<PAGE>
File No. 811-2552
File No. 2-21867
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ____
Post-Effective Amendment No. 117
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 X
Amendment No. 24
UNITED FUNDS, INC.
- ---------------------------------------------------------------------
(Exact Name as Specified in Charter)
6300 Lamar Avenue, Shawnee Mission, Kansas 66202-4200
- ---------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code (913) 236-2000
- ---------------------------------------------------------------------
Sharon K. Pappas, P. O. Box 29217, Shawnee Mission, Kansas 66201-9217
- ---------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
_____ immediately upon filing pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (b)
__X__ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
_____ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment
==================================================================
DECLARATION REQUIRED BY RULE 24f-2 (a) (1)
The issuer has registered an indefinite amount of its securities under the
Securities Act of 1933 pursuant to Rule 24f-2(a)(1). Notice for the
Registrant's fiscal year ended December 31, 1994 was filed on February 21, 1995.
<PAGE>
UNITED FUNDS, INC.
==================
Cross Reference Sheet
=====================
Part A of
Form N-1A
Item No. Prospectus Caption
- --------- ------------------
1 ........................ Cover Page
2(a) ..................... Expenses
(b) ..................... An Overview of the Funds
(c) ..................... An Overview of the Funds
3(a) ..................... Financial Highlights
(b) ..................... Financial Highlights
(c) ..................... Performance
(d)...................... Financial Highlights
4(a) ..................... About the Investment Principles of the Funds;
About the Management and Expenses of the Funds
(b) ..................... About the Investment Principles of the Funds;
About the Management and Expenses of the Funds
(c) ..................... About the Management and Expenses of the Funds
5(a) ..................... About the Management and Expenses of the Funds
(b)...................... Inside Back Cover; About the Management and
Expenses of the Funds
(c) ..................... Inside Back Cover; About the Management and
Expenses of the Funds
(d) ..................... Inside Back Cover; About the Management and
Expenses of the Funds
(e) ..................... Inside Back Cover; About the Management and
Expenses of the Funds
(f) ..................... About the Management and Expenses of the Funds
(g)(i)................... *
(g)(ii).................. About the Management and Expenses of the Funds
5A........................ **
6(a) ..................... About the Management and Expenses of the Funds
(b) ..................... *
(c) ..................... *
(d) ..................... *
(e) ..................... About the Management and Expenses of the Funds
(f)...................... About Your Account
(g) ..................... About Your Account
7(a) ..................... Inside Back Cover; About the Management and
Expenses of the Funds
(b) ..................... About Your Account
(c) ..................... About Your Account
(d) ..................... About Your Account
(e) ..................... *
(f) ..................... About Your Account
8(a) ..................... Redemption
(b) ..................... *
(c) ..................... *
(d) ..................... Redemption
9 ........................ *
Part B of
Form N-1A
Item No. SAI Caption
- --------- -----------
10(a) ..................... Cover Page
(b) ..................... *
11 ........................ Cover Page
12 ........................ *
13(a) ..................... Investment Objective and Policies
(b) ..................... Investment Objective and Policies
(c) ..................... Investment Objective and Policies
(d) ..................... Investment Objective and Policies
14(a) ..................... Directors and Officers
(b) ..................... Directors and Officers
(c) ..................... *
15(a) ..................... Directors and Officers
(b) ..................... Directors and Officers
(c) ..................... Directors and Officers
16(a)(i) .................. Investment Management and Other Services
(a)(ii) ................. Directors and Officers
(a)(iii) ................ Investment Management and Other Services
(b) ..................... Investment Management and Other Services
(c) ..................... *
(d) ..................... Investment Management and Other Services
(e) ..................... *
(f) ..................... Investment Management and Other Services
(g) ..................... *
(h) ..................... Investment Management and Other Services
(i) ..................... *
17(a) ..................... Portfolio Transactions and Brokerage
(b) ..................... *
(c) ..................... Portfolio Transactions and Brokerage
(d) ..................... *
(e) ..................... Portfolio Transactions and Brokerage
18(a) ..................... Other Information
(b) ..................... *
19(a) ..................... Purchase, Redemption and Pricing of Shares
(b) ..................... Purchase, Redemption and Pricing of Shares
(c) ..................... Purchase, Redemption and Pricing of Shares
20 ........................ Payments to Shareholders; Taxes
21(a) ..................... Investment Management and Other Services
(b) ..................... *
(c) ..................... *
22(a) ..................... *
(b)(i) .................. Performance Information
(b)(ii) ................. Performance Information
(b)(iii) ................ *
(b)(iv) ................. Performance Information
23 ........................ Financial Statements
- -------------------------------------------------------------------------
*Not Applicable or Negative Answer
**Contained in the Annual Report to Shareholders
<PAGE>
Please read this Prospectus before investing, and keep it on file for future
reference. It sets forth concisely the information about the Funds that you
ought to know before investing.
Additional information has been filed with the Securities and Exchange
Commission and is contained in a Statement of Additional Information ("SAI")
dated June 17, 1995. The SAI is available free upon request to the Funds or
Waddell & Reed, Inc., the Funds' underwriter, at the address or telephone number
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 "SECURITIES AND INVESTMENT PRACTICES AND ASSOCIATED RISKS" INCLUDED IN THIS
PROSPECTUS FOR A DISCUSSION OF THE RISKS ASSOCIATED WITH NON-INVESTMENT GRADE
SECURITIES.
<PAGE>
United Funds, Inc.
Class A Shares
United Funds, Inc. (the "Corporation") is a management investment company that
has four separate funds (the "Funds"), each of which is designed for investors
with different goals.
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 describes one class of shares -- Class A Shares -- of each of
the Funds.
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.
Prospectus
June 17, 1995
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
913-236-2000
Table of Contents
An Overview of the Funds ..................
Expenses ..................................
Financial Highlights.......................
Performance ...............................
Explanation of Terms..................
About Waddell & Reed ......................
About the Investment Principles of the Funds
Investment Goals and Principles.......
Securities and Investment Practices...
About Your Account.........................
Ways to Set Up Your Account...........
Buying Shares ........................
Minimum Investments ..................
Adding to Your Account ...............
Selling Shares .......................
Shareholder Services .................
Personal Service ................
Reports .........................
Exchanges .......................
Automatic Transactions...........
Dividends, Distributions, and Taxes
Distributions ...................
Taxes ...........................
About the Management and Expenses of the Funds
WRIMCO and Its Affiliates ............
Breakdown of Expenses ................
Management Fee ..................
Other Expenses ..................
<PAGE>
An Overview of the Funds
The Funds: This Prospectus describes the Class A shares of four separate series
(each a "Fund") of an open-end, management investment company. The shares of
each Fund outstanding as of the date of this Prospectus have been designated as
Class A shares. The shares of each Fund offered for sale to the public pursuant
to this Prospectus are Class A shares.
Each Fund has different goals and policies. Each of the Funds is a diversified
Fund.
Goals and Strategies:
United Bond Fund seeks a reasonable return with more emphasis on preservation of
capital. This Fund invests primarily in debt securities, including convertible
securities and debt securities with warrants attached.
United Income Fund seeks to maintain current income, subject to market
conditions. This Fund invests primarily in common stocks, or securities
convertible into common stocks, of companies that have the potential for capital
growth or that may be expected to resist market decline.
United Accumulative Fund seeks capital growth, with current income a secondary
goal. This Fund invests primarily in common stocks or securities convertible
into common stocks.
United Science and Technology Fund seeks long-term capital growth. This Fund
invests primarily in science and technology securities.
See "About the Investment Principles of the Funds" for further information.
Management: Waddell & Reed Investment Management Company ("WRIMCO") provides
investment advice to each of the Funds and manages each Fund's investments.
WRIMCO is a wholly-owned subsidiary of Waddell & Reed, Inc. WRIMCO, Waddell &
Reed, Inc. and its predecessors have provided investment management services to
registered investment companies since 1940. See "About the Management and
Expenses of the Funds" for further information about management fees.
Distributor: Waddell & Reed, Inc. acts as principal underwriter and distributor
of the shares of the Funds.
Purchases: You may buy Class A shares of the Fund through Waddell & Reed, Inc.
and its account representatives. The price to buy a Class A share of the Fund
is the net asset value of a Class A share plus a sales charge. See "About Your
Account" for information on how to purchase Class A shares.
Redemptions: You may redeem your shares at net asset value. When you sell your
shares, they may be worth more or less than what you paid for them. See "About
Your Account" for a description of redemption and reinvestment procedures.
Who May Want to Invest: The Funds of United Funds, Inc. offer a variety of
investment goals that are compatible with different investment decisions. You
should consider whether a Fund, or group of Funds, fits with your particular
investment objectives.
Risk Considerations: Because the Funds own different types of investments,
their performance will be affected by a variety of factors. The value of each
Fund's investments and the income generated will vary from day to day, generally
reflecting changes in interest rates, market conditions, and other company and
economic news. Performance will also depend on WRIMCO's skill in selecting
investments. See "Securities and Investment Practices" for information about
the risks associated with the Funds' respective investments.
<PAGE>
Expenses
United
United United United Science and
Bond Income AccumulativeTechnology
Fund Fund Fund Fund
Shareholder Transaction Expenses are charges you pay when you buy or sell Class
A shares of a Fund.
Maximum sales
load on purchases
(as a percentage
of offering price) 5.75% 5.75% 5.75% 5.75%
Maximum sales load
on reinvested
dividends None None None None
Deferred sales load None None None None
Redemption fees None None None None
Exchange fee None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.45% 0.57% 0.57% 0.62%
12b-1 Fees 0.10% 0.10% 0.09% 0.10%
Other expenses 0.18% 0.17% 0.15% 0.24%
Total Fund
operating
expenses 0.73% 0.84% 0.81% 0.96%
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return1 and (2) redemption at the end of each time period:
Fund 1 Year 3 years 5 years 10 years
United Bond Fund $65 $79 $ 96 $143
United Income Fund $66 $83 $101 $155
United Accumulative
Fund $65 $82 $100 $152
United Science and
Technology Fund $67 $86 $108 $169
The purpose of this table is to assist you in understanding the various costs
and expenses that a shareholder of the Class A shares of each 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. For a more complete discussion of certain expenses and fees, see
"Breakdown of Expenses."
1Use of an assumed annual return of 5% is for illustration purposes only and not
a representation of a Fund's future performance, which may be greater or
lesser.
<PAGE>
Financial Highlights
United Bond Fund
(Audited)
For a Class A share outstanding throughout each period.1
The following information has been audited by Price Waterhouse LLP,
independent accountants, and should be read in conjunction with the financial
statements and notes thereto, together with the report of Price Waterhouse LLP,
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value,
beginning of
period ............ $6.39 $6.31 $6.32 $5.80 $6.07 $6.03 $6.11 $6.42 $6.09 $5.44
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment
income .......... .39 .41 .45 .47 .50 .55 .54 .56 .55 .61
Net realized and
unrealized gain
(loss) on
investments ..... (0.75) .41 .00 .56 (0.26) .07 (0.02) (0.28) .34 .66
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ........ (0.36) .82 .45 1.03 .24 .62 .52 .28 .89 1.27
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income .......... (0.39) (0.41) (0.46) (0.47) (0.50) (0.56) (0.54) (0.55) (0.56) (0.62)
Distributions from
capital gains ... (0.02) (0.33) (0.00) (0.04) (0.01) (0.02) (0.06) (0.04) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions . (0.41) (0.74) (0.46) (0.51) (0.51) (0.58) (0.60) (0.59) (0.56) (0.62)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ..... $5.62 $6.39 $6.31 $6.32 $5.80 $6.07 $6.03 $6.11 $6.42 $6.09
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return* ....... -5.76% 13.19% 7.50% 18.78% 4.24% 10.61% 8.99% 4.50% 15.23% 25.42%
Net assets, end of
period (000
omitted) ..........$517,836 $641,668 $589,946 $524,404 $439,487 $403,010 $335,337 $319,273 $339,544 $338,586
Ratio of expenses to
average net assets 0.72% 0.65% 0.64% 0.65% 0.67% 0.64% 0.65% 0.64% 0.64% 0.67%
Ratio of net investment
income to average
net assets ........ 6.60% 6.14% 7.29% 7.96% 8.54% 8.97% 9.00% 8.83% 8.82% 10.90%
Portfolio turnover
rate .............. 127.11% 175.39% 115.17% 318.76% 294.66% 353.57% 179.07% 232.65% 252.49% 270.71%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
_______________________
1On June 17, 1995, the Fund began offering Class Y shares to the public. Fund
shares outstanding prior to that date were designated Class A shares.
</TABLE>
<PAGE>
Financial Highlights
United Income Fund
(Audited)
For a Class A share outstanding throughout each period.1/
The following information has been audited by Price Waterhouse LLP,
independent accountants, and should be read in conjunction with the financial
statements and notes thereto, together with the report of Price Waterhouse LLP,
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value,
beginning of
period ............ $24.77 $22.05 $20.44 $16.46 $18.69 $16.76 $15.08 $17.03 $16.20 $13.11
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income .36 .40 .46 .51 .61 .65 .60 .72 .48 .58
Net realized and
unrealized gain
(loss) on
investments ..... (0.80) 3.11 1.96 4.29 (1.61) 3.89 2.35 .59 3.12 3.64
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ........ (0.44) 3.51 2.42 4.80 (1.00) 4.54 2.95 1.31 3.60 4.22
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment
income .......... (0.36) (0.40) (0.46) (0.53) (0.63) (0.65) (0.67) (0.66) (0.49) (0.61)
Distributions from
capital gains ... (0.63) (0.39) (0.35) (0.29) (0.60) (1.96) (0.60) (2.60) (2.28) (0.52)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.99) (0.79) (0.81) (0.82) (1.23) (2.61) (1.27) (3.26) (2.77) (1.13)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ..... $23.34 $24.77 $22.05 $20.44 $16.46 $18.69 $16.76 $15.08 $17.03 $16.20
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return* ....... -1.82% 16.05% 11.96% 29.64% -5.45% 27.49% 19.83% 7.17% 22.11% 34.00%
Net assets, end of
period (000
omitted) ........$3,144,904 $3,060,073 $2,537,161 $2,150,986 $1,578,543 $1,550,387 $1,149,934 $964,521 $836,594 $675,314
Ratio of expenses to
average net assets 0.74% 0.66% 0.65% 0.66% 0.68% 0.64% 0.67% 0.63% 0.62% 0.66%
Ratio of net investment
income to average
net assets ........ 1.45% 1.70% 2.19% 2.71% 3.44% 3.41% 3.65% 3.99% 2.70% 4.09%
Portfolio turnover
rate .............. 18.54% 21.70% 19.25% 24.68% 30.94% 60.77% 48.64% 58.46% 29.90% 37.75%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
____________________________
1On June 17, 1995, the Fund began offering Class Y shares to the public. Fund
shares outstanding prior to that date were designated Class A shares.
</TABLE>
<PAGE>
Financial Highlights
United Accumulative Fund
(Audited)
For a Class A share outstanding throughout each period.1/
The following information has been audited by Price Waterhouse LLP,
independent accountants, and should be read in conjunction with the financial
statements and notes thereto, together with the report of Price Waterhouse LLP,
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value,
beginning of
period .......... $7.19 $7.50 $7.15 $6.03 $7.12 $6.43 $5.75 $7.78 $8.73 $7.64
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income .13 .11 .16 .19 .28 .31 .26 .25 .20 .34
Net realized and
unrealized gain
(loss) on
investments ... (0.13) .55 .85 1.22 (0.99) 1.43 .71 .19 1.28 1.51
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ...... 0.00 .66 1.01 1.41 (0.71) 1.74 .97 .44 1.48 1.85
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income ........ (0.13) (0.11) (0.16) (0.20) (0.29) (0.29) (0.29) (0.32) (0.25) (0.39)
Distributions from
capital gains . (0.48) (0.84) (0.50) (0.09) (0.09) (0.76) (0.00) (2.15) (2.18) (0.37)
Distribution in excess
of capital gains (0.00) (0.02) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (0.61) (0.97) (0.66) (0.29) (0.38) (1.05) (0.29) (2.47) (2.43) (0.76)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ... $6.58 $7.19 $7.50 $7.15 $6.03 $7.12 $6.43 $5.75 $7.78 $8.73
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return* ..... 0.04% 9.06% 14.20% 23.68% -10.17% 27.56% 17.05% 4.53% 18.05% 25.56%
Net assets, end of
period (000
omitted) ........ $967,020$1,033,774 $992,924 $904,635 $767,218 $877,109 $737,231 $696,359 $683,989 $604,337
Ratio of expenses to
average net assets 0.71% 0.65% 0.62% 0.63% 0.64% 0.60% 0.63% 0.59% 0.60% 0.63%
Ratio of net investment
income to average
net assets ...... 1.76% 1.34% 2.13% 2.79% 4.12% 4.19% 4.09% 3.17% 2.37% 4.18%
Portfolio turnover
rate ............ 205.40% 230.29% 194.41% 241.11% 288.64% 338.24% 245.42% 316.74% 260.69% 297.37%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
_______________________
1On June 17, 1995, the Fund began offering Class Y shares to the public. Fund
shares outstanding prior to that date were designated Class A shares.
</TABLE>
<PAGE>
Financial Highlights
United Science and Technology Fund
(Audited)
For a Class A share outstanding throughout each period.1/
The following information has been audited by Price Waterhouse LLP,
independent accountants, and should be read in conjunction with the financial
statements and notes thereto, together with the report of Price Waterhouse LLP,
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ......... $14.83 $14.64 $15.42 $10.27 $11.72 $9.91 $9.28 $10.00 $9.98 $9.23
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment
income (loss) 0.00 .01 .03 .10 .24 .20 .20 .19 .17 .32
Net realized and
unrealized gain
(loss) on
investments .. 1.40 1.21 (0.66) 5.90 (0.65) 2.50 .64 1.06 1.61 1.65
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ..... 1.40 1.22 (0.63) 6.00 (0.41) 2.70 .84 1.25 1.78 1.97
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income ....... 0.00 (0.01) (0.03) (0.10) (0.25) (0.19) (0.21) (0.25) (0.24) (0.42)
Distributions from
capital gains (1.02) (0.95) (0.12) (0.75) (0.79) (0.70) (0.00) (1.72) (1.52) (0.80)
Distribution in excess
of capital gains 0.00 (0.07) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (1.02) (1.03) (0.15) (0.85) (1.04) (0.89) (0.21) (1.97) (1.76) (1.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ... $15.21 $14.83 $14.64 $15.42 $10.27 $11.72 $9.91 $9.28 $10.00 $9.98
====== ====== ====== ====== ====== ====== ===== ===== ====== =====
Total return* ..... 9.78% 8.51% -4.03% 59.25% -3.51% 27.40% 9.05% 12.43% 18.19% 22.98%
Net assets, end of
period (000
omitted) ........ $496,503 $446,611 $428,806 $405,380 $239,077 $247,584 $214,693 $214,828 $180,890 $174,042
Ratio of expenses to
average net assets 0.96% 0.91% 0.87% 0.85% 0.90% 0.84% 0.89% 0.81% 0.83% 0.88%
Ratio of net investment
income to average
net assets ...... 0.00% 0.06% 0.24% 0.75% 2.06% 1.73% 1.94% 1.65% 1.62% 3.49%
Portfolio turnover
rate ............ 64.39% 68.38% 45.79% 59.24% 63.86% 83.19% 60.67% 85.35% 91.71% 146.41%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
________________________
</TABLE>
1On June 17, 1995, the Fund began offering Class Y shares to the public. Fund
shares outstanding prior to that date were designated Class A shares.
<PAGE>
Performance
Mutual fund performance is commonly measured as total return. The Funds may
also advertise their performance by showing yield and performance rankings.
Performance information is calculated and presented separately for each class of
Fund shares.
Explanation of Terms
Total Return is the overall change in value of an investment in a Fund over a
given period, assuming reinvestment of any dividends and distributions. A
cumulative total return reflects actual performance over a stated period of
time. An average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
returns smooth out variations in performance; they are not the same as actual
year-by-year results.
Yield refers to the income generated by an investment in the Fund over a given
period of time, expressed as an annual percentage rate. 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.
Performance Rankings are comparisons of a Fund's performance to the performance
of other selected mutual funds, selected recognized market indicators such as
the Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average, or
non-market indices or averages of mutual fund industry groups. A Fund may quote
its performance rankings and/or other information as published by recognized
independent mutual fund statistical services or by publications of general
interest. In connection with a ranking, the Fund may provide additional
information, such as the particular category to which it relates, the number of
funds in the category, the criteria upon which the ranking is based, and the
effect of sales charges, fee waivers and/or expense reimbursements.
All performance information that each 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 a Fund's
shares when redeemed may be more or less than their original cost.
Each Fund's recent performance and holdings will be detailed twice a year in
that Fund's annual and semiannual reports, which are sent to all Fund
shareholders.
About Waddell & Reed
Since 1937, Waddell & Reed has been helping people make the most of their
financial future by helping them take advantage of various financial services.
Today, Waddell & Reed has over 2500 account representatives located throughout
the United States. Your primary contact in your dealings with Waddell & Reed
will be your local account representative. However, the Waddell & Reed
shareholder services department which is part of the Waddell & Reed headquarters
operations in Overland Park, Kansas is available to assist you and your Waddell
& Reed account representative. You may speak with a customer service
representative by calling 913-236-2000.
About the Investment Principles of the Funds
Investment Goals and Principles
The goal of each Fund and the type of securities in which each Fund may invest
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.
United Bond Fund. The goal of United Bond Fund is a reasonable return with more
emphasis on preservation of capital. The Fund seeks to achieve this goal by
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, WRIMCO considers yield and relative safety, and in the
case of convertible securities, the possibility of capital growth.
The Fund may purchase securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities ("U.S. Government Securities"). The Fund will
invest in U.S. Government Securities that are not backed by the full faith and
credit of the United States only when WRIMCO 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").
United Income Fund. The goal of United Income Fund is the maintenance of
current income, subject to market conditions. The Fund seeks to achieve this
goal by investing in common stocks, or securities convertible into common
stocks, of companies that have the potential for capital growth or that may be
expected to resist market decline. When investment conditions are such that
stocks with high yields are less attractive than other common stocks, the Fund
may hold lower yielding common stocks 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 WRIMCO believes a temporary defensive position is desirable, the
Fund may seek to achieve its goal by investing up to all of its assets in debt
securities and preferred stocks.
United Accumulative Fund. The goal of United Accumulative Fund is capital
growth, with current income a secondary goal. The Fund seeks to achieve these
goals by investing in common stocks or securities convertible into common
stocks. As a temporary defensive measure at times when WRIMCO believes that
such securities do not offer a good investment opportunity, the Fund may hold up
to all of its assets in cash or fixed income securities (i.e., debt securities
or preferred stock) or in common stocks that WRIMCO chooses because they are
less volatile rather than for their growth potential.
United Science and Technology Fund. The goal of United Science and Technology
Fund is long-term capital growth. The Fund seeks to achieve this goal by
concentrating its investments in science and technology securities. Science and
technology securities are securities of companies whose products, processes or
services, in WRIMCO's opinion, 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. Certain risks are associated with science and technology
securities, including the impact of governmental regulation and rapid
obsolescence of issuers' products or processes.
Under normal economic and market conditions, United Science and Technology 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. The Fund may own common stock, preferred
stock, debt securities and convertible securities. At times, as a temporary
defensive measure, the Fund may invest up to all of its assets in U.S.
Government Securities or other debt securities.
Securities and Investment Practices
The following pages contain more detailed information about types of instruments
in which the Funds may invest, and strategies WRIMCO may employ in pursuit of
the Funds' investment goals. A summary of risks associated with these
instrument types and investment practices is included as well.
WRIMCO might not buy all of these instruments or use all of these techniques to
the full extent permitted by a Fund's investment policies and restrictions
unless it believes that doing so will help a Fund achieve its goal. As a
shareholder, you will receive annual and semiannual reports detailing your
Fund's holdings.
Certain of the investment policies and restrictions of each Fund are also stated
below. A fundamental policy of a Fund may not be changed without the approval
of the shareholders of that Fund. Operating policies may be changed by the
Board of Directors without the approval of the affected shareholders. The type
of securities in which a Fund may invest is a fundamental policy; unless
otherwise indicated, the types of other assets in which a Fund may invest and
other policies are operating policies.
Policies and limitations are typically considered at the time of purchase; the
sale of instruments is usually not required in the event of a subsequent change
in circumstances.
Please see the SAI for further information concerning the following instruments
and associated risks and the Funds' investment policies and restrictions.
Equity Securities. Equity securities represent an ownership interest in an
issuer. This ownership interest often gives an investor the right to vote on
measures affecting the issuer's organization and operations. Although common
stocks and other equity securities have a history of long-term growth in value,
their prices tend to fluctuate in the short term, particularly those of smaller
companies. The equity securities in which a Fund invests may include preferred
stock that converts to common stock either automatically or after a specified
period of time or at the option of the issuer.
Debt Securities. Bonds and other debt instruments are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values.
Debt securities have varying levels of sensitivity to changes in interest rates
and varying degrees of quality. Longer-term bonds are generally more sensitive
to interest rate changes than shorter-term bonds.
U.S. Government Securities are high-quality instruments issued or guaranteed as
to principal or interest by the U.S. Treasury or by an agency or instrumentality
of the U.S. Government. Not all U.S. Government Securities are backed by the
full faith and credit of the United States. Some are backed by the right of the
issuer to borrow from the U.S. Treasury; others are backed by discretionary
authority of the U.S. Government to purchase the agencies' obligations; while
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.
Lower-quality debt securities (commonly called "junk bonds") are considered to
be speculative and involve greater risk of default or price changes due to
changes in the issuer's creditworthiness. The market prices of these securities
may fluctuate more than high-quality securities and may decline significantly in
periods of general economic difficulty. While the market for high-yield, high-
risk corporate debt securities has been in existence for many years and has
weathered previous economic downturns, the 1980s brought a dramatic increase in
the use of such securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of the
future performance of the high-yield, high-risk bond market, especially during
periods of economic recession. The market for lower-rated debt securities may
be thinner and less active than that for higher-rated debt securities, which can
adversely affect the prices at which the former are sold. Adverse publicity and
changing investor perceptions may decrease the values and liquidity of lower-
rated debt securities, especially in a thinly-traded market. Valuation becomes
more difficult and judgment plays a greater role in valuing lower-rated debt
securities than with respect to securities for which more external sources of
quotations and last sale information are available. Since the risk of default
is higher for lower-rated debt securities, WRIMCO's research and credit analysis
are an especially important part of managing securities of this type held by a
Fund. WRIMCO continuously monitors the issuers of lower-rated debt securities
in a Fund's portfolio in an attempt to determine if the issuers will have
sufficient cash flow and profits to meet required principal and interest
payments. A Fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to be in
the best interest of the Fund's shareholders.
Zero coupon bonds do not make interest payments; instead, they are sold at a
deep discount from their face value and are redeemed at face value when they
mature. Because zero coupon bonds do not pay current income, their prices can
be very volatile when interest rates change. In calculating its dividends, a
Fund takes into account as income a portion of the difference between a zero
coupon bond's purchase price and its face value.
Subject to its investment restrictions, a Fund may invest in debt securities
rated in any rating category of the established rating services. In addition, a
Fund will treat unrated securities judged by WRIMCO to be of equivalent quality
to a rated security to be equivalent to securities having that rating. The
rating categories of Standard & Poor's Ratings Group ("S&P") and Moody's
Investors Service, Inc. ("MIS") are described in Appendix A. Credit ratings for
individual securities may change from time to time, and a Fund may retain a
portfolio security whose rating has been changed.
Policies and Restrictions:
At least 65% of the total assets of United Bond Fund will be invested during
normal market conditions in bonds.
United Bond 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.
At least 65% of United Income Fund's total assets will be invested during normal
market conditions in income-producing securities.
It is anticipated that less than 20% of United Science and Technology Fund's
assets will be held in U.S. Government Securities.
United Income Fund, United Accumulative Fund, and United Science and Technology
Fund do not intend to invest in non-investment grade debt securities if as a
result of such investment more than 5% of that Fund's assets would consist of
such investments.
Debt Holdings, by Ratings. During the fiscal year ended December 31, 1994, 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:
Percentage of
Rated Assets of United
by S&P Bond Fund
- ------ ----------------
AAA 29.4%
AA 6.6
A 11.6
BBB 30.9
BB 11.1
B 2.7
Unrated 3.1
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.
Preferred Stock is also rated by S&P and MIS, as described in Appendix A. The
Funds may invest in preferred stock rated in any rating category by an
established rating service and unrated preferred stock judged by WRIMCO to be of
equivalent quality.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than those of
common stocks of the same or similar issuers, but lower yields than comparable
nonconvertible securities, (2) are less subject to fluctuation in value than the
underlying stock because they have fixed income characteristics, and (3) provide
the potential for capital appreciation if the market price of the underlying
common stock increases. Convertible securities are usually subordinated to
comparable-tier nonconvertible securities but rank senior to common stock in the
corporation's capital structure.
The value of a convertible security is a function of (1) its yield in comparison
with the yields of other securities of comparable maturity and quality that do
not have a conversion privilege and (2) its worth, at market value, if converted
into the underlying common stock. The value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value.
Foreign Securities and foreign currencies can involve significant risks in
addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies, and of dividends and interest
from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign securities markets
generally have less trading volume and less liquidity than U.S. markets, and
prices on some foreign markets can be highly volatile. Many foreign countries
lack uniform accounting and disclosure standards comparable to those applicable
to U.S. companies, and it may be more difficult to obtain reliable information
regarding an issuer's financial condition and operations. In addition, the
costs of foreign investing, including withholding taxes, brokerage commissions,
and custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal
rights in foreign countries.
Investing abroad also involves different political and economic risks. Foreign
investments may be affected by actions of foreign governments adverse to the
interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility
of default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that WRIMCO will be able to
anticipate these potential events or counter their effects.
The considerations noted above generally are intensified for investments in
developing countries. A developing country is a nation that, in WRIMCO's
opinion, is likely to experience long-term gross domestic product growth above
that expected to occur in the United States, the United Kingdom, France,
Germany, Italy, Japan and Canada. Developing countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
Certain foreign securities impose restrictions on transfer within the U.S. or to
U.S. persons. Although securities subject to transfer restrictions may be
marketable abroad, they may be less liquid than foreign securities of the same
class that are not subject to such restrictions.
Policies and Restrictions:
Each Fund may purchase an unlimited amount of foreign securities, but less than
5% of the combined total assets of all the Funds will consist of securities of
foreign governments. Not more than 20% of the net assets of each Fund will be
invested in foreign securities.
Options, Futures and Other Strategies. A Fund may use certain options to
attempt to enhance income or yield or may attempt to reduce the overall risk of
its investments by using certain options, futures contracts, and certain other
strategies described herein. The strategies described below may be used in an
attempt to manage certain risks of a Fund's investments that can affect
fluctuation in its net asset value. Gains and losses on investments in options
and futures contracts depend on WRIMCO's ability to predict correctly the
direction of stock prices, interest rates and other economic factors.
Options and futures transactions may increase portfolio turnover rates, which
results in correspondingly greater commission expenses and transactions costs
and may result in certain tax consequences.
A Fund's ability to use these strategies may be limited by market conditions,
regulatory limits and tax considerations. A Fund might not use any of these
strategies, and there can be no assurance that any strategy that is used will
succeed. The risks associated with such strategies are described below. Also
see the SAI for more information on these instruments and strategies and their
risk considerations.
Options. The Funds may engage in certain strategies involving options to
attempt to enhance a Fund's income or yield or to attempt to reduce the overall
risk of its investments. A call option gives the purchaser the right to buy,
and obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser the
right to sell, and obligates the writer to buy, the underlying investment at the
agreed upon exercise price during the option period. Purchasers of options pay
an amount, known as a premium, to the option writer in exchange for the right
under the option contract.
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 that 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 an index, subject to the call or the collateral
underlying the put until a closing purchase transaction can be entered into or
the option expires. Because index options are settled in cash, a Fund cannot
provide in advance for its potential settlement obligations on a call it has
written on an 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.
Policies and Restrictions:
United Bond Fund may buy and sell put and call options on debt securities
subject to certain limitations set forth in the SAI. Calls on securities that
are written by the Fund must be covered.
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.
United Income Fund, United Accumulative Fund, and United Science and Technology
Fund may, for non-speculative purposes, write and purchase listed options on
domestic stock indices that are not limited to stocks of any industry or group
of industries ("broadly-based stock indices").
Futures Contracts and Options on Futures Contracts. 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.
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 assumes a short futures position. If it has written a put
it assumes a long futures position. 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 long position if the option is a call and a
short position if the option is a put).
Since futures contracts and options thereon can replicate movements in the cash
markets for the securities in which the Fund invests without the large cash
investments required for dealing in such markets, they may subject the Fund to
greater and more volatile risks than might otherwise be the case. The principal
risks related to the use of such instruments are: imperfect correlation between
movements in the market price of the portfolio investments (held or intended)
and in the price of the futures contract or option; possible lack of a liquid
secondary market for closing out futures or options positions; the need for
additional portfolio management skills and techniques; and losses due to
unanticipated market price movements. 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 WRIMCO may still
not result in a successful transaction. WRIMCO 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.
Policies and Restrictions:
United Bond Fund may 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. 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 indices ("Stock Index Futures") and options on Debt Futures
and Stock Index Futures.
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 purposes of hedging not more than 10% of
their respective total assets.
Mortgage-Backed Securities may include pools of mortgages, such as
collateralized mortgage obligations and stripped mortgaged-backed securities.
The value of these securities may be significantly affected by changes in
interest rates, the market's perception of the issuers, and the creditworthiness
of the parties involved.
The yield characteristics of mortgage-backed securities differ from those of
traditional debt securities. Among the major differences are that interest and
principal payments are made more frequently on mortgage-backed securities and
that principal may be prepaid at any time because the underlying mortgage loans
generally may be prepaid at any time. As a result, if a 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 a
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 a 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 pass-through securities of Ginnie
Mae (but not Freddie Mac or Fannie Mae) 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 a Fund. It is possible that the
availability (i.e., liquidity) of these securities could be adversely affected
by actions of the U.S. Government to tighten the availability of its credit.
Each Fund may invest in mortgage-backed securities as long as WRIMCO determines
that it is consistent with the Fund's investment goal and policies.
Stripped Securities are the separate income or principal components of a debt
instrument. These involve risks that are similar to those of other debt
securities, although they may be more volatile. The prices of stripped
mortgage-backed securities may be particularly affected by changes in interest
rates. Each Fund may invest in stripped securities as long as WRIMCO determines
that it is consistent with the Fund's investment goal and policies.
Risks of Derivative Instruments. WRIMCO may use derivative instruments,
including securities with embedded derivatives, for hedging purposes to adjust
the risk characteristics of a Fund's portfolio of investments and may use some
of these instruments to adjust the return characteristics of a Fund's portfolio
of investments. If WRIMCO judges market conditions incorrectly or employs a
strategy that does not correlate well with a Fund's investments, these
techniques could result in a loss, regardless of whether the intent was to
reduce risk or increase return. These techniques may increase the volatility of
a Fund and may involve a small investment of cash relative to the magnitude of
the risk assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised or if there is not
a liquid secondary market to close out a position that a Fund has entered into.
New financial products and risk management techniques continue to be developed.
Each Fund may use these instruments and techniques to the extent consistent with
its investment goal and regulatory requirements applicable to investment
companies.
When-Issued and Delayed-Delivery Transactions are trading practices in which
payment and delivery for the securities take place at a future date. The market
value of a security could change during this period, which could affect a Fund's
yield.
When purchasing securities on a delayed-delivery basis, a Fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations. When a Fund has sold a security on a delayed-delivery basis, a
Fund does not participate in further gains or losses with respect to the
security. If the other party to a delayed-delivery transaction fails to deliver
or pay for the securities, a Fund could miss a favorable price or yield
opportunity, or could suffer a loss.
Repurchase Agreements. In a repurchase agreement, a Fund buys a security at one
price and simultaneously agrees to sell it back at a higher price. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.
Policies and Restrictions:
Each Fund may purchase securities subject to repurchase agreements 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.
Restricted and Illiquid Securities. Restricted securities are securities that
are subject to legal or contractual restrictions on resale. Restricted
securities may be illiquid due to restrictions on their resale.
Illiquid investments may be difficult to sell promptly at an acceptable price.
Difficulty in selling securities may result in a loss or may be costly to a
Fund.
Policies and Restrictions:
United Accumulative Fund and United Income Fund may purchase restricted
securities. United Income Fund does not intend to invest more than 10% of its
assets in restricted securities.
A Fund may not purchase a security if as a result more than 10% of its net
assets would consist of illiquid investments.
Diversification. Diversifying a Fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested in
any one issuer or, on a broader scale, in any one industry.
Policies and Restrictions:
As a fundamental policy, no Fund may invest in a security if, as a result, it
would own more than 10% of the outstanding voting securities of an issuer, or if
more than 5% of the Fund's total assets would be invested in securities of that
issuer.
As a fundamental policy, no Fund other than United Science and Technology Fund
may buy a security if, as a result, 25% or more of the Fund's total assets would
then be invested in securities of companies in any one industry.
Lending. Securities loans may be made on a short-term or long-term basis for
the purpose of increasing a Fund's income. This practice could result in a loss
or a delay in recovering a Fund's securities. Loans will be made only to
parties deemed by WRIMCO to be creditworthy.
Policies and Restrictions:
As a fundamental policy, a Fund will not lend more than 10% of its assets at any
one time.
Other Investment Companies. Each of the Funds may buy shares of other
investment companies that do not redeem their shares, subject to the conditions
stated in the SAI. As a shareholder in an investment company, the Fund would
bear its pro rata share of that investment company's expenses, which could
result in duplication of certain fees, including management and administrative
fees.
About Your Account
The different ways to set up (register) your account are listed below.
Ways to Set Up Your Account
- ----------------------------------------------------------
Individual or Joint Tenants
For your general investment needs
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
- ----------------------------------------------------------
Business or Organization
For investment needs of corporations, associations, partnerships, institutions,
or other groups
- ----------------------------------------------------------
Retirement
To shelter your retirement savings from taxes
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. In addition, contributions to these accounts may be
tax deductible.
_ Individual Retirement Accounts (IRAs) allow anyone of legal age and under 70
1/2 with earned income to invest up to $2,000 per tax year. The maximum is
$2,250 if the investor's spouse has less than $250 of earned income in the
taxable year.
_ Rollover IRAs retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
_ Simplified Employee Pension Plans (SEP - IRAs) provide small business owners
or those with self-employed income (and their eligible employees) with many
of the same advantages as a Keogh, but with fewer administrative
requirements.
_ Keogh Plans allow self-employed individuals to make tax-deductible
contributions for themselves up to 25% of their annual earned income, with a
maximum of $30,000 per year.
_ 401(k) Programs allow employees of corporations of all sizes to contribute a
percentage of their wages on a tax-deferred basis. These accounts need to be
established by the administrator or trustee of the plan.
_ 403(b) Custodial Accounts are available to employees of public school systems
or certain types of charitable organizations.
_ 457 Accounts allow employees of state and local governments and certain
charitable organizations to contribute a portion of their compensation on a
tax-deferred basis.
- ----------------------------------------------------------
Gifts or Transfers to a Minor (UGMA, UTMA)
To invest for a child's education or other future needs
These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying
Federal gift tax. Depending on state laws, you can set up a custodial account
under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors
Act (UTMA).
- ----------------------------------------------------------
Trust
For money being invested by a trust
The trust must be established before an account can be opened, or you may use a
trust form made available by Waddell & Reed. Contact your Waddell & Reed
account representative for the form.
- ----------------------------------------------------------
Buying Shares
You may buy shares of the Funds through Waddell & Reed, Inc. and its account
representatives. To open your account you must complete and sign an
application. Your Waddell & Reed, Inc. account representative can help you with
any questions you might have.
The price to buy a share of each Fund, called the offering price, is calculated
every business day.
The offering price of a Class A share (price to buy one Class A share) is each
Fund's Class A net asset value ("NAV") plus the sales charge shown in the table
below.
Sales
Sales Charge
Charge as
as Approx.
Percent Percent
of of
Size of Offering Amount
Purchase Price 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
A Fund's Class A NAV is the value of a single Class A share. The Class A NAV is
computed by adding with respect to that class the value of a Fund's investments,
cash, and other assets, subtracting its liabilities, and then dividing the
result by the number of Class A shares outstanding.
The securities in each Fund's portfolio that are listed or traded on an exchange
are valued primarily using market quotations or, if market quotations are not
available, at their fair value in a manner determined in good faith by or at the
direction of the Board of Directors. Bonds are generally valued according to
prices quoted by a dealer in bonds that 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 by or at the direction of the Board
of Directors.
A Fund is open for business each day the New York Stock Exchange ("NYSE") is
open. The Funds normally calculate their net asset values as of the later of
the close of business of the NYSE, normally 4 p.m. Eastern time, or the close of
the regular session of any other securities or commodities exchange on which an
option or future held by a Fund is traded.
When you place an order to buy shares, your order will be processed at the next
offering price calculated after your order is received and accepted. Note the
following:
. Orders are accepted only at the home office of Waddell & Reed, Inc.
. All of your purchases must be made in U.S. dollars.
. If you buy shares by check, and then sell those shares by any method other
than by exchange to another Fund in the United Group, the payment may be
delayed for up to ten days to ensure that your previous investment has
cleared.
When you sign your account application, you will be asked to certify that your
Social Security or taxpayer identification number is correct and that you are
not subject to backup withholding for failing to report income to the IRS.
Waddell & Reed, Inc. reserves the right to reject any purchase orders, including
purchases by exchange, and it and the Funds reserve the right to discontinue
offering Fund shares for purchase.
Lower sales charges are available by combining additional purchases of shares of
a corresponding class of any of the funds in the United Group, to the extent
otherwise permitted, 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 Class A shares already held
("rights of accumulation") and by grouping all purchases of Class A shares made
during a thirteen-month period ("Statement of Intention"). Shares of a
corresponding class of another fund purchased through a "contractual plan" may
not be included unless the plan has been completed. Purchases by certain
related persons may be grouped. Additional information and applicable forms are
available from Waddell & Reed, Inc. account representatives.
Fund Class A shares may be purchased at net asset value by the Directors and
officers of the Corporation, employees of Waddell & Reed, Inc., employees of
their affiliates, account representatives of Waddell & Reed, Inc. and the
spouse, children, parents, children's spouses and spouse's parents of each such
Director, officer, employee and account representative. Purchases of Class A
shares in certain retirement plans and certain trusts for these persons may also
be made at net asset value. Purchases of Class A shares in a 401(k) plan having
100 or more eligible employees and purchases in a 457 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.
Minimum Investments
To Open an Account $500
For certain exchanges$100
For certain retirement accounts and accounts opened through Automatic Investment
Service $50
For certain retirement accounts and accounts opened through payroll deductions
for or by employees of WRIMCO, Waddell & Reed, Inc. and their affiliates $25
To Add to an Account
For certain exchanges$100
For Automatic Investment Service $25
Adding to Your Account
Subject to the minimums described under "Minimum Investments," you can make
additional investments of any amount at any time.
To add to your account, make your check payable to Waddell & Reed, Inc. Mail
the check along with:
. the detachable form that accompanies the confirmation of a prior purchase by
you or your year-to-date statement, or
. a letter showing your account number, the account registration, and stating
the Fund whose shares you wish to purchase.
Mail to Waddell & Reed, Inc. at the address printed on your confirmation or
year-to-date statement.
Selling Shares
You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares.
The redemption price (price to sell one share) is the Fund's Class A NAV.
To sell shares, your request must be made in writing.
Complete an Account Service Request form, available from your Waddell & Reed,
Inc. account representative, or write a "letter of instruction" with:
. the name on the account registration,
. the Fund's name,
. the Fund account number,
. the dollar amount or number of shares to be redeemed, and
. any other applicable requirements listed in the table on the next page.
Deliver the form or your letter to your Waddell & Reed account representative,
or mail it to:
Waddell & Reed, Inc.
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
Unless otherwise instructed, Waddell & Reed, Inc. will send a check to the
address on the account.
Special Requirements for Selling Shares
Account Type Special Requirements
Individual or The written instructions must
Joint Tenant be signed by all persons
required to sign for
transactions, exactly as their
names appear on the account.
Sole The written instructions must
Proprietorship be signed by the individual
owner of the business.
UGMA, UTMA The custodian must sign the
written instructions
indicating capacity as
custodian.
Retirement The written instructions must
Account be signed by a properly
authorized person.
Trust The trustee must sign the
written instructions
indicating capacity as
trustee. If the trustee's
name is not in the account
registration, provide a
currently certified copy of
the trust document.
Business or At least one person authorized
Organization by corporate resolution to act
on the account must sign the
written instructions.
Conservator, The written instructions must
Guardian or be signed by the person
Other properly authorized by court
Fiduciary order to act in the particular
fiduciary capacity.
When you place an order to sell shares, your shares will be sold at the next NAV
calculated after your request is received and accepted. Note the following:
. Written requests for redemption 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.
. If you recently purchased the shares by check, a Fund may delay payment of
redemption proceeds. You may arrange for the bank upon which the purchase
check was drawn to provide to the Fund telephone or written assurance,
satisfactory to the Fund, 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 the date the Fund is able to
verify that your purchase check has cleared and been honored.
. Redemptions may be suspended or payment dates postponed on days when the NYSE
is closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the Securities and Exchange Commission.
. Payment is normally made in cash, although under extraordinary conditions
redemptions may be made in portfolio securities.
Each Fund reserves the right to require a signature guarantee on certain
redemption requests. This requirement is designed to protect you and Waddell &
Reed, Inc. from fraud. A Fund may require a signature guarantee in certain
situations such as:
. the request for redemption is made by a corporation, partnership or
fiduciary,
. the request for redemption is made by someone other than the owner of record,
or
. the check is being made payable to someone other than the owner of record.
Each Fund will accept a signature guarantee from 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 Fund's transfer
agent. A notary public cannot provide a signature guarantee.
You may reinvest in a Fund without charge all or part of the amount you redeemed
by sending to the Fund the amount you want to reinvest. The reinvested amounts
must be received by the Fund within thirty days after the date of your
redemption. You may do this only once as to Class A shares of the Fund.
Under the terms of the 401(k) prototype 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 a corresponding class of
any of the funds in the United Group in which the plan may invest.
Shareholder Services
Waddell & Reed provides a variety of services to help you manage your account.
Personal Service
Your local Waddell & Reed account representative is available to provide
personal service. Additionally, the Waddell & Reed Customer Services staff is
available to respond promptly to your inquiries and requests.
Reports
Statements and reports sent to you include the following:
. confirmation statements (after every purchase, exchange, transfer or
redemption)
. year-to-date statements (quarterly)
. annual and semiannual reports (every six months)
To reduce expenses, only one copy of most annual and semiannual reports of each
Fund will be mailed to your household, even if you have more than one account
with a Fund. Call 913-236-2000 if you need copies of annual or semiannual
reports or historical account information.
Exchanges
You may sell your Class A shares and buy corresponding shares of other funds in
the United Group without payment of an additional sales charge. You may
exchange only into funds that are legally registered for sale in your state of
residence. Note that exchanges out of the Fund may have tax consequences for
you. Before exchanging into a fund, read its prospectus.
The Funds reserve the right to terminate or modify these exchange privileges at
any time, upon notice in certain instances.
Automatic Transactions
Flexible withdrawal service lets you set up monthly, quarterly, semiannual or
annual redemptions from your account.
Regular Investment Plans allow you to transfer money into your Fund account, or
between Fund accounts, automatically. While regular investment plans do not
guarantee a profit and will not protect you against loss in a declining market,
they can be an excellent way to invest for retirement, a home, educational
expenses, and other long-term financial goals.
Certain restrictions and fees imposed by the plan custodian may also apply for
retirement accounts. Speak with your Waddell & Reed account representative for
more information.
Regular Investment Plans
Automatic Investment Service
To move money from your bank account to an existing Fund account
Minimum Frequency
$25 Monthly
Funds Plus Service
To move money from United Cash Management, Inc. to a Fund whether in the same or
a different account
Minimum Frequency
$100 Monthly
Dividends, Distributions, and Taxes
Distributions
The Funds distribute substantially all of their net income and capital gains to
shareholders each year. Ordinarily, dividends are distributed from a Fund's net
investment income, which includes accrued interest, earned discount, dividends
and other income earned on portfolio assets less expenses, at the following
times: United Accumulative Fund and United Science and Technology Fund,
semiannually in June and December; United Income Fund, quarterly in March, June,
September and December; and United Bond Fund, monthly. Net capital gains (and
any net realized gains from foreign currency transactions) ordinarily are
distributed in December. Each Fund may make additional distributions if
necessary to avoid Federal income or excise taxes on undistributed income and
capital gains.
Distribution Options.
When you open an account, specify on your application how you want to receive
your distributions. Each Fund offers three options:
1. Share Payment Option. Your dividend and capital gains distributions will be
automatically paid in additional Class A shares of the Fund. If you do not
indicate a choice on your application, you will be assigned this option.
2. Income-Earned Option. Your capital gains distributions will be
automatically paid in Class A shares, but you will be sent a check for each
dividend distribution.
3. Cash Option. You will be sent a check for your dividends and capital gains
distributions.
For retirement accounts, all distributions are automatically paid in Class A
shares.
Taxes
Each Fund, which is treated as a separate corporation for Federal income tax
purposes, has qualified and intends to continue to qualify for treatment as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, 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 (the excess of net long-term capital gain
over net short term capital loss) that are distributed to its shareholders.
There are tax requirements that all Funds must follow in order to avoid Federal
taxation. In its effort to adhere to these requirements, each Fund may have to
limit its investment activity in some types of instruments.
As with any investment, you should consider how your investment in a Fund will
be taxed. If your account is not a tax-deferred retirement account, you should
be aware of the following tax implications:
Taxes on distributions. Dividends from a Fund's investment company taxable
income are taxable to you as ordinary income whether received in cash or paid 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 you after each
calendar year-end as to the amounts of dividends and distributions paid (or
deemed paid) to you for that year.
A portion of the dividends paid by a Fund, whether received in cash or paid 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. 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.
Withholding. Each Fund is required to withhold 31% of all dividends,
distributions and redemption proceeds payable to individuals and certain other
noncorporate shareholders who do not furnish the Fund with a correct taxpayer
identification number. Withholding at that rate from dividends and
distributions also is required for such shareholders who otherwise are subject
to backup withholding.
Taxes on transactions. 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 Fund shares for shares of any other fund
in the United Group generally will have similar tax consequences. However,
special rules apply when you dispose of Fund shares through a redemption or
exchange within ninety days after your purchase thereof and subsequently
reacquire Fund shares or acquire shares of another fund in the United Group
without paying a sales charge due to the thirty-day reinvestment privilege or
exchange privilege. See "About Your Account." 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 Fund Class A shares within thirty days before or after
redeeming other Fund Class A shares at a loss, part or all 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 each Fund and its shareholders. There may be
other Federal, state or local tax considerations applicable to a particular
investor. You are urged to consult your own tax adviser.
About the Management and Expenses of the Funds
United Funds, Inc. is a mutual fund: an investment that pools shareholders'
money and invests it toward a specified goal. In technical terms, United Funds,
Inc. (the "Corporation") is an open-end management investment company organized
as a corporation under Maryland law on February 21, 1974, as successor to a
Delaware corporation which commenced operations in 1940.
The Corporation is governed by a Board of Directors, which has overall
responsibility for the management of its affairs. The majority of directors are
not affiliated with Waddell & Reed, Inc.
The Corporation has four series of shares (the "Funds"), each of which operates
as a separate mutual fund with separate assets and liabilities. Each Fund other
than United Science and Technology Fund is a diversified fund. Prior to June
17, 1995, each Fund offered only one class of its shares to the public. Shares
outstanding on that date were designated as Class A shares which are offered by
this Prospectus. In addition, each Fund offers Class Y shares through a
separate Prospectus. Class Y shares are not subject to a sales charge on
purchases and are not subject to redemption fees. Class Y shares are not
subject to a Rule 12b-1 fee. Additional information about Class Y shares may be
obtained by calling 913-236-2000 or by writing to Waddell & Reed, Inc. at the
address on the inside back cover of the Prospectus.
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 a meeting called by
the Board of Directors for such purpose.
Special meetings of shareholders may be called for any purpose upon receipt by a
Fund 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 of the Corporation are met. There will normally be no meeting of
the 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, ("1940 Act") 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 Fund's
outstanding shares.
Each share (regardless of Class) has one vote. All shares of a Fund (and
Classes thereof) vote together as a single Class, except as to any matter for
which a separate vote of any Fund or Class is required by the 1940 Act, and
except as to any matter which affects the interests of one or more particular
Fund or Classes, in which case only the shareholders of the affected Fund or
Classes are entitled to vote, each as a separate Class. Shares are fully paid
and nonassessable when bought.
WRIMCO and Its Affiliates
The Funds are managed by WRIMCO, subject to the authority of the Corporation's
Board of Directors. WRIMCO provides investment advice to each of the Funds and
supervises each Fund's investments. Waddell & Reed, Inc. and its predecessors
served as investment manager to each of the registered investment companies in
the United Group of Mutual Funds, except United Asset Strategy Fund, Inc., since
1940 or the inception of the company, 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 and assigned its professional staff for
investment management services to WRIMCO. WRIMCO has also served as investment
manager for Waddell & Reed Funds, Inc. since its inception in September 1992,
Torchmark Government Securities Fund, Inc. and Torchmark Insured Tax-Free Fund,
Inc. since each commenced operations in February 1993 and United Asset Strategy
Fund, Inc. since it commenced operations in March 1995.
James C. Cusser is primarily responsible for the day-to-day management of the
portfolio of United Bond Fund. Mr. Cusser has held his Fund responsibilities
since September 1992. He is Vice President of WRIMCO, Vice President of the
Fund and Vice President of other investment companies for which WRIMCO serves as
investment manager. Mr. Cusser has served as the portfolio manager for the Fund
and other investment companies managed by WRIMCO since August 1992 and has been
an employee of WRIMCO 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 has held his Fund
responsibilities since February 1979. He is Senior Vice President of WRIMCO and
Senior Vice President of Waddell & Reed Asset Management Company, an affiliate
of WRIMCO. He is Vice President of the Fund and Vice President of other
investment companies for which WRIMCO serves as investment manager. Mr.
Thompson has served as the portfolio manager for investment companies managed by
Waddell & Reed, Inc. and its successor, WRIMCO, since January 1976 and has been
an employee of Waddell & Reed, Inc. and its successor, WRIMCO, since March 1971.
Antonio Intagliata is primarily responsible for the day-to-day management of the
portfolio of United Accumulative Fund. Mr. Intagliata has held his Fund
responsibilities since November 1979. He is Senior Vice President of WRIMCO,
Vice President of the Fund and Vice President of other investment companies for
which WRIMCO serves as investment manager. Mr. Intagliata has served as the
portfolio manager for investment companies managed by Waddell & Reed, Inc. and
its successor, WRIMCO, since February 1979 and has been an employee of Waddell &
Reed, Inc. and its successor, WRIMCO, since June 1973.
Abel Garcia is primarily responsible for the day-to-day management of the
portfolio of United Science and Technology Fund. Mr. Garcia has held his Fund
responsibilities since January 1984. He is Vice President of WRIMCO, Vice
President of Waddell & Reed Asset Management Company, an affiliate of WRIMCO,
and Vice President of the Fund. Mr. Garcia has been an employee of Waddell &
Reed, Inc. and its successor, WRIMCO, since August 1983.
Other members of WRIMCO's investment management department provide input on
market outlook, economic conditions, investment research and other
considerations relating to a Fund's investments.
Waddell & Reed, Inc. serves as the Corporation's underwriter and as underwriter
for each of the other Funds in the United Group of Mutual Funds, and Waddell &
Reed Funds, Inc., and serves as the distributor for TMK/United Funds, Inc.
Waddell & Reed Services Company acts as transfer agent ("Shareholder Servicing
Agent") for the Corporation and processes the payments of dividends. 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.
WRIMCO and Waddell & Reed Services Company are subsidiaries of Waddell & Reed,
Inc. Waddell & Reed, Inc. is a direct subsidiary of Waddell & Reed Financial
Services, Inc., a holding company and an indirect subsidiary of United Investors
Management Company, a holding company, and Torchmark Corporation, a holding
company.
WRIMCO places transactions for the portfolio of each Fund and in doing so may
consider sales of shares of the Funds and other Funds it manages as a factor in
the selection of brokers to execute portfolio transactions.
Breakdown of Expenses
Like all mutual funds, the Funds pay fees related to their daily operations.
Expenses paid out of each Fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts.
Each Fund pays a management fee to WRIMCO for providing investment advice and
supervising its investments. Each Fund also pays other expenses, which are
explained below.
Management Fee
The management fee of each Fund is calculated by adding a group fee to a
specific fee. It is accrued and paid to WRIMCO daily.
The specific fee is 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, .15 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. The group fee is a pro rata participation based on the
relative net asset size of each Fund in the group. The group fee is computed
each day on the combined net asset values of all the funds in the United Group
at the annual rates shown in the following table.
Group Fee Rate
Annual
Group Net Group
Asset Level Fee Rate
(all dollars For Each
in millions) 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%
Growth in assets of the United Group assures a lower group fee rate.
Other Expenses
While the management fee is a significant component of each Fund's annual
operating costs, the Funds have other expenses as well.
Each Fund pays the Accounting Services Agent a monthly fee based on the average
net assets of the Fund for accounting services. With respect to its Class A
shares, each Fund pays the Shareholder Servicing Agent a monthly fee for each
Class A shareholder account, plus a transaction fee for each dividend or
distribution record date during the month.
Each Fund also pays other expenses, such as fees and expenses of certain
directors, audit and outside legal fees, costs of materials sent to
shareholders, 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 extraordinary expenses including
litigation and indemnification relative to litigation.
Each Fund has adopted a Service Plan pursuant to Rule 12b-1 of the 1940 Act with
respect to its Class A shares. Under the Plan, each Fund may pay monthly a fee
to Waddell & Reed, Inc. in an amount not to exceed .25% of the Fund's average
annual net assets of its Class A shares. The fee is to be paid to reimburse
Waddell & Reed, Inc. for amounts it expends in connection with the provision of
personal services to Fund Class A shareholders and/or maintenance of Class A
shareholder accounts. In particular, the Service Plan and a related Service
Agreement between each Fund 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 account
representatives, sales managers and/or other appropriate personnel in providing
personal services to Fund Class A shareholders and/or maintaining Class A
shareholder accounts; increasing services provided to Fund Class A shareholders
by office personnel located at field sales offices; engaging in other activities
useful in providing personal services to Fund Class A shareholders and/or the
maintenance of Class A shareholder accounts; and in compensating broker-dealers
who may regularly sell Fund Class A shares, and other third parties, for
providing Class A shareholder services and/or maintaining Class A shareholder
accounts.
A Fund cannot precisely predict what its portfolio turnover rate will be, but
each Fund may have a high portfolio turnover. United Accumulative Fund may
engage in short-term trading and have a corresponding high turnover rate. A
higher turnover will increase transaction and commission costs and could
generate taxable income or loss.
<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 in determining the securities eligible for
investment.
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Group. 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 an audit in connection with any
rating 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 based on 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 -- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated AA also qualifies as high quality debt. Capacity to pay
interest and repay principal is very strong, and debt rated AA differs 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 it normally exhibits adequate 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 as having
predominantly speculative characteristics 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 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 Standard & Poor's believes that such payments
will be made during such grace periods. The D rating 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 laws of
various states governing legal investments 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, Inc. 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.
Description of Preferred Stock Ratings
Standard & Poor's Ratings Group. A Standard & Poor's preferred stock rating is
an assessment of the capacity and willingness of an issuer to pay preferred
stock dividends and any applicable sinking fund obligations. A preferred stock
rating differs from a bond rating inasmuch as it is assigned to an equity issue,
which issue is intrinsically different from, and subordinated to, a debt issue.
Therefore, to reflect this difference, the preferred stock rating symbol will
normally not be higher than the debt rating symbol assigned to, or that would be
assigned to, the senior debt of the same issuer.
The preferred stock ratings are based on the following considerations:
1. Likelihood of payment -- capacity and willingness of the issuer to meet the
timely payment of preferred stock dividends and any applicable sinking fund
requirements in accordance with the terms of the obligation;
2. Nature of, and provisions of, the issue;
3. Relative position of the issue 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 that may be assigned by Standard & Poor's to a
preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA -- A preferred stock issue rated AA also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A -- An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB -- An issue rated BBB is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the 'A' category.
BB, B, CCC -- Preferred stock rated BB, B, and CCC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. BB indicates the lowest degree of speculation and CCC the
highest degree of speculation. While such issues will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
CC -- The rating CC is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
C -- A preferred stock rated C is a non-paying issue.
D -- A preferred stock rated D is a non-paying issue with the issuer in default
on debt instruments.
NR -- This indicates that no 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.
Plus (+) or minus (-) -- To provide more detailed indications of preferred stock
quality, the rating 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.
A preferred stock 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
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating 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 based on other circumstances.
Moody's Investors Service, Inc. Because of the fundamental differences between
preferred stocks and bonds, a variation of Moody's familiar bond rating symbols
is used in the quality ranking of preferred stock. The symbols are designed to
avoid comparison with bond quality in absolute terms. It should always be borne
in mind that preferred stock occupies a junior position to bonds within a
particular capital structure and that these securities are rated within the
universe of preferred stocks.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
Preferred stock rating symbols and their definitions are as follows:
aaa -- An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
aa -- An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is a reasonable assurance the earnings and
asset protection will remain relatively well-maintained in the foreseeable
future.
a -- An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classification, earnings and asset protection are, nevertheless, expected
to be maintained at adequate levels.
baa -- An issue which is rated baa is considered to be a medium-grade preferred
stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
ba -- An issue which is rated ba is considered to have speculative elements and
its future cannot be considered well assured. Earnings and asset protection may
be very moderate and not well safeguarded during adverse periods. Uncertainty
of position characterizes preferred stocks in this class.
b -- An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa -- An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future
status of payments.
ca -- An issue which is rated ca is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payments.
c -- This is the lowest rated class of preferred or preference stock. Issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
<PAGE>
United Funds, Inc.
Custodian Underwriter
UMB Bank, n.a. Waddell & Reed, Inc.
Kansas City, Missouri 6300 Lamar Avenue
P. O. Box 29217
Legal Counsel Shawnee Mission, Kansas
Kirkpatrick & Lockhart 66201-9217
1800 M Street, N. W. (913) 236-2000
Washington, D. C. 20036
Shareholder Servicing
Independent Accountants Agent
Price Waterhouse LLP Waddell & Reed
Kansas City, Missouri Services Company
6300 Lamar Avenue
Investment Manager P. O. Box 29217
Waddell & Reed Investment Shawnee Mission, Kansas
Management Company 66201-9217
6300 Lamar Avenue (913)236-2000
P. O. Box 29217
Shawnee Mission, Kansas Accounting Services
66201-9217 Agent
(913) 236-2000 Waddell & Reed Services
Company
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
(913) 236-2000
<PAGE>
United Funds, Inc.
PROSPECTUS
June 17, 1995
The United Group of Mutual Funds
United Asset Strategy Fund, Inc.
United Cash Management, Inc.
United Continental Income Fund, Inc.
United Funds, Inc.
United Bond Fund
United Income Fund
United Accumulative Fund
United Science and Technology Fund
United Gold & Government Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United New Concepts Fund, Inc.
United Retirement Shares, Inc.
United Vanguard Fund, Inc.
printed on recycled paper
NUP2000A(6-95)
<PAGE>
SUBJECT TO COMPLETION -- Information contained herein is subject to completion
or amendment. A registration statement relating to these securities has been
filed with the Securities and Exchange Commission but has not yet become
effective. These securities may not be sold nor may offers to buy be accepted
before the time the registration statement becomes effective. This Prospectus
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful before registration or qualification
under the securities laws of any such state.
Please read this Prospectus before investing, and keep it on file for future
reference. It sets forth concisely the information about the Funds that you
ought to know before investing.
Additional information has been filed with the Securities and Exchange
Commission and is contained in a Statement of Additional Information ("SAI")
dated June 17, 1995. The SAI is available free upon request to the Funds or
Waddell & Reed, Inc., the Funds' underwriter, at the address or telephone number
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 "SECURITIES AND INVESTMENT PRACTICES" INCLUDED IN THIS PROSPECTUS FOR A
DISCUSSION OF THE RISKS ASSOCIATED WITH NON-INVESTMENT GRADE SECURITIES.
United Funds, Inc.
Class Y Shares
United Funds, Inc. (the "Corporation") is a management investment company that
has four separate funds (the "Funds"), each of which is designed for investors
with different goals.
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 describes one class of shares -- Class Y Shares -- of each of
the Funds.
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.
Prospectus
June 17, 1995
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
Table of Contents
An Overview of the Funds ..................
Expenses ..................................
Financial Highlights.......................
Performance ...............................
Explanation of Terms..................
About Waddell & Reed ......................
About the Investment Principles of the Funds
Investment Goals and Principles.......
Securities and Investment Practices
About Your Account.........................
Buying Shares ........................
Minimum Investments ..................
Adding to Your Account ...............
Selling Shares .......................
Shareholder Services .................
Personal Service ................
Reports .........................
Exchanges .......................
Dividends, Distributions, and Taxes
Distributions ...................
Taxes ...........................
About the Management and Expenses of the Funds
WRIMCO and Its Affiliates ............
Breakdown of Expenses ................
Management Fee ..................
Other Expenses ..................
...........................................
<PAGE>
An Overview of the Funds
The Funds: This Prospectus describes the Class Y shares of four separate series
(each a "Fund") of an open-end, management investment company. Each Fund has
different goals and policies. Each of the Funds is a diversified Fund.
Goals and Strategies:
United Bond Fund seeks a reasonable return with more emphasis on preservation of
capital. This Fund invests primarily in debt securities, including convertible
securities and debt securities with warrants attached.
United Income Fund seeks to maintain current income, subject to market
conditions. This Fund invests primarily in common stocks, or in securities
convertible into common stocks, of companies that have the potential for capital
growth or that may be expected to resist market decline.
United Accumulative Fund seeks capital growth, with current income a secondary
goal. This Fund invests primarily in common stocks or securities convertible
into common stocks.
United Science and Technology Fund seeks long-term capital growth. This Fund
invests primarily in science and technology securities.
See "About the Investment Principles of the Funds" for further information.
Management: Waddell & Reed Investment Management Company ("WRIMCO") provides
investment advice to each of the Funds and manages each Fund's investments.
WRIMCO is a wholly-owned subsidiary of Waddell & Reed, Inc. WRIMCO, Waddell &
Reed, Inc. and its predecessors have provided investment management services to
registered investment companies since 1940. See "About the Management and
Expenses of the Funds" for further information about management fees.
Distributor: Waddell & Reed, Inc. acts as principal underwriter and distributor
of the shares of the Funds.
Purchases: You may buy Class Y shares of the Fund through Waddell & Reed, Inc.
and its account representatives. The price to buy a Class Y share of the Fund
is the net asset value of a Class Y share. There is no sales charge incurred
upon purchase of Class Y shares of a Fund. See "About Your Account" for
information on how to purchase Class Y shares.
Redemptions: You may redeem your shares at net asset value. When you sell your
shares, they may be worth more or less than what you paid for them. See "About
Your Account" for a description of redemption procedures.
Who May Want to Invest: The Funds of United Funds, Inc. offer a variety of
investment goals that are compatible with different investment decisions. You
should consider whether a Fund, or group of Funds, fits with your particular
investment objectives.
Risk Considerations: Because the Funds own different types of investments,
their performance will be affected by a variety of factors. The value of each
Fund's investments and the income generated will vary from day to day, generally
reflecting changes in interest rates, market conditions, and other company and
economic news. Performance will also depend on WRIMCO's skill in selecting
investments. See "Securities and Investment Practices" for information about
the risks associated with the Funds' respective investments.
<PAGE>
Expenses
United
United United United Science and
Bond Income AccumulativeTechnology
Fund Fund Fund Fund
Shareholder Transaction Expenses
are charges you pay when you buy or sell Class Y shares of a Fund.
Maximum sales
load on
purchases None None None None
Deferred sales
load None None None None
Redemption fees None None None None
Exchange fee None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)1/
Management
Fees 0.45% 0.57% 0.57% 0.62%
12b-1 Fees None None None None
Other expenses 0.19% 0.22% 0.19% 0.20%
Total Fund
operating
expenses 0.64% 0.79% 0.76% 0.82%
______________________________
1/ Expense ratios are based on the management fees and other Fund-level expenses
of the applicable Fund for the fiscal year ended December 31, 1994, and the
expenses attributable to a Fund's Class Y shares that are anticipated for the
current year. Actual expenses may be greater or lesser than those shown.
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual returns 1/ and (2) redemption at the end of each time period:
Fund 1 Year 3 Years
United Bond Fund $7 $20
United Income Fund $8 $25
United Accumulative
Fund $8 $24
United Science and
Technology Fund $8 $26
The purpose of this table is to assist you in understanding the various costs
and expenses that a shareholder of the Class Y shares of each 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. For a more complete discussion of certain expenses and fees, see
"Breakdown of Expenses."
_________________________________
1/ Use of an assumed annual return of 5% is for illustration purposes only and
not a representation of a Fund's future performance, which may be greater or
lesser.
<PAGE>
Financial Highlights
Financial Highlights for Class Y shares are not included because the Funds did
not offer Class Y shares during the fiscal year ended December 31, 1994.
<PAGE>
Performance
Mutual fund performance is commonly measured as total return. The Funds may
also advertise their performance by showing yield and performance rankings.
Performance information is calculated and presented separately for each class of
Fund shares.
Explanation of Terms
Total Return is the overall change in value of an investment in a Fund over a
given period, assuming reinvestment of any dividends and distributions. A
cumulative total return reflects actual performance over a stated period of
time. An average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
returns smooth out variations in performance; they are not the same as actual
year-by-year results.
Yield refers to the income generated by an investment in the Fund over a given
period of time, expressed as an annual percentage rate. 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.
Performance Rankings are comparisons of a Fund's performance to the performance
of other selected mutual funds, selected recognized market indicators such as
the Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average, or
non-market indices or averages of mutual fund industry groups. A Fund may quote
its performance rankings and/or other information as published by recognized
independent mutual fund statistical services or by publications of general
interest. In connection with a ranking, the Fund may provide additional
information, such as the particular category to which it relates, the number of
funds in the category, the criteria upon which the ranking is based, and the
effect of sales charges, fee waivers and/or expense reimbursements.
All performance information that each 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 a Fund's
shares when redeemed may be more or less than their original cost.
Each Fund's recent performance and holdings will be detailed twice a year in
that Fund's annual and semiannual reports, which are sent to all Fund
shareholders.
About Waddell & Reed
Since 1937, Waddell & Reed has been helping people make the most of their
financial future by helping them take advantage of various financial services.
Today, Waddell & Reed has over 2500 account representatives located throughout
the United States. Your primary contact in your dealings with Waddell & Reed
will be your local account representative. However, the Waddell & Reed
shareholder services department which is part of the Waddell & Reed headquarters
operations in Overland Park, Kansas is available to assist you and your Waddell
& Reed account representative. You may speak with a customer service
representative by calling 913-236-2000.
About the Investment Principles of the Funds
Investment Goals and Principles
The goal of each Fund and the type of securities in which each Fund may invest
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.
United Bond Fund. The goal of United Bond Fund is a reasonable return with more
emphasis on preservation of capital. The Fund seeks to achieve this goal by
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, WRIMCO considers yield and relative safety, and in the
case of convertible securities, the possibility of capital growth.
The Fund may purchase securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities ("U.S. Government Securities"). The Fund will
invest in U.S. Government Securities that are not backed by the full faith and
credit of the United States only when WRIMCO 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").
United Income Fund. The goal of United Income Fund is the maintenance of
current income, subject to market conditions. The Fund seeks to achieve this
goal by investing in common stocks, or securities convertible into common
stocks, of companies that have the potential for capital growth or that may be
expected to resist market decline. When investment conditions are such that
stocks with high yields are less attractive than other common stocks, the Fund
may hold lower yielding common stocks 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 WRIMCO believes a temporary defensive position is desirable, the
Fund may seek to achieve its goal by investing up to all of its assets in debt
securities and preferred stocks.
United Accumulative Fund. The goal of United Accumulative Fund is capital
growth, with current income a secondary goal. The Fund seeks to achieve these
goals by investing in common stocks or securities convertible into common
stocks. As a temporary defensive measure at times when WRIMCO believes that
such securities do not offer a good investment opportunity, the Fund may hold up
to all of its assets in cash or fixed income securities (i.e., debt securities
or preferred stock) or in common stocks that WRIMCO chooses because they are
less volatile rather than for their growth potential.
United Science and Technology Fund. The goal of United Science and Technology
Fund is long-term capital growth. The Fund seeks to achieve this goal by
concentrating its investments in science and technology securities. Science and
technology securities are securities of companies whose products, processes or
services, in WRIMCO's opinion, 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. Certain risks are associated with science and technology
securities, including the impact of governmental regulation and rapid
obsolescence of issuers' products or processes.
Under normal economic and market conditions, United Science and Technology 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. The Fund may own common stock, preferred
stock, debt securities and convertible securities. At times, as a temporary
defensive measure, the Fund may invest up to all of its assets in U.S.
Government Securities and other debt securities.
Securities and Investment Practices
The following pages contain more detailed information about types of instruments
in which the Funds may invest, and strategies WRIMCO may employ in pursuit of
the Funds' investment goals. A summary of risks associated with these
instrument types and investment practices is included as well.
WRIMCO might not buy all of these instruments or use all of these techniques to
the full extent permitted by a Fund's investment policies and restrictions
unless it believes that doing so will help a Fund achieve its goal. As a
shareholder, you will receive annual and semiannual reports detailing your
Fund's holdings.
Certain of the investment policies and restrictions of each Fund are also stated
below. A fundamental policy of a Fund may not be changed without the approval
of the shareholders of that Fund. Operating policies may be changed by the
Board of Directors without the approval of the affected shareholders. The type
of securities in which a Fund may invest is a fundamental policy; unless
otherwise indicated, the types of other assets in which a Fund may invest and
other policies are operating policies.
Policies and limitations are typically considered at the time of purchase; the
sale of instruments is usually not required in the event of a subsequent change
in circumstances.
Please see the SAI for further information concerning the following instruments
and associated risks and the Funds' investment policies and restrictions.
Equity Securities. Equity securities represent an ownership interest in an
issuer. This ownership interest often gives an investor the right to vote on
measures affecting the issuer's organization and operations. Although common
stocks and other equity securities have a history of long-term growth in value,
their prices tend to fluctuate in the short term, particularly those of smaller
companies. The equity securities in which a Fund invests may include preferred
stock that converts to common stock either automatically or after a specified
period of time or at the option of the issuer.
Debt Securities. Bonds and other debt instruments are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values.
Debt securities have varying levels of sensitivity to changes in interest rates
and varying degrees of quality. Longer-term bonds are generally more sensitive
to interest rate changes than shorter-term bonds.
U.S. Government Securities are high-quality instruments issued or guaranteed as
to principal or interest by the U.S. Treasury or by an agency or instrumentality
of the U.S. Government. Not all U.S. Government Securities are backed by the
full faith and credit of the United States. Some are backed by the right of the
issuer to borrow from the U.S. Treasury; others are backed by discretionary
authority of the U.S. Government to purchase the agencies' obligations; while
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.
Lower-quality debt securities (commonly called "junk bonds") are considered to
be speculative and involve greater risk of default or price changes due to
changes in the issuer's creditworthiness. The market prices of these securities
may fluctuate more than high-quality securities and may decline significantly in
periods of general economic difficulty. While the market for high-yield, high-
risk corporate debt securities has been in existence for many years and has
weathered previous economic downturns, the 1980s brought a dramatic increase in
the use of such securities to fund highly leveraged corporate acquisitions and
restructurings. Past experience may not provide an accurate indication of the
future performance of the high-yield, high-risk bond market, especially during
periods of economic recession. The market for lower-rated debt securities may
be thinner and less active than that for higher-rated debt securities, which can
adversely affect the prices at which the former are sold. Adverse publicity and
changing investor perceptions may decrease the values and liquidity of lower-
rated debt securities, especially in a thinly-traded market. Valuation becomes
more difficult and judgment plays a greater role in valuing lower-rated debt
securities than with respect to securities for which more external sources of
quotations and last sale information are available. Since the risk of default
is higher for lower-rated debt securities, WRIMCO's research and credit analysis
are an especially important part of managing securities of this type held by a
Fund. WRIMCO continuously monitors the issuers of lower-rated debt securities
in a Fund's portfolio in an attempt to determine if the issuers will have
sufficient cash flow and profits to meet required principal and interest
payments. A Fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to be in
the best interest of the Fund's shareholders.
Zero coupon bonds do not make interest payments; instead, they are sold at a
deep discount from their face value and are redeemed at face value when they
mature. Because zero coupon bonds do not pay current income, their prices can
be very volatile when interest rates change. In calculating its dividends, a
Fund takes into account as income a portion of the difference between a zero
coupon bond's purchase price and its face value.
Subject to its investment restrictions, a Fund may invest in debt securities
rated in any rating category of the established rating services. In addition, a
Fund will treat unrated securities judged by WRIMCO to be of equivalent quality
to a rated security to be equivalent to securities having that rating. The
rating categories of Standard & Poor's Ratings Group ("S&P") and Moody's
Investors Service, Inc. ("MIS") are described in Appendix A. Credit ratings for
individual securities may change from time to time, and a Fund may retain a
portfolio security whose rating has been changed.
Policies and Restrictions:
At least 65% of the total assets of United Bond Fund will be invested during
normal market conditions in bonds.
United Bond 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.
At least 65% of United Income Fund's total assets will be invested during normal
market conditions in income-producing securities.
It is anticipated that less than 20% of United Science and Technology Fund's
assets will be held in U.S. Government Securities.
United Income Fund, United Accumulative Fund, and United Science and Technology
Fund do not intend to invest in non-investment grade debt securities if as a
result of such investment more than 5% of that Fund's assets would consist of
such investments.
Debt Holdings, by Rating. During the fiscal year ended December 31, 1994, 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:
Percentage of
Rated Assets of United
by S&P Bond Fund
- ------ ----------------
AAA 29.4%
AA 6.6
A 11.6
BBB 30.9
BB 11.1
B 2.7
Unrated 3.1
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.
Preferred Stock is also rated by S&P and MIS, as described in Appendix A. The
Funds may invest in preferred stock rated in any rating category by an
established rating service and unrated preferred stock judged by WRIMCO to be of
equivalent quality.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally (1) have higher yields than those of
common stocks of the same or similar issuers, but lower yields than comparable
nonconvertible securities, (2) are less subject to fluctuation in value than the
underlying stock because they have fixed income characteristics, and (3) provide
the potential for capital appreciation if the market price of the underlying
common stock increases. Convertible securities are usually subordinated to
comparable-tier non-convertible securities but rank senior to common stock in
the corporation's capital structure.
The value of a convertible security is a function of (1) its yield in comparison
with the yields of other securities of comparable maturity and quality that do
not have a conversion privilege and (2) its worth, at market value, if converted
into the underlying common stock. The value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value.
Foreign Securities and foreign currencies can involve significant risks in
addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies, and of dividends and interest
from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign securities markets
generally have less trading volume and less liquidity than U.S. markets, and
prices on some foreign markets can be highly volatile. Many foreign countries
lack uniform accounting and disclosure standards comparable to those applicable
to U.S. companies, and it may be more difficult to obtain reliable information
regarding an issuer's financial condition and operations. In addition, the
costs of foreign investing, including withholding taxes, brokerage commissions,
and custodial costs, are generally higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal
rights in foreign countries.
Investing abroad also involves different political and economic risks. Foreign
investments may be affected by actions of foreign governments adverse to the
interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility
of default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that WRIMCO will be able to
anticipate these potential events or counter their effects.
The considerations noted above generally are intensified for investments in
developing countries. A developing country is a nation that, in WRIMCO's
opinion, is likely to experience long-term gross domestic product growth above
that expected to occur in the United States, the United Kingdom, France,
Germany, Italy, Japan and Canada. Developing countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets that trade a small number of securities.
Certain foreign securities impose restrictions on transfer within the U.S. or to
U.S. persons. Although securities subject to transfer restrictions may be
marketable abroad, they may be less liquid than foreign securities of the same
class that are not subject to such restrictions.
Policies and Restrictions:
Each Fund may purchase an unlimited amount of foreign securities, but less than
5% of the combined total assets of all the Funds will consist of securities of
foreign governments. Not more than 20% of the net assets of each Fund will be
invested in foreign securities.
Options, Futures and Other Strategies. A Fund may use certain options to
attempt to enhance income or yield or may attempt to reduce the overall risk of
its investments by using certain options, futures contracts, and certain other
strategies described herein. The strategies described below may be used in an
attempt to manage certain risks of a Fund's investments that can affect
fluctuation in its net asset value. Gains and losses on investments in options
and futures contracts depend on WRIMCO's ability to predict correctly the
direction of stock prices, interest rates and other economic factors.
Options and futures transactions may increase portfolio turnover rates, which
results in correspondingly greater commission expenses and transactions costs
and may result in certain tax consequences.
A Fund's ability to use these strategies may be limited by market conditions,
regulatory limits and tax considerations. A Fund might not use any of these
strategies, and there can be no assurance that any strategy that is used will
succeed. The risks associated with such strategies are described below. Also
see the SAI for more information on these instruments and strategies and their
risk considerations.
Options. The Funds may engage in certain strategies involving options to
attempt to enhance a Fund's income or yield or to attempt to reduce the overall
risk of its investments. A call option gives the purchaser the right to buy,
and obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser the
right to sell, and obligates the writer to buy, the underlying investment at the
agreed upon exercise price during the option period. Purchasers of options pay
an amount, known as a premium, to the option writer in exchange for the right
under the option contract.
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 that 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 an index, subject to the call or the collateral
underlying the put until a closing purchase transaction can be entered into or
the option expires. Because index options are settled in cash, a Fund cannot
provide in advance for its potential settlement obligations on a call it has
written on an 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.
Policies and Restrictions:
United Bond Fund may buy and sell put and call options on debt securities
subject to certain limitations set forth in the SAI. Calls on securities that
are written by the Fund must be covered.
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.
United Income Fund, United Accumulative Fund, and United Science and Technology
Fund may, for non-speculative purposes, write and purchase listed options on
domestic stock indices that are not limited to stocks of any industry or group
of industries ("broadly-based stock indices").
Futures Contracts and Options on Futures Contracts. 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.
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 assumes a short futures position. If it has written a put
it assumes a long futures position. 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 long position if the option is a call and a
short position if the option is a put).
Since futures contracts and options thereon can replicate movements in the cash
markets for the securities in which the Fund invests without the large cash
investments required for dealing in such markets, they may subject the Fund to
greater and more volatile risks than might otherwise be the case. The principal
risks related to the use of such instruments are: imperfect correlation between
movements in the market price of the portfolio investments (held or intended)
and in the price of the futures contract or option; possible lack of a liquid
secondary market for closing out futures or options positions; the need for
additional portfolio management skills and techniques; and losses due to
unanticipated market price movements. 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 WRIMCO may still
not result in a successful transaction. WRIMCO 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.
Policies and Restrictions:
United Bond Fund may 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. 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 indices ("Stock Index Futures") and options on Debt Futures
and Stock Index Futures.
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 purposes of hedging not more than 10% of
their respective total assets.
Mortgage-Backed Securities may include pools of mortgages, such as
collateralized mortgage obligations and stripped mortgaged-backed securities.
The value of these securities may be significantly affected by changes in
interest rates, the market's perception of the issuers, and the creditworthiness
of the parties involved.
The yield characteristics of mortgage-backed securities differ from those of
traditional debt securities. Among the major differences are that interest and
principal payments are made more frequently on mortgage-backed securities and
that principal may be prepaid at any time because the underlying mortgage loans
generally may be prepaid at any time. As a result, if a 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 a
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 a 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 pass-through securities of Ginnie
Mae (but not Freddie Mac or Fannie Mae) 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 a Fund. It is possible that the
availability (i.e., liquidity) of these securities could be adversely affected
by actions of the U.S. Government to tighten the availability of its credit.
Each Fund may invest in mortgage-backed securities as long as WRIMCO determines
that it is consistent with the Fund's investment goal and policies.
Stripped Securities are the separate income or principal components of a debt
instrument. These involve risks that are similar to those of other debt
securities, although they may be more volatile. The prices of stripped
mortgage-backed securities may be particularly affected by changes in interest
rates. Each Fund may invest in stripped securities as long as WRIMCO determines
that it is consistent with the Fund's investment goal and policies.
Risks of Derivative Instruments. WRIMCO may use derivative instruments,
including securities with embedded derivatives, for hedging purposes to adjust
the risk characteristics of a Fund's portfolio of investments and may use some
of these instruments to adjust the return characteristics of a Fund's portfolio
of investments. If WRIMCO judges market conditions incorrectly or employs a
strategy that does not correlate well with a Fund's investments, these
techniques could result in a loss, regardless of whether the intent was to
reduce risk or increase return. These techniques may increase the volatility of
a Fund and may involve a small investment of cash relative to the magnitude of
the risk assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised or if there is not
a liquid secondary market to close out a position that a Fund has entered into.
New financial products and risk management techniques continue to be developed.
Each Fund may use these instruments and techniques to the extent consistent with
its investment goal and regulatory requirements applicable to investment
companies.
When-Issued and Delayed-Delivery Transactions are trading practices in which
payment and delivery for the securities take place at a future date. The market
value of a security could change during this period, which could affect a Fund's
yield.
When purchasing securities on a delayed-delivery basis, a Fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations. When a Fund has sold a security on a delayed-delivery basis, a
Fund does not participate in further gains or losses with respect to the
security. If the other party to a delayed-delivery transaction fails to deliver
or pay for the securities, a Fund could miss a favorable price or yield
opportunity, or could suffer a loss.
Repurchase Agreements. In a repurchase agreement, a Fund buys a security at one
price and simultaneously agrees to sell it back at a higher price. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.
Policies and Restrictions:
Each Fund may purchase securities subject to repurchase agreements 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.
Restricted and Illiquid Securities. Restricted securities are securities that
are subject to legal or contractual restrictions on resale. Restricted
securities may be illiquid due to restrictions on their resale.
Illiquid investments may be difficult to sell promptly at an acceptable price.
Difficulty in selling securities may result in a loss or may be costly to a
Fund.
Policies and Restrictions:
United Accumulative Fund and United Income Fund may purchase restricted
securities. United Income Fund does not intend to invest more than 10% of its
assets in restricted securities.
A Fund may not purchase a security if as a result more than 10% of its net
assets would consist of illiquid investments.
Diversification. Diversifying a Fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested in
any one issuer or, on a broader scale, in any one industry.
Policies and Restrictions:
As a fundamental policy, no Fund may invest in a security if, as a result, it
would own more than 10% of the outstanding voting securities of an issuer, or if
more than 5% of the Fund's total assets would be invested in securities of that
issuer.
As a fundamental policy, no Fund other than United Science and Technology Fund
may buy a security if, as a result, 25% or more of the Fund's total assets would
then be invested in securities of companies in any one industry.
Lending. Securities loans may be made on a short-term or long-term basis for
the purpose of increasing a Fund's income. This practice could result in a loss
or a delay in recovering a Fund's securities. Loans will be made only to
parties deemed by WRIMCO to be creditworthy.
Policies and Restrictions:
As a fundamental policy, a Fund will not lend more than 10% of its assets at any
one time.
Other Investment Companies. Each of the Funds may buy shares of other
investment companies that do not redeem their shares, subject to the conditions
stated in the SAI. As a shareholder in an investment company, a Fund would bear
its pro rata share of that investment company's expenses, which could result in
duplication of certain fees, including management and administrative fees.
About Your Account
Class Y shares are designed for institutional investors. Class Y shares are
available for purchase by:
. participants of employee benefit plans established under section 403(b) or
section 457, or qualified under section 401, including 401(k) plans, of the
Internal Revenue Code of 1986, as amended, (the "Code"), when the plan has
100 or more eligible employees and holds the shares in an omnibus account
on the Fund's records;
. banks, trust institutions and investment fund administrators investing for
their own accounts or for the accounts of their customers where such
investments for customer accounts are held in an omnibus account on the
Fund's records;
. government entities or authorities and corporations whose investment within
the first twelve months after initial investment is $10 million or more;
and
. certain retirement plans and trusts for employees and account
representatives of Waddell & Reed, Inc. and its affiliates.
Buying Shares
You may buy shares of the Funds through Waddell & Reed, Inc. and its account
representatives. To open your account you must complete and sign an
application. Your Waddell & Reed, Inc. account representative can help you with
any questions you might have.
The price to buy a share of each Fund, called the offering price, is calculated
every business day.
The offering price of a Class Y share (price to buy one Class Y share) is each
Fund's Class Y net asset value ("NAV").
To purchase by wire, you must first fax or mail a completed application to
Waddell & Reed, Inc., P.O. Box 29217, Shawnee Mission, Kansas 66201-9217.
Before wiring funds, call Waddell & Reed, Inc. at 913-236-2000. Provide the
account registration, the amount being wired, the name of the wiring bank and
the name and telephone number of the person to be contacted in connection with
the order. You will then be provided with an account number. Instruct your
bank to wire the specified amount, along with the order number and registration,
to UMB Bank, n.a., ABA Number 101000695, W&R Underwriter Account Number 0007978,
UMB KC, Special Account, FBO customer name and account number.
To purchase by check, make your check payable to Waddell & Reed, Inc. Mail the
check, along with your completed account application, to Waddell & Reed, Inc.,
P.O. Box 29217, Shawnee Mission, Kansas 66201-9217.
A Fund's Class Y NAV is the value of a single Class Y share. The Class Y NAV is
computed by adding with respect to that Class the value of a Fund's investments,
cash, and other assets, subtracting its liabilities, and then dividing the
result by the number of Class Y shares outstanding.
The securities in each Fund's portfolio that are listed or traded on an exchange
are valued primarily using market quotations or, if market quotations are not
available, at their fair value in a manner determined in good faith by or at the
direction of the Board of Directors. Bonds are generally valued according to
prices quoted by a dealer in bonds that 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 by or at the direction of the Board
of Directors.
A Fund is open for business each day the New York Stock Exchange ("NYSE") is
open. The Funds normally calculate their net asset values as of the later of
the close of business of the NYSE, normally 4 p.m. Eastern time, or the close of
the regular session of any other securities or commodities exchange on which an
option or future held by a Fund is traded.
When you place an order to buy shares, your order will be processed at the next
offering price calculated after your order is received and accepted. Note the
following:
. Orders are accepted only at the home office of Waddell & Reed, Inc.
. All of your purchases must be made in U.S. dollars.
. If you buy shares by check, and then sell those shares by any method other
than by exchange to another fund in the United Group, the payment may be
delayed for up to ten days to ensure that your previous investment has
cleared.
. The Funds do not issue certificates representing Class Y shares of the Funds.
When you sign your account application, you will be asked to certify that your
Social Security or taxpayer identification number is correct and that you are
not subject to backup withholding for failing to report income to the IRS.
Waddell & Reed, Inc. reserves the right to reject any purchase orders, including
purchases by exchange, and it and the Funds reserve the right to discontinue
offering Fund shares for purchase.
Minimum Investments
To Open an Account
For a government entity or authority or for a corporation: $10 million
(within first twelve months)
For other investors: $0
Adding to Your Account
You can make additional investments of any amount at any time.
To add to your account by wire: Instruct your bank to wire the specified
amount, along with the account number and registration, to UMB Bank, n.a., ABA
Number 101000695, W&R Underwriter Account Number 0007978, UMB KC, Special
Account, FBO customer name and account number.
To add to your account by mail: Make your check payable to Waddell & Reed, Inc.
Mail the check along with a letter showing your account number, the account
registration, and stating the Fund whose shares you wish to purchase.
Mail to Waddell & Reed, Inc., P.O. Box 29217, Shawnee Mission, Kansas 66201-
9217.
Selling Shares
You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares.
The redemption price (price to sell one share) is the Fund's Class Y NAV.
To sell shares by telephone: If you have elected this method in your
application or subsequent authorization, call 913-236-2000 and give your
instructions to redeem shares and make payment by wire to your pre-designated
bank account or by check to you at the address on the account.
To sell shares by written request: Complete an Account Service Request form,
available from your Waddell & Reed account representative, or write a "letter of
instruction" with:
. the name on the account registration,
. the Fund's name,
. the Fund account number,
. the dollar amount or number of shares to be redeemed, and
. any other applicable requirements listed in the table on the next page.
Deliver the form or your letter to your Waddell & Reed account representative,
or mail it to:
Waddell & Reed, Inc.
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
Unless otherwise instructed, Waddell & Reed, Inc. will send a check to the
address on the account.
When you place an order to sell shares, your shares will be sold at the next NAV
calculated after your request is received and accepted. Note the following:
. Written requests for redemption 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 recently purchased the shares by check, a Fund may delay payment of
redemption proceeds. You may arrange for the bank upon which the purchase
check was drawn to provide to the Fund telephone or written assurance,
satisfactory to the Fund, 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 the date the Fund is able to
verify that your purchase check has cleared and been honored.
. Redemptions may be suspended or payment dates postponed on days when the NYSE
is closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the Securities and Exchange Commission.
. Payment is normally made in cash, although under extraordinary conditions
redemptions may be made in portfolio securities.
Each Fund reserves the right to require a signature guarantee on certain
redemption requests. This requirement is designed to protect you and Waddell &
Reed, Inc. from fraud. A Fund may require a signature guarantee in certain
situations such as:
. the request for redemption is made by a corporation, partnership or
fiduciary,
. the request for redemption is made by someone other than the owner of record,
or
. the check is being made payable to someone other than the owner of record.
Each Fund will accept a signature guarantee from 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 Fund's transfer
agent. A notary public cannot provide a signature guarantee.
Telephone Transactions
The Corporation and its agents will not be liable for following instructions
communicated by telephone that they reasonably believe to be genuine. The
Corporation will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If the Corporation fails to do so, the
Corporation may be liable for losses due to unauthorized or fraudulent
instructions. Current procedures relating to instructions communicated by
telephone include tape recording instructions, requiring personal identification
and providing written confirmations of transactions effected pursuant to such
instructions.
Shareholder Services
Waddell & Reed provides a variety of services to help you manage your account.
Personal Service
Your local Waddell & Reed account representative is available to provide
personal service. Additionally, the Waddell & Reed Customer Services staff is
available to respond promptly to your inquiries and requests.
Reports
Statements and reports sent to you include the following:
. confirmation statements (after every purchase, exchange, transfer or
redemption)
. year-to-date statements (quarterly)
. annual and semiannual reports (every six months)
Exchanges
You may sell your Class Y shares and buy Class Y shares of other funds in the
United Group. You may exchange only into funds that are legally registered for
sale in your state of residence. Note that exchanges out of the Fund may have
tax consequences for you. Before exchanging into a fund, read its prospectus.
The Funds reserve the right to terminate or modify these exchange privileges at
any time, upon notice in certain instances.
Dividends, Distributions, and Taxes
Distributions
The Funds distribute substantially all of their net income and capital gains to
shareholders each year. Ordinarily, dividends are distributed from a Fund's net
investment income, which includes accrued interest, earned discount, dividends
and other income earned on portfolio assets less expenses, at the following
times: United Accumulative Fund and United Science and Technology Fund,
semiannually in June and December; United Income Fund, quarterly in March, June,
September and December; and United Bond Fund, monthly. Net capital gains (and
any net realized gains from foreign currency transactions) ordinarily are
distributed in December. Each Fund may make additional distributions if
necessary to avoid Federal income or excise taxes on undistributed income and
capital gains.
Distribution Options. When you open an account, specify on your application how
you want to receive your distributions. Each Fund offers three options:
1. Share Payment Option. Your dividend and capital gains distributions will be
automatically paid in additional Class Y shares of the Fund. If you do not
indicate a choice on your application, you will be assigned this option.
2. Income-Earned Option. Your capital gains distributions will be
automatically paid in Class Y shares, but you will be sent a check for each
dividend distribution.
3. Cash Option. You will be sent a check for your dividends and capital gains
distributions.
For retirement accounts, all distributions are automatically paid in Class Y
shares.
Taxes
Each Fund, which is treated as a separate corporation for Federal income tax
purposes, has qualified and intends to continue to qualify for treatment as a
regulated investment company under the Code 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 (the
excess of net long-term capital gain over net short term capital loss) that are
distributed to its shareholders.
There are tax requirements that all Funds must follow in order to avoid Federal
taxation. In its effort to adhere to these requirements, each Fund may have to
limit its investment activity in some types of instruments.
As with any investment, you should consider how your investment in a Fund will
be taxed. If your account is not a tax-deferred retirement account, you should
be aware of the following tax implications:
Taxes on distributions. Dividends from a Fund's investment company taxable
income are taxable to you as ordinary income whether received in cash or paid 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 you after each
calendar year-end as to the amounts of dividends and distributions paid (or
deemed paid) to you for that year.
A portion of the dividends paid by a Fund, whether received in cash or paid 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. 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.
Withholding. Each Fund is required to withhold 31% of all dividends,
distributions and redemption proceeds payable to individuals and certain other
noncorporate shareholders who do not furnish the Fund with a correct taxpayer
identification number. Withholding at that rate from dividends and
distributions also is required for such shareholders who otherwise are subject
to backup withholding.
Taxes on transactions. 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. An exchange of Fund
shares for shares of any other fund in the United Group generally will have
similar tax consequences. In addition, if you purchase Fund Class Y shares
within thirty days before or after redeeming other Fund Class Y shares at a
loss, part or all 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 each Fund and its shareholders. There may be
other Federal, state or local tax considerations applicable to a particular
investor. You are urged to consult your own tax adviser.
About the Management and Expenses of the Funds
United Funds, Inc. is a mutual fund: an investment that pools shareholders'
money and invests it toward a specified goal. In technical terms, United Funds,
Inc. (the "Corporation") is an open-end management investment company organized
as a corporation under Maryland law on February 21, 1974, as successor to a
Delaware corporation which commenced operations in 1940.
The Corporation is governed by a Board of Directors, which has overall
responsibility for the management of its affairs. The majority of directors are
not affiliated with Waddell & Reed, Inc.
The Corporation has four series of shares (the "Funds"), each of which operates
as a separate mutual fund with separate assets and liabilities. Each Fund is a
diversified fund. In addition to the Class Y shares offered by this Prospectus,
each Fund has issued and outstanding Class A shares which are offered by Waddell
& Reed, Inc. through a separate Prospectus. Prior to June 17, 1995, each Fund
offered only one class of its shares to the public. Shares outstanding on that
date were designated as Class A shares. Class A shares are subject to a sales
charge on purchases but are not subject to redemption fees. Class A shares are
subject to a Rule 12b-1 fee at an annual rate of up to 0.25% of each Fund's
average net assets attributable to Class A shares. Additional information about
Class A shares may be obtained by calling 913-236-2000 or by writing to Waddell
& Reed, Inc. at the address on the inside back cover of the Prospectus.
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 a meeting called by
the Board of Directors for such purpose.
Special meetings of shareholders may be called for any purpose upon receipt by a
Fund 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 of the Corporation are met. There will normally be no meeting of
the 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, ("1940 Act") 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 Fund's
outstanding shares.
Each share (regardless of Class) has one vote. All shares of a Fund (and
Classes thereof) vote together as a single Class, except as to any matter for
which a separate vote of any Fund or Class is required by the 1940 Act, and
except as to any matter which affects the interests of one or more particular
Fund or Classes, in which case only the shareholders of the affected Fund or
Classes are entitled to vote, each as a separate Class. Shares are fully paid
and nonassessable when bought.
As of ____________, 1995, owned of record and beneficially ____% of the Fund's
outstanding Class Y shares.
WRIMCO and Its Affiliates
The Funds are managed by WRIMCO, subject to the authority of the Corporation's
Board of Directors. WRIMCO provides investment advice to each of the Funds and
supervises each Fund's investments. Waddell & Reed, Inc. and its predecessors
served as investment manager to each of the registered investment companies in
the United Group of Mutual Funds, except United Asset Strategy Fund, Inc., since
1940 or the inception of the company, 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 and assigned its professional staff for
investment management services to WRIMCO. WRIMCO 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 and United Asset Strategy
Fund, Inc. since it commenced operations in March 1995.
James C. Cusser is primarily responsible for the day-to-day management of the
portfolio of United Bond Fund. Mr. Cusser has held his Fund responsibilities
since September 1992. He is Vice President of WRIMCO, Vice President of the
Fund and Vice President of other investment companies for which WRIMCO serves as
investment manager. Mr. Cusser has served as the portfolio manager for
investment companies managed by WRIMCO since August 1992 and has been an
employee of WRIMCO 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 has held his Fund
responsibilities since February 1979. He is Senior Vice President of WRIMCO and
Senior Vice President of Waddell & Reed Asset Management Company, an affiliate
of WRIMCO. He is Vice President of the Fund and Vice President of other
investment companies for which WRIMCO serves as investment manager. Mr.
Thompson has served as the portfolio manager for investment companies managed by
Waddell & Reed, Inc. and its successor, WRIMCO, since January 1976 and has been
an employee of Waddell & Reed, Inc. and its successor, WRIMCO, since March 1971.
Antonio Intagliata is primarily responsible for the day-to-day management of the
portfolio of United Accumulative Fund. Mr. Intagliata has held his Fund
responsibilities since November 1979. He is Senior Vice President of WRIMCO,
Vice President of the Fund and Vice President of other investment companies for
which WRIMCO serves as investment manager. Mr. Intagliata has served as the
portfolio manager for the investment companies managed by Waddell & Reed, Inc.,
and its successor, WRIMCO, since February 1979 and has been an employee of
Waddell & Reed, Inc. and its successor, WRIMCO, since June 1973.
Abel Garcia is primarily responsible for the day-to-day management of the
portfolio of United Science and Technology Fund. Mr. Garcia has held his Fund
responsibilities since January 1984. He is Vice President of WRIMCO, Vice
President of Waddell & Reed Asset Management Company, an affiliate of WRIMCO,
and Vice President of the Fund. Mr. Garcia has been an employee of Waddell &
Reed, Inc. and its successor, WRIMCO, since August 1983.
Other members of WRIMCO's investment management department provide input on
market outlook, economic conditions, investment research and other
considerations relating to a Fund's investments.
Waddell & Reed, Inc. serves as the Corporation's underwriter and as underwriter
for each of the other Funds in the United Group of Mutual Funds, and Waddell &
Reed Funds, Inc., and serves as the distributor for TMK/United Funds, Inc.
Waddell & Reed Services Company acts as transfer agent ("Shareholder Servicing
Agent") for the Corporation and processes the payments of dividends. 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.
WRIMCO and Waddell & Reed Services Company are subsidiaries of Waddell & Reed,
Inc. Waddell & Reed, Inc. is a direct subsidiary of Waddell & Reed Financial
Services, Inc., a holding company, and an indirect subsidiary of United
Investors Management Company, a holding company, and Torchmark Corporation, a
holding company.
WRIMCO places transactions for the portfolio of each Fund and in doing so may
consider sales of shares of the Funds and other Funds it manages as a factor in
the selection of brokers to execute portfolio transactions.
Breakdown of Expenses
Like all mutual funds, the Funds pay fees related to their daily operations.
Expenses paid out of each Fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts.
Each Fund pays a management fee to WRIMCO for providing investment advice and
supervising its investments. Each Fund also pays other expenses, which are
explained below.
Management Fee
The management fee of each Fund is calculated by adding a group fee to a
specific fee. It is accrued and paid to WRIMCO daily.
The specific fee is 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, .15 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. The group fee is a pro rata participation based on the
relative net asset size of each fund in the group fee computed each day on the
combined net asset values of all the funds in the United Group at the annual
rates shown in the following table.
Group Fee Rate
Annual
Group Net Group
Asset Level Fee Rate
(all dollars For Each
in millions) 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%
Growth in assets of the United Group assures a lower group fee rate.
Other Expenses
While the management fee is a significant component of each Fund's annual
operating costs, the Funds have other expenses as well.
Each Fund pays the Accounting Services Agent a monthly fee based on the average
net assets of the Fund for accounting services. With respect to its Class Y
shares, each Fund pays the Shareholder Servicing Agent a monthly fee based on
the average daily net assets of the Class for the preceding month.
Each Fund also pays other expenses, such as fees and expenses of certain
directors, audit and outside legal fees, costs of materials sent to
shareholders, 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 extraordinary expenses including
litigation and indemnification relative to litigation.
A Fund cannot precisely predict what its portfolio turnover rate will be, but
each Fund may have a high portfolio turnover. United Accumulative Fund may
engage in short-term trading and have a corresponding high turnover rate. A
higher turnover will increase transaction and commission costs and could
generate taxable income or loss.
<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 in determining the securities eligible for
investment.
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Group. 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 an audit in connection with any
rating 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 based on 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 -- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated AA also qualifies as high quality debt. Capacity to pay
interest and repay principal is very strong, and debt rated AA differs 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 it normally exhibits adequate 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 as having
predominantly speculative characteristics 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 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 Standard & Poor's believes that such payments
will be made during such grace periods. The D rating 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 laws of
various states governing legal investments 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, Inc. 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.
Description of Preferred Stock Ratings
Standard & Poor's Ratings Group. A Standard & Poor's preferred stock rating is
an assessment of the capacity and willingness of an issuer to pay preferred
stock dividends and any applicable sinking fund obligations. A preferred stock
rating differs from a bond rating inasmuch as it is assigned to an equity issue,
which issue is intrinsically different from, and subordinated to, a debt issue.
Therefore, to reflect this difference, the preferred stock rating symbol will
normally not be higher than the debt rating symbol assigned to, or that would be
assigned to, the senior debt of the same issuer.
The preferred stock ratings are based on the following considerations:
1. Likelihood of payment - capacity and willingness of the issuer to meet the
timely payment of preferred stock dividends and any applicable sinking fund
requirements in accordance with the terms of the obligation;
2. Nature of, and provisions of, the issue;
3. Relative position of the issue 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 that may be assigned by Standard & Poor's to a
preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA -- A preferred stock issue rated AA also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A -- An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB -- An issue rated BBB is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the 'A' category.
BB, B, CCC -- Preferred stock rated BB, B, and CCC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. BB indicates the lowest degree of speculation and CCC the
highest degree of speculation. While such issues will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
CC -- The rating CC is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
C -- A preferred stock rated C is a non-paying issue.
D -- A preferred stock rated D is a non-paying issue with the issuer in default
on debt instruments.
NR -- This indicates that no 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.
Plus (+) or minus (-) -- To provide more detailed indications of preferred stock
quality, the rating 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.
A preferred stock 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
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating 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 based on other circumstances.
Moody's Investors Service, Inc. Because of the fundamental differences between
preferred stocks and bonds, a variation of Moody's familiar bond rating symbols
is used in the quality ranking of preferred stock. The symbols are designed to
avoid comparison with bond quality in absolute terms. It should always be borne
in mind that preferred stock occupies a junior position to bonds within a
particular capital structure and that these securities are rated within the
universe of preferred stocks.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
Preferred stock rating symbols and their definitions are as follows:
aaa -- An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
aa -- An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is a reasonable assurance the earnings and
asset protection will remain relatively well-maintained in the foreseeable
future.
a -- An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classification, earnings and asset protection are, nevertheless, expected
to be maintained at adequate levels.
baa -- An issue which is rated baa is considered to be a medium-grade preferred
stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
ba -- An issue which is rated ba is considered to have speculative elements and
its future cannot be considered well assured. Earnings and asset protection may
be very moderate and not well safeguarded during adverse periods. Uncertainty
of position characterizes preferred stocks in this class.
b -- An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa -- An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future
status of payments.
ca -- An issue which is rated ca is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payments.
c -- This is the lowest rated class of preferred or preference stock. Issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
<PAGE>
United Funds, Inc.
Custodian Underwriter
UMB Bank, n.a. Waddell & Reed, Inc.
Kansas City, Missouri 6300 Lamar Avenue
P. O. Box 29217
Legal Counsel Shawnee Mission, Kansas
Kirkpatrick & Lockhart 66201-9217
1800 M Street, N. W. (913) 236-2000
Washington, D. C. 20036
Shareholder Servicing
Independent Accountants Agent
Price Waterhouse LLP Waddell & Reed
Kansas City, Missouri Services Company
6300 Lamar Avenue
Investment Manager P. O. Box 29217
Waddell & Reed Investment Shawnee Mission, Kansas
Management Company 66201-9217
6300 Lamar Avenue (913)236-2000
P. O. Box 29217
Shawnee Mission, Kansas Accounting Services
66201-9217 Agent
(913) 236-2000 Waddell & Reed Services
Company
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
(913) 236-2000
<PAGE>
United Funds, Inc.
PROSPECTUS
June 17, 1995
The United Group of Mutual Funds
United Asset Strategy Fund, Inc.
United Cash Management, Inc.
United Continental Income Fund, Inc.
United Funds, Inc.
United Bond Fund
United Income Fund
United Accumulative Fund
United Science and Technology Fund
United Gold & Government Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United New Concepts Fund, Inc.
United Retirement Shares, Inc.
United Vanguard Fund, Inc.
printed on recycled paper
NUP2000Y(6-95)
<PAGE>
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
(913) 236-2000
June 17, 1995
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information (the "SAI") is not a
prospectus. Investors should read this SAI in conjunction with a prospectus
("Prospectus") for the Class A shares or the Class Y shares, as applicable, of
United Funds, Inc. (the "Corporation") dated June 17, 1995, 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 .............. 26
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 and, for Class A shares, from which the maximum sales
load of 5.75% is deducted. All dividends and distributions are assumed to be
reinvested in shares of the applicable Class at net asset value for the Class as
of the day the dividend or distribution is paid. No sales load is charged on
reinvested dividends or distributions on Class A shares. The formula used to
calculate the total return for a particular Class of a Fund 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. For
example, a Fund may also compute total return for its Class A shares 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 applicable to Class A shares were reflected,
it would reduce the performance quoted for that Class.
The average annual total return quotations for Class A shares with sales
load deducted as of December 31, 1994, 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
1-1-94 to 1-1-90 to 1-1-85 to
12-31-94 12-31-94 12-31-94
----------- ----------- -----------
United Bond Fund -11.18% 6.00% 9.31%
United Income Fund -7.46 8.06 14.72
United Accumulative Fund -5.71 5.46 11.68
United Science and
Technology Fund 3.47 10.61 14.16
The average annual total return quotations for Class A shares without sales
load deducted as of December 31, 1994, 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
1-1-94 to 1-1-90 to 1-1-85 to
12-31-94 12-31-94 12-31-94
----------- ----------- -----------
United Bond Fund -5.76% 7.26% 9.96%
United Income Fund -1.82 9.35 15.40
United Accumulative Fund 0.04 6.72 12.34
United Science and
Technology Fund 9.78 11.93 14.84
Prior to June 17, 1995, each Fund offered only one class of shares to the
public. Shares outstanding on that date were designated as Class A shares.
Since that date, Class Y shares of the Funds have been available for certain
institutional investors.
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 for a Class
which reflects the change in value of an investment in that Class 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 Class of a Fund is computed by dividing the net
investment income per share of that Class earned during the period for which the
yield is shown by the maximum offering price per share of that Class on the last
day of that period according to the following formula:
6
Yield = 2((((a - b)/cd)+1) -1)
Where, with respect to a particular Class of a Fund:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares of the Class outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share of the Class on the last day
of the period.
The yield for United Bond Fund Class A shares computed according to the
formula for the 30-day period ended on December 31, 1994, the date of the most
recent balance sheet included in this SAI, is 7.51%.
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 the applicable Class's
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. Each Class of 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 ("WRIMCO"), 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. A debt security may not 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 WRIMCO 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. Another type of mortgage-backed security is the collateralized
mortgage obligation. See "Mortgage-Backed Securities". 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.
Each 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.
Each 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.
Zero Coupon Bonds. A broker-dealer creates a derivative zero by separating
the interest and principal components of a U.S. Treasury security and selling
them as two individual securities. CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury
Receipts) are examples of derivative zeros.
The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and principal
components of an outstanding U.S. Treasury bond and selling them as individual
securities. Bonds issued by the Resolution Funding Corporation (REFCORP) and
the Financing Corporation (FICO) can also be separated in this fashion.
Original issue zeros are zero coupon securities originally issued by the U.S.
Government, a government agency, or a corporation in zero coupon form.
Mortgage-Backed Securities. A mortgage-backed security may be an
obligation of the issuer backed by a mortgage or pool of mortgages or a direct
interest in an underlying pool of mortgages. Mortgage-backed securities are
based on different types of mortgages including those on commercial real estate
or residential properties. Some mortgage-backed securities, such as
collateralized mortgage obligations ("CMOs"), make payments of both principal
and interest at a variety of intervals; others make semiannual interest payments
at a predetermined rate and repay principal at maturity (like a typical bond).
Pass-through securities and participation certificates represent 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. 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.
The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment risk.
Prepayment, which occurs when unscheduled or early payments are made on the
underlying mortgages, may shorten the effective maturities of these securities
and may lower their total returns.
Stripped Mortgage-Backed Securities are created when a U.S. Government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security (PO) receives the
principal payments made by the underlying mortgage-backed security, while the
holder of the "interest-only" security (IO) receives interest payments from the
same underlying security.
The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment rates
tend to increase, which tends to reduce prices of IOs and increase prices of
POs. Rising interest rates can have the opposite effect.
Variable or Floating Rate Instruments (including notes purchased directly
from issuers) bear variable or floating interest rates and carry rights that
permit holders to demand payment of the unpaid principal balance plus accrued
interest from the issuers or certain financial intermediaries. Floating rate
securities have interest rates that change whenever there is a change in a
designated base rate while variable rate instruments provide for a specified
periodic adjustment in the interest rate. These formulas are designed to result
in a market value for the instrument that approximates its par value.
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. WRIMCO 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. WRIMCO believes that the Funds' ability to invest assets abroad
might enable them to take advantage of these differences and strengths where
they are favorable.
Restricted Securities
United Accumulative Fund and United Income Fund may purchase restricted
securities. Restricted securities, which are also referred to as private
placements, are subject to legal or contractual restrictions on resale because
they are not registered under the Securities Act of 1933, as amended. In many
cases, issuers expect to sell these securities to institutional investors, such
as the Funds, initially under an exemptive provision and then file a
registration statement to register the securities for public distribution. Once
securities have been registered, they may sell at a premium over the initial
offering price.
Restricted Securities generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, or in a registered public offering. Where registration is
required, a Fund may be obligated to pay all or part of the registration expense
and a considerable period may elapse between the time it decides to seek
registration and the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, a Fund might obtain a less favorable price than
prevailed when it decided to seek registration of the security.
There are risks associated with investment in restricted securities in that
there can be no assurance of a ready market for resale. Also, the contractual
restrictions on resale might prevent a Fund from reselling the securities at a
time when such sale would be desirable. Restricted securities in which a Fund
seeks to invest need not be listed or admitted to trading on an exchange and may
be less liquid than listed securities.
Valuation of restricted securities for which market quotations are readily
available will be at market value. Valuation for restricted securities for
which market quotations are not available will be at fair value as determined in
good faith under procedures established by the Board of Directors.
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.
When-Issued and Delayed Delivery Transactions
Each Fund may purchase any securities in which it may invest on a when-
issued or delayed delivery basis or sell them on a delayed delivery basis. The
securities so purchased by a Fund are subject to market fluctuation; their value
may be less when delivered than the purchase price paid. For example, delivery
to the Fund and payment by the Fund in the case of a purchase by it, or delivery
by the Fund and payment to it in the case of a sale by the Fund, may take place
a month or more after the date of the transaction. The purchase or sale price
are fixed on the transaction date. A Fund will enter into when-issued or
delayed delivery transactions in order to secure what is considered to be an
advantageous price and yield at the time of entering into the transaction. No
interest accrues to a Fund until delivery and payment is completed. When a Fund
makes a commitment to purchase securities on a when-issued or delayed delivery
basis it will record the transaction and thereafter reflect the value of the
securities in determining its net asset value per share. The securities so sold
by a Fund on a delayed delivery basis are also subject to market fluctuation;
their value when a Fund delivers them may be more than the purchase price the
Fund receives. When a Fund makes a commitment to sell securities on a delayed
basis, it will record the transaction and thereafter value the securities at the
sales price in determining the Fund's net asset value per share.
Ordinarily a Fund purchases securities on a when-issued or delayed delivery
basis with the intention of actually taking delivery of the securities.
However, before the securities are delivered to the Fund and before it has paid
for them (the "settlement date"), the Fund could sell the securities if WRIMCO
decided it was advisable to do so for investment reasons. The Fund will hold
aside or segregate cash or other securities, other than those purchased on a
when-issued or delayed delivery basis, at least equal to the amount it will have
to pay on the settlement date; these other securities may be sold at or before
the settlement date.
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; (iv) as to
United Bond Fund, "insured deposits"; and (v) restricted securities except
certain securities that are determined by WRIMCO to be liquid pursuant to
procedures adopted by the Corporation's Board of Directors, such as securities
eligible for resale under Rule 144A of the Securities Act of 1933.
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. WRIMCO 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 WRIMCO have
had experience in this activity with respect to the Fund and other funds and
accounts managed by WRIMCO 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 (see "Taxes" and "Payments to Shareholders"). 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. WRIMCO 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. WRIMCO 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 WRIMCO 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 WRIMCO 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 WRIMCO 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 WRIMCO 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. WRIMCO 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 WRIMCO may still not result in a
successful transaction. WRIMCO 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 WRIMCO 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.
As a shareholder in an investment company, a Fund would bear its pro
rata share of that investment company's expenses, which could result
in duplication of certain fees, including management and
administrative fees;
(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, United Bond Fund and United Science and
Technology Fund 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; 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, 1994 and December 31, 1993 were as follows:
1994 1993
---- ----
United Bond Fund 127.11% 175.39%
United Income Fund 18.54 21.70
United Accumulative Fund 205.40 230.29
United Science and Technology 64.39 68.38
Fund
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
The Management Agreement
The Corporation has an Investment Management Agreement (the "Management
Agreement") with Waddell & Reed, Inc. On January 8, 1992, subject to the
authority of the Corporation's Board of Directors, Waddell & Reed, Inc. assigned
the Management Agreement and all related investment management duties (and
related professional staff) to WRIMCO, a wholly-owned subsidiary of Waddell &
Reed, Inc. Under the Management Agreement, WRIMCO is employed to supervise the
investments of the Funds and provide investment advice to the Funds. The
address of WRIMCO and Waddell & Reed, Inc. is 6300 Lamar Avenue, P.O. Box 29217,
Shawnee Mission, Kansas 66201-9217. Waddell & Reed, Inc. is the Corporation'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 Corporation. The
Management Agreement contains detailed provisions as to the matters to be
considered by the Corporation's Board of Directors prior to approving any
Shareholder Servicing Agreement or Accounting Services Agreement.
Torchmark Corporation and United Investors Management Company
WRIMCO 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,
except United Asset Strategy Fund, Inc., 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 WRIMCO. WRIMCO
has also served as investment manager for Waddell & Reed Funds, Inc. since its
inception in September 1992, Torchmark Government Securities Fund, Inc. and
Torchmark Insured Tax-Free Fund, Inc. since they each commenced operations in
February 1993 and United Asset Strategy Fund, Inc. since it commenced operations
in March 1995. 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 the
Corporation and Waddell & Reed Services Company (the "Agent"), a subsidiary of
Waddell & Reed, Inc., 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 Corporation and handling of shareholder
inquiries. A new Shareholder Servicing Agreement, or amendments to the existing
one, may be approved by the Corporation's Board of Directors without shareholder
approval.
Accounting Services
Under the Accounting Services Agreement entered into between the
Corporation and the Agent, the Agent provides each Fund with bookkeeping and
accounting services and assistance, including maintenance of the Corporation's
records, pricing of the Corporation'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 Corporation's Board of Directors without shareholder approval.
Payments by the Corporation for Management, Accounting and Shareholder Services
Under the Management Agreement, for WRIMCO's management services, each Fund
pays WRIMCO a fee as described in the Prospectus. Prior to the above-described
assignment from Waddell & Reed, Inc. to WRIMCO, all fees were paid to Waddell &
Reed, Inc.
The management fees paid to Waddell & Reed, Inc., or WRIMCO, as the case
may be, during the last three fiscal years were as follows:
1994 1993 1992
---- ---- ----
United Bond Fund ........ $ 2,552,094 $ 2,833,151 $ 2,515,684
United Income Fund ...... 15,069,003 13,089,827 10,987,756
United Accumulative Fund 4,773,506 4,776,064 4,411,534
United Science and Technology
Fund ................. 2,777,832 2,598,347 2,445,983
--------- ----------- -----------
Total ................ $25,172.435 $23,297,389 $20,360,957
=========== ========== ==========
For purposes of calculating the daily fee the Corporation does not include
money owed to it by Waddell & Reed, Inc. for shares which it has sold but not
yet paid to the Corporation. The Corporation accrues and pays this fee daily.
Under the Shareholder Servicing Agreement, with respect to Class A shares,
each Fund pays the Agent a monthly fee of $1.0208 for each shareholder account
that 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. For Class Y shares, each Fund pays the Agent a monthly fee
equal to .15 of 1% of the average daily net assets of that Class for the
preceding month. The Corporation 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., WRIMCO
or the Agent.
Under the Accounting Services Agreement, each Fund pays the Agent a
monthly fee of one-twelfth of the annual fee shown in the following table.
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
Fees paid to the Agent for the fiscal years ended December 31, 1994, 1993
and 1992 were as follows:
1994 1993 1992
---- ---- -----
United Bond Fund ........ $66,667 $ 70,000 $ 65,000
United Income Fund ...... 100,000 100,000 100,000
United Accumulative Fund 92,500 98,750 85,000
United Science and Technology
Fund ................. 60,000 60,000 60,000
The State of California imposes limits on the amount of certain expenses
the Corporation can pay by requiring WRIMCO to reduce its fee to the extent any
included expenses exceed 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 limit does not 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 Corporation's other
expenses, including its management fee, are included.
Since the Corporation pays a management fee for investment supervision and
an accounting services fee for accounting services as discussed above, WRIMCO
and the Agent, respectively, pay all of their own expenses in providing these
services. Amounts paid by the Corporation under the Shareholder Servicing
Agreement are described above. Waddell & Reed, Inc. and affiliates pay the
Corporation's Directors and officers who are affiliated with WRIMCO and its
affiliates. The Corporation pays the fees and expenses of the Corporation's
other Directors.
Waddell & Reed, Inc., under an agreement separate from the Management
Agreement, Shareholder Servicing Agreement and Accounting Services Agreement,
acts as the Corporation'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 Corporation. The aggregate
dollar amounts of underwriting commissions for Class A shares for the fiscal
years ended December 31, 1994, 1993 and 1992 were $19,687,406, $23,716,003 and
$27,641,320, respectively, and the amounts retained by Waddell & Reed, Inc. were
$8,600,788, $10,559,627 and $12,128,976, respectively.
A major portion of the sales charge for Class A shares is paid to account
representatives and managers of Waddell & Reed, Inc. Waddell & Reed, Inc. may
compensate its account representatives as to purchases for which there is no
sales charge.
The Corporation 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
Corporation 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 for Class A shares (the "Plan") adopted by the
Corporation pursuant to Rule 12b-1 under the Investment Company Act of 1940,
each Fund may pay Waddell & Reed, Inc., the principal underwriter for the
Corporation, a fee not to exceed .25% of each Fund's average annual net assets
attributable to Class A shares, paid monthly, to reimburse Waddell & Reed, Inc.
for its costs and expenses in connection with the provision of personal services
to Class A shareholders of the Funds and/or maintenance of Class A shareholder
accounts.
The Plan and a related Service Agreement between the Corporation and
Waddell & Reed, Inc. contemplate that Waddell & Reed, Inc. may be reimbursed for
amounts it expends in compensating, training and supporting registered account
representatives, sales managers and/or other appropriate personnel in providing
personal services to Class A shareholders of each Fund and/or maintaining Class
A shareholder accounts; increasing services provided to Class A shareholders of
each Fund by office personnel located at field sales offices; engaging in other
activities useful in providing personal service to Class A shareholders of each
Fund and/or maintenance of Class A shareholder accounts; and in compensating
broker-dealers, and other third parties, who may regularly sell Class A shares
of each Fund for providing shareholder services and/or maintaining shareholder
accounts with respect to Class A shares. For its fiscal year ended December 31,
1994, service fees paid (or accrued) with respect to Class A shares were as
follows:
1994
----
United Bond Fund .......................$ 542,722
United Income Fund ..................... 3,114,608
United Accumulative Fund ............... 880,968
United Science and Technology Fund...... 466,139
The Plan and the Service Agreement were approved by the Corporation's Board
of Directors, including the Directors who are not interested persons of the
Corporation 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 the affected shareholders of
each Fund.
Among other things, the Plan provides that (i) Waddell & Reed, Inc. will
provide to the Directors of the Corporation 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 Class
A 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 UMB Bank, n.a., Kansas City,
Missouri. In general, the custodian is responsible for holding each Fund's cash
and securities. A 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 LLP, Kansas City, Missouri, the Corporation's
independent accountants, audits each Fund's financial statements.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Determination of Offering Price
The net asset value of each Class of the shares of a Fund is the value
of the assets of that Class, less the Class's liabilities, divided by the total
number of outstanding shares of that Class.
Class A 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, 1994 was as follows:
United Bond Fund
Net asset value per Class A share (Class A net assets
divided by Class A shares outstanding) .......... $5.62
Add: selling commission (5.75% of offering price) . .34
----
Maximum offering price per Class A share (Class A
net asset value per share divided by 94.25%) .... $5.96
=====
United Income Fund
Net asset value per Class A share (Class A net assets
divided by Class A shares outstanding) .......... $23.34
Add: selling commission (5.75% of offering price) . 1.42
------
Maximum offering price per Class A share (Class A
net asset value per share divided by 94.25%) .... $24.76
======
United Accumulative Fund
Net asset value per Class A share (Class A net assets
divided by Class A shares outstanding) .......... $6.58
Add: selling commission (5.75% of offering price) . .40
-----
Maximum offering price per Class A share (Class A
net asset value per share divided by 94.25%) .... $6.98
=====
United Science and Technology Fund
Net asset value per Class A share (Class A net assets
divided by Class A shares outstanding) .......... $15.21
Add: selling commission (5.75% of offering price) . .93
------
Maximum offering price per Class A share (Class A
net asset value per share divided by 94.25%) .... $16.14
======
The offering price of a Class A share is its net asset value next
determined following acceptance of a purchase order plus the sales charge. The
offering price of a Class Y share is its net asset value next determined
following acceptance of a purchase order. 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
Corporation may determine to discontinue offering Corporation shares for
purchase.
The net asset value and offering price per share are ordinarily computed
once daily on each day that the New York Stock Exchange ("NYSE") is open for
trading as of the later of the close of the regular session of the NYSE
(ordinarily, 4:00 p.m. Eastern time) or the close of the regular session of any
domestic securities or commodities exchange on which an option or future held by
the Fund is traded. The NYSE 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 NYSE may close on other days. The net asset
value will change every business day, since the value of the assets and the
number of shares outstanding changes every business day.
The securities in the portfolio of each Fund, except as otherwise noted,
that are 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 National Association of Securities Dealers
Automated Quotations (NASDAQ), 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 and other assets 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
For Class A shares initial investments must be at least $500 with the
exceptions described in this paragraph. A $100 minimum initial investment
pertains to certain exchanges of shares from another fund in the United Group.
A $50 minimum initial investment pertains to purchases for certain retirement
plan accounts and to accounts for which an investor has arranged, at the time of
initial investment, to make subsequent purchases for the account by having
regular monthly withdrawals of $25 or more made from a bank account. A minimum
initial investment of $25 is applicable to purchases made through payroll
deduction for or by employees of WRIMCO, Waddell & Reed, Inc., their affiliates
or certain retirement plan accounts. Except with respect to certain exchanges
and automatic withdrawals from a bank account, a shareholder may make subsequent
investments of any amount. See "Exchanges for Shares of Other Funds in the
United Group."
For Class Y shares, initial investments by government entities or
authorities or by corporations must total at least $10 million within the first
twelve months after initial investment. There is no initial investment minimum
for other Class Y investors.
Reduced Sales Charges (applicable to Class A Shares only)
Account Grouping
Large purchases of Class A shares are subject to lower sales charges.
The schedule of sales charges appears in the Prospectus for Class A shares. 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 provided that
such purchases are subject to a sales charge (see "Net Asset Value
Purchases"), 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 of Class A shares 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 of Class A shares 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 of Class A shares 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 UGMA accounts for H and W's three
minor children and invest $10,000 in each child's name; the combined
purchase of $105,000 of Class A shares 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 Class A 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 Class A 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 Class A shares of 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 of Class A
shares 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 of Class A
shares 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, Class A 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
Class A shares at the sales charge applicable to a purchase of
$100,000. H has an IRA account and the Class A 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 in Class A shares 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 of Class A shares 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 a 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 of Class A shares 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 of Class A shares 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 have shares that 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., United High Income Fund II, Inc. and United
Asset Strategy Fund, Inc. The following funds in the United Group have shares
that 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 of shares that are subject to a full sales charge may not be
grouped with purchases of shares in a fund in the United Group that are subject
to a reduced sales charge; conversely, purchases made of shares in a fund with a
reduced sales charge may not be grouped or combined with purchases of shares of
a fund that are 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 of Class A Shares
As stated in the Prospectus, Class A 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 of Class A
shares in an IRA sponsored by Waddell & Reed, Inc. established for any of these
eligible purchasers may also be at net asset value. Purchases of Class A shares
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 of Class A shares. "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. "Account representatives" includes retired account representatives.
A "retired account representative" is any account 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 account
representative may purchase Class A shares at net asset value whether or not the
custodian himself is an eligible purchaser.
Purchases of Class A shares in a 401(k) plan having 100 or more eligible
employees and purchases in a 457 plan having 100 or more eligible employees may
be made at net asset value.
Reasons for Differences in Public Offering Price of Class A Shares
As described herein and in the Prospectus, there are a number of instances
in which the Fund's Class A 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 of Class A shares, 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 for Class A shares are as follows. Exchanges at net
asset value are permitted because a sales charge has already been paid on the
shares exchanged. Sales of Class A shares 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 of Class A shares at no sales charge are permitted to attempt to
protect against mistaken or not fully informed redemption decisions. Class A
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 by 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 Class A
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 for Class A Shareholders
If you qualify, you may arrange to receive regular monthly, quarterly,
semiannual or annual payments by redeeming Class A shares on a regular basis
through the Flexible Withdrawal Service (the "Service"). The Service is
available not only for Class A Fund shares but also for corresponding shares of
any of the funds in the United Group. It would be a disadvantage to an investor
to make additional purchases of Class A 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
Class A or corresponding shares which you still own of any of the funds in the
United Group; or, you must own Class A or corresponding 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 the 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, semiannual 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.
Retirement plan accounts may be subject to a fee imposed by the plan
custodian for use of their service.
If you have a share certificate for the shares you want to make available
for the Service, you must enclose the certificate with the form initiating the
Service.
The dividends and distributions on shares you have made available for the
Service are reinvested in additional Class A 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 Class A
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
Class A Share Exchanges
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 corresponding 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 corresponding shares you own in another fund in the United
Group for Class A 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. Corresponding shares of any of these funds may be
exchanged for Class A 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 corresponding shares of United Cash Management, Inc.
automatically exchanged each month into Class A shares of 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
Class A 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 the Class A or corresponding
shares of 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.
Class Y Share Exchanges
Class Y shares of a Fund may be exchanged for Class Y shares of any other
fund in the United Group.
General Exchange Information
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 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
As described in the Prospectus, your account may be set up as a funding
vehicle for a retirement plan. For individual taxpayers meeting certain
requirements, Waddell & Reed, Inc. offers prototype documents for the following
retirement plans. All of these plans involve investment in shares of a Fund (or
shares of certain other funds in the United Group).
Individual Retirement Accounts (IRAs). 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 an annual
maximum of $2,000. The annual maximum is $2,250 if an investor's spouse has
earned income of $250 or less in a taxable year. If an investor's spouse has at
least $2,000 of earned income in a taxable year, the annual maximum is $4,000
($2,000 for each spouse). The 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 participate, their 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 advisers or pension consultants as
to the applicable tax rules. If you already have an IRA, you may have the
assets in that IRA transferred directly to an IRA offered by Waddell & Reed,
Inc.
Simplified Employee Pension (SEP) plans and Salary Reduction SEP (SARSEP)
plans. Employers can make contributions to SEP-IRAs established for employees.
An employer may contribute up to 15% of compensation, not to exceed $22,500, per
year for each employee.
Keogh Plans. Keogh plans, which are available to self-employed
individuals, are defined contribution plans that may be either a money purchase
plan or a profit sharing 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 an annual maximum of $30,000.
457 Plans. 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.
TSAs - Custodial Accounts and Title I Plans. 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
custodian account under Section 403(b) of the Code. Some organizations have
adopted Title I plans, which are funded by employer contributions in addition to
employee deferrals.
401(k) Plans. With a 401(k) plan, employees can make tax-deferred
contributions into a plan to which the employer may also contribute, usually on
a matching basis. An employee may defer each year up to 25% of compensation,
subject to certain annual maximums, which may be increased each year based on
cost-of-living adjustments.
More detailed information about these arrangements and applicable forms 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 adviser or pension consultant.
Redemptions
The Prospectus gives information as to redemption procedures.
Redemption payments are made within seven days unless delayed because of
emergency conditions determined by the SEC, when the NYSE is closed other than
for weekends or holidays, or when trading on the NYSE is restricted. Payment is
made in cash, although under extraordinary conditions redemptions may be made in
portfolio securities. Payment for redemptions of shares of the Corporation may
be made in portfolio securities when the Corporation's Board of Directors
determines that conditions exist making cash payments undesirable. Securities
used for payment of redemptions are valued at the value used in figuring net
asset value. There would be brokerage costs to the redeeming shareholder in
selling such securities. The Corporation, 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 for Class A shares discusses the reinvestment privilege
for Class A shares under which, if you redeem your Class A shares and then
decide it was not a good idea, you may reinvest. If Class A shares of a Fund
are then being offered, you can put all or part of your redemption payment back
into that Fund's Class A 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 Class A shares of that Fund. You do not use up
this privilege by redeeming Class A 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 Corporation are handled by outside
organizations selected by the Board of Directors. The Board of Directors has
responsibility for establishing broad corporate policies for the Corporation and
for overseeing overall performance of the selected experts. It has the benefit
of advice and reports from independent counsel and independent auditors.
The principal occupation during at least the past five years of each
Director and officer is given below. Each of the persons listed through and
including Mr. Wright is a member of the Corporation's Board of Directors. The
other persons are officers but not Board members. For purposes of this section,
the term "Fund Complex" includes each of the registered investment companies in
the United Group of Mutual Funds, TMK/United Funds, Inc., Waddell & Reed Funds,
Inc., Torchmark Government Securities Fund, Inc. and Torchmark Insured Tax-Free
Fund, Inc. Each of the Corporation's Directors is also a Director of each of
the other funds in the Fund Complex and each of its officers, with the exception
of Mr. Garcia, is also an officer of one or more of the funds in the Fund
Complex.
RONALD K. RICHEY*
2001 Third Avenue South
Birmingham, Alabama 35233
Chairman of the Board of Directors of the Corporation and each of the
other funds in the Fund Complex; 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; Chairman of the Board of Directors
of Vesta Insurance Group, Inc.; formerly, Chairman of the Board of Directors of
Waddell & Reed, Inc.
KEITH A. TUCKER*
President of the Corporation and of each of the other Funds in the Fund
Complex; President, Chief Executive Officer and Director of Waddell & Reed
Financial Services, Inc.; Chairman of the Board of Directors of WRIMCO, 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; Director of Southwestern Life Corporation; formerly,
partner in Trivest, a private investment concern; formerly, Director of Atlantis
Group, Inc., a diversified company.
HENRY L. BELLMON
Route 1
P. O. Box 26
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
905 13th Street
Boulder, Colorado 80302
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; formerly, Professor of
Marketing, College of Business, University of Colorado.
JAY B. DILLINGHAM
926 Livestock Exchange Building
Kansas City, Missouri 64102
Formerly, President and Director of Kansas City Stock Yards Company;
formerly, Partner in Dillingham Farms, a farming operation.
JOHN F. HAYES*
335 N. Washington
Suite 260
Hutchinson, Kansas 67504-2977
Director of Central Bank and Trust; Director of Central Financial
Corporation; formerly, President of Gilliland & Hayes, P.A., a law firm.
GLENDON E. JOHNSON
7300 Corporate Center Drive
P. O. Box 020270
Miami, Florida 33126-1208
Director and Chief Executive Officer of John Alden Financial Corporation
and subsidiaries.
WILLIAM T. MORGAN*
1799 Westridge Road
Los Angeles, California 90049
Retired; formerly, Chairman of the Board of Directors and President of
the Corporation and each fund in the Fund Complex then in existence. (Mr. Morgan
retired as Chairman of the Board of Directors and President of the funds in the
Fund Complex then in existence on April 30, 1993); formerly, President, Director
and Chief Executive Officer of WRIMCO 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
Retired.
PAUL S. WISE
P. O. Box 5248
8648 Silver Saddle Drive
Carefree, Arizona 85377
Director of Potash Corporation of Saskatchewan.
LESLIE S. WRIGHT
2302 Brookshire Place
Birmingham, Alabama 35213
Chancellor of Samford University; formerly, Director of City Federal
Savings and Loan Association; formerly, President of Samford University.
Robert L. Hechler
Vice President and Principal Financial Officer of the Corporation and
each of the other funds in the Fund Complex; Vice President, Chief Operations
Officer, Director and Treasurer of Waddell & Reed Financial Services, Inc.;
Executive Vice President, Principal Financial Officer, Director and Treasurer of
WRIMCO; 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 Corporation and each of the other funds in the
Fund Complex; 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 WRIMCO and
Waddell & Reed Asset Management Company; Senior Vice President and Chief
Investment Officer of United Investors Management Company.
Theodore W. Howard
Vice President, Treasurer and Principal Accounting Officer of the
Corporation and each of the other funds in the Fund Complex; Vice President of
Waddell & Reed Services Company.
Sharon K. Pappas
Vice President, Secretary and General Counsel of the Corporation and
each of the other funds in the Fund Complex; Vice President, Secretary and
General Counsel of Waddell & Reed Financial Services, Inc.; Senior Vice
President, Secretary and General Counsel of WRIMCO 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.; formerly, Assistant General Counsel of WRIMCO,
Waddell & Reed Financial Services, Inc., Waddell & Reed, Inc., Waddell & Reed
Asset Management Company and Waddell & Reed Services Company.
James C. Cusser
Vice President of the Corporation and two other funds in the Fund
Complex; Vice President of WRIMCO; formerly, Vice President of Kidder Peabody &
Company.
Abel Garcia
Vice President of the Corporation; Vice President of WRIMCO; Vice
President of Waddell & Reed Asset Management Company; formerly, Vice President
of Waddell & Reed, Inc.
John M. Holliday
Vice President of the Corporation and nine other funds in the Fund
Complex; Senior Vice President of WRIMCO and of Waddell & Reed Asset Management
Company; formerly, Senior Vice President of Waddell & Reed, Inc.
Antonio Intagliata
Vice President of the Corporation and one other fund in the Fund
Complex; Senior Vice President of WRIMCO; formerly, Senior Vice President of
Waddell & Reed, Inc.
Carl E. Sturgeon
Vice President of the Corporation and eleven other funds in the Fund
Complex; Vice President of WRIMCO; formerly, Vice President of Waddell & Reed,
Inc.
Russell E. Thompson
Vice President of the Corporation and two other funds in the Fund
Complex; Senior Vice President of WRIMCO; 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 Corporation's Directors may be
deemed to be "interested persons" as defined in the Investment Company Act of
1940 of its underwriter, Waddell & Reed, Inc., or of WRIMCO. The Directors who
may be deemed to be "interested persons" are indicated as such by an asterisk.
The Board of Directors 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 Corporation. Currently, no
person serves as Director Emeritus.
The funds in the United Group (with the exception of United Asset Strategy
Fund, Inc.), TMK/United Funds, Inc. and Waddell & Reed Funds, Inc. pay to each
Director a total of $40,000 per year, plus $1,000 for each meeting of the Board
of Directors attended (prior to January 1, 1995, the fee was $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 (with
the exception of United Asset Strategy Fund, Inc.), TMK/United Funds, Inc. and
Waddell & Reed Funds, Inc. based on their relative size.
During the Corporation's fiscal year ended December 31, 1994, the
Corporation's Directors received the following fees for service as a director:
Pension
or Retirement Total
Aggregate Benefits Compensation
Compensation Accrued As From Corporation
From Part of Fund and Fund
Director Corporation Expenses Complex
- -------- ------------ -------------- ------------
Ronald K. Richey $ 0 $0 $ 0
Keith A Tucker 0 0 0
Henry L. Bellmon 18,875 0 43,000
Dodds I. Buchanan 18,875 0 43,000
Jay B. Dillingham 18,875 0 43,000
John F. Hayes 18,875 0 43,000
Glendon E. Johnson 18,875 0 43,000
William T. Morgan 13,997 0 32,000
Doyle Patterson 18,875 0 43,000
Frederick Vogel III 18,875 0 43,000
Paul S. Wise 18,654 0 42,500
Leslie S. Wright 18,220 0 41,500
The officers are paid by WRIMCO or its affiliates.
Shareholdings
As of May 31, 1995, all of the Corporation's Directors and officers as a
group owned less than 1% of the outstanding shares of the Corporation. As of
such date no person owned of record or was known by the Corporation to own
beneficially 5% or more of the Corporation's outstanding shares.
PAYMENTS TO SHAREHOLDERS
General
There are two sources for the payments each Fund makes to you as a
shareholder of a Class of shares 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 expenses (which will vary by Class). 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. 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, 1994, United Income Fund and United
Science and Technology Fund realized net capital gains of $89,293,944 and
$35,769,799, respectively, of which a portion was paid to Class A shareholders
during the year ended December 31, 1994. The undistributed net capital gains
will be distributed to each Fund's shareholders. United Accumulative Fund
realized net capital gains of $65,889,572 during the year ended December 31,
1994. The capital gain net income was paid to Class A shareholders. United
Bond Fund realized capital losses of $27,347,477 during the year ended December
31, 1994. This amount is available to offset future realized capital gain net
income through December 31, 2002.
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, (ii) you want your dividends and
distributions reinvested in shares of a Fund of the same Class as that with
respect to which they were paid, or (iii) you want cash for your dividends and
want your distributions reinvested in shares of a Fund of the same Class as that
with respect to which they were paid. You can change your instructions at any
time. If you give no instructions, your dividends and distributions will be
reinvested in shares of that Fund of the same Class as that with respect to
which they were paid. 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 on Class A shares in cash, you
can thereafter reinvest them (or distributions only) in Class A 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 the next calendar year net capital losses incurred between November 1
and the end of the current calendar year. From November 1, 1994 through
December 31, 1994, United Accumulative Fund and United Bond Fund incurred net
capital losses of $8,900,860 and $4,164,635, respectively, which have been
deferred to the fiscal year ending December 31, 1995.
Income from Foreign Securities
Dividends and interest received by a 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 receives 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 such an option is
exercised and the Fund thus sells the securities subject to the option, the
premium the Fund receives will be 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 its
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.
Zero Coupon and Payment-in-Kind Securities
Certain Funds may acquire zero coupon or other securities issued with
original issue discount. As the holder of those securities, a Fund must include
in its income the original issue discount that accrues on the securities during
the taxable year, even if the Fund receives no corresponding payment on the
securities during the year. Similarly, a Fund must include in its gross income
securities it receives as "interest" on payment-in-kind securities. Because
each Fund annually must distribute substantially all of its investment company
taxable income, including any original issue discount and other non-cash income,
in order to satisfy the Distribution Requirement described above and to avoid
imposition of the Excise Tax, a Fund may be required in a particular year to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives. Those distributions will be made from a Fund's cash
assets or from the proceeds of sales of portfolio securities, if necessary. A
Fund may realize capital gains or losses from those sales, which would increase
or decrease its investment company taxable income and/or net capital gains. In
addition, any such gains may be realized on the disposition of securities held
for less than three months. Because of the Short-Short Limitation, any such
gains would reduce a Fund's ability to sell other securities, or certain
options, futures or forward contracts, held for less than three months that it
might wish to sell in the ordinary course of its portfolio management.
PORTFOLIO TRANSACTIONS AND BROKERAGE
One of the duties undertaken by WRIMCO pursuant to the Management
Agreement is to arrange the purchase and sale of securities for the portfolio of
each 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. The individual
who manages a Fund may manage other advisory accounts with similar investment
objectives. It can be anticipated that the manager will frequently place
concurrent orders for all or most accounts for which the manager has
responsibility. 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 a Fund, WRIMCO 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. WRIMCO 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/or other services,
including pricing or quotation services directly or through others ("brokerage
services") considered by WRIMCO to be useful or desirable for its investment
management of the Fund and/or the other funds and accounts over which WRIMCO 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 WRIMCO that the commission
is reasonable in relation to the brokerage services provided. Subject to the
foregoing considerations WRIMCO may also consider the willingness of particular
brokers and dealers to sell shares of the Fund and other funds managed by WRIMCO
and its affiliates as a factor in its selection. No allocation of brokerage or
principal business is made to provide any other benefits to WRIMCO 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 WRIMCO 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 WRIMCO 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 WRIMCO.
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 WRIMCO;
serves to make available additional views for consideration and comparisons; and
enables WRIMCO 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, WRIMCO may consider sales of
shares of a Fund and other funds managed by WRIMCO and its affiliates as a
factor in the selection of brokers to execute portfolio transactions. WRIMCO
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, 1994, 1993 and 1992.
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.
1994 1993 1992
---------- ---------- ----------
United Bond Fund ........ $ 0 $ 1,236 $2,034
United Income Fund ...... 1,730,535 2,078,626 1,162,935
United Accumulative Fund 4,787,543 5,230,858 4,015,461
United Science and
Technology Fund ...... 516,617 438,946 314,979
---------- ---------- ----------
Total ................ $7,034,695 $7,749,666 $5,495,409
========== ========== ==========
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 ............... 679,365,682 1,163,580
United Accumulative Fund ............ 2,351,033,359 3,677,479
United Science and Technology Fund .. 204,261,973 328,558
-------------- ----------
Total ............................ $3,234,661,014 $5,169,617
============== ==========
As of December 31, 1994, United Income Fund and United Accumulative Fund
owned securities of Merrill Lynch & Co., Inc. in the amounts of $10,411,563 and
$9,462,788, respectively. Merrill Lynch & Co., Inc. is a regular broker of each
Fund.
The Corporation, WRIMCO and Waddell & Reed, Inc. have adopted a Code of
Ethics which imposes restrictions on the personal investment activities of their
employees, officers and interested directors.
Buying and Selling With Other Funds
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 frequently 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 of
securities 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
fractional share of a Class has the same rights, in proportion, as a full share
of that Class.
Each Fund offers two Classes of its shares: Class A and Class Y. Prior to
June 17, 1995, each Fund offered only one Class of its shares to the public.
Shares outstanding on that date were designated as Class A shares. Each Class
of a Fund represents interests in the same assets of the Fund and differ as
follows: each Class of shares has exclusive voting rights on matters pertaining
to matters appropriately limited to that Class; Class A shares are subject to an
initial sales charge and to an ongoing service fee; each Class may bear
differing amounts of certain Class-specific expenses; and each Class has a
separate exchange privilege. The Funds do not anticipate that there will be any
conflicts between the interests of holders of the different Classes of shares of
the same Fund by virtue of those Classes. On an ongoing basis, the Board of
Directors will consider whether any such conflict exists and, if so, take
appropriate action. Each share of a Fund is entitled to equal voting, dividend,
liquidation and redemption rights, except that due to the differing expenses
borne by the two Classes, dividends and liquidation proceeds of Class A shares
are expected to be lower than for Class Y shares of the same Fund.
Each share of each Fund (regardless of Class) 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 together as a separate class, such as with
respect to a change in an investment restriction of a particular Fund, except
that as to matters for which a separate vote of a Class is required by the 1940
Act or which affects the interests of one or more particular Classes, the
affected shareholders vote as a separate Class. 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, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Aerospace - 1.98%
McDonnell Douglas Corporation,
9.25%, 4-1-2002 ....................... $10,000 $ 10,269,600
Airlines - 1.81%
Federal Express Corporation,
7.89%, 9-23-2008 ...................... 10,000 9,357,700
Automotive - 3.67%
General Motors Corporation,
8.8%, 3-1-2021 ........................ 11,600 11,876,428
Toyota Motor Credit Corporation, Medium
Term, Three Year Basket Inverse
Floating Rate,
3.02%, 8-5-96 (A) ..................... 8,000 7,120,000
Total ................................. 18,996,428
Banks and Savings and Loans - 11.85%
Banco Nacional de Commercio Exterior,
7.5%, 7-1-2000 ........................ 3,000 2,422,500
BankAmerica Corporation,
8.125%, 8-15-2004 ..................... 5,000 4,753,550
Bayerische Landesbank Girozentale, NY Branch,
CD, Currency Protected Duetschemark Swap
Rate Inverse Floating Rate,
3.06%, 3-28-97 (B) .................... 5,000 4,450,000
Central Fidelity Banks, Inc.,
8.15%, 11-15-2002 ..................... 5,000 4,831,400
Chevy Chase Savings Bank, F.S.B.,
9.25%, 12-1-2005 ...................... 1,500 1,260,000
Citicorp,
7.75%, 6-15-2006 ...................... 5,000 4,647,150
First Union Corporation,
8.0%, 11-15-2002 ...................... 7,600 7,284,296
Great Western Financial Corporation,
8.6%, 2-1-2002 ........................ 7,000 6,950,440
Kansallis-Osake-Pankki:
9.75%, 12-15-98 ....................... 1,000 1,035,570
10.0%, 5-1-2002 ....................... 5,000 5,366,100
RBSG Capital Corp.,
10.125%, 3-1-2004 ..................... 5,000 5,447,100
Riggs National Corporation,
8.5%, 2-1-2006 ....................... 4,000 3,700,000
Skandia Enskilda Banken, NY Branch Certificate
of Deposit Dollarized Australian Dollar
Reset,
6.125%, 4-5-99 (C) .................... 5,000 4,200,000
Wells Fargo & Company,
8.75%, 5-1-2002 ....................... 5,000 5,029,750
Total ................................. 61,377,856
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Building - 5.37%
Canadian Pacific Forest Products Ltd.,
9.25%, 6-15-2002 ..................... $ 3,000 $ 2,798,520
Cemex, S.A.,
8.875%, 6-10-98 ....................... 2,000 1,740,000
Doman Industries Limited,
8.75%, 3-15-2004 ...................... 2,000 1,765,000
Georgia-Pacific Corporation,
9.5%, 5-15-2022 ....................... 3,000 3,008,550
Noranda Forest Inc.,
7.5%, 7-15-2003 ....................... 3,000 2,765,460
Noranda Inc.,
8.625%, 7-15-2002 ..................... 7,000 6,944,910
Owens-Corning Fiberglas Corporation,
8.875%, 6-1-2002 ...................... 5,000 4,996,650
Del Webb Corporation,
10.875%, 3-31-2000 .................... 4,000 3,800,000
Total ................................. 27,819,090
Canadian Oil - 1.90%
NOVA Corporation of Alberta,
8.5%, 12-15-2012 ...................... 10,000 9,829,400
Chemicals Major - 1.87%
Dow Capital Corporation,
9.0%, 5-15-2010 ....................... 9,550 9,692,486
Domestic Oil - 3.82%
Apache Corporation,
9.25%, 6-1-2002 ....................... 5,000 5,096,700
LASMO (USA) INC.,
7.125%, 6-1-2003 ...................... 5,000 4,448,600
Seagull Energy Corporation,
7.875%, 8-1-2003 ...................... 4,000 3,460,000
Union Texas Petroleum Holdings, Inc.,
8.25%, 11-15-99 ....................... 7,000 6,801,760
Total ................................. 19,807,060
Electrical Equipment - 3.15%
General Electric Capital Corporation:
8.3%, 9-20-2009 ....................... 15,000 15,285,150
8.65%, 5-1-2018 ....................... 1,000 1,008,680
Total ................................. 16,293,830
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Financial - 10.80%
Banc One Credit Card Master Trust,
7.55%, 12-15-99 ....................... $ 5,000 $ 4,929,650
Chrysler Financial Corporation,
12.75%, 11-1-99 ....................... 9,000 10,452,240
Countrywide Mortgage Backed Securities,
Inc., Series 1994-G A5,
6.5%, 4-25-2024 ....................... 10,000 9,198,600
DLJ Mortgage Acceptance Corp.
1994-3 A13,
6.5%, 4-25-2024 ....................... 4,898 4,246,079
Equicon Loan Trust,
7.30%, 2-18-2013 ...................... 4,571 3,948,458
General Motors Acceptance Corporation,
8.875%, 6-1-2010 ...................... 10,000 10,383,100
Greyhound Financial Corporation,
8.79%, 11-15-2001 ..................... 3,000 3,006,450
Residential Funding Mortgage
Securities I, Inc.,
8.0%, 8-25-2020 ....................... 10,000 9,762,500
Total ................................. 55,927,077
Hospital Management - 0.58%
HealthTrust Inc.:
10.75%, 5-1-2002 ...................... 1,500 1,593,750
8.75%, 3-15-2005 ...................... 1,500 1,432,500
Total ................................. 3,026,250
Household Products - 1.92%
Procter & Gamble Company (The),
8.0%, 9-1-2024 ........................ 10,000 9,918,800
Insurance - 0.35%
Reliance Group Holdings, Inc.,
9.0%, 11-15-2000 ...................... 2,000 1,820,000
International Oil - 0.28%
YPF Sociedad Anoima,
8.0%, 2-15-2004........................ 2,000 1,440,000
Leisure Time - 3.89%
Marriott International, Inc.,
6.75%, 12-15-2003 ..................... 5,000 4,409,800
Tele-Communications, Inc.:
6.58%, 2-15-2005 ..................... 3,000 2,772,270
9.8%, 2-1-2012 ....................... 5,000 5,001,050
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Leisure Time (Continued)
Time Warner Incorporated,
7.95%, 2-1-2000 ....................... $ 5,000 $ 4,687,300
Turner Broadcasting System, Inc.,
8.375%, 7-1-2013 ...................... 4,000 3,252,320
Total ................................. 20,122,740
Machinery - 0.41%
Caterpillar, Inc.,
9.375%, 8-15-2011 ..................... 2,000 2,139,360
Multi-Industry - 0.52%
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 3,000 2,715,000
Public Utilities - Pipelines - 3.95%
Arkla, Inc.,
8.875%, 7-15-99 ....................... 10,000 9,750,000
Coastal Corporation (The),
10.375%, 10-1-2000 .................... 5,000 5,315,950
Tenneco Inc.,
10.375%, 11-15-2000 ................... 5,000 5,368,250
Total ................................. 20,434,200
Publishing and Advertising - 2.15%
News America Holdings Incorporated:
9.125%, 10-15-99 ...................... 5,000 5,039,750
8.25%, 8-10-2018 ...................... 7,000 6,129,270
Total ................................. 11,169,020
Railroads - 1.16%
Penn Central Corporation (The),
10.625%, 4-15-2000 .................... 5,750 6,009,728
Retailing - 0.17%
Penn Traffic Company,
8.625%, 12-15-2003 .................... 1,000 875,000
Steel - 0.95%
USX Corporation,
8.21%, 1-21-2000 ...................... 5,000 4,903,750
Telecommunications - 3.02%
Bell Telephone Company of Pennsylvania (The),
8.35%, 12-15-2030 ..................... 5,000 5,236,850
New England Telephone & Telegraph Company,
7.875%, 11-15-2029 .................... 10,000 10,407,800
Total ................................. 15,644,650
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Tobacco - 0.92%
RJR Nabisco, Inc.,
6.80%, 9-1-2001 ....................... $ 5,000 $ 4,738,600
TOTAL CORPORATE DEBT SECURITIES - 66.49% $344,327,625
(Cost: $369,787,165)
MUNICIPAL BOND - 0.32%
Washington
Washington Public Power Supply System,
Nuclear Project No. 1 Refunding
Revenue Bonds, Series 1993C,
5.375%, 7-1-2015 ...................... 2,000 $ 1,627,500
(Cost: $1,970,444)
OTHER GOVERNMENT SECURITIES
Argentina - 0.28%
Republic of Argentina,
8.375%, 12-20-2003 .................... 2,000 1,425,000
Canada - 2.40%
Hydro Quebec,
8.05%, 7-7-2024 ....................... 5,000 4,807,100
Province of Manitoba,
9.125%, 1-15-2018 ..................... 7,000 7,628,040
Total ................................. 12,435,140
Mexico - 0.62%
United Mexican States,
8.5%, 9-15-2002 ....................... 4,000 3,220,000
Supranational - 1.00%
Inter-American Development Bank,
8.4%, 9-1-2009 ........................ 5,000 5,198,650
TOTAL OTHER GOVERNMENT SECURITIES - 4.30% $ 22,278,790
(Cost: $23,969,755)
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
7.5%, 11-15-2017 ...................... $ 8,000 $ 7,490,000
7.5%, 4-15-2019 ....................... 10,971 9,390,713
Federal National Mortgage Association:
7.0%, 7-25-2006 ....................... 10,000 9,271,800
7.5%, 12-25-2006 ...................... 5,000 4,667,150
7.5%, 9-1-2009 ........................ 9,948 9,521,607
6.5%, 5-25-2018 ....................... 10,000 8,887,500
8.0%, 5-25-2019 ....................... 5,865 5,771,091
7.0%, 8-25-2021 ....................... 10,000 8,900,000
United States Treasury:
6.875%, 10-31-96 ...................... 25,000 24,664,000
6.5%, 5-15-97 ......................... 10,000 9,723,400
5.75%, 10-31-97 ....................... 10,000 9,479,700
11.25%, 2-15-2015 ..................... 10,000 13,212,500
8.875%, 5-15-2017 ..................... 8,000 8,714,960
7.5%, 11-15-2024 ...................... 5,000 4,782,800
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 25.97% $134,477,221
(Cost: $139,327,010)
TOTAL SHORT-TERM SECURITIES - 1.69% $ 8,771,972
(Cost: $8,771,972)
TOTAL INVESTMENT SECURITIES - 98.77% $511,483,108
(Cost: $543,826,346)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.23% 6,353,212
NET ASSETS - 100.00% $517,836,320
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1994
Shares Value
COMMON STOCKS
Aerospace - 0.52%
Boeing Company (The) ................... 350,000 $ 16,362,500
Airlines - 1.56%
AMR Corporation* ....................... 400,000 21,300,000
Southwest Airlines Co. ................. 1,650,000 27,637,500
Total ................................. 48,937,500
Automotive - 7.43%
Chrysler Corporation ................... 1,100,000 53,900,000
Daimler-Benz AG (D) .................... 40,000 19,670,840
Daimler-Benz AG, ADS ................... 154,000 7,584,500
Dana Corporation ....................... 760,000 17,765,000
Eaton Corporation ...................... 500,000 24,750,000
Ford Motor Company ..................... 1,900,000 53,200,000
General Motors Corporation ............. 1,000,000 42,250,000
Magna Group, Inc., Class A ............. 376,500 14,448,188
Total ................................. 233,568,528
Banks and Savings and Loans - 3.75%
Citicorp ............................... 750,000 31,031,250
Deutsche Bank Aktiengesellschaft (D) ... 44,000 20,445,304
First Bank Systems, Inc. ............... 500,000 16,625,000
First Interstate Bancorporation ........ 300,000 20,287,500
Midlantic Corporation .................. 400,000 10,624,800
Skandinaviska Enskilda Banken (D)* ..... 3,300,000 18,866,100
Total ................................. 117,879,954
Beverages - 1.15%
PepsiCo, Inc. .......................... 1,000,000 36,250,000
Biotechnology and Medical Services - 0.71%
Medtronic, Inc. ........................ 400,000 22,250,000
Building - 4.05%
Armstrong World Industries, Inc. ....... 900,000 34,650,000
Georgia-Pacific Corporation ............ 425,000 30,387,500
Louisiana-Pacific Corporation .......... 675,000 18,393,750
Temple-Inland Inc. ..................... 350,000 15,793,750
Weyerhaeuser Company ................... 750,000 28,125,000
Total ................................. 127,350,000
Chemicals Major - 6.37%
Air Products & Chemicals, Inc. ......... 1,150,000 51,318,750
du Pont (E.I.) de Nemours and Company .. 1,000,000 56,250,000
PPG Industries, Inc. ................... 1,250,000 46,406,250
Praxair, Inc. .......................... 1,000,000 20,500,000
Union Carbide Corporation .............. 875,000 25,703,125
Total ................................. 200,178,125
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Chemicals Specialty and Miscellaneous
Technology - 3.88%
Betz Laboratories, Inc. ................ 500,000 $ 22,125,000
Minnesota Mining and Manufacturing
Company ............................... 500,000 26,687,500
Polaroid Corporation ................... 1,400,000 45,500,000
Xerox Corporation ...................... 280,000 27,720,000
Total ................................. 122,032,500
Computers and Office Equipment - 3.54%
General Motors Corporation, Class E .... 1,000,000 38,500,000
International Business Machines
Corporation ........................... 500,000 36,750,000
Microsoft Corporation* ................. 300,000 18,375,000
Oracle Systems Corporation* ............ 400,000 17,700,000
Total ................................. 111,325,000
Consumer Electronics and Appliances - 1.22%
Whirlpool Corporation .................. 765,000 38,441,250
Electrical Equipment - 2.74%
Emerson Electric Co. ................... 400,000 25,000,000
General Electric Company ............... 1,200,000 61,200,000
Total ................................. 86,200,000
Electronics - 5.09%
AMP Incorporated ....................... 550,000 40,012,500
Applied Materials, Inc.* ............... 865,000 36,330,000
cisco Systems, Inc.* ................... 1,000,000 35,062,000
Intel Corporation ...................... 765,000 48,768,750
Total ................................. 160,173,250
Engineering and Construction - 1.61%
BBC Brown Boveri Baen, Series A (D) .... 25,000 21,447,650
Fluor Corporation ...................... 400,000 17,250,000
Foster Wheeler Corporation ............. 400,000 11,900,000
Total ................................. 50,597,650
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Financial - 2.38%
Federal Home Loan Mortgage Corporation . 500,000 $ 25,250,000
Federal National Mortgage Association .. 295,200 21,512,700
Grupo Financiero Banamex Accival,
S.A. de C.V., Class B, CPO Shares (D) . 1,000,000 2,800,000
Grupo Financiero Banamex Accival,
S.A. de C.V., Class C (D) ............. 1,000,000 2,880,000
Grupo Financiero Banamex Accival,
S.A. de C.V., Class L (D) ............. 50,000 144,000
Household International, Inc. .......... 600,000 22,275,000
Total ................................. 74,861,700
Food and Related - 1.33%
CPC International Inc. ................. 500,000 26,625,000
Pet Incorporated ....................... 765,000 15,108,750
Total ................................. 41,733,750
Hospital Management - 0.93%
United HealthCare Corporation .......... 650,000 29,331,250
Household Products - 3.58%
Colgate-Palmolive Company .............. 600,000 38,025,000
Gillette Company (The) ................. 500,000 37,375,000
Procter & Gamble Company (The) ......... 600,000 37,200,000
Total.................................. 112,600,000
Leisure Time - 2.33%
Walt Disney Company (The) .............. 700,000 32,287,500
McDonald's Corporation ................. 1,400,000 40,950,000
Total ................................. 73,237,500
Machinery - 7.04%
Caterpillar Inc. ....................... 1,600,000 88,200,000
Clark Equipment Company* ............... 500,000 27,125,000
Deere & Company ........................ 685,000 45,381,250
Ingersoll-Rand Company ................. 400,000 12,600,000
Mannesmann AG (D) ...................... 45,000 12,255,525
Parker Hannifin Corporation ............ 400,000 18,200,000
Trinova Corporation .................... 600,000 17,625,000
Total ................................. 221,386,775
Metals and Mining - 0.55%
Phelps Dodge Corporation ............... 280,000 17,325,000
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Multi-Industry - 2.11%
ITT Corporation ........................ 750,204 $ 66,486,830
Packaging and Containers - 0.67%
Pilkington PLC (D) ..................... 8,164,516 21,227,742
Paper - 2.19%
International Paper Company ............ 600,000 45,225,000
Union Camp Corporation ................. 500,000 23,562,500
Total ................................. 68,787,500
Railroads - 3.31%
CSX Corporation ........................ 350,000 24,368,750
Conrail Inc. ........................... 600,000 30,300,000
Norfolk Southern Corporation ........... 300,000 18,187,500
Southern Pacific Rail Corporation* ..... 460,000 8,337,500
Union Pacific Corporation .............. 500,000 22,812,500
Total ................................. 104,006,250
Retailing - 9.90%
Cifra, S.A. de C.V., Series C (D) ...... 7,000,000 13,244,000
Circuit City Stores, Inc. .............. 1,600,000 35,600,000
Dayton Hudson Corporation .............. 316,600 22,399,450
Dillard Department Stores, Inc.,
Class A ............................... 950,000 25,412,500
Gap, Inc. (The) ........................ 700,000 21,350,000
Home Depot, Inc. (The) ................. 765,000 35,190,000
Limited, Inc. (The) .................... 750,000 13,593,750
May Department Stores Company (The) .... 1,000,000 33,750,000
Next plc (D) ........................... 5,100,000 20,527,500
Nordstrom, Inc. ........................ 190,000 8,003,750
Penney (J.C.) Company, Inc. ............ 676,000 30,166,500
Sears, Roebuck and Co. ................. 200,000 9,200,000
Tommy Hilfiger Corporation* ............ 280,000 12,635,000
Toys "R" Us Inc.* ...................... 300,000 9,150,000
Wal-Mart Stores, Inc. .................. 1,000,000 21,250,000
Total ................................. 311,472,450
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Steel - 0.84%
Avesta Sheffield AB (D)* ............... 2,660,063 $ 26,300,043
Telecommunications - 7.95%
AT&T Corporation ....................... 500,000 25,125,000
BellSouth Corporation .................. 315,000 17,049,375
General Instrument Corporation* ........ 1,000,000 30,000,000
MCI Communications Corporation ......... 1,475,000 27,194,575
Motorola, Inc. ......................... 1,700,000 98,387,500
Telefonaktiebolaget LM Ericsson,
Class B, ADR........................... 500,000 27,625,000
Telefonos de Mexico S.A. de C.V., ADR .. 600,000 24,600,000
Total ................................. 249,981,450
Tire and Rubber - 1.07%
Goodyear Tire & Rubber Company (The) ... 1,000,000 33,625,000
TOTAL COMMON STOCKS - 89.80% $2,823,909,497
(Cost: $1,996,644,116)
PREFERRED STOCK - 0.89%
Telecommunications
Nokia Corporation (D) ................... 190,000 $ 27,992,890
(Cost: $18,567,891)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Banks and Savings and Loans - 0.31%
Morgan Guaranty Trust Company of New York,
7.375%, 2-1-2002 ...................... $10,250 9,680,100
Electrical Equipment - 0.32%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 10,000 10,190,100
TOTAL CORPORATE DEBT SECURITIES - 0.63% $ 19,870,200
(Cost: $19,842,401)
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
8.5%, 5-15-97 ......................... $16,000 $ 16,237,440
8.75%, 10-15-97 ....................... 20,000 20,450,000
5.75%, 8-15-2003 ...................... 50,000 43,453,000
10.375%, 11-15-2012 ................... 8,500 10,115,000
9.0%, 11-15-2018 ...................... 20,000 22,096,800
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 3.57% $ 112,352,240
(Cost: $113,838,558)
SHORT-TERM SECURITIES
Commercial Paper
Banks and Savings and Loans - 0.34%
ANZ(DE) Inc.,
6.02%, 1-4-95 ......................... 10,440 10,434,763
U.S. Bancorp,
Master Note ........................... 313 313,000
Total ................................. 10,747,763
Drugs and Hospital Supply - 0.40%
Baxter International Inc.,
6.2%, 1-31-95 ......................... 2,610 2,596,515
Pfizer Inc.,
5.875%, 2-3-95 ........................ 10,000 9,946,146
Total ................................. 12,542,661
Financial - 2.92%
AT&T Capital Corp.,
5.95%, 1-17-95 ........................ 10,805 10,776,427
Associates Corporation of North America,
5.97%, 1-9-95 ......................... 8,910 8,898,179
Dana Credit Corp.,
6.28%, 2-10-95 ........................ 7,860 7,805,155
Kerr-McGee Credit Corp.:
6.15%, 1-11-95 ........................ 1,860 1,856,822
6.2%, 1-11-95 ......................... 9,440 9,423,742
Merrill Lynch & Co. Inc.,
5.8%, 1-9-95 .......................... 10,425 10,411,563
Nestle Capital Corp.,
5.9%, 1-31-95 ......................... 8,985 8,940,824
Sears Roebuck Acceptance Corp.,
6.02%, 1-19-95 ........................ 10,000 9,969,900
Textron Financial Corp.:
5.9%, 1-11-95 ......................... 5,695 5,685,667
6.1%, 1-31-95 ......................... 10,000 9,949,167
USAA Capital Corp.,
5.95%, 1-19-95 ........................ 1,165 1,161,534
USL Capital Corp.,
6.0%, 1-17-95 ......................... 6,790 6,771,893
Total ................................. 91,650,873
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Food and Related - 0.68%
ConAgra, Inc.:
6.1%, 1-10-95 ......................... $ 1,305 $ 1,303,010
6.14%, 1-17-95 ........................ 3,500 3,490,449
General Mills, Inc.,
Master Note ........................... 3,367 3,367,000
Quaker Oats Co.,
6.18%, 1-4-95 ......................... 11,244 11,238,209
Sara Lee Corporation,
Master Note ........................... 2,104 2,104,000
Total ................................. 21,502,668
Public Utilities - Electric - 0.37%
PS Colorado Credit Corp.,
6.13%, 1-23-95 ........................ 3,030 3,018,649
Pacific Gas & Electric Co.,
5.95%, 2-1-95 ......................... 8,530 8,486,296
Total ................................. 11,504,945
Public Utilities - Gas - 0.20%
Bay State Gas Co.,
5.98%, 1-13-95 ........................ 3,150 3,143,721
Questar Corp.,
5.9%, 1-27-95 ......................... 3,170 3,156,492
Total ................................. 6,300,213
Total Commercial Paper - 4.91% 154,249,123
Commercial Paper (backed by irrevocable bank
letter of credit) - 0.21%
Banks and Savings and Loans
American Bankers Insurance (Barclays
Bank PLC),
6.0%, 1-11-95 ......................... 6,670 6,658,883
TOTAL SHORT-TERM SECURITIES - 5.12% $ 160,908,006
(Cost: $160,908,006)
TOTAL INVESTMENT SECURITIES - 100.01% $3,145,032,833
(Cost: $2,309,800,972)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.01%) (128,626)
NET ASSETS - 100.00% $3,144,904,207
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1994
Shares Value
COMMON STOCKS
Banks and Savings and Loans - 3.38%
City National Corporation .............. 250,000 $ 2,656,250
Crestar Financial Corporation .......... 229,200 8,623,650
First Chicago Corporation .............. 200,000 9,550,000
Grupo Financiero Bancomer, S.A. de
C.V., Class C (D) ..................... 4,500,000 2,475,000
Mercantile Bancorporation Inc. ......... 300,000 9,375,000
Total ................................. 32,679,900
Biotechnology and Medical Services - 0.84%
Centocor, Inc.* ........................ 500,000 8,156,000
Building - 0.60%
United Dominion Realty Trust, Inc. ..... 400,000 5,750,000
Chemicals Major - 3.13%
Air Products & Chemicals, Inc. ......... 300,000 13,387,500
du Pont (E.I.) de Nemours and
Company .............................. 300,000 16,875,000
Total ................................. 30,262,500
Computers and Office Equipment - 5.72%
Cerner Corporation* .................... 78,400 3,469,200
Compuware Corporation* ................. 400,000 14,350,000
General Motors Corporation, Class E .... 300,000 11,550,000
HBO & Company .......................... 200,000 6,875,000
Informix Corporation* .................. 250,000 8,015,500
International Business Machines
Corporation ........................... 150,000 11,025,000
Total ................................. 55,284,700
Drugs and Hospital Supply - 5.00%
Abbott Laboratories .................... 500,000 16,312,500
Baxter International Inc. .............. 400,000 11,300,000
Schering-Plough Corporation ............ 150,000 11,100,000
Warner-Lambert Company ................. 125,000 9,625,000
Total ................................. 48,337,500
Electronics - 10.06%
cisco Systems, Inc.* ................... 300,000 10,518,600
Emerson Electric Co. ................... 350,000 21,875,000
General Electric Company ............... 550,000 28,050,000
Hewlett-Packard Company ................ 100,000 9,987,500
Level One Communications,
Incorporated* ......................... 200,000 3,050,000
Micron Technology Inc. ................. 200,000 8,825,000
Texas Instruments Incorporated ......... 200,000 14,975,000
Total ................................. 97,281,100
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Financial - 1.06%
American Express Company ............... 250,000 $ 7,375,000
Grupo Financiero Banamex Accival,
S.A. de C.V., Class C (D) ............. 1,000,000 2,880,000
Total ................................. 10,255,000
Food and Related - 3.17%
CPC International Inc. ................. 200,000 10,650,000
Pet Incorporated ....................... 500,000 9,875,000
Sara Lee Corporation ................... 400,000 10,100,000
Total ................................. 30,625,000
Hospital Management - 6.27%
American Medical Holdings, Inc.* ....... 400,000 9,650,000
Columbia/HCA Healthcare Corporation .... 583,700 21,305,050
National Medical Enterprises, Inc.* .... 900,000 12,712,500
Sierra Health Services, Inc.* .......... 250,000 7,906,250
United HealthCare Corporation .......... 200,000 9,025,000
Total ................................. 60,598,800
Insurance - 8.32%
American General Corporation ........... 550,000 15,537,500
American Re Corporation* ............... 350,000 11,287,500
First Colony Corporation ............... 400,000 8,950,000
NWNL Companies, Inc. (The) ............. 200,000 5,800,000
National Re Corporation ................ 209,600 5,502,000
SAFECO Corporation ..................... 150,000 7,818,750
SunAmerica Corporation ................. 200,000 7,250,000
TIG Holdings, Inc. ..................... 700,000 13,125,000
USLIFE Corporation ..................... 150,000 5,231,250
Total ................................. 80,502,000
Leisure Time - 3.55%
Comcast Corporation, Class A ........... 600,000 9,412,200
Tele-Communications, Inc., Class A* .... 500,000 10,906,000
Time Warner Incorporated ............... 400,000 14,050,000
Total ................................. 34,368,200
Machinery - 0.41%
Ingersoll-Rand Company ................. 125,000 3,937,500
Metals and Mining - 0.96%
Phelps Dodge Corporation ............... 150,000 9,281,250
Multi-Industry - 2.29%
ITT Corporation ........................ 250,000 22,156,250
Public Utilities - Electric - 1.01%
Peco Energy Company .................... 400,000 9,800,000
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Railroads - 4.60%
Kansas City Southern Industries,
Inc. .................................. 264,000 $ 8,151,000
Norfolk Southern Corporation ........... 300,000 18,187,500
Southern Pacific Rail Corporation* ..... 500,000 9,062,500
Union Pacific Corporation .............. 200,000 9,125,000
Total ................................. 44,526,000
Retailing - 1.05%
Charming Shoppes Inc. .................. 500,000 3,281,000
Family Dollar Stores, Inc. ............. 550,000 6,875,000
Total ................................. 10,156,000
Steel - 1.01%
Bethlehem Steel Corporation* ........... 250,000 4,500,000
Inland Steel Industries, Inc.* ......... 150,000 5,268,750
Total ................................. 9,768,750
Telecommunications - 7.73%
AT&T Corporation ....................... 500,000 25,125,000
LDDS Communications, Inc.* ............. 150,000 2,925,000
MCI Communications Corporation ......... 700,000 12,905,900
Motorola, Inc. ......................... 250,000 14,468,750
Sprint Corporation ..................... 200,000 5,525,000
Telefonaktiebolaget LM Ericsson,
Class B, ADR .......................... 250,000 13,812,500
Total ................................. 74,762,150
TOTAL COMMON STOCKS - 70.16% $678,488,600
(Cost: $718,167,035)
PREFERRED STOCK - 0.78%
Telecommunications
Nokia Corporation, ADS* ................ 100,000 $ 7,500,000
(Cost: $7,311,532)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Automotive - 2.07%
Hertz Corp.,
6.02%, 1-11-95 ........................ $20,000 19,966,555
Banks and Savings and Loans - 0.16%
U.S. Bancorp,
Master Note ........................... 1,585 1,585,000
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Computers and Office Equipment - 0.27%
Honeywell Inc.,
6.05%, 1-19-95 ........................ $ 2,595 $ 2,587,150
Consumer Electronics and Appliances - 0.44%
TDK (USA) Corp.,
6.05%, 1-17-95 ........................ 4,300 4,288,438
Drugs and Hospital Supply - 1.26%
Baxter International Inc.,
6.2%, 1-31-95 ......................... 12,215 12,151,889
Financial - 11.52%
AT&T Capital Corp.:
5.8%, 1-4-95 .......................... 3,000 2,998,550
5.98%, 1-4-95 ......................... 3,745 3,743,134
6.0%. 1-6-95 .......................... 8,320 8,313,067
Associates Corporation of North America,
5.97%, 1-9-95 ......................... 5,130 5,123,194
Avco Financial Services Inc.,
5.95%, 1-20-95 ........................ 6,685 6,664,007
Block Financial Corp.,
5.87%, 1-9-95 ......................... 12,425 12,408,792
Caterpillar Financial Services Corp.,
6.0%, 1-23-95 ......................... 4,290 4,274,270
Ford Motor Credit Company,
6.02%, 1-12-95 ........................ 3,685 3,678,222
Merrill Lynch & Co. Inc.,
5.8%, 1-9-95 .......................... 9,475 9,462,788
PHH Corp.,
6.0%, 2-6-95 ......................... 2,940 2,922,360
Penney (J.C.) Financial Corp.,
5.7%, 1-4-95 .......................... 23,491 23,479,842
Philip Morris Capital Corp.,
5.92%, 1-25-95 ........................ 11,600 11,554,219
Textron Financial Corp.,
6.25%, 1-12-95 ........................ 7,900 7,884,913
USAA Capital Corp.,
5.95%, 1-19-95 ........................ 6,840 6,819,651
USL Capital Corp.,
6.0%, 1-17-95 ......................... 2,035 2,029,573
Total ................................. 111,356,582
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Food and Related - 0.45%
General Mills, Inc.,
Master Note ........................... $ 3,175 $ 3,175,000
Sara Lee Corporation,
Master Note ........................... 1,206 1,206,000
Total ................................. 4,381,000
Public Utilities - Electric - 3.01%
PS Colorado Credit Corp.,
6.2%, 1-6-95 .......................... 2,270 2,268,045
Potomac Electric Power Co.,
6.03%, 1-13-95 ........................ 1,920 1,916,141
Public Service Electric & Gas Co.:
6.05%, 1-6-95 ......................... 10,000 9,991,597
6.05%, 1-18-95 ........................ 15,000 14,957,146
Total ................................. 29,132,929
Public Utilities - Gas - 0.93%
Questar Corp.,
6.0%, 1-3-95 .......................... 9,000 8,997,000
Public Utilities - Pipelines - 0.16%
Enron Corp.,
6.0%, 1-31-95 ......................... 1,585 1,577,075
Publishing and Advertising - 1.45%
Times Mirror Co.,
6.05%, 1-11-95 ........................ 14,040 14,016,405
Retailing - 1.73%
Albertson's Inc.:
5.95%, 1-5-95 ......................... 9,000 8,994,050
5.875%, 1-20-95 ....................... 7,780 7,755,877
Total.................................. 16,749,927
Telecommunications - 3.47%
GTE North Inc.,
6.05%, 1-6-95 ......................... 14,900 14,887,480
US West Communications Inc.,
5.9%, 1-30-95 ......................... 18,700 18,611,123
Total ................................. 33,498,603
Total Commercial Paper - 26.92% 260,288,553
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (backed by irrevocable
bank letter of credit) - 1.72%
Banks and Savings and Loans
American Bankers Insurance (Barclays
Bank PLC),
6.0%, 1-11-95 ......................... $16,630 $16,602,283
United States Government Obligation - 1.08%
Federal National Mortgage Association,
6.55%, 1-6-95 ......................... 10,500 10,500,000
TOTAL SHORT-TERM SECURITIES - 29.72% $287,390,836
(Cost: $287,390,836)
TOTAL INVESTMENT SECURITIES - 100.66% $973,379,436
(Cost: $1,012,869,403)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.66%) (6,359,137)
NET ASSETS - 100.00% $967,020,299
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1994
Shares Value
COMMON STOCKS
Automotive - 1.72%
Borg-Warner Automotive, Inc. ........... 115,000 $ 2,889,375
AB Volvo (D) ........................... 300,000 5,649,900
Total ................................. 8,539,275
Biotechnology and Medical Services - 1.80%
Centocor, Inc.* ........................ 200,000 3,262,400
Ventritex, Inc.* ....................... 210,000 5,656,770
Total ................................. 8,919,170
Computers and Office Equipment - 29.62%
America Online, Inc.* .................. 86,000 4,816,000
Broderbund Software, Inc.* ............. 300,000 14,100,000
Cerner Corp.* .......................... 246,000 10,885,500
Computer Associates International,
Inc. .................................. 150,000 7,275,000
Compuware Corporation* ................. 202,000 7,246,750
First Data Corporation ................. 150,000 7,106,250
General Motors Corporation, Class E .... 330,000 12,705,000
HBO & Company .......................... 280,000 9,625,000
Informix Corporation* .................. 600,000 19,237,200
Intuit* ................................ 70,000 4,672,500
Macromedia, Inc.* ...................... 155,000 3,991,250
Microsoft Corporation* ................. 133,000 8,146,250
Oracle Systems Corporation* ............ 240,000 10,620,000
Parametric Technology Corporation* ..... 400,000 13,750,000
ParcPlace Systems, Inc.* ............... 212,500 4,794,425
Shiva Corporation* ..................... 39,600 1,579,050
Synopsys, Inc.* ........................ 150,000 6,525,000
Total ................................. 147,075,175
Consumer Electronics and Appliances - 0.69%
Rival Company (The) .................... 200,000 3,450,000
Drugs and Hospital Supply - 5.77%
Abbott Laboratories .................... 150,000 4,893,750
OmniCare, Inc. ......................... 150,000 6,581,250
Roche Holdings AG (D) .................. 1,200 5,798,318
Schering-Plough Corporation ............ 50,000 3,700,000
Warner-Lambert Company ................. 100,000 7,700,000
Total ................................. 28,673,318
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Electrical Equipment - 1.23%
General Electric Company ............... 120,000 $ 6,120,000
Electronics - 14.94%
Advanced Technology Materials Inc.* .... 127,500 741,030
Applied Materials, Inc.* ............... 160,000 6,720,000
Atmel Corporation* ..................... 190,000 6,353,030
Cascade Communications Corp.* .......... 111,600 6,877,350
cisco Systems, Inc.* ................... 375,600 13,169,287
Lam Research* .......................... 200,000 7,425,000
Micron Technology, Inc. ................ 110,000 4,853,750
Summa Four, Inc.* ...................... 200,000 5,300,000
Texas Instruments Incorporated ......... 75,000 5,615,625
3Com Corporation* ...................... 120,000 6,187,440
Xilinx, Inc.* .......................... 185,000 10,938,125
Total ................................. 74,180,637
Engineering and Construction - 0.33%
Grupo Tribasa, S.A. de C.V., ADS* ...... 100,000 1,662,500
Hospital Management - 5.60%
Columbia/HCA Healthcare Corporation .... 125,000 4,562,500
Mid Atlantic Medical Services, Inc.* ... 300,000 6,862,500
Sierra Health Services, Inc. ........... 232,000 7,337,000
United HealthCare Corporation .......... 200,000 9,025,000
Total ................................. 27,787,000
Insurance - 1.03%
Insurance Auto Auctions, Inc.* ......... 165,000 5,115,000
Leisure Time - 1.06%
CBS Inc. ............................... 60,000 3,322,500
Grupo Televisa S.A. de C.V., CPO
Shares (D) ............................ 120,000 1,932,000
Total ................................. 5,254,500
Machinery - 5.13%
Cognex Corporation* .................... 260,000 6,792,500
Deere & Company ........................ 130,000 8,612,500
Parker Hannifin Corporation ............ 114,700 5,218,850
Trinova Corporation .................... 165,000 4,846,875
Total ................................. 25,470,725
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Services, Consumer and Business - 3.31%
Alternative Resources Corporation* ..... 150,000 $ 4,687,500
CUC International Inc.* ................ 350,000 11,725,000
Total ................................. 16,412,500
Telecommunications - 13.17%
Applied Digital Access, Inc.* .......... 200,000 5,100,000
Ascend Communications, Inc.* ........... 240,000 9,810,000
DSC Communications Corporation* ........ 200,000 7,212,400
LDDS Communications, Inc.* ............. 150,000 2,925,000
MFS Communications Company, Inc.* ...... 230,000 7,590,000
Motorola, Inc. ......................... 150,000 8,681,250
Ortel Corporation* ..................... 207,000 5,433,750
Rogers Cantel Mobile Communications
Inc., Class B* ........................ 200,000 5,850,000
Telefonaktiebolaget LM Ericsson,
Class B, ADR .......................... 80,000 4,420,000
Tellabs* ............................... 150,000 8,343,750
Total ................................. 65,366,150
TOTAL COMMON STOCKS - 85.40% $424,025,950
(Cost: $265,535,174)
PREFERRED STOCK - 1.51%
Telecommunications
Nokia Corporation, ADS* ................ 100,000 $ 7,500,000
(Cost: $4,118,004)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITY - 0.43%
Financial
American Express Company,
6.25%, 10-15-96 ....................... $1,838 $ 2,131,243
(Cost: $1,837,500)
SHORT-TERM SECURITIES
Commercial Paper
Automotive - 0.90%
Echlin Inc.,
5.9%, 1-18-95 ......................... 4,500 4,487,463
Banks and Savings and Loans - 0.32%
U.S. Bancorp,
Master Note ........................... 1,570 1,570,000
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Computers and Office Equipment - 1.89%
Honeywell Inc.,
6.05%, 1-19-95 ........................ $ 9,405 $ 9,376,550
Consumer Electronics and Appliances - 0.30%
TDK (USA) Corp.,
5.88%, 1-20-95 ........................ 1,500 1,495,345
Financial - 5.65%
AT&T Capital Corp.,
5.98%, 1-4-95 ......................... 2,855 2,853,577
BHP Finance (USA) Inc.:
6.0%, 1-6-95 .......................... 5,000 4,995,833
6.02%, 1-31-95 ........................ 3,700 3,681,438
Dana Credit Corp.,
6.28%, 2-10-95 ........................ 1,710 1,698,068
Ford Motor Credit Company,
5.86%, 1-30-95 ........................ 3,640 3,622,817
General Electric Capital Company,
6.0%, 2-17-95 ......................... 2,965 2,941,774
Textron Financial Corp.,
6.25%, 1-12-95 ........................ 4,600 4,591,215
USL Capital Corp.,
6.0%, 1-17-95 ......................... 3,705 3,695,120
Total ................................. 28,079,842
Food and Related - 0.83%
ConAgra, Inc.,
6.0%, 1-11-95 ......................... 2,575 2,570,709
General Mills, Inc.,
Master Note ........................... 170 170,000
Sara Lee Corporation,
Master Note ........................... 1,378 1,378,000
Total ................................. 4,118,709
Insurance - 1.31%
Aon Corporation,
5.97%, 1-17-95 ........................ 6,500 6,482,754
Paper - 0.93%
Champion International Corporation:
6.2%, 1-9-95 .......................... 2,000 1,997,244
5.95%, 2-3-95 ......................... 2,635 2,620,628
Total ................................. 4,617,872
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Retailing - 0.60%
Rite Aid Corp.,
6.1%, 1-19-95 ......................... $ 3,000 $ 2,990,850
TOTAL SHORT-TERM SECURITIES - 12.73% $ 63,219,385
(Cost: $63,219,385)
TOTAL INVESTMENT SECURITIES - 100.07% $496,876,578
(Cost: $334,710,063)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.07%) (373,996)
NET ASSETS - 100.00% $496,502,582
Notes to Schedules of Investments
*No income dividends were paid during the preceding 12 months.
(A) Coupon resets semiannually based on the arithmetic mean of two-year swap
rates in four nations: Italy, France, Spain and the United Kingdom,
determined by the following formula (minimum coupon of 0%): 19.65% - 2 x
(average two-year swap rate in the aforementioned nations).
(B) Coupon resets semiannually based on 14.13% - 1.5 x (5-year Deutschemark
swap rate). Coupon guaranteed at 3%.
(C) Coupon resets on 4-5-95 based on the greater of 4% and 4% + 5 x (6.65% - 3-
year Australian Dollar swap rate). After 4-5-95 the coupon becomes fixed.
Minimum coupon - 4%, maximum coupon - 7.5%.
(D) Listed on an exchange outside the United States.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
<TABLE>
UNITED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
<CAPTION>
United
United United United Sciece and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------ ------ ------------ ----------
<S> <C> <C> <C> <C>
Assets
- ------
Investment securities --
at value (Notes 1 and 3) $511,483,108 $3,145,032,833 $973,379,436 $496,876,578
Cash ....................... 10,475 12,190 84,860 8,574
Receivables:
Dividends and interest ... 9,075,289 7,410,297 1,546,648 230,293
Investment securities
sold ................... --- 7,018,773 --- 1,501,250
Fund shares sold ......... 350,426 3,106,177 260,918 500,124
Prepaid insurance
premium ................ 20,172 67,754 40,077 13,624
------------ -------------- ------------ ------------
Total assets ........... 520,939,470 3,162,648,024 975,311,939 499,130,443
------------ -------------- ------------ ------------
Liabilities
Payable for Fund
shares redeemed ........ 2,875,295 11,625,907 6,396,885 1,918,509
Payable for investment
securities purchased ... --- 4,550,625 1,460,625 443,950
Accrued service fee ...... 105,961 654,420 180,242 96,767
Accrued transfer agency
and dividend disbursing 65,042 558,228 151,202 86,482
Accrued accounting
services fee ........... 5,000 8,333 7,083 5,000
Other .................... 51,852 346,304 95,603 77,153
------------ -------------- ------------ ------------
Total liabilities ...... 3,103,150 17,743,817 8,291,640 2,627,861
------------ -------------- ------------ ------------
Total net assets ..... $517,836,320 $3,144,904,207 $967,020,299 $496,502,582
============ ============== ============ ============
Net Assets
$1.00 par value capital stock
Capital stock .......... $ 92,169,870 $ 134,763,916 $146,939,028 $ 32,637,049
Additional paid-in
capital .............. 488,791,181 2,160,636,160 867,495,501 297,212,925
Accumulated undistributed
income (loss):
Accumulated undistributed net
investment income .... 747,994 968,192 873,019 ---
Accumulated undistributed net
realized gain (loss) on
investment
transactions ......... (31,529,487) 13,304,078 (8,797,282) 4,486,093
Net unrealized appreciation
(depreciation) of investments
at end of period ..... (32,343,238) 835,231,861 (39,489,967) 162,166,515
------------ -------------- ------------ ------------
Net assets applicable to
outstanding units
of capital ........... $517,836,320 $3,144,904,207 $967,020,299 $496,502,582
============ ============== ============ ============
Net asset value per share
(net assets divided by
shares outstanding) ...... $5.62 $23.34 $6.58 $15.21
Sales load (offering price X 5.75%) .34 1.42 .40 .93
----- ------ ----- ------
Offering price per share (net asset
value divided by 94.25%) $5.96 $24.76 $6.98 $16.14
===== ====== ===== ======
Capital shares
outstanding .............. 92,169,870 134,763,916 146,939,028 32,637,049
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>
<TABLE>
UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended DECEMBER 31, 1994
<CAPTION>
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Dividends ......... $ --- $ 54,030,661 $16,412,728 $ 1,791,830
Interest .......... 41,837,180 15,251,196 8,322,216 2,494,035
------------ -------------- ------------ ------------
Total income .... 41,837,180 69,281,857 24,734,944 4,285,865
------------ -------------- ------------ ------------
Expenses (Note 2):
Investment
management fee .. 2,552,094 15,069,003 4,773,506 2,777,832
Transfer agency and
dividend disbursing 791,880 4,148,972 1,114,555 815,589
Service fee ....... 542,722 3,114,608 880,968 466,139
Custodian fees .... 38,203 415,478 102,588 54,497
Accounting services fee 66,667 100,000 92,500 60,000
Audit fees ........ 37,702 51,517 40,411 28,077
Legal fees ........ 12,175 71,619 3,759 10,900
Other ............. 93,359 472,601 138,078 91,527
------------ -------------- ------------ ------------
Total expenses .. 4,134,802 23,443,798 7,146,365 4,304,561
------------ -------------- ------------ ------------
Net investment
income (loss) 37,702,378 45,838,059 17,588,579 (18,696)
------------ -------------- ------------ ------------
Realized and Unrealized
Gain (Loss) on
Investments
Realized net gain (loss)
on securities ..... (31,512,111) 89,293,945 60,126,808 37,605,690
Unrealized appreciation
(depreciation) in value
of investments during
the period ........ (41,557,487) (195,072,068) (77,231,909) 6,830,120
------------ -------------- ------------ ------------
Net gain (loss) on
investments ..... (73,069,598) (105,778,123) (17,105,101) 44,435,810
------------ -------------- ------------ ------------
Net increase (decrease)
in net assets
resulting
from operations . $(35,367,220) $(59,940,064) $ 483,478 $44,417,114
============ ============ =========== ===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended December 31, 1994
<CAPTION>
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment
income (loss) ... $ 37,702,378 $ 45,838,059 $ 17,588,579 $(18,696)
Realized net gain (loss)
on investments .. (31,512,111) 89,293,945 60,126,808 37,605,690
Unrealized appreciation
(depreciation) .. (41,557,487) (195,072,068) (77,231,909) 6,830,120
------------ -------------- ------------ ------------
Net increase (decrease)
in net assets resulting
from operations . (35,367,220) (59,940,064) 483,478 44,417,114
------------ -------------- ------------ ------------
Dividends to shareholders:*
From net investment
income .......... (37,265,097) (45,590,722) (17,169,923) ---
From realized net gain on
investment transactions (1,836,092) (82,751,883) (65,811,797) (31,199,630)
------------ -------------- ------------ ------------
(39,101,189) (128,342,605) (82,981,720) (31,199,630)
------------ -------------- ------------ ------------
Capital share
transactions** .... (49,363,402) 273,113,600 15,744,243 36,674,458
------------ -------------- ------------ ------------
Total increase
(decrease) ...... (123,831,811) 84,830,931 (66,753,999) 49,891,942
Net Assets
Beginning of period . 641,668,131 3,060,073,276 1,033,774,298 446,610,640
------------ -------------- ------------ ------------
End of period ....... $517,836,320 $3,144,904,207 $ 967,020,299 $496,502,582
============ ============== ============== ============
Undistributed net
investment income $747,994 $968,192 $873,019 $---
======== ======== ======== ====
*See "Financial Highlights" on pages .
**Shares issued from sale
of shares ......... 6,077,476 17,223,202 4,792,033 4,101,127
Shares issued from
reinvestment of
dividends and/or capital
gains distribution 5,555,134 4,993,419 11,799,943 2,041,497
Shares redeemed ..... (19,918,276) (10,996,133) (13,397,312) (3,619,095)
------------ -------------- ------------ ------------
Increase (decrease) in
outstanding capital
shares ............ (8,285,666) 11,220,488 3,194,664 2,523,529
========== ========== ========= =========
Value issued from sale
of shares ......... $36,518,090 $427,435,360 $34,385,640 $61,082,518
Value issued from
reinvestment of
dividends and/or capital
gains distribution 32,793,687 118,100,262 77,407,382 29,601,725
Value redeemed ...... (118,675,179) (272,422,022) (96,048,779) (54,009,785)
------------ -------------- ------------ ------------
Increase (decrease) in
outstanding capital $(49,363,402) $273,113,600 $15,744,243 $36,674,458
============ ============ =========== ===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended DECEMBER 31, 1993
<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 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 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>
FINANCIAL HIGHLIGHTS OF
UNITED BOND FUND
For a Share of Capital Stock Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value,
beginning of
period ............ $6.39 $6.31 $6.32 $5.80 $6.07 $6.03 $6.11 $6.42 $6.09 $5.44
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment
income .......... .39 .41 .45 .47 .50 .55 .54 .56 .55 .61
Net realized and
unrealized gain
(loss) on
investments ..... (0.75) .41 .00 .56 (0.26) .07 (0.02) (0.28) .34 .66
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ........ (0.36) .82 .45 1.03 .24 .62 .52 .28 .89 1.27
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income .......... (0.39) (0.41) (0.46) (0.47) (0.50) (0.56) (0.54) (0.55) (0.56) (0.62)
Distributions from
capital gains ... (0.02) (0.33) (0.00) (0.04) (0.01) (0.02) (0.06) (0.04) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions . (0.41) (0.74) (0.46) (0.51) (0.51) (0.58) (0.60) (0.59) (0.56) (0.62)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ..... $5.62 $6.39 $6.31 $6.32 $5.80 $6.07 $6.03 $6.11 $6.42 $6.09
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return* ....... -5.76% 13.19% 7.50% 18.78% 4.24% 10.61% 8.99% 4.50% 15.23% 25.42%
Net assets, end of
period (000
omitted) ..........$517,836 $641,668 $589,946 $524,404 $439,487 $403,010 $335,337 $319,273 $339,544 $338,586
Ratio of expenses to
average net assets 0.72% 0.65% 0.64% 0.65% 0.67% 0.64% 0.65% 0.64% 0.64% 0.67%
Ratio of net investment
income to average
net assets ........ 6.60% 6.14% 7.29% 7.96% 8.54% 8.97% 9.00% 8.83% 8.82% 10.90%
Portfolio turnover
rate .............. 127.11% 175.39% 115.17% 318.76% 294.66% 353.57% 179.07% 232.65% 252.49% 270.71%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED INCOME FUND
For a Share of Capital Stock Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value,
beginning of
period ............ $24.77 $22.05 $20.44 $16.46 $18.69 $16.76 $15.08 $17.03 $16.20 $13.11
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income .36 .40 .46 .51 .61 .65 .60 .72 .48 .58
Net realized and
unrealized gain
(loss) on
investments ..... (0.80) 3.11 1.96 4.29 (1.61) 3.89 2.35 .59 3.12 3.64
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ........ (0.44) 3.51 2.42 4.80 (1.00) 4.54 2.95 1.31 3.60 4.22
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment
income .......... (0.36) (0.40) (0.46) (0.53) (0.63) (0.65) (0.67) (0.66) (0.49) (0.61)
Distributions from
capital gains ... (0.63) (0.39) (0.35) (0.29) (0.60) (1.96) (0.60) (2.60) (2.28) (0.52)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.99) (0.79) (0.81) (0.82) (1.23) (2.61) (1.27) (3.26) (2.77) (1.13)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ..... $23.34 $24.77 $22.05 $20.44 $16.46 $18.69 $16.76 $15.08 $17.03 $16.20
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return* ....... -1.82% 16.05% 11.96% 29.64% -5.45% 27.49% 19.83% 7.17% 22.11% 34.00%
Net assets, end of
period (000
omitted) ........$3,144,904 $3,060,073 $2,537,161 $2,150,986 $1,578,543 $1,550,387 $1,149,934 $964,521 $836,594 $675,314
Ratio of expenses to
average net assets 0.74% 0.66% 0.65% 0.66% 0.68% 0.64% 0.67% 0.63% 0.62% 0.66%
Ratio of net investment
income to average
net assets ........ 1.45% 1.70% 2.19% 2.71% 3.44% 3.41% 3.65% 3.99% 2.70% 4.09%
Portfolio turnover
rate .............. 18.54% 21.70% 19.25% 24.68% 30.94% 60.77% 48.64% 58.46% 29.90% 37.75%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED ACCUMULATIVE FUND
For a Share of Capital Stock Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value,
beginning of
period .......... $7.19 $7.50 $7.15 $6.03 $7.12 $6.43 $5.75 $7.78 $8.73 $7.64
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income .13 .11 .16 .19 .28 .31 .26 .25 .20 .34
Net realized and
unrealized gain
(loss) on
investments ... (0.13) .55 .85 1.22 (0.99) 1.43 .71 .19 1.28 1.51
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ...... 0.00 .66 1.01 1.41 (0.71) 1.74 .97 .44 1.48 1.85
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income ........ (0.13) (0.11) (0.16) (0.20) (0.29) (0.29) (0.29) (0.32) (0.25) (0.39)
Distributions from
capital gains . (0.48) (0.84) (0.50) (0.09) (0.09) (0.76) (0.00) (2.15) (2.18) (0.37)
Distribution in excess
of capital gains (0.00) (0.02) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (0.61) (0.97) (0.66) (0.29) (0.38) (1.05) (0.29) (2.47) (2.43) (0.76)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ... $6.58 $7.19 $7.50 $7.15 $6.03 $7.12 $6.43 $5.75 $7.78 $8.73
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return* ..... 0.04% 9.06% 14.20% 23.68% -10.17% 27.56% 17.05% 4.53% 18.05% 25.56%
Net assets, end of
period (000
omitted) ........ $967,020$1,033,774 $992,924 $904,635 $767,218 $877,109 $737,231 $696,359 $683,989 $604,337
Ratio of expenses to
average net assets 0.71% 0.65% 0.62% 0.63% 0.64% 0.60% 0.63% 0.59% 0.60% 0.63%
Ratio of net investment
income to average
net assets ...... 1.76% 1.34% 2.13% 2.79% 4.12% 4.19% 4.09% 3.17% 2.37% 4.18%
Portfolio turnover
rate ............ 205.40% 230.29% 194.41% 241.11% 288.64% 338.24% 245.42% 316.74% 260.69% 297.37%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED SCIENCE AND TECHNOLOGY FUND
For a Share of Capital Stock Outstanding Throughout Each Period:
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ......... $14.83 $14.64 $15.42 $10.27 $11.72 $9.91 $9.28 $10.00 $9.98 $9.23
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment
income (loss) 0.00 .01 .03 .10 .24 .20 .20 .19 .17 .32
Net realized and
unrealized gain
(loss) on
investments .. 1.40 1.21 (0.66) 5.90 (0.65) 2.50 .64 1.06 1.61 1.65
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ..... 1.40 1.22 (0.63) 6.00 (0.41) 2.70 .84 1.25 1.78 1.97
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income ....... 0.00 (0.01) (0.03) (0.10) (0.25) (0.19) (0.21) (0.25) (0.24) (0.42)
Distributions from
capital gains (1.02) (0.95) (0.12) (0.75) (0.79) (0.70) (0.00) (1.72) (1.52) (0.80)
Distribution in excess
of capital gains 0.00 (0.07) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (1.02) (1.03) (0.15) (0.85) (1.04) (0.89) (0.21) (1.97) (1.76) (1.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ... $15.21 $14.83 $14.64 $15.42 $10.27 $11.72 $9.91 $9.28 $10.00 $9.98
====== ====== ====== ====== ====== ====== ===== ===== ====== =====
Total return* ..... 9.78% 8.51% -4.03% 59.25% -3.51% 27.40% 9.05% 12.43% 18.19% 22.98%
Net assets, end of
period (000
omitted) ........ $496,503 $446,611 $428,806 $405,380 $239,077 $247,584 $214,693 $214,828 $180,890 $174,042
Ratio of expenses to
average net assets 0.96% 0.91% 0.87% 0.85% 0.90% 0.84% 0.89% 0.81% 0.83% 0.88%
Ratio of net investment
income to average
net assets ...... 0.00% 0.06% 0.24% 0.75% 2.06% 1.73% 1.94% 1.65% 1.62% 3.49%
Portfolio turnover
rate ............ 64.39% 68.38% 45.79% 59.24% 63.86% 83.19% 60.67% 85.35% 91.71% 146.41%
*Total return calculated without taking into account the sales load deducted on an initial purchase.
See notes to financial statements.
</TABLE>
<PAGE>
UNITED FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
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 except that certain dividends from foreign securities are
recorded as soon as the Corporation is informed of the ex-dividend date.
Interest income is recorded on the accrual basis. See Note 3 -- Investment
Securities Transactions.
C. Foreign currency translations -- All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars daily. Purchases and
sales of investment securities and accruals of income and expenses are
translated at the rate of exchange prevailing on the date of the
transaction. For assets and liabilities other than investments in
securities, net realized and unrealized gains and losses from foreign
currency translations arise from changes in currency exchange rates. The
Corporation combines fluctuations from currency exchange rates and
fluctuations in market value when computing net realized and unrealized
gain or loss from investments.
D. Federal income taxes -- It is the 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.
E. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by each Fund on the record date. Net investment income
distributions and capital gains distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are due to differing treatments
for items such as deferral of wash sales and post-October losses, foreign
currency transactions, net operating losses and expiring capital loss
carryforwards. During the period, United Science and Technology Fund
reclassified $103,749 into accumulated undistributed net realized gain
(loss) on investment transactions and foreign currency transactions; of
this amount, $85,053 was reclassified from accumulated undistributed net
investment income and $18,696 was reclassified from additional paid-in
capital.
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, .15% 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 $11.0 billion of
combined net assets at December 31, 1994) 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 $19,687,406, out of which W&R paid sales commissions of
$11,086,618 and all expenses in connection with the sale of the Corporation's
shares, except for registration fees and related expenses.
Under a Service Plan adopted by the Corporation pursuant to Rule 12b-1
under the Investment Company Act of 1940, the Corporation may pay monthly a fee
to W&R in an amount not to exceed .25% of the Corporation's average annual net
assets. The fee is to be paid to reimburse W&R for amounts it expends in
connection with the provision of personal services to Fund shareholders and/or
maintenance of shareholder accounts.
The Corporation paid Directors' fees of $187,403.
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, 1994
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 $407,864,496$ 626,558,878$1,675,348,938$258,087,558
Purchases of U.S. Government
securities 286,708,313 45,607,813 --- ---
Purchases of short-term
securities 441,413,8701,711,536,1132,717,352,467 652,190,616
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 448,822,323 562,282,8991,895,883,782 284,527,161
Proceeds from maturities and
sales of U.S. Government
securities 274,093,082 --- --- ---
Proceeds from maturities and sales
of short-term securities 465,105,2771,632,825,0262,555,293,938 624,134,331
For Federal income tax purposes, cost of investments owned at December 31,
1994 and the related appreciation (depreciation) were as follows:
Aggregate
Cost AppreciationDepreciation Appreciation
(Depreciation)
-------------- --------------------------------------
United Bond Fund $ 543,826,346 $ 508,996$(32,852,234)$(32,343,238)
United Income Fund 2,309,800,972 893,000,319(57,768,458) 835,231,861
United Accumulative
Fund 1,012,869,403 17,320,376(56,810,343) (39,489,967)
United Science and
Technology Fund 334,813,214 167,873,959 (5,810,595) 162,063,364
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 and United Science and
Technology Fund realized capital gain net income of $89,293,944 and $35,769,799,
respectively, during the year ended December 31, 1994. A portion of the capital
gain net income was paid to shareholders during the year ended December 31,
1994. Remaining capital gain net income will be distributed to the Fund's
shareholders. For Federal income tax purposes, United Accumulative Fund
realized capital gain net income of $65,889,572 during the year ended December
31,1 994. The capital gain net income was paid to shareholders during the year
ended December 31, 1994. For Federal income tax purposes, United Bond Fund
realized capital losses of $27,347,477 during the year ended December 31, 1994.
This amount is available to offset future ralized capital gain net income
through December 31, 2002.
Internal Revenue Code regulations permit each Fund to defer into its next
fiscal year net capital losses or net long-term capital losses incurred between
each November 1 and the end of its fiscal year ("post-October losses"). From
November 1, 1994 through December 31, 1994, United Accumulative Fund and United
Bond Fund incurred post-October losses of $8,900,860 and $4,164,635,
respectively, which have been deferred to the fiscal year ending December 31,
1995.
<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, 1994, 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, 1994 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 LLP
Kansas City, Missouri
January 31, 1995
<PAGE>
REGISTRATION STATEMENT
PART C
OTHER INFORMATION
24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements -- United Funds, Inc.
Included in Part B:
-------------------
As of December 31, 1994
Statement of Assets and Liabilities
For the year ended December 31, 1994
Statements of Operations
For each of the two years in the period ended December 31, 1994
Statement of Changes in Net Assets
Schedule I -- Investment Securities as of December 31, 1994
Report of Independent Accountants
Included in Part C:
-------------------
Articles of Incorporation, as amended, attached hereto as EX-99.B1-charter
Articles Supplementary, as proposed, attached hereto as EX-99.B1-ufartsup
Bylaws, as amended (updated to refile by EDGAR), attached hereto as EX-
99.B2-ufbylaw
Underwriting Agreement attached hereto as EX-99.B6-ufua
Custodian Agreement, as amended (updated to refile by EDGAR), attached
hereto as EX-99.B8-UFCA
Shareholder Servicing Agreement attached hereto as EX-99.B9-ufssa
Fund Class A Application attached hereto as EX-99.B9-ufappca
Fund Class Y Application attached hereto as EX-99.B9-ufappcy
Fund NAV application attached hereto as EX-99.B9-ufappnav
Accounting Services Agreement (to refile by EDGAR) attached hereto as EX-
99.B9-ufasa
Amendment to Service Agreement attached hereto as EX-99.B9-ufsaa
Consent of Independent Accountants attached hereto as EX-99.B11-ufconsnt
Service Plan, as restated, attached hereto as EX-99.B15-ufspca
Financial Data Schedules attached hereto as EX-27.B17-uffds
Plan for Multiple Classes attached hereto as EX-99.B18-ufmcplan
Other schedules prescribed by Regulation S-X are not filed because the
required matter is not present or is insignificant.
(b) Exhibits:
(1) Articles of Incorporation, as amended, attached hereto
Articles Supplementary as proposed, attached hereto
(2) Bylaws, as amended, (updated to refile by EDGAR) attached hereto
(3) Not applicable
(4) Article FIFTH and Article SEVENTH of the Articles of Incorporation, as
amended, attached hereto as EX-99.B1-charter; Article I, Article IV
and Article VII of the Bylaws, as amended, attached hereto as EX-
99.B2-ufbylaw
(5) Investment Management Agreement with amended fee schedule filed
September 30, 1994 as EX-99.B5-UFIMA to Post-Effective Amendment No.
116 to the Registration Statement on Form N-1A*
Assignments of the Investment Management Agreements filed March 9,
1992 as Exhibits (b)(5)(b)(1); (b)(5)(b)(2); (b)(5)(b)(3) and
(b)(5)(b)(4) on Form SE to Post-Effective Amendment No. 111 to the
Registration Statement on Form N-1A*
(6) Underwriting Agreement dated February 8, 1995 attached hereto
(7) Not applicable
(8) Custodian Agreement, as amended (updated to refile by EDGAR) attached
hereto
(9) Shareholder Servicing Agreement attached hereto
Fund Class A application attached hereto
Fund Class Y application attached hereto
Fund NAV application attached hereto
Accounting Services Agreement (to refile by EDGAR) attached hereto
Service Agreement filed by EDGAR August 11, 1993 as Exhibit (b)(15) to
Post-Effective Amendment No. 114 to the Registration Statement on Form
N-1A*
Amendment to Service Agreement attached hereto
(10) Not applicable
(11) Consent of Independent Accountants attached hereto
(12) Not applicable
(13) Not applicable
(14) 1. Qualified Retirement Plan and Trust-Defined Contribution Basic
Plan Document filed December 16, 1994 as EX-99.B14-1-03bpd to
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A of United Asset Strategy Fund, Inc.*
2. Qualified Retirement Plan-Summary Plan Description filed December
16, 1994 as EX-99.B14-2-03spd to Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A of United Asset Strategy
Fund, Inc.*
3. Employer Contribution 403(b)-Adoption Agreement filed December
- ---------------------------------
*Incorporated herein by reference
16, 1994 as EX-99.B14-3-403baa to Pre-Effective Amendment No. 1
to the Registration Statement on Form N-1A of United Asset
Strategy Fund, Inc.*
4. IRC Section 457 Deferred Compensation Plan-Adoption Agreement
filed December 16, 1994 as EX-99.B14-4-457aa to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of
United Asset Strategy Fund, Inc.*
5. IRC Section 457-Deferred Compensation Specimen Plan Document
filed December 16, 1994 as EX-99.B14-5-457bpd to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of
United Asset Strategy Fund, Inc.*
6. National Nonstandardized 401(k)Profit Sharing Plan-Adoption
Agreement filed December 16, 1994 as EX-99.B14-6-ns401aa to Pre-
Effective Amendment No. 1 to the Registration Statement on Form
N-1A of United Asset Strategy Fund, Inc.*
7. 401(k) Nonstandardized Profit Sharing Plan-Summary Plan
Description filed December 16, 1994 as EX-99.B14-7-ns401gs to
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A of United Asset Strategy Fund, Inc.*
8. National Nonstandardized Money Purchase Pension Plan-Adoption
Agreement filed December 16, 1994 as EX-99.B14-8-nsmppaa to Pre-
Effective Amendment No. 1 to the Registration Statement on Form
N-1A of United Asset Strategy Fund, Inc.*
9. National Nonstandardized Profit Sharing Plan-Adoption Agreement
filed December 16, 1994 as EX-99.B14-9-nspspaa to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of
United Asset Strategy Fund, Inc.*
10. Standardized 401(k) Profit sharing Plan-Adoption Agreement filed
December 16, 1994 as EX-99.B14-10-s401aa to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of
United Asset Strategy Fund, Inc.*
11. 401(k) Standardized Profit Sharing Plan-Summary Plan Description
filed December 16, 1994 as EX-99.B14-11-s401gis to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of
United Asset Strategy Fund, Inc.*
12. Universal Simplified Employee Pension Plan-Adoption Agreement
filed December 16, 1994 as EX-99.B14-12-sepaa to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of
United Asset Strategy Fund, Inc.*
13. Universal Simplified Employee Pension Plan-Basic Plan Document
filed December 16, 1994 as EX-99.B14-13-sepbpd to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of
United Asset Strategy Fund, Inc.*
14. National Standardized Money Purchase Pension Plan-Adoption
Agreement filed December 16, 1994 as EX-99.B14-14-smppaa to Pre-
Effective Amendment No. 1 to the Registration Statement on Form
N-1A of United Asset Strategy Fund, Inc.*
15. Standardized Money Purchase pension Plan-Summary Plan Description
filed December 16, 1994 as EX-99.B14-15-smppgis to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of
United Asset Strategy Fund, Inc.*
16. Standardized Profit Sharing Plan-Adoption Agreement filed
December 16, 1994 as EX-99.B14-16-spspaa to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of
United Asset Strategy Fund, Inc.*
17. Standardized Profit Sharing Plan-summary Plan Description field
December 16, 1994 as EX-99.B14-17-spspgis to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of
United Asset Strategy Fund, Inc.*
18. 403(b)(7) Tax-sheltered Custodial Account Agreement filed
December 16, 1994 as EX-99.B14-18-tsa to Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A of United Asset
Strategy Fund, Inc.*
19. Title I 403(b) Plan Document filed December 16, 1994 as EX-
- ---------------------------------
*Incorporated herein by reference
99.B14-19-ttllpbd to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of United Asset Strategy
Fund, Inc.*
(15) Service Plan, as restated, attached hereto
(16) Computation of average annual total return performance quotations (for
Class A shares) filed by EDGAR August 11, 1993 as Exhibit (b)(16) to
Post Effective Amendment No. 114 to the Registration Statement on Form
N-1A*
Computation of yield performance quotation (for Class A shares) filed
February 12, 1993 as Exhibit (b)(16) on Form SE to Post-Effective
Amendment No. 112 to the Registration Statement on Form N-1A*
(17) Financial Data Schedules attached hereto
(18) Multiple Classes Plan attached hereto
25. Persons Controlled by or under common control with Registrant
-------------------------------------------------------------
None
26. Number of Holders of Securities
-------------------------------
Number of Record Holders as of
Title of Class December 31, 1994
-------------- ------------------------------
Capital Stock 398,054
27. Indemnification
---------------
Reference is made to Article SEVENTH paragraph 6(b) through 6(f) of the
Articles of Incorporation, as amended, attached hereto as EX-99.B1-Charter;
and to Article IV of the Underwriting Agreement attached hereto as EX-
99.B6-ufua, both of which provide indemnification. Also refer to Section
2-418 of the Maryland General Corporation Law regarding indemnification of
directors, officers, employees and agents.
28. Business and Other Connections of Investment Manager
----------------------------------------------------
Waddell & Reed Investment Management Company is the investment manager of
the Registrant. Under the terms of an Investment Management Agreement
between Waddell & Reed, Inc. and the Registrant, Waddell & Reed, Inc. is to
provide investment management services to the Registrant. Waddell & Reed,
Inc. assigned its investment management duties under this agreement to
Waddell & Reed Investment Management Company on January 8, 1992. Waddell &
Reed Investment Management Company is not engaged in any business other
than the provision of investment management services to those registered
investment companies described in Part A and Part B of this Post-Effective
Amendment.
Each director and executive officer of Waddell & Reed Investment Management
Company has had as his sole business, profession, vocation or employment
during the past two years only his duties as an executive officer and/or
employee of Waddell & Reed Investment Management Company or its
predecessors, except as to persons who are directors and/or officers of the
Registrant and have served in the capacities shown in the Statement of
Additional Information of the Registrant, and except for Mr. Ronald K.
Richey. Mr. Richey is Chairman of the Board and Chief Executive Officer of
- ---------------------------------
*Incorporated herein by reference
Torchmark Corporation, the parent company of Waddell & Reed, Inc., and
Chairman of the Board of United Investors Management Company, a holding
company of which Waddell & Reed, Inc. is an indirect subsidiary. Mr.
Richey's address is 2001 Third Avenue South, Birmingham, Alabama 35233.
The address of the others is 6300 Lamar Avenue, Shawnee Mission, Kansas
66202-4200.
As to each director and officer of Waddell & Reed Investment Management
Company, reference is made to the Prospectus and SAI of this Registrant.
29. Principal Underwriter
---------------------
(a) Waddell & Reed, Inc. is the principal underwriter of the Registrant.
It is also the principal underwriter to the following investment
companies:
United International Growth Fund, Inc.
United Continental Income Fund, Inc.
United Vanguard Fund, Inc.
United Retirement Shares, Inc.
United Municipal Bond Fund, Inc.
United High Income Fund, Inc.
United Cash Management, Inc.
United Government Securities Fund, Inc.
United New Concepts Fund, Inc.
United Gold & Government Fund, Inc.
United Municipal High Income Fund, Inc.
United High Income Fund II, Inc.
United Asset Strategy Fund, Inc.
TMK/United Funds, Inc.
Waddell & Reed Funds, Inc.
and is depositor of the following unit investment trusts:
United Periodic Investment Plans to acquire shares of United Science
and Energy Fund
United Periodic Investment Plans to acquire shares of United
Accumulative Fund
United Income Investment Programs
United International Growth Investment Programs
United Continental Income Investment Programs
United Vanguard Investment Programs
(b) The information contained in the underwriter's application on form BD,
under the Securities Exchange Act of 1934, is herein incorporated by
reference.
(c) No compensation was paid by the Registrant to any principal
underwriter who is not an affiliated person of the Registrant or any
affiliated person of such affiliated person.
30. Location of Accounts and Records
--------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act and
rules promulgated thereunder are under the possession of Mr. Robert L.
Hechler and Ms. Sharon K. Pappas, as officers of the Registrant, each of
- ---------------------------------
*Incorporated herein by reference
whose business address is Post Office Box 29217, Shawnee Mission, Kansas
66201-9217.
31. Management Services
-------------------
There is no service contract other than as discussed in Part A and B of
this Post-Effective Amendment and as listed in response to Item (b)(9) and
Item (b)(15) hereof.
32. Undertaking
-----------
(a) Not applicable
(b) Not applicable
(c) The Fund agrees to furnish to each person to whom a prospectus is
delivered a copy of the Fund's latest annual report to shareholders
upon request and without charge.
(d) To the extent that Section 16(c) of the Investment Company Act of
1940, as amended, applies to the Fund, the Fund agrees, if requested
in writing by the shareholders of record of not less than 10% of the
Fund's outstanding shares, to call a meeting of the shareholders of
the Fund for the purpose of voting upon the question of removal of any
director and to assist in communications with other shareholders as
required by Section 16(c).
- ---------------------------------
*Incorporated herein by reference
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment pursuant to
Rule 485(a) of the Securities Act of 1933, and has duly caused this Post-
Effective Amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Overland Park, and State of Kansas, on the 18th
day of April, 1995.
UNITED FUNDS, INC.
(Registrant)
By /s/ Keith A. Tucker*
------------------------
Keith A. Tucker, President
Pursuant to the requirements of the Securities Act of 1933, and/or the
Investment Company Act of 1940, this Post-Effective Amendment has been signed
below by the following persons in the capacities and on the date indicated.
Signatures Title
---------- -----
/s/Ronald K. Richey* Chairman of the Board April 18, 1995
- ---------------------- ------------------
Ronald K. Richey
/s/Keith A. Tucker* President and Director April 18, 1995
- ---------------------- (Principal Executive ------------------
Keith A. Tucker Officer)
/s/Theodore W. Howard* Vice President, April 18, 1995
- ---------------------- Treasurer and Principal ------------------
Theodore W. Howard Accounting Officer
/s/Robert L. Hechler* Vice President and April 18, 1995
- ---------------------- Principal Financial ------------------
Robert L. Hechler Officer
/s/Henry L. Bellmon* Director April 18, 1995
- ---------------------- ------------------
Henry L. Bellmon
/s/Dodds I. Buchanan* Director April 18, 1995
- --------------------- ------------------
Dodds I. Buchanan
/s/Jay B. Dillingham* Director April 18, 1995
- -------------------- ------------------
Jay B. Dillingham
/s/John F. Hayes* Director April 18, 1995
- ------------------- ------------------
John F. Hayes
/s/Glendon E. Johnson Director April 18, 1995
- ------------------- ------------------
Glendon E. Johnson
/s/William T. Morgan* Director April 18, 1995
- ------------------- ------------------
William T. Morgan
/s/Doyle Patterson* Director April 18, 1995
- ------------------- ------------------
Doyle Patterson
/s/Frederick Vogel, III* Director April 18, 1995
- ------------------- ------------------
Frederick Vogel, III
/s/Paul S. Wise* Director April 18, 1995
- ------------------- ------------------
Paul S. Wise
/s/Leslie S. Wright* Director April 18, 1995
- ------------------- ------------------
Leslie S. Wright
*By
Sharon K. Pappas
Attorney-in-Fact
ATTEST:
Amy D. Eisenbeis
Assistant Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That each of the undersigned, UNITED FUNDS,
INC., UNITED INTERNATIONAL GROWTH FUND, INC., UNITED MUNICIPAL BOND FUND, INC.,
UNITED VANGUARD FUND, INC., UNITED HIGH INCOME FUND, INC., UNITED CASH
MANAGEMENT, INC., UNITED NEW CONCEPTS FUND, INC., UNITED GOVERNMENT SECURITIES
FUND, INC., UNITED MUNICIPAL HIGH INCOME FUND, INC., UNITED GOLD & GOVERNMENT
FUND, INC., UNITED HIGH INCOME FUND II, INC., UNITED CONTINENTAL INCOME FUND,
INC., UNITED RETIREMENT SHARES, INC., UNITED ASSET STRATEGY FUND, INC.,
TMK/UNITED FUNDS, INC., WADDELL & REED FUNDS, INC., TORCHMARK INSURED TAX-FREE
FUND, INC. AND TORCHMARK GOVERNMENT SECURITIES FUND, INC. (each hereinafter
called the "Corporation"), and certain directors and officers for the
Corporation, do hereby constitute and appoint KEITH A. TUCKER, ROBERT L.
HECHLER, and SHARON K. PAPPAS, and each of them individually, their true and
lawful attorneys and agents to take any and all action and execute any and all
instruments which said attorneys and agents may deem necessary or advisable to
enable each Corporation to comply with the Securities Act of 1933 and/or the
Investment Company Act of 1940, as amended, and any rules, regulations, orders
or other requirements of the United States Securities and Exchange Commission
thereunder, in connection with the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940, as amended, including specifically,
but without limitation of the foregoing, power and authority to sign the names
of each of such directors and officers in his behalf as such director or officer
has indicated below opposite his signature hereto, to any amendment or
supplement to the Registration Statement filed with the Securities and Exchange
Commission under the Securities Act of 1933 and/or the Investment Company Act of
1940, as amended, and to any instruments or documents filed or to be filed as a
part of or in connection with such Registration Statement; and each of the
undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
Date: September 1, 1994 /s/Keith A. Tucker*
---------------------
Keith A. Tucker, President
/s/Ronald K. Richey Chairman of the Board September 1, 1994
- -------------------- --------------------
Ronald K. Richey
/s/Keith A. Tucker* President and Director September 1, 1994
- -------------------- (Principal Executive Officer) --------------------
Keith A. Tucker
/s/Theodore W. Howard* Vice President, Treasurer September 1, 1994
- -------------------- and Principal Accounting --------------------
Theodore W. Howard Officer
/s/Robert L. Hechler* Vice President and September 1, 1994
- -------------------- Principal Financial --------------------
Robert L. Hechler Officer
/s/Henry L. Bellmon* Director September 1, 1994
- -------------------- --------------------
Henry L. Bellmon
/s/Dodds I. Buchanan* Director September 1, 1994
- -------------------- --------------------
Dodds I. Buchanan
/s/Jay B. Dillingham* Director September 1, 1994
- -------------------- --------------------
Jay B. Dillingham
/s/John F. Hayes* Director September 1, 1994
- -------------------- --------------------
John F. Hayes
/s/Glendon E. Johnson* Director September 1, 1994
- -------------------- --------------------
Glendon E. Johnson
/s/William T. Morgan* Director September 1, 1994
- -------------------- --------------------
William T. Morgan
/s/Doyle Patterson* Director September 1, 1994
- -------------------- --------------------
Doyle Patterson
/s/Frederick Vogel, III* Director September 1, 1994
- -------------------- --------------------
Frederick Vogel, III
/s/Paul S. Wise* Director September 1, 1994
- -------------------- --------------------
Paul S. Wise
/s/Leslie S. Wright* Director September 1, 1994
- -------------------- --------------------
Leslie S. Wright
Attest:
/s/Sharon K. Pappas
- --------------------------------
Sharon K. Pappas, Vice President
and Secretary
EX-99.B1-charter
ARTICLES OF INCORPORATION
OF
UNITED FUNDS, INC.
THIS IS TO CERTIFY:
FIRST: THE UNDERSIGNED, Rodney O. McWhinney, whose post office address is
One Crown Center, Kansas City, Missouri 64141, being of full legal age, does
under and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations, act as incorporator with the intention of forming a
corporation.
SECOND: The name of the corporation is United Funds, Inc. (hereinafter
called the "Corporation").
THIRD: The purpose or purposes for which the Corporation is formed and the
business or objects to be transacted, carried on and promoted by it, are as
follows:
(1) To hold, invest and reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to purchase or
otherwise acquire hold for investment or otherwise, sell, assign,
negotiate, transfer, exchange or otherwise dispose of or turn to account or
realize upon, securities (which term "securities" shall for the purposes of
these Articles of Incorporation, without limitation of the generality
thereof, be deemed to include any stocks, shares, bonds, debentures, notes,
mortgages or other obligations, and any certificates, receipts, warrants or
other instruments representing rights to receive, purchase or subscribe for
the same, or evidencing or representing any other rights or interests
therein, or in any property or assets) created or issued by any issuer
(which term "issuer" shall for the purposes of these Articles of
Incorporation, without limitation of the generality thereof be deemed to
include any persons, firms, associations, corporations, syndicates,
combinations, organizations, governments, or subdivisions thereof); and to
exercise, as owner or holder of any securities, all rights, powers and
privileges in respect thereof; and to do any and all acts and things for
the preservation, protection, improvement and enhancement in value of any
or all such securities.
(2) To issue and sell shares of its own stock of any class in such
amounts and on such terms and conditions, for such purposes and for such
amount or kind of consideration (including without limitation thereto,
securities) now or hereafter permitted by the laws of Maryland and by these
Articles of Incorporation, as its Board of Directors may determine; no
shares of any class of the Corporation shall, except as otherwise
specifically permitted by the 1940 Act (as defined below), be sold with a
sales load, as defined in the 1940 Act, which exceeds 8-3/4% of the
offering price of such shares; as used in these Articles of Incorporation,
the term "the 1940 Act" shall mean the Investment Company Act of 1940 as
from time to time amended and any rule, regulation or order thereunder.
(3) To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its stock of any class, in any
manner and to the extent now or hereafter permitted by the laws of said
State and by these Articles of Incorporation.
(4) To conduct its business in all its branches at one or more
offices in Maryland and elsewhere in any part of the world, without
restriction or limit as to extent.
(5) To carry out all or any of the foregoing objects and purposes as
principal or agent, and alone or with associates or, to the extent now or
hereafter permitted by the laws of Maryland, as a member of, or as the
owner or holder of any stock of, or shares of interest in, any issuer, and
in connection therewith to make or enter into such deeds or contracts with
any issuers and to do such acts and things and to exercise such powers, as
a natural person could lawfully make, enter into, do or exercise.
(6) To do any and all such further acts and things and to exercise
any and all such further powers as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise expressly
provided, be in no way limited or restricted by reference to, or inference from,
the terms of any other clause of this or any other Article of these Articles of
Incorporation, and shall each be regarded as independent, and construed as
powers as well as objects and purposes, and the enumeration of specific
purposes, objects and powers shall not be construed to limit or restrict in any
manner the meaning of general terms or the general powers of the Corporation now
or hereafter conferred by the laws of the State of Maryland, nor shall the
expression of one thing be deemed to exclude another, though it be of like
nature, not expressed; provided, however, that the Corporation shall not have
power to carry on within the State of Maryland any business whatsoever the
carrying on of which would preclude it from being classified as an ordinary
business corporation under the laws of said State; nor shall it carry on any
business, or exercise any powers, in any other state, territory, district or
country except to the extent that the same may lawfully be carried on or
exercised under the laws thereof.
FOURTH: The post office address of the place at which the principal office
of the Corporation in the State of Maryland will be located is First Maryland
Building, 25 South Charles Street, Baltimore, Maryland 21201.
The Corporation's resident agent is The Corporation Trust Incorporated,
whose post office address is First Maryland Building, 25 South Charles Street,
Baltimore, Maryland 21201. Said resident agent is a corporation of the State of
Maryland.
FIFTH: (1) The total number of shares of stock of all classes which
the Corporation has authority to issue is 1,000,000,000 shares; the number
of the shares of stock of each class is such number, not exceeding the
total authorized number of shares of stock of all classes, as are
classified below into the shares of each class plus such shares as may be
classified into such class or less such unissued shares as may be
classified into another class by the Board of Directors pursuant to Section
18 of the Maryland General Corporation Law and paragraphs (2) and (3) of
this Article FIFTH; the par value of the shares of stock of each class is
$1.00 per share; the aggregate par value of all such shares of all classes
is $1,000,000,000; the classes of stock of the Corporation shall be "United
Accumulative Fund", "United Bond Fund", "United Income Fund", "United
Science and Technology Fund" and such further class or classes of shares as
may be created by the Board of Directors pursuant to Section 18 of the
Maryland General Corporation Law and paragraphs (2) and (3) of this Article
FIFTH; there are hereby classified into the classes so designated the
number of shares set forth after the designation of each class: United
Accumulative Fund, 340,000,000 shares; United Bond Fund, 260,000,000
shares; United Income Fund, 300,000,000 shares and United Science and
Technology Fund, 100,000,000 shares; no articles supplementary to the
Articles of Incorporation need be filed pursuant to Section 18(b) of the
Maryland General Corporation Law unless and until the unissued shares of
any class or any unclassified shares are classified or reclassified into
one of such designated classes or into an additional class or additional
classes so as to change the classifications set forth above.
(2) The Board of Directors may classify or reclassify any unissued
shares by fixing or altering in any one or more respects, from time to time
before issuance of such shares, the preferences, rights, voting powers,
restrictions and qualifications of, the dividends on, the times and prices
of redemption of, and the conversion rights of, such shares.
(3) Without limiting the generality of the foregoing, the Board of
Directors is authorized to classify or reclassify any unissued shares of
stock of any class or unissued shares not divided into any class into the
classes designated in these Articles of Incorporation as originally filed
or into classes similar to the classes designated in these Articles of
Incorporation as originally filed in that such classes have "assets
belonging to" such class, as defined below; the description of each such
new class contained in the supplementary articles contemplated by Section
18(b) of the Maryland General Corporation Law shall include a designation
of such class.
(4) A description of each class, with the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends and
qualifications of each class is, subject to the powers granted to the Board
of Directors in paragraphs (2) and (3) of this Article FIFTH, as follows:
(a) All consideration received by the Corporation for the issue
or sale of shares of stock of each class, together with all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any funds
or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably belong to the class of shares
of stock with respect to which such assets, payments, or funds were
received by the Corporation for all purposes, subject only to the
rights of creditors, and shall be so handled upon the books of
account of the Corporation. Such assets, income, earnings, profits
and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, any asset derived from any
reinvestment of such proceeds, in whatever form the same may be, are
herein referred to as "assets belonging to" such class.
(b) Dividends or distributions on shares of any class of stock,
whether payable in stock or cash, shall be paid only out of earnings,
surplus or other assets belonging to such class.
(c) In event of the liquidation or dissolution of the
Corporation, shareholders of each class shall be entitled to receive,
as a class, out of the assets of the Corporation available for
distribution to shareholders, but other than general assets not
belonging to any particular class of stock, the assets belonging to
such class; and the assets so distributable to the shareholders of any
class shall be distributed among such shareholders in proportion to
the number of shares of such class held by them and recorded on the
books of the Corporation. In the event that there are any general
assets not belonging to any particular class of stock and available
for distribution, such distribution shall be made to the holders of
stock of all classes in proportion to the asset value of the
respective classes determined as hereinafter provided.
(d) The assets belonging to any class of stock shall be charged
with the liabilities in respect to such class, and shall also be
charged with its share of the general liabilities of the Corporation,
in proportion to the asset value of the respective classes determined
as hereinafter set out. The determination of the Board of Directors
shall be conclusive as to the amount of liabilities, including accrued
expenses and reserves, and as to the allocation of the same as to a
given class, and as to whether the same, or general assets of the
Corporation, are allocable to one or more classes. The liabilities so
allocated to a class are herein referred to as "liabilities belonging
to" such class.
(e) At all meetings of stockholders each stockholder of each
share of stock of each class of the Corporation shall be entitled to
one vote for each share of stock irrespective of the class standing in
his name on the books of the Corporation, except that where a vote of
the holders of the shares of stock of any class, or of more than one
class, voting by class, is required by the 1940 Act and/or Maryland
law as to any proposal, only the holders of such class or classes,
voting by class, shall be entitled to vote upon such proposal and the
holders of any other class or classes shall not be entitled to vote
thereon. Any fractional share, if any such fractional shares are
outstanding, shall carry proportionately all the rights of a whole
share, including the right to vote and the right to receive dividends.
(f) Each holder of the shares of stock of each class of the
Corporation, upon proper written request (including signature
guarantees, if required by the Board of Directors) to the Corporation
accompanied, when stock certificates representing such shares are
outstanding, by surrender of the appropriate stock certificate or
certificates in proper form for transfer, or any such other form as
the Board of Directors may provide, shall be entitled to require the
Corporation to redeem all or any part of the shares standing in the
name of such holder on the books of the Corporation, out of the assets
belonging to the class of stock in question and not otherwise, at the
net asset value of such shares. The method of computing such net
asset value, the time as of which such net asset value shall be
computed and the time within which the Corporation shall make payment
therefor shall be determined as hereinafter provided in Article
SEVENTH of these Articles of Incorporation. Notwithstanding the
foregoing, the Board of Directors of the Corporation may suspend the
right of the holders of the shares of stock of any class of the
Corporation to require the Corporation to redeem such shares, when
permitted or required to do so by the 1940 Act.
(g) All shares of the stock of each class of the Corporation now
or hereafter authorized shall be subject to redemption and redeemable,
in the sense used in the Maryland General Corporation Law, at the
redemption price for any such shares, determined in the manner set out
in these Articles of Incorporation. In the absence of any
specification as to the purposes for which shares are redeemed or
purchased by it, all shares so redeemed or purchased shall be deemed
to be acquired for retirement in the sense contemplated by the laws of
the State of Maryland and the number of the authorized shares of the
stock of any class of the Corporation and/or the number of
unclassified shares shall not be reduced by the number of any shares
of such class redeemed or purchased by the Corporation.
(h) Notwithstanding any provision of Maryland law requiring any
action to be taken or authorized by the affirmative vote of the
holders of a majority or other designated proportion of the shares or
of the shares of any class, or to be otherwise taken or authorized by
a vote of the stockholders, such action shall be effective and valid
if taken or authorized by the affirmative vote of the holders of a
majority of the total number of shares of all classes or each class
outstanding and entitled to vote thereon pursuant to the provisions of
these Articles of Incorporation.
(i) Each holder of any class of stock of the Corporation, who
shall surrender his certificate in good delivery form to the
Corporation and pay any and all taxes in connection therewith, who if
the shares in question are not represented by certificates, shall
deliver to the Corporation a written request in good order signed by
the shareholder, shall be entitled to convert the shares in question
on the basis hereinafter set forth, into shares of stock of any other
class of the Corporation. The Corporation shall determine the net
asset value, as hereinafter defined, of the shares to be converted and
shall deduct therefrom the conversion cost, hereinafter mentioned and,
within five (5) business days after such surrender and payment, shall
issue to the shareholder such number of shares of stock of the class
desired as, taken at the net asset value thereof determined in the
same manner and at the same time as that of the shares surrendered,
shall equal the net asset value of the shares surrendered, less the
conversion cost as aforesaid. Any amount representing a fraction of a
share may be paid in cash at the option of the Corporation. The
conversion cost above mentioned shall be determined by adding: (1) a
transaction charge of $5.00 per transaction (which may be waived by
the Corporation) and (2) any and all taxes payable in connection
therewith. The transaction charge may be paid and/or assigned by the
Corporation to the underwriter and/or to any other agency, as it may
elect. Upon any conversion taking place, proper transfer shall be
made between the assets belonging to the various classes of stock
involved. The Board of Directors may limit this privilege to shares
which have been held for such reasonable period as the directors may
determine.
(j) No holder of shares of stock of any class of the Corporation
shall, as such holder, have any right to purchase or subscribe for any
shares of the stock of his or any other class of stock of the
Corporation which it may issue or sell (whether out of the number of
shares authorized by these Articles of Incorporation, or out of any
shares of the stock of the Corporation acquired by it after the issue
thereof, or otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
(k) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of these Articles of
Incorporation.
SIXTH: The number of Directors of the Corporation shall be eleven and the
names of those who shall act as such until the first annual meeting or until
their successors are duly chosen and qualified are as follows:
Julius Jensen III Sabino Marinella
John H. Kostmayer Doyle Patterson
Dodds I. Buchanan Mitchel J. Valicenti
Jay B. Dillingham Frederick Vogel III
Glendon E. Johnson Edward P. Williams
John A. Kroh
However, the By-Laws of the Corporation may fix the number of Directors at
a number greater or less than that named in these Articles of Incorporation and
may authorize the Board of Directors, by the vote of a majority of the entire
Board of Directors, to increase or decrease the number of Directors fixed by
these Articles of Incorporation or by the By-Laws within a limit specified in
the By-Laws, provided that in no case shall the number of Directors be less than
three, and to fill the vacancies created by any such increase in the number of
Directors. Unless otherwise provided by the By-Laws of the Corporation, the
Directors of the Corporation need not be stockholders therein.
SEVENTH: The following provisions are hereby adopted for the purpose of
defining and regulating the powers of the Corporation and of the Directors and
stockholders.
(1) The holders of shares of any class of the Corporation shall have
only such rights to inspect the records, documents, accounts and books of
the Corporation as are provided by Maryland law, subject to reasonable
regulations of the Board of Directors, not contrary to Maryland law, as to
whether and to what extent, and at what times and places, and under what
conditions and regulations such rights shall be exercised.
(2) Any officer elected or appointed by the Board of Directors or by
any committee of said Board or by the stockholders or otherwise, may be
removed at any time with or without cause, in such lawful manner as may be
provided in the By-Laws of the Corporation.
(3) If the By-Laws so provide; the Board of Directors of the
Corporation shall have power to hold their meetings, to have an office or
offices and, subject to the provisions of the laws of Maryland, to keep the
books of the Corporation outside of said State at such places as may from
time to time be designated by them.
(4) In addition to the powers and authority herein before or by
statute expressly conferred upon them, the Board of Directors may exercise
all such powers and do all such acts and things as may be exercised or done
by the Corporation, subject, nevertheless, to the express provisions of the
laws of Maryland, of these Articles of Incorporation and of the By-Laws of
the Corporation.
(5) Shares of stock in other corporations shall be voted by the
President or a Vice President, or such officer or officers of the
Corporation or such other person or persons as the Board of Directors shall
designate for the purpose, or by a proxy or proxies thereunto duly
authorized by the Board of Directors, except as otherwise ordered by vote
of the holders of a majority of the shares of the capital stock of the
Corporation outstanding and entitled to vote in respect thereto.
(6) (a) Subject to the provisions of the 1940 Act, any director,
officer or employee individually, or any partnership of which any director,
officer or employee may be a member, or any corporation or association of
which any director, officer or employee may be an officer, director,
trustee, employee or stockholder, may be a party to, or may be pecuniarily
or otherwise interested in, any contract or transaction of the Corporation,
and in the absence of fraud no contract or other transaction shall be
thereby affected or invalidated; provided that in case a director, or a
partnership, corporation or association of which a director is a member,
officer, director, trustee, employee or stockholder is so interested, such
fact shall be disclosed or shall have been known to the Board of Directors,
or a majority thereof; and any director of the Corporation who is so
interested, or who is also a director, officer, trustee, employee or
stockholder of such other corporation or association or a member of such
partnership which is so interested, may be counted in determining the
existence of a quorum at any meeting of the Board of Directors of the
Corporation which shall authorize any such contract or transaction, and may
vote thereat to authorize any such contract or transaction, with like force
and effect as if he were not such director, officer, trustee, employee or
stockholder of such other corporation or association or not so interested
or a member of a partnership so interested.
(b) As used in paragraph 6(b) through (f) of this paragraph (6)
of this Article SEVENTH, the following terms shall have the meanings set
forth below:
(i) the term "indemnitee" shall mean any present or former director
or officer of the Corporation, any present or former director or officer of
another corporation whose securities are or were owned by the Corporation
or of which the Corporation is or was a creditor and who served or serves
in such capacity at the request of the Corporation and the heirs, executors
and administrators of any of the foregoing; however, whenever conduct by an
indemnitee is referred to, the conduct shall be that of the original
indemnitee rather than that of the heir, executor or administrator;
(ii) the term "covered proceeding" shall mean any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which an indemnitee is or was a party
or is threatened to be made a party by reason of the fact or facts under
which he is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of the office in question;
(iv) the term "covered expenses" shall mean expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by an indemnitee in connection with a covered
proceeding; and
(v) the term "adjudication of liability" shall mean, as to any
covered proceeding and as to any indemnitees, an adverse determination as
to the indemnitee whether by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent.
(c) The Corporation shall not indemnify any indemnitee for any
covered expenses in any covered proceeding if there has been an
adjudication of liability against such indemnitee expressly based on a
finding of disabling conduct.
(d) Except as set forth in (c) above, the Corporation shall
indemnify any indemnitee for covered expenses in any covered proceeding,
whether or not there is an adjudication of liability as to such indemnitee,
if a determination has been made that the indemnitee was not liable by
reason of disabling conduct by (i) a final decision of the court or other
body before which the covered proceeding was brought; or (ii) in the
absence of such decision, a reasonable determination, based on a review of
the facts, by either (a) the vote of a majority of a quorum of directors
who are neither "interested persons", as defined in the Investment Company
Act of 1940 nor parties to the covered proceeding or (b) an independent
legal counsel in a written opinion; in voting of such matter, or in giving
such opinion, such directors or counsel may consider that the dismissal of
a covered proceeding against an indemnitee for insufficiency of evidence of
any disabling conduct with which indemnitee has been charged would provide
reasonable assurance that the indemnitee was not liable by reason of
disabling conduct.
(e) Covered expenses incurred by an indemnitee in connection
with a covered proceeding shall be advanced by the Corporation to an
indemnitee prior to the final disposition of a covered proceeding upon the
request of the indemnitee for which such advance and the undertaking by or
on behalf of the indemnitee to repay the advance unless it is ultimately
determined that the indemnitee is entitled to indemnification hereunder,
but only if one or more of the following is the case: (i) the indemnitee
shall provide a security for such undertaking; (ii) the Corporation shall
be insured against losses arising out of any lawful advances; or (iii)
there shall have been a determination, based on a review of the readily
available facts (as opposed to a full trial-type inquiry) that there is
reason to believe that the indemnitee ultimately will be found entitled to
indemnification by either independent legal counsel in a written opinion or
by the vote of a majority of a quorum of directors who are neither
interested persons as defined by the Investment Company Act of 1940 nor
parties to the covered proceeding.
(f) Nothing herein shall be deemed to affect the right of the
Corporation and/or any indemnitee to acquire and pay for any insurance
covering any or all indemnitees to the extent permitted by the Investment
Company Act of 1940 or to affect any other indemnification rights to which
any indemnitee may be entitled to the extent permitted by the Investment
Company Act of 1940.
(7) The computation of net asset value of each share of stock of each
class, as in these Articles of Incorporation referred to, shall be
determined as provided in the 1940 Act, and, except as so provided shall be
computed in accordance with the following rules:
(a) The net asset value of each share of stock of each class of
the Corporation tendered to the Corporation for redemption shall be
determined as of the close of business on the New York Stock Exchange next
succeeding the tender of such share;
(b) The net asset value of each share of stock of each class of
the Corporation for the purpose of the issue of such share shall be
determined as of the close of business on the New York Stock Exchange next
succeeding the receipt of an order to purchase such share;
(c) The net asset value of each share of stock of each class of
the Corporation, as of the close of business on the New York Stock Exchange
on any day, shall be the quotient obtained by dividing the value, as at
such close, of the net assets of the class (i.e., the value of the assets
belonging to such class less the liabilities belonging to such class
exclusive of the par value of its shares and surplus) by the total number
of shares of stock of such class outstanding at such close. The assets and
liabilities belonging to such class shall be determined in accordance with
generally accepted accounting principles; provided, however, that in
determining the liabilities, there shall be included such reserves for
taxes or contingent liabilities as may be authorized or approved by the
Board of Directors, and provided further that in determining the value of
the assets belonging to each class for the purpose of obtaining the net
asset value, each security listed on the New York Stock Exchange shall be
valued on the basis of the closing sale thereof on the New York Stock
Exchange on the business day as of which such value is being determined; if
there be no sale on such day, then the security shall be valued on the
basis of the mean between closing bid and asked prices on such day; if no
bid and asked prices are quoted for such day, then the security shall be
valued by such method as the Board of Directors shall deem in good faith to
reflect its fair market value; securities not listed on the New York Stock
Exchange shall be valued in like manner on the basis of quotations on any
other stock exchange which the Board of Directors may from time to time
approve for that purpose; readily marketable securities traded in the over-
the-counter market shall be valued at the mean between their bid and asked
prices, or, if the Board of Directors shall so determine, at their bid
prices; and all other securities and other assets of the Corporation and
all securities as to which the Corporation might be considered an
"underwriter" (as that term is used in the Securities Act of 1933), whether
or not such securities are listed or traded in the over-the-counter market,
shall be valued by such method as they shall deem in good faith to reflect
their fair market value. In connection with the accrual of any fee or
refund payable to or by an investment adviser of the Corporation, the
amount of which accrual is not definitely determinable as of any time at
which the net asset value of each share of the capital stock of the
Corporation is being determined due to the contingent nature of such fee or
refund, the Board of Directors is authorized to establish from time to time
formulae for such accrual, on the basis of the contingencies in question to
the date of such determination, or on such other basis as the Board of
Directors may establish.
For the purposes hereof:
(A) Shares of stock of any class to be issued shall be deemed to be
outstanding as of the time of the determination of the net asset value per
share applicable to such issuance and the net price thereof shall be deemed
to be an asset belonging to the class of stock in question.
(B) Shares of stock of any class to be redeemed by the Corporation
shall be deemed to be outstanding until the time of the determination of
the net asset value applicable to such redemption and thereupon and until
paid the redemption price thereof shall be deemed to be a liability
belonging to the class of stock in question.
(C) The net asset value per share of any class of stock for the
purposes of its redemption shall be the net asset value per share computed
in accordance herewith except that in computing the liabilities belonging
to such class there may be included an amount equal to the amount that
would then be payable for taxes, brokerage and expenses if all securities
then belonging to that class were then being sold, in each case, as from
time to time may be determined by or under the direction of the Board of
Directors.
(d) The net asset value of each share of the stock of any class
of the Corporation, as of any time other than the close of business on the
New York Stock Exchange on any day, may be determined by applying to the
net asset value as of the close of business on that Exchange on the
preceding business day, computed as provided in paragraph 7(c) of this
Article SEVENTH, such adjustments as are authorized by or pursuant to the
direction of the Board of Directors and designed reasonably to reflect any
material changes in the market value of securities and other assets
belonging to such class and any other material changes in the assets or
liabilities belonging to such class and in the number of its outstanding
shares which shall have taken place since the close of business on such
preceding business day.
(e) In addition to the foregoing, the Board of Directors is
empowered, in its absolute discretion, to establish other bases or times,
or both, for determining the net asset value of each share of stock of any
class of the Corporation in accordance with the 1940 Act and to authorize
the voluntary purchase by the Corporation, either directly or through an
agent, of shares of capital stock of the Corporation upon such terms and
conditions and for such consideration as the Board of Directors shall deem
advisable in accordance with the 1940 Act.
(f) Payment of the net asset value of shares of stock of any
class of the Corporation properly surrendered to it for redemption shall be
made by the Corporation within seven days after tender of such stock to the
Corporation for such purpose plus any period of time during which the right
of the holders of the shares of stock of such class to require the
Corporation to redeem such capital stock has been suspended. Any such
payment may be made in portfolio securities belonging to such class and/or
in cash, as the Board of Directors shall deem advisable, and no shareholder
shall have a right, other than as determined by the Board of Directors, to
have his shares redeemed in kind.
EIGHTH: From time to time any of the provisions of these Articles of
Incorporation may be amended, altered or repealed upon the vote contemplated by
paragraphs 4(e) and 4(h) of Article FIFTH, and other provisions which might
under the statutes of the State of Maryland at the time in force be lawfully
contained in articles of incorporation, may be added or inserted upon such a
vote and all rights at any time conferred upon the stockholders of the
Corporation by these Articles of Incorporation are granted subject to the
provisions of this Article EIGHTH.
The term "these Articles of Incorporation" as used herein and in the By-
Laws of the Corporation shall be deemed to mean these Articles of Incorporation
as from time to time amended and restated.
IN WITNESS WHEREOF, the undersigned incorporator of United Funds, Inc. who
executed the foregoing Articles of Incorporation hereby acknowledges the same to
be his act and further acknowledges that, to the best of his knowledge,
information and belief the matters and facts set forth therein are true in all
material respects under the penalties of perjury.
Dated the 11th day of February, 1974.
(As amended subsequent to such date).
Rodney O. McWhinney
-------------------
Rodney O. McWhinney
STATE OF MISSOURI )
)ss.
COUNTY OF JACKSON)
This is to certify that on this 11th day of February, 1974, before me, the
subscriber, a Notary Public of the State of Missouri, personally appeared Rodney
O. McWhinney and acknowledged the foregoing Articles of Incorporation to be his
act.
Witness my hand and Notarial Seal the day and year last above written.
(SEAL) D. Gail Gretlein
----------------
D. Gail Gretlein, Notary Public
My Commission Expires: 3/15/74
D. Gail Gretlein
EX-99.B1-ufartsup
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
UNITED FUNDS, INC.
United Funds, Inc. (the "Corporation"), a Maryland corporation, having its
principal office in Baltimore City, Maryland, hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The total number of shares of all classes of stock of the
Corporation heretofore authorized is one billion (1,000,000,000) shares of
capital stock (par value $1.00 per share). The shares of capital stock have
been classified among the four series of the Corporation as follows:
United Bond Fund (260,000,000 shares)
United Income Fund (300,000,000 shares)
United Accumulative Fund (340,000,000 shares)
United Science and Technology Fund (100,000,000 shares)
SECOND: The total number of shares of stock that the Corporation has
authority to issue has been increased by the Board of Directors of the
Corporation in accordance with Section 2-105 of Title 2 of the Maryland General
Corporation Law from one billion (1,000,000,000) shares to one billion eight
hundred million (1,800,000,000) shares.
THIRD: Pursuant to the authority vested in the Board of Directors of the
Corporation by Article FIFTH of the Articles of Incorporation of the
Corporation, the Board of Directors, in accordance with Maryland General
Corporation Law, now duly redesignates and reclassifies the capital stock of
the Corporation, as hereby increased, among the series of the Corporation and
classes thereof as follows:
United Bond Fund, Class A (200,000,000 shares)
United Bond Fund, Class Y (200,000,000 shares)
United Income Fund, Class A (300,000,000 shares)
United Income Fund, Class Y (300,000,000 shares)
United Accumulative Fund, Class A (300,000,000 shares)
United Accumulative Fund, Class Y (300,000,000 shares)
United Science and Technology Fund,
Class A (100,000,000 shares)
United Science and Technology Fund,
Class Y (100,000,000 shares)
FOURTH: (1) The aggregate par value of all of the shares of all classes of
stock of the Corporation heretofore authorized is one billion dollars
($1,000,000,000.00), and the par value for each class of the capital stock of
the Corporation is One Dollar ($1.00) each, and of the following aggregate par
value for each class of shares:
United Bond Fund ($260,000,000.00)
United Income Fund ($300,000,000.00)
United Accumulative Fund ($340,000,000.00)
United Science and Technology Fund ($100,000,000.00)
(2) The aggregate par value of all of the shares of all classes of stock of
the Corporation as increased is one billion eight hundred million dollars
($1,800,000,000.00), and the par value for each class of the capital stock of
the Corporation is One Dollar ($1.00) each, and of the following aggregate par
value for each class of shares:
United Bond Fund, Class A ($200,000,000.00)
United Bond Fund, Class Y ($200,000,000.00)
United Income Fund, Class A ($300,000,000.00)
United Income Fund, Class Y ($300,000,000.00)
United Accumulative Fund, Class A ($300,000,000.00)
United Accumulative Fund, Class Y ($300,000,000.00)
United Science and Technology Fund,
Class A ($100,000,000.00)
United Science and Technology Fund,
Class Y ($100,000,000.00)
FIFTH: The capital stock of the Corporation is divided into classes and
there are no changes in the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption as shares of capital stock as set forth in the
Corporation's Articles of Incorporation, except as follows:
(1) The capital stock of each of the United Bond Fund, Class A,
United Income Fund, Class A, United Accumulative Fund, Class A and
United Science and Technology Fund, Class A shall be subject to a
front-end sales load and a Rule 12b-1 service and distribution fee
as determined by the Board of Directors of the Corporation from
time to time prior to issuance of such stock;
(2) The capital stock of each of the United Bond Fund, Class Y,
United Income Fund, Class Y, United Accumulative Fund, Class Y and
United Science and Technology Fund, Class Y shall not be subject to
either a front-end or contingent deferred sales charge or Rule 12b-
1 service and distribution fees.
SIXTH: The Corporation is registered with the Securities and Exchange
Commission as an open-end investment company under the Investment Company Act of
1940, as amended.
IN WITNESS WHEREOF, the undersigned Vice President of the Corporation
hereby executes these Articles Supplementary on behalf of the Corporation and
further states under the penalties of perjury that, to the best of her
knowledge, information and belief, the matters and facts set forth herein are
true in all material respects.
Dated:
------------- ----------------------
Sharon K. Pappas,
Vice President
Attest:
-------------------
Amy D. Eisenbeis
Assistant Secretary
The undersigned, Vice President of United Funds, Inc. who executed on
behalf said Corporation the foregoing Articles of Amendment, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said Corporation, the foregoing Articles Supplementary to be the corporate act
of said Corporation and further certifies that, to the best of her knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
UNITED FUNDS, INC.
By:
------------------------
Sharon K. Pappas,
Vice President
EX-99.B2-ufbylaw
UNITED FUNDS, INC.
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. Place of Meeting. All meetings of the stockholders shall be
held at the principal office of the Corporation or at such other place within or
without the State of Maryland as may from time to time be designated by the
Board of Directors and stated in the notice of meeting.
Section 2. Annual Meeting. The annual meeting of the stockholders of the
Corporation shall be held at such hour as may be determined by the Board of
Directors and as shall be designated in the notice of meeting on such date
within 31 days after the 1st day of June in each year as may be fixed by the
Board of Directors for the purpose of electing directors for the ensuing year
and for the transaction of such other business as may properly be brought before
the meeting. The Corporation shall not be required to hold an annual meeting in
any year in which the election of directors is not required to be acted upon
under the Investment Company Act of 1940.
Section 3. Special or Extraordinary Meetings. Special or extraordinary
meetings of the stockholders for any purpose or purposes may be called at by the
Chairman of the Board of Directors, if any, or by the President or by the Board
of Directors and shall be called by the Secretary upon receipt of the request in
writing signed by stockholders holding not less than one fourth in amount of the
entire capital stock issued and outstanding and entitled to vote thereat. Such
request shall state the purpose or purposes of the proposed meeting.
Section 4. Notice of Meetings of Stockholders. Not less than ten days'
and not more than ninety days' written or printed notice of every meeting of
stockholders, stating the time and place thereof (and the general nature of the
business proposed to be transacted at any special or extraordinary meeting),
shall be given to each stockholder entitled to vote thereat by leaving the same
with him or at his residence or usual place of business or by mailing it,
postage prepaid, and addressed to him at his address as it appears upon the
books of the Corporation.
No notice of the time, place or purpose of any meeting of stockholders need
be given to any stockholder who attends in person or by proxy or to any
stockholder who, in writing executed and filed with the records of the meeting,
either before or after the holding thereof, waives such notice.
Section 5. Record Dates. The Board of Directors may fix, in advance, a
date, not exceeding ninety days and not less than ten days preceding the date of
any meeting of stockholders, and not exceeding ninety days preceding any
dividend payment date or any date for the allotment of rights, as a record date
for the determination of the stockholders entitled to receive such dividends or
rights, as the case may be; and only stockholders of record on such date shall
be entitled to notice of and to vote at such meeting or to receive such
dividends or rights, as the case may be.
Section 6. Quorum, Adjournment of Meetings. The presence in person or by
proxy of the holders of record of a majority of the shares of the stock of the
Corporation issued and outstanding and entitled to vote thereat, shall
constitute a quorum at all meetings of the stockholders. If at any meeting of
the stockholders there shall be less than a quorum present, the stockholders
present at such meeting may, without further notice, adjourn the same from time
to time until a quorum shall attend, but no business shall be transacted at any
such adjourned meeting except such as might have been lawfully transacted had
the meeting not been adjourned.
Section 7. Voting and Inspectors. At all meetings of stockholders every
stockholder of record entitled to vote thereat shall be entitled to vote at
such meeting either in person or by proxy appointed by instrument in writing
subscribed by such stockholder or his duly authorized attorney. No proxy which
is dated more than three months before the meeting at which it is offered shall
be accepted, unless such proxy shall, on its face, name a longer period for
which it is to remain in force.
All elections shall be had and all questions decided by a majority of the
votes cast at a duly constituted meeting, except as otherwise provided in the
Articles of Incorporation or in these By-Laws or by specific statutory provision
superseding the restrictions and limitations contained in the Articles of
Incorporation or in these By-Laws.
At any election of Directors, the Board of Directors prior thereto may, or,
if they have not so acted, the Chairman of the meeting may, and upon the request
of the holders of ten per cent (10%) of the stock entitled to vote at such
election shall, appoint two inspectors of election who shall first subscribe an
oath or affirmation to execute faithfully the duties of inspectors at such
election with strict impartiality and according to the best of their ability,
and shall after the election make a certificate of the result of the vote taken.
No candidate for the office of Director shall be appointed such Inspector.
The Chairman of the meeting may cause a vote by ballot to be taken upon any
election or matter, and such vote shall be taken upon the request of the holders
of ten per cent (10%) of the stock entitled to vote on such election or matter.
Section 8. Conduct of Stockholders' Meetings. The meetings of the
stockholders shall be presided over by the Chairman of the Board of Directors,
if any, or if he shall not be present, by the President, or if he shall not be
present, by a Vice-President, or if neither the Chairman of the Board of
Directors, the President nor any Vice President is present, by a chairman to be
elected at the meeting. The Secretary of the Corporation, if present, shall act
as Secretary of such meetings, or if he is not present, an Assistant Secretary
shall so act, if neither the Secretary nor an Assistant Secretary is present,
then the meeting shall elect its secretary.
Section 9. Concerning Validity of Proxies, Ballots, Etc. At every meeting
of the stockholders, all proxies shall be received and taken in charge of and
all ballots shall be received and canvassed by the secretary of the meeting, who
shall decide all questions touching the qualification of voters, the validity of
the proxies, and the acceptance or rejection of votes, unless inspectors of
election shall have been appointed as provided in Section 7, in which event such
inspectors of election shall decide all such questions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Tenure of Office. The business and property of the
Corporation shall be conducted and managed by a Board of Directors consisting of
eleven Directors, which number may be increased or decreased as provided in
Section 2 of this Article. Each director shall hold office until the annual
meeting of stockholders of the Corporation next succeeding his election or until
his successor is duly elected and qualifies. Directors need not be
stockholders.
Section 2. Increase or Decrease in Number of Directors. The Board of
Directors, by the vote of a majority of the entire Board, may increase the
number of Directors to a number not exceeding twenty, and may elect Directors to
fill the vacancies created by any such increase in the number of Directors until
the next annual meeting or until their successors are duly elected and qualify;
the Board of Directors, by the vote of a majority of the entire Board, may
likewise decrease the number of Directors to a number not less than three.
Vacancies occurring other than by reason of any such increase shall be filled as
provided by the Maryland General Corporation Law.
Section 3. Place of Meeting. The Directors may hold their meetings, have
one or more offices, and keep the books of the Corporation outside the State of
Maryland, at any office or offices of the Corporation or at any other place as
they may from time to time by resolution determine, or, in the case of meetings,
as they may from time to time by resolution determine or as shall be specified
or fixed in the respective notices or waivers of notice thereof.
Section 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and on such notice, if any, as the Directors may from
time to time determine.
The annual meeting of the Board of Directors shall be held as soon as
practicable after the annual meeting of the stockholders for the election of
Directors.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be held from time to time upon call of the Chairman of the Board of
Directors, if any, the President or two or more of the Directors, by oral or
telegraphic or written notice duly served on or sent or mailed to each Director
not less than one day before such meeting. No notice need be given to any
Director who attends in person or to any Director who, in writing executed and
filed with the records of the meeting either before or after the holding
thereof, waives such notice. Such notice or waiver of notice need not state the
purpose or purposes of such meeting.
Section 6. Quorum. A majority of the Directors then in office shall
constitute a quorum for the transaction of business, provided that a quorum for
the transaction of business, provided that a quorum shall in no case be less
than two Directors. If at any meeting of the Board there shall be less than a
quorum present, a majority of those present may adjourn the meeting from time to
time until a quorum shall have been obtained. The act of the majority of the
Directors present at any meeting at which there is a quorum shall be the act of
the Directors, except as may be otherwise specifically provided by statute, by
the Articles of Incorporation or by these By-Laws.
Section 7. Executive Committee. The Board of Directors may, by the
affirmative vote of a majority of the entire Board, elect from the Directors an
Executive Committee to consist of such number of Directors as the Board may from
time to time determine. The Board of Directors by such affirmative vote shall
have power at any time to change the members of such Committee and may fill
vacancies in the Committee by election from the Directors. When the Board of
Directors is not in session, the Executive Committee shall have and may exercise
any or all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation (including the power to authorize the
seal of the Corporation to be affixed to all papers which may require it) except
as provided by law and except the power to increase or decrease the size of, or
fill vacancies on the Board. The Executive Committee may fix its own rules of
procedure, and may meet, when and as provided by such rules or by resolution of
the Board of Directors, but in every case the presence of a majority shall be
necessary to constitute a quorum. In the absence of any member of the Executive
Committee the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Directors to act in
the place of such absent member.
Section 8. Other Committees. The Board of Directors, by the affirmative
vote of a majority of the entire Board; may appoint other committees which shall
in each case consist of such number of members (not less than two) and shall
have and may exercise such powers as the Board may determine in the resolution
appointing them. A majority of all members of any such committee may determine
its action, and fix the time and place of its meetings, unless the Board of
Directors shall otherwise provide. The Board of Directors shall have power at
any time to change the members and powers of any such committee, to fill
vacancies, and to discharge any such committee.
Section 9. Informal Action by Directors and Committees. Any action
required or permitted to be taken at any meeting of the Board of Directors or
any committee thereof may be taken without a meeting, if a written consent to
such action is signed by all members of the Board, or of such committee, as the
case may be.
Section 10. Compensation of Directors. No Director shall receive any
stated salary or fees from the Corporation for his services as such Director if
such Director is, otherwise than by reason of being such Director, affiliated
(as such term is defined in the Investment Company Act of 1940) with the
Corporation or with any investment adviser of the Corporation. Except as
provided in the preceding sentence, Directors shall be entitled to receive such
compensation from the Corporation for their services as may from time to time be
voted by the Board of Directors.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of the Corporation
shall be chosen by the Board of Directors as soon as may be practicable after
the annual meeting of the stockholders. These may include a Chairman of the
Board of Directors, and shall include a President, one or more Vice Presidents
(the number thereof to be determined by the Board of Directors), a Secretary and
a Treasurer. The Chairman of the Board of Directors, if any, and the President
shall be selected from among the Directors. The Board of Directors may also in
its discretion appoint Assistant Secretaries, Assistant Treasurer, and other
offices, agents and employees, who shall have such authority and perform such
duties as the Board or the Executive Committee may determine. The Board of
Directors may fill any vacancy which may occur in any office. Any two offices,
except those of President and Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more than
one capacity, if such instrument is required by law or these By-Laws to be
executed, acknowledged or verified by two or more officers.
Section 2. Term of Office. The term of office of all officers shall be
one year and until their respective successors are chosen and qualify; however,
any officer may be removed from office at any time with or without cause by the
vote of a majority of the entire Board of Directors.
Section 3. Powers and Duties. The officers of the Corporation shall have
such powers and duties as generally pertain to their respective offices, as well
as such powers and duties as may from time to time be conferred by the Board of
Directors or the Executive Committee.
ARTICLE IV
CAPITAL STOCK
Section 1. Certificates of Shares. Each stockholder of the Corporation
shall be entitled to a certificate or certificates for the full shares of the
class of stock of the Corporation owned by them in such form as the Board of
Directors may from time to time prescribe.
Section 2. Transfer of Shares. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder thereof in person or
by his duly authorized attorney or legal representative, upon surrender and
cancellation of certificates, if any, for the same number of shares, duly
endorsed or accompanied by proper instruments of assignment and transfer, with
such proof of the authenticity of the signature as the Corporation or its agents
may reasonably require, in the case of shares not represented by certificates,
the same or similar requirements may be imposed by the Board of Directors.
Section 3. Stock Ledgers. The stock ledgers of the Corporation,
containing the name and address of the stockholders and the number of shares
held by them respectively, shall be kept at the principal offices of the
Corporation or, if the Corporation employs a transfer agent, at the offices of
the transfer agent of the Corporation.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of Directors
may determine the conditions upon which a new certificate of stock of the
Corporation of any class may be issued in place of a certificate which is
alleged to have been lost, stolen or destroyed; and may, in their discretion,
require the owner of such certificate or his legal representative to give bond,
with sufficient surety to the Corporation and the transfer agent, if any, to
indemnify it and such transfer agent against any and all loss or claims which
may arise by reason of the issue of a new certificate in the place of the one so
lost, stolen or destroyed.
ARTICLE V
CORPORATE SEAL
The Board of Directors shall provide a suitable corporate seal, in such
form and bearing such inscriptions as it may determine.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of
Directors.
ARTICLE VII
MISCELLANEOUS
Section 1. Custodianship. All cash and securities owned by the
Corporation shall be held by one or more banks or trust companies of good
standing, each having a capital, surplus and undivided profits aggregating not
less than two million ($2,000,000), provided such a bank or trust company can be
found ready and willing to act. Upon the resignation or inability to serve of
any such bank or trust company the Corporation shall (i) use its best efforts to
obtain a qualified successor, (ii) require the cash and securities of the
Corporation held by such bank or trust company to be delivered directly to the
successor, and (iii) in the event that no qualified successor can be found,
submit to the holders of the shares of the capital stock of the Corporation at
the time outstanding and entitled to vote, before permitting delivery of such
cash and securities to anyone other than a qualified successor, the question
whether the Corporation shall be dissolved and liquidated or shall function
without a qualified bank of trust company selected by it, such assets to be held
subject to the terms of the agreement which governed such retiring bank or trust
company, pending action by the Corporation as set forth in this Article VII.
Nothing herein contained, however, shall prevent the termination of any
agreement between the Corporation and any such bank or trust company by the
Corporation at the discretion of the Board of Directors, and any such agreement
shall be terminated upon the affirmative vote of the holders of a majority of
all the shares of the capital stock of the Corporation at the time outstanding
and entitled to vote.
Section 2. Certain Transactions. The Corporation shall not purchase or
sell any securities (other than stock which may be issued by the Corporation)
from or to any of the following acting as principals and shall not make any loan
to any of the following: (i) any officer or director of the Corporation; (ii)
any person or organization furnishing managerial or supervisory services to the
Corporation; or (iii) any officer, director or partner of any person or
organization furnishing such managerial or supervisory services.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Except as set forth below, the By-Laws of the Corporation may be altered,
amended, added to or repealed by the stockholders or by majority vote of the
entire Board of Directors; but any such alteration, amendment, addition or
repeal of the By-Laws by action of the Board of Directors may be altered or
repealed by the stockholders. Article VII may be altered, amended or repealed
only by the stockholders.
EX-99.B6-ufua
UNDERWRITING AGREEMENT
THIS AGREEMENT, made this 8th day of February, 1995, by and between United
Funds, Inc. (hereinafter the "Company"), a Maryland corporation, and Waddell &
Reed, Inc. (hereinafter "W&R"), a Delaware corporation;
I. REPRESENTATIONS
A. The Company represents that
1) it is a registered open-end management investment company
(mutual fund), and
2) the shares of each of its classes of shares ("Fund") and of
each sub-class thereof ("Class"), if any, are, as of the date of the
effectiveness of this Agreement as to each such Fund or Class, registered with
the Securities and Exchange Commission ("SEC") and qualified or otherwise
authorized for sale in all states of the United States as may be agreed upon.
(As to any Fund or Class not registered with the SEC and qualified or otherwise
authorized for sale in all states of the United States as may be agreed upon,
this Agreement shall become effective as to such Fund or Class upon such
registration and qualification or authorization.)
B. W&R represents that
1) it is a broker-dealer registered with the SEC and is duly
qualified to offer shares of the Company in all states in which the shares are
currently qualified or otherwise authorized for offer for sale;
2) it is a member of the National Association of Securities
Dealers, Inc. ("NASD");
3) it maintains a retail securities and insurance sales
organization consisting in part of a number of representatives authorized under
Federal and state securities laws to solicit as representatives of W&R orders
for Company shares and other securities;
4) it maintains and enforces procedures to enable it to
supervise its representatives and associated persons in accordance with
applicable securities laws, rules and regulations including the Rules of the
NASD; and
5) it maintains and enforces procedures to review for compliance
with applicable securities laws, rules and regulations all sales literature and
promotional materials used by it and authorized to be used by its
representatives in solicitation of orders to buy Company shares, and it files,
when applicable, such literature and materials with the NASD.
II. APPOINTMENT OF UNDERWRITER and OBLIGATIONS
The Company hereby, as applicable, appoints W&R or continues the
appointment of W&R, and W&R, as applicable, agrees to act or continues to act,
as the Company's principal underwriter under the terms and provisions of this
Agreement.
A. Company agrees
1) to use its best efforts to register from time to time under
the Securities Act of 1933 (the "Securities Act") adequate amounts of its shares
for sale by W&R to the public and to qualify or to permit W&R to qualify such
shares for offering to the public in such states as may from time to time be
agreed upon;
2) to immediately advise W&R (i) when any post-effective
amendment to its registration statement or any further amendment or supplement
thereto or any further registration statement or amendment or supplement thereto
becomes effective, (ii) of any request by the SEC for amendments to the
registration statement(s) or any then effective prospectus or for additional
information, (iii) of the issuance by the SEC of any stop-order suspending the
effectiveness of the registration statement or the initiation of any proceedings
for that purpose, and (iv) of the happening of any event which makes untrue any
material statement made in the registration statement or any then effective
prospectus or which, in the opinion of counsel for the Company, requires the
making of a change in the registration statement or any then effective
prospectus in order to make the statements therein not misleading; in case of
the happening at any time of any event which materially affects the Company or
its securities and which should be set forth in a supplement to or an amendment
of any then effective prospectus in order to make the statements therein not
misleading, to prepare and furnish to W&R such amendment or amendments to that
prospectus as will correct the prospectus so that as corrected it will not
contain, or such supplement or supplements to that prospectus which when read in
conjunction with that prospectus will make the combined information not contain
any untrue statement of a material fact or any omission to state any material
fact necessary in order to make the statements in that prospectus not
misleading; if any time the SEC shall issue any stop-order suspending the
effectiveness of the registration statement, to make every reasonable effort to
obtain the prompt lifting of such order; and, before filing any amendment to the
registration statement or to any then effective prospectus, to furnish W&R with
a copy of the proposed amendment;
3) to advise W&R of the net asset value of the shares of each of
its Funds and Classes, as applicable, as often as computed and to furnish to W&R
as soon as practical such information as may be reasonably requested by W&R in
order that it may know all of the facts necessary to sell shares of the Company;
4) to make delivery of its shares subject to the provisions of
its Articles of Incorporation and Bylaws to W&R as ordered by W&R as soon as
reasonably possible after receipt of the orders and against payment of the
consideration to be received by the Company therefor from W&R;
5) to pay or cause to be paid all expenses incident to the
issuance, transfer, registration and delivery of its shares, all taxes in
connection therewith, costs and expenses incident to preparing and filing any
registration statements and prospectuses and any amendments or supplements to a
registration statement or a prospectus, statutory fees incidental to the
registration of additional shares with the SEC, statutory fees and expenses
incurred in connection with any Blue Sky law qualifications undertaken by or at
the request of W&R, and the fees and expenses of the Company's counsel,
accountants or any other experts used in connection with the foregoing; and
6) not without the consent of W&R to offer any of its shares for
sale directly or to any persons or corporations other than W&R, except only
a) the reinvestment of dividends and/or distributions or
their declaration in shares of the Company, in optional form or otherwise;
b) the issuance of additional shares to stock splits or
stock dividends;
c) sale of shares to another investment or securities
holding company in the process of purchasing all or a portion of its assets;
d) in connection with an exchange of shares of the Company
for shares in another investment or securities holding company;
e) the sale of shares to registered unit investment trusts;
or
f) in connection with the exchange of one Fund's shares for
shares of another Fund of the Company.
B. W&R agrees
1) to offer Company shares in such states as may be agreed upon
through its retail account representatives and, at its sole discretion, through
broker-dealers which are members of the NASD on such terms as are not
inconsistent with this Agreement;
2) to order shares from the Company only after it has received a
purchase order therefor;
3) to pay to the Company the net asset value of shares sold
within two business days after the day payment is received by W&R at its
principal place of business from the investor or broker-dealer, or pay the
Company at such other time as may be agreed upon hereafter by the Company and
W&R, or as may be prescribed by law or the Rules of the NASD;
4) in offering shares to comply with the provisions of the
Articles of Incorporation and Bylaws of the Company and with the provisions
stated in its applicable then current prospectus(es);
5) timely to inform the Company of any action or proceeding to
terminate, revoke or suspend W&R's registration as a broker-dealer with the SEC,
membership in the NASD, or authority with any state securities commission to
offer Company shares; and
6) to pay the cost of all sales literature, advertising and
other materials which it may at its discretion use in connection with the sale
of Company shares, including the cost of reports to the shareholders of the
Company in excess of the cost of reports to existing shareholders and the cost
of printing the prospectus(es) furnished to it by the Company.
III. TERMS FOR SALE OF SHARES
A. It is mutually agreed that
1) W&R shall act as principal in all matters relating to
promotion and sale of Company shares, including the preparation and use of all
advertising, sales literature and other promotional materials, and shall make
and enter into all other arrangements, agreements and contracts as principal on
its own account and not as agent for the Company. Title to shares issued and
sold by the Company through W&R shall pass directly from the Company to the
dealer or investor, or shall first pass to W&R as it may from time to time be
determined by W&R and the Company; except provided, however, that W&R may, if so
agreed by W&R and the Company, act as agent of the Company without commission on
repurchase of shares of the Company;
2) certificates for shares shall not be created or delivered by
the Company in any case in which the purchase is pursuant to any provisions of
the Company described in its applicable then current prospectus(es) under the
terms of which certificates are not to be issued to the shareholder. Shares
sold by W&R shall be registered in such name or names and amounts as W&R may
request from time to time, and all shares when so paid for and issued shall be
fully paid and non-assessable;
3) the offering price at which shares of the Company may be sold
by W&R shall include such selling commission as may be applicable to that Class
and as may be fixed from time to time by W&R but shall not be in excess of 8.5
percent of the offering price. W&R shall retain any such sales commission and
may re-allow all or any part of the sales commission to its account
representatives and to selected brokers and dealers who sell shares of the
Company; and
4) W&R may designate, reduce or eliminate its selling
commissions in certain sales or exchanges to the extent described in the
applicable then current prospectus(es) of the Company and in accordance with
Section 22(d) of the Investment Company Act of 1940 and any rules, regulations
or orders of the SEC thereunder.
IV. THE PLAN
A. It is mutually acknowledged that the Company has adopted a plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (a
"Plan"), which Plan is applicable to certain shares and that the Company may in
the future adopt Plans applicable to certain Funds and Classes, respectively.
B. With respect to any Fund or Class as to which the Company has
adopted a Plan, pursuant to that Plan, each day the Company shall pay to W&R a
distribution fee and/or a service fee at the maximum rates and under the terms
and conditions set forth in the applicable Plan, as amended from time to time,
or such lesser amount as the Company and W&R may agree.
C. The Company shall, after excluding from the redemption proceeds
that portion represented by the reinvestment of dividends and distributions and
the appreciation of the value of Fund shares being redeemed, promptly pay W&R an
amount, if any, equal to the percent of the amount invested as determined by W&R
and as is then stated in the Company's current prospectus applicable to the
shares redeemed (the "contingent deferred sales charge"). For purposes of
determining the applicable contingent deferred sales charge, if any: the
redemptions shall be deemed in order of investment made when more than one
investment has been made; and when the shares being redeemed were acquired by
exchange of shares of another Fund or Class of the Company, or corresponding
class of another registered investment company for which W&R or its affiliate
serves as principal underwriter, the investment shall be deemed as if it had
been made when the Company's shares were first purchased, and the applicable
contingent deferred sales charges, if any, shall be with respect to the amount
originally invested in Company shares; and provided that any contingent deferred
sales charge shall be determined in accordance with and in the manner set forth
in the applicable then current prospectus and any applicable Order or Rule
issued by the SEC.
D. It is contemplated that W&R may pay commissions to its field sales
force at the time of sale of the Company's shares and may incur other expenses
substantially in advance of receiving the distribution fee, if any, that may be
applicable to the payment of such commissions and expenses. W&R recognizes that
such payments are at its risk and that this Agreement may be terminated or not
continued as hereinafter provided without the payment to it of any further
distribution fees or service fees whatsoever and without the payment of any
penalty. The contingent deferred sales charges, if any, shall, however, be
payable to W&R with respect to all subject sales made prior to the termination
of this Agreement.
E. W&R shall at least quarterly provide to the Company's board of
directors a written report with respect to each Fund or Class, as applicable, of
the amounts of the distribution and/or service fees expended and the purposes
for which these expenditures were made. W&R shall in addition furnish to the
board of directors of the Company such information as may be requested or as may
be necessary to an informed determination by the directors of whether or not the
directors should continue the Company's Plan(s) and continue this Agreement and
to determine whether there is reasonable likelihood that the Plan(s) and this
Agreement will benefit the Company and its shareholders affected by such
Plan(s).
V. INDEMNIFICATION
A. The Company agrees with W&R for the benefit of W&R and each
person, if any, who controls W&R within the meaning of Section 15 of the
Securities Act and each and all and any of them, to indemnify and hold harmless
W&R and any such controlling person from and against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Securities Act, under any other statute, at common law
or otherwise, and to reimburse the underwriter and such controlling persons, if
any, for any legal or other expenses (including the cost of any investigation
and preparation) reasonably incurred by them or any of them in connection with
any litigation whether or not resulting in any liability, insofar as such
losses, claims, damages, liabilities or litigation arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or any prospectus or any amendment
thereof or supplement thereto or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that this indemnity agreement shall not apply to amounts paid in settlement of
any such litigation if such settlement is effected without the consent of the
Company or to any such losses, claims, damages, liabilities or litigation
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any registration statement or prospectus or any
amendment thereof or supplement thereto, or arising out of or based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, which
statement or omission was made in reliance upon information furnished in writing
to the Company by W&R for inclusion in any registration statement or any
prospectus or any amendment thereof or supplement thereto. W&R and each such
controlling person shall promptly, after the complaint shall have been served
upon W&R or such controlling person in any litigation against W&R or such
controlling person in respect of which indemnity may be sought from the Company
on account of its agreement contained in this paragraph, notify the Company in
writing of the commencement thereof. The omission of W&R or such controlling
person so to notify the Company of any such litigation shall relieve the Company
from any liability which it may have to W&R or such controlling person on
account of the indemnity agreement contained in this paragraph but shall not
relieve the Company from any liability which it may have to W&R or controlling
person otherwise than on account of the indemnity agreement contained in this
paragraph. In case any such litigation shall be brought against W&R or any such
controlling person and the underwriter or such controlling person shall notify
the Company of the commencement thereof, the Company shall be entitled to
participate in (and, to the extent that it shall wish, to direct) the defense
thereof at its own expense but such defense shall be conducted by counsel of
good standing and satisfactory to W&R or such controlling person or persons,
defendant or defendants in the litigation. The indemnity agreement of the
Company contained in this paragraph shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of W&R or any such
controlling person and shall survive any delivery of shares of the Company. The
Company agrees to notify W&R promptly of the commencement of any litigation or
proceeding against it or any of its officers or directors of which it may be
advised in connection with the issue and sale of its shares.
B. Anything herein to the contrary notwithstanding, the agreement in
Section A of this article, insofar as it constitutes a basis for reimbursement
by the Company for liabilities (other than payment by the Company of expenses
incurred or paid in the successful defense of any action, suit or proceeding)
arising under the Securities Act, shall not extend to the extent of any interest
therein of any person who is an underwriter or a partner or controlling person
of an underwriter within the meaning of Section 15 of the Securities Act or who,
at the date of this Agreement, is a director of the Company, except to the
extent that an interest of such character shall have been determined by a court
of appropriate jurisdiction the question of whether or not such interest is
against public policy as expressed in the Securities Act.
C. W&R agrees to indemnify and hold harmless the Company and its
directors and such officers as shall have signed any registration statement from
and against any and all losses, claims, damages or liabilities, joint or
several, to which the Company or such directors or officers may become subject
under the Securities Act, under any other statute, at common law or otherwise,
and will reimburse the Company or such directors or officers for any legal or
other expenses (including the cost of any investigation and preparation)
reasonably incurred by it or them or any of them in connection with any
litigation, whether or not resulting in any liability insofar as such losses,
claims, damages, liabilities or litigation arise out of, or are based upon, any
untrue statement or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
which statement or omission was made in reliance upon information furnished in
writing to the Company by W&R for inclusion in any registration statement or any
prospectus, or any amendment thereof or supplement thereto, or which statement
was made in, or the alleged omission was from, any advertising or sales
literature (including any reports to shareholders used as such) which relate to
the Company.
W&R shall not be liable for amounts paid in settlement of any such
litigation if such settlement was effected without its consent. The Company and
its directors and such officers, defendant or defendants, in any such litigation
shall, promptly after the complaint shall have been served upon the Company or
any such director or officer in any litigation against the Company or any such
director or officer in respect of which indemnity may be sought from W&R on
account of its agreement contained in this paragraph, notify W&R in writing of
the commencement thereof. The omission of the Company or such director or
officer so to notify the underwriter of any such litigation shall relieve W&R
from any liability which it may have to the Company or such director or officer
on account of the indemnity agreement contained in this paragraph, but shall not
relieve W&R from any liability which it may have to the Company or such director
or officer otherwise than on account of the indemnity agreement contained in
this paragraph. In case any such litigation shall be brought against the
Company or any such officer or director and notice of the commencement thereof
shall have been so given to W&R, W&R shall be entitled to participate in (and,
to the extent that it shall wish, to direct) the defense thereof at its own
expense, but such defense shall be conducted by counsel of good standing and
satisfactory to the Company. The indemnity agreement of W&R contained in this
paragraph shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Company and shall survive any delivery
of shares of the Company. W&R agrees to notify the Company promptly of the
commencement of any litigation or proceeding against it or any of its officers
or directors or against any such controlling person of which it may be advised,
in connection with the issue and sale of the Company's shares.
D. Notwithstanding any provision contained in this Agreement, no
party hereto and no person or persons in control of any party hereto shall be
protected against any liability to the Company or its security holders to which
they would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance of their duties or by reason of their
reckless disregard of their obligations and duties under this Agreement.
VI. OTHER TERMS
A. This Agreement shall not be deemed to limit W&R from acting as
underwriter and/or dealer for any other mutual fund, from engaging in any other
aspects of the securities business, whether or not such may be deemed in
competition with the sale of shares of the Company, and to carry on any other
lawful business whatsoever.
B. Except as expressly provided in Article V and hereinabove, the
agreements herein set forth have been made and are made solely for the benefit
of the Company and W&R, and the persons expressly provided for in Article V,
their respective heirs and successors, personal representatives and assigns, and
except as so provided, nothing expressed or mentioned herein is intended or
shall be construed to give any person, firm or corporation other than the
Company, W&R and the persons expressly provided for in Article V any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
representation, warranty or agreement herein contained. Except as so provided,
the term "heirs, successors, personal representatives and assigns" shall not
include any purchaser of shares merely because of such purchase.
C. This Agreement shall continue in effect, unless terminated as
hereinafter provided, for a period of one (1) year and thereafter only if such
continuance is specifically approved at least annually by the Board of
Directors, including the vote of a majority of the directors who are not parties
to the Agreement or "interested persons" (as defined in the Investment Company
Act of 1940) or any such party and who have no direct or indirect financial
interest in the operation of any Plan or any agreement relating to that Plan
(hereafter the "Plan directors"), cast in person at a meeting called for the
purpose of voting on such approval. This Agreement may be terminated by W&R at
any time without penalty upon giving the Company sixty (60) days' written notice
(which notice may be waived by the Company) and may be terminated by the Company
at any time without penalty upon giving W&R sixty (60) days' written notice
(which notice may be waived by W&R), provided that such termination by the
Company shall be directed or approved by the vote of a majority of the Plan
directors, or by the vote of a majority (as defined in the Investment Company
Act of 1940) of the outstanding voting securities of a Fund with respect to that
Fund. This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the Investment Company Act of 1940.
D. This Agreement shall be governed and construed in accordance with
the laws of Kansas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized officers and their corporate seals to be
affixed as of the day and year first above written.
United Funds, Inc.
By:_____________________________
Sharon K. Pappas, Vice President
and Secretary
ATTEST:
By:_____________________
Amy D. Eisenbeis
Assistant Secretary
WADDELL & REED, INC.
By:____________________________
Robert L. Hechler, President
ATTEST:
By:_____________________
Sharon K. Pappas, Secretary
<PAGE>
EX-99.B8-ufca
CUSTODIAN AGREEMENT
Dated as of November 26, 1991
Between
UNITED MISSOURI BANK, n.a.
and
UNITED FUNDS, INC. UNITED BOND FUND
<PAGE>
Table of Contents
ARTICLE
I. Appointment of Custodian
II. Powers and Duties of Custodian
2.01 Safekeeping
2.02 Manner of Holding Securities
2.03 Purchase of Assets
2.04 Exchanges of Securities
2.05 Sales of Securities
2.06 Depositary Receipts
2.07 Exercise of Rights, Tender Offers, Etc.
2.08 Stock Dividends, Rights, Etc.
2.09 Options
2.10 Futures Contracts
2.11 Borrowing
2.12 Interest Bearing Deposit
2.13 Foreign Exchange Transactions
2.14 Securities Loan
2.15 Collections
2.16 Dividends, Distributions and Redemptions
2.17 Proceeds from Shares Sold
2.18 Proxies, Notices, Etc.
2.19 Bills and Other Disbursements
2.20 Nondiscretionary Functions
2.21 Bank Accounts
2.22 Deposit of Fund Assets in Securities System
2.23 Other Transfers
2.24 Establishment of Segregated Account
2.25 Custodian's Books and Records
2.26 Opinion of Fund's Independent
Certified Public Accountants
2.27 Reports by Independent Certified Public Accountants
2.28 Overdraft Facility
III. Proper Instructions, Special Instructions
and Related Matters
3.01 Proper Instruction and Special Instructions
3.02 Authorized Persons
3.03 Persons Having Access to Assets of the Portfolios
3.04 Actions of Custodian Based on Proper
Instructions and Special Instructions
IV. Subcustodians
4.01 Domestic Subcustodians
4.02 Foreign Sub-Subcustodians and
Interim Sub-Subcustodians
4.03 Special Subcustodians
4.04 Termination of a Subcustodian
4.05 Certification Regarding Foreign Sub-Subcustodians
V. Standard of Care, Indemnification
5.01 Standard of Care
5.02 Liability of the Custodian for Actions
of Other Person
5.03 Indemnification by Fund
5.04 Investment Limitations
5.05 Fund's Right to Proceed
5.06 Indemnification by Custodian
5.07 Custodian's Right to Proceed
VI. Compensation
VII. Termination
VIII. Defined Terms
IX. Miscellaneous
9.01 Execution of Documents, Etc.
9.02 Representations and Warranties
9.03 Entire Agreement
9.04 Waivers and Amendments
9.05 Interpretation
9.06 Captions
9.07 Governing Law
9.08 Notices
9.09 Assignment
9.10 Counterparts
9.11 Confidentiality
Appendices
Appendix "A"
Appendix "B"
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of the 26th day of November, 1991 between United Funds,
Inc. United Bond Fund (the "Fund") and United Missouri Bank, n.a. (the
"Custodian").
WITNESSETH
WHEREAS, the Fund desires to appoint the Custodian as custodian on behalf
of the Fund in accordance with the provisions of the Investment Company Act of
1940, as amended (the "1940 Act") and the rules and regulations thereunder,
under the terms and conditions set forth in this Agreement, and the Custodian
has agreed so to act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
Subject to the terms and provisions of this Agreement, the Fund hereby
employs and appoints the Custodian as a custodian of the cash, securities and
other assets owned by the Fund and deposited from time to time with the
Custodian ("Assets"). The Fund shall deliver to the Custodian, or shall cause
to be delivered to the Custodian, Assets during the term of this Agreement. The
Custodian is authorized to act under the terms and conditions of this Agreement
as the Fund's agent and shall be representing the Fund when acting within the
scope of this Agreement. The Custodian hereby accepts such appointment as
custodian and shall perform the duties and responsibilities set forth herein on
the terms and conditions set forth herein.
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and duties
set forth in this Article II. Pursuant to and in accordance with Article IV
hereof, the Custodian may appoint one or more Subcustodians (as hereinafter
defined) to exercise the powers and perform the duties of the Custodian set
forth in this Article II and references to the Custodian in this Article II
shall include any Subcustodian so appointed.
Section 2.01. Safekeeping. The Custodian shall accept delivery of and
keep safely the Assets in accordance with the terms and conditions hereof on
behalf of the Fund.
Section 2.02. Manner of Holding Securities.
(a) The Custodian shall at all times hold securities of the Fund either:
(i) by physical possession of the share certificates or other instruments
representing such securities in registered or bearer form; or (ii) in book-entry
form by a Securities System (as hereinafter defined) in accordance with the
provisions of Section 2.22 below.
(b) The Custodian may at all times hold registered securities of the Fund
in the name of the Fund or the Fund's nominee, or in the nominee name of the
Custodian unless specifically directed by Proper Instructions (as hereinafter
defined) to hold such registered securities in so-called street name; provided
that, in any event, all Assets shall be held in an account of the Custodian
containing only assets of the Fund. Notwithstanding the foregoing, unless it
receives Proper Instructions to the contrary, the Custodian shall register all
securities in the name of the Custodian's nominee as authorized by the Fund.
All securities held directly or indirectly by the Custodian hereunder shall at
all times be identifiable on the records of the Custodian. Except as otherwise
provided herein, the Custodian shall keep the Assets physically segregated from
those of other persons or entities. The Custodian shall execute and deliver all
certificates and documents in connection with registration of securities as may
be required by the applicable provisions of the Internal Revenue Code, the laws
of any State or territory of the United States and the laws of any jurisdiction
in which the securities are held.
Section 2.03. Purchase of Assets.
(a) Security Purchases. Upon receipt of Proper Instructions, the
Custodian shall pay for and receive securities purchased for the account of the
Fund, provided that payment shall be made by Custodian only upon receipt of the
securities: (a) by the Custodian; (b) by a clearing corporation of a national
securities exchange of which the Custodian is a member; or (c) by a Securities
System. Notwithstanding the foregoing, upon receipt of Proper Instructions:
(i) in the case of a repurchase agreement, the Custodian may release funds to a
Securities System prior to the receipt of advice from the Securities System that
the securities underlying such repurchase agreement have been transferred by
book-entry into the Account (as hereinafter defined) maintained with such
Securities System by the Custodian, provided that the Custodian's instructions
to the Securities System require that the Securities System may make payment of
such funds to the other party to the repurchase agreement only upon transfer by
book-entry of the securities underlying the repurchase agreement into the
Account; (ii) in the case of time deposits, call account deposits, currency
deposits and other deposits, foreign exchange transactions, futures contracts or
options, pursuant to Sections 2.09, 2.10, 2.12 and 2.13 hereof, the Custodian
may make payment therefor before receipt of an advice or transaction; and (iii)
in the case of the purchase of securities, the settlement of which occurs
outside of the United States of America, the Custodian may make payment therefor
and receive delivery of such securities in accordance with local custom and
practice generally accepted by Institutional Clients (as hereinafter defined) in
the country in which the settlement occurs, but in all events subject to the
standard of care set forth in Article V hereof. For purposes of this Agreement,
an "Institutional Client" shall mean a major commercial bank, corporation,
insurance company, or substantially similar institution, which, as a substantial
part of its business operations, purchases or sells securities and makes use of
custodial services.
(b) Other Asset Purchases. Upon receipt of Proper Instructions and except
as otherwise provided herein, the Custodian shall pay for and receive other
Assets for the account of the Fund as provided in Proper Instructions.
Section 2.04. Exchanges of Securities. Upon receipt of Proper
Instructions, the Custodian shall exchange securities held by it for the account
of the Fund for other securities in connection with any reorganization,
recapitalization, split-up of shares, change of par value, conversion or other
event relating to the securities or the issuer of such securities, and shall
deposit any such securities in accordance with the terms of any reorganization
or protective plan. The Custodian shall, without receiving Proper Instructions:
surrender securities for transfer into the name of the Fund, the Fund's nominee
or the nominee name of the Custodian as permitted by Section 2.02(b); and
surrender securities for a different number of certificates or instruments
representing the same number of shares or same principal amount of indebtedness,
provided that the securities to be issued will be delivered to the Custodian.
Section 2.05. Sales of Securities. Upon receipt of Proper Instructions,
the Custodian shall make delivery of securities which have been sold for the
account of the Fund, but only against payment therefor in the form of: (a)
cash, certified check, bank cashier's check, bank credit, or bank wire transfer;
(b) credit to the account of the Custodian with a clearing corporation of a
national securities exchange of which the Custodian is a member; or (c) credit
to the Account of the Custodian with a Securities System, in accordance with the
provisions of Section 2.22 hereof. Notwithstanding the foregoing: (i) in the
case of the sale of securities, the settlement of which occurs outside of the
United States of America, such securities shall be delivered and paid for in
accordance with local custom and practice generally accepted by Institutional
Clients in the country in which the settlement occurs, but in all events subject
to the standard of care set forth in Article V hereof; and (ii) in the case of
securities held in physical form, such securities shall be delivered and paid
for in accordance with "street delivery custom" to a broker or its clearing
agent, against delivery to the Custodian of a receipt for such securities,
provided that the Custodian shall have taken reasonable steps to ensure prompt
collection of the payment for, or return of, such securities by the broker or
its clearing agent, and provided further that, subject to the standard of care
set forth in Article V hereof, the Custodian shall not be responsible for the
selection of or the failure or inability to perform of such broker or its
clearing agent.
Section 2.06. Depositary Receipts. Upon receipt of Proper Instructions,
the Custodian shall surrender securities to the depositary used for such
securities by an issuer of American Depositary Receipts or International
Depositary Receipts (hereinafter referred to, collectively , a "ADRs"), against
a written receipt therefor adequately describing such securities and written
evidence satisfactory to the Custodian that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such securities in the
name of the Custodian or a nominee of the Custodian, for delivery to the
Custodian at such place as the Custodian may from time to time designate. Upon
receipt of Proper Instructions, the Custodian shall surrender ADRs to the issuer
thereof, against a written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian that the issuer
of the ADRs has acknowledged receipt of instructions to cause its depository to
deliver the securities underlying such ADRs to the Custodian.
Section 2.07. Exercise of Rights, Tender Offers, Etc. Upon receipt of
Proper Instructions, the Custodian shall: (a) deliver warrants, puts, calls,
rights or similar securities to the issuer or trustee thereof (or to the agent
of such issuer or trustee) for the purpose of exercise or sale, provided that
the new securities, cash or other Assets, if any, acquired as a result of such
actions are to be delivered to the Custodian; and (b) deposit securities upon
invitations for tenders thereof, provided that the consideration for such
securities is to be paid or delivered to the Custodian, or the tendered
securities are to be returned to the Custodian. Notwithstanding any provision
of this Agreement to the contrary, the Custodian shall promptly notify the Fund
in writing of (i) any default in payment of funds on securities; (ii) any
securities that have matured, been called or redeemed; and (iii) to the extent
the Custodian has notice which is contained in services to which it normally
subscribes for such purposes, or actual knowledge if not contained in such
services, any other default involving securities; and all announcements of
defaults, bankruptcies, reorganizations, mergers, consolidations,
recapitalizations or rights or privileges to subscribe, convert, exchange, put,
redeem or tender securities held subject to this Agreement. The Custodian
shall, following receipt or knowledge, convey such information to the Fund in a
timely manner based upon the circumstances of each particular case. Whenever
any such rights or privileges exist, the Fund will, in a timely manner based
upon the circumstances of each particular case, provide the Custodian with
Proper Instructions. Absent the Custodian's timely receipt of Proper
Instructions, the Custodian shall not be liable for not taking any action or not
exercising such rights prior to their expiration unless such failure is due to
Custodian's failure to give timely notice to the Fund in accordance with this
Section 2.07.
Section 2.08. Stock Dividends, Rights, Etc. The Custodian shall receive
and collect all stock dividends, rights and other items of like nature and, upon
receipt of Proper Instructions, take action with respect to the same as directed
in such Proper Instructions.
Section 2.09. Options. Upon receipt of Proper Instructions and in
accordance with the provisions of any agreement between the Custodian, any
registered broker-dealer and, if necessary, the Fund relating to compliance with
the rules of the Options Clearing Corporation (the "OCC") or of any registered
national securities exchange or similar organization(s), the Custodian shall:
(a) receive and retain confirmations or other documents, if any, evidencing the
purchase or writing of an option by the Fund; (b) deposit and maintain in a
segregated account, securities (either physically or by book-entry in a
Securities System), cash or other Assets; and (c) pay, release and/or transfer
such securities, cash or other Assets in accordance with any such agreement and
with notices or other communications evidencing the expiration, termination or
exercise of such options furnished by the OCC, the securities or options
exchange on which such options are traded or such other organization as may be
responsible for handling such option transactions. The Fund and the broker-
dealer shall be responsible for determining the sufficiency of assets held in
any segregated account established in compliance with applicable margin
maintenance requirements and the performance of other terms of any option
contract; provided, however, that the Custodian shall be liable for performance
of its duties under this Agreement and in accordance with Proper Instructions,
and shall be liable for performance of its duties under any other agreement
between the Custodian, any registered broker-dealer and, if necessary, the Fund.
Notwithstanding anything herein to the contrary, if the Fund issues Proper
Instructions to sell a naked option (including stock index options), then as
part of the transaction, the Custodian, the Fund and the broker-dealer shall
have entered into a tri-party agreement, as described above.
Section 2.10. Futures Contracts. Upon receipt of Proper Instructions,
or pursuant to the provisions of any futures margin procedural agreement among
the Fund, the Custodian and any futures commission merchant (a "Procedural
Agreement"), the Custodian shall: (a) receive and retain confirmations, if any
evidencing the purchase of or sale of a futures contract or an option on a
futures contract by the Fund; (b) deposit and maintain in a segregated account
cash, securities and other Assets designated as initial, maintenance or
variation "margin" deposits intended to secure the Fund's performance of its
obligations under any futures contracts purchased or sold or any options on
futures contracts written by the Fund, in accordance with the provisions of the
Commodity Futures Trading Commission and/or any commodity exchange or contract
market (such as the Chicago Board of Trade), or any similar organization(s),
regarding such margin deposits; and (c) release assets from and/or transfer
assets into such margin accounts only in accordance with any such Procedural
Agreements. The Fund and such futures commission merchant shall be responsible
for determining the sufficiency of assets held in the segregated account in
compliance with applicable margin maintenance requirements and the performance
of any futures contract or option on a futures contract in accordance with its
terms; provided, however, that the Custodian shall be liable for performance of
its duties under this Agreement and in accordance with Proper Instructions, and
shall be liable for performance of its duties under any Procedural Agreement.
Section 2.11. Borrowing. Upon receipt of Proper Instructions, the
Custodian shall deliver securities of the Fund to lenders or their agents, or
otherwise establish a segregated account as agreed to by the Fund and the
Custodian, as collateral for borrowings effected by the Fund, provided that such
borrowed money is payable by the lender (a) to or upon the Custodian's order, as
Custodian for the Fund, and (b) concurrently with delivery of such securities.
Section 2.12. Interest Bearing Deposits. Upon receipt of Proper
Instructions directing the Custodian to purchase interest bearing fixed term and
call deposits (hereinafter referred to collectively, as "Interest Bearing
Deposits") for the account of the Fund, the Custodian shall purchase such
Interest Bearing Deposits in the name of the Fund with such banks or trust
companies (including the Custodian, any Subcustodian or any subsidiary or
affiliate of the Custodian) (hereinafter referred to as "Banking Institutions")
and in such amounts as the Fund may direct pursuant to Proper Instructions.
Such Interest Bearing Deposits may be denominated in U.S. Dollars or other
currencies, as the Fund may determine and direct pursuant to Proper
Instructions. The Custodian shall include in its records with respect to the
Assets of the Fund appropriate notation as to the amount and currency of each
such Interest Bearing Deposit, the accepting Banking Institution and all other
appropriate details, and shall retain such forms of advice or receipt evidencing
such account, if any, as may be forwarded to the Custodian by the Banking
Institution. The responsibilities of the Custodian to the Fund for Interest
Bearing Deposits accepted on the Custodian's books in the United States shall be
that of a U.S. bank for a similar deposit. With respect to Interest Bearing
Deposits other than those accepted on the Custodian's books, (a) the Custodian
shall be responsible for the collection of income as set forth in Section 2.15
and the transmission of cash and instructions to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or, so long as the Custodian acts in accordance with Proper
Instructions and the terms and conditions of this Agreement, for the failure of
such Banking Institution to pay upon demand. Upon receipt of Proper
Instructions, the Custodian shall take such reasonable actions as the Fund deems
necessary or appropriate to cause each such Interest Bearing Deposit account to
be insured to the maximum extent possible by all applicable deposit insurers
including, without limitation, the Federal Deposit Insurance Corporation.
Section 2.13. Foreign Exchange Transactions.
(a) Foreign Exchange Transactions Other than as Principal. Upon receipt
of Proper Instructions, the Custodian shall settle foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of the Fund with such currency brokers or Banking
Institutions as the Fund may determine and direct pursuant to Proper
Instructions. The Fund accepts full responsibility for its use of third party
foreign exchange brokers (any dealer other than the Foreign Subcustodian) (as
hereinafter defined) and for execution of said foreign exchange contracts and
understands that the Fund shall be responsible for any and all costs and
interest charges which may be incurred as a result of the failure or delay of
its third party broker to deliver foreign exchange unless such loss, damage, or
expense is caused by, or results from the negligence, misfeasance or misconduct
of the Custodian. Notwithstanding the foregoing, the Custodian shall be
responsible for the transmission of cash and instructions to and from the
currency broker or Banking Institution with which the contract or option is
made, the safekeeping of all certificates and other documents and agreements
evidencing or relating to such foreign exchange transactions and the maintenance
of proper records as set forth in Section 2.25. The Custodian shall have no
duty with respect to the selection of the currency brokers or Banking
Institutions with which the Fund deals or, so long as the Custodian acts in
accordance with Proper Instructions, for the failure of such brokers or Banking
Institutions to comply with the terms of any contract or option.
(b) Foreign Exchange Contracts as Principal. The Custodian shall not be
obligated to enter into foreign exchange transactions as principal. However, if
the Custodian has made available to the Fund its services as a principal in
foreign exchange transactions, upon receipt of Proper Instructions, the
Custodian shall enter into foreign currencies for spot and future delivery on
behalf of and for the account of the Fund with the Custodian as principal. The
Custodian shall be responsible for the selection of the currency brokers or
Banking Institutions and the failure of such currency brokers or Banking
Institutions to comply with the terms of any contract or option.
(c) Payments. Notwithstanding anything to the contrary contained herein,
upon receipt of Proper Instructions the Custodian may, in connection with a
foreign exchange contract, make free outgoing payments of cash in the form of
U.S. Dollars or foreign currency prior to receipt of confirmation of such
foreign exchange contract or confirmation that the countervalue currency
completing such contract has been delivered or received.
Section 2.14. Securities Loans. Upon receipt of Proper Instructions,
the Custodian shall, in connection with loans of securities by the Fund, deliver
securities of the Fund to the borrower thereof and may, except as otherwise
provided below, deliver such securities prior to receipt of the collateral, if
any, for such borrowing; provided that, in cases of loans of securities secured
by cash collateral, the Custodian's instructions to the Securities System shall
require that the Securities System deliver the securities of the Fund to the
borrower thereof only upon receipt of the collateral for such borrowing. The
Custodian shall retain on the Fund's behalf the right to any dividends, interest
or distribution on such loaned securities and any other rights specified in
Proper Instructions. Upon receipt of Proper Instructions and the loaned
securities, the Custodian will release the collateral to the borrower.
Section 2.15. Collections. The Custodian shall: (a) collect amounts
due and payable to the Fund with respect to portfolio securities and other
Assets; (b) promptly credit to the account of the Fund all income and other
payments relating to portfolio securities and other Assets held by the Custodian
hereunder upon Custodian's receipt of such income or payments or as otherwise
agreed in writing by the Custodian and the Fund; (c) promptly endorse and
deliver any instruments required to effect such collection; and (d) promptly
execute ownership and other certificates and affidavits for all federal, state,
local and foreign tax purposes in connection with receipt of income or other
payments with respect to portfolio securities and other Assets, or in connection
with the transfer of such securities or other Assets; provided, however, that
with respect to portfolio securities registered in so-called street name, or
physical securities with variable interest rates, the Custodian shall use its
best efforts to collect amounts due and payable to the Fund. The Custodian
shall promptly notify the Fund in writing by facsimile transmission or in such
other manner as the Fund and Custodian may agree in writing if any amount
payable with respect to portfolio securities or other Assets is not received by
the Custodian when due. The Custodian shall not be responsible for the
collection of amounts due and payable with respect to portfolio securities or
other Assets that are in default.
Section 2.16. Dividends, Distributions and Redemptions. To enable the
Fund to pay dividends or other distributions to shareholders of the Fund and to
make payment to shareholders who have requested repurchase or redemption of
their shares of the Fund (collectively, the "Shares"), the Custodian shall
promptly release cash or securities (a) in the case of cash, upon receipt of
Proper Instructions, to one or more Distribution Accounts (as hereinafter
defined) designated by the Fund in such Proper Instructions; or (b) in the case
of securities, upon the receipt of Special Instructions (as hereinafter defined)
to such entity or account designated by the Fund in such Special Instructions.
For purposes of this Agreement, a "Distribution Account" shall mean an account
established at a Banking Institution designated by the Fund in Special
Instructions.
Section 2.17. Proceeds from Shares Sold. The Custodian shall receive
funds representing cash payments received for Shares issued or sold from time to
time by the Fund, and shall promptly credit such funds to the account of the
Fund. The Custodian shall promptly notify the Fund of Custodian's receipt of
cash in payment for Shares issued by the Fund by facsimile transmission or in
such other manner as the Fund and Custodian may agree in writing. Upon receipt
of Proper Instructions, the Custodian shall: (a) deliver all federal funds
received by the Custodian in payment for Shares in payment for such investments
as may be set forth in such Proper Instructions and at a time agreed upon
between the Custodian and the Fund; and (b) make federal funds available to the
Fund as of specified times agreed upon from time to time by the Fund and the
Custodian, in the amount of checks received in payment for Shares which are
deposited to the accounts of the Fund.
Section 2.18. Proxies, Notices, Etc. The Custodian shall deliver or
cause to be delivered to the Fund, in the most expeditious manner practicable,
all forms of proxies, all notices of meetings, and any other notices or
announcements affecting or relating to securities owned by the Fund that are
received by the Custodian, any Subcustodian, or any nominee of either of them,
and, upon receipt of Proper Instructions, the Custodian shall execute and
deliver, or cause such Subcustodian or nominee to execute and deliver, such
proxies or other authorizations as may be required. Except as directed pursuant
to Proper Instructions, neither the Custodian nor any Subcustodian or nominee
shall vote upon any such securities, or execute any proxy to vote thereon, or
give any consent or take any other action with respect thereto. The Custodian
will not release the identity of the Fund to an issuer which requests such
information pursuant to the Shareholder Communications Act of 1985, for the
specific purpose of direct communications between such issuer and the Fund
unless the Fund directs the Custodian otherwise in writing.
Section 2.19. Bills and Other Disbursements. Upon receipt of Proper
Instructions, the Custodian shall pay or cause to be paid, all bills,
statements, or other obligations of the Fund.
Section 2.20. Nondiscretionary Functions. The Custodian shall attend
to all nondiscretionary details not specifically covered by this Agreement in
accordance with industry standards in connection with the sale, exchange,
substitution, purchase, transfer or other dealings with securities or other
Assets held by the Custodian, except as otherwise directed from time to time
pursuant to Proper Instructions.
Section 2.21. Bank Accounts.
(a) Accounts with the Custodian. The Custodian shall open and operate a
bank account or accounts (hereinafter referred to collectively, as "Bank
Accounts") on the books of the Custodian; provided that such Bank Account(s)
shall be in the name of the Custodian or a nominee thereof, for the account of
the Fund, and shall be subject only to draft or order of the Custodian. The
responsibilities of the Custodian to the Fund for deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar deposit.
(b) Deposit Insurance. Upon receipt of Proper Instructions, the
Custodian shall take such action as the Fund deems necessary or appropriate to
cause each deposit account established by the Custodian pursuant to this Section
2.21 to be insured to the maximum extent possible by all applicable deposit
insurers, including, without limitation, the Federal Deposit Insurance
Corporation.
Section 2.22. Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain domestic securities owned by the Fund in:
(a) The Depository Trust Company; (b) the Participants Trust Company; (c) any
book-entry system as provided in (i) Subpart O of Treasury Circular No. 300, 31
CFR 306.115 (ii) Subpart B of Treasury Circular Public Debt Series No. 27-76, 31
CFR 350.2, or (iii) the book-entry regulations of federal agencies substantially
in the form of 31 CFR 306.115; or (d) any other domestic clearing agency
registered with the Securities and Exchange Commission ("SEC") under Section 17A
of the Securities Exchange Act of 1934 (or as may otherwise be authorized by the
Securities and Exchange Commission to serve in the capacity of depository or
clearing agent for the securities or other assets of investment companies) which
acts as a securities depository; provided, however, that no such deposit or
maintenance of securities may be made except with respect to those agencies and
entities the use of which the Fund has previously approved by Special
Instructions (each of the foregoing being referred to in this Agreement as a
"Securities System"). Use of a Securities System shall be in accordance with
applicable Federal Reserve Board and SEC rules and regulations, if any, and
subject to the following provisions:
(A) The Custodian or any Subcustodian may deposit and/or maintain
securities held hereunder in a Securities System, provided that such securities
are represented in an account ("Account") of the Custodian in the Securities
System which Account shall not contain any assets of the Custodian other than
assets held as fiduciary, custodian or otherwise for customers.
(B) The books and records of the Custodian shall at all times identify
those securities belonging to the Fund which are maintained in a Securities
System.
(C) The Custodian shall pay for securities purchased for the account of the
Fund only upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account of the Custodian, and (ii) the
making of an entry on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund only upon (iii) receipt of advice from the
Securities System that payment for such securities has been transferred to the
Account of the Custodian, and (iv) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Securities System relating to transfers of
securities for the account of the Fund shall identify the Fund, and shall be
maintained for the Fund by the Custodian. The Custodian shall deliver to the
Fund on the next succeeding business day daily transaction reports which shall
include each day's transactions in the Securities System for the account of the
Fund. Such transaction reports shall be delivered to the Fund or any agent
designated by the Fund pursuant to Proper Instructions, by computer or in such
other manner as the Fund and Custodian may agree in writing.
(D) The Custodian shall, if requested by the Fund pursuant to Proper
Instructions, provide the Fund with all reports obtained by the Custodian or any
Subcustodian with respect to a Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Securities System.
(E) Upon receipt of Special Instructions, the Custodian shall terminate the
use of any Securities System (except the federal book-entry system) on behalf of
the Fund as promptly as practicable and shall take all actions reasonably
practicable to safeguard the securities of the Fund maintained with such
Securities System.
Section 2.23. Other Transfers. Upon receipt of Special Instructions,
the Custodian shall make such other dispositions of securities, funds, or other
Assets of the Fund in a manner or for purposes other than as expressly set forth
in this Agreement, provided that the Special Instructions relating to such
disposition shall include a statement of the purposes for which the delivery is
to be made, the amount of funds, Assets and/or securities to be delivered and
the name of the person or persons to whom delivery is to be made, and shall
otherwise comply with the provisions of Sections 3.01 and 3.03 hereof.
Section 2.24. Establishment of Segregated Account. Upon receipt of
Proper Instructions, the Custodian shall establish and maintain on its books a
segregated account or accounts for and on behalf of the Fund, into which account
or accounts may be transferred cash and/or securities or other Assets of the
Fund, including securities maintained by the Custodian in a Securities System
pursuant to Section 2.22 hereof, said account or accounts to be maintained: (a)
for the purposes set forth in Section 2.09, 2.10 and 2.11 hereof; (b) for the
purposes of compliance by the Fund with the procedures required by Investment
Company Act Release No. 10666, or any subsequent release or releases of the SEC
relating to the maintenance of segregated accounts by registered investment
companies; or (c) for such other purposes as may be set forth, from time to
time, in Special Instructions. The Custodian shall not be responsible for the
determination of the type or amount of Assets to be held in any segregated
account referred to in this Section 2.24.
Section 2.25. Custodian's Books and Records. The Custodian shall
provide any assistance reasonably requested by the Fund in the preparation of
reports to Fund shareholders and others, audits of accounts, and other
ministerial matters of like nature. The Custodian shall maintain complete and
accurate records with respect to securities and other Assets held for the
accounts of the Fund as required by the rules and regulations of the SEC
applicable to investment companies registered under the 1940 Act, including, but
not limited to: (a) journals or other records of original entry containing a
detailed and itemized daily record of all receipts and deliveries of securities
(including certificate and transaction identification numbers, if any), and all
receipts and disbursements of cash; (b) ledgers or other records reflecting (i)
securities in transfer, (ii) securities in physical possession, (iii) securities
borrowed, loaned or collateralizing obligations of the Fund, (iv) monies
borrowed and monies loaned (together with a record of the collateral therefor
and substitutions of such collateral), and (v) dividends and interest received;
and (c) cancelled checks and bank records relating thereto. The Custodian shall
keep such other books and records of the Fund as the Fund shall reasonably
request. All such books and records maintained by the Custodian shall be
maintained in a form acceptable to the Fund and in compliance with the rules and
regulations of the SEC, including, but not limited to, books and records
required to be maintained by Section 31(a) of the 1940 Act and the rules and
regulations from time to time adopted thereunder. All books and records
maintained by the Custodian pursuant to this Agreement shall at all times be the
property of the Fund and shall be available during normal business hours for
inspection and use by the Fund and its agents, including without limitation, its
independent certified public accountants. Notwithstanding the preceding
sentence, the Funds shall not take any actions or cause the Custodian to take
any actions which would knowingly cause, either directly or indirectly, the
Custodian to violate any applicable laws, regulations or orders.
Notwithstanding the provisions of this Section 2.25, in the event the Fund
purchases cash, securities and other Assets requiring the use of a Domestic
Subcustodian or Foreign Sub-Subcustodian, the Custodian shall be entitled to
rely upon and use the books, records and accountings of the Domestic
Subcustodian as its means of accounting to the Fund for all cash, securities and
other Assets deposited with such entities; provided however, that such books,
records and accountings on which the Bank may rely must be maintained in the
United States by such Domestic Subcustodian and, provided further, that any
agreement between the Custodian and such Domestic Subcustodian must state that
the Domestic Subcustodian agrees to make any records available upon request and
preserve, for the periods described in Rule 31a-2 of the 1940 Act, the records
required to be maintained by Rule 31a-1 of the 1940 Act. In no event shall the
Custodian be entitled to rely upon and use books, records and accountings which
are maintained outside of the United States.
Section 2.26. Opinion of Fund's Independent Certified Public
Accountants. The Custodian shall take all reasonable action as the Fund may
request to obtain from year to year favorable opinions from the Fund's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of the Fund's Form N-1A
and the Fund's Form N-SAR or other periodic reports to the SEC and with respect
to any other requirements of the SEC.
Section 2.27. Reports by Independent Certified Public Accountants. At
the request of the Fund, the Custodian shall deliver to the Fund a written
report prepared by the Custodian's independent certified public accountants with
respect to the services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting system, internal
accounting control and procedures for safeguarding cash, securities and other
assets, including cash, securities and other assets deposited and/or maintained
in a Securities System or with a Subcustodian. Such report shall be of
sufficient scope and in sufficient detail as may reasonably be required by the
Fund and as may reasonably be obtained by the Custodian.
Section 2.28. Overdraft Facility. Notwithstanding any Proper or Special
Instructions, the Custodian shall not make any payment or transfer of funds on
behalf of the Fund for which there would be, at the close of business on the
date of such payment or transfer, insufficient funds held by the Custodian on
behalf of such Fund.
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
Section 3.01. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used herein, the term "Proper Instructions"
shall mean: (i) a tested telex, a written (including, without limitation,
facsimile transmission) request, direction, instruction or certification signed
or initialed by or on behalf of the Fund by two or more Authorized Persons (as
hereinafter defined); (ii) a telephonic or other oral communication by one or
more Authorized Persons; or (iii) a communication effected directly between an
electro-mechanical or electronic device or system (including, without
limitation, computers) by or on behalf of the Fund by one or more Authorized
Persons; provided, however, that communications of the types described in
clauses (ii) and (iii) above purporting to be given by an Authorized Person
shall be considered Proper Instructions only if the Custodian reasonably
believes such communications to have been given by an Authorized Person with
respect to the transaction involved. Proper Instructions in the form of oral
communications shall be confirmed by the Fund by tested telex or in writing in
the manner set forth in clause (i) above, but the lack of such confirmation
shall in no way affect any action taken by the Custodian in reliance upon such
oral instructions prior to the Custodian's receipt of such confirmation. The
Fund and the Custodian are hereby authorized to record any and all telephonic or
other oral instructions communicated to the Custodian. Proper Instructions may
relate to specific transactions or to types or classes of transactions, and may
be in the form of standing instructions.
(b) Special Instructions. As used herein, the term "Special Instructions"
shall mean Proper Instructions countersigned or confirmed in writing by the
Treasurer or any Assistant Treasurer of the Fund or any other person designated
by the Treasurer of the Fund in writing, which countersignature or confirmation
shall be (i) included on the same instrument containing the Proper Instructions
or on a separate instrument relating thereto, and (ii) delivered by hand, by
facsimile transmission or in such other manner as the Fund and the Custodian
agree in writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the Custodian at the
address and/or telephone, telecopy or telex number agreed upon from time to time
by the Custodian and the Fund.
Section 3.02. Authorized Persons. Concurrently with the execution of
this Agreement and from time to time thereafter, as appropriate, the Fund shall
deliver to the Custodian, duly certified as appropriate by a Treasurer or
Assistant Treasurer of the Fund, a certificate setting forth: (a) the names,
titles, signatures, and scope of authority of all persons authorized to give
Proper Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of the Fund (collectively, the "Authorized
Persons" and individually, an "Authorized Person"); and (b) the names, titles
and signatures of those persons authorized to issue Special Instructions. Such
certificate may be accepted and relied upon by the Custodian as conclusive
evidence of the facts set forth therein and shall be considered to be in full
force and effect until delivery to the Custodian of a similar certificate to the
contrary. Upon delivery of a certificate which deletes or does not include the
name(s) of a person previously authorized to give Proper Instructions or to
issue Special Instructions, such persons shall no longer be considered an
Authorized Person or authorized to issue Special Instructions.
Section 3.03. Persons Having Access to Assets of the Portfolios.
Notwithstanding anything to the contrary contained in this Agreement, no
Authorized Person, Director, officer, employee or agent of the Fund shall have
physical access to the Assets of the Fund held by the Custodian nor shall the
Custodian deliver any Assets of the Fund to an account of such person; provided,
however, that nothing in this Section 3.03 shall prohibit (a) any Authorized
Person from giving Proper Instructions, or any person authorized to issue
Special Instructions from issuing Special Instructions, so long as such action
does not result in delivery of or access to Assets of the Fund prohibited by
this Section 3.03; or (b) the Fund's independent certified public accountants
from examining or reviewing the Assets of the Fund held by the Custodian. The
Fund will deliver from time to time a written certificate executed by two
Authorized Persons identifying such Authorized Persons, Directors, officers,
employees and agents of the Fund. Notwithstanding the foregoing, to the extent
that the person acting on behalf of the Custodian in making such delivery has
actual knowledge that any person is an Authorized Person, Director, officer,
employee or agent of the Fund, the Custodian will comply with this Section 3.03
as if the name of such Authorized Person, Director, officer, employee or agent
had been contained in a written certificate provided pursuant to this Section
3.03.
Section 3.04. Actions of Custodian Based on Proper Instructions and
Special Instructions. So long as and to the extent that the Custodian acts in
accordance with (a) Proper Instructions or Special Instructions, as the case may
be, and (b) the terms of this Agreement, the Custodian shall not be responsible
for the title, validity or genuineness of any property, or evidence of title
thereof, received by it or delivered by it pursuant to this Agreement.
ARTICLE IV
SUBCUSTODIANS
From time to time, in accordance with the relevant provisions of this
Agreement, (i) the Custodian may appoint one or more Domestic Subcustodians and
Special Subcustodians (each, as hereinafter defined) to act on behalf of the
Fund; and (ii) any Domestic Subcustodian so appointed may appoint a Foreign Sub-
Subcustodian or Interim Sub-Subcustodian (as each are hereinafter defined) in
accordance with this Article IV. For purposes of this Agreement, all Domestic
Subcustodians, Special Subcustodians, Foreign Sub-Subcustodians and Interim Sub-
Subcustodians shall be referred to collectively as "Subcustodians".
Section 4.01. Domestic Subcustodians. The Custodian may, at any time
and from time to time, appoint any bank as defined in Section 2(a)(5) of the
1940 Act or any trust company or other entity any of which meet requirements of
a custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder, to act as agent for the Custodian on behalf of the Fund as a
subcustodian for purposes of holding cash, securities and other Assets of the
Fund and performing other functions of the Custodian within the United States (a
"Domestic Subcustodian"); provided, that, the Custodian shall notify the Fund in
writing of the identity and qualifications of any proposed Domestic Subcustodian
at least sixty (60) days prior to the desired appointment of such Domestic
Subcustodian, and the Fund will notify the Custodian, in writing signed by two
or more Authorized Persons, of approval or disapproval of the appointment of the
proposed Domestic Subcustodian; and provided, further, that the Custodian may
not appoint any such Domestic Subcustodian without such prior written approval
of the Fund by such Authorized Persons. Each such duly approved Domestic
Subcustodian and the countries where, Foreign Sub-Subcustodians and the
securities depositories and clearing agencies through which they may hold
securities and other Assets of the Fund shall be as agreed upon by the parties
hereto in writing, from time to time, in accordance with the provisions of
Section 9.04 hereof (the "Subcustodian List").
Section 4.02. Foreign Sub-Subcustodians and Interim Sub-Subcustodians.
(a) Foreign Sub-Subcustodians. The Custodian may at any time appoint, or
cause a Domestic Subcustodian to appoint: (i) any bank, trust company or other
entity meeting requirements of an "eligible foreign custodian" under Section
17(f) of the 1940 Act and the rules and regulations thereunder or by order of
the Securities and Exchange Commission exempted therefrom, or (ii) any bank as
defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a
custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder to act on behalf of the Fund as a sub-subcustodian for purposes of
holding cash, securities and other Assets of the Fund and performing other
functions of the Domestic Subcustodian in countries other than the United States
of America (a "Foreign Sub-Subcustodian"); provided that, prior to the
appointment or approval of any Foreign Sub-Subcustodian the Custodian shall, or
shall cause the Domestic Subcustodian to, notify the Fund, in writing, of the
identity and qualifications of the proposed Foreign Sub-Subcustodian and make a
copy of the proposed sub-subcustodian agreement available to the Fund at least
sixty (60) days prior to the desired appointment; and provided further that the
Custodian shall have obtained written confirmation from two or more Authorized
Persons of the approval of the Board of Directors or other governing body of the
Fund (which approval may be withheld in the sole discretion of such Board of
Directors or other governing body or entity) with respect to (i) the identity
and qualifications of any proposed Foreign Sub-Subcustodian, and (ii) the
country or countries in which, and the securities depositories or clearing
agencies (hereinafter "Securities Depositories and Clearing Agencies"), if any,
through which, any proposed Foreign Sub-Subcustodian is authorized to hold
securities and other Assets of the Fund. Each such duly approved Foreign Sub-
Subcustodian and the countries where and the Securities Depositories and
Clearing Agencies through which they may hold securities and other Assets of the
Fund shall be listed on the Subcustodian List. The Fund shall be responsible
for informing the Custodian sufficiently in advance of a proposed investment
which is to be held in a country in which no Foreign Sub-Subcustodian is
authorized to act, in order that there shall be sufficient time for the
Custodian or any Domestic Subcustodian to effect the appropriate arrangements
with a proposed Foreign Sub-Subcustodian, including obtaining approval as
provided in this Section 4.02(a). In connection with the appointment of any
Foreign Sub-Subcustodian, the Custodian shall, or shall cause the Domestic
Subcustodian to, enter into a sub-subcustodian agreement with the Foreign Sub-
Subcustodian in form and substance approved by the Fund, provided that the
agreement shall, in all events, comply with the provisions of the 1940 Act and
the rules and regulations thereunder, and the terms and provisions of this
Agreement. The Custodian shall not and shall cause any Domestic Subcustodian
not to consent to the amendment of any sub-subcustodian agreement entered into
with a Foreign Sub-Subcustodian, or agree to any changes thereunder, or waive
any rights under such agreement, except upon prior approval pursuant to Special
Instructions.
(b) Interim Sub-Subcustodians. Notwithstanding the foregoing, in the
event that the Fund shall invest in a security or other Asset to be held in a
country in which no Foreign Sub-Subcustodian is authorized to act, the Custodian
shall, or shall cause the Domestic Subcustodian to, promptly notify the Fund in
writing by facsimile transmission or in such other manner as the Fund and
Custodian shall agree in writing of the unavailability of an approved Foreign
Sub-Subcustodian in such country; and upon the receipt of Special Instructions,
the Custodian shall, or shall cause the Domestic Subcustodian to, appoint or
approve any Person (as hereinafter defined) designated by the Fund in such
Special Instructions, to hold such security or other Asset. (Any Person
appointed or approved as a sub-subcustodian pursuant to this Section 4.02(b) is
hereinafter referred to as an "Interim Sub-Subcustodian.")
Section 4.03. Special Subcustodians. Upon receipt of Special
Instructions, the Custodian shall, on behalf of the Fund, appoint one or more
banks, trust companies or other entities designated in such Special Instructions
to act as a subcustodian for the purpose of (i) effecting third-party repurchase
transactions with banks, brokers, dealers or other entities, (ii) providing
depository and clearing agency services with respect to certain variable rate
demand note securities; and (iii) effecting any other transactions designated by
the Fund in Special Instructions. (Each such designated subcustodian is
hereinafter referred to as a "Special Subcustodian.") Each such duly appointed
Special Subcustodian shall be listed on the Subcustodian List. In connection
with the appointment of any Special Subcustodian, the Custodian shall enter into
a subcustodian agreement with the Special Subcustodian in form and substance
approved by the Fund, provided that such agreement shall in all events comply
with the provisions of the 1940 Act and the rules and regulations thereunder and
the terms and provisions of this Agreement. The Custodian shall not amend any
subcustodian agreement entered into with a Special Subcustodian, or agree to
change or permit any changes thereunder, or waive any rights under such
agreement, except upon prior approval pursuant to Special Instructions.
Section 4.04. Termination of a Subcustodian. The Custodian shall (i)
cause each Domestic Subcustodian to, and (ii) use its best efforts to cause each
Interim Sub-Subcustodian and Special Subcustodian to, perform all of its
obligations in accordance with the terms and conditions of the subcustodian
agreement between the Custodian and such Domestic Subcustodian and Special
Subcustodian or between the Domestic Subcustodian and a Foreign Sub-Subcustodian
or Interim Sub-Subcustodian. In the event that the Custodian is unable to cause
such subcustodian or sub-subcustodian to fully perform its obligations
thereunder, the Custodian shall promptly notify the Fund in writing and
forthwith, upon the receipt of Special Instructions, terminate or cause the
termination of such Subcustodian or Sub-Subcustodian with respect to the Fund
and, if necessary or desirable, appoint or cause the appointment of a
replacement Subcustodian or Sub-Subcustodian in accordance with the provisions
of this Article IV. In addition to the foregoing, the Custodian (A) may, at any
time in its discretion, upon written notification to the Fund, terminate any
Domestic Subcustodian, and (B) shall, upon receipt of Special Instructions,
terminate any Special Subcustodian with respect to the Fund, in accordance with
the termination provisions under the applicable subcustodian agreement, and (C)
shall, upon receipt of Special Instructions, cause the Domestic Subcustodian to
terminate any Foreign Sub-Subcustodian or Interim Sub-Subcustodian as to its use
of such entities with respect to the Fund, in accordance with the termination
provisions under the applicable sub-subcustodian agreement.
Section 4.05. Certification Regarding Foreign Sub-Subcustodians. Upon
request of the Fund, the Custodian shall deliver to the Fund a certificate
stating: (i) the identity of each Foreign Sub-Subcustodian then acting on
behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agents through which each such Foreign Sub-
Subcustodian is then holding cash, securities and other Assets of the Fund; and
(iii) such other information as may be requested by the Fund to ensure
compliance with rules and regulations under the 1940 Act.
ARTICLE V
STANDARD OF CARE: INDEMNIFICATION
Section 5.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise reasonable
care and diligence in carrying out all of its duties and obligations under this
Agreement, and shall be liable to the Fund for all loss, damage and expense
suffered or incurred by the Fund resulting from the failure of the Custodian to
exercise such reasonable care and diligence.
(b) Actions Prohibited by Applicable Law, Etc. In no event shall the
Custodian incur liability hereunder if the Custodian or any Subcustodian or
Securities System, or any subcustodian, Securities Depository or Clearing Agency
utilized by any such Subcustodian, or any nominee of the Custodian or any
Subcustodian (individually, a "Person") is prevented, forbidden or delayed from
performing, or omits to perform, any act or thing which this Agreement provides
shall be performed or omitted to be performed, by reason of: (i) any provision
of any present or future law or regulation or order of the United States of
America, or any state thereof, or of any foreign country, or political
subdivision thereof or of any court of competent jurisdiction (and the Custodian
nor any other Person shall not be obligated to take any action contrary
thereto); or (ii) any act of God or war or other similar circumstance beyond the
control of the Custodian unless in each case, such delay or nonperformance is
caused by the negligence, misfeasance or misconduct of the Custodian.
(c) Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to the Fund, (i) the Custodian
shall, (ii) the Custodian shall cause any applicable Domestic Subcustodian or
Foreign Sub-Subcustodian to, and (iii) the Custodian shall use its best efforts
to cause any applicable Interim Sub-Subcustodian or Special Subcustodian to, use
all commercially reasonable efforts and take all reasonable steps under the
circumstances to mitigate the effects of such event and to avoid continuing harm
to the Fund.
(d) Advice of Counsel. The Custodian shall be without liability for any
action reasonably taken or omitted in good faith pursuant to the written advise
of (i) counsel for the Fund, or (ii) at the expense of the Custodian, such other
counsel as the Fund and the Custodian may agree upon in writing; provided,
however, with respect to the performance of any action or omission of any action
upon such advice, the Custodian shall be required to conform to the standard of
care set forth in Section 5.01 (a).
(e) Expenses of the Fund. In addition to the liability of the Custodian
under this Article V, the Custodian shall be liable to the Fund for all
reasonable costs and expenses incurred by the Fund in connection with any claim
by the Fund against the Custodian arising from the obligations of the Custodian
hereunder including, without limitation, all reasonable attorneys' fees and
expenses incurred by the Fund in asserting any such claim, and all expenses
incurred by the Fund in connection with any investigations, lawsuits or
proceedings relating to such claim; provided however, that the Fund has
recovered from the Custodian for such claim.
(f) Liability for Past Records. The Custodian shall have no liability in
respect of any loss, damage or expense suffered by the Fund, insofar as such
loss, damage or expense arises from the performance of the Custodian in reliance
upon records that were maintained for the Fund by entities other than the
Custodian prior to the Custodian's employment hereunder which the Custodian has
no reason to believe are inaccurate or incomplete after reasonable inquiry.
Section 5.02. Liability of the Custodian for Actions of Other Persons.
(a) Domestic Subcustodian and Foreign Sub-Subcustodian. The Custodian
shall be liable for the actions or omissions of any Domestic Subcustodian or
Foreign Sub-Subcustodian (excluding any Securities Depository or Clearing Agency
appointed by them) to the same extent as if such actions or omissions were
performed by the Custodian itself. In the event of any loss, damage or expense
suffered or incurred by the Fund caused by or resulting from the actions or
omissions of any Domestic Subcustodian or Foreign Sub-Subcustodian for which the
Custodian would otherwise be liable, the Custodian shall promptly reimburse the
Fund in the amount of any such loss, damage or expense.
(b) Special Subcustodians, Interim Sub-Subcustodians, Security Systems,
Securities Depositories and Clearing Agencies. The Custodian shall not be
liable to the Fund for any loss, damage or expense suffered or incurred by the
Fund resulting from the actions or omissions of a Special Subcustodian, Interim
Sub-Subcustodian, Securities System, Securities Depository or Clearing Agency
unless such loss, damage or expense is caused by, or results from, the
negligence, misfeasance or misconduct of the Custodian; provided, however, in
the event of any such loss, damage or expense, the Custodian shall take all
reasonable steps to enforce such rights as it may have against such Special
Subcustodian, Interim Sub-Subcustodian, Security System, Securities Depository
or Clearing Agency to protect the interest of the Fund.
(c) Reimbursement of Expenses. The Fund agrees to reimburse the
Custodian for all reasonable out-of-pocket expenses incurred by the Custodian in
connection with the fulfillment of its obligations under Section 5.01(c) as it
relates to Interim Sub-Subcustodians and Special Subcustodians and 5.02(b);
provided however, that such reimbursement shall not apply to expenses occasioned
by or resulting from the negligence, misfeasance or misconduct of the Custodian.
Section 5.03. Indemnification by Fund.
(a) Indemnification Obligations of Fund. Subject to the limitations set
forth in this Agreement, the Fund agrees to indemnify and hold harmless the
Custodian and its nominees from all loss, damage and expense (including
reasonable attorneys' fees) suffered or incurred by the Custodian or its nominee
caused by or arising from actions taken by the Custodian, its employees or
agents in the performance of its duties and obligations under this Agreement;
provided, however, that such indemnity shall not apply to loss, damage and
expense occasioned by or resulting from the negligence, misfeasance or
misconduct of the Custodian or its nominee. In addition, the Fund agrees to
indemnify any Person against liability incurred by reason of taxes assessed to
such Person resulting from the fact that securities and other property of the
Fund are registered in the name of such Person in accordance with the provisions
of this Agreement; provided, however, that in no event shall such
indemnification be applicable to income, franchise or similar taxes which may be
imposed or assessed against any Person. It is also understood that the Fund
agrees to indemnify and hold harmless the Custodian and its nominee for any loss
arising from a foreign currency transaction or contract, where the loss results
from a Sovereign Risk (as hereinafter defined) or where any Person maintaining
securities, currencies, deposits or other Assets of the Fund in connection with
any such transactions has exercised reasonable care maintaining such property or
in connection with any such transaction involving such Assets. A "Sovereign
Risk" shall mean nationalization, expropriation, devaluation, revaluation,
confiscation, seizure, cancellation, destruction or similar action by any
governmental authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of currency
restrictions, exchange controls, taxes, levies or other charges affecting the
Fund's property; or acts of war, terrorism, insurrection or revolution.
(b) Notice of Litigation. Right to Prosecute, Etc. The Fund shall not
be liable for indemnification under this Section 5.03 unless a Person shall have
promptly notified the Fund in writing of the commencement of any litigation or
proceeding brought against the Custodian or other Person in respect of which
indemnity may be sought under this Section 5.03. With respect to claims in such
litigation or proceedings for which indemnity by the Fund may be sought and
subject to applicable law and the ruling of any court of competent jurisdiction,
the Fund shall be entitled to participate in any such litigation or proceeding
with counsel of its choice at its own expense in respect of that portion of the
litigation for which the Fund may be subject to an indemnification obligation;
provided, however, a Person shall be entitled to participate in (but not
control) at its own cost and expense, the defense of any such litigation or
proceeding if the Fund has not acknowledged in writing it obligation to
indemnify the Person with respect to such litigation or proceeding. If the Fund
is not permitted to participate or control such litigation or proceeding under
applicable law or by a ruling of a court of competent jurisdiction, or if the
Fund chooses not to so participate, the Custodian or other Person shall not
consent to the entry of any judgment or enter into any settlement in any such
litigation or proceeding without providing the Fund with adequate notice of any
such settlement or judgment, and without the Fund's prior written consent which
consent shall not be unreasonably withheld or delayed. All Persons shall submit
written evidence to the Fund with respect to any cost or expense for which they
are seeking indemnification in such form and detail as the Fund may reasonably
request.
Section 5.04. Investment Limitations. If the Custodian has otherwise
complied with the terms and conditions of this Agreement in performing its duty
generally, and more particularly in connection with the purchase, sale or
exchange of securities made by or for the Fund, the Custodian shall not be
liable to the Fund and the Fund agrees to indemnify the Custodian and its
nominees, for any loss, damage or expense suffered or incurred by the Custodian
and its nominees arising out of any violation of any investment or other
limitation to which the Fund is subject except for violations of which the
Custodian has actual knowledge. For purposes of this Section 5.04 the term
"actual knowledge" shall mean knowledge gained by the Custodian by means other
than from any prospectus published by the Fund or contained in any filing by the
Fund with the SEC.
Section 5.05. Fund's Right to Proceed. Notwithstanding anything to the
contrary contained herein, the Fund shall have, at its election upon reasonable
notice to the Custodian, the right to enforce, to the extent permitted by any
applicable agreement and applicable law, the Custodian's rights against any
Subcustodian, Securities System or other Person for loss, damage or expense
caused the Fund by such Subcustodian, Securities System or other Person, which
the Custodian may have as a consequence of any such loss, damage or expense, if
and to the extent that the Fund has not been made whole for any such loss,
expense or damage. If the Custodian makes the Fund whole for any such loss,
expense or damage, the Custodian shall retain the ability to enforce its rights
directly against such Subcustodian, Securities System or other Person. Upon the
Fund's election to enforce any rights of the Custodian under this Section 5.05,
the Fund shall reasonably prosecute all actions and proceedings directly
relating to the rights of the Custodian in respect of the loss, damage or
expense incurred by the Fund; provided that, so long as the Fund has
acknowledged in writing its obligation to indemnify the Custodian under Section
5.03 hereof with respect to such claim, the Fund shall retain the right to
settle, compromise and/or terminate any action or proceeding in respect of the
loss, damage or expense incurred by the Fund without the Custodian's consent and
provided further, that if the Fund has not made an acknowledgement of its
obligation to indemnify, the Fund shall not settle, compromise or terminate any
such action or proceeding without the written consent of the Custodian, which
consent shall not be unreasonably withheld or delayed. The Custodian agrees to
cooperate with the Fund and take all actions reasonably requested by the Fund in
connection with the Fund's enforcement of any rights of the Custodian. Nothing
contained in this Section 5.05 shall be construed as an obligation of the Fund
to enforce the Custodian's rights. The Fund agrees to reimburse the Custodian
for out-of-pocket expenses incurred by it in connection with the fulfillment of
its obligations under this Section 5.05; provided, however, that such
reimbursement shall not apply to expenses occasioned by or resulting from the
negligence, misfeasance or misconduct of the Custodian.
Section 5.06. Indemnification by Custodian.
(a) Indemnification Obligations of Custodian. Subject to the limitations
set forth in this Agreement and in addition to the reimbursement obligations
provided in Section 5.02(a), the Custodian agrees to indemnify and hold harmless
the Fund and its nominees from all loss, damage and expense (including
reasonable attorneys' fees) suffered or incurred by the Fund or its nominee
caused by or arising from the failure of the Custodian, its nominee, employees
or agents to comply with the terms or conditions of this Agreement or arising
out of the negligence, misfeasance or misconduct of the Custodian or its
nominee.
(b) Notice of Litigation, Right to Prosecute, Etc. The Custodian shall
not be liable for indemnification under this Section 5.06 unless the Fund shall
have promptly notified the Custodian in writing of the commencement of any
litigation or proceeding brought against the Fund in respect of which indemnity
may be sought under this Section 5.06. With respect to claims in such
litigation or proceedings for which indemnity by the Custodian may be sought and
subject to applicable law and the ruling of any court of competent jurisdiction,
the Custodian shall be entitled to participate in any such litigation or
proceeding with counsel of its choice at its own expense in respect of that
portion of the litigation for which the Custodian may be subject to an
indemnification obligation; provided, however, the Fund shall be entitled to
participate in (but not control) at its own cost and expense, the defense of any
such litigation or proceeding if the Custodian has not acknowledged in writing
its obligation to indemnify the Fund with respect to such litigation or
proceeding. If the Custodian is not permitted to participate or control such
litigation or proceeding under applicable law or by a ruling of a court of
competent jurisdiction, or if the Custodian chooses not to so participate, the
Fund shall not consent to the entry of any judgement or enter into any
settlement in any such litigation or proceeding without providing the Custodian
with adequate notice of any such settlement or judgement, and without the
Custodian's prior written consent which consent shall not be unreasonably
withheld or delayed. The Fund shall submit written evidence to the Custodian
with respect to any cost or expense for which it is seeking indemnification in
such form and detail as the Custodian may reasonably request.
Section 5.07. Custodian's Right to Proceed. Notwithstanding anything
to the contrary contained herein, the Custodian shall have, at its election upon
reasonable notice to the Fund, the right to enforce, to the extent permitted by
any applicable agreement and applicable law, the Fund's rights against any
Subcustodian, Securities System or other Person for loss, damage or expense
caused the Custodian by such Subcustodian, Securities System or other Person,
which the Fund may have as a consequence of any such loss, damage or expense, if
and to the extent that the Custodian has not been made whole for any such loss,
expense or damage. If the Fund makes the Custodian whole for any such loss,
expense or damage, the Fund shall retain the ability to enforce its rights
directly against such Subcustodian, Securities System or other Person. Upon the
Custodian's election to enforce any rights of the Fund under this Section 5.07,
the Custodian shall reasonably prosecute all actions and proceedings directly
relating to the rights of the Fund in respect of the loss, damage and expense
incurred by the Custodian; provided that, so long as the Custodian has
acknowledged in writing its obligation to indemnify the Fund under Section 5.06
hereof with respect to such claim, the Custodian shall retain the right to
settle, compromise and/or terminate any action or proceeding in respect of the
loss, damage or expense incurred by the Custodian without the Fund's consent and
provided further, that if the Custodian has not made an acknowledgement of its
obligation to indemnify, the Custodian shall not settle, compromise or terminate
any such action or proceeding without the written consent of the Fund, which
consent shall not be unreasonably withheld or delayed. The Fund agrees to
cooperate with the Custodian and take all actions reasonably requested by the
Custodian in connection with the Custodian's enforcement of any rights of the
Fund. Nothing contained in this Section 5.07 shall be construed as an
obligation of the Custodian to enforce the Fund's rights. The Custodian agrees
to reimburse the Fund for out-of-pocket expenses incurred by it in connection
with the fulfillment of its obligations under this Section 5.07; provided,
however, that such reimbursement shall not apply to expenses occasioned by or
resulting from the negligence, misfeasance or misconduct of the Fund.
ARTICLE VI
COMPENSATION
For the initial three year period beginning on the effective date of this
Agreement, the Fund shall compensate the Custodian in the amount and at the
times specified in Appendix "B" attached hereto. Thereafter, the Fund shall
compensate the Custodian in the amount, and at times, as may be agreed upon in
writing, from time to time, by the Custodian and the Fund.
ARTICLE VII
TERMINATION
This Agreement shall continue in full force and effect until the first to
occur of: (a) termination by the Custodian by an instrument in writing
delivered or mailed (certified mail, return receipt requested) to the Fund, such
termination to take effect not sooner than ninety (90) days after the date of
such delivery or receipt; (b) termination by the Fund by an instrument in
writing delivered or mailed (certified mail, return receipt requested) to the
Custodian, such termination to take effect not sooner than ninety (90) days
after the date of such delivery or receipt; or (c) termination by the Fund by an
instrument in writing delivered to the Custodian, based upon the Fund's
determination that there is reasonable basis to conclude that the Custodian is
insolvent or that the financial condition of the Custodian is deteriorating in
any material respect, in which case termination shall take effect upon the
Custodian's receipt of such notice or at such later time as the Fund shall
designate. In the event of termination pursuant to this Article VII, the Fund
shall make payment of all accrued fees and unreimbursed expenses within a
reasonable time following termination and delivery of a statement to the Fund
setting forth such fees and expenses. The Fund shall identify in any notice of
termination a successor custodian to which the cash, securities and other Assets
of the Fund shall, upon termination of this Agreement, be delivered. In the
event that securities and other Assets remain in the possession of the Custodian
after the date of termination hereof owing to failure of the Fund to appoint a
successor custodian, the Custodian shall be entitled to compensation for its
services in accordance with the fee schedule most recently in effect, for such
period as the Custodian retains possession of such securities and other Assets,
and the provisions of this Agreement relating to the duties and obligations of
the Custodian and the Fund shall remain in full force and effect for such
period. In the event of the appointment of a successor custodian, the cash,
securities and other Assets owned by the Fund and held by the Custodian, any
Subcustodian or nominee shall be delivered, at the terminating party's expense,
to the successor custodian; and the Custodian agrees to cooperate with the Fund
in the execution of documents and performance of other actions necessary or
desirable in order to substitute the successor custodian for the Custodian under
this Agreement.
ARTICLE VIII
DEFINED TERMS
The following terms are defined in the following sections:
Term Section
Account 2.22(A)
ADRs 2.06
Assets Article I
Authorized Person 3.02
Banking Institution 2.12
Bank Accounts 2.21
Clearing Agency 4.02(a)
Distribution Account 2.16
Domestic Subcustodian 4.01
Foreign Sub-Subcustodian 4.02(a)
Institutional Client 2.03
Interest Bearing Deposit 2.12
Interim Sub-Subcustodian 4.02(b)
OCC 2.09
Overdraft 2.28
Overdraft Notice 2.28
Person 5.01(b)
Procedural Agreement 2.10
Proper Instruction 3.01(a)
SEC 2.22
Securities Depositories 4.02(a)
Securities System 2.22
Shares 2.16
Sovereign Risk 5.03(a)
Special Instruction 3.01(b)
Special Subcustodian 4.03
Subcustodian Article IV
1940 Act Preamble
ARTICLE IX
MISCELLANEOUS
Section 9.01. Execution of Documents, Etc.
(a) Actions by the Fund. Upon request, the Fund shall execute and
deliver to the Custodian such proxies, powers of attorney or other instruments
as may be reasonable and necessary or desirable in connection with the
performance by the Custodian or any Subcustodian of their respective obligations
under this Agreement or any applicable subcustodian agreement, provided that the
exercise by the Custodian or any Subcustodian of any such rights shall in all
events be in compliance with the terms of this Agreement.
(b) Actions by Custodian. Upon receipt of Proper Instructions, the
Custodian shall execute and deliver to the Fund or to such other parties as the
Fund may designate in such Proper Instructions, all such documents, instruments
or agreements as may be reasonable and necessary or desirable in order to
effectuate any of the transactions contemplated hereby and designated therein.
Section 9.02. Representations and Warranties.
(a) Representations and Warranties of the Fund. The Fund hereby
represents and warrants that each of the following shall be true, correct and
complete as of the date of execution of this Agreement and, unless notice to the
contrary is provided by the Fund to the Custodian, at all times during the term
of this Agreement: (i) the Fund is duly organized under the laws of its
jurisdiction of organization and is registered as an open-end management
investment company under the 1940 Act or is a series of portfolio of such
entity; and (ii) the execution, delivery and performance by the Fund of this
Agreement are (w) within its power, (x) have been duly authorized by all
necessary action, and (y) will not (A) contribute to or result in a breach of or
default under or conflict with any existing law, order, regulation or ruling of
any governmental or regulatory agency or authority, or (B) violate any provision
of the Fund's corporate charter or other organizational document, or bylaws, or
any amendment thereof or any provision of its most recent Prospectus or
Statement of Additional Information.
(b) Representations and Warranties of the Custodian. The Custodian
hereby represents and warrants that each of the following shall be true, correct
and complete as of the date of execution of this Agreement and, unless notice to
the contrary is provided by the Custodian to the Fund, at all times during the
term of this Agreement: (i) the Custodian is duly organized under the laws of
its jurisdiction of organization and qualifies to serve as a custodian to open-
end management investment companies under the provisions of the 1940 Act; and
(ii) the execution, delivery and performance by the Custodian of this Agreement
are (w) within its power (x) have been duly authorized by all necessary action,
and (y) will not (A) contribute to or result in a breach of or default under or
conflict with any existing law, order, regulation or ruling of any governmental
or regulatory agency or authority, or (B) violate any provision of the
Custodian's corporate charter, or other organizational document, or bylaws, or
any amendment thereof. The Custodian acknowledges receipt of a copy of the
Fund's most recent Prospectus and Statement of Additional Information.
Section 9.03. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and accordingly, supersedes as of the effective date of this
Agreement any custodian agreement heretofore in effect between the Fund and the
Custodian.
Section 9.04. Waivers and Amendments. No provisions of this Agreement
may be waived, amended or deleted except by a statement in writing signed by the
party against which enforcement of such waiver, amendment or deletion is sought;
provided, however, the Subcustodian List may be amended from time to time by the
Fund's execution and delivery to the Custodian of an amended Subcustodian List,
in which case such amendment shall take effect immediately upon execution by the
Custodian.
Section 9.05. Interpretation. In connection with the operation of this
Agreement, the Custodian and the Fund may agree in writing from time to time on
such provisions interpretative of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor of
this Agreement. No interpretative or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this Agreement.
Section 9.06. Captions. Headings contained in this Agreement, which
are included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the parties
hereto.
Section 9.07. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Missouri, in each case
without giving effect to principles of conflicts of law.
Section 9.08. Notices. Except in the case of Proper Instructions or
Special Instructions, and as otherwise provided in this Agreement, notices and
other writings contemplated by this Agreement shall be delivered by hand or by
facsimile transmission or as otherwise agreed to by the Fund and the Custodian
in writing (provided that in the case of delivery by facsimile transmission,
notice shall also be mailed postage prepaid) to the parties at the following
addresses:
(a) If to the Fund:
United Funds, Inc. United Bond Fund
6300 Lamar Avenue
Overland Park, Kansas 66202
Attn: Fund Treasurer
Telephone: 913-236-2000
Telefax: 913-236-1595
(b) If to the Custodian:
United Missouri Bank, n.a.
928 Grand Avenue, 10th Floor
Kansas City, Missouri 64106
Attn: Securities Administration
Telephone: 816-860-7764
Telefax: 816-860-4869
or such other address as either party may have designated in writing to the
other party hereto.
Section 9.09. Assignment. This Agreement shall be binding on and shall
inure to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that, subject to the provisions of Section 7.01
hereof, neither party hereto may assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other party.
Section 9.10. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original. This
Agreement shall become effective when one or more counterparts have been signed
and delivered by each of the parties.
Section 9.11. Confidentiality; Survival of Obligations. The parties
hereto agree that each shall treat confidentially the terms and conditions of
this Agreement and all information provided by each party to the other regarding
its business and operations. All confidential information provided by a party
hereto shall be used by any other party hereto solely for the purpose of
rendering services pursuant to this Agreement and, except as may be required in
carrying out this Agreement, shall not be disclosed to any third party without
the prior consent of such providing party. The foregoing shall not be
applicable to any information that is publicly available when provided or
thereafter becomes publicly available other than through a breach of this
Agreement, or that is required to be disclosed by any bank examiner of the
Custodian or any Subcustodians, any auditor or examiner of the parties hereto,
by judicial or administrative process or otherwise by applicable law or
regulation. The provisions of this Section 9.11 and Section 9.01, 9.07, Section
2.28, Section 3.04, Section 4.05, Section 7.01, Article V and Article VI hereof
and any other rights or obligations incurred or accrued by any party hereto
prior to termination of this Agreement shall survive any termination of this
Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
UNITED FUNDS, INC. UNITED BOND FUND UNITED MISSOURI BANK, n.a.
By: /s/Rodney O. McWhinney By: /s/David F. Larrabee
Name: Rodney O. McWhinney Name: David F. Larrabee
Title: Vice President Title: Vice President
<PAGE>
APPENDIX "A"
TO CUSTODIAN AGREEMENT
BETWEEN
UNITED FUNDS, INC. UNITED BOND FUND
AND
UNITED MISSOURI BANK, n.a.
Dated as of November 26, 1991
The following is a list of Domestic Subcustodians, Foreign Sub-
Subcustodian and Special Subcustodians under the Custodian Agreement as
amended:
A. Domestic Subcustodians:
Brown Brothers Harriman & Co.
United Missouri Trust Company of New York
B. Foreign Sub-Subcustodians:
Country Sub-Subcustodian Depository
Argentina Citibank, n.a. CDV
Australia National Australia Bank Ltd. AUSTRACLEAR, RITs
Austria Creditanstalt Bankverein KONTROLLBANK (OEKB)
Belgium Banque Bruxelles Lambert CIK, BNB
Brazil First National Bank of Boston, BOVESPA, CLC
Brazil
Canada Canadian Imperial Bank of CDS
Commerce
Chile Citibank, n.a. None
Denmark Den Danske Bank VP
Finland Union Bank of Finland Securities Association
France Banque Indosuez SICOVAM; Banque De
France
Germany Berliner Handels Und KASSENVEREIN
Frankfurter Bank
Hong Kong HongKong & Shanghai Banking HongKing Securities
Corp. Clearing Company
Indonesia Citibank, n.a. None
Italy Banca Commerciale Italiana MONTE TITOLI, Banca
D'Italia
Japan Mitsui Trust & Banking Co. JASDEC, Bank of
Japan
Korea Citibank, n.a. Korean Securities
Depository Corporation (KSD)
Malaysia HongKong & Shanghai Banking MCD; Bank Negara Malaysia
Corp.
Mexico Citibank Mexico, s.a. INDEVAL; Banco De Mexico
Netherlands ABN - Amro Bank NECIGER; De Nederlandsche Bank
Norway Christiana Bank VPS
Peru Citibank, n.a. Caja De Valores (CAVAL)
Philippines Citibank, n.a. None
Singapore HongKong & Shanghai Banking CDP
Corp.
Spain Banco Santander SCLV; Banco De Espana
Sweden Skandinaviska Enskilda Banken VPC
Switzerland Union Bank of Switzerland SEGA
Thailand HongKong & Shanghai Banking Share Depository Center (SDC)
Corp.
Turkey Citibank, n.a. TvS, Central Bank of Turkey
United Kingdom Midland Securities PLC CMO, CGO
C. Special Subcustodians:
Wilmington Trust Co.
The Bank of New York, n.a.
Euroclear
<PAGE>
APPENDIX "B"
TO
CUSTODIAN AGREEMENT
BETWEEN
UNITED FUNDS, INC. UNITED BOND FUND
AND
UNITED MISSOURI BANK, n.a.
Dated as of November 26, 1991
The Fund shall be responsible for providing the Custodian the net asset
levels the Custodian requires to calculate the net asset portion of the
Custodian's fees. Such determinations shall be based upon the average monthly
assets of each Fund and shall specify the level of domestic assets and foreign
assets by country, as appropriate. Domestic assets shall include all assets
held in the United States including but not limited to American Depositary
Receipts. Foreign assets shall include all assets held outside the United
States including but not limited to securities which clear through Euroclear or
CEDEL. The Custodian will provide as soon as practicable after receiving the
information provided by the Fund with respect to the net asset level numbers, a
bill for the Fund, including such reasonable detail in support of each bill as
may be reasonably requested by the Fund. As used in this Appendix "B", "United
Funds" shall mean all funds in the United Group of Funds, TMK/United Funds,
Inc., Waddell & Reed Funds, Inc., Torchmark Insured Tax-Free Fund, Inc. and
Torchmark Government Securities Fund, Inc.
DOMESTIC CUSTODY FEE SCHEDULE
A. Annual Fee (combining all domestic assets):
An annual fee to be computed as of month end and payable each month of the
Fund's fiscal year (after receipt of the bill issued to each Fund based
upon its portion of domestic assets), at the annual rate of:
.00005 for the first $5,000,000,000 of the net assets of all the United
Funds, plus
.00004 for any net assets exceeding $5,000,000,000 of the assets of all the
United Funds.
B. Portfolio Transaction Fees (billed to each Fund):
(a)For each portfolio transaction* processed through a
Depository (DTC, PTC or Fed) $ 7.00
(b) For each portfolio transaction* processed through the
New York office (physical settlement) 20.00
(c)For each futures/options contract written 25.00
(d)For each principal/interest paydown 6.00
(e)For each interfund note transaction 5.00
* A portfolio transaction includes a receive, delivery, maturity, free
security movement and corporate action.
C. Earnings Credits:
Positive earnings credits will be applied on all collected custody and cash
management balances of each Fund at the Custodian to earn the Custodian's
daily repurchase agreement rate less reserve requirements and FDIC
premiums. Negative earnings credits will be charged on all uncollected
custody and cash management balances of each Fund at the Custodian's prime
rate less 150 basis points on each day a negative balance occurs. Positive
and/or negative earnings credits will be monitored daily for each Fund and
the net positive or negative amount for each Fund will be included in the
monthly statements. Excess positive credits for each Fund will be carried
forward indefinitely.
D. Out-of-Pocket Expenses (passed directly from Special Subcustodians):
Includes all charges by any Special Subcustodian to the Custodian as
Custodian for any Assets held at the Special Subcustodian.
GLOBAL CUSTODY FEE SCHEDULE
A. Global Fee Schedule:
Market: Annual Asset Fees Transaction Fees
Argentina .0037 $85
Australia .0009 $85
Austria .0011 $70
Belgium .0011 $60
Brazil .0035 $60
Canada .0008 $35
Chile .0045 $85
Denmark .0011 $60
Finland .0011 $85
France .0011 $85
Germany .0008 $60
Hong Kong .0009 $85
India .0055 $135
Indonesia .0009 $85
Ireland .0011 $60
Italy .0011 $70
Japan .0008 $40
Korea .0035 $60
Malaysia .0009 $85
Mexico .0016 $60
Netherlands .0011 $35
New Zealand .0009 $85
Norway .0011 $85
Peru .0070 $160
Phillippines .0035 $95
Portugal .0035 $145
Singapore .0009 $85
Spain .0009 $85
Sweden .0011 $70
Switzerland .0009 $85
Thailand .0009 $85
Turkey .0045 $110
U.K. .0011 $60
Note: Fee Schedule eliminates sub-custodian asset and transaction-based out-
of-pocket expenses. Other sub-custodian out-of-pocket expenses (i.e. Scrip
fees, stamp duties, certificate fees, etc.)
B. Out-of-Pocket Expenses (passed directly from Brown Brothers Harriman &
Co.):
Includes, but is not limited to telex, legal, telephones, postage, and
direct expenses including but not limited to tax reclaim, customized
systems programming, certificate fees, duties, and registration fees.
C. Short-term Dollar Denominated Global Assets
Eurodollar CDs, Time Deposits
(1) An annual fee to be computed as of month end and payable each month of
the Fund's fiscal year (after receipt of the bill issued to the Fund
based upon its portion of short-term dollar denominated assets), at
the annual rate of:
.0004 on all short-term dollar denominated assets of the United Funds.
(2) Portfolio Transaction Fees:
First Chicago Clearing Centre-Trades with Members $136.00
First Chicago Clearing Centre-Trades with Non-members 153.00
First Chicago Clearing Centre-Income Collection64.00
D. Euroclear Eligible Issues:
(1) An annual fee to be computed as of month end and payable each month of
the Fund's fiscal year (after receipt of the bill issued to the Fund
based upon its portion of Euroclear issues), at the annual rate of:
2.5 basis points on all United Funds Euroclear assets held in account
at UMB Bank, n.a.
(2) Portfolio Transaction Fees:
Euroclear $60.00
Except for the change of names,this Custodian Agreement is identical for United
Income Fund, United Accumulative Fund and United Science and Technology Fund.
We are therefore, filing only one copy of the agreement.
EX-99.B9-ufssa
SHAREHOLDER SERVICING AGREEMENT
THIS AGREEMENT, made as of the ____ day of ____________, 1995, by and
between UNITED FUNDS, INC, and Waddell & Reed Services Company (the "Agent"),
W I T N E S S E T H :
WHEREAS, The Company wishes, as applicable, to appoint the Agent or to
continue the appointment of the Agent to be its shareholder servicing agent
upon, and subject to, the terms and provisions of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties agree as follows:
1. Appointment of Agent as Shareholder Servicing Agent for the Company;
Acceptance.
(1) The Company hereby appoints the Agent to act as Shareholder
Servicing Agent for the Company upon, and subject to, the terms and provisions
of this Agreement.
(2) The Agent hereby accepts the appointment as Shareholder Servicing
Agent for the Company and agrees to act as such upon, and subject to, the terms
and provisions of this Agreement.
2. Definitions.
(1) In this Agreement -
(a) The term the "Act" means the Investment Company Act of 1940
as amended from time to time;
(b) The term "account" means the shares of the Company
registered on the books of the Company in the name of a shareholder and includes
shares subject to instructions by the shareholder with respect to periodic
redemptions and/or reinvestment in additional shares of any dividends payable on
said shares. An account does not include shares held under a plan or program
issued by a unit investment trust for which Waddell & Reed, Inc. was or is the
depositor or sponsor;
(c) The term "affiliate" of a person shall mean a person
controlling, controlled by, or under common control with that person;
(d) The term "Class" shall mean each separate sub-class of a
class of shares of the Company, as may now or in the future exist;
(e) The term "Fund" shall mean each separate class of shares of
the Company, as may now or in the future exist;
(f) The term "officers' instruction" means an instruction given
on behalf of the Company to the Agent and signed on behalf of the Company by any
one or more persons authorized to do so by the Company's Board of Directors;
(g) The term "prospectus" means the prospectus and Statement of
Additional Information of the applicable Fund or Class from time to time in
effect;
(h) The term "shares" means shares including fractional shares
of capital stock of the Company, whether or not such shares are evidenced by an
outstanding stock certificate issued by the Company;
(i) The term "shareholder" shall mean the owner of record of
shares of the Company;
(j) The term "stock certificate" means a certificate
representing shares in the form then currently in use by the Company.
3. Duties of the Agent.
The Agent shall perform such duties as shall be set forth in this
paragraph 3 and in accordance with the practice stated in Exhibit A of this
Agreement or any amendment thereof.
(1) Transfers.
Subject to the provisions of this Agreement the Agent hereby
agrees to perform the following functions as transfer agent for the Company:
(a) Recording the ownership, transfer, exchange and cancellation
of ownership of shares of the Company on the books of the Company;
(b) Causing the issuance, transfer, exchange and cancellation of
stock certificates;
(c) Establishing and maintaining records of accounts;
(d) Computing and causing to be prepared and mailed or otherwise
delivered to shareholders payment checks and notices of reinvestment in
additional shares of dividends, stock dividends or stock splits declared by the
Company on shares and of redemption proceeds due by the Company on redemption of
shares;
(e) Furnishing to shareholders such information as may be
reasonably required by the Company, including appropriate income tax
information;
(f) Addressing and mailing to shareholders prospectuses, annual
and semi-annual reports and proxy materials for shareholder meetings prepared by
or on behalf of the Company;
(g) Replacing allegedly lost, stolen or destroyed stock
certificates in accordance with and subject to procedures and conditions agreed
upon and set out in officers' instructions;
(h) Maintaining such books and records relating to transactions
effected by the Agent pursuant to this Agreement as are required by the Act, or
by rules or regulations thereunder, or by any other applicable provisions of
law, to be maintained by the Company or its transfer agent with respect to such
transactions; preserving, or causing to be preserved, any such books and records
for such periods as may be required by any such law, rule or regulation;
furnishing the Company such information as to such transactions and at such time
as may be reasonably required by it to comply with applicable laws and
regulations;
(i) Providing such services and carrying out such
responsibilities on behalf of the Company, or imposed on the Agent as the
Company's transfer agent, not otherwise expressly provided for in this Paragraph
3, as may be required by or be reasonably necessary to comply with any statute,
act, governmental rule, regulation or directive or court order, including,
without limitation, the requirements imposed by the Tax Equity and Fiscal
Responsibility Act of 1982 and the Income and Dividend Tax Compliance Act of
1983 relating to the withholding of tax from distributions to shareholders.
(2) Correspondence.
The Agent agrees to deal with and answer all correspondence from
or on behalf of shareholders relating to its functions under this Agreement.
4. Compensation of the Agent.
The Company agrees to pay the Agent for its services under this
Agreement in accordance with the schedule as then in effect set forth in Exhibit
B of this Agreement or any amendment thereof. In addition, the Company agrees
to reimburse the Agent for the following "out-of-pocket" expenses of the Agent
within five days after receipt of an itemized statement of such expenses, to the
extent that payment of such expenses has not been or is not to be made directly
by the Company: (i) costs of stationery, appropriate forms, envelopes, checks,
postage, printing (except cost of printing prospectuses, annual and semi-annual
reports and proxy materials) and mailing charges, including returned mail and
proxies, incurred by the Agent with respect to materials and communications sent
to shareholders in carrying out its duties to the Company under this Agreement;
(ii) long distance telephone costs incurred by the Agent for telephone
communications and microfilm and storage costs for transfer agency records and
documents; (iii) costs of all ancillary and supporting services and related
expenses (other than insurance premiums) reasonably required by and provided to
the Agent, other than by its employees or employees of an affiliate, with
respect to functions of the Company being performed by it in its capacity as
Agent hereunder, including legal advice and representation in litigation to the
extent that such payments are permitted under Paragraph 7 of this Agreement;
(iv) costs for special reports or information furnished on request pursuant to
this Agreement and not specifically required by the Agent by Paragraph 3 of this
Agreement; and (v) reasonable costs and expenses incurred by the Agent in
connection with the duties of the Agent described in Paragraph (3)(1)(i). In
addition, the Company agrees to promptly pay over to the Agent any fees or
payment of charges it may receive from a shareholder for services furnished to
the shareholder by the Agent.
Services and operations incident to the sale and distribution of the
Company's shares, including sales communications, confirmations of investments
(not including reinvestment of dividends) and the clearing or collection of
payments will not be for the account or at the expense of the Company under this
Agreement.
5. Right of Company to Inspect Records, etc.
The Company will have the right under this Agreement to perform on
site inspection of records and accounts and to perform audits directly
pertaining to the Company shareholder accounts serviced by the Agent hereunder
at the Agent's facilities in accordance with reasonable procedures at the
frequency necessary to assure proper administration of the Agreement. The Agent
will cooperate with the Company's auditors or representatives of appropriate
regulatory agencies and furnish all reasonably requested records and data.
6. Insurance.
The Agent now has the insurance coverage described in Exhibit C,
attached hereto, and the Agent will not take any action to eliminate or decrease
such coverage during the term of this Agreement without receiving the approval
of the Fund in advance of any change, except the Agent, after giving reasonable
notice to the Company, may eliminate or decrease any coverage if the premiums
for such coverage are substantially increased.
7. Standard of Care; Indemnification.
The Agent will at all times exercise due diligence and good faith in
performing its duties hereunder. The Agent will make every reasonable effort
and take all reasonably available measures to assure the adequacy of its
personnel and facilities as well as the accurate performance of all services to
be performed by it hereunder within, at a minimum, the time requirements of any
applicable statutes, rules or regulations or as set forth in the prospectus.
The Agent shall not be responsible for, and the Company agrees to
indemnify the Agent for any losses, damages or expenses (including reasonable
counsel fees and expenses) (i) resulting from any claim, demand, action or suit
not resulting from the Agent's failure to exercise good faith or due diligence
and arising out of or in connection with the Agent's duties on behalf of the
Company hereunder; (ii) for any delay, error or omission by reason of
circumstances beyond its control, including acts of civil or military authority,
national emergencies, labor difficulties (except with respect to the Agent's
employees), fire, mechanical breakdown beyond its control, flood or catastrophe,
acts of God, insurrection, war, riots, or failure beyond its control of
transportation, communication or power supply; or (iii) for any action taken or
omitted to be taken by the Agent in good faith in reliance on (a) the
authenticity of any instrument or communication reasonably believed by it to be
genuine and to have been properly made and signed or endorsed by an appropriate
person, (b) the accuracy of any records or information provided to it by the
Company, (c) any authorization or instruction contained in any officers'
instruction, or (d) with respect to the functions performed for the Company
listed under Paragraph 3(1) of this Agreement, any advice of counsel approved by
the Company who may be internally employed counsel or outside counsel, in either
case for the Company and/or the Agent.
In order for the rights to indemnification to apply, it is understood
that if in any case the Company may be asked to indemnify or hold the Agent
harmless, the Company shall be advised of all pertinent facts concerning the
situation in question, and it is further understood that the Agent will use
reasonable care to identify and notify the Company promptly concerning any
situation which presents or appears likely to present a claim for
indemnification against the Company. The Company shall have the option to
defend the Agent against any claim which may be the subject of this
indemnification and, in the event that the Company so elects, it will so notify
the Agent and thereupon the Company shall take over complete defense of the
claim and the Agent shall sustain no further legal or other expenses in such
situation for which the Agent shall seek indemnification under this paragraph.
The Agent will in no case confess any claim or make any compromise in any case
in which the Company will be asked to indemnify the Agent except with the
Company's prior written consent.
8. Term of the Agreement; Taking Effect; Amendments.
This Agreement shall become effective at the start of business on the
date hereof and shall continue, unless terminated as hereinafter provided, for a
period of one year and from year to year thereafter, provided that such
continuance shall be specifically approved as provided below.
This Agreement shall go into effect, or may be continued, or may be
amended or a new agreement between the Company and the Agent covering the
substance of this Agreement may be entered into only if the terms of this
Agreement, such continuance, the terms of such amendment or the terms of such
new agreement have been approved by the Board of Directors of the Company,
including the vote of a majority of the directors who are not "interested
persons," as defined in the Act, of either party to this Agreement or of Waddell
& Reed Investment Management Company, cast in person at a meeting called for the
purpose of voting on such approval. Such a vote is hereinafter referred to as a
"disinterested director vote."
Any disinterested director vote shall include a determination that (i)
the Agreement, amendment, new agreement or continuance in question is in the
best interests of the Company and its shareholders; (ii) the services to be
performed under the Agreement, the Agreement as amended, new agreement or
agreement to be continued, are services required for the operation of the
Company; (iii) the Agent can provide services the nature and quality of which
are at least equal to those provided by others offering the same or similar
services; and (iv) the fees for such services are fair and reasonable in the
light of the usual and customary charges made by others for services of the same
nature and quality.
9. Termination.
(1) This Agreement may be terminated by the Agent at any time without
penalty upon giving the Company 120 days' written notice (which notice may be
waived by the Company) and may be terminated by the Company at any time without
penalty upon giving the Agent sixty (60) days' written notice (which notice may
be waived by the Agent), provided that such termination by the Company shall be
directed or approved by the vote of a majority of the Board of Directors of the
Company in office at the time or by the vote of the holders of a majority (as
defined in or under the Act) of the outstanding shares of the Company.
(2) On termination, the Agent will deliver to the Company or its
designee all files, documents and records of the Company used, kept or
maintained by the Agent in the performance of its services hereunder, including
such of the Company's records in machine readable form as may be maintained by
the Agent, as well as such summary and/or control data relating thereto used by
or available to the Agent.
(3) In the event of any termination which involves the appointment of
a new shareholder servicing agent, including the Company's acting as such on its
own behalf, the Company shall have the non-exclusive right to the use of the
data processing programs used by the Agent in connection with the performance of
its duties under this Agreement without charge.
(4) In addition, on such termination or in preparation therefore, at
the request of the Company and at the Company's expense the Agent shall provide
to the extent that its capabilities then permit such documentation, personnel
and equipment as may be reasonably necessary in order for a new agent or the
Company to fully assume and commence to perform the agency functions described
in this Agreement with a minimum disruption to the Company's activities.
10. Construction; Governing Law.
The headings used in this Agreement are for convenience only and shall
not be deemed to constitute a part hereof. Whenever the context requires, words
denoting singular shall be read to include the plural. This Agreement and the
rights and obligations of the parties hereunder, shall be construed and
interpreted in accordance with the laws of the State of Kansas, except to the
extent that the laws of the State of Maryland apply with respect to share
transactions.
11. Representations and Warranties of Agent.
Agent represents and warrants that it is a corporation duly organized
and existing and in good standing under the laws of the State of Missouri, that
it is duly qualified to carry on its business in the State of Kansas and
wherever its duties require, that it has the power and authority under laws and
by its Articles of Incorporation and Bylaws to enter into this Shareholder
Servicing Agreement and to perform the services contemplated by this Agreement.
12. Entire Agreement.
This Agreement and the Exhibits annexed hereto constitutes the entire
and complete agreement between the parties hereto relating to the subject matter
hereof, supersedes and merges all prior discussions between the parties hereto,
and may not be modified or amended orally.
IN WITNESS WHEREOF, the parties have hereto caused this Agreement to
be duly executed on the day and year first above written.
NAME OF FUND
By:_________________________________
Sharon K. Pappas, Vice President
ATTEST:
By:____________________________
Amy D. Eisenbeis, Assistant Secretary
WADDELL & REED SERVICES COMPANY
By:__________________________________
Robert L. Hechler, President
ATTEST:
By:___________________________
Sharon K. Pappas, Secretary
<PAGE>
EXHIBIT A
A. DUTIES IN SHARE TRANSFERS AND REGISTRATION
1. The Agent in carrying out its duties shall follow general commercial
practices and the Rules of the Stock Transfer Association, Inc. except as they
may conflict or be inconsistent with the specific provisions of the Company's
Articles of Incorporation and Bylaws, prospectus, applicable Federal and state
laws and regulations and this Agreement.
2. The Agent shall not require that the signature of the appropriate
person be guaranteed, witnessed or verified in order to effect a redemption,
transfer, exchange or change of address except as may from time to time be
directed by the Company as set forth in an officers' instruction. In the event
a signature guarantee is required by the Company, the Agent shall not inquire as
to the genuineness of the guarantee.
3. The Agent shall not replace a lost, stolen or misplaced stock
certificate without requiring and being furnished with an open penalty surety
bond protecting the Company and the Agent against loss.
B. The practices, procedures and requirements specified in A above may be
modified, altered, varied or supplemented as from time to time may be mutually
agreed upon by the Company and the Agent and evidenced on behalf of the Company
by an officers' instruction. Any such change shall not be deemed to be an
amendment to the Agreement within the meaning of Paragraph 8 of the Agreement.
<PAGE>
EXHIBIT B
COMPENSATION
Class A Shares
An amount payable on the first day of each month of $1.0208 for each account of
the Company which was in existence during any portion of the immediately
preceding month and, in addition, to pay to the Agent the sum of $0.30 for each
account for which, during such month, a record date was established for payment
of a dividend, in cash or otherwise (which term includes a distribution),
irrespective of whether such dividend was payable in that month or later or was
payable directly or was to be reinvested.
Class Y Shares
An amount payable on the first day of each month equal to 1/12 of .15 of 1% of
the average daily net assets of the Class for the preceding month.
<PAGE>
EXHIBIT C
Bond or
Name of Bond Policy No. Insurer
Investment Company 87015194B ICI Mutual
Blanket Bond Form Insurance
Company
Fidelity $25,000,000
Audit Expense 500,000
On Premises 25,000,000
In Transit 25,000,000
Forgery or Alteration 25,000,000
Securities 25,000,000
Counterfeit Currency 25,000,000
Uncollectible Items of
Deposit 25,000
Voice-Initiated Transactions 25,000,000
Total Limit 25,000,000
Directors and Officers/ 87015194D ICI Mutual
Errors and Omissions Liability Insurance
Insurance Form Company
Total Limit $ 5,000,000
Blanket Lost Instrument Bond (Mail Loss) 30S100639551 Aetna Life
& Casualty
Blanket Undertaking Lost Instrument
Probate Waiver 42SUN339806 Hartford
Casualty
Insurance
EX-99.B9-ufappca
[ Division Office Stamp]
Waddell & Reed, Inc. Mutual Funds
P.O. Box 29217 Net Asset Value (NAV)
Shawnee Mission, Kansas 66201-9217 APPLICATION
I (We) make application for an account to be established as follows:
[] A NAV account to be established.
[] A new Fund to be added to an existing NAV account.
[] An existing non-NAV account to be converted to a NAV account.
Check applicable block:
[] Home Office Personnel
[] Field Personnel
[] 401(k) Plan with 100 or more eligible employees
________________________________________________________________________________
REGISTRATION TYPE (one only) * SEE REVERSE SIDE FOR ELIGIBLE PURCHASERS*
________________________________________________________________________________
NON RETIREMENT PLAN
[] Single Name [] Joint Tenants W/Right of Survivorship [] Declaration of
Trusts Revocable
[] Uniform Gifts (Transfers) To Minors [] Other: ______ (Attach CUF022)
________________________________________________________________________________
RETIREMENT PLAN
[] Individual IRA [] 401(k) Unallocated account
[] Spousal IRA [] 401(k) Participant
[] Rollover (Qual. plan lump sum distr.) [] Keogh Participant* (Profit Sharing
[] Simplified Pension Plan (SEP/SPP)* Plan)
*(If new plan attach Adoption [] Keogh Participant* (Money Purchase
Agreement from MRP1166) Plan
*(If new plan attach Adoption
Agreement from MRP1182)
[] TSA or [] 457 Plan Employer's Name _____________________________________
(Do Not Abbreviate)
(If billing is required, -----------------------------------------------------
attach form #CSF1417) Street City State Zip
[] If Tri-Vest, enter Partnership name _____________________________ amt $______
________________________________________________________________________________
REGISTRATION []NEW ACCOUNT or []NEW FUND FOR EXISTING ACCOUNT: [][][][][][][]-[]
(Must have same ownership) Date of Birth
________________________________________________________________________________
Individual Name (exactly as desired) If spousal IRA, name of working spouse; if
Keogh or 401(k), name of Plan/Trustee/Custodian.
______________________
Month Day Year
________________________________________________________________________________
Joint Name (if any, exactly as desired) If spousal IRA, name of non-working
spouse; if Keogh or 401(k) Participant, enter name.
______________________ ______________
Month Day Year Relationship
________________________________________________________________________________
Mailing Address
_______________ ______________ ____________ _____/__________-________________
City State Zip Telephone
Social Security #:[][][]-[][]-[][][][] or Taxpayer Identification #:
[][]-[][][][][][][]
________________________________________________________________________________
BENEFICIARY: For Retirement Plan Accounts Only. (not for use with 401(k) Plans)
Full Name of Beneficiary Tax Identification Number Relationship Percent
________________________ _________________________ ____________ ______%
________________________________________________________________________________
INVESTMENTS: Make check payable to Waddell & Reed
FUND CODES
101 - W&R Total Return
102 - W&R Growth
103 - W&R Limited-Term Bond
104 - W&R Municipal Bond
(not available for retirement plans)
105 - W&R International Growth
106 - W&R Asset Strategy
621 - Income
622 - Science & Technology
623 - Accumulative
624 - Bond
625 - International Growth
626 - Gold and Government
627 - Continental Income
628 - High Income
629 - Vanguard
630 - New Concepts
634 - High Income II
680 - Retirement Shares
684 - Asset Strategy
750 - Cash Management
753 - Government Securities
760 - Municipal Bond (not available for Retirement Plans)
762 - Municipal High Income (not available for Retirement Plans)
____ - Other
________________________________________________________________________________
OPEN ACCOUNT
-----If Retirement Plan-----
FUND Amount Yr. Deductible or
(enter code) Enclosed of Contr. Non-Deductible
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
Total $______________
Monthly Div./C.G. Distr**
TOP From AIS* (Assumes RR)
Another Carrier (if any) RR CC CR
[] $______________ [] [] []
[] $______________ [] [] []
[] $______________ [] [] []
[] $______________ [] [] []
[] $______________ [] [] []
$______________
Existing Accounts
To Be Converted
To NAV
[][][][][][][][]
[][][][][][][][]
[][][][][][][][]
[][][][][][][][]
[][][][][][][][]
________________________________________________________________________________
*Attach AIS Authorization Form #CUP0714 **Attach Payroll Deduction Authorization
(PFM743) **RR=Reinvest Div/Cap Gain CC=Cash Div/Cap Gain CR=Cash Div/Reinvest
Cap Gain
NAV application must be approved and signed by Division Manager or Regional Vice
President for field personnel and 401(k) plans or Supervisor for Home Office
personnel. Refer to the reverse side for more details.
CHECK SERVICE (Not available for retirement plans)
Send information to establish redemption checking account for: [] United
Government Securities [] United Cash Management
_______________________________________________________________________________
EXPEDITED REDEMPTION: For United Cash Management Only. (Not available for
retirement plans)
Complete items below:
_________________________________________________________
Name and Address of Bank/Broker/Savings & Loan
_________________________________________________________
Street
_________________________________________________________
City State Zip
_________________________________________________________
Account Number
If account is with a Broker or Savings and Loan, provide:
_________________________________________________________
Name of Its Commercial Bank
_________________________________________________________
Street
_________________________________________________________
City State Zip
_________________________________________________________
Its Account # with Its Commercial Bank
One United Cash Management Accounts where expedited redemption is requested,
Waddell & Reed, Inc. is authorized to honor telephonic, telegraphic or written
requests from anyone for redemption of all or any fund shares so long as the
proceeds are transmitted to the identified account.
_______________________________________________________________________________
ELIGIBLE PURCHASERS
A. EMPLOYEE - Any employee (including retired employees) of Waddell & Reed or
its affiliated companies. A retired employee is an individual separated
from service from Waddell & Reed or affiliated companies with a vested
interest in any Employee Benefit Plan sponsored by Waddell & Reed or its
affiliated companies.
B. SALES REPRESENTATIVE - Any sales representative who is licensed to sell the
products and/or services of Waddell & Reed or a retired Sales Representative.
A retired sales representative is defined as any sales representative who was
at the time of separation from service from Waddell & Reed a Senior Account
Representative.
C. QUALIFYING FAMILY MEMBERS - Spouses, children, parents (no age limit) of
employees and their spouses and sales representatives as defined above.
D. RETIREMENT PLANS - Any Retirement Plan sponsored by Waddell & Reed, Inc.
established for the benefit of an employee, sales representative or
qualifying family member, as defined above.
E. TRUSTS - Trusts, under which the grantor and the trustee or a co-trustee are
each an employee, sales representative or qualifying family member.
F. CUSTODIANS - A custodian pursuant to a Uniform Gifts (or Transfers) to Minors
Act purchasing for the child of an employee or sales representative. (The
Custodian need not be an Eligible Purchaser.)
G. 401(k) PLANS - Any Cash or Deferred Arrangement established pursuant to
Internal Revenue Code Section 401(k) which has 100 or more eligible
employees.
TERMS AND CONDITIONS
A. NO TRANSFER OF OWNERSHIP - Shares purchased hereunder at net asset value
shall not be transferable on the books of the Fund to other than an Eligible
Purchaser except upon death of the registered shareholder(s). However,
assignments to lending institutions to secure loans are permitted except
where otherwise prohibited.
B. JOINT TENANCY - All registered shareholders in a joint tenancy account must
be Eligible Purchasers.
C. CHANGES IN REGISTRATION - A change in registration of shares purchases at net
asset value will be permitted provided the new registration maintains owner-
ship by an Eligible Purchaser.
D. ISSUANCE OF SHARE CERTIFICATES - A share certificate will not be issued,
unless required in connection with a loan.
E. REDEMPTION OF SHARES - Shares may be redeemed as provided in the prospectus
of the respective Fund.
F. PURCHASES - A minimum initial purchase of $500 is usually required for all
Funds. The minimum repeat purchase is $25, except for United Cash Manage-
ment which has no minimum.
G. GENERAL -
1. Purchases of Investment Programs are not included in net asset value
purchases.
2. Shares purchases at net asset value will not be added to existing sales
load accounts. New accounts will be established.
3. If shares held in a non-NAV account are converted/transferred into a NAV
account, the same terms and conditions that apply to NAV shares will also
apply to the converted/transferred shares.
________________________________________________________________________________
TERMINATION
A. The right to purchase shares at net asset value may be terminated by Waddell
& Reed, Inc. at anytime without notice.
________________________________________________________________________________
ACKNOWLEDGEMENT
* I (we) have received a copy of the current prospectus(es) of the Funds
selected.
* If purchasing an IRA, I (we) certify that I (we) have read the Retirement Plan
and Custody Agreement and agree to the terms and conditions set forth therein,
and do hereby establish the Individual Retirement Plan.
* In the case of a 401(k) plan, I (we) certify that more than 100 employees are
currently eligible to participate.
* Under penalties of perjury, I certify that the social security number or other
taxpayer identification number shown on reverse side is correct (or I am wait-
ing for a number to be issued to me) and (strike the following if not true)
that I am not subject to backup withholding because (a) I am exempt fro backup
withholding, or (b) I have not been notified by the IRS that I am subject to
backup withholding as a result of a failure to report all interest and
dividends, or (c) the IRS has notified me that I am no longer subject to back-
up withholding.
An approved application must be submitted for each initial purchase, each new
Fund, and each conversion to NAV. Full payment must accompany the application.
No order will be accepted by wire nor by written request except on the approved
application. MAIL THIS APPLICATION FOR ANY INITIAL PURCHASE, NEW FUND, AND
CONVERSION TO NAV TO THE HOME OFFICE CUSTOMER SERVICE DIVISION. REPEAT
PURCHASES IN AN EXISTING FUND ACCOUNT SHOULD BE MAILED TO THE HOME OFFICE
CUSTOMER SERVICE DIVISION ACCOMPANIED BY THE TEAR-OFF PORTION OF A CONFIRMATION.
I am eligible to purchase shares at net asset value. I have read all the terms
and conditions stated above and understand and agree to all of them. I agree to
notify Waddell & Reed if my account(s) become ineligible of NAV status.
___________________________________ _______________________________________
Signature of Applicant Representative Number, if applicable
___________________________________ _______________________________________
Signature of Division Manager/ RVP or Date
Supervisor of Home Office Personnel
___________________________________ _______________________________________
Name of Waddell & Reed Employee or Applicant's Relationship to Employee
Representative, if applicable or Representative
[Home Office Use Only]
Fiduciary Trust Company of New
Hampshire accepts appointment as
Custodian in accordance with the Custody
Agreement:
By: _________________________________________
Fiduciary Trust Company Authorized Signature
[OSJ: ]
CUF0025(11/93)
EX-99.B9-ufappcy
UNITED FUND GROUP OF FUNDS INSTITUTIONAL
WADDELL & REED FUNDS PURCHASE
APPLICATION
INSTRUCTIONS You can open an account by calling 1-800-366-2520 or by mailing
an application and check to Waddell & Reed, Inc., 6300 Lamar, Shawnee Mission,
Kansas 66202 Date:
Fill in where applicable 6300 Lamar, Shawnee Mission, Kansas 66202.
Account Name ___________________________________________________________________
Tax I.D. No. _________________________________
Registration
Name _______________________________________________________________or
______________________________________________________________________
Number and Street _____________________________________________________
Soc. Sec. No. _________________________________
FULL ADDRESS
Please fill in completely, including telephone number.
City______________State _________Zip Code _________
Telephone _________________________________________________ Citizen of: []
U.S. [] Other (specify) ___________________________
[] Please establish an account(s) as follows:
INITIAL Dividends and capital
INVESTMENT(S): gains to be paid in:*
Account No. Assigned _________________Amount Shares Cash
FUND(S) TO BE PURCHASED
___________________________________________________________________
$________ [] []
___________________________________________________________________
$________ [] []
___________________________________________________________________
$________ [] []
___________________________________________________________________
$________ [] []
Total amount $________________ *If no election is checked,
all payments will be made in shares.
I (We) hereby authorize Waddell & Reed Services Co. to act upon instructions
received by telephone to have amounts withdrawn from my organization's
account(s) in the Portfolio(s) and wired or mailed to the bank account designed
below.
I (We) hereby ratify any such instructions and agree that none of the Fund(s),
Waddell & Reed, Inc. nor Waddell & Reed Services will be liable for any loss,
liability, cost or expense for acting upon such instructions in accordance with
the procedures set forth in the Prospectus.
EXPEDITED
REDEMPTION Note: The indicated bank should be a member of the Federal
Reserve System.
SERVICE
Please fill in completely.
Name of Bank
_____________________________________________________________________
Bank A.B.A. No. _________________________
Number and Street
____________________________________________________________________________
City ___________________________________________________ State
_________________________________ Zip Code ___________________
Account Name __________________________________________________________ Account
No. ________________________________________
TELEPHONE This account will be established with a telephone exchange
EXCHANGE privilege which will authorize Waddell & Reed Services Co. to act upon
PRIVILEGE instructions by telephone to exchange Fund shares held in my (our)
account for shares of other Funds eligible under the Exchange Privilege to be
held in an identically registered account(s) (see Prospectus for details),
unless you check the box on the left to indicate your rejection of this service.
Check box at the right
if this service is NOT requsted. I (We) hereby ratify any instructions given
pursuant to this authorization and agree that none of the funds, Waddell & Reed,
Inc. nor Waddell & Reed Serices Company will be liable for any loss, liability,
cost or expense for acting upon instructions believed to be genuine.[]
Under penalties of perjury, I (we) certify that the number shown on this
application is the correct Tax Identification Number of my organization (or my
correct Social Security Number if the account is for my personal use) and that
the organization is not (I am not) subject to backup withholding either because
if it has not (I have not) been notified that it is (I am) subject to backup
withholding as a result of a failure to report all interest, dividends or
capital gains, or the Internal Revenue Service has notified it (me) that it is
no (I am no) longer subject to backup withholding. The undersigned certify that
I (we) have full authority and legal capacity to purchase shares of the Fund and
affirm that I (we) have received a current Prospectus and agree to be bound by
its terms.
AUTHORIZED
SIGNATURE(S)
Complete Corporate resolution on
reverse side.
1.___________________ 2. ___________________________
Authorized Signature Authorized Signature
_____________________ ____________________________
Title Title
3. _________________ 4. ___________________________
Authorized Signature Authorized Signature
____________________ ____________________________
Title Title
Corporate Resolution
IT WILL BE NECESSARY FOR YOU TO PROVIDE A CERTIFIED COPY OF A CORPORATE
RESOLUTION OR OTHER CERTIFICATE OF AUTHORITY TO AUTHORIZE WITHDRAWALS. THE
SAMPLES BELOW MAY BE USED FOR THIS PURPOSE OR YOU MAY USE YOUR OWN. IT IS
UNDERSTOOD THAT THE FUND(S) WADDELL & REED, INC. AFFILIATES AND ITS CUSTODIAN
BANK, MAY RELY UPON THESE AUTHORIZATIONS UNTIL REVOKED OR AMENDED BY WRITTEN
NOTICE DELIVERED TO THE FUND(S) BY REGISTERED MAIL.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he is duly elected (title)
__________________________________________ of (corporate name)
_________________________ a corporation organized under the laws of (the State
of) __________________________ and that the following is a true and correct copy
of a resolution adopted by the corporation's Board of Directors at a meeting
duly called and held on (date) ________________________________.
RESOLVED, that any (enter number required to act) _________ of the corporation's
following identified officers (enter titles only)
____________________________________
____________________________________________________________________ are
authorized to execute investment applications with the United Fund Group/W&R
Funds and any Fund investment accounts in the name of the corporation; to invest
such funds of the corporation in shares issued by one or more United Fund/W&R
Funds ("Fund Shares"), as they deem appropriate; and to issue instructions
(including the execution of money fund drafts, if applicable) pertaining to the
redemption, exchange or transfer of Fund Shares.
FURTHER RESOLVED, that each shall be held harmless and fully protected in
relying from time to time upon any certifications by the secretary or any
assistant secretary of the corporation as to the name of the individuals
occupying the above identified offices, and in acting in reliance upon the
foregoing resolutions, until actual receipt by them of a certified copy of a
resolution of the Board of Directors of the corporation modifying or revoking
any or all such resolutions.
The undersigned further certifies that the following individuals occupy the
offices designated. (Attach additional list if necessary.)
___________________________________________________________________
x______________________________________________________________________
Name/Title (please print or type) (Signature)
___________________________________________________________________
x______________________________________________________________________
Name/Title (please print or type) (Signature)
___________________________________________________________________
x______________________________________________________________________
Name/Title (please print or type) (Signature)
___________________________________________________________________
x______________________________________________________________________
Name/Title (please print or type) (Signature)
___________________________________________________________________
___________________________________________________
Corporate Name CORPORATE SEAL (Date)
Certified from Minutes: _______________________________________________
Name and Title
CONFIDENTAL DATA (Must be completed on New Accounts/New Products)
1. Annual Income: $_______________________________ 2. Taxable Income:
$________
3. Total Investment Assets: ________________________________________________
4. Other Assets: _______________________________________
5. Net Worth (Assets minus Liabilities):
________________________________________________________________________________
________________
6. Investment Objectives (mark all that apply)6. [] Retirement Needs h
Reserves6. [] Other needs/goals (specify in Special Remarks)
7. Special Remarks/Considerations:
________________________________________________________________________________
________________________________
INITIAL INVESTMENT INSTRUCTIONS
HOW TO INVEST
By Federal Funds Wire By Mail
Obtain account number from the Fund. Complete Purchase Application
Telephone toll free: 1-800-366-2520 Make check payable to Waddell & Reed, Inc.
Instruct bank to transmit investment by Federal funds wire to: u
Mail application and check to:
United Missouri Bank Waddell & Reed Services
Co.,Kansas City, Missouri 6300 Lamar
ABA Number: 101000695 Shawnee Mission, KS 66202
W&R Underwriter Account
#0007978
FBO _____________________________________
Fund Acct # _______________________________
FUND CODES
737 - United Accumulative - Class Y 763 - United Municipal High
Income - Class Y
785 - United Asset Strategy - Class Y 748 - United New Concepts -
Class Y
738 - United Bond - Class Y 783 - United Retirement Shares
- - Class Y
745 - United Continental Income - Class Y 736 - United Science and
Technology - Class Y
744 - United Gold & Government - Class Y 747 - United Vanguard -Class Y
754 - United Government Securities - Class Y 716 - W&R Asset Strategy -
Class Y
746 - United High Income - Class Y 715 - W&R International Growth
- - Class Y
749 - United High Income II - Class Y 712 - W&R Growth - Class Y
735 - United Income - Class Y 713 - W&R Limited-Term Bond -
Class Y
739 - United International Growth - Class Y 714 - W&R Municipal Bond -
Class Y
761 - United Municipal Bond - Class Y 711 - W&R Total Return Class Y
99.B9-ufappnav
[ Division Office Stamp]
Waddell & Reed, Inc. Mutual Funds
P.O. Box 29217 Net Asset Value (NAV)
Shawnee Mission, Kansas 66201-9217 APPLICATION
I (We) make application for an account to be established as follows:
[] A NAV account to be established.
[] A new Fund to be added to an existing NAV account.
[] An existing non-NAV account to be converted to a NAV account.
Check applicable block:
[] Home Office Personnel
[] Field Personnel
[] 401(k) Plan with 100 or more eligible employees
________________________________________________________________________________
REGISTRATION TYPE (one only) * SEE REVERSE SIDE FOR ELIGIBLE PURCHASERS*
________________________________________________________________________________
NON RETIREMENT PLAN
[] Single Name [] Joint Tenants W/Right of Survivorship [] Declaration of
Trusts Revocable
[] Uniform Gifts (Transfers) To Minors [] Other: ______ (Attach CUF022)
________________________________________________________________________________
RETIREMENT PLAN
[] Individual IRA [] 401(k) Unallocated account
[] Spousal IRA [] 401(k) Participant
[] Rollover (Qual. plan lump sum distr.) [] Keogh Participant* (Profit Sharing
[] Simplified Pension Plan (SEP/SPP)* Plan)
*(If new plan attach Adoption [] Keogh Participant* (Money Purchase
Agreement from MRP1166) Plan
*(If new plan attach Adoption
Agreement from MRP1182)
[] TSA or [] 457 Plan Employer's Name _____________________________________
(Do Not Abbreviate)
(If billing is required, -----------------------------------------------------
attach form #CSF1417) Street City State Zip
[] If Tri-Vest, enter Partnership name _____________________________ amt $______
________________________________________________________________________________
REGISTRATION []NEW ACCOUNT or []NEW FUND FOR EXISTING ACCOUNT: [][][][][][][]-[]
(Must have same ownership) Date of Birth
________________________________________________________________________________
Individual Name (exactly as desired) If spousal IRA, name of working spouse; if
Keogh or 401(k), name of Plan/Trustee/Custodian.
______________________
Month Day Year
________________________________________________________________________________
Joint Name (if any, exactly as desired) If spousal IRA, name of non-working
spouse; if Keogh or 401(k) Participant, enter name.
______________________ ______________
Month Day Year Relationship
________________________________________________________________________________
Mailing Address
_______________ ______________ ____________ _____/__________-________________
City State Zip Telephone
Social Security #:[][][]-[][]-[][][][] or Taxpayer Identification #:
[][]-[][][][][][][]
________________________________________________________________________________
BENEFICIARY: For Retirement Plan Accounts Only. (not for use with 401(k) Plans)
Full Name of Beneficiary Tax Identification Number Relationship Percent
________________________ _________________________ ____________ ______%
________________________________________________________________________________
INVESTMENTS: Make check payable to Waddell & Reed
FUND CODES
101 - W&R Total Return
102 - W&R Growth
103 - W&R Limited-Term Bond
104 - W&R Municipal Bond
(not available for retirement plans)
105 - W&R International Growth
106 - W&R Asset Strategy
621 - Income
622 - Science & Technology
623 - Accumulative
624 - Bond
625 - International Growth
626 - Gold and Government
627 - Continental Income
628 - High Income
629 - Vanguard
630 - New Concepts
634 - High Income II
680 - Retirement Shares
684 - Asset Strategy
750 - Cash Management
753 - Government Securities
760 - Municipal Bond (not available for Retirement Plans)
762 - Municipal High Income (not available for Retirement Plans)
____ - Other
________________________________________________________________________________
OPEN ACCOUNT
-----If Retirement Plan-----
FUND Amount Yr. Deductible or
(enter code) Enclosed of Contr. Non-Deductible
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
Total $______________
Monthly Div./C.G. Distr**
TOP From AIS* (Assumes RR)
Another Carrier (if any) RR CC CR
[] $______________ [] [] []
[] $______________ [] [] []
[] $______________ [] [] []
[] $______________ [] [] []
[] $______________ [] [] []
$______________
Existing Accounts
To Be Converted
To NAV
[][][][][][][][]
[][][][][][][][]
[][][][][][][][]
[][][][][][][][]
[][][][][][][][]
________________________________________________________________________________
*Attach AIS Authorization Form #CUP0714 **Attach Payroll Deduction Authorization
(PFM743) **RR=Reinvest Div/Cap Gain CC=Cash Div/Cap Gain CR=Cash Div/Reinvest
Cap Gain
NAV application must be approved and signed by Division Manager or Regional Vice
President for field personnel and 401(k) plans or Supervisor for Home Office
personnel. Refer to the reverse side for more details.
CHECK SERVICE (Not available for retirement plans)
Send information to establish redemption checking account for: [] United
Government Securities [] United Cash Management
_______________________________________________________________________________
EXPEDITED REDEMPTION: For United Cash Management Only. (Not available for
retirement plans)
Complete items below:
_________________________________________________________
Name and Address of Bank/Broker/Savings & Loan
_________________________________________________________
Street
_________________________________________________________
City State Zip
_________________________________________________________
Account Number
If account is with a Broker or Savings and Loan, provide:
_________________________________________________________
Name of Its Commercial Bank
_________________________________________________________
Street
_________________________________________________________
City State Zip
_________________________________________________________
Its Account # with Its Commercial Bank
One United Cash Management Accounts where expedited redemption is requested,
Waddell & Reed, Inc. is authorized to honor telephonic, telegraphic or written
requests from anyone for redemption of all or any fund shares so long as the
proceeds are transmitted to the identified account.
_______________________________________________________________________________
ELIGIBLE PURCHASERS
A. EMPLOYEE - Any employee (including retired employees) of Waddell & Reed or
its affiliated companies. A retired employee is an individual separated
from service from Waddell & Reed or affiliated companies with a vested
interest in any Employee Benefit Plan sponsored by Waddell & Reed or its
affiliated companies.
B. SALES REPRESENTATIVE - Any sales representative who is licensed to sell the
products and/or services of Waddell & Reed or a retired Sales Representative.
A retired sales representative is defined as any sales representative who was
at the time of separation from service from Waddell & Reed a Senior Account
Representative.
C. QUALIFYING FAMILY MEMBERS - Spouses, children, parents (no age limit) of
employees and their spouses and sales representatives as defined above.
D. RETIREMENT PLANS - Any Retirement Plan sponsored by Waddell & Reed, Inc.
established for the benefit of an employee, sales representative or
qualifying family member, as defined above.
E. TRUSTS - Trusts, under which the grantor and the trustee or a co-trustee are
each an employee, sales representative or qualifying family member.
F. CUSTODIANS - A custodian pursuant to a Uniform Gifts (or Transfers) to Minors
Act purchasing for the child of an employee or sales representative. (The
Custodian need not be an Eligible Purchaser.)
G. 401(k) PLANS - Any Cash or Deferred Arrangement established pursuant to
Internal Revenue Code Section 401(k) which has 100 or more eligible
employees.
TERMS AND CONDITIONS
A. NO TRANSFER OF OWNERSHIP - Shares purchased hereunder at net asset value
shall not be transferable on the books of the Fund to other than an Eligible
Purchaser except upon death of the registered shareholder(s). However,
assignments to lending institutions to secure loans are permitted except
where otherwise prohibited.
B. JOINT TENANCY - All registered shareholders in a joint tenancy account must
be Eligible Purchasers.
C. CHANGES IN REGISTRATION - A change in registration of shares purchases at net
asset value will be permitted provided the new registration maintains owner-
ship by an Eligible Purchaser.
D. ISSUANCE OF SHARE CERTIFICATES - A share certificate will not be issued,
unless required in connection with a loan.
E. REDEMPTION OF SHARES - Shares may be redeemed as provided in the prospectus
of the respective Fund.
F. PURCHASES - A minimum initial purchase of $500 is usually required for all
Funds. The minimum repeat purchase is $25, except for United Cash Manage-
ment which has no minimum.
G. GENERAL -
1. Purchases of Investment Programs are not included in net asset value
purchases.
2. Shares purchases at net asset value will not be added to existing sales
load accounts. New accounts will be established.
3. If shares held in a non-NAV account are converted/transferred into a NAV
account, the same terms and conditions that apply to NAV shares will also
apply to the converted/transferred shares.
________________________________________________________________________________
TERMINATION
A. The right to purchase shares at net asset value may be terminated by Waddell
& Reed, Inc. at anytime without notice.
________________________________________________________________________________
ACKNOWLEDGEMENT
* I (we) have received a copy of the current prospectus(es) of the Funds
selected.
* If purchasing an IRA, I (we) certify that I (we) have read the Retirement Plan
and Custody Agreement and agree to the terms and conditions set forth therein,
and do hereby establish the Individual Retirement Plan.
* In the case of a 401(k) plan, I (we) certify that more than 100 employees are
currently eligible to participate.
* Under penalties of perjury, I certify that the social security number or other
taxpayer identification number shown on reverse side is correct (or I am wait-
ing for a number to be issued to me) and (strike the following if not true)
that I am not subject to backup withholding because (a) I am exempt fro backup
withholding, or (b) I have not been notified by the IRS that I am subject to
backup withholding as a result of a failure to report all interest and
dividends, or (c) the IRS has notified me that I am no longer subject to back-
up withholding.
An approved application must be submitted for each initial purchase, each new
Fund, and each conversion to NAV. Full payment must accompany the application.
No order will be accepted by wire nor by written request except on the approved
application. MAIL THIS APPLICATION FOR ANY INITIAL PURCHASE, NEW FUND, AND
CONVERSION TO NAV TO THE HOME OFFICE CUSTOMER SERVICE DIVISION. REPEAT
PURCHASES IN AN EXISTING FUND ACCOUNT SHOULD BE MAILED TO THE HOME OFFICE
CUSTOMER SERVICE DIVISION ACCOMPANIED BY THE TEAR-OFF PORTION OF A CONFIRMATION.
I am eligible to purchase shares at net asset value. I have read all the terms
and conditions stated above and understand and agree to all of them. I agree to
notify Waddell & Reed if my account(s) become ineligible of NAV status.
___________________________________ _______________________________________
Signature of Applicant Representative Number, if applicable
___________________________________ _______________________________________
Signature of Division Manager/ RVP or Date
Supervisor of Home Office Personnel
___________________________________ _______________________________________
Name of Waddell & Reed Employee or Applicant's Relationship to Employee
Representative, if applicable or Representative
[Home Office Use Only]
Fiduciary Trust Company of New
Hampshire accepts appointment as
Custodian in accordance with the Custody
Agreement:
By: _________________________________________
Fiduciary Trust Company Authorized Signature
[OSJ: ]
CUF0025(11/93)
EX-99.B9-ufasa
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT, made as of the 1st day of August, 1990, by and between
United Funds, Inc. (the "Fund"), a Maryland corporation and Waddell & Reed
Services Company ("Agent"), a Missouri corporation,
WITNESSETH:
WHEREAS, the Fund wishes to appoint the Agent to be its Accounting Services
Agent upon and subject to the terms and provisions of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties agree as follows:
A. Appointment of the Agent as Accounting Services Agent for the Fund;
Acceptance.
(1) The Fund hereby appoints the Agent to act as Accounting Services
Agent for the Fund upon and subject to the terms and provisions of this
Agreement.
(2) Agent hereby accepts the appointment as Accounting Services Agent
for the Fund and agrees to act as such upon and subject to the terms and
provisions of this Agreement.
B. Duties of the Agent.
The Agent shall perform such duties as set forth in this Paragraph B
as agent for and on behalf of the Fund.
(1) Agent shall provide bookkeeping and accounting services and
assistance by providing to the Fund the necessary personnel and facilities to
maintain the Fund's portfolio records and general accounting records, to price
daily the value of shares of the Fund, and with the assistance and advice of the
Fund's attorneys and independent accountants, to prepare or assist the Fund's
attorneys and independent accountants to prepare, as may be applicable, reports
required to be filed by the Fund with regulatory agencies including the
preparation of proxy statements, prospectuses, shareholder reports and other
reports as required by law.
(2) Agent shall maintain and keep current the accounts, books,
records, and other documents relating to the Fund's financial and portfolio
transactions as may be required by rules and regulations of the Securities and
Exchange Commission adopted under Section 31(a) of the Investment Company Act of
1940 as amended (the "Act").
(3) Agent shall cause the subject records of the Fund to be
maintained and preserved pursuant to the requirements under the Act.
(4) In pricing daily the value of shares of the Fund, Agent may make
arrangements to and obtain the value of portfolio securities from pricing
services or quotation services that are compensated by the Fund directly or
indirectly through the placement of portfolio transactions with broker-dealers
who provide such valuation or quotation services to the Agent.
(5) The Agent shall maintain duplicate copies of, or information from
which copies of, the records necessary to the preparation of the Fund's
financial statements and valuations of its assets may be reconstructed. Such
duplicate copies or information shall be maintained at a location other than
where the Agent performs its normal duties hereunder so that in the event the
records established and maintained pursuant to the foregoing provisions of this
Section B are damaged or destroyed, the Agent shall be able to provide the
bookkeeping and accounting services and assistance specified in this Section B.
(6) In the event any of the Agent's facilities or equipment necessary
for the performance of its duties hereunder is damaged, destroyed or rendered
inoperable by reason of fire, vandalism, riot, natural disaster or otherwise,
Agent will use its best efforts to restore all services hereunder to the Fund
and will not seek from the Fund additional compensation to repair or replace
damaged or destroyed facilities or equipment. The Agent shall also make and
maintain arrangements for emergency use of alternative facilities for use in the
event of the aforesaid destruction of or damage to its facilities.
C. Compensation of the Agent.
The Fund agrees to pay to the Agent for its services under this
Agreement, an amount payable on the first day of the month as shown on the
following table pertinent to the average daily net assets of the Fund during the
prior month:
Fund's Average Daily Net Asset for Monthly
the Month Fee
$ 0 - $ 10 million $ 0
$ 10 - $ 25 million $ 833
$ 25 - $ 50 million $ 1,667
$ 50 - $ 100 million $ 2,500
$100 - $ 200 million $ 3,333
$200 - $ 350 million $ 4,167
$350 - $ 550 million $ 5,000
$550 - $ 750 million $ 5,833
$750 - $ 1.0 billion $ 7,083
$1.0 billion and over $ 8,333
D. Right of Fund to Inspect, and Ownership of Records.
The Fund will have the right under this Agreement to perform on-site
inspection of records and accounts, and audits directly pertaining to the Fund's
accounting and portfolio records maintained by the Agent hereunder at the
Agent's facilities. The Agent will cooperate with the Fund's independent
accountants or representatives of appropriate regulatory agencies and furnish
all reasonably requested records and data. Agent acknowledges that these
records are the property of the Fund, and that it will surrender to the Fund all
such records promptly on request.
E. Standard of Care; Indemnification.
The Agent will at all times exercise due diligence and good faith in
performing its duties hereunder. The Agent will make every reasonable effort
and take all reasonably available measures to assure the adequacy of its
personnel, facilities and equipment as well as the accurate performance of all
services to be performed by it hereunder within, at a minimum, the time
requirements of any applicable statutes, rules or regulations and in conformity
with the Fund's Articles of Incorporation, Bylaws and representations made in
the Fund's current registration statement as filed with the Securities and
Exchange Commission.
The Agent shall not be responsible for, and the Fund agrees to
indemnify the Agent for, any losses, damages or expenses (including reasonable
counsel fees and expenses) (i) resulting from any claim, demand, action or suit
not resulting from the Agent's failure to exercise good faith or due diligence
and arising out of or in connection with the Agent's duties on behalf of the
Fund hereunder; (ii) for any delay, error or omission by reason of circumstances
beyond its control, including acts of civil or military authority, national
emergencies, labor difficulties (except with respect to the Agent's employees),
fire, mechanical breakdown beyond its control, flood or catastrophe, acts of
God, insurrection, war, riots or failure beyond its control of transportation,
communication or power supply; or (iii) for any action taken or omitted to be
taken by the Agent in good faith in reliance on the accuracy of any information
provided to it by the Fund or its directors or in reliance on any advice of
counsel who may be internally employed counsel or outside counsel for the Fund
or advice of any independent accountant or expert employed by the Fund with
respect to the preparation and filing of any document with a governmental agency
or authority.
In order for the rights to indemnification to apply, it is understood
that if in any case the Fund may be asked to indemnify or hold the Agent
harmless, the Fund shall be advised of all pertinent facts concerning the
situation in question, and it is further understood that the Agent will use
reasonable care to identify and notify the Fund promptly concerning any
situation which presents or appears likely to present a claim for
indemnification against the Fund. The Fund shall have the option to defend the
Agent against any claim which may be the subject of this indemnification and, in
the event that the Fund so elects, it will so notify the Agent, and thereupon
the Fund shall take over complete defense of the claim, and the Agent shall
sustain no further legal or other expenses in such situation for which the Agent
shall seek indemnification under this paragraph. The Agent will in no case
confess any claim or make any compromise in any case in which the Fund will be
asked to indemnify the Agent except with the Fund's prior written consent.
F. Term of the Agreement; Taking Effect; Amendments.
This Agreement shall become effective at the start of business on the
date hereof and shall continue, unless terminated as hereinafter provided, for a
period of one (1) year and from year-to-year thereafter, provided that such
continuance shall be specifically approved as provided below.
This Agreement shall go into effect, or may be continued, or may be
amended, or a new agreement covering the same topics between the Fund and the
Agent may be entered into only if the terms of this Agreement, such continuance,
the terms of such amendment or the terms of such new agreement have been
approved by the Board of Directors of the Fund, including the vote of a majority
of the directors who are not "interested persons," as defined in the Act, of
either party to this Agreement, the agreement to be continued, amendment or new
agreement, cast in person at a meeting called for the purpose of voting on such
approval. Such a vote is hereinafter referred to as a "disinterested director
vote."
Any disinterested director's vote shall, in favor of continuance,
amendment or execution of a new agreement, include a determination that (i) the
Agreement, amendment, new agreement or continuance in question is in the best
interests of the Fund and its shareholders; (ii) the services to be performed
under the Agreement, the Agreement as amended, new agreement or agreement to be
continued, are services required for the operation of the Fund; (iii) the Agent
can provide services, the nature and quality of which are at least equal to
those provided by others offering the same or similar services; and (iv) the
fees for such services are fair and reasonable in the light of the usual and
customary charges made by others for services of the same nature and quality.
Nothing herein contained shall prevent any disinterested director vote
from being conditioned on the favorable vote of the holders of a majority (as
defined in or under the Act) of the outstanding shares of the Fund.
G. Termination.
(1) This Agreement may be terminated by the Agent at any time without
penalty upon giving the Fund at least one hundred twenty (120) days' written
notice (which notice may be waived by the Fund) and may be terminated by the
Fund at any time without penalty upon giving the Agent at least sixty (60) days'
written notice (which notice may be waived by the Agent), provided that such
termination by the Fund shall be directed or approved by the vote of a majority
of the Board of Directors of the Fund in office at the time or by the vote of
the holders of a majority (as defined in or under the Act) of the outstanding
shares of the Fund.
(2) On termination, the Agent will deliver to the Fund or its
designee all files, documents and records of the Fund used, kept or maintained
by the Agent in the performance of its services hereunder, including such of the
Fund's records in machine readable form as may be maintained by the Agent, as
well as such summary and/or control data relating thereto used by or available
to the Agent.
(3) In addition, on such termination or in preparation therefore at
the request of the Fund and at the Fund's expense, the Agent shall provide, to
the extent that its capabilities then permit, such documentation, personnel and
equipment as may be reasonably necessary in order for a new agent or the Fund to
fully assume and commence to perform the agency functions described in this
Agreement with a minimum disruption to the Fund's activities.
(4) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the Act and the rules and regulations thereunder of the
Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date and year first above written.
UNITED FUNDs, INC.
By:/s/Rodney O. McWhinney
-------------------------
ATTEST:
By:/s/Sharon K. Pappas
- ----------------------
Secretary
WADDELL & REED SERVICES COMPANY
By: /s/Robert L. Hechler
------------------------
ATTEST:
By:/s/Rodney O. McWhinney
- -------------------------
Secretary
Secretary
EX-99.B9-ufsaa
AMENDMENT TO SERVICE AGREEMENT
This Amendment to the Service Agreement made this 8th day of February, 1995, by
and between United Funds, Inc. (the "Company") and Waddell & Reed, Inc. ("W&R").
WHEREAS, the Company and W&R have entered into a certain Service Agreement dated
October 1, 1993, as amended September 1, 1994, which the parties now desire to
amend to clarify that the Service Agreement, as amended, relates solely to the
Class A shares of the Company, as such shares may now or in the future exist;
AND WHEREAS, the Company has adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 a Service Plan applicable to Class A shares.
NOW THEREFORE, it is mutually agreed as follows:
1. It is understood that the Service Agreement, as previously amended, is
applicable only with respect to the Class A shares of the Company, as such
shares may now or in the future exist.
2. The Company represents that this Amendment has been approved by vote of the
Board of Directors of the Company and of the directors of the Company who
are not interested persons of the Company and who have no direct financial
interest in the operation of the Service Plan or this Agreement
("independent directors"), which was cast in person by such directors at a
meeting called for the purpose of voting on approval of this Amendment.
3. It is understood that this Amendment is part of the aforesaid Service
Agreement and is subject to continuation and termination as set forth in
the Service Agreement and to the other provisions set forth therein.
UNITED FUNDS, INC.
By:
------------------------
Waddell & Reed, Inc.
By:
-----------------------
EX-99.B11-ufConsnt
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 117 to the Registration
Statement on Form N-1A of our report dated January 31, 1995 relating to the
financial statements and the financial highlights of United Funds, Inc., which
appears in such Statement of Additional Information. We further consent to the
reference to us under the heading "Custodial and Auditing Services" in the
Statement of Additional Information and to the reference to us under the heading
"Financial Highlights" in the Prospectus of the Class A shares constituting part
of this Post-Effective Amendment.
PRICE WATERHOUSE LLP
Kansas City, Missouri
April 18, 1995
EX-99.B15-ufspca
SERVICE PLAN
FOR CLASS A SHARES
(Adopted on October 1, 1993
and Restated on February 8, 1995)
This Plan is adopted by United Funds, Inc. (the "Company"), pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act") to
provide for payment by the Company of certain expenses in connection with the
provision of personal services to the Company's Class A shareholders and/or
maintenance of its Class A shareholder accounts. Payments under the Plan are to
be made to Waddell & Reed, Inc. ("W&R") which serves as the principal
underwriter for the Company under the terms of a written Service Agreement
("Agreement") separate and apart from the Underwriting Agreement pursuant to
which W&R offers and sells the shares of the Company.
Service Fee
The Company is authorized to pay to W&R an amount not to exceed .25 of 1% of the
average net assets of the Class A shares as a "service fee" to finance
shareholder servicing by W&R, its affiliated companies and broker-dealers who
may sell Class A shares and to encourage and foster the maintenance of Class A
shareholder accounts. The amounts shall be payable to W&R monthly or at such
other intervals as the board of directors may determine to reimburse W&R for
costs and expenses incurred.
NASD Definition
For purposes of this Plan the "service fee" shall be considered a payment made
by the Company for personal service and/or maintenance of Class A shareholder
accounts, as such is now defined by the National Association of Securities
Dealers, Inc. ("NASD"), provided, however, if the NASD adopts a definition of
"service fee" for purposes of Article III, Section 26(b) of its Rules of Fair
Practice that differs from the definition of "service fee" as presently used, or
if the NASD adopts a related definition intended to define the same concept, the
definition of "service fee" as used herein shall be automatically amended to
conform to the NASD definition.
Quarterly Reports
W&R shall provide to the board of directors of the Company and the board of
directors shall review at least quarterly a written report of the amounts so
expended of the service fee paid or payable to it under this Plan and the
purposes for which such expenditures were made.
Approval of Plan
This Plan shall become effective when it has been approved by a vote of at least
a majority of the outstanding Class A voting securities of the Company (as
defined in the Act) and by a vote of the board of directors of the Company and
of the directors who are not interested persons of the Company and have no
direct or indirect financial interest in the operation of the Plan or any
agreement related to this Plan (other than as directors or shareholders of the
Company) ("independent directors") cast in person at a meeting called for the
purpose of voting on such Plan. The initial Agreement shall become effective
the effective date of this Plan, provided, however, that it has been approved in
accordance with the requirements of Rule 12b-1 under the Act.
Continuance
This Plan shall continue in effect for a period of one (1) year and thereafter
from year-to-year only so long as such continuance is approved by the directors,
including the independent directors, as specified hereinabove for the adoption
of a Plan by the directors and independent directors.
Director Consideration
In considering whether to adopt, implement or continue this Plan, the directors
shall have a duty to request and evaluate, and W&R shall have a duty to furnish,
such information as may be reasonably necessary to an informed determination of
whether this Plan should be adopted, implemented or continued.
Termination
This Plan may be terminated at any time by a vote of a majority of the
independent directors of the Company or by a vote of the majority of the
outstanding Class A voting securities of the Company without penalty. On
termination, the payment of all service fees shall cease, and the Company shall
have no obligation to W&R to reimburse it for any cost or expenditure it has
made or may make to service Class A shareholder accounts.
Amendments
This Plan may not be amended to increase materially the amount to be spent for
personal service and/or maintenance of shareholder accounts without approval of
the Class A shareholders, and all material amendments of this Plan must be
approved in the manner prescribed for the adoption of the Plan as provided
hereinabove.
Directors
While this Plan is in effect, the selection and nomination of the directors who
are not interested persons of the Company shall be committed to the discretion
of the directors who are not interested persons of the Company.
Records
Copies of this Plan, the Agreement and reports made pursuant to this Plan shall
be preserved as provided in Rule 12b-1(f) under the Act.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT TO
SHAREHOLDERS DATED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000217420
<NAME> UNITED FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> UNITED INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 2,309,800,972
<INVESTMENTS-AT-VALUE> 3,145,032,833
<RECEIVABLES> 17,535,247
<ASSETS-OTHER> 67,754
<OTHER-ITEMS-ASSETS> 12,190
<TOTAL-ASSETS> 3,162,648,024
<PAYABLE-FOR-SECURITIES> 4,550,625
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,193,192
<TOTAL-LIABILITIES> 17,743,817
<SENIOR-EQUITY> 134,763,916
<PAID-IN-CAPITAL-COMMON> 2,160,636,160
<SHARES-COMMON-STOCK> 134,763,916
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 968,192
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,304,078
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 835,231,861
<NET-ASSETS> 3,144,904,207
<DIVIDEND-INCOME> 54,030,661
<INTEREST-INCOME> 15,251,196
<OTHER-INCOME> 0
<EXPENSES-NET> 23,443,798
<NET-INVESTMENT-INCOME> 45,838,059
<REALIZED-GAINS-CURRENT> 89,293,945
<APPREC-INCREASE-CURRENT> (195,072,068)
<NET-CHANGE-FROM-OPS> (59,940,064)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 45,590,722
<DISTRIBUTIONS-OF-GAINS> 82,751,883
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17,223,202
<NUMBER-OF-SHARES-REDEEMED> 10,996,133
<SHARES-REINVESTED> 4,993,419
<NET-CHANGE-IN-ASSETS> 84,830,931
<ACCUMULATED-NII-PRIOR> 720,855
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,069,003
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,443,798
<AVERAGE-NET-ASSETS> 3,174,028,336
<PER-SHARE-NAV-BEGIN> 24.77
<PER-SHARE-NII> .36
<PER-SHARE-GAIN-APPREC> (0.80)
<PER-SHARE-DIVIDEND> .36
<PER-SHARE-DISTRIBUTIONS> .63
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.34
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT TO
SHAREHOLDERS DATED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000217420
<NAME> UNITED FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> UNITED ACCUMULATIVE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 1,012,869,403
<INVESTMENTS-AT-VALUE> 973,379,436
<RECEIVABLES> 1,807,566
<ASSETS-OTHER> 40,077
<OTHER-ITEMS-ASSETS> 84,860
<TOTAL-ASSETS> 975,311,939
<PAYABLE-FOR-SECURITIES> 1,460,625
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,831,015
<TOTAL-LIABILITIES> 8,291,640
<SENIOR-EQUITY> 146,939,028
<PAID-IN-CAPITAL-COMMON> 867,495,501
<SHARES-COMMON-STOCK> 146,939,028
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 873,019
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,797,282)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (39,489,967)
<NET-ASSETS> 967,020,299
<DIVIDEND-INCOME> 16,412,728
<INTEREST-INCOME> 8,322,216
<OTHER-INCOME> 0
<EXPENSES-NET> 7,146,365
<NET-INVESTMENT-INCOME> 17,588,579
<REALIZED-GAINS-CURRENT> 60,126,808
<APPREC-INCREASE-CURRENT> (77,231,909)
<NET-CHANGE-FROM-OPS> 483,478
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,169,923
<DISTRIBUTIONS-OF-GAINS> 65,811,797
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,792,033
<NUMBER-OF-SHARES-REDEEMED> 13,397,312
<SHARES-REINVESTED> 11,799,943
<NET-CHANGE-IN-ASSETS> (66,753,999)
<ACCUMULATED-NII-PRIOR> 454,363
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,773,506
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,146,365
<AVERAGE-NET-ASSETS> 1,004,683,296
<PER-SHARE-NAV-BEGIN> 7.19
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> (0.13)
<PER-SHARE-DIVIDEND> .13
<PER-SHARE-DISTRIBUTIONS> .48
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.58
<EXPENSE-RATIO> .71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT TO
SHAREHOLDERS DATED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000217420
<NAME> UNITED FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> UNITED SCIENCE AND TECHNOLOGY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 334,710,063
<INVESTMENTS-AT-VALUE> 496,876,578
<RECEIVABLES> 2,231,667
<ASSETS-OTHER> 13,624
<OTHER-ITEMS-ASSETS> 8,574
<TOTAL-ASSETS> 499,130,443
<PAYABLE-FOR-SECURITIES> 443,950
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,183,911
<TOTAL-LIABILITIES> 2,627,861
<SENIOR-EQUITY> 32,637,049
<PAID-IN-CAPITAL-COMMON> 297,212,925
<SHARES-COMMON-STOCK> 32,637,049
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,486,093
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 162,166,515
<NET-ASSETS> 496,502,582
<DIVIDEND-INCOME> 1,791,830
<INTEREST-INCOME> 2,494,035
<OTHER-INCOME> 0
<EXPENSES-NET> 4,304,561
<NET-INVESTMENT-INCOME> (18,696)
<REALIZED-GAINS-CURRENT> 37,605,690
<APPREC-INCREASE-CURRENT> 6,830,120
<NET-CHANGE-FROM-OPS> 44,417,114
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 31,199,630
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,101,127
<NUMBER-OF-SHARES-REDEEMED> 3,619,095
<SHARES-REINVESTED> 2,041,497
<NET-CHANGE-IN-ASSETS> 49,891,942
<ACCUMULATED-NII-PRIOR> 103,749
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,777,832
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,304,561
<AVERAGE-NET-ASSETS> 450,555,424
<PER-SHARE-NAV-BEGIN> 14.83
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 1.40
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.21
<EXPENSE-RATIO> .96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT TO
SHAREHOLDERS DATED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000217420
<NAME> UNITED FUNDS, INC.
<SERIES>
<NUMBER> 4
<NAME> UNITED BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 543,826,346
<INVESTMENTS-AT-VALUE> 511,483,108
<RECEIVABLES> 9,425,715
<ASSETS-OTHER> 20,172
<OTHER-ITEMS-ASSETS> 10,475
<TOTAL-ASSETS> 520,939,470
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,103,150
<TOTAL-LIABILITIES> 3,103,150
<SENIOR-EQUITY> 92,169,870
<PAID-IN-CAPITAL-COMMON> 488,791,181
<SHARES-COMMON-STOCK> 92,169,870
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 747,994
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (31,529,487)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (32,343,238)
<NET-ASSETS> 517,836,320
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 41,837,180
<OTHER-INCOME> 0
<EXPENSES-NET> 4,134,802
<NET-INVESTMENT-INCOME> 37,702,378
<REALIZED-GAINS-CURRENT> (31,512,111)
<APPREC-INCREASE-CURRENT> (41,557,487)
<NET-CHANGE-FROM-OPS> (35,367,220)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 37,265,097
<DISTRIBUTIONS-OF-GAINS> 1,836,092
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,077,476
<NUMBER-OF-SHARES-REDEEMED> 19,918,276
<SHARES-REINVESTED> 5,555,134
<NET-CHANGE-IN-ASSETS> (123,831,811)
<ACCUMULATED-NII-PRIOR> 310,713
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,552,094
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,134,802
<AVERAGE-NET-ASSETS> 571,163,933
<PER-SHARE-NAV-BEGIN> 6.39
<PER-SHARE-NII> .39
<PER-SHARE-GAIN-APPREC> (0.75)
<PER-SHARE-DIVIDEND> .39
<PER-SHARE-DISTRIBUTIONS> .02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.62
<EXPENSE-RATIO> .72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
EX-99.B18-ufmcp
UNITED FUNDS, INC.
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
This Multiple Class Plan ("Plan") pursuant to Rule 18f-3 under the
Investment Company Act of 1940, as amended ("1940 Act"), sets forth the multiple
class structure for each fund ("Fund") comprising United Funds, Inc. This
multiple class structure was approved by the Board of Directors of United Funds,
Inc. on February 8, 1995, under an order of exemption issued by the Securities
and Exchange Commission on January 11, 1995. This Plan describes the classes of
shares of stock of each Fund -- Class A shares and Class Y shares -- offered to
the public on or after June 17, 1995 ("Implementation Date").
General Description of the Classes:
Class A Shares. Class A shares will be sold to the general public subject
to an initial sales charge. The maximum sales charge is 5.75% of the amount
invested and declines to 0% based on discounts for volume purchases. The
initial sales charge is waived for certain eligible purchasers.
Class A shares also will be subject to a service fee charged pursuant to a
Service Plan adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1")
that provides for a maximum fee of .25% of the average annual net assets of the
Class A shares of the Fund. All of the shares of the Fund issued pursuant to a
Fund prospectus effective prior to the Implementation Date and that are
outstanding on the Implementation Date will be designated as Class A shares.
Class Y Shares. Class Y shares will be sold without an initial sales
charge and without a 12b-1 fee. Class Y shares are designed for institutional
investors and will be available for purchase by: (i) participants of employee
benefit plans established under section 403(b) or section 457, or qualified
under section 401, including 401(k) plans, of the Internal Revenue Code of 1986
("Code"), when the plan has 100 or more eligible employees and holds the shares
in an omnibus account on the Fund's records; (ii) banks, trust institutions and
investment fund administrators investing for their own accounts or for the
accounts of their customers where such investments for customer accounts are
held in an omnibus account on the Fund's records; (iii) government entities or
authorities and corporations whose investment within the first twelve months
after initial investment is $10 million or more; and (iv) certain retirement
plans and trusts for employees and sales representatives of Waddell & Reed, Inc.
and its affiliates.
Expense Allocations of Each Class:
In addition to the difference with respect to 12b-1 fees, Class A shares
and Class Y shares of a Fund differ with respect to the applicable shareholder
servicing fees. Class A shares pay a monthly shareholder servicing fee of
$1.0208 for each Class A shareholder account which was in existence during the
prior month, plus $0.30 for each Class A account on which a dividend or
distribution had a record date in that month. Class Y shares pay a monthly
shareholder servicing fee equal to one-twelfth of .15 of 1% of the average daily
net Class Y assets for the preceding month.
Each Class may also pay a different amount of the following other expenses:
(a) stationery, printing, postage and delivery expenses related to
preparing and distributing materials such as shareholder reports,
prospectuses, and proxy statements to current shareholders of a specific
Class;
(b) Blue Sky registration fees incurred by a specific Class of
shares;
(c) SEC registration fees incurred by a specific Class of shares;
(d) expenses of administrative personnel and services required to
support the shareholders of a specific Class of shares;
(e) Directors' fees or expenses incurred as a result of issues
relating to a specific Class of shares;
(f) accounting expenses relating solely to a specific Class of
shares;
(g) auditors' fees, litigation expenses, and legal fees and expenses
relating to a specific Class of shares; and
(h) expenses incurred in connection with shareholders meetings as a
result of issues relating to a specific Class of shares.
The shareholder servicing fees and other expenses listed above which are
attributable to a particular Class are charged directly to the net assets of the
particular Class and, thus, are borne on a pro rata basis by the outstanding
shares of that Class.
The expenses of the Funds that cannot be attributed to any one Fund
generally are allocated to each Fund based on the relative net assets of the
Funds. Certain expenses that may be attributable to a particular Fund, but not
a particular Class, are allocated based on the relative daily net assets of that
Class.
Exchange Privileges:
Class A shares of a Fund may be exchanged for Class A shares of another
Fund or corresponding shares of any other fund in the United Group of Mutual
Funds.
Class Y shares may be exchanged for Class Y shares of another Fund or of
any other fund in the United Group of Mutual Funds.
These exchange privileges may be modified or terminated by a Fund, and
exchanges may only be made into funds that are legally registered for sale in
the investor's state of residence.
Additional Information:
This Plan is qualified by and subject to the terms of the then current
prospectus for the applicable Class after the Implementation Date; provided,
however, that none of the terms set forth in any such prospectus shall be
inconsistent with the terms of the Classes contained in this Plan. The
prospectus for each Class contains additional information about that Class and
the applicable Fund's multiple class structure.
April 17, 1995
