgage-backed securities include
"pass-through" securities and "participation certificates"; both are
similar, representing pools of mortgages that are assembled, with interests
sold in the pool; the assembly is made by an "issuer," such as a mortgage
banker, commercial bank or savings and loan association, which assembles
the mortgages in the pool and passes through payments of principal and
interest for a fee payable to it. Payments of principal and interest by
individual mortgagors are "passed through" to the holders of the interest
in the pool. Thus, the monthly or other regular payments on pass-through
securities and participation certificates include payments of principal
(including prepayments on mortgages in the pool) rather than only interest
payments. Another type of mortgage-backed security is the "collateralized
mortgage obligation," which is similar to a conventional bond (in that it
has more regular principal and interest payments than pass-through
securities and participation certificates) and is secured by groups of
individual mortgages. Timely payment of principal and interest on Ginnie
Mae pass-throughs is guaranteed by the full faith and credit of the United
States. Freddie Mac and Fannie Mae are both instrumentalities of the U.S.
Government, but their obligations are not backed by the full faith and
credit of the United States. It is possible that the availability and the
marketability (i.e., liquidity) of the securities discussed in this
paragraph could be adversely affected by actions of the U.S. Government to
tighten the availability of its credit .
The Fund may also invest in deposits in banks (represented by
certificates of deposit or other evidence of deposit issued by such banks)
of varying maturities the principal of which is insured by the Federal
Deposit Insurance Corporation ("FDIC"); such deposits are referred to as
"Insured Deposits." Such insurance (and accordingly, the Fund's
investment) is currently limited to $100,000 per bank; any interest above
that amount is not insured. Insured Deposits are not considered to be U.S.
Government Securities for purposes of the foregoing policies. Insured
Deposits are not marketable, and the Fund will invest in them only within
the 10% limit mentioned below under "Illiquid Investments" unless such
obligations are payable at principal amount plus accrued interest on demand
or within seven days after demand.
Pursuant to certain state requirements, United Bond Fund has
undertaken that it will not (i) invest in oil, gas and other mineral
leases; (ii) purchase or sell real property, including limited partnership
interests but excluding readily marketable (liquid) interests in real
estate investment trusts or readily marketable securities of companies
which invest in real estate; or (iii) invest in warrants (other than
warrants acquired in units or attached to other securities), valued at the
lower of cost or market, if such investment exceeds 5% of the value of its
net assets, which amount may include no more than 2% of its net assets in
warrants not listed on the New York or American Stock Exchanges.
Securities - General
The main types of securities in which the Funds may invest include
common stock, preferred stock, debt securities and convertible securities,
as described in the Prospectus. These securities may include the following
securities from time to time.
Certain of the Funds may purchase debt securities whose principal
amount at maturity is dependent upon the performance of a specified equity
security. The issuer of such debt securities, typically an investment
banking firm, is unaffiliated with the issuer of the equity security to
whose performance the debt security is linked. Equity-linked debt
securities differ from ordinary debt securities in that the principal
amount received at maturity is not fixed, but is based on the price of the
linked equity security at the time the debt security matures. The
performance of equity-linked debt securities depends primarily on the
performance of the linked equity security and may also be influenced by
interest rate changes. In addition, although the debt securities are
typically adjusted for diluting events such as stock splits, stock
dividends and certain other events affecting the market value of the linked
equity security, the debt securities are not adjusted for subsequent
issuances of the linked equity security for cash. Such an issuance could
adversely affect the price of the debt security. In addition to the equity
risk relating to the linked equity security, such debt securities are also
subject to credit risk with regard to the issuer of the debt security. In
general, however, such debt securities are less volatile than the equity
securities to which they are linked.
Certain of the Funds may also invest in a type of convertible
preferred stock that pays a cumulative, fixed dividend that is senior to,
and expected to be in excess of, the dividends paid on the common stock of
the issuer. At the mandatory conversion date, the preferred stock is
converted into not more than one share of the issuer's common stock at the
"call price" that was established at the time the preferred stock was
issued. If the price per share of the related common stock on the
mandatory conversion date is less than the call price, the holder of the
preferred stock will nonetheless receive only one share of common stock for
each share of preferred stock (plus cash in the amount of any accrued but
unpaid dividends). At any time prior to the mandatory conversion date, the
issuer may redeem the preferred stock upon issuing to the holder a number
of shares of common stock equal to the call price of the preferred stock in
effect on the date of redemption divided by the market value of the common
stock, with such market value typically determined one or two trading days
prior to the date notice of redemption is given. The issuer must also pay
the holder of the preferred stock cash in an amount equal to any accrued
but unpaid dividends on the preferred stock. This convertible preferred
stock is subject to the same market risk as the common stock of the issuer,
except to the extent that such risk is mitigated by the higher dividend
paid on the preferred stock. The opportunity for equity appreciation
afforded by an investment in such convertible preferred stock, however, is
limited, because in the event the market value of the issuer's common stock
increases to or above the call price of the preferred stock, the issuer may
(and would be expected to) call the preferred stock for redemption at the
call price. This convertible preferred stock is also subject to credit
risk with regard to the ability of the issuer to pay the dividend
established upon issuance of the preferred stock. Generally, convertible
preferred stock is less volatile than the related common stock of the
issuer.
Foreign Securities
Each of the Funds may purchase an unlimited amount of foreign
securities, but less than 5% of the combined total assets of all of the
Funds will consist of securities of foreign governments. As an operating
policy not more than 20% of the net assets of each Fund will be invested in
foreign securities. The Funds will not speculate in foreign currencies, but
may briefly hold foreign currencies in connection with the purchase or sale
of foreign securities. The Manager believes that while there are
investment risks (see below) in investing in foreign securities, there are
also investment opportunities in foreign securities. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy or each
other in such matters as gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Individual foreign companies may also differ favorably or unfavorably from
domestic companies in the same industry. Foreign currencies may be
stronger or weaker than the U.S. dollar or than each other. The Manager
believes that the Funds' ability to invest assets abroad might enable them
to take advantage of these differences and strengths where they are
favorable.
Further, an investment may be affected by changes in currency rates
and in exchange control regulations (i.e., currency blockage). The Funds
may bear a transaction charge in connection with the exchange of currency.
There may be less publicly available information about a foreign company
than about a domestic company. Foreign companies are not generally subject
to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. Most foreign stock
markets have substantially less volume than the New York Stock Exchange and
securities of some foreign companies are less liquid and more volatile than
securities of comparable domestic companies. There is generally less
government regulation of stock exchanges, brokers and listed companies than
in the United States. In addition, with respect to certain foreign
countries, there is a possibility of expropriation or confiscatory
taxation, political or social instability or diplomatic developments which
could adversely affect investments in securities of issuers located in
those countries. If it should become necessary, the Funds would normally
encounter greater difficulties in commencing a lawsuit against the issuer
of a foreign security than it would against a United States' issuer.
Lending Securities
The Funds may lend securities to attempt to increase income. If a
Fund does this, the borrower pays the Fund an amount equal to the dividends
or interest on the securities that the Fund would have received if it had
not loaned the securities. The Funds also receive additional compensation.
Any securities loan which a Fund makes must be collateralized in
accordance with applicable regulatory requirements (the "Guidelines").
This policy can only be changed by shareholder vote. Under the present
Guidelines, the collateral must consist of cash , U.S. Government
Securities or bank letters of credit, at least equal in value to the
market value of the securities loaned on each day that the loan is
outstanding. If the market value of the loaned securities exceeds the
value of the collateral, the borrower must add more collateral so that it
at least equals the market value of the securities loaned. If the market
value of the securities decreases, the borrower is entitled to return of
the excess collateral.
Under the Funds' current securities lending procedures, the Funds may
lend securities only to creditworthy broker-dealers and financial
institutions. A Fund may pay reasonable finder's, administrative and
custodian fees in connection with loans of securities.
There may be risks of delay in receiving additional collateral from
the borrower if the market value of the securities loaned goes up, risks of
delay in recovering the securities loaned or even loss of rights in the
collateral should the borrower of the securities fail financially.
Repurchase Agreements
The Funds may purchase securities subject to repurchase agreements. A
repurchase transaction occurs when, at the time a Fund purchases
securities, it also agrees to resell them to the vendor(normally a
commercial bank or broker-dealer), and must deliver those securities and/or
securities substituted for them under the repurchase agreement to the
vendor on an agreed-upon date in the future. In this section, such
securities, including any securities so substituted, are referred to as the
"Resold Securities." The resale price is in excess of the purchase price
in that it reflects an agreed-upon market interest rate effective for the
period of time during which the Fund's money is invested in the Resold
Securities. The majority of the repurchase transactions in which a Fund
would engage run from day to day, and the delivery pursuant to the resale
typically will occur within one to five days of the purchase. A Fund's
risk is limited to the ability of the vendor to pay the agreed-upon sum
upon the delivery date. In the event of bankruptcy or other default by the
vendor, there may be possible delays or expenses in liquidating the Resold
Securities, decline in their value or loss of interest. Upon default, the
Resold Securities constitute collateral security for the repurchase
obligation. The return on such collateral may be more or less than that
from the repurchase agreement. The Funds' repurchase agreements will be
structured so as to fully collateralize the loans, i.e., the value of the
Resold Securities, which will be held by the Fund's custodian bank or by a
third party that qualifies as a custodian under section 17(f) of the
Investment Company Act of 1940, is and, during the entire term of the
agreement, remains at least equal to the value of the loan, including the
accrued interest earned thereon. Repurchase Agreements are entered into
only with those entities approved on the basis of criteria established by
the Board of Directors.
Illiquid Investments
Each Fund has an operating policy, which may be changed without
shareholder approval, which provides that due to their possible limited
liquidity, the Fund may not make certain investments if as a result more
than 10% of its net assets would consist of such investments. The
investments which are included in this 10% limit are: (i) repurchase
agreements not terminable within seven days; (ii) securities for which
market quotations are not readily available; (iii) unlisted options and
their underlying collateral; and (iv) as to United Bond Fund, "insured
deposits."
Writing Covered Calls on Securities
Each of the Funds is permitted to write call options ("calls")
subject to the limitations set forth under "Investment Restrictions."
If a Fund writes a call, it agrees to sell to a purchaser of a call
the securities subject to the call. The price at which it must sell is
fixed by the call and is referred to as the exercise price. This price may
be equal to, or more or less than, the market price of the securities
covered by the call. The period during which the Fund must sell at this
price is also fixed by the call. Most calls run for periods of up to nine
months except that calls on certain debt securities may run for periods of
up to 15 months. During the period of a call the Fund must, if the call is
exercised, sell at the exercise price no matter what happens to the market
price of the securities subject to the call.
As compensation for entering into this contract when it writes a call
a Fund receives a premium. The Manager believes that a Fund's income can
be increased through the receipt of premiums on calls. Also, should the
market price of securities on which the Fund has written calls go down
during the call period, the premium would help to offset that decline.
However, if the Fund wrote a call, it would lose the opportunity to profit
from an increase in the market price of securities which are subject to a
call over the exercise price except to the extent that the premium
represents such a profit. The Fund will write calls when it considers that
the amount of the premium represents adequate compensation for the loss of
the opportunity.
Writing calls is a highly specialized activity. Personnel of the
Manager have had experience in this activity with respect to the Fund and
other funds and accounts managed by the Manager and its affiliates.
Writing calls involves investment techniques and risks different from those
ordinarily associated with investment companies. It is believed that the
Funds' limitations on writing calls will tend to reduce these risks.
A Fund may purchase calls to close its position in a call which it has
written. To do this, it will make a "closing purchase transaction;" this
involves buying a call on the same security with the same exercise price
and call period as the call it has written. When a Fund sells a security
on which it has written a call, it will, so that the call will remain
covered, effect a closing purchase transaction. A Fund may also effect a
closing purchase transaction to avoid having to sell a security on which it
has written a call if the call is exercised. A Fund will have a profit or
loss from a closing purchase transaction, depending on whether the amount
it paid to purchase the call is less or more than the premium it received
on the call which is closed out. There is no assurance that the Fund will
be able to effect a closing purchase transaction, if there is no market for
the call in question; if it cannot do so, it will have to hold the security
on which the call was written until the call expires or is exercised even
though it might otherwise be desirable to sell the security. If a call
which the Fund wrote is exercised, it could deliver the securities which it
owns (or the securities which it has the right to get). It could also
deliver other securities which it purchases.
Portfolio securities will be bought and sold on the basis of
attempting to achieve the goals of each Fund. However, the fact that
listed calls can be written on a particular security may be a factor in
buying or keeping it if it is otherwise considered suitable for a Fund.
Each Fund's Custodian bank (or a securities depository acting for it)
will act as the Fund's escrow agent as to securities on which the Fund has
written calls (or other securities which, under the applicable rules, are
acceptable for escrow arrangements). The securities will not be released
from the escrow until the call expires or the Fund enters into a closing
purchase transaction.
The writing of calls by a Fund may affect its turnover rate and the
brokerage commissions it pays. Calls may be exercised causing the sale of
securities, thus increasing turnover rate. The increase would be beyond a
Fund's control, since it has no control over the exercise of calls written
by it.
A premium received by a Fund upon writing a call will be included in
its assets; an equal amount will be included in the liability section of
the Statement of Assets and Liabilities as a deferred credit. This amount
will be subsequently adjusted to the current market value of the call. For
example, if the current market value of the call exceeds the premium
received, the excess would be an unrealized loss; if the premium exceeds
the current market value, the excess would be an unrealized gain. The
current market value of a call will be the last sales price on the
principal exchange in which the call is traded or, in the absence of
transactions, the mean between the bid and asked prices.
Writing Puts on Securities
Each of the Funds may write put options ("puts") on securities
subject to the limitations set forth under "Investment Restrictions" and
also under "Operating Restrictions of United Income Fund, United
Accumulative Fund and United Science and Technology Fund." As with covered
call writing, the Fund will write puts on securities for the purpose of
increasing income by receiving premiums from the purchaser of the option.
When a Fund writes a put, it receives a premium and agrees to purchase the
related investments from a purchaser of a put during the put period at a
fixed exercise price (which may differ from the market price of the related
investments) regardless of market price changes during the put period. If
the put is exercised, the Fund must purchase the related investments at the
exercise price. Puts are ordinarily sold when it is anticipated that
during the option period the market price of the underlying security will
decline by less than the amount of the premium, adjusted for any amount by
which the market price of the underlying security at the time of sale is
greater than the strike price. In writing puts, a Fund assumes the risk of
loss should the market value of the underlying security decline below the
exercise price of the option. The Fund's cost of purchasing the
investments will be adjusted by the amount of the premium it has received.
A Fund will write a put only when it has determined that it would be
willing to purchase the underlying security at the exercise price.
To terminate its obligation on a put which it has written, a Fund may
purchase a put in a "closing purchase transaction." (As discussed below,
it may also purchase puts other than as part of such closing transaction.)
A profit or loss may be realized depending on the amount of option
transaction costs and whether the premium previously received is more or
less than the cost of the put purchased. A profit will also be realized if
the put lapses unexercised because the Fund retains the premium
received. [JB3]
When a Fund writes a put it will, until it enters into a closing
purchase transaction, maintain designated cash or readily marketable assets
adequate to purchase the related investments should the put be exercised.
The Fund may hold cash or acquire readily marketable assets for this
purpose. The Fund will be unable to utilize such cash or assets for other
investment purposes until the exercise or expiration of the put.
Purchasing Calls and Puts on Securities
A Fund may purchase a call in a closing purchase transaction in order
to terminate its obligation on a call it has written. In addition, subject
to the limitations set forth under "Investment Restrictions" and also under
"Operating Restrictions of United Income Fund, United Accumulative Fund and
United Science and Technology Fund," the Funds may purchase calls on
securities for the purpose of taking advantage of a rise in the market
value of the underlying securities.
When a Fund buys a call, it pays a premium and has the right to buy
the related investments from a seller of a call during the call period at a
fixed exercise price. The Fund benefits only if the market price of the
related investments is above the call price during the call period and the
call is either exercised or sold at a profit. If the call is not exercised
or sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose the premium payment and the right to
purchase the related investments.
A Fund will purchase puts on securities to protect against major price
declines in the value of its portfolio securities. The Fund may purchase a
put on a security it owns ("protective put") or on a security it does not
own ("nonprotective put"). When a Fund buys a put, it pays a premium and
has the right to sell the related investments to a seller of a put during
the put period at a fixed exercise price. Buying a protective put (as
defined above) permits a Fund to protect itself during the put period
against a decline in the value of the related investments below the
exercise price by selling them through the exercise of the put. Buying a
nonprotective put (as defined above) permits a Fund, if the market price of
the related investments is below the put price during the put period,
either to resell the put or to buy the related investments and sell them at
the exercise price. If the market price of the related investments is
above the exercise price and as a result the put is not exercised or resold
(whether or not at a profit), the put will become worthless at its
expiration date.
A type of put which the Funds may purchase is an "optional delivery
standby commitment" which is entered into by parties selling debt
securities to a Fund. An optional delivery standby commitment gives a Fund
purchasing the security the right to sell the security back to the seller
on specified terms. This right is provided as an inducement to purchase
the security.
Risks and Other Considerations Concerning Options on Securities
A position in an exchange-listed option may be closed out only on an
exchange which provides a secondary market for options covering the same
related investment having the same exercise price and expiration date.
There is no assurance that a liquid secondary market will exist for any
particular option. In investing in options on securities which are not
listed on an exchange, a Fund must rely on the creditworthiness of the
party with whom it has entered into the options transaction. The Manager
will evaluate the creditworthiness of all such parties and intends to enter
into unlisted option transactions only with major dealers in such unlisted
options. The market for these options may be less active than the market
for exchange-listed options. The Manager will evaluate the ability to
enter into closing purchase transactions on unlisted options prior to
investing in them.
A Fund's put and call activities may affect its turnover rate and
brokerage commission payments. The exercise of calls or puts written by a
Fund may cause it to sell or purchase related investments, thus increasing
its turnover rate in a manner beyond its control. The exercise of puts may
also cause the sale of related investments, also increasing turnover;
although such exercise is within a Fund's control, holding a protective put
might cause it to sell the related investments for reasons which would not
exist in the absence of the put. A Fund will pay a brokerage commission
each time it buys or sells a put or call or buys or sells an underlying
investment in connection with the exercise of a put or call. Such
commissions may be higher than those which would apply to direct purchases
or sales. A Fund's custodian bank, or a securities depository acting for
it, will act as the Fund's escrow agent as to the related investments on
which it has written covered calls, or as to other assets acceptable for
such escrow, so that pursuant to the rules of the Option Clearing
Corporation and certain exchanges, no margin deposit will be required of
the Fund on such calls. Until the related investments or other investments
held in escrow are released from escrow, they cannot be sold by the Fund;
this release will take place on the expiration of the call or by the Fund's
entering into a closing purchase transaction. Once a Fund has received an
exercise notice on an option it has written, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option
and must deliver or receive the underlying securities at the exercise
price.
Option premiums paid to control an amount of related investments are
small in relation to the market value of related investments and,
consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options will result in a Fund's net asset
value being more sensitive to changes in the value of the related
investment. Markets for options on securities and options on futures
contracts are relatively new so it is not possible to predict whether
active exchange markets will continue over time.
Options On Stock Indexes
United Accumulative Fund, United Income Fund and United Science and
Technology Fund are permitted to write and purchase options on broadly-
based stock indexes, subject to the limitations set forth under "Operating
Restrictions" and "Investment Restrictions." Broadly-based stock indexes
are indexes which are not limited to stocks of any particular industry or
industries. A Fund will write options on stock indexes primarily to
generate income when the Manager anticipates that the index price will not
increase or decrease by more than the premium received by the Fund. A Fund
will purchase calls on stock indexes to hedge against anticipated increases
in the price of securities it wishes to acquire and purchase puts on stock
indexes to hedge against anticipated declines in the market value of
portfolio securities. Puts and calls on stock indexes are similar to puts
and calls on securities or futures contracts except that all settlements
are in cash and gain or loss depends on changes in the broad-based index in
question (and thus on price movements in the stock market generally) rather
than on price movements in individual securities or futures contracts.
When a Fund writes a call on a stock index, it receives a premium and
agrees that during the call period a purchaser of a call, upon exercise of
the call, will receive from the Fund an amount of cash if the closing level
of the stock index upon which the call is based is greater than the
exercise price of the call. The amount of cash is equal to the difference
between the closing price of the index and the exercise price of the call
times a specified multiple (the "multiplier") which determines the total
dollar value for each point of such difference. When a Fund buys a call on
a stock index it pays a premium and has the same rights as to such call as
are indicated above as the Fund's obligation when it writes such a call.
When a Fund buys a put on a stock index, it pays a premium and has the
right during the put period to require a seller of such a put, upon the
Fund's exercise of the put, to deliver to the Fund an amount of cash if the
closing level of the stock index upon which the put is based is lesser than
the exercise price of the put, which amount of cash is determined by the
multiplier, as described above for calls. When a Fund writes a put on a
stock index it receives a premium and the purchaser of such a put has the
right during the put period to require the Fund to deliver to it an amount
of cash equal to the difference between the closing level of the stock
index and the exercise price times the multiplier is the closing level is
less than the exercise price.
When a Fund writes a call on a stock index it will, until it enters
into a closing purchase transaction as to that call, segregate and maintain
cash or readily marketable assets adequate to make the required cash
delivery if the call is exercised. When it writes a put on a stock index,
it will, until it enters into a closing purchase transaction as to that
put, maintain designated cash or readily marketable assets adequate to
purchase the related investments should the put be exercised.
Risks of Options on Stock Indexes
The risks of investment in options on stock indexes may be greater
than options on securities. Because exercises of stock index options are
settled in cash, when a Fund writes a call on a stock index it cannot
provide in advance for its potential settlement obligations by acquiring
and holding the underlying securities. A Fund can offset some of the risk
of its writing position by holding a diversified portfolio of stocks
similar to those on which the underlying index is based. However, a Fund
cannot, as a practical matter, acquire and hold a portfolio containing
exactly the same stocks as the underlying index and, as a result, bears a
risk that the value of the securities held will vary from the value of the
index. Even if a Fund could assemble a stock portfolio that exactly
reproduced the composition of the underlying index, it still would not be
fully covered from a risk standpoint because of the "timing risk" inherent
in writing index options. When an index option is exercised, the amount of
cash that the holder is entitled to receive is determined by the difference
between the exercise price and the closing index level on the date when the
option is exercised. As with other kinds of options, a Fund as the call
writer will not learn that it has been assigned until the next business day
at the earliest. The time lag between exercise and notice of assignment
poses no risk for the writer of a covered call on a specific underlying
security, such as a common stock, because there the writer's obligation is
to deliver the underlying security, not to pay its value as of a fixed time
in the past. So long as the writer already owns the underlying security,
it can satisfy its settlement obligations by simply delivering it, and the
risk that its value may have declined since the exercise date is borne by
the exercising holder. In contrast, even if the writer of an index call
holds stocks that exactly match the composition of the underlying index, it
will not be able to satisfy its assignment obligations by delivering those
stocks against payment of the exercise price. Instead, it will be required
to pay cash in an amount based on the closing index value on the exercise
date; and by the time it learns that it has been assigned, the index may
have declined, with a corresponding decline in the value of its stock
portfolio. This "timing risk" is an inherent limitation on the ability of
index call writers to cover their risk exposure by holding stock positions.
If a Fund has purchased an index option and exercises it before the
closing index value for that day is available it runs the risk that the
level of the underlying index may subsequently change. If such a change
causes the exercised option to fall out-of-the-money, the Fund exercising
the option will be required to pay the difference between the closing index
value and the exercise price of the option (times the applicable
multiplier) to the assigned writer.
Futures Contracts and Options on Futures Contracts
Subject to the limitations set forth under "Investment Restrictions,"
United Bond Fund may purchase and sell Debt Futures and options thereon.
Subject to the limitations set forth under "Investment Restrictions" and
"Operating Restrictions of United Income Fund, United Accumulative Fund and
United Science and Technology Fund," United Income Fund, United
Accumulative Fund and United Science and Technology Fund may purchase and
sell Debt Futures and Stock Index Futures and options thereon.
When a Fund purchases a futures contract, it incurs an obligation to
take delivery of a specified amount of the obligation underlying the
contract at a specified time in the future for a specified price. When a
Fund sells a futures contract it incurs an obligation to deliver the
specified amount of the underlying obligation at a specified time in return
for an agreed upon price. In the case of futures contracts on
broadly-based stock indexes (" Stock Index Futures "), the
obligation underlying the futures contract is an amount of cash equal to a
specified dollar amount times the difference between the index value at the
close of the last trading day of the futures contract and the price at
which the futures contract is originally struck. In the case of a
futures contract on debt securities (" Debt Future "), the
underlying obligation is the related debt security.
When a Fund writes an option on a futures contract it becomes
obligated, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time during the term
of the option. If a Fund has written a call it becomes obligated to assume
a "long" position in a futures contract which means that it is required to
take delivery of the underlying securities. If it has written a put it is
obligated to assume a "short" position in a futures contract which means
that it is required to deliver the underlying securities. When the Fund
purchases an option on a futures contract it acquires a right in return for
the premium it pays to assume a position in a futures contract.
A Fund will not purchase or sell futures contracts and options thereon
for speculative purposes but rather only for the purpose of hedging against
changes in the market value of its portfolio securities or changes in the
market value of securities which the Manager anticipates that it may wish
to include in the portfolio of a Fund. A Fund may sell a Stock Index
Future or write a call or purchase a put on a Stock Index Future if the
Manager anticipates that a general market or market sector decline may
adversely affect the market value of any or all of the Fund's common stock
holdings. A Fund may buy a Stock Index Future or purchase a call or sell a
put on a Stock Index Future if the Manager anticipates a significant market
advance in the common stock it intends to purchase for the Fund's
portfolio. A Fund may purchase a Stock Index Future or a call option
thereon as a temporary substitute for the purchase of individual stocks
which may then be purchased in a orderly fashion. In the case of debt
securities a Fund could sell a Debt Future or write a call or buy a put on
a Debt Future to attempt to protect against the risk that the value of debt
securities held by the Fund might decline. A Fund could purchase a Debt
Future or purchase a call or write a put on a Debt Future to protect
against the risk of an increase in the value of debt securities at a time
when the Fund is not invested in debt securities to the extent permitted by
its investment policies. As securities are purchased, corresponding
Futures positions would be terminated by offsetting sales.
Unlike when a Fund purchases or sells securities, no price is paid or
received by it upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit an amount of cash or U.S. Treasury
Bills equal to a varying specified percentage of the contract amount. This
amount is known as initial margin. Cash held in the margin account is not
income producing. Subsequent payments, called variation margin, to and
from the broker will be made on a daily basis as the price of the
underlying index fluctuates making the futures contract more or less
valuable, a process known as marking-to-the-market.
If a Fund writes an option on a futures contract it will be required
to deposit initial and variation margin pursuant to requirements similar to
those applicable to futures contracts. Premiums received from the writing
of an option on a future are included in the initial margin deposit.
Changes in variation margin are recorded by a Fund as unrealized gains
or losses. Initial margin payments will be deposited in the Fund's
custodian bank in an account registered in the broker's name; access to the
assets in that account may be made by the broker only under specified
conditions. At any time prior to expiration of a futures contract or an
option thereon, a Fund may elect to close the position by taking an
opposite position which will operate to terminate its position in the
futures contract or option. A final determination of variation margin is
made at that time, additional cash is required to be paid by or released to
it and it realizes a loss or gain. Although futures contracts by their
terms call for the actual delivery or acquisition of the underlying
obligation, in most cases the contractual obligation is so fulfilled
without having to make or take delivery. The Funds do not intend to make
or take delivery of the underlying obligation. All transactions in futures
contracts and options thereon are made, offset or fulfilled through a
clearing house associated with the exchange on which the contracts are
traded. Although the Funds intend to buy and sell futures contracts only
on exchanges where there appears to be an active secondary market, there is
no assurance that a liquid secondary market will exist for any particular
future at any particular time. In such event, it may not be possible to
close a futures contract position.
A Fund will deposit in a segregated account with its custodian bank
high-quality debt obligations maturing in one year or less, or cash, in an
amount equal to the fluctuating market value of long futures contracts it
has purchased less any margin deposited on its long position. It may hold
cash or acquire such debt obligations for the purpose of making these
deposits.
The use of futures contracts and options thereon to attempt to protect
against the market risk of a decline in the value of portfolio securities
is referred to as having a "short futures position." The use of futures
contracts and options thereon to attempt to protect against the market risk
that a Fund might not be fully invested at a time when the value of the
securities in which it invests is increasing is referred to as having a
"long futures position." The Funds must operate within certain
restrictions as to long and short positions in futures contracts and
options thereon under a rule (the "CFTC Rule") adopted by the Commodity
Futures Trading Commission ("CFTC") under the Commodity Exchange Act (the
"CEA") to be eligible for the exclusion provided by the CFTC Rule from
registration by the Fund with the CFTC as a "commodity pool operator" (as
defined under the CEA), and must represent to the CFTC that it will operate
within such restrictions. Under these restrictions a Fund will not, as to
any positions, whether long, short or a combination thereof, enter into
futures contracts and options thereon for which the aggregate initial
margins and premiums exceed 5% of the fair market value of the Fund's
assets after taking into account unrealized profits and losses on options
the Fund has entered into; in the case of an option that is "in-the-money"
(as defined under the CEA) the "in-the-money" amount may be excluded in
computing such 5%. (In general a call option on a futures contract is "in-
the-money" if the value of the Future exceeds the strike, i.e., exercise,
price of the call; a put option on a futures contract is "in-the-money" if
the value of the futures contract which is the subject of the put is
exceeded by the strike price of the put.) Under the restrictions, a Fund
also must, as to short positions, use futures contracts and options thereon
solely for bona fide hedging purposes within the meaning and intent of the
applicable provisions under the CEA. As to its long positions which are
used as part of a Fund's portfolio strategy and are incidental to the
Fund's activities in the underlying cash market, the "underlying commodity
value" (see below) of the Fund's futures contracts and options thereon must
not exceed the sum of (i) cash set aside in an identifiable manner, or
short-term U.S. debt obligations or other U.S. dollar-denominated high-
quality short-term money market instruments so set aside, plus any funds
deposited as margin; (ii) cash proceeds from existing investments due in 30
days; and (iii) accrued profits held at the futures commission merchant.
(There is described above the segregated accounts which a Fund must
maintain with its custodian bank as to its options and futures contracts
activities due to Securities and Exchange Commission ("SEC") requirements;
the Fund will, as to its long positions, be required to abide by the more
restrictive of these SEC and CFTC requirements.) The "underlying commodity
value" of a futures contract is computed by multiplying the size (dollar
amount) of the futures contract by the daily settlement price of the
futures contract. For an option on a futures contract that value is the
underlying commodity value of the Future underlying the option.
Risk of Futures Contracts and Options Thereon
Since futures contracts and options thereon can replicate movements in
the cash markets for the securities in which a Fund invests without the
large cash investments required for dealing in such markets, they may
subject a Fund to greater and more volatile risks than might otherwise be
the case. The principal risks related to the use of such instruments are
(i) the offsetting correlation between movements in the market price of the
portfolio investments (held or intended) being hedged and in the price of
the futures contract or option may be imperfect; (ii) possible lack of a
liquid secondary market for closing out futures or options positions; (iii)
the need for additional portfolio management skills and techniques; and
(iv) losses due to unanticipated market price movements. For a hedge to be
completely effective, the price change of the hedging instrument should
equal the price change of the security being hedged. Such equal price
changes are not always possible because the investment underlying the
hedging instrument may not be the same investment that is being hedged.
The Manager will attempt to create a closely correlated hedge but hedging
activity may not be completely successful in eliminating market value
fluctuation. (See below for additional discussion of correlation as it
relates to Stock Index Futures.) The ordinary spreads between prices in
the cash and futures markets, due to the differences in the natures of
those markets, are subject to the following factors which may create
distortions. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures
contracts through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity
of the futures market depends on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures
market could be reduced, thus producing distortion. Third, from the point
of view of speculators the deposit requirements in the futures market are
less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may cause
temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest or stock market trends by the Manager
may still not result in a successful transaction. The Manager may be
incorrect in its expectations as to the extent of various interest rate
movements or stock market movements or the time span within which the
movements take place.
The risk of imperfect correlation between movements in the price of a
Stock Index Future and movements in the price of the securities which are
the subject of the hedge increases as the composition of a Fund's common
stock portfolio diverges from the common stocks included in the applicable
index. The price of the Stock Index Future may move more than or less than
the price of the securities being hedged. If the price of the Stock Index
Future moves less than the price of the securities which are the subject of
the hedge, the hedge will not be fully effective but, if the price of the
common stocks being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the
price of the common stocks being hedged has moved in a favorable direction,
this advantage will be partially offset by the futures contract. If the
price of the futures contract moves more than the price of the stock, a
Fund will experience either a loss or a gain on the futures contract which
will not be completely offset by movements in the price of the securities
which are the subject of the hedge. To compensate for the imperfect
correlation of movements in the price of the securities being hedged and
movements in the price of the Stock Index Futures, a Fund may buy or sell
Stock Index Futures in a greater dollar amount than the dollar amount of
common stocks being hedged if the historical volatility of the prices of
such common stocks being hedged is less than the historical volatility of
the stock index. It is also possible that, where a Fund has sold futures
contracts to hedge its common stocks against decline in the market, the
market may advance and the value of common stocks held in the portfolio may
decline. If this occurred, a Fund would lose money on the futures contract
and also experience a decline in value in its portfolio securities.
However, while this could occur for a very brief period or to a very small
degree, over time the value of a diversified portfolio of common stocks
will tend to move in the same direction as the market indices upon which
the futures contracts are based.
Where Stock Index Futures are purchased to hedge against a possible
increase in the price of stocks before a Fund is able to invest in common
stocks in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest in common stocks at that
time because of concern as to possible further market decline or for other
reasons, it will realize a loss on the futures contract that is not offset
by a reduction in the price of the common stocks it had anticipated
purchasing.
Operating Restrictions of United Income Fund, United Accumulative Fund and
United Science and Technology Fund
The following operating restrictions pertaining to investments in
options and futures may be revised by the Board depending on its judgments
regarding the ability of the Manager to make use of these instruments to
the benefit of these Funds and in order to conform to rules and regulations
of the CFTC, the SEC, various state securities commissions, Federal tax law
and regulations, and the rules of the exchanges on which the investments
are traded.
(i) Options on stock indexes, futures contracts and options on
futures contracts will be used only for risk management
("hedging") purposes within the meaning of applicable
regulations. A Fund will not hedge more than 10% of its total
assets.
(ii) Only options on securities which are issued by the Options
Clearing Corporation may be purchased or sold except for options
on securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and except for optional delivery
standby commitments; only options on stock indexes, options on
futures contracts and futures contracts which are listed on a
national securities or commodities exchange may be purchased or
sold; to the extent options transactions involving unlisted
options are illiquid, such options and the underlying collateral
will be subject to an operating policy of the Funds which limits
investment in illiquid securities to 10% of the net assets of
each Fund.
(iii) The aggregate premiums paid for the purchase of permitted options
which are held by any Fund at any one time, adjusted for the
portion of any premium attributable to a difference between the
"strike price" of the option and the market value of the
underlying security or futures contract at the time of purchase,
may not exceed 20% of the total net assets of that Fund;
(iv) The aggregate margin deposits and premiums required on all
futures contracts and options thereon held or outstanding at any
one time by any Fund may not exceed 5% of the total assets of
that Fund adjusted for unrealized gains or losses of the Fund on
such options and futures contracts;
(v) The aggregate amount of the obligations underlying the puts
written by a Fund which are outstanding at any one time may not
exceed 25% of the net assets of that Fund computed at the time of
sale.
Investment Restrictions
Certain of the Funds' investment restrictions are described in the
Prospectus. The following are fundamental policies and together with
certain restrictions described in the Prospectus cannot be changed without
shareholder approval. Under these additional restrictions, the Funds may
not:
(i) Buy real estate nor any nonliquid interests in real estate
investment trusts;
(ii) Buy shares of other investment companies which redeem their
shares. A Fund can buy shares of investment companies which do
not redeem their shares if it does so in a regular transaction in
the open market and then does not have more than one tenth (i.e.,
10%) of the total assets of the four Funds in these shares;
however, there is no current intent to invest more than 5% of the
assets of any Fund in such securities in the foreseeable future
nor has any Fund done so within the past year;
(iii) Lend money or other assets, other than through certain limited
types of loans; the Funds may buy debt securities which have been
sold to the public; the Funds may buy other obligations
customarily acquired by institutional investors; they may also
lend their portfolio securities (see "Lending Securities" above)
and enter into repurchase agreements (see "Repurchase Agreements"
above);
(iv) Invest for the purpose of exercising control or management of
other companies;
(v) Buy or continue to hold securities if the Corporation's Directors
or officers or certain others own a certain percentage of the
same securities; if any one of these people owns more than one
two-hundredths (i.e., .5 of 1%) of the shares of a company and if
the people who own that much or more own one twentieth (i.e., 5%)
of that company's shares, the Funds cannot buy that company's
shares or continue to own them;
(vi) Participate on a joint, or a joint and several, basis in any
trading account in any securities;
(vii) Sell securities short, buy securities on margin or engage in
arbitrage transactions; however, a fund may make margin deposits
in connection with its use of any financial instrument permitted
by its fundamental policies;
(viii) Engage in the underwriting of securities, that is, the selling of
securities for others; also, the Funds do not invest in
restricted securities; restricted securities are securities which
cannot freely be sold for legal reasons;
(ix) Buy a security if, as a result, it would own more than ten
percent of the issuer's voting securities or any class of its
securities, or if more than five percent of its total assets
would be invested in securities of that issuer, or if more than
twenty-five percent of its assets would then be invested in
securities of companies in any one industry; United Income Fund,
United Accumulative Fund and United Bond Fund may not buy
securities of companies in any one industry if more than 25% of
that Fund's total assets would then be invested in companies in
that industry;
(x) Buy securities of companies less than three years old, that is,
which have not been in continuous operation for at least three
years, including the operation of predecessor companies; buy
securities which do not have readily available market quotations,
other than commercial paper; or
(xi) Purchase warrants, except United Bond Fund may purchase warrants
to the extent described above under "United Bond Fund."
Additional Investment Restrictions of United Bond Fund
(i) United Bond Fund may not buy commodities or commodity contracts;
however, it may buy and sell any of the financial instruments it
is permitted to by fundamental policy, whether or not any such
financial instrument is considered to be a commodity or commodity
contract;
(ii) United Bond Fund may not borrow money or mortgage or pledge any
assets; this does not prohibit the escrow arrangements
contemplated by the writing of covered call options;
(iii) United Bond Fund may write (i.e., sell) call options ("calls")
but only if (i) the investments to which the call relates (the
"related investments") are either debt securities or futures
contracts relating to debt securities ("Debt Futures"); and (ii)
either (a) the calls are covered, i.e., the Fund owns the related
investments (or other investments acceptable for escrow
arrangements) while the call is outstanding, or (b) the related
investments are Debt Futures.
The Fund may purchase calls but only if the related investments are
either debt securities or Debt Futures.
The Fund may purchase put options ("puts") but only if the investments
to which the put relates (the "related investments") are debt securities or
Debt Futures. The Fund may purchase puts as to related investments it owns
("protective puts") or as to related investments it does not own
("nonprotective puts").
In order to comply with certain state regulations, the Fund has
adopted an operating policy which provides that the aggregate premiums paid
for all such options held by the Fund at any one time, adjusted for the
portion of the premium attributable to the difference between the option
strike price and the market value of the underlying security or futures
contract at the time of purchase, may not exceed 20% of the Fund's total
net assets.
The Fund may write (i.e., sell) puts but only if the related
investments are debt securities or Debt Futures.
Additional Investment Restrictions of United Accumulative Fund, United
Income Fund and United Science and Technology Fund
(i) The Funds may not purchase or write puts, calls or combinations
thereof; however call options ("calls") may be written on
securities if (i) such calls are listed on a domestic securities
exchange; (ii) when any such call is written and at all times
prior to a closing purchase transaction as to such call, or its
lapse or exercise, a Fund owns the securities which are subject
to the call or has the right to acquire such securities without
the payment of further consideration; and (iii) when any such
call is written, not more than 25% of any one Fund's total assets
would be subject to calls. In addition, the Funds may purchase
calls and write and purchase put options ("puts") on securities
in which the Funds may invest and may, for non-speculative
purposes, write and purchase options on broadly-based stock
indexes.
(ii) The Funds may not buy or sell commodities or commodities
contracts except that each Fund may, for non-speculative
purposes, buy or sell futures contracts on broadly-based stock
indexes ("Stock Index Futures"), futures contracts on debt
securities ("Debt Futures") and options on Stock Index Futures
and Debt Futures.
(iii) The Funds may not borrow money or pledge any of their assets but
may enter into escrow and collateral arrangements in connection
with investment in options and futures contracts.
Portfolio Turnover
A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities for a year
and dividing it by the monthly average of the market value of such
securities during the year, excluding certain short-term securities. A
Fund's turnover rate may vary greatly from year to year as well as within a
particular year and may be affected by cash requirements for the redemption
of its shares.
The portfolio turnover rates for each of the Funds for the fiscal
years ended December 31, 199 3 and December 31, 199 2 were as
follows:
1993 1992
---- ----
United Bond Fund 175.39% 115.17%
United Income Fund 21.70 19.25
United Accumulative Fund 230.29 194.41
United Science and Technology Fund 68.38 45.79
A high turnover rate will increase transaction costs and commission
costs that will be borne by the Funds and could generate taxable income or
loss.
INVESTMENT MANAGEMENT AND OTHER SERVICES
As used hereafter, up to and including page __, "the Fund" refers to
United Funds, Inc.
The Management Agreement
The Fund has an Investment Management Agreement (the "Management
Agreement") with Waddell & Reed, Inc. On January 8, 1992, subject to the
authority of the Fund's Board of Directors, Waddell & Reed, Inc. assigned
the Management Agreement and all related investment management duties (and
related professional staff) to Waddell & Reed Investment Management
Company, a wholly-owned subsidiary of Waddell & Reed, Inc. Under the
Management Agreement, the Manager is employed to supervise the investments
of the Fund and provide investment advice to the Fund. The address of the
Manager and Waddell & Reed, Inc. is 6300 Lamar Avenue, P.O. Box 29217,
Shawnee Mission, Kansas 66201-9217. Waddell & Reed, Inc. is the Fund's
underwriter.
The Management Agreement permits Waddell & Reed, Inc. or an affiliate
of Waddell & Reed, Inc. to enter into a separate agreement for transfer
agency services ("Shareholder Servicing Agreement") and a separate
agreement for accounting services ("Accounting Services Agreement") with
the Fund. The Management Agreement contains detailed provisions as to the
matters to be considered by the Fund's Directors prior to approving any
Shareholder Servicing Agreement or Accounting Services Agreement.
Torchmark Corporation and United Investors Management Company
The Manager is a wholly-owned subsidiary of Waddell & Reed, Inc.
Waddell & Reed, Inc. is a wholly-owned subsidiary of Waddell & Reed
Financial Services, Inc., a holding company. Waddell & Reed Financial
Services, Inc. is a wholly-owned subsidiary of United Investors Management
Company. United Investors Management Company is a wholly-owned
subsidiary of Torchmark Corporation. Torchmark Corporation is a
publicly held company . The address of Torchmark Corporation and
United Investors Management Company is 2001 Third Avenue South, Birmingham,
Alabama 35233.
Waddell & Reed, Inc. and its predecessors served as investment manager
to each of the registered investment companies in the United Group of
Mutual Funds since 1940 or the company's inception date, whichever was
later, and to TMK/United Funds, Inc. since that fund's inception, until
January 8, 1992 when it assigned its duties as investment manager for these
funds (and the related professional staff) to the Manager. The Manager has
also served as investment manager for Waddell & Reed Funds, Inc. since its
inception in September 1992 and Torchmark Government Securities Fund, Inc.
and Torchmark Insured Tax-Free Fund, Inc. since they each commenced
operations in February 1993. Waddell & Reed, Inc. serves as principal
underwriter for the investment companies in the United Group of Mutual
Funds, TMK/United Funds, Inc. and Waddell & Reed Funds, Inc.
Shareholder Services
Under the Shareholder Servicing Agreement entered into between Waddell
& Reed Services Company (the "Agent"), a subsidiary of Waddell & Reed,
Inc., and the Fund, the Agent performs shareholder servicing functions,
including the maintenance of shareholder accounts, the issuance, transfer
and redemption of shares, distribution of dividends and payment of
redemptions, the furnishing of related information to the Fund and handling
of shareholder inquiries. A new Shareholder Servicing Agreement, or
amendments to the existing one, may be approved by the Fund's Directors
without shareholder approval.
Accounting Services
Under the Accounting Services Agreement entered into between the Fund
and the Agent, the Agent provides the Fund with bookkeeping and accounting
services and assistance, including maintenance of the Fund's records,
pricing of the Fund's shares, and preparation of prospectuses for existing
shareholders, proxy statements and certain reports. A new Accounting
Services Agreement, or amendments to an existing one, may be approved by
the Fund's Directors without shareholder approval.
Payments by the Fund for Management, Accounting and Shareholder Services
Under the Management Agreement, for the Manager's management services,
the Fund pays the Manager a fee as described in the Prospectus. Prior to
the above-described assignment from Waddell & Reed, Inc. to Waddell & Reed
Investment Management Company, all fees were paid to Waddell & Reed,
Inc.
The management fees paid to
Waddell & Reed, Inc., or the
Manager , as the case may be, during the last three fiscal
years were as follows:
1993 1992 1991
---- ---- ----
United Bond Fund ........ $ 2,833,151 $ 2,515,684 $ 2,157,351
United Income Fund ...... 13,089,827 10,987,756 9,129,221
United Accumulative Fund 4,776,064 4,411,534 4,141,933
United Science and Technology
Fund ................. 2,598,347 2,445,983 1,930,128
----------- ----------- -----------
Total ................ $23,297,389 $20,360,957 $17,358,633
=========== =========== ===========
For purposes of calculating the daily fee the Fund does not include
money owed to it by Waddell & Reed, Inc. for shares which it has sold but
not yet paid to the Fund. The Fund accrues and pays this fee daily.
Under the Shareholder Servicing Agreement, the Fund pays the Agent a
monthly fee of $1.0208 for each shareholder account which was in existence
at any time during the prior month, plus $0.30 for each account on which a
dividend or distribution, of cash or shares, had a record date in that
month. It also pays certain out-of-pocket expenses of the Agent, including
long distance telephone communications costs; microfilm and storage costs
for certain documents; forms, printing and mailing costs; and costs of
legal and special services not provided by Waddell & Reed, Inc., the
Manager or the Agent.
Under the Accounting Services Agreement, the Fund pays the Agent a fee
for accounting services as described in the Prospectus. F ees paid
to the Agent for the fiscal years ended December 31, 199 3,
199 2 and 199 1 were as follows:
1993 1992 1991
---- ---- ----
United Bond Fund ........ $ 70,000 $ 65,000 $ 60,000
United Income Fund ...... 100,000 100,000 100,000
United Accumulative Fund 98,750 85,000 85,000
United Science and Technology Fund 60,000 60,000 51,667
The State of California imposes limits on the amount of certain
expenses the Fund can pay and requires the Manager to reduce its fee if
these expense amounts are exceeded. The Manager must reduce the amount of
such expenses to the extent they exceed these expense limits. Not all of
the Fund's expenses are included in the limit. The excluded expenses
include interest, taxes, brokerage commissions and extraordinary expenses
such as litigation that usually do not arise in the normal operations of a
mutual fund. The Fund's other expenses, including its management fee, are
included.
The Manager must, under California law, reduce the cost of any
included expenses which are over 2.5% of the first $30 million of average
net assets, 2% of the next $70 million of average net assets, and 1.5% of
any remaining average net assets during a fiscal year. The Fund will
notify shareholders of any change in the limitation.
Since the Fund pays a management fee for investment supervision and an
accounting services fee for accounting services as discussed above, the
Manager and the Agent, respectively, pay all of their own expenses in
providing these services. Amounts paid by the Fund under the Shareholder
Servicing Agreement are described above. Waddell & Reed, Inc. and
affiliates pay the Fund's Directors and officers who are affiliated with
the Manager and its affiliates. The Fund pays the fees and expenses of the
Fund's other Directors.
Waddell & Reed, Inc., under an agreement separate from the Management
Agreement, Shareholder Servicing Agreement and Accounting Services
Agreement, acts as the Fund's underwriter, i.e., sells its shares on a
continuous basis. Waddell & Reed, Inc. is not required to sell any
particular number of shares, and sells shares only for purchase orders
received. Under this agreement, Waddell & Reed, Inc. pays the costs of
sales literature, including the costs of shareholder reports used as sales
literature, and the costs of printing the prospectus furnished to it by the
Fund. The aggregate dollar amounts of underwriting commissions for the
fiscal years ended December 31, 199 3 , 199 2 and 199 1
were $ 23,716,003 , $ 27,641,320 and $ 22,622,936 ,
respectively, and the amounts retained by Waddell & Reed, Inc. were
$ 10,559,627 , $ 12,128,976 and $ 10,029,290 ,
respectively.
A major portion of the sales charge is paid to sales representatives
and managers of Waddell & Reed, Inc. Waddell & Reed, Inc. may compensate
its sales representatives as to purchases for which there is no sales
charge.
The Fund pays all of its other expenses. These include the costs of
materials sent to shareholders, audit and outside legal fees, taxes,
brokerage commissions, interest, insurance premiums, custodian fees, fees
payable by the Fund under Federal or other securities laws and to the
Investment Company Institute and nonrecurring and extraordinary expenses,
including litigation and indemnification relating to litigation.
Under a Service Plan (the "Plan") adopted by the Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940, each Fund may pay
Waddell & Reed, Inc., the principal underwriter for the Fund, a fee not to
exceed .25% of each Fund's average annual net assets, paid monthly, to
reimburse Waddell & Reed, Inc. for its costs and expenses in connection
with the provision of personal services to shareholders of the Funds and/or
maintenance of shareholder accounts.
The Plan and a related Service Agreement between the Fund and Waddell
& Reed, Inc. contemplate that Waddell & Reed, Inc. may be reimbursed for
amounts it expends in compensating, training and supporting registered
sales representatives, sales managers and/or other appropriate personnel in
providing personal services to shareholders of each Fund and/or maintaining
shareholder accounts; increasing services provided to shareholders of each
Fund by office personnel located at field sales offices; engaging in other
activities useful in providing personal service to shareholders of each
Fund and/or maintenance of shareholder accounts; and in compensating
broker-dealers who may regularly sell shares of each Fund for providing
shareholder services and/or maintaining shareholder accounts. For its
fiscal year ended December 31,1993, service fees paid (or accrued) were as
follows:
1993
----
United Bond Fund ........ $141,574
United Income Fund ...... 666,545
United Accumulative Fund 211,828
United Science and Technology Fund 101,879
The Plan and the Service Agreement were approved by the Fund's Board
of Directors, including the Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the
operations of the Plan or any agreement referred to in the Plan (hereafter,
the "Plan Directors"). The Plan was also approved by shareholders of each
Fund.
Among other things, the Plan provides that (i) Waddell & Reed, Inc.
will provide to the Directors of the Fund at least quarterly, and the
Directors will review, a report of amounts expended under the Plan and the
purposes for which such expenditures were made, (ii) the Plan will continue
in effect only so long as it is approved at least annually, and any
material amendments thereto will be effective only if approved, by the
Directors including the Plan Directors acting in person at a meeting called
for that purpose, (iii) amounts to be paid by a Fund under the Plan may not
be materially increased without the vote of the holders of a majority of
the outstanding shares of that Fund, and (iv) while the Plan remains in
effect, the selection and nomination of the Directors who are Plan
Directors will be committed to the discretion of the Plan Directors.
Custodial and Auditing Services
The custodian for the four Funds is United Missouri Bank, n.a., Kansas
City, Missouri. In general, the custodian is responsible for holding each
Fund's cash and securities. The Fund may place and maintain its foreign
securities and cash with a foreign custodian in accordance with Rule 17f-5
of the Investment Company Act of 1940. Price Waterhouse, Kansas City,
Missouri, the Fund's independent accountants, audits the Fund's financial
statements.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Determination of Offering Price
The net asset value of one of the shares of a Fund is the value of its
assets, less what it owes, divided by the total number of shares. For
example, if on a particular day a Fund owned securities worth $100 and had
cash of $15, the total value of the assets would be $115. If it owed $5,
the net asset value would be $110 ($115 minus $5). If it had 11 shares
outstanding, the net asset value of one share would be $10 ($110 divided by
11).
Shares of the Funds are sold at their next determined net asset value
plus the sales charge described in the Prospectus. The price makeup as of
December 31 , 1993 was as follows:
United Bond Fund
Net asset value per share (net assets divided by
capital shares outstanding) ..................... $6.39
Add: selling commission ( 5.75 % of offering
price) ........................................... .39
----
Maximum offering price per share (net asset value
per share divided by 94.25 %) .......... $6.78
=====
United Income Fund
Net asset value per share (net assets divided by
capital shares outstanding) .................... $24.77
Add: selling commission ( 5.75 % of offering
price) .......................................... 1.51
------
Maximum offering price per share (net asset value
per share divided by 94.25 %) ............ $26.28
======
United Accumulative Fund
Net asset value per share (net assets divided by
capital shares outstanding) ..................... $7.19
Add: selling commission ( 5.75 % of offering
price) ........................................... .44
-----
Maximum offering price per share (net asset value
per share divided by 94.25 %) ............. $7.63
=====
United Science and Technology Fund
Net asset value per share (net assets divided by
capital shares outstanding) .................... $14.83
Add: selling commission ( 5.75 % of offering
price) .......................................... .90
------
Maximum offering price per share (net asset value
per share divided by 94.25 %) ............ $15.73
======
The offering price of a share is its net asset value next determined
following acceptance of a purchase order plus the sales charge. The number
of shares you receive for your purchase depends on the next offering price
after Waddell & Reed, Inc. receives and accepts your order at its principal
business office at the address shown on the cover of this SAI. You will be
sent a document called a confirmation after your purchase which will
indicate how many shares you have purchased. Shares are normally issued
for cash only.
Waddell & Reed, Inc. need not accept any purchase order, and it or the
Fund may determine to discontinue offering Fund shares for purchase.
The net asset value and offering price per share are ordinarily
computed once each day that the New York Stock Exchange is open for
trading. Net asset value per share will ordinarily be computed on each day
on which it is computed as of the last close of the regular session of the
New York Stock Exchange or the close of the regular session of any such
domestic securities or commodities exchange on which an option or future
held by the Fund is traded. The New York Stock Exchange annually announces
the days on which it will not be open for trading. The most recent
announcement indicates that it will not be open on the following days: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. However, it is possible
that the Exchange may close on other days. The net asset value will change
every business day, since the value of the assets changes every business
day and so does the number of shares.
The portfolio securities of each Fund, except as otherwise noted,
listed or traded on a stock exchange, are valued on the basis of the last
sale on that day or, lacking any sales, at a price which is the mean
between the closing bid and asked prices. Other securities which are
traded over-the-counter are priced using NASDAQ (National Association of
Securities Dealers Automated Quotations), which provides information on bid
and asked prices quoted by major dealers in such stocks. Bonds, other than
convertible bonds, are valued using a pricing system provided by a major
dealer in bonds. Convertible bonds are valued using this pricing system
only on days when there is no sale reported. Short-term debt securities
are valued at amortized cost, which approximates market. When market
quotations are not readily available, securities are valued at fair value
as determined in good faith under procedures established by and under the
general supervision and responsibility of the Board of Directors.
Puts, calls and Debt Futures purchased and held by United Bond Fund
are valued at the last sales price thereof on the securities or commodities
exchanges on which they are traded, or, if there are no transactions, at
the mean between bid and asked prices. Ordinarily, the close of the
regular session for option trading on national securities exchanges is 4:10
P.M. Eastern time and the close of the regular session of commodities
exchanges is 4:15 P.M. Eastern time. Futures contracts will be valued by
reference to established futures exchanges. The value of a futures
contract purchased by the Fund will be either the closing price of that
contract or the bid price. Conversely, the value of a futures contract
sold by the Fund will be either the closing price or the asked price.
When a Fund writes a put or call, an amount equal to the premium
received is included in that Fund's Statement of Assets and Liabilities as
an asset, and an equivalent deferred credit is included in the liability
section. The deferred credit is "marked-to-market" to reflect the current
market value of the put or call. If a call a Fund wrote is exercised, the
proceeds received on the sale of the related investment are increased by
the amount of the premium that the Fund received. If a Fund exercises a
call it purchased, the amount paid to purchase the related investment is
increased by the amount of the premium paid. If a put written by a Fund is
exercised, the amount that Fund pays to purchase the related investment is
decreased by the amount of the premium it received. If a Fund exercises a
put it purchased, the amount that Fund receives from the sale of the
related investment is reduced by the amount of the premium it paid. If a
put or call written by a Fund expires, it has a gain in the amount of the
premium; if it enters into a closing purchase transaction, it will have a
gain or loss depending on whether the premium was more or less than the
cost of the closing transaction.
Optional delivery standby commitments are valued at fair value under
the general supervision and responsibility of the Fund's Board of
Directors. They are accounted for in the same manner as exchange-listed
puts.
Minimum Initial and Subsequent Investments
Initial investments must be at least $500 with the exceptions
described in this paragraph. A $50 minimum initial investment pertains to
certain retirement plan accounts and to sales of United Income Fund in
California, Maine, Montana, Washington and Wisconsin. A minimum initial
investment of $25 is applicable to purchases made through payroll deduction
for or by employees of the Manager, Waddell & Reed, Inc., their affiliates
or certain retirement plan accounts. A $100 minimum initial investment
pertains to certain exchanges of shares from another fund in the United
Group. Except with respect to certain exchanges and automatic withdrawals
from a checking account, a shareholder may make subsequent investments of
any amount. See "Exchanges for Shares of Other Funds in the United Group."
Waddell & Reed, Inc., in addition to distributing shares of the funds
in the United Group, TMK/United Funds, Inc. and Waddell & Reed Funds, Inc.
may distribute certain limited partnership investment interests from time
to time. These investments may provide distributions at various intervals
in amounts less than $500. A Fund account may be set up by an investor in
these limited partnerships to receive partnership distributions of $25 or
more. Accordingly, the $500 minimum initial investment will not apply to
such accounts.
Reduced Sales Charges
Account Grouping
Large purchases are subject to lower sales charges. The schedule of
sales charges appears in the Prospectus. For the purpose of taking
advantage of the lower sales charges available for large purchases, a
purchase in any of categories 1 through 7 listed below made by an
individual or deemed to be made by an individual may be grouped with
purchases in any other of these categories.
1. Purchases by an individual for his or her own account (includes
purchases under the United Funds Revocable Trust Form);
2. Purchases by that individual's spouse purchasing for his or her own
account (includes United Funds Revocable Trust Form of spouse);
3. Purchases by that individual or his or her spouse in their joint
account;
4. Purchases by that individual or his or her spouse for the account of
their child under age 21;
5. Purchase by any custodian for the child of that individual or spouse
in a Uniform Gifts to Minors Act ("UGMA") or Uniform Transfers
to Minors Act account;
6. Purchases by that individual or his or her spouse for his or her
Individual Retirement Account ("IRA") , Section 457 of the
Internal Revenue Code of 1986, as amended (the "Code") salary
reduction plan account, tax sheltered annuity account ("TSA") or Keogh
Plan account, provided that the individual and spouse are the only
participants in the Keogh Plan; and
7. Purchases by a trustee under a trust where that individual or his or
her spouse is the settlor (the person who establishes the trust).
Examples:
A. Grandmother opens a UGMA account for grandson A;
Grandmother has an account in her own name; A's father has an
account in his own name; the UGMA account may be grouped with A's
father's account but may not be grouped with Grandmother's
account;
B. H establishes a trust naming his children as beneficiaries and
appointing himself and his bank as co-trustees; a purchase made
in the trust account is eligible for grouping with an IRA account
of W, H's wife;
C. H's will provides for the establishment of a trust for the
benefit of his minor children upon H's death; his bank is named
as trustee; upon H's death, an account is established in the name
of the bank, as trustee; a purchase in the account may be grouped
with an account held by H's wife in her own name.
D. X establishes a trust naming herself as trustee and R, her son,
as successor trustee and R and S as beneficiaries; upon X's
death, the account is transferred to R as trustee; a purchase in
the account may not be grouped with R's individual account. If
X's spouse, Y, was successor trustee, this purchase could be
grouped with Y's individual account.
All purchases made for a participant in a multi-participant Keogh plan
may be grouped only with other purchases made under the same plan; a multi-
participant Keogh plan is defined as a plan in which there is more than one
participant where one or more of the participants is other than the spouse
of the owner/employer.
Example A: H has established a Keogh plan; he and his wife W are the only
participants in the plan; they may group their purchases made
under the plan with any purchases in categories 1 through 7
above.
Example B: H has established a Keogh Plan; his wife, W, is a participant
and they have hired one or more employees who also become
participants in the plan; H and W may not combine any purchases
made under the plan with any purchases in categories 1 through
7 above; however, all purchases made under the plan for H, W or
any other employee will be combined.
All purchases made under a "qualified" employee benefit plan of an
incorporated business will be grouped. A "qualified" employee benefit plan
is established pursuant to Section 401 of the Code. All qualified
employee benefit plans of any one employer or affiliated employers will
also be grouped. An affiliate is defined as an employer that directly, or
indirectly, controls or is controlled by or is under control with another
employer.
Example: Corporation X sets up a defined benefit plan; its subsidiary,
Corporation Y, sets up a 401(k) plan; all contributions made
under both plans will be grouped.
All purchases made under a simplified employee pension plan ("SEP"),
payroll deduction plan or similar arrangement adopted by an employer or
affiliated employers (as defined above) may be grouped provided that the
employer elects to have all such purchases grouped at the time the plan is
set up. If the employer does not make such an election, the purchases made
by individual employees under the plan may be grouped with the other
accounts of the individual employees described above in "Account Grouping."
Account grouping as described above is available under the following
circumstances.
One-time Purchases
A one-time purchase in accounts eligible for grouping may be combined
for purposes of determining the availability of a reduced sales charge. In
order for an eligible purchase to be grouped, the investor must advise
Waddell & Reed, Inc. at the time the purchase is made that it is eligible
for grouping and identify the accounts with which it may be grouped.
Example: H and W open an account in the Fund and invest $75,000; at the
same time, H's parents open up three Uniform Gift to Minors Act
accounts for H and W's three minor children and invest $10,000 in
each child's name; the combined purchase of $105,000 is subject
to a reduced sales load of 4.75% provided that Waddell & Reed,
Inc. is advised that the purchases are entitled to grouping.
Rights of Accumulation
If shares are held in any account and an additional purchase is made
in that account or in any account eligible for grouping with that account,
the additional purchase is combined with the net asset value of the
existing account as of the date the new purchase is accepted by Waddell &
Reed, Inc. for the purpose of determining the availability of a reduced
sales charge.
Example: H is a current shareholder who invested in the Fund three years
ago. His account has a net asset value of $80,000. His wife, W,
now wishes to invest $20,000 in the Fund. W's purchase will be
combined with H's existing account and will be entitled to a
reduced sales charge of 4.75%. H's original purchase was subject
to a full sales charge and the reduced charge does not apply
retroactively to that purchase.
In order to be entitled to rights of accumulation, the purchaser must
inform Waddell & Reed, Inc. that the purchaser is entitled to a reduced
charge and provide Waddell & Reed, Inc. with the name and number of the
existing account with which the purchase may be combined.
If a purchaser holds shares which have been purchased under an
investment program ("contractual plan") the shares held under the plan may
be combined with the additional purchase only if the contractual plan has
been completed.
Statement of Intention
The benefit of a reduced sales charge for larger purchases is also
available under a Statement of Intention. By signing a Statement of
Intention form, which is available from Waddell & Reed, Inc., the purchaser
indicates an intention to invest, over a 13-month period, a dollar amount
which is sufficient to qualify for a reduced sales charge. The 13-month
period begins on the date the first purchase made under the Statement is
accepted by Waddell & Reed, Inc. Each purchase made from time to time
under the Statement is treated as if the purchaser were buying at one time
the total amount which he or she intends to invest. The sales charge
applicable to all purchases made under the terms of the statement will be
the sales charge in effect on the beginning date of the 13-month period.
In determining the amount which the purchaser must invest in order to
qualify for a reduced sales charge under a Statement of Intention, the
investor's Rights of Accumulation (see above) will be taken into account;
that is, shares already held in the same account in which the purchase is
being made or in any account eligible for grouping with that account, as
described above, will be included.
Example: H signs a Statement of Intention indicating his intent to invest
in his own name a dollar amount sufficient to entitle him to
purchase shares at the sales charge applicable to a purchase of
$100,000. H has an IRA account and the shares held under the IRA
in the Fund have a net asset value as of the date the Statement
is accepted by Waddell & Reed, Inc. of $15,000; H's wife, W, has
an account in her own name invested in another fund in the United
Group which charges the same sales load as the Fund, with a net
asset value as of the date of acceptance of the Statement of
$10,000; H needs to invest $75,000 over the 13-month period in
order to qualify for the reduced sales load applicable to a
purchase of $100,000.
A copy of the Statement of Intention signed by a purchaser will be
returned to the purchaser after it is accepted by Waddell & Reed, Inc. and
will set forth the dollar amount which must be purchased within the 13-
month period in order to qualify for the reduced sales charge.
If a purchaser holds shares which have been purchased under an
investment program ("contractual plan"), the shares held under the plan
will be taken into account in determining the amount which must be invested
under the Statement only if the contractual plan has been completed.
The minimum initial investment under a Statement of Intention is 5% of
the dollar amount which must be invested under the Statement. An amount
equal to 5% of the purchase required under the Statement will be held "in
escrow." If a purchaser does not, during the period covered by the
Statement, invest the amount required to qualify for the reduced sales
charge under the terms of the Statement, he or she will be responsible for
payment of the sales charge applicable to the amount actually invested.
The additional sales charge owed on purchases made under a Statement which
is not completed will be collected by redeeming part of the shares
purchased under the Statement and held "in escrow" unless the purchaser
makes payment of this amount to Waddell & Reed, Inc. within 20 days of
Waddell & Reed, Inc.'s request for payment.
If the actual amount invested is higher than the amount an investor
intends to invest, and is large enough to qualify for a sales charge lower
than that available under the Statement of Intention, the lower sales
charge will apply.
A Statement of Intention does not bind the purchaser to buy, or
Waddell & Reed, Inc. to sell, the shares covered by the Statement.
With respect to Statements of Intention for $2,000,000 or purchases
otherwise qualifying for no sales charge under the terms of the Statement
of Intention, the initial investment must be at least $200,000, and the
value of any shares redeemed during the 13-month period which were acquired
under the Statement will be deducted in computing the aggregate purchases
under the Statement.
Statements of Intention are not available for purchases made under a
simplified employee pension plan ("SEP") where the employer has elected to
have all purchases under the SEP grouped.
Other Funds in the United Group
Reduced sales charges for larger purchases apply to purchases of any
of the funds in the United Group which are subject to a sales charge. A
purchase of, or shares held in, any of the funds in the United Group which
are subject to the same sales charge as the Fund will be treated as an
investment in the Fund for the purpose of determining the applicable sales
charge. The following funds in the United Group are subject to a maximum
5.75% ("full") sales charge as described in the prospectus of each Fund:
United Funds, Inc., United International Growth Fund, Inc., United
Continental Income Fund, Inc., United Vanguard Fund, Inc., United
Retirement Shares, Inc., United High Income Fund, Inc., United New Concepts
Fund, Inc., United Gold & Government Fund, Inc. and United High Income Fund
II, Inc. The following funds in the United Group are subject to a
"reduced" sales charge as described in the prospectus of each fund: United
Municipal Bond Fund, Inc., United Government Securities Fund, Inc. and
United Municipal High Income Fund, Inc. For the purposes of obtaining the
lower sales charge which applies to large purchases, purchases in a fund in
the United Group which is subject to a full sales charge may not be grouped
with purchases in a fund in the United Group which is subject to a reduced
sales charge; conversely, purchases made in a fund with a reduced sales
charge may not be grouped or combined with purchases of a fund which is
subject to a full sales charge.
United Cash Management, Inc. is not subject to a sales charge.
Purchases in that fund are not eligible for grouping with purchases in any
other fund.
Net Asset Value Purchases
As stated in the Prospectus, Fund shares may be purchased at net asset
value by the Directors and officers of the Fund, employees of Waddell &
Reed, Inc., employees of their affiliates, sales representatives of
Waddell & Reed, Inc. and the spouse, children, parents , children's
spouses and spouse's parents of each such Director, officer,
employee and sales representative . "Child" includes stepchild;
"parent" includes stepparent. Purchases in an IRA sponsored by
Waddell & Reed, Inc. established for any of these eligible purchasers may
also be at net asset value. Purchases in any tax qualified retirement plan
under which the eligible purchaser is the sole participant may also be made
at net asset value. Trusts under which the grantor and the trustee or a
co-trustee are each an eligible purchaser are also eligible for net asset
value purchases. "Employees" includes retired employees. A retired
employee is an individual separated from service from Waddell & Reed, Inc.
or affiliated companies with a vested interest in any Employee Benefit Plan
sponsored by Waddell & Reed, Inc. or its affiliated companies. "Sales
representatives" includes retired sales representatives. A "retired sales
representative" is any sales representative who was, at the time of
separation from service from Waddell & Reed, Inc., a Senior Account
Representative. A custodian under the Uniform Gifts (or Transfers) to
Minors Act purchasing for the child or grandchild of any employee or
sales representative may purchase at net asset value whether or not the
custodian himself is an eligible purchaser.
Reasons for Differences in Public Offering Price
As described herein and in the Prospectus, there are a number of
instances in which the Fund's shares are sold or issued on a basis other
than the maximum public offering price, that is, the net asset value plus
the highest sales charge. Some of these relate to lower or eliminated
sales charges for larger purchases, whether made at one time or over a
period of time as under a Statement of Intention or right of accumulation.
See the table of sales charges in the Prospectus. The reasons for these
quantity discounts are, in general, that (i) they are traditional and have
long been permitted in the industry and are therefore necessary to meet
competition as to sales of shares of other funds having such discounts;
(ii) certain quantity discounts are required by rules of the National
Association of Securities Dealers, Inc. (as are elimination of sales
charges on the reinvestment of dividends and distributions); and (iii) they
are designed to avoid an unduly large dollar amount of sales charges on
substantial purchases in view of reduced selling expenses. Quantity
discounts are made available to certain related persons for reasons of
family unity and to provide a benefit to tax exempt plans and
organizations.
The reasons for the other instances in which there are reduced or
eliminated sales charges are as follows. Exchanges at net asset value are
permitted because a sales charge has already been paid on the shares
exchanged. Sales without sales charge are permitted to Directors, officers
and certain others due to reduced or eliminated selling expenses and since
such sales may aid in the development of a sound employee organization,
encourage incentive, responsibility and interest in the United Group and an
identification with its aims and policies. Limited reinvestments of
redemptions at no sales charge are permitted to attempt to protect against
mistaken or not fully informed redemption decisions. Shares may be issued
at no sales charge in plans of reorganization due to reduced or eliminated
sales expenses and since, in some cases, such issuance is exempted in the
Investment Company Act of 1940 from the otherwise applicable restrictions
as to what charge must be imposed. In no case in which there is a reduced
or eliminated sales charge are the interests of existing shareholders
adversely affected since, in each case, the Fund receives the net asset
value per share of all shares sold or issued.
Flexible Withdrawal Service
If you qualify, you may arrange to receive regular monthly, quarterly,
semi-annual or annual payments; this can be done by redeeming shares on a
regular basis. This service is called Flexible Withdrawal Service (the
"Service"). It is available not only for Fund shares but also for shares
of any of the funds in the United Group. It would be a disadvantage to an
investor to make additional purchases of shares while a withdrawal program
is in effect as this would result in duplication of sales charges.
To qualify for the Service, you must have invested at least $10,000 in
shares which you still own of any of the funds in the United Group; or, you
must own shares having a value of at least $10,000. The value for this
purpose is not the net asset value but the value at the offering price,
i.e., the net asset value plus the sales charge.
To start this Service, you must fill out a form (available from
Waddell & Reed, Inc.), advising Waddell & Reed, Inc. how you want your
shares redeemed to make the payments. You have three choices:
First. To get a monthly, quarterly, semi-annual or annual payment of
$50 or more;
Second. To get a monthly payment, which will change each month, equal
to one-twelfth of a percentage of the value of the shares in the Account;
you fix the percentage; or
Third. To get a monthly or quarterly payment, which will change each
month or quarter, by redeeming a number of shares fixed by you (at least
five shares).
Shares are redeemed on the 20th day of the month in which the payment
is to be made, or on the prior business day if the 20th is not a business
day. Payments are made within five days of the redemption.
The Fund, not Waddell & Reed, Inc., pays the costs of this Service.
Having the Service costs you nothing extra individually. There is a $2.00
fee for each withdrawal from a Retirement Plan account.
If you have a share certificate for the shares you want to make
available for this Service, you must enclose the certificate with the form
initiating the Service.
The dividends and distributions on shares you have made available for
this Service are reinvested in additional shares. All payments are made by
redeeming shares, which may involve a gain or loss for tax purposes. To
the extent that payments exceed dividends and distributions, the number of
shares you own will decrease. When all of the shares in your account are
redeemed, you will not receive any payments. Thus, the payments are not an
annuity or income or return on your investment.
You may, at any time, change the manner in which you have chosen to
have shares redeemed. You can change to any of the other choices
originally available to you. For example, if you started out with a $50
monthly payment, you could change to a $200 quarterly payment. You can at
any time redeem part or all of the shares in your account; if you redeem
all of the shares, the Service is terminated. The Fund can also terminate
the Service by notifying you in writing.
After the end of each calendar year, information on shares redeemed
will be sent to you to assist you in completing your Federal income tax
return.
Exchanges for Shares of Other Funds in the United Group
Once a sales charge has been paid on shares of a fund in the United
Group, these shares and any shares added to them from reinvestment of
dividends or distributions may be freely exchanged for shares of another
fund in the United Group. The shares you exchange must be worth at least
$100 or you must already own shares of the fund in the United Group into
which you want to exchange.
You may exchange shares you own in another fund in the United Group
for shares of a Fund without charge if (i) a sales charge was paid on these
shares, or (ii) the shares were received in exchange for shares for which a
sales charge was paid, or (iii) the shares were acquired from reinvestment
of dividends and distributions paid on such shares. There may have been
one or more such exchanges so long as a sales charge was paid on the shares
originally purchased. Also, shares acquired without a sales charge because
the purchase was $2 million or more will be treated the same as shares on
which a sales charge was paid.
United Municipal Bond Fund, Inc., United Government Securities Fund,
Inc. and United Municipal High Income Fund, Inc. shares are the exceptions
and special rules apply. Shares of any of these funds may be exchanged for
shares of the Funds only if (i) you have received those shares as a result
of one or more exchanges of shares on which a sales charge was originally
paid, or (ii) the shares have been held from the date of the original
purchase for at least six months.
Subject to the above rules regarding sales charges, you may have a
specific dollar amount of shares of United Cash Management, Inc.
automatically exchanged each month into the Fund or any other fund in the
United Group. The shares of United Cash Management, Inc. which you
designate for automatic exchange must be worth at least $100 or you must
own shares of the fund in the United Group into which you want to exchange.
The minimum value of shares which you may designate for automatic exchange
monthly is $100, which may be allocated among different funds in the United
Group so long as each fund receives a value of at least $25. Minimum
initial investment and minimum balance requirements apply to such automatic
exchange service.
When you exchange shares, the total shares you receive will have the
same aggregate net asset value as the total shares you exchange. The
relative values are those next figured after your written exchange request
is received in good order.
These exchange rights and other exchange rights concerning the other
funds in the United Group can in most instances be eliminated or modified
at any time and any such exchange may not be accepted.
Retirement Plans
For individual taxpayers meeting certain requirements, Waddell & Reed,
Inc. offers four retirement plan arrangements which provide tax deferral
and contribute to retirement assets. All four of them involve investment
in shares of the Funds (or the shares of certain other funds in the United
Group).
First. A self-employed person may set up a plan that is commonly
called a Keogh plan. As a general rule, an investor under a defined
contribution Keogh Plan can contribute each year up to 25% of his or her
annual earned income, with a maximum of $30,000.
Second. Investors having earned income may set up a plan that is
commonly called an IRA . Under an IRA, an investor can
contribute each year up to 100% of his or her earned income up to a maximum
of $2,000. The maximum is $2,250 if the investor's spouse has no earned
income in a taxable year. If the investor's spouse has at least $2,000
of earned income in a taxable year, the maximum is $4,000 ($2,000 for
each spouse).
These contributions are deductible unless the investor (or, if
married, either spouse) is an active participant in a qualified retirement
plan or if, notwithstanding that the investor or one or both spouses so
participates, the adjusted gross income does not exceed certain levels.
An investor may also use an IRA to receive a rollover contribution
which is either (a) a direct rollover from an employer's plan or (b) a
rollover of an eligible distribution paid to the investor from an
employer's plan or another IRA. To the extent a rollover contribution is
made to an IRA, the distribution will not be subject to Federal income tax
until distributed from the IRA. A direct rollover generally applies to any
distribution from an employer's plan (including a custodial account under
Section 403(b)(7) of the Code, but not an IRA) other than certain periodic
payments, required minimum distributions and other specified distributions.
In a direct rollover, the eligible rollover distribution is paid directly
to the IRA, not to the investor. If, instead, an investor receives payment
of an eligible rollover distribution, all or a portion of that distribution
generally may be rolled over to an IRA within 60 days after receipt of the
distribution. Because mandatory Federal income tax withholding applies to
any eligible rollover distribution which is not paid in a direct rollover,
investors should consult their tax advisors or pension consultants as to
the applicable tax rules.
Third. If an investor is an employee of a public school system or of
certain types of charitable organizations, he or she may be able to enter
into a deferred compensation arrangement through a custodial account under
Section 403(b) of the Code.
Fourth. If an investor is an employee of a state or local government
or of certain types of charitable organizations, he or she may be able to
enter into a deferred compensation arrangement in accordance with Section
457 of the Code.
Waddell & Reed, Inc. also offers to businesses prototype employee
benefit plans qualified under Section 401 of the Code. Investments may be
made in the Fund in accordance with the terms of the plans.
More detailed information about these arrangements is in the
applicable forms which are available from Waddell & Reed, Inc. These plans
may involve complex tax questions as to premature distributions and other
matters. Investors should consult their tax advisor or pension consultant.
Redemptions
The Prospectus gives information as to redemption procedures; the
emergency or other extraordinary conditions there indicated under which
payment may be delayed beyond seven days are certain emergency conditions
determined by the Securities and Exchange Commission, when the New York
Stock Exchange is closed other than for weekends or holidays, or when
trading on the Exchange is restricted. The extraordinary conditions
mentioned in the Prospectus under which redemptions may be made in
portfolio securities are that the Fund's Board of Directors can decide that
conditions exist making cash payments undesirable. If they should,
redemption payments could be made in securities. They would be valued at
the value used in figuring net asset value. There would be brokerage costs
to the redeeming shareholder in selling such securities. The Fund,
however, has elected to be governed by Rule 18f-1 under the Investment
Company Act, pursuant to which it is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of its net asset value during any
90-day period for any one shareholder.
Reinvestment Privilege
The Prospectus discusses the reinvestment privilege under which, if
you redeem and then decide it was not a good idea, you may reinvest. If
shares of a Fund are then being offered, you can put all or part of your
redemption payment back into that Fund's shares without any sales charge at
the net asset value next determined after you have returned the amount.
Your written request to do this must be received within 30 days after your
redemption request was received. You can do this only once as to shares of
that Fund. You do not use up this privilege by redeeming shares to invest
the proceeds at net asset value in a Keogh plan or an IRA.
DIRECTORS AND OFFICERS
The day-to-day affairs of the Fund are handled by outside
organizations selected by the Board of Directors. The Board has
responsibility for establishing broad corporate policies for the Fund and
for overseeing overall performance of the selected experts. It has the
benefit of advice and reports from independent counsel and independent
auditors.
Each of the Fund's Directors is also a Director of each of the other funds
in the United Group, TMK/United Funds, Inc., Waddell & Reed Funds, Inc.,
Torchmark Government Securities Fund, Inc. and Torchmark Insured Tax-Free
Fund, Inc. and each of its officers, with the exception of Mr. Garcia, is
also an officer of one or more of these funds. The principal occupation of
each Director and officer during at least the past five years is given
below. Each of the persons listed through and including Mr. Wright
is a member of the Fund's Board of Directors. The other persons are
officers but not Board members.
RONALD K. RICHEY*
2001 Third Avenue South
Birmingham, Alabama 35233
Chairman of the Board of Directors of the Fund; Chairman of the Board
of Directors of Waddell & Reed Financial Services, Inc., United Investors
Management Company and United Investors Life Insurance Company; Chairman of
the Board of Directors and Chief Executive Officer of Torchmark
Corporation; formerly, Chairman of the Board of Directors of Waddell &
Reed, Inc.
KEITH A. TUCKER*
President of the Fund; President, Chief Executive Officer and Director
of Waddell & Reed Financial Services, Inc.; Chairman of the Board of
Directors of the Manager, Waddell & Reed, Inc., Waddell & Reed Services
Company, Waddell & Reed Asset Management Company and Torchmark
Distributors, Inc., an affiliate of Waddell & Reed, Inc.; Vice Chairman of
the Board of Directors, Chief Executive Officer and President of United
Investors Management Company; Vice Chairman of the Board of Directors of
Torchmark Corporation; formerly, partner in Trivest, a private investment
concern; formerly, Director of Atlantis Group, Inc., a diversified company.
HENRY L. BELLMON
Route 1
Red Rock, Oklahoma 74651
Rancher; Professor, Oklahoma State University; formerly, Governor of
Oklahoma; prior to his current service as Director of the funds in the
United Group, TMK/United Funds, Inc., Waddell & Reed Funds, Inc., Torchmark
Government Securities Fund, Inc. and Torchmark Insured Tax-Free Fund, Inc.,
he served in such capacity for the funds in the United Group and TMK/United
Funds, Inc.
DODDS I. BUCHANAN
University of Colorado
Campus Box 419
Boulder, Colorado 80309
Professor of Marketing, College of Business, University of Colorado;
Advisory Director, The Hand Companies; President, Buchanan Ranch Corp.;
formerly, Senior Vice President and Director of Marketing Services, The
Meyer Group of Management Consultants; formerly, Chairman, Department of
Marketing, Transportation and Tourism, University of Colorado.
JAY B. DILLINGHAM
926 Livestock Exchange Building
Kansas City, Missouri 64102
Partner in Dillingham Farms, a farming operation; formerly, President
and Director of Kansas City Stock Yards Company.
JOHN F. HAYES*
335 N. Washington
P. O. Box 2977
Hutchinson, Kansas 67504-2977
President of Gilliland & Hayes, P.A., a law firm; Director of Central
Bank and Trust.
GLENDON E. JOHNSON
7300 Corporate Center Drive
Miami, Florida 33126-1208
Director and Chief Executive Officer of John Alden Life Insurance
Company.
WILLIAM T. MORGAN*
1799 Westridge Road
Los Angeles, California 90049
Retired; formerly, Chairman of the Board of Directors and President of
the Fund, each Fund in the United Group, TMK/United Funds, Inc., Waddell &
Reed Funds, Inc., Torchmark Government Securities Fund, Inc. and Torchmark
Insured Tax-Free Fund, Inc. (Mr. Morgan retired as Chairman of the Board of
Directors and President of these Funds on April 30, 1993); formerly,
President, Director and Chief Executive Officer of the Manager and Waddell
& Reed, Inc.; formerly, Chairman of the Board of Directors of Waddell &
Reed Services Company; formerly, Director of Waddell & Reed Asset
Management Company, United Investors Management Company and United
Investors Life Insurance Company, affiliates of Waddell & Reed, Inc.
DOYLE PATTERSON
1030 West 56th Street
Kansas City, Missouri 64113
Associated with Republic Real Estate, engaged in real estate
management and investment; formerly, Director of The Vendo Company, a
manufacturer and distributor of vending machines.
FREDERICK VOGEL, III
1805 West Bradley Road
Milwaukee, Wisconsin 53217
Formerly, President and Director of Univest Corporation, a real estate
investment company; formerly, Director of Classified Financial Corp., an
insurance company.
PAUL S. WISE
P. O. Box 5248
8648 Silver Saddle Drive
Carefree, Arizona 85377
Director of Potash Corporation of Saskatchewan.
LESLIE S. WRIGHT
Samford University
800 Lakeshore Drive
Birmingham, Alabama 35209
Chancellor of Samford University; formerly, Director of City Federal
Savings and Loan Association; formerly, President of Samford University.
Robert L. Hechler
Vice President of the Fund; Vice President, Chief Operations Officer,
Director and Treasurer of Waddell & Reed Financial Services, Inc.;
Executive Vice President, Principal Financial Officer, Director and
Treasurer of the Manager; President, Chief Executive Officer, Principal
Financial Officer, Director and Treasurer of Waddell & Reed, Inc.; Director
and Treasurer of Waddell & Reed Asset Management Company; President,
Director and Treasurer of Waddell & Reed Services Company; Vice President,
Treasurer and Director of Torchmark Distributors, Inc.
Henry J. Herrmann
Vice President of the Fund; Vice President, Chief Investment Officer
and Director of Waddell & Reed Financial Services, Inc.; Director of
Waddell & Reed, Inc.; President, Chief Executive Officer, Chief Investment
Officer and Director of the Manager and Waddell & Reed Asset Management
Company; Senior Vice President and Chief Investment Officer of United
Investors Management Company.
Theodore W. Howard
Vice President and Treasurer of the Fund; Vice President of Waddell &
Reed Services Company.
Rodney O. McWhinney
Vice President, Assistant Secretary and General Counsel of the Fund;
Vice President, Secretary and General Counsel of Waddell & Reed Financial
Services, Inc.; Senior Vice President, Secretary and General Counsel of the
Manager and Waddell & Reed, Inc.; Director, Senior Vice President,
Secretary and General Counsel of Waddell & Reed Services Company; Director,
Secretary and General Counsel of Waddell & Reed Asset Management Company;
Vice President, Secretary and General Counsel of Torchmark Distributors,
Inc.; Director of ICI Mutual Insurance Company.
Sharon K. Pappas
Vice President, Secretary and Assistant General Counsel of the Fund;
Assistant Secretary and Assistant General Counsel of the Manager; Assistant
General Counsel of Waddell & Reed Financial Services, Inc., Waddell & Reed,
Inc., Waddell & Reed Asset Management Company and Waddell & Reed Services
Company; formerly, an associate with Stinson, Mag & Fizzell, a law firm.
James C. Cusser
Vice President of the Fund; Vice President of the Manager; formerly,
Vice President of Kidder Peabody & Company.
Abel Garcia
Vice President of the Fund; Vice President of the Manager; Vice
President of Waddell & Reed Asset Management Company; formerly, Vice
President of Waddell & Reed, Inc.
John M. Holliday
Vice President of the Fund; Senior Vice President of the Manager and
of Waddell & Reed Asset Management Company; formerly, Senior Vice President
of Waddell & Reed, Inc.
Antonio Intagliata
Vice President of the Fund; Senior Vice President of the Manager;
formerly, Senior Vice President of Waddell & Reed, Inc.
Carl E. Sturgeon
Vice President of the Fund; Vice President of the Manager; formerly,
Vice President of Waddell & Reed, Inc.
Russell E. Thompson
Vice President of the Fund; Senior Vice President of the Manager; Vice
President of Waddell and Reed Asset Management Company; formerly, Senior
Vice President of Waddell & Reed, Inc.
The address of each person is 6300 Lamar Avenue, P. O. Box 29217,
Shawnee Mission, Kansas 66201-9217 unless a different address is given.
As of the date of this SAI, four of the Fund's Directors may be deemed
to be "interested persons" of its underwriter, Waddell & Reed, Inc. The
Directors who may be deemed to be "interested persons" as defined in the
Investment Company Act of 1940 are indicated as such by an asterisk.
The Board has created an honorary position of Director Emeritus, which
position a director may elect after resignation from the Board provided the
director has attained the age of 75 and has served as a director of the
Funds in the United Group for a total of at least five years. A Director
Emeritus receives fees in recognition of his past services whether or not
services are rendered in his capacity as Director Emeritus, but has no
authority or responsibility with respect to management of the Fund.
The funds in the United Group , TMK/United Funds, Inc.
and Waddell & Reed Funds, Inc. pay to each Director a total of
$40,000 per year , plus $500 for each meeting of the Board of
Directors attended and $500 for each committee meeting attended which is
not in conjunction with a Board of Directors meeting, other than Directors
who are affiliates of Waddell & Reed, Inc. The fees to the Directors who
receive them are divided among the Funds in the United Group ,
TMK/United Funds, Inc. and Waddell & Reed Funds, Inc. based on their
relative size. During the Fund's fiscal year ended December 31,
199 3 , its share was $ 184,976 . The officers are paid by the
Manager or its affiliates.
Shareholdings
As of March 1 , 199 4 , all of the Fund's Directors and
officers as a group owned less than 1% of the outstanding shares of the
Fund. As of such date no person owned of record or was known by the Fund
to own beneficially 5% or more of the Fund's outstanding shares.
PAYMENTS TO SHAREHOLDERS
General
There are two sources for the payments each Fund makes
to you as a shareholder of that Fund, other than payments when you
redeem your shares. The first source is net investment income, which is
derived from the dividends , interest and earned discount a
Fund receives on the securities it holds, less its expenses. The second
source is realized capital gains, which are derived from a Fund's proceeds
received from the sale of securities at a price higher than the Fund's
basis (usually cost) in such securities; these gains can be either long-
term or short-term, depending on how long the Fund has owned the securities
before it sells them.
The payments made to shareholders from net investment income, net
short-term capital gains and realized gains from certain foreign currency
transactions are called dividends. A Fund would not pay dividends
if its expenses were greater than its income; this has never happened.
Payments, if any, from long-term capital gains (including gains from
other foreign currency transactions) are called distributions.
A Fund pays distributions only if it has net capital
gains (the excess of net long-term capital gains over net short-term
capital losses) . A Fund may or may not have such gains ,
depending on whether securities are sold and at what price. If a
Fund has net capital gains , it will distribute the gains
in the latter part of the fourth calendar quarter. Even if a Fund
has net capital gains for a year, it does not pay the
gains out if it has applicable prior year losses to offset the
gains . It is the policy of each Fund to make annual capital
gains distributions to the extent that net capital gains are realized in
excess of available capital loss carryovers.
Income and expenses are earned and incurred separately by each
of the four Funds , and gains and losses on portfolio
transactions of each Fund are attributable to that Fund . For
example, capital losses realized by one Fund would not affect
capital gains realized by another Fund.
During the year ended December 31, 199 3 , United Income Fund,
United Accumulative Fund and United Science and Technology Fund
realized net capital gains of $ 53,914,906 ,
$ 102,177,031 and $ 21,770,561 , respectively, of which a
portion was paid to shareholders during the year ended December 31,
199 3 . The undistributed net capital gains will be
distributed to each Fund's shareholders. United Bond Fund realized
net capital gains in the amount of $ 41,552,432 during the year ended
December 31, 199 3 . This capital gains net income was
partially offset by utilization of all available capital loss
carryovers resulting in distributable capital gains of $33,322,306.
Choices you have on your Dividends and Distributions
In your application form, you can give instructions that (i) you want
cash for your dividends and distributions or (ii) you want cash for your
dividends and want your distributions reinvested in shares of a Fund. You
can change your instructions at any time. If you give neither instruction,
your dividends and distributions will be reinvested in shares of that Fund.
All reinvestments are at net asset value without any sales charge. The net
asset value used for this purpose is that computed as of the record date
for the dividend or distribution, although this could be changed by the
Directors. The record date is the date used to determine which
shareholders are entitled to receive a dividend or distribution; investors
who own shares on that date are so entitled.
Even if you get dividends and distributions in cash, you can
thereafter reinvest them (or distributions only) in shares of that Fund at
net asset value (i.e., no sales charge) next determined after receipt by
Waddell & Reed, Inc. of the amount clearly identified as a reinvestment.
The reinvestment must be within 45 days after the payment.
TAXES
General
Each Fund is treated as a separate corporation for Federal income tax
purposes. In order to continue to qualify for treatment as a regulated
investment company ("RIC") under the Code, each Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income, net short-
term capital gains and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. With respect to each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options or futures)
derived with respect to its business of investing in securities or those
currencies ("Income Requirement"); (2) the Fund must derive less than 30%
of its gross income each taxable year from the sale or other disposition of
securities, options or futures -- or foreign currencies that are not
directly related to the Fund's principal business of investing in
securities (or options and Futures with respect to securities) -- that were
held for less than three months ("Short-Short Limitation"); (3) at the
close of each quarter of the Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S.
Government Securities, securities of other RICs and other securities that
are limited, in respect of any one issuer, to an amount that does not
exceed 5% of the value of the Fund's total assets and that does not
represent more than 10% of the issuer's outstanding voting securities; and
(4) at the close of each quarter of the Fund's taxable year, not more than
25% of the value of its total assets may be invested in securities (other
than U.S. Government Securities or the securities of other RICs) of any one
issuer.
Dividends and distributions declared by the Fund in October, November
or December of any year and payable to shareholders of record on a date in
any of those months are deemed to have been paid by the Fund and received
by you on December 31 of that year if they are paid by the Fund during the
following January. Accordingly, those dividends and distributions will be
taxed to shareholders for the year in which that December 31 falls.
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital
loss to the extent of any distributions received on those shares.
Investors also should be aware that if shares are purchased shortly before
the record date for a dividend or distribution, the purchaser will receive
some portion of the purchase price back as a taxable dividend or
distribution.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gains
net income for the one-year period ending on October 31 of that year, plus
certain other amounts. It is the policy of each Fund to make sufficient
distribution each year to avoid imposition of the Excise Tax. The Code
permits each Fund to defer into its next taxable year net capital losses
incurred between November 1 and the end of its fiscal year ("post-October
losses"). From November 1, 1993 through December 31, 1993, United
Accumulative Fund and United Science and Technology Fund incurred net
capital losses of $2,287,546 and $1,521,176, respectively, which have been
deferred to the fiscal year ending December 31, 1994.
Income from Foreign Securities
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate
these foreign taxes, however, and many foreign countries do not impose
taxes on capital gains in respect of investments by foreign investors.
Foreign Currency Gains and Losses
Gains or losses (1) from the disposition of foreign currencies, (2)
from the disposition of debt securities denominated in foreign currency
that are attributable to fluctuations in the value of the foreign currency
between the date of acquisition of each security and the date of
disposition, and (3) that are attributable to fluctuations in exchange
rates that occur between the time the Fund accrues interest, dividends or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the Fund actually collects the receivables or
pays the liabilities, generally are treated as ordinary income or loss.
These gains or losses, referred to under the Code as "section 988" gains or
losses, may increase or decrease the amount of the Fund's investment
company taxable income to be distributed to its shareholders.
Income from Options, Futures and Currencies
The use of hedging strategies, such as writing (selling) and
purchasing options and Futures, involves complex rules that will determine
for income tax purposes the character and timing of recognition of the
gains and losses the Fund realizes in connection therewith. Income from
foreign currencies (except certain gains therefrom that may be excluded by
future regulations), and income from transactions in options and Futures
derived by a Fund with respect to its business of investing in securities,
will qualify as permissible income under the Income Requirement. However,
income from the disposition of options and Futures will be subject to the
Short-Short Limitation if they are held for less than three months. Income
from the disposition of foreign currencies that are not directly related to
the Fund's principal business of investing in securities (or options and
futures with respect to securities) also will be subject to the Short-Short
Limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining whether
the Fund satisfies the Short-Short Limitation. Thus, only the net gain (if
any) from the designated hedge will be included in gross income for
purposes of that limitation. The Fund intends that, when it engages in
hedging transactions, they will qualify for this treatment, but at the
present time it is not clear whether this treatment will be available for
all the Funds' hedging transactions. To the extent this treatment is not
available, the Fund may be forced to defer the closing out of certain
options, futures and Forward Contracts beyond the time when it otherwise
would be advantageous to do so, in order for the Fund to continue to
qualify as a RIC.
Any income a Fund earns from writing options is treated as short-term
capital gains. If a Fund enters into a closing purchase transaction, it
will have a short-term capital gain or loss based on the difference between
the premium it received for the option it wrote and the premium it pays for
the option it buys. If an option written by a Fund expires without being
exercised, the premium it receives is also a short-term gain. If a call a
Fund writes is exercised and thus it sells the securities subject to the
call, the premium the Fund received is added to the exercise price to
determine the gain or loss on the sale. A Fund will not write so many
options that it could fail to continue to qualify as a RIC.
Certain options and Futures in which the Fund may invest will be
"section 1256 contracts." Section 1256 contracts held by a Fund at the end
of each taxable year, other than section 1256 contracts that are part of a
"mixed straddle" with respect to which the Fund has made an election not to
have the following rules apply, are "marked-to-market" (that is, treated as
sold for their fair market value) for Federal income tax purposes, with the
result that unrealized gains or losses are treated as though they were
realized. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net realized gain or loss from any actual sales of
section 1256 contracts, are treated as long-term capital gain or loss, and
the balance is treated as short-term capital gain or loss. Section 1256
contracts also may be marked-to-market for purposes of the Excise Tax and
for other purposes.
Code Section 1092 (dealing with straddles) also may affect the
taxation of options and futures contracts. Section 1092 defines a
"straddle" as offsetting positions with respect to personal property; for
these purposes, options and futures contracts are personal property.
Section 1092 generally provides that any loss from the disposition of a
position in a straddle may be deducted only to the extent the loss exceeds
the unrealized gain on the offsetting position(s) of the straddle. Section
1092 also provides certain "wash sale" rules that apply to transactions
where a position is sold at a loss and a new offsetting position is
acquired within a prescribed period and certain "short sale" rules
applicable to straddles.
PORTFOLIO TRANSACTIONS AND BROKERAGE
One of the duties undertaken by the Manager pursuant to the Management
Agreement is to arrange the purchase and sale of securities for the
portfolio of the Fund. Transactions in securities other than those for
which an exchange is the primary market are generally done with dealers
acting as principals or market makers. Brokerage commissions are paid
primarily for effecting transactions in securities traded on an exchange
and otherwise only if it appears likely that a better price or execution
can be obtained. When possible, concurrent orders to purchase or sell the
same security by more than one of the funds or advisory accounts managed by
the Manager or its affiliates are combined. Transactions effected pursuant
to such combined orders are averaged as to price and allocated in
accordance with the purchase or sale orders actually placed for each fund
or advisory account.
To effect the portfolio transactions of the Fund, the Manager is
authorized to engage broker-dealers ("brokers") which, in its best judgment
based on all relevant factors, will implement the policy of the Fund to
achieve "best execution" (prompt and reliable execution at the best price
obtainable) for reasonable and competitive commissions. The Manager need
not seek competitive commission bidding but is expected to minimize the
commissions paid to the extent consistent with the interests and policies
of the Fund. Subject to review by the Board of Directors, such policies
include the selection of brokers which provide execution and/or research
services and other services, including pricing or quotation services
directly or through others ("brokerage services") considered by the Manager
to be useful or desirable for its investment management of the Fund and/or
the other funds and accounts over which the Manager or its affiliates have
investment discretion.
Brokerage services are, in general, defined by reference to Section
28(e) of the Securities Exchange Act of 1934 as including (i) advice,
either directly or through publications or writings, as to the value of
securities, the advisability of investing in, purchasing or selling
securities and the availability of securities and purchasers or sellers;
(ii) furnishing analyses and reports; or (iii) effecting securities
transactions and performing functions incidental thereto (such as
clearance, settlement and custody). "Investment discretion" is, in
general, defined as having authorization to determine what securities shall
be purchased or sold for an account, or making those decisions even though
someone else has responsibility.
The commissions paid to brokers that provide such brokerage services
may be higher than another qualified broker would charge for effecting
comparable transactions if a good faith determination is made by the
Manager that the commission is reasonable in relation to the brokerage
services provided. Subject to the foregoing considerations the Manager may
also consider the willingness of particular brokers and dealers to sell
shares of the Fund and other funds managed by the Manager and its
affiliates as a factor in its selection. No allocation of brokerage or
principal business is made to provide any other benefits to the Manager or
its affiliates.
The investment research provided by a particular broker may be useful
only to one or more of the other advisory accounts of the Manager and its
affiliates and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such other
accounts. To the extent that electronic or other products provided by such
brokers to assist the Manager in making investment management decisions are
used for administration or other non-research purposes, a reasonable
allocation of the cost of the product attributable to its non-research use
is made by the Manager.
Such investment research (which may be supplied by a third party at
the instance of a broker) includes information on particular companies and
industries as well as market, economic or institutional activity areas. It
serves to broaden the scope and supplement the research activities of the
Manager; serves to make available additional views for consideration and
comparisons; and enables the Manager to obtain market information on the
price of securities held in the Fund's portfolio or being considered for
purchase.
In placing transactions for the portfolios, the Manager may consider
sales of shares of a Fund and other funds managed by the Manager and its
affiliates as a factor in the selection of brokers to execute portfolio
transactions. The Manager intends to allocate brokerage on the basis of
this factor only if the sale is $2 million or more and there is no sales
charge. This results in the consideration only of sales which by their
nature would not ordinarily be made by Waddell & Reed, Inc.'s direct sales
force and is done in order to prevent the direct sales force from being
disadvantaged by the fact that it cannot participate in Fund brokerage.
The table below sets forth the brokerage commissions paid by each of
the four Funds during the fiscal years ended December 31, 199 3 ,
199 2 and 199 1 . These figures do not include principal
transactions or spreads or concessions on principal transactions, i.e.,
those in which a Fund sells securities to a broker-dealer firm or buys from
a broker-dealer firm securities owned by it.
1993 1992 1991
---------- ---------- ----------
United Bond Fund ........ $ 1,236 $ 2,034$ 23,367
United Income Fund ...... 2,078,626 1,162,9351,360,719
United Accumulative Fund 5,230,858 4,015,4614,976,207
United Science and
Technology Fund ... 438,946 314,979 267,636
---------- ---------- ----------
Total ................ $7,749,666 $5,495,409$6,627,929
========== ========== ==========
The next table shows for each of the four Funds' last fiscal year the
transactions, other than principal transactions, which were directed to
broker-dealers who provided research as well as execution and the brokerage
commissions paid. These transactions were allocated to these broker-
dealers by the internal allocation procedures described above.
Amount of Brokerage
Transactions Commissions
-------------- ----------
United Bond Fund .................... $ --- $ ---
United Income Fund ............... 867,643,2461,489,827
United Accumulative Fund ............ 2,473,177,8353,972,853
United Science and Technology Fund 150,708,648 241,190
-------------- ----------
Total ......................... $3,491,529,729$5,703,870
============== ==========
Buying and Selling With Other Funds
Sometimes a Fund and one or more of the other funds in the United
Group, TMK/United Funds, Inc., Waddell & Reed Funds, Inc., Torchmark
Government Securities Fund, Inc. and Torchmark Insured Tax-Free Fund, Inc.
or accounts over which Waddell & Reed Asset Management Company exercises
investment discretion buy or sell the same securities at the same time. If
this happens, the amount of each purchase or sale is divided. This is done
on the basis of the amount each fund or account wanted to buy or sell.
Sharing in large transactions could affect the price a Fund pays or
receives or the amount it buys or sells. However, sometimes a better
negotiated commission is available.
OTHER INFORMATION
The Shares of the Four Funds
The shares of each of the four Funds represents an interest in that
Fund's securities and other assets and in its profits or losses. Each
share of each Fund has the same rights to dividends and to receive assets
if United Funds, Inc. liquidates (winds-up) as every other share of that
Fund. Each fractional share has the same rights, in proportion, as a full
share. All shares of each Fund are fully paid and nonassessable when you
buy them.
Each share of each Fund is entitled to one vote. On certain matters
such as the election of Directors, all shares of all of the four Funds vote
together as a single class. On other matters affecting a particular Fund,
the shares of that Fund vote as a separate class; an example would be a
change in an investment restriction of a particular Fund. In voting on a
Management Agreement, approval by the shareholders of a Fund is effective
as to that Fund whether or not enough votes are received from the
shareholders of the other Funds to approve the Management Agreement for the
other Funds.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Aerospace - 1.59%
McDonnell Douglas Corporation,
9.25%, 4-1-2002 ....................... $ 9,000 $ 10,192,590
Airlines - 1.54%
Federal Express Corporation,
7.15%, 9-28-2012 ...................... 10,000 9,900,000
Automotive - 1.27%
Toyota Motor Credit Corp.,
4.15%, 8-5-96 ......................... 8,000 8,160,000
Banks and Savings and Loans - 13.80%
Banc One Corporation,
6.0%, 9-15-2005 ....................... 10,000 9,573,300
Banco Nacional de Comercio Exterior,
S.N.C.,
7.5%, 7-1-2000 ........................ 5,000 5,100,000
Central Fidelity Bank,
8.15%, 11-15-2002 ..................... 10,000 11,063,700
Chemical Banking Corporation:
7.625%, 1-15-2003 ..................... 5,000 5,345,500
7.125%, 3-1-2005 ...................... 5,000 5,183,400
Citicorp,
6.75%, 8-15-2005 ...................... 10,000 9,978,300
National Westminster Bancorp Inc.,
9.375%, 11-15-2003 .................... 5,000 6,047,200
Norwest Corporation,
6.65%, 10-15-2023 ..................... 10,000 9,272,600
RBSG Capital Corp.,
10.125%, 3-1-2004 ..................... 5,000 6,277,000
Republic New York Corporation,
5.875%, 10-15-2008 .................... 5,000 4,684,850
Shawmut National Corporation,
7.2%, 4-15-2003 ....................... 10,000 10,342,400
Wells Fargo & Company,
8.75%, 5-1-2002 ....................... 5,000 5,698,000
Total ................................. 88,566,250
Building - 2.64%
Centex Corporation,
8.75%, 3-1-2007 ....................... 5,000 5,539,900
Georgia-Pacific Corporation,
9.875%, 11-1-2021 ..................... 5,000 5,850,100
Owens-Corning Fiberglas Corporation,
8.875%, 6-1-2002 ...................... 5,000 5,555,050
Total ................................. 16,945,050
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Canadian Oil - 1.74%
NOVA Corporation of Alberta,
8.5%, 12-15-2012 ...................... $10,000 $ 11,145,400
Chemicals Major - 2.59%
Dow Capital Corporation,
9.0%, 5-15-2010 ....................... 9,550 11,393,628
Grace (W.R.) & Co.,
7.4%, 2-1-2000 ........................ 5,000 5,238,750
Total ................................. 16,632,378
Chemicals Specialty and Miscellaneous
Technology - 1.87%
Eastman Kodak Company,
9.2%, 6-1-2021 ........................ 10,000 11,975,000
Domestic Oil - 2.21%
Occidental Petroleum Corporation,
10.125%, 9-15-2009 .................... 5,000 6,307,750
Seagull Energy Corporation,
7.875%, 8-1-2003 ...................... 2,500 2,506,250
Union Texas Petroleum Holdings, Inc.,
8.25%, 11-15-99 ....................... 5,000 5,361,750
Total ................................. 14,175,750
Electrical Equipment - 3.06%
Black & Decker Corporation (The),
6.625%, 11-15-2000 .................... 10,000 9,896,400
General Electric Capital Corporation,
8.5%, 7-24-2008 ....................... 8,250 9,747,210
Total ................................. 19,643,610
Financial - 6.52%
Chrysler Financial Corporation,
9.5%, 12-15-99 ........................ 10,000 11,545,400
Equicon Loan Trust,
7.30%, 2-18-2013 ...................... 4,571 4,655,592
General Motors Acceptance Corporation,
8.875%, 6-1-2010 ...................... 10,000 11,600,000
Greyhound Financial Corporation,
8.79%, 11-15-2001 ..................... 3,000 3,466,200
Residential Funding Mortgage
Securities I, Inc.,
8.0%, 8-25-2020 ....................... 10,000 10,565,600
Total ................................. 41,832,792
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food and Related - 2.69%
Archer Daniels-Midland Company,
8.875%, 4-15-2011 ..................... $10,000 $ 12,021,600
ConAgra, Inc.,
7.375%, 2-1-2005 ...................... 5,000 5,202,500
Total ................................. 17,224,100
Insurance - 0.47%
Reliance Group Holdings, Inc.,
9.0%, 11-15-2000 ...................... 3,000 3,018,750
International Oil - 0.79%
LASMO (USA) INC.,
7.125%, 6-1-2003 ...................... 5,000 5,077,750
Leisure Time - 4.44%
Marriott International, Inc.,
6.75%, 12-15-2003 ..................... 3,000 2,979,180
Tele-Communications, Inc.,
7.875%, 8-1-2013 ...................... 10,000 10,424,900
Time Warner Incorporated:
8.875%, 10-1-2012 ..................... 5,000 5,577,750
9.15%, 2-1-2023 ....................... 5,000 5,482,250
Turner Broadcasting,
8.375%, 7-1-2013 ...................... 4,000 4,048,760
Total ................................. 28,512,840
Machinery - 0.95%
Caterpillar, Inc.,
9.375%, 8-15-2011 ..................... 5,000 6,087,550
Metals and Mining - 1.18%
Noranda Inc.,
8.625%, 7-15-2002 ..................... 7,000 7,582,470
Multi-Industry - 0.81%
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 5,000 5,200,000
Public Utilities - Electric - 6.37%
Beaver Valley Public Service II Funding
Corporation,
8.68%, 6-1-2017 ....................... 4,000 3,972,120
Korea Electric Power Corporation,
6.375%, 12-1-2003 ..................... 5,000 4,856,650
PVNGS Funding Corp., Inc.,
8.0%, 12-30-2015 ...................... 7,000 7,139,860
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Public Utilities - Electric (Continued)
Pacific Gas and Electric Company,
5.875%, 10-1-2005 ..................... $10,000 $ 9,550,400
Texas Utilities Company,
7.875%, 3-1-2023 ...................... 10,000 10,379,300
Union Electric Company,
7.15%, 8-1-2023 ....................... 5,000 4,940,300
Total ................................. 40,838,630
Public Utilities - Pipelines - 2.68%
Arkla, Inc.,
8.875%, 7-15-99 ....................... 10,000 10,691,600
Williams Companies, Inc. (The),
10.25%, 7-15-2020 ..................... 5,000 6,468,550
Total ................................. 17,160,150
Publishing and Advertising - 1.58%
News America Holdings Incorporated,
8.25%, 8-10-2018 ...................... 10,000 10,159,900
Railroads - 0.78%
Kansas City Southern Railway (The),
6.625%, 3-1-2005 ...................... 5,000 4,991,200
Retailing - 1.40%
Best Buy Co., Inc.,
8.625%, 10-1-2000 ..................... 2,500 2,500,000
Eagle Food Centers, Inc.,
8.625%, 4-15-2000 ..................... 2,500 2,487,500
Penn Traffic Company,
8.625%, 12-15-2003 .................... 4,000 4,020,000
Total ................................. 9,007,500
Telecommunications - 2.71%
Bell Telephone Company of Pennsylvania,
8.35%, 12-15-2030 ..................... 5,000 5,981,550
GTE Corporation,
7.83%, 5-1-2023 ....................... 10,000 10,329,400
Sprint Corporation,
8.125%, 7-15-2002 ..................... 1,000 1,078,180
Total ................................. 17,389,130
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Textiles and Apparel - 0.78%
Fruit of the Loom, Inc.,
6.5%, 11-15-2003 ...................... $ 5,000 $ 4,976,100
Tobacco - 0.76%
RJR Nabisco, Inc.,
8.75%, 4-15-2004 ...................... 5,000 4,901,100
TOTAL CORPORATE DEBT SECURITIES - 67.22% $431,295,990
(Cost: $426,661,637)
MUNICIPAL BONDS
Alabama - 0.45%
The Special Care Facilities Financing
Authority of the City of Birmingham-
Baptist Medical Centers, Taxable
Revenue Bonds (The Baptist Medical
Centers), Series 1993-B,
7.1%, 8-15-2005 ....................... 2,800 2,866,500
California - 0.15%
Department of Water and Power of the City
of Los Angeles, Electric Plant Revenue Bonds,
Second Issue of 1993,
5.125%, 10-15-2014 .................... 1,000 975,000
Florida - 0.62%
State of Florida, Full Faith and Credit
State Board of Education, Public
Education Capital Outlay Refunding
Bonds, 1993 Series A,
5.1%, 6-1-2009 ........................ 3,000 3,022,500
City of Vero Beach, Florida, Taxable
Electric Refunding Revenue Bonds,
Series 1993B,
6.8%, 12-1-2013 ....................... 1,000 938,750
Total ................................. 3,961,250
New York - 0.15%
County of Nassau, New York, General
Obligation Bonds (Federally Taxable),
5.75%, 10-15-2005 ..................... 1,000 943,750
South Carolina - 0.32%
Oconee County, South Carolina, Pollution
Control Facilities Revenue Refunding
Bonds, Series 1993 (Duke Power Company
Project),
5.8%, 4-1-2014 ........................ 2,000 2,062,500
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
Washington - 0.46%
Seattle, Washington, Municipal Light
and Power Refunding Revenue Bonds,
5.375%, 11-1-2018 ..................... $1,000 $ 995,000
Washington Public Power Supply System,
Nuclear Project No. 1 Refunding
Revenue Bonds, Series 1993C,
5.375%, 7-1-2015 ...................... 2,000 1,967,500
Total.................................. 2,962,500
TOTAL MUNICIPAL BONDS - 2.15% $13,771,500
(Cost: $13,613,673)
OTHER GOVERNMENT SECURITIES
Argentina - 0.78%
Republic of Argentina,
8.375%, 12-20-2003 .................... 5,000 5,037,500
Italy - 1.52%
Republic of Italy,
6.0%, 9-27-2003 ....................... 10,000 9,750,600
Mexico - 0.83%
United Mexican States,
8.50%, 9-15-2002 ...................... 5,000 5,356,250
New Zealand - 0.94%
New Zealand,
8.75%, 12-15-2006 ..................... 5,000 6,000,300
TOTAL OTHER GOVERNMENT SECURITIES - 4.07% $ 26,144,650
(Cost: $25,818,994)
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation,
0.0%, 3-23-94 ......................... 2,000 2,200,000
Federal National Mortgage Association:
7.0%, 7-25-2006 ....................... 10,000 10,346,800
7.5%, 12-25-2006 ...................... 5,000 5,192,150
6.5%, 5-25-2018 ....................... 10,000 10,068,700
8.0%, 5-25-2019 ....................... 9,000 9,177,120
7.0%, 8-25-2021 ....................... 10,000 10,093,700
Government National Mortgage Association,
10.5%, 3-15-2029 ...................... 1,426 1,584,893
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES (Continued)
United States Treasury:
0.0%, 2-15-95 ......................... $25,000 $ 23,978,500
6.375%, 1-15-2000...................... 5,000 5,251,550
15.75%, 11-15-2001 .................... 5,000 8,192,950
6.25%, 2-15-2003 ...................... 10,000 10,334,400
11.625%, 11-15-2004 ................... 5,000 7,258,600
0.0%, 8-15-2010 ....................... 20,000 6,583,600
0.0%, 11-15-2014 ...................... 20,000 4,779,000
Miscellaneous United States Government
Backed Securities:
Agency for International Development
for the State of Israel:
6.125%, 3-15-2003 ................... 10,000 10,089,000
0.0%, 3-15-2014 ..................... 10,000 2,409,000
Postal Square Limited Partnership,
8.95%, 6-15-2022 .................... 4,945 6,015,515
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 20.81% $133,555,478
(Cost: $129,459,065)
TOTAL SHORT-TERM SECURITIES - 4.94% $ 31,716,465
(Cost: $31,716,465)
TOTAL INVESTMENT SECURITIES - 99.19% $636,484,083
(Cost: $627,269,834)
CASH AND OTHER ASSETS, NET
OF LIABILITIES - 0.81% 5,184,048
NET ASSETS - 100.00% $641,668,131
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS
Aerospace - 0.13%
Aviall Inc.* ........................... 250,000 $ 3,812,500
Airlines - 3.25%
AMR Corporation* ....................... 400,000 26,800,000
Delta Air Lines, Incorporated .......... 200,000 10,925,000
Southwest Airlines Co. ................. 1,650,000 61,875,000
Total ................................. 99,600,000
Automotive - 7.64%
Chrysler Corporation ................... 1,280,000 68,160,000
Dana Corporation ....................... 380,000 22,752,500
Eaton Corporation ...................... 500,000 25,250,000
Ford Motor Company ..................... 950,000 61,275,000
General Motors Corporation ............. 710,000 38,961,250
Magna Group, Inc., Class A ............. 350,000 17,412,500
Total ................................. 233,811,250
Banks and Savings and Loans - 8.18%
Banc One Corporation ................... 350,000 13,693,750
BankAmerica Corporation ................ 502,500 23,303,438
Barclays Bank PLC (A) .................. 500,000 4,697,500
Chase Manhattan Corporation ............ 850,000 28,793,750
Chemical Banking Corporation ........... 625,000 25,078,125
Citicorp* .............................. 1,000,000 36,750,000
Deutsche Bank Aktiengesellschaft (A) ... 44,000 22,433,972
First Bank Systems, Inc. ............... 610,500 18,772,875
First Interstate Bancorporation ........ 300,000 19,237,500
Midlantic Corporation* ................. 600,000 15,337,200
NationsBank Corporation ................ 389,000 19,061,000
PNC Bank Corp. ......................... 500,000 14,500,000
Skandinaviska Enskilda Banken (A)* ..... 1,300,000 8,799,700
Total ................................. 250,458,810
Beverages - 2.14%
PepsiCo, Inc. .......................... 1,300,000 53,137,500
Whitman Corporation .................... 765,000 12,431,250
Total ................................. 65,568,750
Building - 3.27%
Armstrong World Industries, Inc. ....... 696,100 37,067,325
Georgia-Pacific Corporation ............ 200,000 13,750,000
Louisiana-Pacific Corporation .......... 200,000 8,250,000
Stanley Works (The) .................... 150,000 6,675,000
Temple-Inland Inc. ..................... 350,000 17,631,250
Weyerhaeuser Company ................... 375,000 16,734,375
Total ................................. 100,107,950
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS (Continued)
Business Machines and Office Equipment - 1.65%
Apple Computer, Inc. ................... 725,000 $ 21,296,875
General Motors Corporation, Class E .... 1,000,000 29,250,000
Total ................................. 50,546,875
Chemicals Major - 4.84%
Air Products & Chemicals, Inc. ......... 800,000 35,400,000
du Pont (E.I.) de Nemours and Company .. 600,000 28,950,000
PPG Industries, Inc. ................... 625,000 47,578,125
Praxair, Inc. .......................... 1,000,000 16,625,000
Union Carbide Corporation .............. 875,000 19,578,125
Total ................................. 148,131,250
Chemicals Specialty and Miscellaneous Technology - 2.83%
Betz Laboratories, Inc. ................ 280,000 12,285,000
Minnesota Mining and Manufacturing
Company ............................... 250,000 27,187,500
Polaroid Corporation ................... 1,400,000 47,250,000
Total ................................. 86,722,500
Consumer Electronics and Appliances - 1.85%
Maytag Corporation ..................... 1,200,000 21,600,000
Rival Company (The) .................... 221,200 4,465,364
Whirlpool Corporation .................. 460,300 30,609,950
Total ................................. 56,675,314
Drugs and Hospital Supply - 2.72%
American Cyanamid Company .............. 250,000 12,562,500
Sandoz Ltd. (A) ........................ 15,567 43,259,090
Schering-Plough Corporation ............ 400,000 27,400,000
Total ................................. 83,221,590
Electrical Equipment - 2.84%
Emerson Electric Co. ................... 400,000 24,100,000
General Electric Company ............... 600,000 62,925,000
Total ................................. 87,025,000
Electronics - 5.28%
AMP Incorporated ....................... 550,000 34,718,750
Applied Materials, Inc.* ............... 400,000 15,600,000
Intel Corporation ...................... 525,000 32,615,625
Motorola, Inc. ......................... 850,000 78,518,750
Total ................................. 161,453,125
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS (Continued)
Engineering and Construction - 1.56%
BBC Brown Boveri Baen, Series A (A)* ... 25,000 $ 18,245,950
Fluor Corporation ...................... 400,000 16,200,000
Foster Wheeler Corporation ............. 400,000 13,400,000
Total ................................. 47,845,950
Financial - 3.58%
Federal Home Loan Mortgage Corporation . 500,000 25,000,000
Federal National Mortgage Association .. 295,200 23,173,200
Grupo Financiero Banamex Accival,
S.A. de C.V. B (A) .................... 1,000,000 7,083,000
Grupo Financiero Banamex Accival,
S.A. de C.V. C (A) .................... 1,000,000 8,692,000
Grupo Financiero Banamex Accival,
S.A. de C.V. L (A) .................... 50,000 384,700
Household International, Inc. .......... 600,000 19,575,000
Xerox Corporation ...................... 280,000 25,025,000
Total ................................. 108,932,900
Food and Related - 1.44%
CPC International Inc. ................. 500,000 23,812,500
Nestle S.A. (A) ........................ 8,000 6,897,848
Pet Incorporated ....................... 765,000 13,387,500
Total ................................. 44,097,848
Household Products - 3.76%
Avon Products, Inc. .................... 280,000 13,615,000
Colgate-Palmolive Company .............. 600,000 37,425,000
Gillette Company (The) ................. 500,000 29,812,500
Procter & Gamble Company (The) ......... 600,000 34,200,000
Total.................................. 115,052,500
Leisure Time - 2.28%
Walt Disney Company (The) .............. 700,000 29,837,500
McDonald's Corporation ................. 700,000 39,900,000
Total ................................. 69,737,500
Machinery - 6.65%
Caterpillar Inc. ....................... 800,000 71,200,000
Clark Equipment Company* ............... 500,000 26,187,500
Deere & Company ........................ 685,000 50,690,000
Ingersoll-Rand Company ................. 400,000 15,300,000
Mannesmann AG (A) ...................... 25,000 6,074,925
Parker Hannifin Corporation ............ 400,000 15,100,000
Trinova Corporation .................... 600,000 18,825,000
Total ................................. 203,377,425
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS (Continued)
Multi-Industry - 1.94%
ITT Corporation ........................ 650,204 $ 59,331,115
Packaging and Containers - 0.70%
Pilkington PLC (A) ..................... 8,164,516 21,464,513
Paper - 3.04%
Champion International Corporation ..... 800,000 26,700,000
International Paper Company ............ 400,000 27,100,000
James River Corporation of Virginia .... 800,000 15,400,000
Union Camp Corporation ................. 500,000 23,812,500
Total ................................. 93,012,500
Railroads - 3.95%
CSX Corporation ........................ 350,000 28,350,000
Conrail, Inc. .......................... 600,000 40,125,000
Norfolk Southern Corporation ........... 300,000 21,150,000
Union Pacific Corporation .............. 500,000 31,312,500
Total ................................. 120,937,500
Retailing - 9.35%
Cifra, S.A. de C.V. C (A) .............. 7,000,000 21,000,000
Circuit City Stores, Inc. .............. 1,500,000 32,625,000
Dayton Hudson Corporation .............. 300,000 20,025,000
Dillard Department Stores, Inc.,
Class A ............................... 710,000 26,980,000
Gap, Inc. (The) ........................ 400,000 15,750,000
Home Depot, Inc. (The) ................. 725,000 28,637,500
K Mart Corporation ..................... 750,000 15,937,500
Limited Inc. ........................... 760,000 13,015,000
May Department Stores Company (The) .... 1,000,000 39,375,000
Penney (J.C.) Company, Inc. ............ 676,000 35,405,500
Toys "R" Us Inc.* ...................... 300,000 12,262,500
Wal-Mart Stores, Inc. .................. 1,000,000 25,000,000
Total ................................. 286,013,000
Services, Consumer and Business - 0.80%
Block (H&R), Inc. ...................... 600,000 24,450,000
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS (Continued)
Steel - 2.55%
Avesta Sheffield AB (A)* ............... 3,831,000 $ 19,737,312
Bethlehem Steel Corporation* ........... 400,000 8,150,000
British Steel PLC (A) .................. 8,250,000 15,353,250
Inland Steel Industries, Inc.* ......... 400,000 13,250,000
USX Corporation - U.S. Steel Group ..... 500,000 21,687,500
Total ................................. 78,178,062
Telecommunications - 3.78%
American Telephone and Telegraph
Company ............................... 500,000 26,250,000
General Instrument Corporation* ........ 250,000 14,031,250
MCI Communications Corporation ......... 1,000,000 28,187,000
Telefonaktiebolaget LM Ericsson,
Class B, ADR........................... 500,000 20,125,000
Telefonos de Mexico S.A. de C.V., ADR .. 400,000 27,000,000
Total ................................. 115,593,250
Tire and Rubber - 1.23%
Goodyear Tire & Rubber Company (The) ... 825,000 37,743,750
Trucking - 0.87%
Ryder System, Inc. ..................... 1,000,000 26,500,000
TOTAL COMMON STOCKS - 94.10% $2,879,402,727
(Cost: $1,861,674,843)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Banks and Savings and Loans - 0.36%
Morgan Guaranty Trust Company of New York,
7.375%, 2-1-2002 ...................... $10,250 11,079,123
Electrical Equipment - 0.39%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 10,000 11,703,200
TOTAL CORPORATE DEBT SECURITIES - 0.75% $ 22,782,323
(Cost: $19,806,227)
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
8.5%, 5-15-97 ......................... $16,000 $ 17,849,920
8.75%, 10-15-97 ....................... 20,000 22,615,600
10.375%, 11-15-2012 ................... 8,500 11,736,630
9.0%, 11-15-2018 ...................... 20,000 25,928,200
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 2.55% $ 78,130,350
(Cost: $68,530,401)
TOTAL SHORT-TERM SECURITIES - 2.48% $ 75,960,254
(Cost: $75,960,254)
TOTAL INVESTMENT SECURITIES - 99.88% $3,056,275,654
(Cost: $2,025,971,725)
CASH AND OTHER ASSETS,
NET OF LIABILITIES - 0.12% 3,797,622
NET ASSETS - 100.00% $3,060,073,276
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS
Airlines - 2.12%
Mesa Airlines, Inc.* ................... 500,000 $ 8,750,000
Southwest Airlines Co. ................. 350,000 13,125,000
Total ................................. 21,875,000
Automotive - 10.58%
Chrysler Corporation ................... 300,000 15,975,000
Dana Corporation ....................... 100,000 5,987,500
Federal-Mogul Corp. .................... 400,000 11,600,000
Ford Motor Company ..................... 700,000 45,150,000
MascoTech, Inc. ........................ 250,000 6,968,750
Superior Industries International,
Inc. .................................. 135,000 5,805,000
Varity Corporation* .................... 400,000 17,900,000
Total ................................. 109,386,250
Banks and Savings and Loans - 7.33%
BankAmerica Corporation ................ 400,000 18,550,000
Banque National de Paris (A) ........... 240,000 11,657,280
Continental Bank Corporation ........... 300,000 7,912,500
Grupo Financiero Bancomer, S.A. de
C.V. C (A) ............................ 2,950,000 6,209,750
Midlantic Corporation* ................. 500,000 12,781,000
UJB Financial Corp. .................... 400,000 9,500,000
Washington Federal Savings and Loan
Association ........................... 350,000 9,100,000
Total ................................. 75,710,530
Building - 1.63%
Temple-Inland Inc. ..................... 250,000 12,593,750
United Dominion Realty Trust, Inc. ..... 300,000 4,275,000
Total ................................. 16,868,750
Business Machines and Office Equipment - 5.31%
BMC Software* .......................... 53,300 2,545,075
First Data Corporation ................. 300,000 12,225,000
General Motors Corporation, Class E .... 500,000 14,625,000
Informix Corporation* .................. 500,000 10,500,000
Microsoft Corporation* ................. 150,000 12,093,750
Pyramid Technology Corporation* ........ 200,000 2,925,000
Total ................................. 54,913,825
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS (Continued)
Chemicals Major - 2.34%
du Pont (E.I.) de Nemours and Company .. 500,000 $ 24,125,000
Chemicals Specialty and Miscellaneous
Technology - 0.50%
Browning-Ferris Industries, Inc. ....... 200,000 5,150,000
Drugs and Hospital Supply - 2.36%
Biocraft Laboratories Inc. ............. 150,000 3,206,250
Mylan Laboratories Inc. ................ 150,000 3,806,250
Perrigo Company* ....................... 400,000 13,650,000
Watson Pharmaceuticals Inc.* ........... 150,000 3,768,750
Total ................................. 24,431,250
Electronics - 4.55%
Atmel Corporation* ..................... 200,000 6,900,000
cisco Systems, Inc.* ................... 250,000 16,156,250
Intel Corporation ...................... 200,000 12,425,000
Motorola, Inc. ......................... 125,000 11,546,875
Total ................................. 47,028,125
Engineering and Construction - 1.17%
Grupo Tribasa, S.A. de C.V., ADS* ...... 350,000 12,118,750
Financial - 1.56%
Grupo Financiero Banamex Accival,
S.A. de C.V., B (A) ................... 300,000 2,124,900
Grupo Financiero Banamex Accival,
S.A. de C.V., C (A) ................... 525,000 4,563,300
Grupo Financiero Banamex Accival,
S.A. de C.V., L (A) ................... 41,250 317,378
Household International, Inc. .......... 280,000 9,135,000
Total ................................. 16,140,578
Hospital Management - 1.10%
Hillhaven Corporation (The)* ........... 600,000 11,325,000
Insurance - 9.77%
American International Group, Inc. ..... 100,000 8,775,000
American Re Corporation* ............... 350,000 9,931,250
Equitable of Iowa Companies ............ 250,000 8,468,750
First Colony Corporation ............... 500,000 12,687,500
General Re Corporation ................. 150,000 16,050,000
Kemper Corporation ..................... 173,900 6,303,875
NWNL Companies, Inc. (The) ............. 100,000 3,200,000
National Re Corporation ................ 209,600 6,497,600
SAFECO Corporation ..................... 150,000 8,240,550
Sphere Drake Holdings Ltd. ............. 300,000 5,025,000
TIG Holdings, Inc. ..................... 700,000 15,837,500
Total ................................. 101,017,025
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS (Continued)
International Oil - 1.22%
Exxon Corporation ...................... 200,000 $ 12,600,000
Leisure Time - 3.77%
Bell Sports Corp.* ..................... 144,000 4,500,000
Cheesecake Factory Incorporated (The)* . 104,500 3,553,000
Comcast Corporation, Class A ........... 250,000 8,984,250
Walt Disney Company (The) .............. 400,000 17,050,000
GTECH Holdings Corporation* ............ 150,000 4,912,500
Total ................................. 38,999,750
Machinery - 2.06%
Cooper Industries, Inc. ................ 200,000 9,850,000
Ingersoll-Rand Company ................. 300,000 11,475,000
Total ................................. 21,325,000
Multi-Industry - 3.95%
Allied-Signal Inc. ..................... 150,000 11,850,000
Grupo Carso, S.A. de C.V.,
Class 1 (A)* .......................... 1,400,000 15,279,600
ITT Corporation ........................ 150,000 13,687,500
Total ................................. 40,817,100
Paper - 1.98%
Champion International Corporation ..... 400,000 13,350,000
Union Camp Corporation ................. 150,000 7,143,750
Total ................................. 20,493,750
Publishing and Advertising - 3.15%
Gannett Co., Inc. ...................... 150,000 8,587,500
Knight-Ridder Newspapers, Inc. ......... 200,000 11,950,000
Tribune Company ........................ 200,000 12,025,000
Total ................................. 32,562,500
Railroads - 4.07%
Burlington Northern Inc. ............... 240,000 13,890,000
Norfolk Southern Corporation ........... 400,000 28,200,000
Total ................................. 42,090,000
Retailing - 9.57%
Bed, Bath & Beyond, Inc.* .............. 200,000 6,875,000
Books-A-Million, Inc.* ................. 250,000 5,531,250
Circuit City Stores, Inc. .............. 500,000 10,875,000
Dillard Department Stores, Inc.,
Class A ............................... 300,000 11,400,000
Family Dollar Stores, Inc. ............. 500,000 8,500,000
May Department Stores Company (The) .... 250,000 9,843,750
Penney (J.C.) Company, Inc. ............ 200,000 10,475,000
Sears, Roebuck and Co. ................. 200,000 10,550,000
Spiegel, Inc., Class A ................. 300,000 6,750,000
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS (Continued)
Retailing - (Continued)
Tommy Hilfiger Corporation* ............ 252,000 $ 7,875,000
Toys "R" Us, Inc.* ..................... 250,000 10,218,750
Total ................................. 98,893,750
Steel - 0.78%
LTV Corporation (The)* ................. 500,000 8,062,500
Telecommunications - 6.43%
General Instrument Corporation* ........ 100,000 5,612,500
Glenayre Technologies, Inc. ............ 165,900 7,154,438
MCI Communications Corporation ......... 500,000 14,093,500
Sprint Corporation ..................... 200,000 6,950,000
Telefonaktiebolaget LM Ericsson,
Class B, ADR .......................... 500,000 20,125,000
Telefonos de Mexico S.A. de C.V., ADR .. 100,000 6,750,000
Vanguard Cellular Systems, Inc.* ....... 200,000 5,800,000
Total ................................. 66,485,438
TOTAL COMMON STOCKS - 87.30% $ 902,419,871
(Cost: $865,033,304)
PREFERRED STOCK - 2.07%
Airlines
Delta Air Lines, Inc. .................. 400,000 $ 21,400,000
(Cost: $21,044,625)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Banks and Savings and Loans - 1.24%
Credit Lyonnais N.A. Inc.,
3.27%, 2-1-94 ......................... $11,550 11,517,477
U.S. Bancorp,
Master Note ........................... 1,346 1,346,000
Total ................................. 12,863,477
Beverages - 0.22%
PepsiCo, Inc.:
3.3%, 1-6-94 .......................... 1,130 1,129,482
3.29%, 1-21-94 ........................ 1,150 1,147,898
Total ................................. 2,277,380
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Financial - 3.45%
Associates Corporation of North America,
Master Note ........................... $ 2,615 $ 2,615,000
BHP Finance (U.S.A.) Inc.,
3.22%, 2-7-94 ......................... 9,300 9,269,222
Block Financial Corp.,
3.28%, 1-27-94 ........................ 1,595 1,591,222
Grand Metropolitan Investment Corp.,
3.35%, 1-6-94 ......................... 3,600 3,598,325
John Deere Capital Corp.,
3.35%, 1-7-94 ......................... 4,500 4,497,487
Kerr-McGee Credit Corp.,
3.45%, 1-14-94 ........................ 6,000 5,992,525
Merrill Lynch & Co. Inc.,
3.27%, 1-31-94 ........................ 7,100 7,080,653
USAA Capital Corp.,
3.27%, 1-12-94 ........................ 1,000 999,001
Total ................................. 35,643,435
Food and Related - 1.18%
ConAgra, Inc.,
3.5%, 1-31-94 ......................... 3,500 3,489,792
Golden Peanut Co.,
3.25%, 2-11-94 ........................ 5,000 4,981,493
Sara Lee Corporation,
Master Note ........................... 3,770 3,770,000
Total ................................. 12,241,285
Metals and Mining - 1.01%
Aluminum Company of America,
3.25%, 2-11-94 ........................ 10,500 10,461,135
Multi-Industry - 1.03%
Baxter International Inc.,
3.53%, 1-7-94 ......................... 650 649,618
Olin Corp.,
3.4%, 1-12-94 ......................... 10,000 9,989,611
Total ................................. 10,639,229
Public Utilities - Electric - 0.14%
Houston Industries Inc.,
3.45%, 1-14-94 ........................ 1,450 1,448,194
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Public Utilities - Gas - 1.09%
Michigan Consolidated Gas Co.,
3.23%, 1-24-94 ........................ $ 9,300 $ 9,280,808
Questar Corp.,
3.22%, 2-4-94 ......................... 1,950 1,944,070
Total ................................. 11,224,878
Telecommunications - 1.95%
American Telephone and Telegraph Company,
3.3%, 1-28-94 ......................... 6,800 6,783,170
Siemens Corp.,
3.3%, 1-21-94 ......................... 5,000 4,990,833
Southwestern Bell Capital Corp.,
3.25%, 1-24-94 ........................ 8,400 8,382,558
Total ................................. 20,156,561
TOTAL SHORT-TERM SECURITIES - 11.31% $ 116,955,574
(Cost: $116,955,574)
TOTAL INVESTMENT SECURITIES - 100.68% $1,040,775,445
(Cost: $1,003,033,503)
LIABILITIES, NET OF CASH AND
OTHER ASSETS - (0.68%) (7,001,147)
NET ASSETS - 100.00% $1,033,774,298
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS
Automotive - 6.79%
Chrysler Corporation ................... 60,000 $ 3,195,000
General Motors Corporation ............. 135,000 7,408,125
Hayes Wheels International, Inc. ....... 150,000 4,593,750
Standard Products Company (The) ........ 137,500 4,812,500
Superior Industries International, Inc. 240,000 10,320,000
Total ................................. 30,329,375
Biotechnology and Medical Services - 2.83%
Kendall International, Inc.* ........... 85,000 3,899,375
Osteotech, Inc.* ....................... 106,500 545,813
Ventritex, Inc.* ....................... 210,000 8,216,250
Total ................................. 12,661,438
Business Machines and Office Equipment - 24.04%
BMC Software, Inc.* .................... 155,000 7,401,250
Broderbund Software, Inc.* ............. 164,000 5,699,000
Cerner Corporation* .................... 246,000 10,578,000
Computer Associates International,
Inc. .................................. 100,000 4,000,000
Creative Technology Ltd.* .............. 50,000 1,575,000
First Data Corporation ................. 200,000 8,150,000
General Motors Corporation, Class E .... 330,000 9,652,500
Informix Corporation* .................. 700,000 14,700,000
Intuit* ................................ 100,000 4,275,000
Micro Focus Group Plc (A)* .............. 150,000 2,215,950
Micro Focus Group Plc, ADR* ............ 75,000 1,115,625
Microchip Technology Incorporated* ..... 30,000 1,166,250
Microsoft Corporation* ................. 95,000 7,659,375
Oracle Systems Corporation* ............ 280,000 8,067,360
Parametric Technology Corporation* ..... 350,000 13,475,000
Pinnacle Micro, Inc.* .................. 150,000 2,718,750
Santa Cruz Operation, Inc.* ............ 60,000 408,720
Synopsys, Inc.* ........................ 100,000 4,500,000
Total ................................. 107,357,780
Chemicals Major - 1.08%
Georgia Gulf Corporation* .............. 215,000 4,810,625
Chemicals Specialty and Miscellaneous Technology - 1.28%
Crompton & Knowles Corporation ......... 260,000 5,720,000
Consumer Electronics and Appliances - 0.45%
Rival Company (The) .................... 100,000 2,018,700
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS (Continued)
Drugs and Hospital Supply - 4.36%
Perrigo Company* ....................... 200,000 $ 6,825,000
Roche Holdings AG (A) .................. 3,000 12,661,290
Total ................................. 19,486,290
Electrical Equipment - 1.41%
General Electric Company ............... 60,000 6,292,500
Electronics - 17.00%
Advanced Technology Materials Inc.* .... 127,500 772,905
Applied Materials, Inc.* ............... 380,000 14,820,000
Atmel Corporation* ..................... 115,000 3,967,500
cisco Systems, Inc.* ................... 360,000 23,265,000
IDB Communications Group, Inc.* ........ 110,000 6,022,500
Intel Corporation ...................... 100,000 6,212,500
Lam Research* .......................... 125,000 4,046,875
Motorola, Inc. ......................... 40,000 3,695,000
Quickturn System Inc.* ................. 77,500 959,063
Standard Microsystems Corporation* ..... 25,000 537,500
Summa Four, Inc.* ...................... 72,200 2,833,850
Wellfleet Communications, Inc.* ........ 40,000 2,575,000
Xilinx, Inc.* .......................... 131,000 6,222,500
Total ................................. 75,930,193
Hospital Management - 5.25%
TakeCare, Inc.* ........................ 145,000 8,283,125
United HealthCare Corporation .......... 200,000 15,175,000
Total ................................. 23,458,125
Household Products - 0.58%
ADESA Corporation ...................... 140,000 2,572,500
Insurance - 1.69%
Insurance Auto Auctions, Inc.* ......... 165,000 6,043,125
Valence Technology Inc.* ............... 100,000 1,500,000
Total ................................. 7,543,125
Leisure Time - 3.18%
ANTEC Corporation* ..................... 100,000 2,450,000
Comcast Corporation, Class A ........... 100,000 3,625,000
Grupo Televisa S.A. de C.V. (A) ........ 120,000 4,180,200
Iwerks Entertainment, Inc.* ............ 30,000 791,250
SPI Holdings Inc., Class B* ............ 350,000 3,150,000
Total ................................. 14,196,450
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1993
Shares Value
COMMON STOCKS (Continued)
Machinery - 5.04%
Cognex Corporation* .................... 260,000 $ 3,737,500
Deere & Company ........................ 85,000 6,290,000
Illinois Tool Works Inc. ............... 100,000 3,900,000
Parker Hannifin Corporation ............ 90,000 3,397,500
Trinova Corporation .................... 165,000 5,176,875
Total ................................. 22,501,875
Paper - 1.07%
Union Camp Corporation ................. 100,000 4,762,500
Public Utilities - Electric - 3.70%
Detroit Edison Company ................. 200,000 6,000,000
L G & E Energy Corp. ................... 100,000 4,050,000
Northern States Power Company .......... 150,000 6,468,750
Total ................................. 16,518,750
Publishing and Advertising - 1.03%
Centros Commerciales Pryca, S.A. (A) ... 150,000 1,980,300
Pilkington PLC (A) ..................... 1,000,000 2,629,000
Total ................................. 4,609,300
Retailing - 1.01%
Wal-Mart Stores, Inc. .................. 180,000 4,500,000
Services, Consumer and Business - 2.60%
CUC International Inc.* ................ 322,500 11,610,000
Telecommunications - 7.92%
DSC Communications Corporation* ........ 50,000 3,071,850
General Instrument Corporation* ........ 65,000 3,648,125
Glenayre Technologies, Inc. ............ 160,000 6,900,000
MCI Communications Corporation ......... 170,000 4,791,790
MFS Communications Company, Inc.* ...... 130,000 4,241,250
Rogers Cantel Mobile Communications
Inc.* ................................. 200,000 5,387,400
Telefonaktiebolaget LM Ericsson,
Class B, ADR .......................... 110,000 4,427,500
Vanguard Cellular Systems, Inc.* ....... 100,000 2,900,000
Total ................................. 35,367,915
TOTAL COMMON STOCKS - 92.31% $412,247,441
(Cost: $257,113,541)
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Electronics - 0.10%
IDB Communications Group, Inc.,
5.0%, 8-15-2003 ....................... $ 375 $ 435,000
Financial - 0.44%
American Express Company,
6.25%, 10-15-96 ....................... 1,838 1,987,495
Hospital Management - 0.22%
Vencor, Incorporated,
6.0%, 10-1-2002 ....................... 1,000 992,500
TOTAL CORPORATE DEBT SECURITIES - 0.76% $ 3,414,995
(Cost: $3,212,500)
SHORT-TERM SECURITIES
Banks and Savings and Loans - 0.96%
Credit Lyonnais N.A. Inc.,
3.34%, 1-4-94 ......................... 3,600 3,598,998
U.S. Bancorp,
Master Note ........................... 700 700,000
Total ................................. 4,298,998
Beverages - 0.40%
PepsiCo, Inc.,
3.29%, 1-21-94 ........................ 1,800 1,796,710
Financial - 3.03%
Associates Corporation of North America,
Master Note ........................... 6,460 6,460,000
Merrill Lynch & Co., Inc.,
3.32%, 1-13-94 ........................ 100 99,889
Textron Financial Corp.,
3.57%, 1-19-94 ........................ 1,000 998,215
Transamerica Finance Corp.,
3.35%, 1-28-94 ........................ 6,000 5,984,925
Total ................................. 13,543,029
Food and Related - 1.60%
Heinz (H.J.) Company,
3.29%, 1-24-94 ........................ 6,800 6,785,707
Sara Lee Corporation,
Master Note ........................... 340 340,000
Total ................................. 7,125,707
Public Utilities - Electric - 0.50%
Houston Industries Inc.,
3.45%, 1-14-94 ........................ 2,250 2,247,197
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Public Utilities - Gas - 0.34%
Northern Illinois Gas Co.,
3.18%, 1-7-94 ......................... $ 1,500 $ 1,499,205
Retailing - 0.50%
K Mart Corporation,
3.3%, 1-24-94 ......................... 2,250 2,245,256
TOTAL SHORT-TERM SECURITIES - 7.33% $ 32,756,102
(Cost: $32,756,102)
TOTAL INVESTMENT SECURITIES - 100.40% $448,418,538
(Cost: $293,082,143)
LIABILITIES, NET OF CASH
AND OTHER ASSETS - (0.40%) (1,807,898)
NET ASSETS - 100.00% $446,610,640
See Notes to Schedules of Investments on page .
<PAGE>
Notes to Schedules of Investments
(A) Listed on an exchange outside the United States.
*No income dividends were paid during the preceding 12 months.
See Note 1 to financial statements for security valuation and other
significant accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
<TABLE>
<CAPTION>
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ -------------- -------------- ------------
<S> <C> <C> <C> <C>
Assets
Investment securities --
at value (Notes 1 and 3) $636,484,083 $3,056,275,654 $1,040,775,445 $448,418,538
Cash .................... 21,560 72,071 14,500 46,598
Receivables:
Dividends and interest 9,332,893 5,906,855 872,470 469,358
Fund shares sold ...... 1,158,824 4,054,389 571,185 517,031
Investment securities
sold .................. --- 3,473,959 --- ---
Prepaid insurance
premium ............... 20,913 67,422 41,444 13,797
------------ -------------- -------------- ------------
Total assets .......... 647,018,273 3,069,850,350 1,042,275,044 449,465,322
------------ -------------- -------------- ------------
Liabilities
Payable for Fund
shares redeemed ....... 5,115,255 8,646,931 8,132,549 1,954,047
Accrued service fee ..... 117,930 539,819 172,654 78,610
Payable for investment
securities purchased --- --- --- 677,500
Accrued transfer agency
and dividend disbursing 64,036 330,904 100,500 77,611
Accrued accounting
services fee .......... 5,833 8,333 8,333 5,000
Other ................... 47,088 251,087 86,710 61,914
------------ -------------- -------------- ------------
Total liabilities ..... 5,350,142 9,777,074 8,500,746 2,854,682
------------ -------------- -------------- ------------
Total net assets .... $641,668,131 $3,060,073,276 $1,033,774,298 $446,610,640
============ ============== ============== ============
Net Assets
$1.00 par value capital stock
Capital stock ......... $100,455,536 $ 123,543,428 $ 143,744,364 $ 30,113,520
Additional paid-in
capital ............. 529,868,917 1,898,743,048 854,945,922 263,080,692
Accumulated undistributed
income(loss):
Accumulated undistributed
net investment income 310,713 720,855 454,363 103,749
Accumulated undistributed net
realized gain (loss) on
investment transactions 1,818,716 6,762,016 (3,112,293) (2,023,716)
Net unrealized appreciation
of investments at
end of period ....... 9,214,249 1,030,303,929 37,741,942 155,336,395
------------ -------------- -------------- ------------
Net assets applicable to
outstanding units
of capital ........ $641,668,131 $3,060,073,276 $1,033,774,298 $446,610,640
============ ============== ============== ============
Net asset value per share (net
assets divided by shares
outstanding) ............ $6.39 $24.77 $7.19 $14.83
Sales load (offering price
X 5.75%) ................ .39 1.51 .44 .90
----- ------ ----- ------
Offering price per share (net asset
value divided by 94.25%) $6.78 $26.28 $7.63 $15.73
===== ====== ===== ======
Capital shares
outstanding ............. 100,455,536 123,543,428 143,744,364 30,113,520
Capital shares authorized . 260,000,000 300,000,000 340,000,000 100,000,000
On sales of $100,000 or more the sales load is reduced as set forth in the
Prospectus.
See notes to financial statements.
</TABLE>
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended DECEMBER 31, 1993
<TABLE>
<CAPTION>
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ -------------- -------------- ------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Dividends ............. $ --- $ 51,680,226 $13,332,161 $ 2,050,080
Interest .............. 42,809,303 14,164,531 6,876,726 2,004,864
----------- ------------ ----------- -----------
Total income ........ 42,809,303 65,844,757 20,208,887 4,054,944
----------- ------------ ----------- -----------
Expenses (Note 2):
Investment
management fee ...... 2,833,151 13,089,827 4,776,064 2,598,347
Transfer agency and
dividend disbursing . 844,833 3,736,787 1,092,567 849,529
Service fee ........... 141,574 666,545 211,828 101,879
Custodian fees ........ 50,794 336,818 166,981 56,911
Accounting services fee 70,000 100,000 98,750 60,000
Audit fees ............ 24,849 71,837 33,450 19,498
Legal fees ............ 13,027 44,505 27,866 8,170
Other ................. 127,909 500,322 169,904 114,908
----------- ------------ ----------- -----------
Total expenses ........ 4,106,137 18,546,641 6,577,410 3,809,242
----------- ------------ ----------- -----------
Net investment
income ............ 38,703,166 47,298,116 13,631,477 245,702
----------- ------------ ----------- -----------
Realized and Unrealized
Gain (Loss) on Investments
Realized net gain
on investments ........ 42,273,683 72,262,232 99,077,252 19,831,519
Unrealized appreciation
(depreciation) in
value of investments
during the period ..... (4,437,167) 297,996,504 (24,457,177) 14,872,734
----------- ------------ ----------- -----------
Net gain on
investments ......... 37,836,516 370,258,736 74,620,075 34,704,253
----------- ------------ ----------- -----------
Net increase in
net assets
resulting
from operations ..... $76,539,682 $417,556,852 $88,251,552 $34,949,955
=========== ============ =========== ===========
See notes to financial statements.
</TABLE>
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended DECEMBER 31, 1993
<TABLE>
<CAPTION>
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ -------------- -------------- ------------
<S> <C> <C> <C> <C>
Increase in Net Assets
Operations:
Net investment income .. $ 38,703,166 $ 47,298,116 $ 13,631,477 $ 245,702
Realized net gain
on investments ....... 42,273,683 72,262,232 99,077,252 19,831,519
Unrealized appreciation
(depreciation) ....... (4,437,167) 297,996,504 (24,457,177) 14,872,734
------------ -------------- -------------- ------------
Net increase in net
assets resulting
from operations ... 76,539,682 417,556,852 88,251,552 34,949,955
------------ -------------- -------------- ------------
Dividends to shareholders:*
From net investment
income ................ (38,417,817) (47,391,411) (14,057,190) (289,842)
From realized net gain
on investment
transactions .......... (31,560,821) (47,069,010) (107,396,676) (26,791,116)
In excess of realized net
gain from investment
transactions .......... --- --- (3,112,293) (2,023,716)
------------ -------------- -------------- ------------
(69,978,638) (94,460,421) (124,566,159) (29,104,674)
------------ -------------- -------------- ------------
Capital share
transactions** .......... 45,161,486 199,815,817 77,165,152 11,958,973
------------ -------------- -------------- ------------
Total increase ........ 51,722,530 522,912,248 40,850,545 17,804,254
Net Assets
Beginning of period ..... 589,945,601 2,537,161,028 992,923,753 428,806,386
------------ -------------- -------------- ------------
End of period ........... $641,668,131 $3,060,073,276 $1,033,774,298 $446,610,640
============ ============== ============== ============
Undistributed net
investment income ... $310,713 $720,855 $454,363 $103,749
======== ======== ======== ========
*See "Financial Highlights" on pages .
**Shares issued from sale
of shares ............. 10,823,257 15,138,889 8,005,063 2,391,048
Shares issued from
reinvestment of dividends
dividends and/or
distributions ......... 9,135,589 3,568,938 16,395,920 1,897,450
Shares redeemed ......... (13,016,181) (10,230,919) (13,035,089) (3,465,411)
----------- ----------- ----------- ----------
Increase in
outstanding capital
shares ................ 6,942,665 8,476,908 11,365,894 823,087
=========== =========== =========== ==========
Value issued from sale
of shares ............. $72,085,126 $354,349,326 $ 61,908,432 $34,447,164
Value issued from
reinvestment of dividends
dividends and/or
distributions ......... 59,457,945 85,633,675 116,166,594 27,467,139
Value redeemed .......... (86,381,585) (240,167,184) (100,909,874) (49,955,330)
----------- ------------ ------------ -----------
Increase in outstanding
capital ............... $45,161,486 $199,815,817 $ 77,165,152 $11,958,973
=========== ============ ============ ===========
See notes to financial statements.
</TABLE>
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended DECEMBER 31, 1992
<TABLE>
<CAPTION>
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ -------------- -------------- ------------
<S> <C> <C> <C> <C>
Increase in Net Assets
Operations:
Net investment
income .............. $ 40,237,323 $ 50,479,790 $ 19,762,339 $ 933,927
Realized net gain
on investments ...... 21,422,845 20,047,357 52,249,568 7,054,052
Unrealized
appreciation
(depreciation) ...... (20,856,292) 196,241,900 53,132,957 (22,885,513)
------------ -------------- -------------- ------------
Net increase (decrease)
in net assets
resulting from
operations ........ 40,803,876 266,769,047 125,144,864 (14,897,534)
------------ -------------- -------------- ------------
Dividends to
shareholders from:*
Net investment income ... (40,699,367) (50,369,748) (19,168,674) (947,911)
Realized net gain
on investment
transactions .......... --- (39,110,054) (61,762,288) (3,540,877)
------------ -------------- -------------- ------------
(40,699,367) (89,479,802) (80,930,962) (4,488,788)
------------ -------------- -------------- ------------
Capital share
transactions** .......... 65,437,125 208,885,817 44,074,916 42,813,031
------------ -------------- -------------- ------------
Total increase ........ 65,541,634 386,175,062 88,288,818 23,426,709
Net Assets
Beginning of period ..... 524,403,967 2,150,985,966 904,634,935 405,379,677
------------ -------------- -------------- ------------
End of period ........... $589,945,601 $2,537,161,028 $992,923,753 $428,806,386
============ ============== ============== ============
Undistributed net investment
income ................ $25,364 $814,150 $880,076 $147,889
======= ======== ======== ========
*See "Financial Highlights" on pages .
**Shares issued from sale
of shares ............. 17,482,760 15,872,640 6,974,607 5,038,057
Shares issued from
reinvestment of dividends
and/or capital gains
distributions ......... 5,232,824 3,706,114 10,083,013 292,379
Shares redeemed ......... (12,206,683) (9,762,859) (11,199,087) (2,326,876)
---------- --------- ---------- ---------
Increase in
outstanding
capital shares ........ 10,508,901 9,815,895 5,858,533 3,003,560
========== ========= ========= =========
Value issued from sale
of shares ............. $108,793,491 $334,825,656 $51,857,594 $70,977,017
Value issued from
reinvestment of dividends
and/or capital gains
distributions ......... 32,474,091 79,889,015 75,225,480 4,176,680
Value redeemed .......... (75,830,457) (205,828,854) (83,008,158) (32,340,666)
------------ ------------ ----------- -----------
Increase in outstanding
capital ............... $ 65,437,125 $208,885,817 $44,074,916 $42,813,031
============ ============ =========== ===========
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED BOND FUND
For a Share of Capital Stock Outstanding Throughout Each Period:
United Bond Fund
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
-----------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ............ $6.31 $6.32 $5.80 $6.07 $6.03 $6.11 $6.42 $6.09 $5.44 $5.48
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment income .41 .45 .47 .50 .55 .54 .56 .55 .61 .67
Net realized and
unrealized gain
(loss) on
investments ..... .41 .00 .56 (0.26) .07 (0.02) (0.28) .34 .66 (0.05)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ........ .82 .45 1.03 .24 .62 .52 .28 .89 1.27 .62
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income .......... (0.41) (0.46) (0.47) (0.50) (0.56) (0.54) (0.55) (0.56) (0.62) (0.66)
Distributions from
capital gains ... (0.33) (0.00) (0.04) (0.01) (0.02) (0.06) (0.04) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions . (0.74) (0.46) (0.51) (0.51) (0.58) (0.60) (0.59) (0.56) (0.62) (0.66)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period $6.39 $6.31 $6.32 $5.80 $6.07 $6.03 $6.11 $6.42 $6.09 $5.44
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return* ...... 13.19% 7.50% 18.78% 4.24% 10.61% 8.99% 4.50% 15.23% 25.42% 12.43%
Net assets, end of
period (000
omitted) ......... $641,668 $589,946 $524,404 $439,487 $403,010 $335,337 $319,273 $339,544 $338,586 $305,935
Ratio of expenses to
average net assets 0.65% 0.64% 0.65% 0.67% 0.64% 0.65% 0.64% 0.64% 0.67% 0.73%
Ratio of net investment
income to average
net assets ....... 6.14% 7.29% 7.96% 8.54% 8.97% 9.00% 8.83% 8.82% 10.90% 12.66%
Portfolio turnover
rate** ........... 175.39% 115.17% 318.76% 294.66% 353.57% 179.07% 232.65% 252.49% 270.71% 93.56%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
**This rate is, in general, calculated by dividing the average value of the Fund's portfolio during the period into the
lesser of its purchases or sales in the period, excluding short-term securities. For periods ended prior to April 1,
1985, U.S. Government Securities were excluded from the calculation.
</TABLE>
<PAGE>
United Income Fund
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........... $22.05 $20.44 $16.46 $18.69 $16.76 $15.08 $17.03 $16.20 $13.11 $13.53
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income .40 .46 .51 .61 .65 .60 .72 .48 .58 .66
Net realized and
unrealized gain
(loss) on
investments .... 3.11 1.96 4.29 (1.61) 3.89 2.35 .59 3.12 3.64 .04
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ....... 3.51 2.42 4.80 (1.00) 4.54 2.95 1.31 3.60 4.22 .70
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income ......... (0.40) (0.46) (0.53) (0.63) (0.65) (0.67) (0.66) (0.49) (0.61) (0.64)
Distributions from
capital gains .. (0.39) (0.35) (0.29) (0.60) (1.96) (0.60) (2.60) (2.28) (0.52) (0.48)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (0.79) (0.81) (0.82) (1.23) (2.61) (1.27) (3.26) (2.77) (1.13) (1.12)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $24.77 $22.05 $20.44 $16.46 $18.69 $16.76 $15.08 $17.03 $16.20 $13.11
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return* ...... 16.05% 11.96% 29.64% -5.45% 27.49% 19.83% 7.17% 22.11% 34.00% 6.37%
Net assets, end of
period (000
omitted) .........$3,060,073$2,537,161$2,150,986$1,578,543$1,550,387$1,149,934 $964,521 $836,594 $675,314 $533,916
Ratio of expenses to
average net assets 0.66% 0.65% 0.66% 0.68% 0.64% 0.67% 0.63% 0.62% 0.66% 0.70%
Ratio of net investment
income to average
net assets ....... 1.70% 2.19% 2.71% 3.44% 3.41% 3.65% 3.99% 2.70% 4.09% 5.32%
Portfolio turnover
rate** ........... 21.70% 19.25% 24.68% 30.94% 60.77% 48.64% 58.46% 29.90% 37.75% 20.71%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
**This rate is, in general, calculated by dividing the average value of the Fund's portfolio during the period into the
lesser of its purchases or sales in the period, excluding short-term securities. For periods ended prior to April 1,
1985, U.S. Government Securities were excluded from the calculation.
</TABLE>
<PAGE>
United Accumulative Fund
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........... $7.50 $7.15 $6.03 $7.12 $6.43 $5.75 $7.78 $8.73 $7.64 $10.13
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income .11 .16 .19 .28 .31 .26 .25 .20 .34 .40
Net realized and
unrealized gain
(loss) on
investments .... .55 .85 1.22 (0.99) 1.43 .71 .19 1.28 1.51 (0.02)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ....... .66 1.01 1.41 (0.71) 1.74 .97 .44 1.48 1.85 .38
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income ......... (0.11) (0.16) (0.20) (0.29) (0.29) (0.29) (0.32) (0.25) (0.39) (0.40)
Distributions from
capital gains .. (0.84) (0.50) (0.09) (0.09) (0.76) (0.00) (2.15) (2.18) (0.37) (2.47)
Distribution in excess
of capital gains (0.02) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (0.97) (0.66) (0.29) (0.38) (1.05) (0.29) (2.47) (2.43) (0.76) (2.87)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $7.19 $7.50 $7.15 $6.03 $7.12 $6.43 $5.75 $7.78 $8.73 $7.64
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return* ...... 9.06% 14.20% 23.68% -10.17% 27.56% 17.05% 4.53% 18.05% 25.56% 6.90%
Net assets, end of
period (000
omitted) .........$1,033,774 $992,924 $904,635 $767,218 $877,109 $737,231 $696,359 $683,989 $604,337 $503,862
Ratio of expenses to
average net assets 0.65% 0.62% 0.63% 0.64% 0.60% 0.63% 0.59% 0.60% 0.63% 0.67%
Ratio of net investment
income to average
net assets ....... 1.34% 2.13% 2.79% 4.12% 4.19% 4.09% 3.17% 2.37% 4.18% 5.56%
Portfolio turnover
rate** ........... 230.29% 194.41% 241.11% 288.64% 338.24% 245.42% 316.74% 260.69% 297.37% 190.69%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
**This rate is, in general, calculated by dividing the average value of the Fund's portfolio during the period into the
lesser of its purchases or sales in the period, excluding short-term securities. For periods ended prior to April 1,
1985, U.S. Government Securities were excluded from the calculation.
</TABLE>
<PAGE>
United Science and Technology Fund
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
-------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........... $14.64 $15.42 $10.27 $11.72 $9.91 $9.28 $10.00 $9.98 $9.23 $11.31
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income .01 .03 .10 .24 .20 .20 .19 .17 .32 .52
Net realized and
unrealized gain
(loss) on
investments .... 1.21 (0.66) 5.90 (0.65) 2.50 .64 1.06 1.61 1.65 (0.75)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ....... 1.22 (0.63) 6.00 (0.41) 2.70 .84 1.25 1.78 1.97 (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income ......... (0.01) (0.03) (0.10) (0.25) (0.19) (0.21) (0.25) (0.24) (0.42) (0.45)
Distributions from
capital gains .. (0.95) (0.12) (0.75) (0.79) (0.70) (0.00) (1.72) (1.52) (0.80) (1.40)
Distribution in excess
of capital gains (0.07) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (1.03) (0.15) (0.85) (1.04) (0.89) (0.21) (1.97) (1.76) (1.22) (1.85)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $14.83 $14.64 $15.42 $10.27 $11.72 $9.91 $9.28 $10.00 $9.98 $9.23
====== ====== ====== ====== ====== ===== ===== ====== ===== =====
Total return* ...... 8.51% -4.03% 59.25% -3.51% 27.40% 9.05% 12.43% 18.19% 22.98% -1.36%
Net assets, end of
period (000
omitted) ......... $446,611 $428,806 $405,380 $239,077 $247,584 $214,693 $214,828 $180,890 $174,042 $160,296
Ratio of expenses to
average net assets 0.91% 0.87% 0.85% 0.90% 0.84% 0.89% 0.81% 0.83% 0.88% 0.96%
Ratio of net investment
income to average
net assets ....... 0.06% 0.24% 0.75% 2.06% 1.73% 1.94% 1.65% 1.62% 3.49% 5.50%
Portfolio turnover
rate** ........... 68.38% 45.79% 59.24% 63.86% 83.19% 60.67% 85.35% 91.71% 146.41% 156.00%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
**This rate is, in general, calculated by dividing the average value of the Fund's portfolio during the period into the
lesser of its purchases or sales in the period, excluding short-term securities. For periods ended prior to April 1,
1985, U.S. Government Securities were excluded from the calculation.
</TABLE>
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
NOTE 1 -- Significant Accounting Policies
United Funds, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. The Corporation issues four classes of capital shares;
each class represents ownership of a separate mutual fund. The assets
belonging to each Fund are held separately by the Custodian. The capital
shares of each Fund represent a pro rata beneficial interest in the
principal, net income and realized and unrealized capital gains or losses
of its respective investments and other assets. The following is a summary
of significant accounting policies consistently followed by the Corporation
in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal
period as reported by the principal securities exchange on which the
issue is traded or, if no sale is reported for a stock, the average of
the latest bid and asked prices. Bonds, other than convertible bonds,
are valued using a pricing system provided by a major dealer in bonds.
Convertible bonds are valued using this pricing system only on days
when there is no sale reported. Stocks which are traded over-the-
counter are priced using NASDAQ (National Association of Securities
Dealers Automated Quotations) which provides information on bid and
asked or closing prices quoted by major dealers in such stocks.
Securities for which quotations are not readily available are valued
as determined in good faith in accordance with procedures established
by and under the general supervision of the Corporation's Board of
Directors. Short-term debt securities are valued at amortized cost,
which approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed). Securities gains and losses are calculated
on the identified cost basis. Original issue discount (as defined in
the Internal Revenue Code), premiums on the purchase of bonds and
post-1984 market discount are amortized for both financial and tax
reporting purposes over the remaining lives of the bonds. Dividend
income is recorded on the ex-dividend date. Interest income is
recorded on the accrual basis. See Note 3 -- Investment Securities
Transactions.
C. Federal income taxes -- It is the Corporation's policy to distribute
all of its taxable income and capital gains to its shareholders and
otherwise qualify as a regulated investment company under the Internal
Revenue Code. In addition, the Corporation intends to pay
distributions as required to avoid imposition of excise tax.
Accordingly, provision has not been made for Federal income taxes.
See Note 4 -- Federal Income Tax Matters.
D. Dividends and distributions -- Dividends and distributions to
shareholders are recorded by each Fund on the record date. During the
twelve months ended December 31, 1993, the Fund adopted Statement of
Position 93-2 Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. Accordingly, permanent book
and tax basis differences relating to future shareholder distributions
have been reclassified to additional paid-in capital. As of January
1, 1993, the cumulative effect of such differences was reclassified
from accumulated undistributed net realized gain on investment
transactions to additional paid-in capital as follows:
United Bond Fund $(28,709,089)
United Income Fund 5,236,411
United Accumulative Fund (1,305,150)
United Science and Technology Fund 977,095
Additionally, certain distributions have been reclassified in the
Statement of Changes in Net Assets to better disclose the differences
between financial statement amounts and distributions determined in
accordance with income tax regulations. Net investment income, net
realized gains and net assets were not affected by this change.
NOTE 2 -- Investment Management And Payments To Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The
fee consists of two elements: (i) a "Specific" fee computed on net asset
value as of the close of business each day at the annual rate of .03% of
net assets for United Bond Fund, .05% of net assets for United Income Fund
and United Accumulative Fund, and .20% for United Science and Technology
Fund; and (ii) a "Group" fee computed each day on the combined net asset
values of all of the funds in the United Group of mutual funds
(approximately $11.1 billion of combined net assets at December 31, 1993)
at annual rates of .51% of the first $750 million of combined net assets,
.49% on that amount between $750 million and $1.5 billion, .47% between
$1.5 billion and $2.25 billion, .45% between $2.25 billion and $3 billion,
.43% between $3 billion and $3.75 billion, .40% between $3.75 billion and
$7.5 billion, .38% between $7.5 billion and $12 billion, and .36% of that
amount over $12 billion. The Fund accrues and pays this fee daily.
Pursuant to assignment of the Investment Management Agreement between
the Corporation and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment
Management Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as
the Corporation's investment manager.
The Corporation has an Accounting Services Agreement with Waddell &
Reed Services Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under
the agreement, WARSCO acts as the agent in providing accounting services
and assistance to the Corporation and pricing daily the value of shares of
the Corporation. For these services, each of the four Funds pays WARSCO a
monthly fee of one-twelfth of the annual fee shown in the following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Fund
------------------------- ------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
The Corporation also pays WARSCO a per account charge for transfer
agency and dividend disbursement services of $1.0208 for each shareholder
account which was in existence at any time during the prior month, plus
$0.30 for each account on which a dividend or distribution of cash or
shares had a record date in that month. The Corporation also reimburses W&R
and WARSCO for certain out-of-pocket costs.
As principal underwriter for the Corporation's shares, W&R received
direct and indirect gross sales commissions (which are not an expense of
the Corporation) of $23,716,003, out of which W&R paid sales commissions of
$13,156,376 and all expenses in connection with the sale of the
Corporation's shares, except for registration fees and related expenses.
On September 28, 1993, shareholders of the Fund approved the adoption
of a 12b-1 Service Plan with a maximum fee of .25%. The Plan went into
effect October 1, 1993.
The Corporation paid Directors' fees of $184,976.
W&R is an indirect subsidiary of Torchmark Corporation, a holding
company, and United Investors Management Company, a holding company, and
a direct subsidiary of Waddell & Reed Financial Services, Inc., a holding
company.
NOTE 3 -- Investment Securities Transactions
Investment securities transactions for the period ended December 31,
1993 are summarized as follows:
United
United United United Science and
Bond IncomeAccumulative Technology
Fund Fund Fund Fund
----------- ------------------------ ------------
Purchases of investment
securities, excluding
short-term and U.S.
Government securities $772,224,082$ 842,027,861$1,919,573,087$261,362,421
Purchases of U.S. Government
securities 275,773,051 11,461,719 --- ---
Purchases of short-term
securities 631,608,3241,430,815,2572,070,112,359 512,029,023
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 634,959,873 515,220,1141,857,983,221 247,801,169
Proceeds from maturities and
sales of U.S. Government
securities 400,818,383 59,670,000 --- ---
Proceeds from maturities and sales
of short-term securities 625,556,0631,553,332,7782,176,307,288 542,103,588
Realized gain on U.S.
Government securities 11,897,226 8,133,087 --- ---
For Federal income tax purposes, cost of investments owned at December
31, 1993 and the related appreciation (depreciation) were as follows:
Aggregate
Cost AppreciationDepreciation Appreciation
-------------- --------------------------------------
United Bond Fund $627,269,834 $14,505,379$(5,291,130) $9,214,249
United Income Fund 2,025,971,7251,060,313,925(30,009,996)1,030,303,929
United Accumulative Fund1,003,884,052 72,749,735(35,858,342) 36,891,393
United Science and
Technology Fund 293,500,010 161,864,485 (6,945,957) 154,918,528
NOTE 4 -- Federal Income Tax Matters
The Corporation's income and expenses attributed to each Fund and the
gains and losses on security transactions of each Fund have been attributed
to that Fund for Federal income tax purposes as well as for accounting
purposes. For Federal income tax purposes, United Income Fund, United
Accumulative Fund and United Science and Technology Fund realized capital
gain net income of $53,914,906, $102,177,031 and $21,770,561, respectively,
during the year ended December 31, 1993. A portion of the capital gain net
income was paid to shareholders during the year ended December 31, 1993.
For Federal income tax purposes, United Bond Fund realized capital gain net
income in the amount of $41,552,432 during the year ended December 31,
1993. This capital gain net income was partially offset by utilization of
all available capital loss carryovers resulting in distributable capital
gains of $33,322,306. A portion of the capital gain net income was paid to
shareholders during the year ended December 31, 1993. Remaining capital
gain net income will be distributed to each Fund's shareholders.
Internal Revenue Code regulations permit each Fund to defer into its
next fiscal year net capital losses incurred between each November 1 and
the end of its fiscal year ("post-October losses"). From November 1, 1993
through December 31, 1993, United Accumulative Fund and United Science and
Technology Fund incurred net capital losses of $2,287,546 and $1,521,176,
respectively, which have been deferred to the fiscal year ending December
31, 1994.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedules of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of each of
the four mutual funds (United Bond Fund, United Income Fund, United
Accumulative Fund and United Science and Technology Fund) comprising United
Funds, Inc. (hereafter referred to as the "Corporation") at December 31,
1993, the results of its operations for the year then ended and the changes
in its net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Corporation's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
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, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at December 31,
1993 by correspondence with the custodian and brokers and the application
of alternative auditing procedures where confirmations from brokers were
not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Kansas City, Missouri
January 31, 1994
<PAGE>
REGISTRATION STATEMENT
PART C
OTHER INFORMATION
24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements -- United Funds, Inc.
Included in Part B:
-------------------
As of December 31, 1993
Statements of Assets and Liabilities
For the year ended December 31, 1993
Statements of Operations
For each of the two years in the period ended December 31, 1993
Statement of Changes in Net Assets
Schedule I -- Investment Securities as of December 31, 1993
Report of Independent Accountants
Included in Part C:
-------------------
Consent of Independent Accountants
Other schedules prescribed by Regulation S-X are not filed because the
required matter is not present or is insignificant.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 115 to the
Registration Statement on Form N-1A of our report dated January 31, 1994
relating to the financial statements and the financial highlights of United
Funds, Inc., which appears in such Statement of Additional Information. We
further consent to the reference to us under the heading "Custodial and
Auditing Services" in such Statement of Additional Information and to the
reference to us under the heading "Financial Highlights" in the Prospectus
constituting part of this Post-Effective Amendment.
PRICE WATERHOUSE
Kansas City, Missouri
March 29, 1994
<PAGE>
(b) Exhibits:
(1) Articles of Incorporation, as amended, filed through EDGAR on
August 11, 1993 as Exhibit (b)(1) to Post-Effective Amendment No.
114 to the Registration Statement on Form N-1A*
(2) (a) By-Laws filed December 24, 1974 as Exhibit b(b) to the
Registration Statement of Management Investment Company on
Form N-8B-1*
(b) Amendment to By-Laws filed June 28, 1988 as Exhibit
(b)(2)(b) to Post-Effective Amendment No. 106 to the
Registration Statement on Form N-1A*
Amendment to By-Laws filed February 27, 1990 as Exhibit No.
2 on Form SE to Form N-SAR for the six months ended December
31, 1989*
Amendment to By-Laws filed February 25, 1991 as Exhibit No.
2 on Form SE to Form N-SAR for the six months ended December
31, 1990*
(3) Not applicable
(4) Article FIFTH and Article SEVENTH of the Articles of
Incorporation of Registrant, filed through EDGAR August 11, 1993
as Exhibit (b)(1) to Post-Effective Amendment No. 114 to the
Registration Statement on Form N-1A*; Article I, Article IV and
Article VII of the Bylaws of the Registrant filed December 24,
1974 as Exhibit (b)(b) to the Registration Statement of
Management Investment Company on Form N-8B-1*
(5) (a) Investment Management Agreement filed April 29, 1990 as
Exhibit (b)(5) to Post-Effective Amendment No. 109 to the
Registration Statement on Form N-1A*
(b) Assignments of the Investment Management Agreements filed
March 9, 1992 as Exhibits (b)(5)(b)(1); (b)(5)(b)(2);
(b)(5)(b)(3) and (b)(5)(b)(4) on Form SE to Post-Effective
Amendment No. 111 to the Registration Statement on Form N-
1A*
(c) Accounting Services Agreement filed February 25, 1991 as
Exhibit No. 3 on Form SE to Form N-SAR for the period ended
December 31, 1990*
(6) Underwriting Agreement filed April 15, 1982 as Exhibit 6 to Post-
Effective Amendment No. 91 to the Registration Statement on Form
N-1*
(7) Not applicable
(8) Custodian Agreements filed March 9, 1992 as Exhibits (b)(8)(a);
(b)(8)(b); (b)(8)(c) and (b)(8)(d) on Form SE to Post-Effective
Amendment No. 111 to the Registration Statement on Form N-1A*
(a) Amendments to Custodian Agreements dated October 28, 1992
filed February 17, 1993 as Exhibits (b)(8) to Post-Effective
Amendment No. 112 to the Registration Statement on Form N-
1A*
(b) Amendments to Custodian Agreements dated December 9, 1992
filed February 17, 1993 as Exhibits (b)(8) to Post-Effective
Amendment No. 112 to the Registration Statement on Form N-1A*
- ---------------------------------
*Incorporated herein by reference
(c) Amendments to Custodian Agreements dated February 17, 1993
filed through EDGAR as Exhibit (b)(8) to Post-Effective
Amendment No. 114 to the Registration Statement on Form N-
1A*
(9) (a) Shareholder Servicing Agreement filed February 17, 1993 as
Exhibit (b)(9) to Post-Effective Amendment No. 112 to the
Registration Statement on Form N-1A*
(b) Fund application filed March 11, 1991 as Exhibit (b)(9)(b)
on Form SE to Post-Effective Amendment No. 110 to the
Registration Statement on Form N-1A*
(10) Not applicable
(11) Not applicable
(12) Not applicable
(13) Not applicable
(14) (a) Individual Retirement Plan filed March 9, 1992 as Exhibit
(b)(14)(a) on Form SE to Post-Effective Amendment No. 111 to
the Registration Statement on Form N-1A*
(b) Simplified Employee Pension Plan filed March 9, 1992 as
Exhibit (b)(14)(b) on Form SE to Post-Effective Amendment
No. 111 to the Registration Statement on Form N-1A*
(c) Tax Sheltered Account for Employees of Public and Private
Schools and Tax-Exempt Organizations filed March 9, 1992 as
Exhibit (b)(14)(c) on Form SE to Post-Effective Amendment
No. 111 to the Registration Statement on Form N-1A*
(d) Tax Sheltered Keogh Retirement Plan for self-employed
individuals, sole proprietors and common partnerships filed
March 9, 1992 as Exhibit (b)(14)(d) on Form SE to Post-
Effective Amendment No. 111 to the Registration Statement on
Form N-1A*
(e) Defined Contribution Plan filed March 9, 1992 as Exhibit
(b)(14)(e) on Form SE to Post-Effective Amendment No. 111 to
the Registration Statement on Form N-1A*
(f) 457 Plan for Public Employees filed March 9, 1992 as Exhibit
(b)(14)(f) on Form SE to Post-Effective Amendment No. 111 to
the Registration Statement on Form N-1A*
(g) 401(K) Plan for Public Employees filed March 9, 1992 as
Exhibit (b)(14)(g) on Form SE to Post-Effective Amendment
No. 111 to the Registration Statement on Form N-1A*
(15) Service Plan filed through EDGAR August 11, 1993 as Exhibit
(b)(15) to Post Effective Amendment No. 114 to the Registration
Statement on Form N-1A*
Service Agreement filed through EDGAR August 11, 1993 as Exhibit
(b)(15) to Post Effective Amendment No. 114 to the Registration
Statement on Form N-1A*
(16) Computation of average annual total return performance quotations
filed through EDGAR August 11, 1993 as Exhibit (b)(16) to Post
Effective Amendment No. 114 to the Registration Statement on Form
N-1A*
- ---------------------------------
*Incorporated herein by reference
Computation of yield performance quotation filed February 12,
1993 as Exhibit (b)(16) on Form SE to Post-Effective Amendment
No. 112 to the Registration Statement on Form N-1A*
25. Persons Controlled by or under common control with Registrant
-------------------------------------------------------------
None
26. Number of Holders of Securities
-------------------------------
Number of Record Holders as of
Title of Class December 31, 1993
-------------- ------------------------------
Capital Stock 380,797
27. Indemnification
---------------
Reference is made to Article SEVENTH paragraph 6(b) through 6(f) of
the Articles of Incorporation, as amended, of Registrant filed through
EDGAR August 11, 1994 as Exhibit (b)(1) to the Post-Effective
Amendment No. 114 to Registration Statement on Form N-1A*; and to
Article IV of the Underwriting Agreement filed April 15, 1982 as
Exhibit (1)(b)(6) to Post-Effective Amendment No. 91*, both of which
provide indemnification. Also refer to Section 2-418 of the Maryland
General Corporation Law regarding indemnification of directors,
officers, employees and agents.
28. Business and Other Connections of Investment Manager
----------------------------------------------------
Waddell & Reed Investment Management Company is the investment manager
of the Registrant. Under the terms of an Investment Management
Agreement between Waddell & Reed, Inc. and the Registrant, Waddell &
Reed, Inc. is to provide investment management services to the
Registrant. Waddell & Reed, Inc. assigned its investment management
duties under this agreement to Waddell & Reed Investment Management
Company on January 8, 1992. Waddell & Reed Investment Management
Company is not engaged in any business other than the provision of
investment management services to those registered investment
companies described in Part A and Part B of this Post-Effective
Amendment.
Each director and executive officer of Waddell & Reed Investment
Management Company has had as his sole business, profession, vocation
or employment during the past two years only his duties as an
executive officer and/or employee of Waddell & Reed Investment
Management Company or its predecessors, except as to persons who are
directors and/or officers of the Registrant and have served in the
capacities shown in the Statement of Additional Information of the
Registrant, and except for Mr. Ronald K. Richey. Mr. Richey is
Chairman of the Board and Chief Executive Officer of Torchmark
Corporation, the parent company of Waddell & Reed, Inc., and Chairman
of the Board of United Investors Management Company, a holding company
of which Waddell & Reed, Inc. is an indirect subsidiary. Mr. Richey's
address is 2001 Third Avenue South, Birmingham, Alabama 35233. The
address of the others is 6300 Lamar Avenue, Shawnee Mission, Kansas
66202-4200.
As to each director and officer of Waddell & Reed Investment
Management Company, reference is made to the Prospectus and SAI of
this Registrant.
29. Principal Underwriter
---------------------
(a) Waddell & Reed, Inc. is the principal underwriter of the
Registrant. It is also the principal underwriter to the
following investment companies:
United International Growth Fund, Inc.
United Continental Income Fund, Inc.
United Vanguard Fund, Inc.
United Retirement Shares, Inc.
United Municipal Bond Fund, Inc.
United High Income Fund, Inc.
United Cash Management, Inc.
United Government Securities Fund, Inc.
United New Concepts Fund, Inc.
United Gold & Government Fund, Inc.
United Municipal High Income Fund, Inc.
United High Income Fund II, Inc.
TMK/United Funds, Inc.
Waddell & Reed Funds, Inc.
and is depositor of the following unit investment trusts:
United Periodic Investment Plans to acquire shares of United
Science and Energy Fund
United Periodic Investment Plans to acquire shares of United
Accumulative Fund
United Income Investment Programs
United International Growth Investment Programs
United Continental Income Investment Programs
United Vanguard Investment Programs
(b) The information contained in the underwriter's application on
form BD, under the Securities Exchange Act of 1934, is herein
incorporated by reference.
(c) No compensation was paid by the Registrant to any principal
underwriter who is not an affiliated person of the Registrant or
any affiliated person of such affiliated person.
30. Location of Accounts and Records
--------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act and
rules promulgated thereunder are under the possession of Mr. Rodney O.
McWhinney and Mr. Robert L. Hechler, as officers of the Registrant,
each of whose business address is Post Office Box 29217, Shawnee
Mission, Kansas 66201-9217.
31. Management Services
-------------------
There is no service contract other than as discussed in Part A and B
of this Post-Effective Amendment and as listed in response to Item
(b)(9) and Item (b)(15) hereof.
32. Undertaking
-----------
(a) Not applicable
(b) Not applicable
(c) The Fund agrees to furnish to each person to whom a prospectus is
delivered a copy of the Fund's latest annual report to
shareholders upon request and without charge.
(d) To the extent that Section 16(c) of the Investment Company Act of
1940, as amended, applies to the Fund, the Fund agrees, if
requested in writing by the shareholders of record of not less
than 10% of the Fund's outstanding shares, to call a meeting of
the shareholders of the Fund for the purpose of voting upon the
question of removal of any director.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or
the Investment Company Act of 1940, the Registrant (certifies that it
meets all of the requirements for effectiveness of this Post-Effective
Amendment pursuant to Rule 485(b) under the Securities Act of 1933 and)
has duly caused this Post-Effective Amendment to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Overland
Park, and State of Kansas, on the 29th day of March, 1994.
UNITED FUNDS, INC.
(Registrant)
By /s/ Keith A. Tucker*
------------------------
Keith A. Tucker, President
Pursuant to the requirements of the Securities Act of 1933, and/or the
Investment Company Act of 1940, this Post-Effective Amendment has been
signed below by the following persons in the capacities and on the date
indicated.
Signatures Title
---------- -----
/s/Ronald K. Richey* Chairman of the Board March 29, 1994
- ---------------------- ----------------
Ronald K. Richey
/s/Keith A. Tucker* President and Director March 29, 1994
- ---------------------- (Principal Executive Officer) ----------------
Keith A. Tucker
/s/Theodore W. Howard* Vice President, Treasurer March 29, 1994
- ---------------------- and Principal Accounting ----------------
Theodore W. Howard Officer
/s/Robert L. Hechler* Vice President and March 29, 1994
- ---------------------- Principal Financial ----------------
Robert L. Hechler Officer
/s/Henry L. Bellmon* Director March 29, 1994
- ---------------------- ----------------
Henry L. Bellmon
/s/Dodds I. Buchanan* Director March 29, 1994
- --------------------- ----------------
Dodds I. Buchanan
/s/Jay B. Dillingham* Director March 29, 1994
- -------------------- ----------------
Jay B. Dillingham
/s/John F. Hayes* Director March 29, 1994
- ------------------- ----------------
John F. Hayes
Director
- ------------------- ----------------
Glendon E. Johnson
/s/William T. Morgan* Director March 29, 1994
- ------------------- ----------------
William T. Morgan
/s/Doyle Patterson* Director March 29, 1994
- ------------------- ----------------
Doyle Patterson
/s/Frederick Vogel, III* Director March 29, 1994
- ------------------- ----------------
Frederick Vogel, III
/s/Paul S. Wise* Director March 29, 1994
- ------------------- ----------------
Paul S. Wise
/s/Leslie S. Wright* Director March 29, 1994
- ------------------- ----------------
Leslie S. Wright
*By
Rodney O. McWhinney
Attorney-in-Fact
ATTEST:
Sharon K. Pappas
Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned, UNITED FUNDS, INC.,
UNITED INTERNATIONAL GROWTH FUND, INC., UNITED MUNICIPAL BOND FUND, INC., UNITED
VANGUARD FUND, INC., UNITED HIGH INCOME FUND, INC., UNITED CASH MANAGEMENT,
INC., UNITED NEW CONCEPTS FUND, INC., UNITED GOVERNMENT SECURITIES FUND, INC.,
UNITED MUNICIPAL HIGH INCOME FUND, INC., UNITED GOLD & GOVERNMENT FUND, INC.,
UNITED HIGH INCOME FUND II, INC., UNITED CONTINENTAL INCOME FUND, INC., UNITED
RETIREMENT SHARES, INC., TMK/UNITED FUNDS, INC., WADDELL & REED FUNDS, INC.,
TORCHMARK INSURED TAX-FREE FUND, INC., AND TORCHMARK GOVERNMENT SECURITIES FUND,
INC. (each hereinafter called the "Corporation"), and certain directors and
officers of the Corporation, do hereby constitute and appoint WILLIAM T. MORGAN,
ROBERT L. HECHLER, and RODNEY O. MCWHINNEY, and each of them individually, their
true and lawful attorneys and agents to take any and all action and execute any
and all instruments which said attorneys and agents may deem necessary or
advisable to enable the Corporation to comply with the Securities Act of 1933
and/or the Investment Company Act of 1940, as amended, and any rules,
regulations, orders or other requirements of the United States Securities and
Exchange Commission thereunder, in connection with the registration under the
Securities Act of 1933 and/or the Investment Company Act of 1940, as amended,
including specifically, but without limitation of the foregoing, power and
authority to sign the names of each of such directors and officers in his behalf
as such director or officer has indicated below opposite his signature hereto,
to any amendment or supplement to the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940, as amended, and to any instruments or documents
filed or to be filed as a part of or in connection with such Registration
Statement; and each of the undersigned hereby ratifies and confirms all that
said attorneys and agents shall do or cause to be done by virtue hereof.
Date: May 1, 1993 /s/Keith A. Tucker*
---------------------
Keith A. Tucker, President
/s/Ronald K. Richey* Chairman of the Board May 1, 1993
- -------------------- ---------------
Ronald K. Richey
/s/Keith A. Tucker* President and Director May 1, 1993
- -------------------- (Principal Executive Officer) ---------------
Keith A. Tucker
/s/Theodore W. Howard* Vice President, Treasurer May 1, 1993
- -------------------- and Principal Accounting ---------------
Theodore W. Howard Officer
/s/Robert L. Hechler* Vice President and May 1, 1993
- -------------------- Principal Financial ---------------
Robert L. Hechler Officer
/s/Henry L. Bellmon* Director May 1, 1993
- -------------------- ---------------
Henry L. Bellmon
/s/Dodds I. Buchanan* Director May 1, 1993
- -------------------- ---------------
Dodds I. Buchanan
/s/Jay B. Dillingham* Director May 1, 1993
- -------------------- ---------------
Jay B. Dillingham
/s/John F. Hayes* Director May 1, 1993
- -------------------- ---------------
John F. Hayes
Director
- -------------------- ---------------
Glendon E. Johnson
/s/William T. Morgan* Director May 1, 1993
- -------------------- ---------------
William T. Morgan
/s/Doyle Patterson* Director May 1, 1993
- -------------------- ---------------
Doyle Patterson
/s/Frederick Vogel, III* Director May 1, 1993
- -------------------- ---------------
Frederick Vogel, III
/s/Paul S. Wise* Director May 1, 1993
- -------------------- ---------------
Paul S. Wise
/s/Leslie S. Wright* Director May 1, 1993
- -------------------- ---------------
Leslie S. Wright
Attest:
/s/Sharon K. Pappas
- ---------------------
Sharon K. Pappas, Vice President
and Secretary
March 29, 1994
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N. W.
Judiciary Plaza
Washington, D. C. 20549
Re: United Funds, Inc.
Post-Effective Amendment No. 115
Dear Sir or Madam:
In connection with the filing of the above-referenced Post-Effective Amendment,
I hereby represent that the Amendment does not contain disclosures which would
render it ineligible to become effective pursuant to paragraph (b) of Rule 485.
Yours truly,
Rodney O. McWhinney
General Counsel
ROM:jb
