<PAGE>
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
(913) 236-2000
- -----------------------------------------------------------------
March 31, 1994
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, 1994. 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.
SUPPLEMENT TO THE PROSPECTUS
The Board of Directors of United Funds, Inc. has approved, subject to approval
by the shareholders of a Fund, an amendment to the fee schedule of its
Investment Management Agreement that will increase the "Specific" fee payable by
United Accumulative Fund and United Income Fund as described below. If the
shareholders of a Fund approve the proposal, the Investment Management Agreement
will be amended to increase that Fund's Specific fee as follows:
Specific Annual Fee
Name of Fund as % of Net Assets
United Funds, Inc.
United Accumulative Fund .15 of 1%
United Funds, Inc.
United Income Fund .15 of 1%
The Board of Directors has also approved, subject to approval by the
shareholders of a Fund, elimination of United Accumulative Fund and United
Income Fund's fundamental investment restriction regarding investments in
restricted securities. If the shareholders of a Fund approve this proposal to
eliminate that Fund's fundamental restriction regarding restricted securities,
whether or not the Fund could invest in an unregistered security would be
determined by reference to the Fund's investment objective and policies,
including its policy regarding illiquid investments, subject to the applicable
requirements of the Investment Company Act of 1940.
To be attached to the cover page of the Prospectus of United Funds, Inc. dated
March 31, 1994.
This supplement is dated October 31, 1994.
NUS1137
<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, 1993, 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, 1993.
Management fees for each Fund as a percent of each Fund's net assets for
the fiscal year ended December 31, 1993 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, 1994
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
NUP2000(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, 1994
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 .............. 27
Purchase, Redemption and Pricing of Shares ............ 30
Directors and Officers ................................ 44
Payments to Shareholders .............................. 48
Taxes ................................................. 50
Portfolio Transactions and Brokerage .................. 53
Other Information ..................................... 56
Financial Statements .................................. 57
<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.
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, 1993 and December 31, 1992 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 56, "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. Fees paid to the Agent for
the fiscal years ended December 31, 1993, 1992 and 1991 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 Fund60,000 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, 1993, 1992 and
1991 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, 1993, its share was
$184,976. The officers are paid by the Manager or its affiliates.
Shareholdings
As of March 1, 1994, 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, 1993, 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, 1993. 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, 1993. 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, 1993, 1992 and 1991.
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 1,162,935 1,360,719
United Accumulative Fund 5,230,858 4,015,461 4,976,207
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 .................. 867,643,246 1,489,827
United Accumulative Fund ............ 2,473,177,835 3,972,853
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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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 81.
<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
